<PAGE>
As filed with the Securities and Exchange Commission on April 22, 1996
Registration Nos. 2-87203;
811-3881
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 34 [X]
==
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 35 [X]
==
PIMCO ADVISORS FUNDS
(Exact Name of Registrant as Specified in Charter)
2187 Atlantic Street
Stamford, Connecticut 06902
(Address of principal executive offices)
(203) 352-4990
(Registrant's telephone number, including area code)
Name and address
of agent for service Copy to
- -------------------- -------
Newton B. Schott, Jr., Esq. Douglass N. Ellis, Jr., Esq.
c/o PIMCO Advisors L.P. Ropes & Gray
2187 Atlantic Street One International Place
Stamford, Connecticut 06902 Boston, Massachusetts 02110
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b), or
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on [date] pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on [date] pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement]
Pursuant to Rule 24f-2(a) under the Investment Company Act of 1940, the
Registrant has registered an indefinite number or amount of its shares of
beneficial interest under the Securities Act of 1933. The Registrant filed a
Rule 24f-2 Notice with respect to the Registrant's fiscal year ended September
30, 1995 on November 20, 1995.
<PAGE>
PIMCO ADVISORS FUNDS
--------------------
Cross Reference Sheet for Items Required by
Form N-1A
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
1. Cover Page
2. Prospectus Summary; Schedule of Fees
3. Financial Highlights;
Performance Information
4. Description of the Trust; Cover
Page; Investment Objectives and
Policies; Description and Risks of
Fund Investments
5. Management of the Trust; Back Cover
5A. N/A (Information contained in Annual
Report)
6. Description of the Trust; Back
Cover; Distributions; Taxes
7. How to Buy Shares; Alternative
Purchase Arrangements; Back Cover;
Distributor and Distribution and
Servicing Plans; How Net Asset
Value is Determined
8. How to Redeem
9. None
-2-
<PAGE>
PIMCO ADVISORS FUNDS
Cross Reference Sheet for Items Required by
Form N-1A
Caption in Statement of
Additional Information
----------------------
10. Cover Page
11. Table of Contents
12. Not Applicable
13. Investment Objectives and
Policies; Derivative Instruments;
Investment Restrictions; Portfolio
Transactions
14. Management of the Trust
15. Not Applicable
16. Management of the Trust;
Distributor and Distribution and
Servicing Plans; Other Services
17. Portfolio Transactions
18. Organization and Capitalization of
the Trust
19. Contingent Deferred Sales Charge -
Class A, Class B and Class C Shares;
Distributor and Distribution and
Servicing Plans; Exchange
Privilege; How to Redeem; How Net
Asset Value Is Determined
20. Taxes
21. Distributor and Distribution and
Servicing Plans
22. Calculation of Yield and Return;
Performance Comparisons
23. Financial Statements
-3-
<PAGE>
- --------------------------------------------------------------------------------
PIMCO ADVISORS FUNDS
PROSPECTUS July , 1996
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PIMCO Advisors Funds (the "Trust") is an open-end series management investment
company offering seventeen diversified portfolios and one non-diversified port-
folio (each a "Fund") with different investment objectives and strategies. Un-
less otherwise noted, each of the Funds referred to below is a "diversified"
portfolio. For a discussion of the risks associated with "non-diversified"
portfolios, see "Description and Risks of Fund Investments" below. PIMCO Advi-
sors Funds, 2187 Atlantic Street, Stamford, CT 06902.
PIMCO ADVISORS EQUITY FUNDS
Equity Income Fund seeks long-term growth of capital and current income. The
Fund invests primarily in common stocks, preferred stocks and convertible secu-
rities. It may also invest a portion of its assets in bonds and other fixed-in-
come securities.
Value Fund seeks long-term growth of capital and current income. The Fund in-
vests primarily in common stocks of companies that are characterized by having
below average price to earnings ("P/E") ratios and/or higher dividend yields
relative to their industry groups.
Summit Fund seeks long-term growth of capital. Income is an incidental consid-
eration. The Fund invests primarily in common stocks of companies with medium
and large equity capitalizations.
Growth Fund seeks long-term growth of capital. Income is an incidental consid-
eration. The Fund invests primarily in common stocks of companies with medium
to large equity capitalizations.
Target Fund seeks capital appreciation. No consideration is given to income.
The Fund invests primarily in common stocks of companies with medium equity
capitalizations.
Discovery Fund seeks capital appreciation. No consideration is given to income.
The Fund invests primarily in common stocks of small companies with equity cap-
italizations of $500 million to $1 billion that exhibit favorable growth char-
acteristics and reasonable valuations.
Opportunity Fund seeks capital appreciation. No consideration is given to in-
come. The Fund invests primarily in common stocks of companies with small eq-
uity capitalizations, which may include companies without wide market recogni-
tion. THE OPPORTUNITY FUND IS CURRENTLY CLOSED TO NEW INVESTORS.
Innovation Fund seeks capital appreciation. No consideration is given to in-
come. The Fund invests primarily in common stocks of companies which use inno-
vative technology to gain a strategic, competitive advantage in their industry
as well as companies that provide and service those technologies.
International Fund seeks capital appreciation through investments in an inter-
national portfolio. Income is an incidental consideration. The Fund invests
primarily in equity securities of companies whose principal activities are out-
side of the United States.
Emerging Markets Fund seeks capital appreciation. No consideration is given to
income. The Fund invests primarily in an international portfolio of equity se-
curities of companies whose principal activities are in countries with emerging
markets and developing economies.
Precious Metals Fund seeks capital appreciation. No consideration is given to
income. The Fund concentrates investments in a global portfolio of common
stocks of companies principally engaged in precious metals-related activities.
PIMCO ADVISORS INCOME FUNDS
Global Income Fund is a non-diversified portfolio that seeks maximum total re-
turn, consistent with preservation of capital. The Fund invests primarily in
investment grade U.S. and foreign fixed income securities and has an intermedi-
ate duration portfolio.
High Income Fund seeks maximum total return, consistent with preservation of
capital. The Fund invests primarily in higher yielding, lower-rated fixed-in-
come securities and has an intermediate duration portfolio.
Total Return Income Fund seeks maximum total return, consistent with preserva-
tion of capital. The Fund invests primarily in investment grade fixed-income
securities and has an intermediate duration portfolio.
Tax Exempt Fund seeks high current income exempt from federal income taxes,
consistent with preservation of capital. The Fund invests primarily in invest-
ment grade municipal securities and has an intermediate to long duration port-
folio.
U.S. Government Fund seeks maximum total return, consistent with preservation
of capital. The Fund invests in U.S. government securities and has an interme-
diate duration portfolio.
Short-Intermediate Fund seeks current income, consistent with relatively low
volatility of principal. The Fund invests primarily in investment grade fixed-
income securities and has a shorter duration portfolio.
Money Market Fund seeks the maximum current income believed to be consistent
with preservation of capital and maintenance of liquidity. The Fund invests in
high quality, short-term fixed-income instruments.
THE EQUITY INCOME FUND AND THE HIGH INCOME FUND MAY INVEST WITHOUT LIMIT IN
LOWER-RATED BONDS (COMMONLY CALLED "JUNK BONDS"), INCLUDING CONVERTIBLE BONDS,
WHICH MAY BE CONSIDERED HIGHLY SPECULATIVE. INVESTORS SHOULD CONSIDER THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THESE FUNDS -- SEE "DESCRIPTION AND RISKS OF
FUND INVESTMENTS-- RISKS OF HIGH YIELD BONDS" IN THIS PROSPECTUS.
INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
Each Fund (except the Opportunity Fund) currently offers three classes of
shares: Class A shares (generally sold subject to an initial sales load), Class
B Shares (sold subject to a contingent deferred sales charge) and Class C
shares (sold subject to an asset based sales charge). The Opportunity Fund does
not offer Class B shares.
This Prospectus concisely describes the information investors should know be-
fore investing in the Funds. Please read this Prospectus carefully and keep it
for further reference.
Information about the investment objective of each Fund, along with a detailed
description of the types of securities in which each Fund may invest, and of
investment policies and restrictions applicable to each Fund, is set forth in
this Prospectus. There can be no assurance that the investment objective of any
Fund will be achieved. Because the market value of the Funds' investments will
change, the investment returns and net asset value per share of each Fund will
also vary.
A Statement of Additional Information dated July , 1996, as supplemented from
time to time, is available free of charge by writing to PIMCO Advisors Distri-
bution Company (the "Distributor"), 2187 Atlantic Street, Stamford, Connecticut
06902 or by telephoning 800-426-0107. The Statement of Additional Information,
which contains more detailed information about the Trust, has been filed with
the Securities and Exchange Commission (the "SEC") and is incorporated by ref-
erence in this Prospectus.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.......... 3
Schedule of Fees............ 4
Financial Highlights........ 7
Investment Objectives and
Policies................... 22
Description and Risks of
Fund Investments........... 31
Performance Information..... 42
How to Buy Shares........... 43
General..................... 45
Alternative Purchase Ar-
rangements................. 46
Exchange Privilege.......... 53
How to Redeem............... 54
Distributor and Distribution
and Servicing Plans........ 57
How Net Asset Value is De-
termined................... 59
Distributions............... 59
Taxes....................... 60
Management of the Trust..... 61
Description of the Trust.... 66
Mailings to Shareholders.... 67
Appendix A.................. 67
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
PIMCO Advisors Funds 3
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
PIMCO Advisors L.P. (the "Manager") is the manager of all of the Funds. PIMCO
Advisors L.P. is one of the largest investment management firms in the U.S. As
of May 31, 1996, PIMCO Advisors L.P. had approximately $ billion in assets
under management. Each of the PIMCO Advisors Funds also has a sub-adviser
responsible for portfolio investment decisions. All of the Funds' sub-advisers
are affiliates of PIMCO Advisors L.P. except for Van Eck Associates
Corporation, an independent sub-adviser that advises the Precious Metals Fund.
