<PAGE>
Filed pursuant to Rule 497(e)
Registration No. 333-92415
Fixed Income SHares ("FISH") Prospectus
FISH: Series C This Prospectus explains what you should know about each
and FISH: Portfolio before you invest. Please read it carefully.
Series M
(each a The Securities and Exchange Commission has not approved or
"Portfolio") disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to
March 17, the contrary is a criminal offense.
2000
<PAGE>
Risk/Return Summary
The following summaries identify the investment objective,
principal investments and strategies, principal risks,
performance information and fees and expenses of each
Portfolio. A more detailed "Summary of Principal Risks"
describing principal risks of investing in a Portfolio
begins on p. 7.
It is possible to lose money on investments in a Portfolio.
An investment in a Portfolio is not a deposit of a bank and
is not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency.
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<PAGE>
FISH: Series C
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Principal Investment Objective Portfolio Focus
Investments and Seeks maximum total return, Intermediate maturity fixed
Strategies consistent with preservation of income securities
capital and prudent investment
management Average Portfolio Duration
0-8 years
Credit Quality
B to Aaa; maximum 50% below Baa
Dividend Frequency
Declared daily and distributed monthly
The FISH: Series C seeks to achieve its investment objective
by investing in a portfolio of U.S. and foreign fixed income
instruments of the following types:
o corporate debt securities, including convertible
securities and corporate commercial paper;
o inflation-indexed bonds issued by corporations;
o structured notes, including hybrid or "indexed"
securities, catastrophe bonds and loan participations;
o delayed funding loans and revolving credit facilities;
o bank certificates of deposit, fixed time deposits and
bankers' acceptances;
o repurchase agreements and reverse repurchase agreements;
o debt securities issued by states or local governments and
their agencies, authorities and other instrumentalities;
o obligations of foreign governments and their subdivisions,
agencies and instrumentalities; and
o obligations of international agencies or supranational
entities.
The Portfolio may invest up to 50% of its assets
in high yield securities (commonly known as "junk bonds")
rated B or higher by Standard & Poor's Rating Service or
Moody's Investors Service, Inc. or, if unrated, determined
by the Portfolio's investment adviser or sub-adviser to be
of comparable quality. The Portfolio may invest its assets
in securities denominated in foreign currencies; however,
the Portfolio will normally hedge at least 75% of its
exposure to foreign currency to reduce the risk of loss due
to fluctuations in currency exchange rates through forward
foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currencies and
foreign currency futures contracts.
The Portfolio may invest its assets in securities
issued or guaranteed by the U.S. Government, its agencies
or instrumentalities.
The Portfolio may invest in instruments of any
maturity, and the average portfolio duration of this
Portfolio varies, and will not normally exceed eight years,
based on the adviser's or sub-adviser's forecast for
interest rates. Duration is a measure of the expected life
of a fixed income security that is used to determine the
sensitivity of a security's price to changes in interest
rates. The longer a security's duration, the more sensitive
it will be to changes in interest rates. Similarly, a
portfolio with a longer average portfolio duration will be
more sensitive to changes in interest rates than a
portfolio with a shorter average portfolio duration.
The Portfolio may invest all of its assets in
derivative instruments, such as options, futures contracts
or swap agreements. The Portfolio may lend its portfolio
securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly
in the securities in which it primarily invests, the
Portfolio may use other investment techniques to gain
exposure to market movements related to such securities,
such as entering into a series of contracts to buy or sell
such securities. The "total return" sought by the Portfolio
consists of income earned on its investments, plus capital
appreciation, if any, which generally arises from decreases
in interest rates or improving credit fundamentals for a
particular sector or security.
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<PAGE>
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Principal Risks Among the principal risks of investing in the Portfolio,
which could adversely affect its net asset value, yield and
total return, are:
o Interest Rate Risk o Derivatives Risk
o Credit Risk o Liquidity Risk
o Market Risk o Management Risk
o Foreign Investment Risk o Non-diversification Risk
o Currency Risk
o Leveraging Risk
o Issuer Risk
o High Yield Risk
o Emerging Market Risk
Please see "Summary of Principal Risks" for a description of
these and other principal risks of investing in the
Portfolio.
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Performance No performance information is available for the Portfolio
Information because it has not yet been in operation for a full calendar
year. In the future, the Portfolio will disclose performance
information in a bar chart and performance table. Such
disclosure will give some indication of the risks of an
investment in the Portfolio by comparing the Portfolio's
performance with a broad measure of market performance and
by showing changes in the Portfolio's performance from year
to year.
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Fees and Expenses These tables describe the fees and expenses you may pay
Portfolio of the if you buy and hold shares of the Portfolio(1):
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Maximum Sales Charge (Load) Maximum Contingent Deferred Sales Charge
Imposed on Purchases (as (Load) (as a percentage of original
a percentage of offering price) purchase price)
=============================================================================================
<S> <C> <C>
FISH: Series C 0% 0%
=============================================================================================
</TABLE>
Annual Portfolio Operating Expenses (expenses that are
deducted from Portfolio assets)
<TABLE>
<CAPTION>
Total
Annual
Portfolio
Distribution and/or Operating
Advisory Fees Service (12b-1) Fees Other Expenses Expenses
=============================================================================================
<S> <C> <C> <C> <C>
FISH: Series C 0% 0% 0% 0%
=============================================================================================
</TABLE>
Examples: The examples are intended to help you compare the
cost of investing in shares of the FISH: Series C with the
costs of investing in other mutual funds. The Examples
assume that you invest $10,000 in the shares of the
Portfolio for the time periods indicated, that your
investment has a 5% return each year, the reinvestment of
all dividends and distributions, and that the Portfolio's
operating expenses remain the same. Although your actual
costs may be higher or lower, the Examples show what your
costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your Example: Assuming you do not
shares at the end of each period redeem your shares
Year 1 Year 3 Year 1 Year 3
===========================================================================================
<S> <C> <C> <C> <C>
FISH: Series C $0 $0 $0 $0
===========================================================================================
</TABLE>
(1) The tables show fees and expenses of the Portfolio as 0%, reflecting the
fact that no fees or expenses are charged by the Portfolio. You should be
aware, however, that the Portfolio is an integral part of "wrap-fee" programs
sponsored by investment advisers unaffiliated with the Portfolio or PIMCO.
Typically, participants in these programs pay a "wrap" fee to their investment
adviser. You should read carefully the wrap-fee brochure provided to you by
your investment adviser. The brochure is required to include information about
the fees charged by your adviser and the fees paid by your adviser to PIMCO.
You pay no additional fees or expenses to purchase shares of the Portfolio.
-4-
<PAGE>
FISH: Series M
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Principal Investment Objective Portfolio Focus
Investments and Seeks maximum total return, Intermediate maturity fixed
Strategies consistent with preservation of income securities
capital and prudent investment
management Average Portfolio Duration
0-8 years
Credit Quality
B to Aaa; maximum 50% below Baa
Dividend Frequency
Declared daily and distributed monthly
The FISH: Series M seeks to achieve its investment objective
by investing primarily in a portfolio of mortgage and other
asset-backed securities, including:
o mortgage pass-through securities;
o collateralized mortgage obligations;
o commercial mortgage-backed securities;
o mortgage dollar rolls;
o stripped mortgage-backed securities;
o debt securities issued by states or local governments
and their agencies, authorities and other instrumen-
talities;
o bank certificates of deposit, fixed time deposits and
bankers' acceptances; and
o other securities that directly or indirectly represent a
participation in, or are secured by and payable from,
mortgage loans on real property.
The Portfolio may invest up to 45% of its assets in
securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.
The Portfolio may invest in instruments of any
maturity, and the average portfolio duration of this
Portfolio varies, and will not normally exceed eight
years, based on the investment adviser's or sub-adviser's
forecast for interest rates.
The Portfolio may invest up to 50% of its assets in
high yield mortgage-backed securities (commonly known as
"junk bonds"), including commercial mortgage-backed
securities, rated B or higher by Standard & Poor's Rating
Service or Moody's Investors Service, Inc. or, if unrated,
determined by the Portfolio's investment adviser or
sub-adviser to be of comparable quality.
