<PAGE>
FIXED INCOME SHARES ("FISH")
SERIES C
SCHEDULE OF INVESTMENTS
APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
------------------ ----------------
<S> <C> <C>
MORTGAGE-RELATED - 47.7%
Federal Home Loan Mortgage Corp.
$2,400 6.875%, 1/15/05 (cost-$2,366,517)............................. $2,364,845
-----------------
CORPORATE BONDS & NOTES - 26.3%
BANKING - 4.1%
100 Deutsche Bank Capital Trust (a) (b),
7.962%, 12/22/49 .............................................. 101,500
100 KBC Bank Funding Bank Funding III,
9.86%, 11/29/49 ............................................... 102,387
-----------------
203,887
-----------------
ELECTRONICS - 3.9%
100 Calpine Corp.,
8.75%, 7/15/07 ................................................ 99,125
100 CMS Energy Corp.,
6.75%, 1/15/04 ................................................ 91,697
-----------------
190,822
-----------------
FINANCIAL SERVICES - 3.9%
100 Associates Corp. North America,
6.875%, 11/15/08 .............................................. 92,073
100 HSBC Capital Funding,
9.547%, 12/31/49 .............................................. 101,824
-----------------
193,897
-----------------
HEALTH & HOSPITALS - 2.0%
100 Tenet Healthcare Corp.,
8.625%, 12/1/03 ............................................... 97,305
-----------------
HOTELS - 1.9%
100 Harrahs Operating Co., Inc.,
7.875%, 12/15/05 .............................................. 93,500
-----------------
INDUSTRIAL - 3.5%
100 American Standard, Inc.,
7.125%, 2/15/03 ............................................... 95,375
100 Federal Mogul Corp.,
7.375%, 1/15/06 ............................................... 80,135
-----------------
175,510
-----------------
INSURANCE - 1.9%
100 Interpublic Group Co., Inc.,
Convertible Bond,
1.87%, 6/1/06 ................................................. 93,750
-----------------
MEASURING INSTRUMENTS - 1.9%
100 Beckman Coulter, Inc.,
7.10%, 3/4/03 ................................................. 94,941
-----------------
OIL/GAS - 2.0%
100 Gulf Canada Resources Ltd.,
9.25%, 1/15/04 ................................................ 100,500
-----------------
TELECOMMUNICATIONS - 1.2%
100 U.S. Cellular Corp.,
6.00% (c), 6/15/15 ............................................ 58,375
-----------------
Total Corporate Bonds & Notes (cost-$1,318,807) ............ 1,302,487
-----------------
</TABLE>
<PAGE>
FISH
SERIES C
SCHEDULE OF INVESTMENTS
APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
-------------- --------------
<S> <C> <C>
SOVEREIGN DEBT OBLIGATIONS- 14.6%
BRAZIL - 3.8%
$209 Republic of Brazil, FRN
7.375%, 4/15/06 ................................................ $186,756
-----------------
BULGARIA - 1.9%
125 National Republic of Bulgaria, FRN
7.062%, 7/28/24 ................................................ 95,625
-----------------
MEXICO - 3.0%
125 United Mexican States,
11.50%, 5/15/26 ............................................... 147,812
-----------------
PANAMA - 2.0%
125 Republic of Panama, IRB
4.25%, 7/17/14 (d) ............................................ 99,425
-----------------
PERU - 2.0%
150 Republic of Peru, PDI
4.50%, 3/7/17 (d) ............................................. 100,687
-----------------
POLAND - 1.9%
150 Republic of Poland,
3.50%, 10/27/24 ............................................... 92,445
-----------------
Total Sovereign Debt Obligations (cost-$752,650) ............. 722,750
-----------------
U.S. TREASURY NOTES - 1.1%
53 3.625%, 7/15/02 (cost-$52,852) (e) ........................... 52,839
-----------------
SHORT-TERM INVESTMENTS - 11.1%
COMMERCIAL PAPER - 10.0%
APPAREL - 4.0%
200 NIKE, Inc., 6.08%, 6/12/00 ...................................... 198,581
FINANCIAL SERVICES - 4.0%
KFW International Financial, Inc.,
200 6.06%, 6/22/00 ................................................ 198,250
INSURANCE - 2.0%
USAA Capital Corp.,
100 6.04%, 6/2/00 .................................................. 99,463
-----------------
Total Commercial Paper (amortized cost-$496,294) .............. 496,294
-----------------
REPURCHASE AGREEMENT - 1.1%
56 Repurchase Agreement with State Street Bank & Trust Co., dated
April 28, 2000, 4.75% due 5/1/00, proceeds: $56,022; collateralized by
Federal Home Loan Bank, valued at $58,725; (amortized cost-$56,000)... 56,000
-----------------
Total Short-Term Investments (amortized cost-$552,294)............. 552,294
-----------------
Total Investments (cost-$5,034,120) ................ 100.8% 4,995,215
Options written (premium received $1,336)(f) ....... (0.0) (1,616)
Liabilities in excess of other assets .............. (0.8) (37,374)
------ -----------------
Net Assets . ................................. 100.0% $4,956,225
====== =================
</TABLE>
<PAGE>
FISH
SERIES C
SCHEDULE OF INVESTMENTS
APRIL 30, 2000
(UNAUDITED)(CONCLUDED)
---------------------------------
(a) This security became affiliated subsequent to April 30, 2000; it was not
deemed to be affiliated at the time of purchase.