The affiliated sub-advisers are listed below.
<TABLE>
<CAPTION>
PIMCO ADVISORS INVESTMENT FIRM LOCATION FUNDS MANAGED
- ----------------------------------------------------------------------------------
<S> <C> <C>
Columbus Circle Investors Stamford, CT Equity Income, Growth, Target,
Opportunity, Innovation, Tax
Exempt, Money Market
- ----------------------------------------------------------------------------------
Pacific Investment Manage- Newport Beach, CA Global Income, High Income,
ment Company Total Return Income, U.S.
Government, Short-Intermediate
- ----------------------------------------------------------------------------------
Cadence Capital Management Boston, MA Discovery, Summit
- ----------------------------------------------------------------------------------
NFJ Investment Group Dallas, TX Value
- ----------------------------------------------------------------------------------
Blairlogie Capital Manage- Edinburgh, Scotland International, Emerging
ment Markets
- ----------------------------------------------------------------------------------
</TABLE>
Presented in the tables below are some key facts and comparisons of the PIMCO
Advisors Funds.
PIMCO ADVISORS EQUITY FUNDS
<TABLE>
<CAPTION>
FUND PRIMARY OBJECTIVE PRIMARY INVESTMENTS INDUSTRIES FOREIGN/1/
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income Long-term growth of Income-producing stocks and Diversified 0-15%
Fund capital and current convertibles of companies
income with small, medium and
large equity
capitalizations
- -------------------------------------------------------------------------------------------------
Value Fund Long-term growth of Stocks of companies with Diversified 0-15%
capital and current small, medium and large
income equity capitalizations
- -------------------------------------------------------------------------------------------------
Summit Fund Long-term growth of Stocks of companies with Diversified 0-15%
capital medium and large equity
Income is incidental capitalizations
- -------------------------------------------------------------------------------------------------
Growth Fund Long-term growth of Stocks of companies with Diversified 0-15%
capital medium to large equity
Income is incidental capitalizations
- -------------------------------------------------------------------------------------------------
Target Fund Capital appreciation Stocks of companies with Diversified 0-15%
medium equity
capitalizations
- -------------------------------------------------------------------------------------------------
Discovery Fund Capital appreciation Stocks of small companies Diversified 0-15%
with equity capitalizations
of $500 million to $1
billion
- -------------------------------------------------------------------------------------------------
Opportunity Capital appreciation Stocks of companies with Diversified 0-15%
Fund small equity
capitalizations
- -------------------------------------------------------------------------------------------------
Innovation Capital appreciation Stocks of companies with Technology-related 0-15%
Fund small, medium and large
equity capitalizations
- -------------------------------------------------------------------------------------------------
International Capital appreciation Non-U.S. stocks of Diversified 65-100%
Fund Income is incidental companies with small,
medium and large equity
capitalizations
- -------------------------------------------------------------------------------------------------
Emerging Mar- Capital appreciation Non-U.S. stocks of Diversified 65-100%
kets Fund companies in emerging
markets
- -------------------------------------------------------------------------------------------------
Precious Met- Capital appreciation U.S. and non-U.S. stocks of Precious Metals- 0-100%
als Fund companies with medium and related
large equity
capitalizations
- -------------------------------------------------------------------------------------------------
</TABLE>
/1/Refers to securities principally traded in securities markets outside the
United States. The Equity Funds may invest without limit in securities of for-
eign issuers traded in U.S. securities markets.
PIMCO ADVISORS INCOME FUNDS
<TABLE>
<CAPTION>
FUND PRIMARY OBJECTIVE PRIMARY INVESTMENTS DURATION/1/ CREDIT QUALITY FOREIGN/2/
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Global Income Maximum total Investment grade 3-6 yrs. B to Aaa 25-75%
Fund return, consistent U.S. and foreign 0-10% below Baa
with preservation of fixed-income
capital securities
- -----------------------------------------------------------------------------------------------------
High Income Maximum total Higher yielding 2-6 yrs. B to Aaa; min of 0-20%
Fund return, consistent fixed- 65% below Baa
with preservation of income
capital securities
- -----------------------------------------------------------------------------------------------------
Total Return Maximum total Investment grade 3-6 yrs. B to Aaa; 0-10% 0-20%
Income Fund return, consistent fixed- below Baa
with preservation of income
capital securities
- -----------------------------------------------------------------------------------------------------
Tax Exempt Fund High current income Investment grade 3-10 yrs. Ba to Aaa; 0-20% None
exempt from federal municipal below Baa
income taxes, securities
consistent with
preservation of
capital
- -----------------------------------------------------------------------------------------------------
U.S. Government Maximum total U.S. government 3-6 yrs. Gov't. AAA None
Fund return, consistent securities
with preservation of
capital
- -----------------------------------------------------------------------------------------------------
Short-Interme- Current income Short- to 1-3 yrs. B to Aaa; 0-10% 0-20%
diate Fund consistent with Intermediate- below Baa
relatively low term investment
volatility of grade fixed-
principal income
securities
- -----------------------------------------------------------------------------------------------------
Money Market Maximum current Money market less than 1 yr. A-1, P-1 None
Fund income instruments
believed to be
consistent with
preservation of
capital and
maintenance of
liquidity
- -----------------------------------------------------------------------------------------------------
</TABLE>
/1/Based, in the case of callable securities, securities subject to early re-
payment and foreign securities, on the relevant sub-adviser's estimates.
/2/Refers to securities denominated in foreign currencies. The Income Funds may
invest beyond these limits in U.S. dollar-denominated securities of foreign
issuers.
<PAGE>
4 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
SCHEDULE OF FEES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (ALL FUNDS) CLASS A SHARES CLASS B SHARES CLASS C SHARES
<S> <C> <C> <C>
Maximum initial sales charge im-
posed on purchases (as a percent-
age of offering price at time of pur-
chase)
Equity Income, Value, Summit,
Growth, Target, Discovery,
Opportunity, Innovation,
International, Emerging Markets
and Precious Metals Funds........ 5.50% None None
Global Income, High Income, Total
Return Income, Tax Exempt and
U.S. Government Funds............ 4.75% None None
Short-Intermediate Fund........... 3.00% None None
Money Market Fund................. None* None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of net asset value at
time of purchase)................. None None None
Maximum contingent deferred sales
charge ("CDSC") (as a percentage
of original purchase price)....... 1%** 5%*** 1%****
Exchange Fee....................... None* None None
</TABLE>
*Regular sales charges apply when Class A shares of the Money Market Fund
(on which no sales charge was paid at time of purchase) are exchanged for
shares of any other Fund.
**Imposed only in certain circumstances where Class A shares are purchased
without a sales charge at the time of purchase. See "Alternative Purchase
Arrangements" in this Prospectus.
***The maximum CDSC is imposed on shares redeemed in the first year. For shares
held longer than one year, the CDSC declines according to the schedules set
forth under "Deferred Sales Charge Alternative--Class B Shares" in this
Prospectus.
****The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
<TABLE>
<CAPTION>
EXAMPLE: You would pay the following
ANNUAL FUND expenses on a $1,000 investment assuming
OPERATING EXPENSES (1) 5% annual return and (2) redemption
CLASS A SHARES (As a percentage of average net assets) at the end of each time period:
- -----------------------------------------------------------------------------------------------------------------
Total Fund
Management Other Operating
Fund Fees 12b-1 Fees/1/ Expenses Expenses 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income... .75% .25% .25% 1.25% $67 $92 $120 $198
Value........... .70 .25 .25 1.20 67 91 117 192
Summit.......... -- -- -- -- -- -- -- --
Growth.......... .66 .25 .19 1.10 66 88 112 182
Target.......... .71 .25 .29 1.25 67 92 120 198
Discovery....... .75 .25 .25 1.25 67 92 120 198
Opportunity..... .71 .25 .19 1.15 66 90 115 187
Innovation...... .75 .25 .25 1.25 67 92 120 198
International... .80 .25 .35 1.40 68 97 127 214
Emerging Mar-
kets........... -- -- -- -- -- -- -- --
Precious Met-
als............ .75 .25 .35 1.35 68 95 125 208
Global Income... .70 .25 .25 1.20 59 84 -- --
High Income..... .60 .25 .25 1.10 58 81 105 175
Total Return In-
come........... .60 .25 .25 1.10 58 81 105 175
Tax Exempt...... .60 .25 .25 1.10 58 81 105 175
U.S. Govern-
ment........... .58 .25 .17 1.00 57 78 100 164
Short-Intermedi-
ate............ .50 .25 .20 .95 39 59 81 143
Money Market.... .10/2/ .10/3/ .25 .45/4/ 5 14 25 57
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
EXAMPLE: You would pay the following
expenses on a $1,000 investment assuming
CLASS A SHARES (1) 5% annual return and (2) no redemption:
- -------------------------------------------------------------------------
Fund 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income... $67 $92 $120 $198
Value........... 67 91 117 192
Summit.......... -- -- -- --
Growth.......... 66 88 112 182
Target.......... 67 92 120 198
Discovery....... 67 92 120 198
Opportunity..... 66 90 115 187
Innovation...... 67 92 120 198
International... 68 97 127 214
Emerging Mar-
kets........... -- -- -- --
Precious Met-
als............ 68 95 125 208
Global Income... 59 84 -- --
High Income..... 58 81 105 175
Total Return In-
come........... 58 81 105 175
Tax Exempt...... 58 81 105 175
U.S. Govern-
ment........... 57 78 100 164
Short-Intermedi-
ate............ 39 59 81 143
Money Market.... 5 14 25 57
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
/1/12b-1 fees represent servicing fees which are paid annually to the
Distributor and repaid to participating brokers, certain banks and other
financial intermediaries. See "Distributor and Distribution and Servicing
Plans."