The Portfolio may invest all of its assets in
derivative instruments, such as options, futures contracts
or swap agreements. The Portfolio may lend its portfolio
securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly
in the securities in which it primarily invests, the
Portfolio may use other investment techniques to gain
exposure to market movements related to such securities,
such as entering into a series of contracts to buy or sell
such securities. The "total return" sought by the Portfolio
consists of income earned on its investments, plus capital
appreciation, if any, which generally arises from decreases
in interest rates or improving credit fundamentals for a
particular sector or security.
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Principal Risks Among the principal risks of investing in the Portfolio,
which could adversely affect its net asset value, yield and
total return, are:
o Mortgage Risk o Derivatives Risk
o Interest Rate Risk o Liquidity Risk
o Credit Risk o Management Risk
o Market Risk o Non-diversification Risk
o Currency Risk
o Leveraging Risk
o Issuer Risk
o High Yield Risk
Please see "Summary of Principal Risks" for a description of
these and other principal risks of investing in the
Portfolio.
- --------------------------------------------------------------------------------
Performance No performance information is available for the Portfolio
Information because it has not yet been in operation for a full calendar
year. In the future, the Portfolio will disclose performance
information in a bar chart and performance table. Such
disclosure will give some indication of the risks of an
investment in the Portfolio by comparing the Portfolio's
performance with a broad measure of market performance and
by showing changes in the Portfolio's performance from year
to year.
-5-
<PAGE>
Fees and Expenses These tables describe the fees and expenses you may pay if
of the Portfolio you buy and hold shares of the Portfolio(2):
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Maximum Contingent Deferred
Maximum Sales Charge (Load) Sales Charge (Load)
Imposed on Purchases (as (as a percentage of original
a percentage of offering price) purchase price)
=============================================================================================
<S> <C> <C>
FISH: Series M 0% 0%
=============================================================================================
</TABLE>
Annual Portfolio Operating Expenses (expenses that are
deducted from Portfolio assets)
<TABLE>
<CAPTION>
Total
Annual
Portfolio
Distribution and/or Operating
Advisory Fees Service (12b-1) Fees Other Expenses Expenses
=============================================================================================================
<S> <C> <C> <C> <C>
FISH: Series M 0% 0% 0% 0%
=============================================================================================================
</TABLE>
Examples: The examples are intended to help you compare the
cost of investing in shares of the FISH: Series C with the
costs of investing in other mutual funds. The Examples
assume that you invest $10,000 in the shares of the
Portfolio for the time periods indicated, that your
investment has a 5% return each year, the reinvestment of
all dividends and distributions, and that the Portfolio's
operating expenses remain the same. Although your actual
costs may be higher or lower, the Examples show what your
costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your Example: Assuming you do not
shares at the end of each period redeem your shares
Year 1 Year 3 Year 1 Year 3
=========================================================================================================
<S> <C> <C> <C> <C>
FISH: Series M $0 $0 $0 $0
=========================================================================================================
</TABLE>
(2) The tables show fees and expenses of the Portfolio as 0%, reflecting the
fact that no fees or expenses are charged by the Portfolio. You should be
aware, however, that the Portfolio is an integral part of "wrap-fee" programs
sponsored by investment advisers unaffiliated with the Portfolio or PIMCO.
Typically, participants in these programs pay a "wrap" fee to their investment
adviser. You should read carefully the wrap-fee brochure provided to you by
your investment adviser. The brochure is required to include information about
the fees charged by your adviser and the fees paid by your adviser to PIMCO.
You pay no additional fees or expenses to purchase shares of the Portfolio.
-6-
<PAGE>
Summary of Principal Risks
The value of your investment in a Portfolio changes with
the values of that Portfolio's investments. Many factors
can affect those values. The factors that are most likely
to have a material effect on a particular Portfolio's
portfolio as a whole are called "principal risks." The
principal risks of each Portfolio are identified in the
Portfolio Summaries and are summarized in this section.
Each Portfolio may be subject to additional principal risks
and risks other than those described below because the
types of investments made by a Portfolio can change over
time. Securities and investment techniques mentioned in
this summary and described in greater detail under
"Characteristics and Risks of Securities and Investment
Techniques" appear in bold type. That section and
"Investment Objectives and Policies" in the Statement of
Additional Information also include more information about
the Portfolios, their investments and the related risks.
There is no guarantee that a Portfolio will be able to
achieve its investment objective.
Interest Rate Risk As interest rates rise, the value of fixed income
securities in a Portfolio's portfolio are likely to
decrease. Securities with longer durations tend to be more
sensitive to changes in interest rates, usually making them
more volatile than securities with shorter durations.
Some investments give the issuer the option to call,
or redeem, these investments before their maturity date. If
an issuer "calls" its security during a time of declining
interest rates, a Portfolio might have to reinvest the
proceeds in an investment offering a lower yield, and
therefore might not benefit from any increase in value as a
result of declining interest rates.
Credit Risk A Portfolio could lose money if the issuer or guarantor of
a fixed income security, or the counterparty to a
derivatives contract, repurchase agreement or loan of
portfolio securities, is unable or unwilling to make timely
principal and/or interest payments, or to otherwise honor
its obligations. Securities are subject to varying degrees
of credit risk, which are often reflected in credit
ratings. Municipal bonds are subject to the risk that
litigation, legislation or other political events, local
business or economic conditions, or the bankruptcy of the
issuer could have a significant effect on an issuer's
ability to make payments of principal and/or interest.
High Yield Risk Each Portfolio, through its investments in high yield
securities and unrated securities of similar credit quality
(commonly known as "junk bonds"), may be subject to greater
levels of interest rate, credit and liquidity risk than
portfolios that do not invest in such securities. High
yield securities are considered predominantly speculative
with respect to the issuer's continuing ability to make
principal and interest payments. An economic downturn or
period of rising interest rates could adversely affect the
market for high yield securities and reduce the Portfolio's
ability to sell its high yield securities (liquidity risk).
Market Risk The market price of securities owned by a Portfolio may go
up or down, sometimes rapidly or unpredictably. Securities
may decline in value due to factors affecting securities
markets generally or particular industries represented in
the securities markets. The value of a security may decline
due to general market conditions which are not specifically
related to a particular company, such as real or perceived
adverse economic conditions, changes in the general outlook
for corporate earnings, changes in interest or currency
rates or adverse investor sentiment generally. They may
also decline due to factors which affect a particular
industry or industries, such as labor shortages or
increased production costs and competitive conditions
within an industry.
Issuer Risk The value of a security may decline for a number of reasons
which directly relate to the issuer, such as management
performance, financial leverage and reduced demand for the
issuer's goods and services.
Liquidity Risk Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing a
Portfolio from selling such illiquid securities at an
advantageous time or price. The FISH: Series C's
investments in foreign securities, and each of the
Portfolio's investments in derivatives or securities with
substantial market and/or credit risk, tend to have the
greatest exposure to liquidity risk.
Derivatives Risk Each Portfolio may use derivatives, which are financial
contracts whose value depends on, or is derived from, the
value of an underlying asset, reference rate or index. The
various derivative instruments that the Portfolios may use
are referenced under "Characteristics and Risks of
Securities and Investment Techniques--Derivatives" in this
Prospectus and described in more detail under "Investment
Objectives
-7-
<PAGE>
and Policies" in the Statement of Additional Information.
The Portfolios may sometimes use derivatives as part of a
strategy designed to reduce exposure to other risks, such
as interest rate or currency risk. The Portfolios may also
use derivatives for leverage, in which case their use would
involve leveraging risk. A Portfolio's use of derivative
instruments may involve risks different from, or greater
than, the risks associated with investing directly in
securities and other traditional investments. Derivatives
are subject to a number of risks described elsewhere in
this section, such as liquidity risk, interest rate risk,
market risk, credit risk and management risk. They also
involve the risk of mispricing or improper valuation and
the risk that changes in the value of the derivative may
not correlate perfectly with the underlying asset, rate or
index. A Portfolio investing in a derivative instrument
could lose more than the principal amount invested. Also,
suitable derivative transactions may not be available in
all circumstances and there can be no assurance that a
Portfolio will engage in these transactions to reduce
exposure to other risks when that would be beneficial. In
addition, a Portfolio's use of derivatives may increase the
taxes payable by shareholders.
Mortgage Risk The FISH: Series M, which purchases mortgage-related and
other asset-backed securities, is subject to certain
additional risks. Rising interest rates tend to extend the
duration of mortgage-related and other asset-backed
securities, making them more sensitive to changes in
interest rates. As a result, in a period of rising interest
rates, a Portfolio that holds mortgage-related and other
asset-backed securities may exhibit additional volatility.