(b) Security exempt from registration under Rule 144a of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
typically to qualified institutional investors. At April 30, 2000, this
security amounted to $101,500 or 2.0% of net assets.
(c) Zero coupon bond; stated interest rate represents yield to maturity.
(d) Interest rate increases periodically based upon a predetermined schedule.
Stated interest rate in effect at April 30, 2000.
(e) Portion of security, valued at $49,906, has been segregated to collateralize
the following open futures contracts at April 30, 2000:
FUTURES CONTRACTS:
<TABLE>
<CAPTION>
EXPIRATION UNREALIZED
TYPE CONTRACTS DATE VALUE DEPRECIATION
------------------------------ ----------------- ------------ ------------- -------------------
<S> <C> <C> <C> <C>
U.S. Treasury 10 Year Notes 7 June 2000 $678,672 $4,703
</TABLE>
(f) Premium received on options written:
WRITTEN OPTIONS:
<TABLE>
<CAPTION>
TYPE CONTRACTS PREMIUM VALUE
------------------------------ ----------------- ------------ -------------
<S> <C> <C> <C>
Put - Eurodollar vs. U.S.$, 2,800 $1,336 $(1,616)
expiring 5/26/00 @ $0.90
</TABLE>
Glossary of Terms:
------------------
FRN - Floating Rate Note, interest rates shown are the current rates at April
30, 2000.
IRD - Industrial Revenue Bond
PDI - Past Due Interest
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
FISH
SERIES M
SCHEDULE OF INVESTMENTS
APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
---------------- ------------
<S> <C> <C>
MORTGAGE-RELATED - 135.0%
$2,731 Federal National Mortgage Association,
7.50%, 7/1/29-9/1/29..................................................................... $2,628,872
4,200 Government National Mortgage Association,*
7.50%, 5/22/30 .......................................................................... 4,130,448
-------------
Total Mortgage-Related (cost-$6,831,526) ............................................. 6,759,320
-------------
SHORT-TERM INVESTMENTS - 49.3%
U.S. GOVERNMENT AGENCY - 45.7%
2,300 Federal Home Loan Bank Discount Notes,
5.94%, 6/1/00 (amortized cost-$2,288,236)................................................ 2,288,236
-------------
REPURCHASE AGREEMENT - 3.6%
179 Repurchase Agreement with State Street Bank & Trust Co, dated
April 28, 2000, 4.75% due 5/1/00, proceeds: $179,071; collateralized by
Federal National Mortgage Association, valued at $183,381 (amortized cost $179,000) .... 179,000
-------------
Total Short-Term Investments (amortized cost $2,467,236) .......................... 2,467,236
-------------
Total Investments (cost-$9,298,762) ............................. 184.3% 9,226,556
Liabilities in excess of other assets ........................... (84.3) (4,219,959)
--------- -------------
Net Assets .................................................... 100.0% $5,006,597
========= =============
</TABLE>
------------------------
* When-issued security to be delivered and settled after April 30, 2000.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
FISH
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS: SERIES C SERIES M
--------------- ------------
<S> <C> <C>
Investments, at value (cost - $5,043,120 and $9,298,762, respectively) .................. $ 4,995,215 $ 9,226,556
Interest receivable ..................................................................... 92,499 16,843
Receivable for investments sold ......................................................... 1,336 4,932,031
Receivable for variation margin on futures contracts .................................... 875 --
--------------- ------------
Total Assets ........................................................................ 5,089,925 14,175,430
--------------- ------------
LIABILITIES:
Due to custodian ........................................................................ 36,803 35,224
Payable for investments purchased ....................................................... 95,281 9,133,609
Put options written, at value (premium received $1,336) ................................. 1,616 --
--------------- ------------
Total Liabilities ................................................................... 133,700 9,168,833
--------------- ------------
Net Assets..................................................................... $ 4,956,225 $ 5,006,597
=============== ============
COMPOSITION OF NET ASSETS:
Beneficial interest shares of $0.001 par value (unlimited number authorized) ........... $ 501 $ 501
Paid-in-capital in excess of par ........................................................ 5,005,895 5,005,895
Accumulated net realized gain ........................................................... 2,717 72,407
Net unrealized depreciation of investments, futures contracts, and options .............. (52,888) (72,206)
--------------- ------------
Net Assets..................................................................... $ 4,956,225 $ 5,006,597
=============== ============
Shares outstanding ...................................................................... 500,640 500,640