/2/The Manager has voluntarily undertaken to reduce its advisory fee with
respect to the Money Market Fund to .10% of the Fund's average daily net
assets until further notice. Absent such undertaking, the advisory fee would
be .50% of the Fund's average daily net assets.
/3/The Distributor has voluntarily undertaken to reduce the 12b-1 fee it
receives with respect to the Money Market Fund to .10% of the Fund's average
daily net assets until further notice. Absent such undertaking, the 12b-1 fee
would be .20% of the Fund's average daily net assets.
/4/Absent the undertakings noted, the total operating expenses for the Money
Market Fund would be .95% of the Fund's average daily net assets.
<PAGE>
PIMCO Advisors Funds 5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXAMPLE: You would pay the following
ANNUAL FUND expenses on a $1,000 investment assuming
OPERATING EXPENSES (1) 5% annual return and (2) redemption
CLASS B SHARES (As a percentage of average net assets) at the end of each time period:
- --------------------------------------------------------------------------------------------------------------
Total Fund
Management Other Operating
Fund Fees 12b-1 Fees Expenses Expenses 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income... .75% 1.00% .25% 2.00% $70 $93 $128 $198
Value........... .70 1.00 .25 1.95 70 91 125 192
Summit.......... -- -- -- -- -- -- -- --
Growth.......... .66 1.00 .19 1.85 69 88 120 182
Target.......... .71 1.00 .29 2.00 70 93 128 198
Discovery....... .75 1.00 .25 2.00 70 93 128 198
Opportunity..... .71 1.00 .19 1.90 69 90 123 187
Innovation...... .75 1.00 .25 2.00 70 93 128 198
International... .80 1.00 .35 2.15 72 97 135 214
Emerging Mar-
kets........... -- -- -- -- -- -- -- --
Precious Met-
als............ .75 1.00 .35 2.10 71 96 133 208
Global Income... .70 1.00 .25 1.95 70 91 -- --
High Income..... .60 1.00 .25 1.85 69 88 120 175
Total Return In-
come........... .60 1.00 .25 1.85 69 88 120 175
Tax Exempt...... .60 1.00 .25 1.85 69 88 120 175
U.S. Govern-
ment........... .58 1.00 .17 1.75 68 85 115 164
Short-Intermedi-
ate............ .50 1.00 .20 1.70 67 84 112 143
Money Market.... 10/1/ 1.00 .25 1.35/2/ 64 73 94 57
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
EXAMPLE: You would pay the following
expenses on a $1,000 investment assuming
CLASS B SHARES (1) 5% annual return and (2) no redemption:
- -------------------------------------------------------------------------------------------------------------
Fund 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income... $20 $63 $108 $198
Value........... 20 61 105 192
Summit.......... -- -- -- --
Growth.......... 19 58 100 182
Target.......... 20 63 108 198
Discovery....... 20 63 108 198
Opportunity..... 19 60 103 187
Innovation...... 20 63 108 198
International... 22 67 115 214
Emerging Mar-
kets........... -- -- -- --
Precious Met-
als............ 21 66 113 208
Global Income... 20 61 -- --
High Income..... 19 58 100 175
Total Return In-
come........... 19 58 100 175
Tax Exempt...... 19 58 100 175
U.S. Govern-
ment........... 18 55 95 164
Short-Intermedi-
ate............ 17 54 92 143
Money Market.... 14 43 74 57
- -------------------------------------------------------------------------------------------------------------
</TABLE>
/1/The Manager has voluntarily undertaken to reduce its advisory fee with
respect to the Money Market Fund to .10% of the Fund's average daily net
assets until further notice. Absent such undertaking, the advisory fee would
be .50% of the Fund's average daily net assets.
/2/Absent the undertaking noted, the total operating expenses for the Money
Market Fund would be 1.75% of the Fund's average daily net assets.
<TABLE>
<CAPTION>
EXAMPLE: You would pay the following
ANNUAL FUND expenses on a $1,000 investment assuming
OPERATING EXPENSES (1) 5% annual return and (2) redemption
CLASS C SHARES (As a percentage of average net assets) at the end of each time period:
- ----------------------------------------------------------------------------------------------------------------
Total Fund
Management Other Operating
Fund Fees 12b-1 Fees/1/ Expenses Expenses 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income... .75% 1.00% .25% 2.00% $30 $63 $108 $233
Value........... .70 1.00 .25 1.95 30 61 105 227
Summit.......... -- -- -- -- -- -- -- --
Growth.......... .66 1.00 .19 1.85 29 58 100 217
Target.......... .71 1.00 .29 2.00 30 63 108 233
Discovery....... .75 1.00 .25 2.00 30 63 108 233
Opportunity..... .71 1.00 .19 1.90 29 60 103 222
Innovation...... .75 1.00 .25 2.00 30 63 108 233
International... .80 1.00 .35 2.15 32 67 115 248
Emerging Mar-
kets........... -- -- -- -- -- -- -- --
Precious Met-
als............ .75 1.00 .35 2.10 31 66 113 243
Global Income... .70 1.00 .25 1.95 30 61 -- --
High Income..... .60 1.00 .25 1.85 29 58 100 217
Total Return In-
come........... .60 1.00 .25 1.85 29 58 100 217
Tax Exempt...... .60 1.00 .25 1.85 29 58 100 217
U.S. Govern-
ment........... .58 1.00 .17 1.75 28 55 95 206
Short-Intermedi-
ate............ .50 .75 .20 1.45 25 46 79 174
Money Market.... .10/2/ .10/3/ .25 .45/4/ 15 14 25 57
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
EXAMPLE: You would pay the following
expenses on a $1,000 investment assuming
CLASS C SHARES (1) 5% annual return and (2) no redemption:
- ----------------------------------------------------------------------------------------------------------------
Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income... $20 $63 $108 $233
Value........... 20 61 105 227
Summit.......... -- -- -- --
Growth.......... 19 58 100 217
Target.......... 20 63 108 233
Discovery....... 20 63 108 233
Opportunity..... 19 60 103 222
Innovation...... 20 63 108 233
International... 22 67 115 248
Emerging Mar-
kets........... -- -- -- --
Precious Met-
als............ 21 66 113 243
Global Income... 20 61 -- --
High Income..... 19 58 100 217
Total Return In-
come........... 19 58 100 217
Tax Exempt...... 19 58 100 217
U.S. Govern-
ment........... 18 55 95 206
Short-Intermedi-
ate............ 15 46 79 174
Money Market.... 5 14 25 57
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
/1/12b-1 fees which equal or are less than .25% represent servicing fees which
are paid annually to the Distributor and repaid by the Distributor to
participating brokers, certain banks and other financial intermediaries. 12b-
1 fees which exceed .25% represent aggregate distribution and servicing fees.
See "Distributor and Distribution and Servicing Plans."
/2/The Manager has voluntarily undertaken to reduce its advisory fee with
respect to the Money Market Fund to .10% of the Fund's average daily net
assets until further notice. Absent such undertaking, the advisory fee would
be .50% of the Fund's average daily net assets.
/3/The Distributor has voluntarily agreed to reduce the 12b-1 fee it receives
with respect to the Money Market Fund to .10% of the Fund's average daily net
assets until further notice. Absent such undertaking, the 12b-1 fee would be
.20% of the Fund's average daily net assets.
/4/Absent the undertakings noted, the total operating expenses for the Money
Market Fund would be .95% of the Fund's average daily net assets.
<PAGE>
6 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
The purpose of the foregoing tables is to assist investors in understanding the
various costs and expenses of the Trust that are borne directly or indirectly
by shareholders. Except for the Value, Summit, Discovery, Emerging Markets and
Global Income Funds, Annual Fund Operating Expenses are based on actual ex-
penses during the fiscal year ended September 30, 1995 and Fund average net as-
sets during such fiscal year. Annual Fund Operating Expenses for the Value,
Summit, Discovery, Emerging Markets and Global Income Funds are based on esti-
mated expenses for the fiscal year ending September 30, 1996. The Examples for
Class A shares assume payment of the current maximum applicable sales load. Due
to the 12b-1 distribution fee imposed on Class B and Class C shares, a Class B
or Class C shareholder of the Trust may, depending on the length of time the
shares are held, pay more than the economic equivalent of the maximum front-end
sales charges permitted by relevant rules of the National Association of Secu-
rities Dealers, Inc.