This is known as extension risk. In addition,
mortgage-related securities are subject to prepayment risk.
When interest rates decline, borrowers may pay off their
mortgages sooner than expected. This can reduce the returns
of the Portfolio because it will have to reinvest that
money at the lower prevailing interest rates.
Foreign Investment The FISH: Series C, which invests in part in foreign fixed
Risk income securities, may experience more rapid and extreme
changes in value than a portfolio that invests exclusively
in fixed income securities of U.S. companies. The
securities markets of many foreign countries are relatively
small, with a limited number of companies representing a
small number of industries. Additionally, issuers of
foreign securities are usually not subject to the same
degree of regulation as U.S. issuers. Reporting, accounting
and auditing standards of foreign countries differ, in some
cases significantly, from U.S. standards. Also,
nationalization, expropriation or confiscatory taxation,
currency blockage, political changes or diplomatic
developments could adversely affect the Portfolio's
investments in a foreign country. In the event of
nationalization, expropriation or other confiscation, the
Portfolio could lose its entire investment in foreign
securities. Adverse conditions in a certain region can
adversely affect securities of other countries whose
economies appear to be unrelated. To the extent that the
Portfolio invests a significant portion of its assets in a
concentrated geographic area like Eastern Europe or Asia,
the Portfolio will generally have more exposure to regional
economic risks associated with foreign investments.
Emerging Markets Because the FISH: Series C may invest to a limited
Risk extent in emerging market fixed income securities of
issuers based in countries with developing economies,
foreign investment risk may be particularly high.
These securities may present market, credit, currency,
liquidity, legal, political and other risks different
from, or greater than, the risks of investing in
developed foreign countries.
Currency Risk Because the FISH: Series C invests directly in foreign
currencies or in securities that trade in, and receive
revenues in, foreign currencies, it is subject to the risk
that those currencies will decline in value relative to the
U.S. Dollar, or, in the case of hedging positions, that the
U.S. Dollar will decline in value relative to the currency
being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for a
number of reasons, including changes in interest rates,
intervention (or the failure to intervene) by U.S. or
foreign governments, central banks or supranational
entities such as the International Monetary Fund, and by
the imposition of currency controls or other political
developments in the U.S. or abroad.
Non-diversification Focusing investments in a small number of issuers
Risk increases risk. Each Portfolio is "non-diversified,"
which means that it may invest a greater percentage
of its assets in the securities of a single issuer
than "diversified" funds. Portfolios that invest in a
relatively small number of issuers are more susceptible
to risks associated with a single economic, political
or regulatory occurrence than a more diversified portfolio
might be. Some of those issuers also may present
substantial credit or other risks.
Leveraging Risk Each of the Portfolios may engage in transactions that give
rise to a form of leverage. Such transactions may include,
among others, reverse repurchase agreements, loans of
portfolio securities, and the use
-8-
<PAGE>
of when-issued, delayed delivery or forward commitment
transactions. The use of derivatives may also create
leveraging risk. To mitigate leveraging risk, PIMCO will
segregate liquid assets or otherwise cover the transactions
that may give rise to such risk. The use of leverage may
cause a Portfolio to liquidate portfolio positions when it
may not be advantageous to do so to satisfy its obligations
or to meet segregation requirements. Leverage, including
borrowing, will cause a Portfolio to be more volatile than
if the Portfolio had not been leveraged. This is because
leverage tends to exaggerate the effect of any increase or
decrease in the value of a Portfolio's securities.
Smaller Company The general risks associated with fixed income securities
Risk are particularly pronounced for securities issued by
companies with smaller market capitalizations. These
companies may have limited product lines, markets or
financial resources or may depend on a few key
employees. As a result, they may be subject to greater
levels of credit, market and issuer risk. Securities of
smaller companies may trade less frequently and in lesser
volumes than more widely held securities, and their values
may fluctuate more sharply than other securities. Companies
with medium-sized market capitalizations may have risks
similar to those of smaller companies.
Management Risk Each Portfolio is subject to management risk because it is
an actively managed investment portfolio. Each Portfolio's
sub-adviser and each individual portfolio manager will
apply investment techniques and risk analyses in making
investment decisions for the Portfolios, but there can be
no guarantee that these will produce the desired results.
Management of the Portfolios
Investment Adviser, PIMCO Advisors L.P. serves as the investment adviser for
Sub-adviser and the Portfolios. Pacific Investment Management Company
Administrator ("PIMCO") serves as the sub-adviser for the Portfolios.
PIMCO Advisory Services serves as the administrator and
sole trading desk for purchases and redemptions of
Portfolio shares. Subject to the supervision of the Board
of Trustees, PIMCO is responsible for managing the
investment activities of the Portfolios, PIMCO Advisors
L.P. is responsible for managing the Portfolios' business
affairs, and PIMCO Advisory Services, in its role as the
administrator, is responsible for other administrative
matters.
PIMCO Advisors L.P. is located at 800 Newport Center
Drive, Newport Beach, California 92660. Organized in 1987,
PIMCO Advisors L.P. provides investment management and
advisory services to private accounts of institutional and
individual clients and to mutual funds. As of December 31,
1999, PIMCO Advisors L.P. and its subsidiary partnerships
had more than $260 billion in assets under management.
PIMCO is located at 840 Newport Center Drive, Newport
Beach, California 92660. Organized in 1971, PIMCO provides
investment management and advisory services to private
accounts of institutional and individual clients and to
mutual funds. As of December 31, 1999, PIMCO had
approximately $186 billion in assets under management.
PIMCO Advisory Services is located at 1345 Avenue of
the Americas, New York, New York 10105.
Advisory Fees Neither Portfolio pays any advisory or other fees.
Individual A team of investment professionals, led by William H.
Portfolio Managers Gross, a founding partner of PIMCO, has had primary
responsibility for managing the Portfolios since their
inception. For the past five years, Mr. Gross has been
Managing Director and Chief Investment Officer of PIMCO.
Distributor The Portfolios' Distributor is PIMCO Funds Distributors
LLC, a wholly owned subsidiary of PIMCO Advisors. The
Distributor, located at 2187 Atlantic Street, Stamford,
Connecticut 06902, is a broker-dealer registered with the
SEC.
Purchases and Redemptions
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<PAGE>
Purchasing Shares Investors may purchase Portfolio shares at the relevant net
asset value of that Portfolio without a sales charge or
other fee.
Shares of the Portfolios are offered exclusively to
registered investment advisers approved by PIMCO Advisory
Services.
o Timing of Purchase Orders and Share Price Calculations. A
purchase order initiated by PIMCO Advisory Services, in its
role as the trading desk, prior to 4:00 p.m., Eastern
time, on a day the Portfolios are open for business, will
be effected at that day's net asset value. An order
received after 4:00 p.m., Eastern time will be effected at
the net asset value determined on the next business day.
The Portfolios are "open for business" on each day the
New York Stock Exchange is open for trading. Purchase
orders will be accepted only on days on which the
Portfolios are open for business.
o Initial Investment. Registered investment advisers may
open an account by submitting an executed Client Agreement,
a copy of which is mailed to PIMCO Advisory Services at
1345 Avenue of the Americas, New York, New York 10105.
There are no maximum or minimum initial investment
requirements.
o Additional Investments. Additonal shares can be purchased
only through PIMCO Advisory Services, and payment must be
wired in federal funds to the transfer agent.
o Other Purchase Information. Purchases of a Portfolio's
shares will be made only in full shares. Certificates for
shares will not be issued. The payment for shares to be
purchased shall be wired to the Portfolio's transfer agent.
Each of the Portfolios, acting through PIMCO Advisory
Services, in its role as the administrator, reserves the
right, in its sole discretion, to suspend the offering of
shares of the Portfolios or to reject any purchase order,
in whole or in part, when, in the judgment of management,
such suspension or rejection is in the best interests of
the Portfolios.
An investor should invest in the Portfolios for
long-term investment purposes only. The Portfolios, acting
through PIMCO Advisory Services, in its role as the
administrator, each reserve the right to restrict purchases
of Portfolio shares when a pattern of frequent purchases
and sales made in response to short-term fluctuations in
share price appears evident. Notice of any such
restrictions, if any, will vary according to the particular
circumstances.
o Redemption by Electronic Transmission. Shares can be
redeemed only through PIMCO Advisory Services, in its role
as the trading desk.
o Other Redemption Information. Redemption requests for
Portfolio shares are effected at the net asset value per
share next determined after receipt of a redemption request
by PIMCO Advisory Services, in its role as the trading
desk. A redemption request received by the transfer agent
prior to 4:00 p.m., Eastern time, on a day the Portfolios
are open for business, is effected on that day. A
redemption request received
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<PAGE>
after that time is effected on the next business day.