--------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE .......................... $9.90 $10.00
==== =====
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
FISH
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 17, 2000* THROUGH APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME: SERIES C SERIES M
------------ ------------
<S> <C> <C>
Interest ......................................................................................... $ 37,678 $ 35,458
EXPENSES .......................................................................................... -- --
------------ ------------
Net investment income ......................................................................... 37,678 35,458
------------ ------------
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND OPTIONS WRITTEN:
<S> <C> <C>
Net realized gain (loss) on:
Investments ................................................................................. 8,250 37,052
Futures contracts ........................................................................... (5,533) 35,355
Net unrealized depreciation of:
Investments ................................................................................. (47,905) (72,206)
Futures contracts ........................................................................... (4,703) --
Options written ............................................................................. (280) --
------------ ------------
Net realized and unrealized gain (loss) on investments, futures contracts and options written (50,171) 201
------------ ------------
Net increase (decrease) in net assets resulting from investment operations ........................ $(12,493) $ 35,659
============ ============
</TABLE>
===============================================================================
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MARCH 17, 2000* THROUGH APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS: SERIES C SERIES M
-------------- -------------
<S> <C> <C>
Investment income ............................................................... $ 37,678 $ 35,458
Net realized gain on investments ................................................ 2,717 72,407
Net unrealized depreciation of investments, futures contracts and options written (52,888) (72,206)
-------------- -------------
Net increase (decrease) in net assets resulting from investment operations .. (12,493) 35,659
-------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .......................................................... (37,678) (35,458)
-------------- -------------
SHARE TRANSACTIONS:
Net proceeds from the sale of shares ............................................ 4,956,396 4,956,396
-------------- -------------
Total increase in net assets ........................................... 4,906,225 4,956,597
NET ASSETS:
Beginning of period ............................................................. 50,000 50,000
-------------- -------------
End of period ................................................................... $ 4,956,225 $ 5,006,597
============== =============
SHARES ISSUED AND REDEEMED:
Issued ......................................................................... 495,640 495,640
Redeemed ....................................................................... -- --
-------------- -------------
Net increase ............................................................... 495,640 495,640
============== =============
</TABLE>
----------------------------
* Commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
FISH
FINANCIAL HIGHLIGHTS
FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING FOR THE PERIOD
MARCH 17, 2000* THROUGH APRIL 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SERIES C SERIES M
------------- ---------------
<S> <C> <C>
Net asset value, beginning of period ................... $10.00 $ 10.00
------------- ---------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.08 0.07
Net realized and unrealized loss on investments ........ (0.10) -- **
------------- ---------------
Total income (loss) from investment operations .... (0.02) 0.07
------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................................. (0.08) (0.07)
------------- ---------------
Net asset value, end of period ......................... $ 9.90 $10.00
============= ===============
TOTAL RETURN (1) ....................................... (0.22)% 0.73%
------------- ---------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ...................... $4,956 $5,007
Ratio of expenses to average net assets (2) ............ 0.00% 0.00%
Ratio of net investment income to average net assets (2) 6.53% 6.11%
Portfolio Turnover ..................................... 234% 261%
</TABLE>
-------------------------------
* Commencements of operations
** Less than $0.005 per share
(1) Assumes reinvestment of all dividends. Total return for a period of less
than one year is not annualized.