NOTE: THE FIGURES SHOWN IN THE EXAMPLES ARE ENTIRELY HYPOTHETICAL. THEY ARE NOT
REPRESENTATIONS OF PAST OR FUTURE PERFORMANCE OR EXPENSES; ACTUAL PERFORMANCE
AND/OR EXPENSES MAY BE MORE OR LESS THAN SHOWN.
<PAGE>
PIMCO Advisors Funds 7
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights set forth below and on the following pages present
certain information and ratios as well as performance information for each of
the Funds. Additional information about the performance of all of the Funds of
the Trust is contained in the Trust's Annual Report to Shareholders which may
be obtained without charge from the Distributor. The information provided below
for each Fund, has been audited by Coopers & Lybrand L.L.P., the Trust's
independent accountants, whose report thereon, for the five year period ended
September 30, 1995, appears in the Statement of Additional Information.
Financial Statements and related Notes are also included in the Statement of
Additional Information.
- --------------------------------------------------------------------------------
The following schedule of financial highlights for the Equity Income Fund is
for shares outstanding throughout the periods listed. The information provided
reflects results of operations under the Fund's former investment objective and
policies through January 31, 1992; such results would not necessarily have been
achieved had the Fund's current objective and policies then been in effect.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
EQUITY INCOME FUND
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- ------- -------- ------- -------- ------- ------- ------- ------- ------- -------
Year Ended September 30,
------------------------------------------------------------------------------------------------------
1995 1995(1) 1995 1994 1994 1993 1993 1992 1992 1991(2) 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $12.50 $12.55 $12.47 $12.88 $12.85 $10.57 $10.56 $ 9.92 $ 9.91 $ 8.38 $ 8.16
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income From
Investment
Operations
Net investment
income 0.36 0.11 0.27 0.34 0.24 0.33 0.25 0.34 0.29 0.28 0.36
Net gains or
losses on
securities (both
realized and
unrealized) 1.61 1.55 1.59 (0.17) (0.16) 2.30 2.29 0.71 0.68 1.54 1.75
------ ------ ------ ------- ------- ------ ------ ------ ------ ------ ------
Total from
investment
operations 1.97 1.66 1.86 0.17 0.08 2.63 2.54 1.05 0.97 1.82 2.11
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less
Distributions
Dividends (from
net investment
income) (0.33) (0.08) (0.24) (0.33) (0.24) (0.32) (0.25) (0.40) (0.32) (0.28) (0.36)
Distributions
(from capital
gain) -- -- -- (0.22) (0.22) -- -- -- -- -- --
---- ---- ---- ------- ------- ---- ---- ---- ---- ---- ----
Total
distributions (0.33) (0.08) (0.24) (0.55) (0.46) (0.32) (0.25) (0.40) (0.32) (0.28) (0.36)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value,
end of period $14.14 $14.13 $14.09 $12.50 $12.47 $12.88 $12.85 $1O.57 $10.56 $ 9.92 $ 9.91
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return
(without sales
charge) 16.1% 13.3% 15.2% 1.4% 0.7% 25.3% 24.4% 10.7% 9.9% 34.8% 26.5%
Ratios/Supplemental
Data
Net assets, end
of
period (in
000's) $12,933 $1,760 $174,316 $14,942 $178,892 $6,328 $94,247 $2,593 $45,101 $15 $22,651
Ratio of
expenses to
average net
assets 1.3% 2.1%* 2.1% 1.3% 2.0% 1.3% 2.1% 1.4% 2.1% 1.6%* 2.2%
Ratio of net
investment
income to
average net
assets 2.9% 2.2%* 2.1% 2.7% 2.0% 2.9% 2.2% 3.3% 2.7% 4.4%* 4.2%
Portfolio
turnover rate 176.9% 176.9% 176.9% 174.9% 174.9% 167.9% 167.9% 149.0% 149.0% 142.7% 142.7
<CAPTION>
CLASS C
----------------------------
Period Ended
--------------------September 30,
1990 1989 1988(3)
-----------------------------
<S> <C> <C> <C>
Net asset value,
beginning of
period $11.17 $10.05 $10.00
------ ------ ------
Income From
Investment
Operations
Net investment
income 0.49 0.55 0.24
Net gains or
losses on
securities (both
realized and
unrealized) (2.32) 1.19 (0.05)
------- ------ -------
Total from
investment
operations (1.83) 1.74 0.19
------- ------- -------
Less
Distributions
Dividends (from
net investment
income) (0.49) (0.62) (0.14)
Distributions
(from capital
gain) (0.69) -- --
------ ------ -------
Total
distributions (1.18) (0.62) (0.14)
------- ------- -------
Net asset value,
end of period $ 8.16 $11.17 $10.05
====== ====== ======
Total Return
(without sales
charge) (18.0%) 17.9% 4.3%
Ratios/Supplemental
Data
Net assets, end
of
period (in
000's) $25,758 $45,168 $47,118
Ratio of
expenses to
average net
assets 2.0% 1.9% 2.0%*
Ratio of net
investment
income to
average net
assets 5.1% 5.2% 5.4%*
Portfolio
turnover rate 70.2% 84.8% 22.9%
- --------------------------------------------------------------
</TABLE>
(1) The distribution of Class B shares commenced on May 22, 1995.
(2) The distribution of Class A shares commenced on February 1, 1991.
(3) The Fund commenced operations on April 18, 1988.
<PAGE>
8 PIMCO Advisors Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Value Fund is for shares
outstanding throughout the period listed.
<TABLE>
<CAPTION>
----------------------------------------------
VALUE FUND
CLASS A CLASS B CLASS C
------- ------- -------
Period Ended September 30,
-------------------------------
1995(4) 1995(4) 1995(4)
- -----------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $10.00 $10.00 $10.00
-------- -------- --------
Income from investment
operations
Net investment income 0.07 0.05 0.05
Net gains or losses on
securities
(both realized and
unrealized) 0.68 0.68 0.68
-------- -------- --------
Total from investment
operations 0.75 0.73 0.73
-------- -------- --------
Less Distributions
Dividends (from
net investment income) (0.07) (0.05) (0.05)
Distributions (from
capital gain) -- -- --
-------- -------- --------
Total distributions (0.07) (0.05) (0.05)
-------- -------- --------
Net asset value, end of
period $10.68 $10.68 $10.68
====== ====== ======
Total Return (without
sales charge) 7.5% 7.3% 7.3%
Ratios/Supplemental Data
Net assets, end of
period (in 000's) $2,492 $3,975 $6,643
Ratio of expenses to
average net assets 1.3%* 2.1%* 2.0%*
Ratio of net investment
income to average
net assets 2.7%* 1.9%* 1.9%*
Portfolio turnover rate 0.5% 0.5% 0.5%
- -----------------------------------------------------------
</TABLE>
(4) The Fund commenced operations on June 27, 1995.
*Annualized
<PAGE>
PIMCO Advisors Funds 9
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Growth Fund is for
shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
GROWTH FUND
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- ------- ---------- ------- --------- ------- ---------- ------- ------- ------- -------
Year Ended September 30,
-----------------------------------------------------------------------------------------------------------
1995 1995(6) 1995 1994 1994 1993 1993 1992 1992 1991(7) 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $22.01 $22.63 $21.52 $23.64 $23.32 $20.76 $20.64 $20.63 $20.54 $16.99 $16.93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment
operations
Net investment
income (loss) 0.12 (0.03) (0.04) 0.12 (0.04) 0.09 (0.07) 0.14 (0.01) 0.21 0.12
Net gains or
losses on
securities
(both realized
and unrealized) 4.79 2.34 4.65 0.12 0.11 3.53 3.49 1.38 1.37 5.28 5.32
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations 4.91 2.31 4.61 0.24 0.07 3.62 3.42 1.52 1.36 5.49 5.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less
Distributions
Dividends (from
net investment
income) -- -- -- -- -- -- -- (0.14) (0.01) (0.19) (0.17)
Distributions
(from capital
gain) (1.19) -- (1.19) (1.87) (1.87) (0.74) (0.74) (1.25) (1.25) (1.66) (1.66)
------ ------ ------- ------ ------- ------ ------- ------ ------ ------ ------
Total
distributions (1.19) -- (1.19) (1.87) (1.87) (0.74) (0.74) (1.39) (1.26) (1.85) (1.83)
------ ------ ------- ------ ------- ------ ------- ------ ------ ------ ------
Net asset value,
end of period $25.73 $24.94 $24.94 $22.01 $21.52 $23.64 $23.32 $20.76 $20.64 $20.63 $20.54
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return
(without sales
charge) 23.7% 10.2% 22.8% 1.3% 0.5% 17.7% 16.9% 7.7% 6.9% 38.6% 35.1%
Ratios/Supplemental
Data
Net assets, end
of period (in
000's) $134,819 $7,671 $1,290,152 $107,269 $1,085,427 $97,509 $1,077,490 $71,209 $853,121 $17,064 $564,398
Ratio of
expenses to
average net
assets 1.1% 1.9%* 1.9% 1.1% 1.9% 1.1% 1.9% 1.1% 1.9% 1.2%* 1.8%
Ratio of net
investment
income (loss) to
average net
assets 0.5% (0.4%)* (0.2%) 0.6% (0.2%) 0.4% (0.3%) 0.7% (0.1%) 0.9%* 0.6%
Portfolio
turnover rate 110.6% 110.6% 110.6% 115.3% 115.3% 109.9% 109.9% 92.3% 92.3% 95.3% 95.3%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(6)The distribution of Class B shares commenced on May 23, 1995.