Redemption proceeds will be wired to the registered
investment adviser within one business day after the
redemption request, but may take up to three business days.
Redemption proceeds will be sent by wire only. The
Portfolios may suspend the right of redemption or postpone
the payment date at times when the New York Stock Exchange
is closed, or during certain other periods as permitted
under the federal securities laws.
Each Portfolio reserves the right to redeem shares
of any registered investment adviser at the then-current
value of such shares (which will be paid promptly to the
registered investment adviser) if the registered investment
adviser is no longer approved by PIMCO Advisory Services. A
registered investment adviser will receive advance notice
of any such mandatory redemption.
It is highly unlikely that shares would ever be
redeemed in kind. However, in consideration of the best
interests of the remaining investors, each Portfolio
reserves the right to pay any redemption proceeds exceeding
this amount in whole or in part by a distribution in kind
of securities held by the Portfolio in lieu of cash. Each
Portfolio agrees to redeem shares solely in cash up to the
lesser of $250,000 or 1% of the Portfolio's net assets
during any 90-day period for any one registered investment
adviser. When shares are redeemed in kind, the redeeming
registered investment adviser should expect to incur
transaction costs upon the disposition of the securities
received in the distribution.
How Portfolio Shares Are Priced
The net asset value of a Portfolio's shares is determined
by dividing the total value of a Portfolio's investments
and other assets attributable to that Portfolio, less any
liabilities, by the total number of shares outstanding of
that Portfolio.
For purposes of calculating net asset value,
portfolio securities and other assets for which market
quotes are available are stated at market value. Market
value is generally determined on the basis of last reported
sales prices or, if no sales are reported, based on quotes
obtained from a quotation reporting system, established
market makers, or pricing services. Certain securities or
investments for which daily market quotations are not
readily available may be valued, pursuant to guidelines
established by the Board of Trustees, with reference to
other securities or indices. Short-term investments having
a maturity of 60 days or less are generally valued at
amortized cost. Exchange traded options, futures and
options on futures are valued at the settlement price
determined by the exchange. Other securities for which
market quotes are not readily available are valued at fair
value as determined in good faith by the Board of Trustees
or persons acting at their direction.
Investments initially valued in foreign currencies
are converted to U.S. dollars using foreign exchange rates
obtained from pricing services. As a result, the net asset
value of a Portfolio's shares may be affected by changes in
the value of foreign currencies in relation to the U.S.
dollar. The value of securities traded in foreign markets
or denominated in foreign currencies may be affected
significantly on a day that the New York Stock Exchange is
closed and an investor is not able to buy or redeem shares.
Portfolio shares are valued at 4:00 p.m., Eastern
time on each day that the New York Stock Exchange and the
Portfolios are open. For purposes of calculating the net
asset value, information that becomes known to the
Portfolios or their agents after the net asset value has
been calculated on a particular day will not generally be
used to retroactively adjust the price of a security or the
net asset value determined earlier that day.
In unusual circumstances, instead of valuing
securities in the usual manner, the Portfolios may value
securities at fair value or estimate their value as
determined in good faith by the Board of Trustees,
generally based upon recommendations provided by PIMCO.
Fair valuation may also be used if extraordinary events
occur after the close of the relevant market but prior to
4:00 p.m. Eastern time.
Portfolio Distributions
Each Portfolio distributes substantially all of its net
investment income to shareholders investing in the
Portfolio in the form of dividends. An investment in
Portfolio shares begins earning dividends on the
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shares the day after the Portfolio receives the related
purchase payment. Dividends are paid monthly on the last
business day of the month.
In addition, each Portfolio distributes any net
capital gains it earns from the sale of portfolio
securities to shareholders investing in the Portfolio no
less frequently than annually. Net short-term capital gains
may be paid more frequently.
A Portfolio's dividend and capital gain distributions
will be paid only in cash. Dividends will not reinvest.
Tax Consequences
o Taxes on Portfolio Distributions. A shareholder subject
to U.S. federal income tax will be subject to tax on
Portfolio distributions. For federal income tax purposes,
Portfolio distributions will be taxable to the shareholder
as either ordinary income or capital gains.
Portfolio dividends (i.e., distributions of investment
income) are taxable to shareholders investing in the
Portfolio as ordinary income. Federal taxes on Portfolio
distributions of gains are determined by how long the
Portfolio owned the investments that generated the gains,
rather than how long a shareholder has owned the shares.
Distributions of gains from investments that a Portfolio
owned for more than 12 months will generally be taxable to
shareholders as capital gains. Distributions of gains from
investments that the Portfolio owned for 12 months or less
will generally be taxable as ordinary income.
Portfolio distributions are taxable to shareholders
even if they are paid from income or gains earned by a
Portfolio prior to the shareholder's investment and thus
were included in the price paid for the shares. For
example, a shareholder who purchases shares on or just
before the record date of a Portfolio distribution will pay
full price for the shares and may receive a portion of his
or her investment back as a taxable distribution.
A Portfolio's investment in certain debt obligations
(including obligations issued with market discount,
zero-coupon bonds, pay-in-kind securities, catastrophe
bonds, and metal-indexed notes) may cause the Portfolio to
recognize taxable income in excess of the cash generated by
such obligations. Thus, the Portfolio could be required at
times to liquidate other investments in order to distribute
all of its net income and gain annually.
The FISH: Series C's investment in foreign securities
may be subject to foreign withholding taxes. In that case,
the Portfolio's yield on these securities would be
decreased. Shareholders generally will not be entitled to
claim a credit or deduction with respect to foreign taxes.
In addition, the Portfolio's investment in foreign
securities or foreign currencies may increase or accelerate
the Portfolio's recognition of ordinary income and may
affect the timing or amount of the Portfolio's
distributions.
o Taxes on Redemption of Shares. Any gain resulting from
the sale of Portfolio shares will generally be subject to
federal income tax.
This section relates only to federal income tax; the
consequences under other tax laws may differ. Shareholders
should consult their tax advisors as to the possible
application of foreign, state and local income tax laws to
Portfolio dividends and capital distributions. Please see
the Statement of Additional Information for additional
information regarding the tax aspects of investing in the
Portfolios.
Characteristics and Risks of
Securities and Investment Techniques
This section provides additional information about some of
the principal investments and related risks of the
Portfolios described under "Summary Information" above. It
also describes characteristics and risks of additional
securities and investment techniques that may be used by
the Portfolios from time to time. Most of these securities
and investment techniques are discretionary, which means
that PIMCO can decide whether to use them or not. This
Prospectus does not attempt to disclose all of the various
types
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of securities and investment techniques that may be used by
the Portfolios. As with any portfolio, investors in the
Portfolios rely on the professional investment judgment and
skill of PIMCO and the individual portfolio managers.
Please see "Investment Objectives and Policies" in the
Statement of Additional Information for more detailed
information about the securities and investment techniques
described in this section and about other strategies and
techniques that may be used by the Portfolios.
Securities The total return sought by a Portfolio consists of both
Selection income earned on a Portfolio's investments and capital
appreciation, if any, arising from increases in the market
value of a Portfolio's holdings. Capital appreciation of
fixed income securities generally results from decreases in
market interest rates or improving credit fundamentals for
a particular market sector or security.
In determining what securities to buy or sell for a
Portfolio, PIMCO develops an outlook for interest rates,
foreign currency exchange rates and the economy, analyzes
credit and call risks, and uses other security selection
techniques. The proportion of a Portfolio's assets
committed to investment in securities with particular
characteristics (such as quality, sector, interest rate or
maturity) varies based on PIMCO's outlook for the U.S. and
foreign economies, the financial markets and other factors.
A Portfolio will sell a security when PIMCO believes the
Portfolio is more likely to achieve its objective by
investing the proceeds elsewhere.
PIMCO attempts to identify areas of the bond market
that are undervalued relative to the rest of the market.
PIMCO identifies these areas by grouping bonds into the
following sectors: money markets, governments, corporates,
mortgages, asset-backed and international. Sophisticated
proprietary software then assists in evaluating sectors and
pricing specific securities. Once investment opportunities
are identified, PIMCO will shift assets among sectors
depending upon changes in relative valuations and credit
spreads. There is no guarantee that PIMCO's security
selection techniques will produce the desired results.