(2) Annualized
<PAGE>
FISH
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Fixed Income SHares ("FISH" or the "Trust"), was organized as a Massachusetts
Business Trust on November 3, 1999 and offers two series of shares: Series C
and Series M (the "Portfolios"). Prior to commencing operations on March 17,
2000, the Trust had no operations other than matters relating to its
organization and registration as a non-diversified, open-end investment
company under the Investment Company Act of 1940, as amended, and the sale
and issuance to PIMCO Advisory Services of 10,000 shares of beneficial
interest at an aggregate purchase price of $100,000. The Portfolios are
authorized to issue an unlimited number of shares of beneficial interest at
$0.001 par value.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements:
(A) SECURITY VALUATION
Securities and other financial instruments for which market quotations are
readily available are stated at market value. Market value is determined on the
basis of last reported sale price, or if no sale is reported, as is the case for
most securities traded over-the-counter, the mean between representative bid
and asked quotations obtained from a quotation reporting system or from
established market makers. Fixed income securities, including those to be
purchased under firm commitment agreements, are normally valued on the basis of
quotes obtained from brokers and dealers or pricing services. Short-term
investments which mature in 60 days or less are valued at amortized cost, which
approximates market value. Certain fixed income securities for which daily
market quotations are not readily available may be valued, pursuant to
guidelines established by the Board of Trustees, with reference to fixed income
securities whose prices are more readily obtainable.
(B) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the trade date. Securities purchased
or sold on a when-issued or delayed-delivery basis may be settled a month or
more after the trade date. Realized gains and losses from securities sold are
recorded on the identified cost basis. Dividend income is recorded on the
ex-dividend date, except for certain dividends from foreign securities which are
recorded as soon after the ex-dividend date, as the Portfolios, using reasonable
diligence, become aware of such dividends. Interest income, adjusted for the
accretion of discounts and amortization of premiums, is recorded on an accural
basis.
(C) FEDERAL INCOME TAXES
It is the Portfolios policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders; accordingly, no federal
income tax provision is required.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid at
least annually.
The Portfolios record dividends and distributions to shareholders on the
ex-dividend date. The amount of dividends and distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles. These "book-tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal income tax treatment; temporary differences do not
require reclassification.
<PAGE>
FISH
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) FOREIGN CURRENCY TRANSLATION - SERIES C
The books and records of Series C are maintained in U.S. dollars as follows: (1)
the foreign currency market value of investments and other assets and
liabilities denominated in foreign currency are translated at the prevailing
exchange rate at the end of the period; and (2) purchases and sales, income and
expenses are translated at the prevailing exchange rate on the respective dates
of such transactions. The resulting net foreign currency gain or loss is
included in the Statement of Operations.
Series C does not generally isolate that portion of the results of operations
arising as a result of changes in the foreign currency exchange rates from the
fluctuations arising from changes in the market prices of securities.
Accordingly, such foreign currency gain (loss) is included in net realized and
unrealized gain (loss) on investments. However, Series C does isolate the effect
of fluctuations in foreign currency exchange rates when determining the gain or
loss upon the sale or maturity of foreign currency demoninated debt obligations
pursuant to U.S. federal income tax regulations; such amount is categorized as
foreign currency gain or loss for both financial reporting and income tax
reporting purposes.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, the Portfolio is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange.
Pursuant to the contracts, the Portfolio agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in the value of the
contracts. Such receipts or payments are known as "variation margin" and are
recorded by the Portfolio as unrealized appreciation or depreciation. When the
contracts are closed, the Portfolio records a realized gain or loss equal to the
difference between the value of the contracts at the time they were opened and
the value at the time they were closed. Any unrealized appreciation or
depreciation recorded is simultaneously reversed. The Portfolios invest in
futures contracts for both hedging and investment purposes. The use of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts, interest rates and the underlying hedged assests,
and the possible inability of counterparties to meet the terms of their
contracts.
(G) OPTION TRANSACTIONS
For hedging purposes, each Portfolio may purchase and write (sell) put and call
options on equity, fixed income or other securities or indexes in standardized
contracts traded on foreign or domestic securities exchanges, boards of trade,
or similar entities. The risk associated with purchasing an option is that the
Portfolio pays a premium whether or not the option is exercised. Additionally,
the Portfolio bears the risk of loss of premium and change in market value
should the counterparty not perform under the contract. Put and call options
purchased are accounted for in the same manner as portfolio securities. The cost
of securities acquired through the exercise of call options is increased by the
premiums paid. The proceeds from securities sold through the exercise of put
options is decreased by the premiums paid.
When an option is written, the premium received is recorded as an asset with an
equal liability which is subsequently adjusted to the current market value of
the option written. Premiums received from writing options which expire
unexercised are recorded on the expiration date as a realized gain. The
difference between the premium received and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transactions, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether there has been a realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the security. In
writing an option, a Portfolio bears the market risk of an unfavorable change in
the price of the security or currency underlying the written option. Exercise of
an option written could result in a Portfolio purchasing a security or currency
at a price different from the current market value.