(7)The distribution of Class A shares commenced on October 26, 1990.
*Annualized
-------------------------------------------------------
GROWTH FUND
<TABLE>
<CAPTION>
CLASS C
------------------------------------------
Year Ended September 30,
------------------------------------------
1990 1989 1988 1987 1986
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $19.71 $13.93 $18.04 $14.76 $11.92
------ ------ ------ ------ ------
Income from investment operations
Net investment income (loss) 0.19 0.11 0.09 0.14 0.33
Net gains or losses on securities
(both realized and unrealized) (1.67) 5.77 (2.96) 5.24 3.82
------ ------ ------ ------ ------
Total from investment operations (1.48) 5.88 (2.87) 5.38 4.15
------ ------ ------ ------ ------
Less Distributions
Dividends (from
net investment income) (0.18) (0.10) (0.11) (0.18) (0.43)
Distributions (from capital gain) (1.12) -- (1.13) (1.92) (0.88)
------ ------ ------ ------ ------
Total distributions (1.30) (0.10) (1.24) (2.10) (1.31)
------ ------ ------ ------ ------
Net asset value, end of period $16.93 $19.71 $13.93 $18.04 $14.76
====== ====== ====== ====== ======
Total Return (without sales
charge) (8.0%) 42.4% (14.8%) 41.5% 37.9%
Ratios/Supplemental Data
Net assets, end of period (in
000's) $314,075 $373,490 $338,493 $509,348 $192,325
Ratio of expenses to average net
assets 1.7% 1.7% 1.8% 1.6% 1.7%
Ratio of net investment income to
average net assets 1.0% 0.7% 0.6% 0.8% 2.4%
Portfolio turnover rate 88.7% 82.5% 103.6% 128.1% 168.7%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
10 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Target Fund is for
shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
---------------------------------------------------------------
TARGET FUND
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C
------- ------- ------- ------- ------- ------- -------
Year Ended September 30,
---------------------------------------------------------------
1995 1995(8) 1995 1994 1994 1993(9) 1993(9)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.13 $13.93 $12.95 $12.72 $12.65 $10.00 $10.00
------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment loss (0.02) (0.05) (0.12) (0.04) (0.14) (0.02) (0.09)
Net gains or losses on
securities (both
realized
and unrealized) 3.45 2.18 3.38 0.57 0.56 2.74 2.74
------ ------ ------ ------ ------ ------ ------
Total from investment
operations 3.43 2.13 3.26 0.53 0.42 2.72 2.65
------ ------ ------ ------ ------ ------ ------
Less Distributions
Dividends (from net
investment income) -- -- -- -- -- -- --
Distributions (from
capital gain) (0.16) -- (0.16) (0.12) (0.12) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions (0.16) -- (0.16) (0.12) (0.12) -- --
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period $16.40 $16.06 $16.05 $13.13 $12.95 $12.72 $12.65
====== ====== ====== ====== ====== ====== ======
Total Return (without
sales charge) 26.5% 15.3% 25.6% 4.2% 3.4% 27.2% 26.5%
Ratios/Supplemental Data
Net assets, end of
period (in 000's) $121,915 $7,554 $780,355 $90,527 $556,043 $48,787 $298,238
Ratio of expenses to
average net assets 1.2% 2.0%* 2.0% 1.2% 2.0% 1.3%* 2.0%*
Ratio of net investment
income (loss) to
average net assets (0.1%) (0.9%)* (0.9%) (0.3%) (1.1%) (0.3%)* (1.0%)*
Portfolio turnover rate 128.3% 128.3% 128.3% 103.5% 103.5% 76.0% 76.0%
- -------------------------------------------------------------------------------------------
</TABLE>
(8)The distribution of Class B shares commenced on May 22, 1995.
(9)The Fund commenced operations on December 17, 1992.
*Annualized
<PAGE>
PIMCO Advisors Funds 11
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Discovery Fund is for
shares outstanding throughout the period listed.
<TABLE>
<CAPTION>
---------------------------
DISCOVERY FUND
CLASS A CLASS B CLASS C
-------- -------- --------
Period Ended September 30,
---------------------------
1995(10) 1995(10) 1995(10)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00
------ ------ ------
Income from investment operations
Net investment income 0.01 0.01 0.01
Net gains or losses on securities (both realized
and unrealized) 0.88 0.87 0.87
------ ------ ------
Total from investment operations 0.89 0.86 0.86
------ ------ ------
Less Distributions
Dividends (from net investment income) -- -- --
Distributions (from capital gain) -- -- --
------ ------ ------
Total distributions -- -- --
------ ------ ------
Net asset value, end of period $10.89 $10.86 $10.86
====== ====== ======
Total Return (without sales charge) 8.9% 8.6% 8.6%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $7,658 $10,832 $20,260
Ratio of expenses to average net assets 1.3%* 2.0%* 2.0%*
Ratio of net investment income (loss) to average
net assets 0.2%* (0.5%)* (0.5%)*
Portfolio turnover rate 34.9% 34.9% 34.9%
- ------------------------------------------------------------------------------
</TABLE>
(10)The Fund commenced operations on June 27, 1995.
*Annualized
<PAGE>
12 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Opportunity Fund is for
shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
OPPORTUNITY FUND
CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Year Ended September 30,
-----------------------------------------------------------------------------------------
1995 1995 1994 1994 1993 1993 1992 1992 1991(12) 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $28.87 $28.04 $33.43 $32.77 $19.84 $19.60 $17.95 $17.87 $11.78 $11.93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income
(loss) (0.11) (0.34) (0.17) (0.38) (0.15) (0.34) (0.04) (0.18) (0.03) (0.11)
Net gains or losses on
securities
(both realized and
unrealized) 11.19 10.81 (2.02) (1.98) 14.00 13.77 3.61 3.59 6.20 6.42
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 11.08 10.47 (2.19) (2.36) 13.85 13.43 3.57 3.41 6.17 6.31
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions
Dividends (from net
investment income) -- -- -- -- -- -- -- -- -- --
Distributions (from
capital gain) (0.87) (0.87) (2.26) (2.26) (0.26) (0.26) (1.68) (1.68) -- (0.37)
Return of capital
distribution -- -- (.11) (.11) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.87) (0.87) (2.37) (2.37) (0.26) (0.26) (1.68) (1.68) -- (0.37)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period $39.08 $37.64 $28.87 $28.04 $33.43 $32.77 $19.84 $19.60 $17.95 $17.87
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (without
sales charge) 39.7% 38.6% (6.7%) (7.4%) 70.4% 69.1% 21.6% 20.8% 70.9% 54.4%
Ratios/Supplemental Data
Net assets, end of
period (in 000's) $120,830 $715,191 $95,261 $553,460 $106,666 $618,193 $22,454 $179,081 $1,623 $58,656
Ratio of expenses to
average net assets 1.2% 1.9% 1.1% 1.9% 1.2% 2.0% 1.3% 2.0% 1.4%* 2.0%
Ratio of net investment
income (loss) to average
net assets (0.4%) (1.1%) (0.6%) (1.4%) (0.6%) (1.3%) (0.2%) (1.0%) (0.5%)* (0.8%)
Portfolio turnover rate 101.6% 101.6% 78.4% 78.4% 105.4% 105.4% 93.8% 93.8% 144.6% 144.6%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(12)The distribution of Class A shares commenced on December 17, 1990.
*Annualized.
<TABLE>
<CAPTION>
-----------------------------------------
OPPORTUNITY FUND
CLASS C
-----------------------------------------
Year Ended September 30,
-----------------------------------------
1990 1989 1988 1987 1986
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $15.78 $11.84 $16.73 $13.18 $12.04
------ ------ ------ ------ ------
Income from investment operations
Net investment income (loss) (0.01) (0.03) 0.03 0.02 (0.03)
Net gains or losses on securities
(both realized and unrealized) (2.13) 3.97 (2.34) 4.80 2.00
------ ------ ------ ------ ------
Total from investment operations (2.14) 3.94 (2.31) 4.82 1.97
------ ------ ------ ------ ------
Less Distributions
Dividends (from net investment
income) -- -- (0.03) -- (0.03)
Distributions (from capital gain) (1.71) -- (2.55) (1.27) (0.80)
Return of capital distribution -- -- -- -- --
------ ------ ------ ------ ------
Total distributions (1.71) -- (2.58) (1.27) (0.83)
------ ------ ------ ------ ------
Net asset value, end of period $11.93 $15.78 $11.84 $16.73 $13.18
====== ====== ====== ====== ======
Total Return (without sales
charge) (14.8%) 33.3% (9.0%) 40.2% 17.2%
Ratios/Supplemental Data
Net assets, end of period (in
000's) $33,472 $51,680 $51,062 $74,235 $52,233
Ratio of expenses to average net
assets 1.9% 1.9% 2.0% 1.7% 1.8%
Ratio of net investment income to
average net assets (0.1%) (0.2%) 0.3% 0.1% (0.3%)
Portfolio turnover rate 106.2% 153.4% 124.9% 188.7% 108.6%
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
PIMCO Advisors Funds 13
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Innovation Fund is for
shares outstanding throughout the period listed.