U.S. Government U.S. Government securities are obligations of, or
Securities guaranteed by, the U.S. Government, its agencies or
instrumentalities. U.S. Government securities are subject
to market and interest rate risk, and may be subject to
varying degrees of credit risk. U.S. Government securities
include zero coupon securities, which tend to be subject to
greater market risk than interest-paying securities of
similar maturities.
Corporate Debt Corporate debt securities are subject to the risk of the
Securities issuer's inability to meet principal and interest payments
on the obligation and may also be subject to price
volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of
the issuer and general market liquidity. When interest
rates rise, the value of corporate debt securities can be
expected to decline. Debt securities with longer maturities
tend to be more sensitive to interest rate movements than
those with shorter maturities.
Variable and Variable and floating rate securities provide for a
Floating Rate periodic adjustment in the interest rate paid on the
Securities obligations. Each Portfolio may invest in floating rate
debt instruments and engage in credit spread trades. While
floating rate debt instruments provide a certain degree of
protection against rises in interest rates, a Portfolio
will participate in any declines in interest rates as well.
Each Portfolio may also invest in inverse floating rate
debt instruments. An inverse floating rate debt instrument
may exhibit greater price volatility than a fixed rate
obligation of similar credit quality. A Portfolio may not
invest more than 40% of its net assets in any combination
of inverse floating rate debt instruments, interest-only,
or principal-only securities.
Foreign Securities Investing in foreign securities involves special risks and
considerations not typically associated with investing in
U.S. securities. Registered investment advisers should
consider carefully the substantial risks involved for the
FISH: Series C, which invests in securities issued by
foreign companies and governments of foreign countries.
These risks include: differences in accounting, auditing
and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or
exchange control regulations; and political instability.
Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as
growth of gross domestic product, rates of inflation,
capital reinvestment, resources, self-sufficiency and
balance of payments position. The securities markets,
values of securities, yields and risks associated with
foreign securities markets may change independently of each
other. Also, foreign securities and dividends and interest
payable on those securities may be subject to foreign
taxes, including taxes withheld from payments on those
securities. Foreign securities often trade with less
frequency and volume than domestic securities and therefore
may
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exhibit greater price volatility. Investments in foreign
securities may also involve higher custodial costs than
domestic investments and additional transaction costs with
respect to foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities
denominated or quoted in foreign currencies.
Emerging Market Securities. The FISH: Series C may
invest up to 15% of its assets in securities of issuers
based in developing (or "emerging market") countries.
Investing in emerging market securities imposes risks
different from, or greater than, risks of investing in
domestic securities or in foreign, developed countries.
These risks include: smaller market capitalization of
securities markets, which may suffer periods of relative
illiquidity; significant price volatility; restrictions on
foreign investment and possible repatriation of investment
income and capital. In addition, foreign investors may be
required to register the proceeds of sales; future economic
or political crises could lead to price controls, forced
mergers, expropriation or confiscatory taxation, seizure,
nationalization, or creation of government monopolies. The
currencies of emerging market countries may experience
significant declines against the U.S. dollar, and
devaluation may occur subsequent to investments in these
currencies by a Portfolio. Inflation and rapid fluctuations
in inflation rates have had, and may continue to have,
negative effects on the economies and securities markets of
certain emerging market countries.
Additional risks of emerging markets securities may
include: greater social, economic and political uncertainty
and instability; more substantial governmental involvement
in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques;
companies that are newly organized and small; differences
in auditing and financial reporting standards, which may
result in unavailability of material information about
issuers; and less developed legal systems. In addition,
emerging securities markets may have different clearance
and settlement procedures, which may be unable to keep pace
with the volume of securities transactions or otherwise
make it difficult to engage in such transactions.
Settlement problems may cause a Portfolio to miss
attractive investment opportunities, hold a portion of its
assets in cash pending investment, or be delayed in
disposing of a portfolio security. Such a delay could
result in possible liability to a purchaser of the
security.
The FISH: Series C may invest in Brady Bonds, which
are securities created through the exchange of existing
commercial bank loans to sovereign entities for new
obligations in connection with a debt restructuring.
Investments in Brady Bonds may be viewed as speculative.
Brady Bonds acquired by the Portfolio may be subject to
restructuring arrangements or to requests for new credit,
which may cause the Portfolio to suffer a loss of interest
or principal on any of its holdings.
Foreign Currencies The FISH: Series C, which may invest directly in foreign
currencies or in securities that trade in, or receive
revenues in, foreign currencies, is subject to currency
risk. Foreign currency exchange rates may fluctuate
significantly over short periods of time. They generally
are determined by supply and demand in the foreign exchange
markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates
and other complex factors. Currency exchange rates also can
be affected unpredictably by intervention (or the failure
to intervene) by U.S. or foreign governments or central
banks, or by currency controls or political developments.
For example, significant uncertainty surrounds the recent
introduction of the euro (a common currency unit for the
European Union) in January 1999 and the effect it may have
on the value of securities denominated in local European
currencies. These and other currencies in which the
Portfolio's assets are denominated may be devalued against
the U.S. dollar, resulting in a loss to the Portfolio.
Foreign Currency Transactions. The FISH: Series C may
enter into forward foreign currency exchange contracts and
invest in foreign currency futures contracts and options on
foreign currencies and futures. A forward foreign currency
exchange contract, which involves an obligation to purchase
or sell a specific currency at a future date at a price set
at the time of the contract, reduces the Portfolio's
exposure to changes in the value of the currency it will
deliver and increases its exposure to changes in the value
of the currency it will receive for the duration of the
contract. The effect on the value of the Portfolio is
similar to selling securities denominated in one currency
and purchasing securities denominated in another currency.
A contract to sell foreign currency would limit any
potential gain which might be
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realized if the value of the hedged currency increases. The
Portfolio may enter into these contracts to hedge against
foreign exchange risk, to increase exposure to a foreign
currency or to shift exposure to foreign currency
fluctuations from one currency to another. Suitable hedging
transactions may not be available in all circumstances, and
there can be no assurance that the Portfolio will engage in
such transactions at any given time or from time to time.
Also, such transactions may not be successful and may
eliminate any chance for a Portfolio to benefit from
favorable fluctuations in relevant foreign currencies. The
Portfolio may use one currency (or a basket of currencies)
to hedge against adverse changes in the value of another
currency (or basket of currencies) when exchange rates
between the two currencies are positively correlated. The
Portfolio will segregate assets determined to be liquid by
PIMCO in accordance with procedures established by the
Board of Trustees to cover its obligations under forward
foreign currency exchange contracts entered into for
non-hedging purposes.
High Yield Securities rated lower than Baa by Moody's Investors
Securities Service, Inc. or lower than BBB by Standard & Poor's
Ratings Services are sometimes referred to as "high yield"
or "junk" bonds. Investing in high yield securities
involves special risks in addition to the risks associated
with investments in higher-rated fixed income securities.
While offering a greater potential opportunity for capital
appreciation and higher yields, high yield securities
typically entail greater potential price volatility and may
be less liquid than higher-rated securities. High yield
securities may be regarded as predominantly speculative
with respect to the issuer's continuing ability to meet
principal and interest payments. They may also be more
susceptible to real or perceived adverse economic and
competitive industry conditions than higher-rated
securities.
Credit Ratings and Unrated Securities. Rating agencies
are private services that provide ratings of the credit
quality of fixed income securities, including convertible
securities. Appendix A to the Prospectus describes the
various ratings assigned to fixed income securities by
Moody's and S&P. Ratings assigned by a rating agency are
not absolute standards of credit quality and do not
evaluate market risks. Rating agencies may fail to make
timely changes in credit ratings, and an issuer's current
financial condition may be better or worse than a rating
indicates. A Portfolio will not necessarily sell a security
when its rating is reduced below its rating at the time of
purchase. PIMCO does not rely solely on credit ratings, and
develops its own analysis of issuer credit quality.
A Portfolio may purchase unrated securities (which are
not rated by a rating agency) if its portfolio manager
determines that the security is of comparable quality to a
rated security that the Portfolio may purchase. Unrated
securities may be less liquid than comparable rated
securities and involve the risk that the portfolio manager
may not accurately evaluate the security's comparative
credit rating. Analysis of the creditworthiness of issuers
of high yield securities may be more complex than for
issuers of higher-quality fixed income securities. To the
extent that a Portfolio invests in high yield and/or
unrated securities, the Portfolio's success in achieving
its investment objective may depend more heavily on the
portfolio manager's creditworthiness analysis than if the
Portfolio invested exclusively in higher-quality and rated
securities.