<PAGE>
FISH
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
(H) DELAYED DELIVERY TRANSACTIONS
The Portfolios may purchase or sell securities on a when-issued or delayed
delivery basis. These transactions involve a commitment to purchase or sell
securities for a predetermined price or yield, with payment and delivery taking
place beyond the customary settlement period. When delayed delivery purchases
are outstanding, the Portfolio will set aside and maintain until the settlement
date in a segregated account, liquid assets in an amount sufficient to meet the
purchase price. When purchasing a security on a delayed delivery basis, a
Portfolio assumes the rights and risks of ownership of the security, including
the risk of price and yield fluctuations, and takes such fluctuations into
account when determining its net asset value. A Portfolio may dispose of or
renegotiate a delayed delivery transaction after it is entered into, and may
sell when-issued securities before they are delivered, which may result in a
realized gain or loss. When a Portfolio sells a security on a delayed delivery
basis, the Portfolio does not participate in future gains and losses with
respect to the security.
(I) REPURCHASE AGREEMENTS
The Portfolios' custodian takes possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is valued daily
on a mark-to-market basis to ensure that the value, including accrued interest,
is at least equal to the repurchase price. In the event of default of the
obligation to repurchase, the Portfolio has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligations. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings.
(2) INVESTMENTS IN SECURITIES
At April 30, 2000, the Portfolios' cost of investments for federal income tax
purposes was substantially the same as the basis for financial reporting
purposes. Accordingly, the composition of net unrealized depreciation for the
Portfolios were as follows:
<TABLE>
<CAPTION>
Net
Gross Gross Unrealized
Appreciation Depreciation Depreciation
----------------- ---------------- --------------
<S> <C> <C> <C>
Series C $5,386 $58,274 $52,888
Series M - 72,206 72,206
</TABLE>
For the period ended April 30, 2000, purchases and sales of investments, other
than short-term securities, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------- --------------
<S> <C> <C>
Series C $12,687,770 $8,206,550
Series M 19,877,076 13,082,957
</TABLE>
(3) INVESTMENT ADVISER, SUB-ADVISER AND ADMINISTRATOR
PIMCO Advisors L.P. (the "Adviser") serves as the investment adviser to the
Portfolios pursuant to an Investment Advisory agreement between the Adviser and
the Trust. Pursuant to a Portfolio Management Agreement, the Adviser employs
Pacific Investment Management Company LLC ("PIMCO"), an affiliate of the
Adviser, to serve as sub-adviser and provide investment advisory services to the
Portfolios. The Adviser receives no investment advisory or other fees from the
Portfolios and at its own expense pays the fees of the sub-adviser.
PIMCO Advisory Services (the "Administrator") serves as administrator to the
Portfolios pursuant to an administration agreement ("Administration Agreement")
with the Trust. The administrator provides or procures certain administrative
services to the Portfolios. In addition, the Administrator arranges at its own
expense for the provision of legal, audit, custody, transfer agency and other
services required for the ordinary operation of the Portfolios, and is
responsible for printing, trustees fees, and other portfolio costs. Under the
Administration Agreement, the Administrator has agreed to provide or procure
these services, and to bear these expenses at no charge to the Portfolios.
(4) ACQUISITION OF INVESTMENT ADVISER, SUB-ADVISER AND ADMINISTRATOR
On May 5, 2000, the general partners of PIMCO Advisors closed the transactions
contemplated by the Implementation and Merger Agreement dated as of October 31,
1999 ("Implementation Agreement"), as amended March 3, 2000, with Allianz of
America, Inc., Pacific Asset Management LLC, PIMCO Partners LLC, PIMCO Holding
LLC, PIMCO Partners, G.P., and other parties to the Implementation Agreement. As
a result of completing these transactions, PIMCO Advisors is now majority-owned
indirectly by Allianz AG, with subsidiaries of Pacific Life Insurance Company
retaining a significant minority interest. Allianz AG is a German based insurer.
Pacific Life Insurance Company is a Newport Beach, California based insurer. For
the Portfolios, the change of control as a result of the closing of the
Implementation Agreement resulted in the automatic termination of the current
investment management/administration agreements with PIMCO Advisors and the
current sub-advisory agreement with PIMCO. Prior to the closing of the
Implementation Agreement, the Board of Trustees and stockholders of the
Portfolios approved new agreements to become effective upon the closing of the
Implementation Agreement.