<TABLE>
<CAPTION>
--------------------------------------------------
INNOVATION FUND
CLASS A CLASS B CLASS C
-------- -------- --------
Period Ended September 30,
------------------------------
1995(13) 1995(14) 1995(13)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $11.81 $10.00
------ ------ ------
Income from investment operations
Net investment income (loss) (0.06)(15) (0.08) (0.13)(15)
Net gains or losses on securities
(both realized and unrealized) 4.80 2.93 4.78
------ ------ ------
Total from investment operations 4.74 2.85 4.65
------ ------ ------
Less Distributions
Dividends (from net investment income) -- -- --
Distributions (from capital gain) -- -- --
------ ------ ------
Total distributions -- -- --
------ ------ ------
Net asset value, end of period $14.74 $14.66 $14.65
====== ====== ======
Total Return (without sales charge) 47.4% 24.1% 46.5%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $28,239 $6,509 $63,952
Ratio of expenses to average net assets 1.4%* 2.3%* 2.2%*
Ratio of net investment income to average
net assets (0.6%)* (1.7%)* (1.4%)*
Portfolio turnover rate 86.1% 86.1% 86.1%
- ----------------------------------------------------------------------------
</TABLE>
(13)The Fund commenced operations on December 22, 1994.
(14)The distribution of Class B shares commenced on May 22, 1995.
(15)Reflecting voluntary waiver of investment advisory fee of $4,666 (.00 per
share) by the Manager as more fully described in note 3(a) to the Financial
Statements.
*Annualized
<PAGE>
14 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the International Fund is
for shares outstanding throughout the periods listed. The information provided
reflects results of operations the Fund's former investment objective and
policies through August 31, 1992; such results would not necessarily have been
achieved had the Fund's current objective and policies been in effect. On
November 15, 1994, Blairlogie Capital Management became the sub-adviser of the
Fund.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
INTERNATIONAL FUND
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- -------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Year Ended September 30,
-----------------------------------------------------------------------------------------------
1995 1995(16) 1995 1994 1994 1993 1993 1992 1992 1991(17) 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.92 $11.30 $12.56 $12.17 $11.92 $10.04 $ 9.92 $10.54 $10.49 $ 9.48 $10.04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income
(loss) 0.07 0.00 (0.02) 0.04 (0.06) 0.07 (0.01) 0.05 (0.06) 0.02 (0.08)
Net gains or losses on
securities
(both realized and
unrealized) (0.56) 0.45 (0.55) 0.94 0.93 2.80 2.75 (0.37) (0.33) 1.04 1.76
----- ---- ----- ---- ---- ---- ---- ----- ----- ---- ----
Total from investment
operations (0.49) 0.45 (0.57) 0.98 0.87 2.87 2.74 (0.32) (0.39) 1.06 1.68
----- ---- ----- ---- ---- ---- ---- ----- ----- ---- ----
Less Distributions
Dividends (from net
investment income) -- -- -- -- -- -- -- -- -- -- --
Distributions (from
capital gain) (0.24) -- (0.24) (0.23) (0.23) (0.74) (0.74) (0.18) (0.18) -- (1.23)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.24) -- (0.24) (0.23) (0.23) (0.74) (0.74) (0.18) (0.18) -- (1.23)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period $12.19 $11.75 $11.75 $12.92 $12.56 $12.17 $11.92 $10.04 $ 9.92 $10.54 $10.49
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (without
sales charge) (3.7%) 4.0% (4.5%) 8.2% 7.4% 30.4% 29.4% (3.1%) (3.8%) 17.3% 18.3%
Ratios/Supplemental Data
Net assets, end of
period (in 000's) $17,951 $503 $215,349 $23,289 $294,492 $11,992 $147,194 $471 $28,299 $22 $33,594
Ratio of expenses to
average net assets 1.5% 2.3%* 2.2% 1.4% 2.2% 1.4% 2.2% 1.9% 2.6% 1.9%* 2.6%
Ratio of net investment
income (loss) to average
net assets 0.6% (0.1%)* (0.2%) 0.3% (0.5%) 0.6% (0.1%) 0.5% (0.6%) 0.7%* (0.2%)
Portfolio turnover rate 169.8% 169.8% 169.8% 55.1% 55.1% 67.6% 67.6% 159.6% 159.6% 107.1% 107.1%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(16)The distribution of Class B shares commenced on May 22, 1995.
(17)The distribution of Class A shares commenced on February 1, 1991.
*Annualized
<TABLE>
<CAPTION>
-------------------------------------------------
INTERNATIONAL FUND
CLASS C
-------------------------------------------------
Period Ended
Year Ended September 30, September 30,
--------------------------------- -------------
1990 1989 1988 1987 1986(18)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $13.33 $10.07 $12.87 $ 9.70 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income (loss) (0.10) (0.18) (0.10) (0.10) --
Net gains or losses on
securities (both realized
and unrealized) (2.02) 3.44 (1.83) 3.27 (0.30)
------ ------ ------ ------ ------
Total from investment
operations (2.12) 3.26 (1.93) 3.17 (0.30)
------ ------ ------ ------ ------
Less Distributions
Dividends (from net
investment income) -- -- -- -- --
Distributions (from capital
gain) (1.17) -- (0.87) -- --
------ ------ ------ ------ ------
Total distributions (1.17) -- (0.87) -- --
------ ------ ------ ------ ------
Net asset value, end of
period $10.04 $13.33 $10.07 $12.87 $ 9.70
====== ====== ====== ====== ======
Total Return (without sales
charge) (17.4%) 32.4% (14.0%) 32.7% (26.9%)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $36,282 $56,150 $60,394 $107,584 $67,668
Ratio of expenses to average
net assets 2.3% 2.3% 2.4% 2.4% 2.3%*
Ratio of net investment
income (loss) to average net
assets (0.3%) (0.7%) (0.5%) (0.9%) (0.3%)*
Portfolio turnover rate 93.0% 83.6% 94.9% 134.0% --
- -------------------------------------------------------------------------------
</TABLE>
(18)The Fund commenced operations on August 25, 1986.
*Annualized
<PAGE>
PIMCO Advisors Funds 15
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Precious Metals Fund is
for shares outstanding throughout the periods listed. The information provided
reflects results of operations under the Fund's former investment objective and
policies through November 14, 1994; such results would not necessarily have
been achieved had the Fund's current objective and policies been in effect.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
PRECIOUS METALS FUND
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
------- -------- ------- ------- ------- ------- ------- ------- ------- --------
Year Ended September 30,
-----------------------------------------------------------------------------------------
1995 1995(19) 1995 1994 1994 1993 1993 1992 1992 1991(20)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $14.14 $11.61 $13.75 $10.32 $10.11 $ 7.54 $ 7.44 $ 7.51 $ 7.46 $ 7.19
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income From
Investment
Operations
Net investment
income (loss) 0.07 (0.01) (0.02) 0.08 (0.02) 0.06 (0.02) (0.01) (0.06) (0.07)
Net gains or
losses on
securities (both
realized and
unrealized) (1.88) 0.30 (1.83) 3.74 3.66 2.72 2.69 0.04 0.04 0.39
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations (1.81) 0.29 (1.85) 3.82 3.64 2.78 2.67 0.03 (0.02) 0.32
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less
Distributions
Dividends (from
net investment
income) -- -- -- -- -- -- -- -- -- --
Distributions
(from
capital gain) -- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
distributions -- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $12.33 $11.90 $11.90 $14.14 $13.75 $10.32 $10.11 $ 7.54 $ 7.44 $ 7.51
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return
(without sales
charge) (12.8%) 2.5% (13.5%) 37.0% 36.0% 36.9% 35.9% 0.4% (0.3%) 6.8%
Ratios/Supplemental
Data
Net assets, end
of period (in
000's) $7,670 $251 $42,341 $11,229 $62,825 $3,425 $23,884 $668 $6,633 $514
Ratio of
expenses to
average net
assets 1.4% 2.2%* 2.2% 1.3% 2.1% 1.4% 2.2% 1.9% 2.6% 2.1%*
Ratio of net
investment
income (loss) to
average net
assets 0.6% (0.2%)* (0.2%) 0.6% (0.2%) 0.6% (0.2%) (0.1%) (0.8%) (1.4%)*
Portfolio
turnover rate 8.7% 8.7% 8.7% 11.0% 11.0% 10.0% 10.0% 29.6% 29.6% 19.4%
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
-------------------------------
Period Ended
September 30,
---------------- -------------
1991 1990 1989(21)
- -------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of
period $ 9.40 $ 9.86 $10.00
------ ------ ------
Income From
Investment
Operations
Net investment
income (loss) (0.05) (0.05) (0.05)
Net gains or
losses on
securities (both
realized and
unrealized) (1.89) (0.41) (0.08)
------ ------ ------
Total from
investment
operations (1.94) (0.46) (0.13)
------ ------ ------
Less
Distributions
Dividends (from
net investment
income) -- -- (0.01)
Distributions
(from
capital gain) -- -- --
------ ------ ------
Total
distributions -- -- (0.01)
------ ------ ------
Net asset value,
end of period $ 7.46 $ 9.40 $ 9.86
====== ====== ======
Total Return
(without sales
charge) (20.6%) (4.7%) (1.3%)
Ratios/Supplemental
Data
Net assets, end
of period (in
000's) $6,995 $9,918 $6,630
Ratio of
expenses to
average net
assets 2.4% 2.4% 2.5%*
Ratio of net
investment
income (loss) to
average net
assets (0.8%) (0.8%) (0.6%)*
Portfolio
turnover rate 19.4% 22.5% 8.8%
- -------------------------------------------
</TABLE>
(19)The distribution of Class B shares commenced on June 15, 1995.