Inflation-Indexed Inflation-indexed bonds are fixed income securities whose
Bonds principal value is periodically adjusted according to the
rate of inflation. If the index measuring inflation falls,
the principal value of inflation-indexed bonds will be
adjusted downward, and consequently the interest payable on
these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the
original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury
inflation-indexed bonds. For bonds that do not provide a
similar guarantee, the adjusted principal value of the bond
repaid at maturity may be less than the original principal.
The value of inflation-indexed bonds is expected to change
in response to changes in real interest rates. Real
interest rates are tied to the relationship between nominal
interest rates and the rate of inflation. If nominal
interest rates increase at a faster rate than inflation,
real interest rates may rise, leading to a decrease in
value of inflation-indexed bonds. Short-term increases in
inflation may lead to a decline in value. Any increase in
the principal amount of an inflation-indexed bond will be
considered taxable ordinary income, even though investors
do not receive their principal until maturity.
Derivatives Each Portfolio may, but is not required to, use derivative
instruments for risk management purposes or as part of its
investment strategies. Generally, derivatives are financial
contracts whose value depends upon or is derived from, the
value of an underlying asset, reference rate or index, and
may relate to stocks, bonds, interest rates, currencies or
currency exchange rates, commodities, and related indexes.
Examples of derivative instruments include options
contracts, futures contracts, options on futures contracts
and
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swap agreements. Each Portfolio may invest all of its
assets in derivative instruments, subject to the
Portfolio's objectives and policies. A portfolio manager
may decide not to employ any of these strategies, and there
is no assurance that any derivatives strategy used by a
Portfolio will succeed. A description of these and other
derivative instruments that the Portfolios may use are
described under "Investment Objectives and Policies" in the
Statement of Additional Information.
A Portfolio's use of derivative instruments involves
risks different from, or greater than, the risks associated
with investing directly in securities and other more
traditional investments. A description of various risks
associated with particular derivative instruments is
included in "Investment Objectives and Policies" in the
Statement of Additional Information. The following provides
a more general discussion of important risk factors
relating to all derivative instruments that may be used by
the Portfolios.
Management Risk. Derivative products are highly
specialized instruments that require investment techniques
and risk analyses different from those associated with
stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument but
also of the derivative itself, without the benefit of
observing the performance of the derivative under all
possible market conditions.
Credit Risk. The use of a derivative instrument
involves the risk that a loss may be sustained as a result
of the failure of another party to the contract (usually
referred to as a "counterparty") to make required payments
or otherwise comply with the contract's terms.
Liquidity Risk. Liquidity risk exists when a
particular derivative instrument is difficult to purchase
or sell. If a derivative transaction is particularly large
or if the relevant market is illiquid (as is the case with
many privately negotiated derivatives), it may not be
possible to initiate a transaction or liquidate a position
at an advantageous time or price.
Leverage Risk. Because many derivatives have a
leverage component, adverse changes in the value or level
of the underlying asset, reference rate or index can result
in a loss substantially greater than the amount invested in
the derivative itself. Certain derivatives have the
potential for unlimited loss, regardless of the size of the
initial investment. When a Portfolio uses derivatives for
leverage, investments in that Portfolio will tend to be
more volatile, resulting in larger gains or losses in
response to market changes. To limit leverage risk, each
Portfolio will segregate assets determined to be liquid by
PIMCO in accordance with procedures established by the
Board of Trustees (or, as permitted by applicable
regulation, enter into certain offsetting positions) to
cover its obligations under derivative instruments.
Lack of Availability. Because the markets for certain
derivative instruments (including markets located in
foreign countries) are relatively new and still developing,
suitable derivatives transactions may not be available in
all circumstances for risk management or other purposes.
There is no assurance that a Portfolio will engage in
derivatives transactions at any time or from time to time.
A Portfolio's ability to use derivatives may also be
limited by certain regulatory and tax considerations.
Market and Other Risks. Like most other investments,
derivative instruments are subject to the risk that the
market value of the instrument will change in a way
detrimental to a Portfolio's interest. If a portfolio
manager incorrectly forecasts the values of securities,
currencies or interest rates or other economic factors in
using derivatives for a Portfolio, the Portfolio might have
been in a better position if it had not entered into the
transaction at all. While some strategies involving
derivative instruments can reduce the risk of loss, they
can also reduce the opportunity for gain or even result in
losses by offsetting favorable price movements in other
Portfolio investments. A Portfolio may also have to buy or
sell a security at a disadvantageous time or price because
the Portfolio is legally required to maintain offsetting
positions or asset coverage in connection with certain
derivatives transactions.
Other risks in using derivatives include the risk of
mispricing or improper valuation of derivatives and the
inability of derivatives to correlate perfectly with
underlying assets, rates and indexes. Many derivatives, in
particular privately negotiated derivatives, are complex
and often valued subjectively. Improper valuations can
result in increased cash payment requirements to
counterparties or a loss of value to a Portfolio. Also, the
value of derivatives may not correlate perfectly, or at
all, with the value of the assets, reference rates or
indexes they are designed to closely track. In addition, a
Portfolio's use of derivatives may cause the Portfolio to
realize higher amounts of short-term capital gains (taxed
at
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ordinary income tax rates when distributed) than if the
Portfolio had not used such instruments.
Convertible Each Portfolio may invest in convertible securities.
Securities Convertible securities are generally preferred stocks and
other securities, including fixed income securities and
warrants, that are convertible into or exercisable for
common stock at a stated price or rate. The price of a
convertible security will normally vary in some proportion
to changes in the price of the underlying common stock
because of this conversion or exercise feature. However,
the value of a convertible security may not increase or
decrease as rapidly as the underlying common stock. A
convertible security will normally also provide income and
is subject to interest rate risk. Convertible securities
may be lower-rated securities subject to greater levels of
credit risk. A Portfolio may be forced to convert a
security before it would otherwise choose, which may have
an adverse effect on the Portfolio's ability to achieve its
investment objective.
While the Portfolios intend to invest primarily in
fixed income securities, each may invest in convertible
securities or equity securities. While some countries or
companies may be regarded as favorable investments, pure
fixed income opportunities may be unattractive or limited
due to insufficient supply, or legal or technical
restrictions. In such cases, a Portfolio may consider
equity securities or convertible securities to gain
exposure to such investments.
Mortgage-Related The FISH: Series M invests primarily in mortgage- or other
and Other asset-backed securities. Mortgage-related securities
Asset-Backed include mortgage pass-through securities, collateralized
Securities mortgage obligations, commercial mortgage-backed
securities, mortgage dollar rolls, stripped mortgage-backed
securities and other securities that directly or indirectly
represent a participation in, or are secured by and payable
from, mortgage loans on real property.
The value of some mortgage- or asset-backed securities
may be particularly sensitive to changes in prevailing
interest rates. Early repayment of principal on some
mortgage-related securities may expose the Portfolio to a
lower rate of return upon reinvestment of principal. When
interest rates rise, the value of a mortgage-related
security generally will decline; however, when interest
rates are declining, the value of mortgage-related
securities with prepayment features may not increase as
much as other fixed income securities. The rate of
prepayments on underlying mortgages will affect the price
and volatility of a mortgage-related security, and may
shorten or extend the effective maturity of the security
beyond what was anticipated at the time of purchase. If
unanticipated rates of prepayment on underlying mortgages
increase the effective maturity of a mortgage-related
security, the volatility of the security can be expected to
increase. The value of these securities may fluctuate in
response to the market's perception of the creditworthiness
of the issuers. Additionally, although mortgages and
mortgage-related securities are generally supported by some
form of government or private guarantee and/or insurance,
there is no assurance that private guarantors or insurers
will meet their obligations.
One type of stripped mortgage-backed security has one
class receiving all of the interest from the mortgage
assets (the interest-only class), while the other class
will receive all of the principal (the principal-only
class). The yield to maturity on an interest-only class is
extremely sensitive to the rate of principal payments
(including prepayments) on the underlying mortgage assets,
and a rapid rate of principal payments may have a material
adverse effect on the Portfolio's yield to maturity from
these securities. The Portfolio may not invest more than
40% of its net assets in any combination of interest-only,
principal-only, or inverse floating rate securities. The
Portfolio may invest in other asset-backed securities that
have been offered to investors.