(20)The distribution- of Class A shares commenced on February 1, 1991.
(21)The Fund commenced operations on October 10, 1988.
*Annualized
<PAGE>
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the High Income Fund is for
shares outstanding throughout the periods listed. The information provided
reflects results of operations under the Fund's former investment objective and
policies through November 15, 1994; such results would not necessarily have
been achieved had the Fund's current objective and policies been in effect.
-----------------------------------------------------------
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- -------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Year Ended September 30,
-----------------------------------------------------------------------------------------------
1995 1995(22) 1995 1994 1994 1993 1993 1992 1992 1991(23) 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 7.56 $ 7.75 $ 7.51 $ 8.78 $ 8.75 $ 8.68 $ 8.65 $ 8.36 $ 8.36 $ 8.56 $ 8.55
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.65 0.22 0.58 0.68 0.62 0.75 0.68 0.79 0.74 0.57 0.85
Net gains or losses on
securities (both
realized and
unrealized) 0.39 0.16 0.39 (1.23) (1.26) 0.10 0.10 0.29 0.25 (0.14) (0.17)
------ ------ ------- ------ ------- ------ ------- ------ ------ ------ ------
Total from investment
operations 1.04 0.38 0.97 (0.55) (0.64) 0.85 0.78 1.08 0.99 0.43 0.68
------ ------ ------- ------ ------- ------ ------- ------ ------ ------ ------
Less Distributions
Dividends (from net
investment income) (0.66) (0.21) (0.60) (0.67) (0.60) (0.75) (0.68) (0.76) (0.70) (0.63) (0.87)
Distributions (from
capital gain) -- -- -- -- -- -- -- -- -- -- --
------ ------ ---- ------ ------- ------ ------- ------ ------ ------ ------
Total distributions (0.66) (0.21) (0.60) (0.67) (0.60) (0.75) (0.68) (0.76) (0.70) (0.63) (0.87)
------ ------ ------- ------ ------- ------ ------- ------ ------ ------ ------
Net asset value, end
of period $ 7.94 $ 7.92 $ 7.88 $ 7.56 $ 7.51 $ 8.78 $ 8.75 $ 8.68 $ 8.65 $ 8.36 $ 8.36
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (without
sales charge) 14.5% 4.9% 13.5% (6.5%) (7.5%) 10.3% 9.5% 13.5% 12.4% 8.2% 8.5%
Ratios/Supplemental
Data
Net assets, end of
period (in 000's) $7,791 $4,552 $157,507 $4,336 $179,274 $5,675 $255,266 $4,257 $242,160 $1,456 $270,622
Ratio of expenses to
average net assets 1.1% 1.9%* 1.9% 1.1% 1.9% 1.2% 2.0% 1.2% 1.9% 1.2%* 1.9%
Ratio of net
investment income to
average net assets 8.5% 7.8%* 7.7% 8.4% 7.7% 8.7% 8.0% 9.3% 8.7% 10.5%* 10.1%
Portfolio turnover
rate 162.5% 162.5% 162.5% 133.9% 133.9% 124.1% 124.1% 162.8% 162.8% 124.0% 124.0%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(22)The distribution of Class B shares commenced on May 22, 1995.
(23)The distribution of Class A shares commenced on February 6, 1991.
*Annualized
---------------------------------------------
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS C
------------------------------------------
Year Ended September 30,
------------------------------------------
1990 1989 1988 1987 1986
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.31 $ 9.69 $ 9.74 $10.14 $10.00
------ ------ ------ ------ ------
Income from investment operations
Net investment income 0.93 0.94 0.97 1.03 1.16
Net gains or losses on securities
(both realized and unrealized) (0.74) (0.36) (0.04) (0.43) 0.10
------ ------ ------ ------ ------
Total from investment operations 0.19 0.58 0.93 0.60 1.26
------ ------ ------ ------ ------
Less Distributions
Dividends (from net investment
income) (0.95) (0.96) (0.98) (1.00) (1.12)
Distributions (from capital gain) -- -- -- -- --
------ ------ ------ ------ ------
Total distributions (0.95) (0.96) (0.98) (1.00) (1.12)
------ ------ ------ ------ ------
Net asset value, end of period $ 8.55 $ 9.31 $ 9.69 $ 9.74 $10.14
====== ====== ====== ====== ======
Total Return (without sales
charge) 2.2% 6.3% 10.1% 5.9% 12.9%
Ratios/Supplemental Data
Net assets, end of period (in
000's) $356,427 $579,254 $524,966 $438,304 $335,404
Ratio of expenses to average net
assets 1.8% 1.6% 1.6% 1.6% 1.6%
Ratio of net investment income to
average net assets 10.5% 9.8% 10.0% 10.1% 11.2%
Portfolio turnover rate 63.8% 94.6% 127.7% 81.7% 59.2%
- -------------------------------------------------------------------------------
</TABLE>
PIMCO Advisors Funds
16
- --------------------------------------------------------------------------------
<PAGE>
PIMCO Advisors Funds 17
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Total Return Income Fund
is for shares outstanding throughout the period listed.
<TABLE>
<CAPTION>
--------------------------
TOTAL RETURN INCOME FUND
CLASS A CLASS B CLASS C
-------- -------- --------
Period Ended September 30,
--------------------------
1995(25) 1995(26) 1995(25)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.48 $10.00
------ ------ ------
Income from investment operations
Net investment income 0.41 0.16 0.35
Net gains or losses on securities (both realized
and unrealized) 0.68 0.24 0.69
------ ------ ------
Total from investment operations 1.09 0.40 1.04
------ ------ ------
Less Distributions
Dividends (from net investment income) (0.39) (0.15) (0.34)
Distributions (from capital gain) -- -- --
------ ------ ------
Total distributions (0.39) (0.15) (0.34)
------ ------ ------
Net asset value, end of period $10.70 $10.73 $10.70
====== ====== ======
Total Return (without sales charge) 11.1% 3.8% 10.5%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $37,714 $8,805 $45,631
Ratio of expenses to average net assets 1.2%* 2.0%* 2.0%*
Ratio of net investment income to average net
assets 5.1%* 4.2%* 4.3%*
Portfolio turnover rate 98.0% 98.0% 98.0%
- ----------------------------------------------------------------------------
</TABLE>
(25) The Fund commenced operations on December 22, 1994.
(26) The distribution of Class B shares commenced on May 22, 1995.
* Annualized
<PAGE>
18 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Tax Exempt Fund is for
shares outstanding throughout the periods listed.
------------------------------------------------------
TAX EXEMPT FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- -------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Year Ended September 30,
-------------------------------------------------------------------------------------------
1995 1995(27) 1995 1994 1994 1993 1993 1992 1992 1991(28) 1991
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.21 $11.90 $11.21 $12.74 $12.73 $11.94 $11.94 $11.53 $11.53 $11.30 $10.97
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.57 0.16 0.48 0.56 0.47 0.61 0.52 0.65 0.58 0.38 0.62
Net gains or losses on
securities
(both realized and
unrealized) 0.63 (0.07) 0.62 (1.31) (1.30) 1.02 1.01 0.42 0.41 0.23 0.56
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 1.20 0.09 1.10 (0.75) (0.83) 1.63 1.53 1.07 0.99 0.61 1.18
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions
Dividends (from net
investment income) (0.58) (0.15) (0.49) (0.58) (0.49) (0.64) (0.55) (0.66) (0.58) (0.38) (0.62)
Distributions (from
capital gain) -- -- -- (0.20) (0.20) (0.19) (0.19) -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.58) (0.15) (0.49) (0.78) (0.69) (0.83) (0.74) (0.66) (0.58) (0.38) (0.62)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period $11.83 $11.84 $11.82 $11.21 $11.21 $12.74 $12.73 $11.94 $11.94 $11.53 $11.53
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (without
sales charge) 11.0% 0.8% 10.1% (6.1%) (6.7%) 14.2% 13.3% 9.5% 8.8% 10.4% 11.0%
Ratios/Supplemental Data
Net assets, end of
period (in 000's) $2,701 $ 288 $54,224 $2,726 $68,214 $2,852 $81,475 $2,295 $52,113 $321 $46,663
Ratio of expenses to
average net assets 1.1% 1.9%* 1.8% 1.1% 1.8% 1.1% 1.8% 1.1% 1.8% 1.1%* 1.8%
Ratio of net investment
income to average net
assets 5.0% 4.0%* 4.3% 4.7% 4.0% 5.0% 4.2% 5.6% 4.9% 5.8%* 5.5%
Portfolio turnover rate 35.0% 35.0% 35.0% 63.2% 63.2% 55.9% 55.9% 107.4% 107.4% 119.0% 119.0%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(27)The distribution of Class B shares commenced on May 30, 1995.