Municipal Bonds Municipal bonds are generally issued by state and local
governments and their agencies, authorities and other
instrumentalities. Municipal bonds are subject to interest
rate, credit and market risk. The ability of an issuer to
make payments could be affected by litigation, legislation
or other political events or the bankruptcy of the issuer.
Lower rated municipal bonds are subject to greater credit
and market risk than higher quality municipal bonds.
Loan Participations The FISH: Series C may invest in fixed- and floating-rate
and Assignments loans, which investments generally will be in the form of
loan participations and assignments of portions of such
loans. Participations and assignments involve special types
of risk, including credit risk, interest rate risk,
liquidity risk, and the risks of being a lender. If the
Portfolio purchases a participation, it may only be able to
enforce its rights through the lender, and may assume the
credit risk of the lender in addition to the borrower.
Delayed Funding The FISH: Series C may also enter into, or acquire
participations in, delayed funding loans
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Loans and Revolving and revolving credit facilities, in which a lender agrees
Credit Facilities to make loans up to a maximum amount upon demand by the
borrower during a specified term. These commitments may
have the effect of requiring the Portfolio to increase its
investment in a company at a time when it might not
otherwise decide to do so (including at a time when the
company's financial condition makes it unlikely that such
amounts will be repaid). To the extent that the Portfolio
is committed to advance additional funds, it will segregate
assets determined to be liquid by PIMCO in accordance with
procedures established by the Board of Trustees in an
amount sufficient to meet such commitments. Delayed funding
loans and revolving credit facilities are subject to
credit, interest rate and liquidity risk and the risks of
being a lender.
Loans of Portfolio For the purpose of achieving income, each Portfolio may
Securities lend its portfolio securities to brokers, dealers, and
other financial institutions, provided that a number of
conditions are satisfied, including that the loan be fully
collateralized. Please see "Investment Objectives and
Policies" in the Statement of Additional Information for
details. When a Portfolio lends portfolio securities, its
investment performance will continue to reflect changes in
the value of the securities loaned, and the Portfolio will
also receive a fee or interest on the collateral.
Securities lending involves the risk of loss of rights in
the collateral or delay in recovery of the collateral if
the borrower fails to return the security loaned or becomes
insolvent. A Portfolio may pay lending fees to a party
arranging the loan.
Short Sales Each Portfolio may make short sales as part of its overall
portfolio management strategies or to offset a potential
decline in value of a security. A short sale involves the
sale of a security that is borrowed from a broker or other
institution to complete the sale. For these purposes, a
Portfolio may also hold or have the right to acquire
securities which, without the payment of any further
consideration, are convertible into or exchangeable for the
securities sold short. Short sales expose a Portfolio to
the risk that it will be required to acquire, convert or
exchange securities to replace the borrowed securities
(also known as "covering" the short position) at a time
when the securities sold short have appreciated in value,
thus resulting in a loss to the Portfolio. A Portfolio
making a short sale (other than a "short sale against the
box") must segregate assets determined to be liquid by
PIMCO in accordance with procedures established by the
Board of Trustees or otherwise cover its position in a
permissible manner.
When-Issued, Each Portfolio may purchase securities which it is eligible
Delayed Delivery to purchase on a when-issued basis, may purchase and sell
and Forward such securities for delayed delivery and may make contracts
Commitment to purchase such securities for a fixed price at a future
Transactions date beyond normal settlement time (forward commitments).
When-issued transactions, delayed delivery purchases and
forward commitments involve a risk of loss if the value of
the securities declines prior to the settlement date. This
risk is in addition to the risk that the Portfolio's other
assets will decline in value. Therefore, these transactions
may result in a form of leverage and increase a Portfolio's
overall investment exposure. Typically, no income accrues
on securities a Portfolio has committed to purchase prior
to the time delivery of the securities is made, although a
Portfolio may earn income on securities it has segregated
to cover these positions.
Repurchase Each Portfolio may enter into repurchase agreements, in
Agreements which the Portfolio purchases a security from a bank or
broker-dealer that agrees to repurchase the security at the
Portfolio's cost plus interest within a specified time. If
the party agreeing to repurchase should default, the
Portfolio will seek to sell the securities which it holds.
This could involve procedural costs or delays in addition
to a loss on the securities if their value should fall
below their repurchase price. Repurchase agreements
maturing in more than seven days are considered illiquid
securities.
Reverse Repurchase Each Portfolio may enter into reverse repurchase agreements
Agreements, Dollar and dollar rolls, subject to the Portfolio's limitations on
Rolls and Other borrowings. A reverse repurchase agreement or dollar roll
Borrowings involves the sale of a security by a Portfolio and its
agreement to repurchase the instrument at a specified time
and price, and may be considered a form of borrowing for
some purposes. A Portfolio will segregate assets determined
to be liquid by PIMCO in accordance with procedures
established by the Board of Trustees to cover its
obligations under reverse repurchase agreements. A
Portfolio also may borrow money for investment purposes
subject to any policies of the Portfolio currently
described in this Prospectus or in the Statement of
Additional Information. Reverse repurchase agreements,
dollar rolls and other forms of borrowings may create
leveraging risk for a Portfolio.
Catastrophe Bonds Each Portfolio may invest in "catastrophe bonds," which are
fixed income securities for which the return of principal
and payment of interest is contingent on the non-occurrence
of a specific "trigger" catastrophic event, such as a
hurricane or an earthquake. If a trigger event occurs, a
Portfolio may lose a portion or all of its principal
invested in the bond. Catastrophe bonds often provide for
an extension of
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maturity to process and audit loss claims where a trigger
event has, or possibly has, occurred. An extension of
maturity may increase volatility. Catastrophe bonds may
also expose the Portfolio to certain unanticipated risks
including credit risk, adverse regulatory or jurisdictional
interpretations, and adverse tax consequences. Catastrophe
bonds may also be subject to liquidity risk.
Portfolio Turnover The length of time a Portfolio has held a particular
security is not generally a consideration in investment
decisions. A change in the securities held by a Portfolio
is known as "portfolio turnover." Each Portfolio may engage
in frequent and active trading of portfolio securities to
achieve its investment objective, particularly during
periods of volatile market movements. High portfolio
turnover (e.g., over 100%) involves correspondingly greater
expenses to a Portfolio, including brokerage commissions or
dealer mark-ups and other transaction costs on the sale of
securities and reinvestments in other securities. Such
sales may also result in realization of taxable capital
gains, including short-term capital gains (which are taxed
at ordinary income tax rates when distributed). The trading
costs and tax effects associated with portfolio turnover
may adversely affect a Portfolio's performance.
Illiquid Securities Each Portfolio may invest up to 15% of its net assets in
illiquid securities. Certain illiquid securities may
require pricing at fair value as determined in good faith
under the supervision of the Board of Trustees. A portfolio
manager may be subject to significant delays in disposing
of illiquid securities, and transactions in illiquid
securities may entail registration expenses and other
transaction costs that are higher than those for
transactions in liquid securities. The term "illiquid
securities" for this purpose means securities that cannot
be disposed of within seven days in the ordinary course of
business at approximately the amount at which a Portfolio
has valued the securities. Restricted securities, i.e.,
securities subject to legal or contractual restrictions on
resale, may be illiquid. However, some restricted
securities (such as securities issued pursuant to Rule 144A
under the Securities Act of 1933 and certain commercial
paper) may be treated as liquid, although they may be less
liquid than registered securities traded on established
secondary markets.
Investment in Other Each Portfolio may invest up to 10% of its assets in
Investment securities of other investment companies, such as
Companies closed-end management investment companies, or in pooled
accounts or other investment vehicles which invest in
foreign markets. As a shareholder of an investment company,
a Portfolio may indirectly bear service and other fees
which are in addition to the fees the Portfolio pays its
service providers.
Temporary Defensive For temporary or defensive purposes, each Portfolio may
Strategies invest without limit in U.S. debt securities, including
short-term money market securities, when PIMCO deems it
appropriate to do so. When a Portfolio engages in such
strategies, it may not achieve its investment objective.
Changes in The investment objective of each Portfolio may be changed
Investment by the Board of Trustees without the approval of the
Objectives and registered investment advisers investing in the Portfolio.
Policies Unless otherwise stated, all other investment policies of
the Portfolios may be changed by the Board of Trustees
without the approval of the registered investment advisers
investing in the Portfolios.
Percentage Unless otherwise stated, all percentage limitations on
Investment Portfolio investments listed in this Prospectus will apply
Limitations at the time of investment. A Portfolio would not violate
these limitations unless an excess or deficiency were to
occur or exist immediately after and as a result of an
investment.
Other Investments The Portfolios may invest in other types of securities and
and Techniques use a variety of investment techniques and strategies which
are not described in this Prospectus. These securities and
techniques may subject the Portfolios to additional risks.
Please see the Statement of Additional Information for
additional information about the securities and investment
techniques described in this Prospectus and about
additional securities and techniques that may be used by
the Portfolios.
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Appendix A A Portfolio's investments may range in quality from
Description of securities in the lowest category in which the Portfolio is
Securities Ratings permitted to invest to securities rated in the highest
category (as rated by Moody's or S&P or, if unrated,
determined by PIMCO to be of comparable quality). The
percentage of a Portfolio's assets invested in securities
in a particular rating category will vary. The following
terms are generally used to describe the credit quality of
fixed income securities.
High Quality Debt Securities are those rated in one of the
two highest rating categories (the highest category for
commercial paper) or, if unrated, deemed comparable by
PIMCO.
Investment Grade Debt Securities are those rated in one of
the four highest rating categories or, if unrated, deemed
comparable by PIMCO.
Below Investment Grade, High Yield Securities are those
rated lower than Baa by Moody's or BBB by S&P and
comparable securities. They are deemed predominately
speculative with respect to the issuer's ability to repay
principal and interest.
Following is a description of Moody's and S&P's rating
categories applicable to fixed income securities.
Moody's Investors Corporate and Municipal Bond Ratings
Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present that make
the long-term risks appear somewhat larger than with Aaa
securities.
A: Bonds which are rated A possess many favorable
investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements
may be present that suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated Baa are considered as
medium-grade obligations (i.e., they are neither highly
protected nor poorly secured). Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as
well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this
class.
B: Bonds which are rated B generally lack characteristics
of a desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements
of danger with respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which
are speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of
bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
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Moody's applies numerical modifiers, 1, 2 and 3 in each
generic rating classified from Aa through B in its
corporate bond rating system. The modifier 1 indicates that
the security ranks in the higher end of its generic rating
category; the modifier 2 indicated a mid-range raking; and
the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Corporate Short- Moody's short-term debt ratings are opinions of the ability
Term Debt Ratings of issuers to repay punctually senior debt obligations
which have an original maturity not exceeding one year.
Obligations relying upon support mechanisms such as letters
of credit and bonds of indemnity are excluded unless
explicitly rated.
Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative
repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions)
have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be
evidenced by many of the following characteristics: leading
market positions in well-established industries, high rates
of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset
protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and
well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions)
have a strong ability for repayment of senior short-term
debt obligations. This will normally be evidenced by many
of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions)
have an acceptable ability for repayment of senior
short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may
result in changes in the level of debt protection
measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any
of the Prime rating categories.
Standard & Poor's Corporate Municipal Bond Ratings
Ratings Services Investment Grade
AAA: Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and
economic conditions that debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in
higher-rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having
predominantly speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates
the least degree of speculation and C the highest. While
such debt will likely have some quality and protective
characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.
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<PAGE>
BB: Debt rated BB has less near-term vulnerability to
default than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and
principal payments. The BB rating category is also used for
debt subordinated to senior debt that is assigned an actual
or implied BBB-rating.
B: Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or
BB-rating.
CCC: Debt rated CCC has a currently identifiable
vulnerability to default and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the
event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is
assigned an actual or implied B or B-rating.
CC: The rating CC is typically applied to debt subordinated
to senior debt that is assigned an actual or implied CCC
rating.
C: The rating C is typically applied to debt subordinated
to senior debt that is assigned an actual or implied
CCC-debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI: The rating CI is reserved for income bonds on which no
interest is being paid.
D: Debt rated D is in payment default. The D rating
category is used when interest payments or principal
payments are not made on the date due even if the
applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace
period. The D rating will also be used upon the filing of a
bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be
modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
Provisional ratings: The letter "p" indicates that the
rating is provisional. A provisional rating assumes the
successful completion of the project being financed by the
debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the
successful and timely completion of the project. This
rating, however, while addressing credit quality subsequent
to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
r: The "r" is attached to highlight derivative, hybrid, and
certain other obligations that S&P believes may experience
high volatility or high variability in expected returns due
to non-credit risks. Examples of such obligations are:
securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and
options; and interest-only and principal-only mortgage
securities.
The absence of an "r" symbol should not be taken as an
indication that an obligation will exhibit no volatility or
variability in total return.
N.R.: Not rated.
Debt obligations of issuers outside the United States and
its territories are rated on the same basis as domestic
corporate and municipal issues. The ratings measure the
creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.
Commercial Paper An S&P commercial paper rating is a current assessment of
Rating Definitions the likelihood of timely payment of debt having an original
maturity of no more than 365 days. Ratings are graded into
several categories, ranging from A for the highest quality
obligations to D for the lowest. These categories are as
follows:
A-1: This highest category indicates that the degree of
safety regarding timely payment is strong. Those
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issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+)
designation.
A-2: Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree
of safety is not as high as for issues designated A-1.
A-3: Issues carrying this designation have adequate
capacity for timely payment. They are, however, more
vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher
designations.
B: Issues rated B are regarded as having only speculative
capacity for timely payment.
C: This rating is assigned to a short-term debt obligations
with a doubtful capacity for payment.
D: Debt rated D is in payment default. The D rating
category is used when interest payments or principal
payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace
period.
A commercial paper rating is not a recommendation to
purchase, sell or hold a security inasmuch as it does not
comment as to market price or suitability for a particular
investor. The ratings are based on current information
furnished to S&P by the issuer or obtained from other
sources it considers reliable. S&P does not perform an
audit in connection with any rating and may, on occasion,
rely on unaudited financial information. The ratings may be
changed, suspended, or withdrawn as a result of changes in
or unavailability of such information.
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FISH: Series C and INVESTMENT ADVISER
FISH: Series M PIMCO Advisors L.P., 800 Newport Center Drive, Newport
Beach, CA 92660
INVESTMENT SUB-ADVISER
Pacific Investment Management Company, 840 Newport Center
Drive, Suite 300, Newport Beach, CA 92660
ADMINISTRATOR/TRADING DESK
PIMCO Advisory Services, 1345 Avenue of the Americas, New
York, NY 10105
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street,
Boston, MA 02110
TRANSFER AGENT
State Street Bank and Trust Company, 225 Franklin Street,
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO
64105
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, MA 02110
TRUSTEES & OFFICERS
Stephen J. Treadway Chairman, Trustee
Paul Belica Trustee
Robert E. Connor Trustee
Newton B. Schott, Jr. Secretary
Elliot M. Weiss Assistant Secretary
Brian Shlissel Treasurer
Susan A. Murphy President, Chief Executive
Officer
Angie Clark Executive Vice President
Robert B. Beel Senior Vice President
Jonathan C. Hart Senior Vice President
Sharon Highland Senior Vice President
George Peterson Senior Vice President
Joni H. Rheingold Senior Vice President
Richard P. Triolo Senior Vice President
Christopher Casenhiser Vice President
Thomas S. Gatto Vice President
Raymond Harvier Vice President
Jessica McInnis Hill Vice President
Leslie Kravetzky Vice President
Scott Rymsa Vice President
The Portfolios' Statement of Additional Information ("SAI") includes additional
information about the Portfolios. The SAI is incorporated by reference into this
Prospectus, which means it is part of this Prospectus for legal purposes.
You may get free copies of the SAI, request other information about a Portfolio,
or make inquiries by calling PIMCO Advisory Services at 1-212-739-3535.
You may review and copy information about the Portfolios, including their SAI,
at the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. You may call the Commission at 1-202-942-8090 for information about the
operation of the Public Reference Room. You may also access reports and other
information about the Portfolios on the EDGAR Database on the Commission's
Internet site at http://www.sec.gov. You may get copies of this information,
with payment of a duplication fee, by electronic request at the following E-mail
address: [email protected], or by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. You may need to refer to the
Portfolios' file number under the Investment Company Act, which is 811-9721.
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