(28)The distribution of Class A shares commenced on March 14, 1991.
*Annualized
----------------------------------------------
TAX EXEMPT FUND
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------
Period Ended
Year Ended September 30, September 30,
------------------------------ -------------
1990 1989 1988 1987 1986(29)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $11.10 $10.82 $10.23 $11.51 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.63 0.65 0.65 0.66 0.61
Net gains or losses on
securities (both realized and
unrealized) (0.13) 0.28 0.59 (0.84) 1.51
------ ------ ------ ------ ------
Total from investment
operations 0.50 0.93 1.24 (0.18) 2.12
------ ------ ------ ------ ------
Less Distributions
Dividends (from net investment
income) (0.63) (0.65) (0.65) (0.66) (0.61)
Distributions (from capital
gain) -- -- -- (0.44) --
------ ------ ------ ------ ------
Total distributions (0.63) (0.65) (0.65) (1.10) (0.61)
------ ------ ------ ------ ------
Net asset value, end of period $10.97 $11.10 $10.82 $10.23 $11.51
====== ====== ====== ====== ======
Total Return (without sales
charge) 4.5% 8.8% 12.4% (2.1%) 23.9%
Ratios/Supplemental Data
Net assets, end of period (in
000's) $46,630 $60,609 $63,261 $66,610 $53,370
Ratio of expenses to average
net assets 1.7% 1.7% 1.8% 1.8% 1.8%*
Ratio of net investment income
to average net assets 5.6% 5.9% 6.1% 5.9% 6.1%*
Portfolio turnover rate 77.5% 203.6% 211.3% 204.4% 301.0%
- ------------------------------------------------------------------------------
</TABLE>
(29)The Fund commenced operations on November 1, 1985.
*Annualized
<PAGE>
PIMCO Advisors Funds 19
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the U.S. Government Fund is
for shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
U.S. GOVERNMENT FUND
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- -------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Year Ended September 30,
----------------------------------------------------------------------------------------------
1995 1995(30) 1995 1994 1994 1993 1993 1992 1992 1991(31) 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.68 $ 9.17 $ 8.65 $ 9.71 $ 9.68 $ 9.61 $ 9.58 $ 9.46 $ 9.45 $ 9.31 $ 9.02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.58 0.16 0.51 0.60 0.53 0.65 0.58 0.75 0.69 0.65 0.81
Net gains or losses on
securities (both
realized and
unrealized) 0.47 (0.02) 0.48 (1.03) (1.03) 0.10 0.10 0.19 0.15 0.15 0.46
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 1.05 0.14 0.99 (0.43) (0.50) 0.75 0.68 0.94 0.84 0.80 1.27
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions
Dividends (from net
investment income) (0.57) (0.16) (0.51) (0.60) (0.53) (0.65) (0.58) (0.79) (0.71) (0.65) (0.84)
Distributions (from
capital gain) -- -- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.57) (0.16) (0.51) (0.60) (0.53) (0.65) (0.58) (0.79) (0.71) (0.65) (0.84)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end
of period $ 9.16 $ 9.15 $ 9.13 $ 8.68 $ 8.65 $ 9.71 $ 9.68 $ 9.61 $ 9.58 $ 9.46 $ 9.45
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (without
sales charge) 12.6% 1.6% 11.8% (4.6%) (5.3%) 8.2% 7.4% 10.3% 9.2% 12.3% 14.8%
Ratios/Supplemental
Data
Net assets, end of
period (in 000's) $16,248 $1,671 $287,086 $15,250 $365,044 $19,939 $533,288 $15,224 $531,310 $3,983 $429,796
Ratio of expenses to
average net assets 1.0% 1.8%* 1.8% 1.0% 1.7% 1.0% 1.7% 1.0% 1.8% 1.1%* 1.8%
Ratio of net
investment income to
average net assets 6.5% 5.6%* 5.8% 6.5% 5.8% 6.8% 6.1% 7.8% 7.3% 9.3%* 8.8%
Portfolio turnover
rate 120.3% 120.3% 120.3% 121.0% 121.0% 199.7% 199.7% 156.4% 156.4% 37.1% 37.1%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(30)The distribution of Class B shares commenced on June 2, 1995.
(31)The distribution of Class A shares commenced on January 3, 1991.
*Annualized
<TABLE>
<CAPTION>
------------------------------------------
U.S. GOVERNMENT FUND
CLASS C
------------------------------------------
Year Ended September 30,
------------------------------------------
1990 1989 1988 1987 1986
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.35 $ 9.42 $ 9.32 $10.48 $10.00
------ ------ ------ ------ ------
Income from investment operations
Net investment income 0.80 0.84 0.86 0.86 0.94
Net gains or losses on securities
(both realized and unrealized) (0.31) (0.08) 0.12 (1.00) 0.47
------ ------ ------ ------ ------
Total from investment operations 0.49 0.76 0.98 (0.14) 1.41
------ ------ ------ ------ ------
Less Distributions
Dividends (from net investment
income) (0.82) (0.83) (0.88) (0.92) (0.83)
Distributions (from capital gain) -- -- -- (0.10) (0.10)
------ ------ ------ ------ ------
Total distributions (0.82) (0.83) (0.88) (1.02) (0.93)
------ ------ ------ ------ ------
Net asset value, end of period $ 9.02 $ 9.35 $ 9.42 $ 9.32 $10.48
====== ====== ====== ====== ======
Total Return (without sales
charge) 5.4% 8.5% 10.8% (1.7%) 15.1%
Ratios/Supplemental Data
Net assets, end of period (in
000's) $447,272 $583,667 $733,306 $783,545 $409,482
Ratio of expenses to average net
assets 1.7% 1.7% 1.7% 1.7% 1.7%
Ratio of net investment income to
average net assets 8.6% 9.0% 9.0% 8.5% 8.9%
Portfolio turnover rate 99.1% 188.4% 221.8% 332.0% 252.3%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
20 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Short-Intermediate Fund
is for shares outstanding througout the periods listed. The information
provided reflects results of operations under the Fund's former investment
objective and policies through November 15, 1994; such results would not
necessarily have been achieved had the Fund's current objective and policies
been in effect.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
SHORT-INTERMEDIATE FUND
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- -------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Period Ended
Year Ended September 30, September 30,
----------------------------------------------------------------------------- -------------------
1995 1995(33) 1995 1994 1994 1993 1993 1992 1992 1991(34) 1991(34)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.37 $ 9.49 $ 9.37 $ 9.81 $ 9.82 $ 9.96 $ 9.97 $10.03 $10.03 $10.00 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income From Investment
Operations
Net investment income 0.59 0.18 0.54 0.47 0.42 0.48 0.44 0.60(35) 0.55(35) 0.07(36) 0.07(36)
Net gains or losses on
securities (both
realized and
unrealized) 0.25 0.13 0.23 (0.43) (0.44) (0.15) (0.16) (0.04) (0.03) 0.03 0.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.84 0.31 0.77 0.04 (0.02) 0.33 0.28 0.56 0.52 0.10 0.10
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions
Dividends (from net
investment income) (0.59) (0.18) (0.54) (0.48) (0.43) (0.48) (0.43) (0.62) (0.57) (0.07) (0.07)
Distributions (from
capital gain) -- -- -- -- -- -- -- (0.01) (0.01) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.59) (0.18) (0.54) (0.48) (0.43) (0.48) (0.43) (0.63) (0.58) (0.07) (0.07)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 9.62 $ 9.62 $ 9.60 $ 9.37 $ 9.37 $ 9.81 $ 9.82 $ 9.96 $ 9.97 $10.03 $10.03
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return (without
sales charge) 9.3% 3.3% 8.5% 0.4% (0.2%) 3.4% 2.9% 5.8% 5.4% 8.5% 8.6%
Ratios/Supplemental
Data
Net assets, end of
period (in 000's) $6,343 $ 941 $65,608 $4,913 $88,909 $7,169 $123,857 $13,535 $135,655 $ 844 $32,052
Ratio of expenses to
average net assets 1.0% 1.7%* 1.5% 0.9% 1.4% 1.0% 1.5% 0.9% 1.3% 0.4%* 0.9%*
Ratio of net investment
income to average net
assets 6.3% 5.4%* 5.7% 4.9% 4.4% 4.9% 4.4% 6.0% 5.5% 5.3%* 5.0%*
Portfolio turnover rate 173.4% 173.4% 173.4% 86.2% 86.2% 112.7% 112.7% 132.8% 132.8% 114.6% 114.6%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(33) The distribution of Class B shares commenced on May 22, 1995.
(34) The Fund commenced operations on August 16, 1991.
(35) Reflecting voluntary waiver of investment advisory fee of $138,100 (.02
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements.
(36) Reflecting expense reduction of $2,957 (.00 per share) and voluntary
waiver of investment advisory fee of $29,149 (.01 per share) by the
Manager as more fully described in Note 3(a) to the Financial Statements.
* Annualized
<PAGE>
PIMCO Advisors Funds 21
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Money Market Fund is for
shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- -------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Year ended September 30,
-----------------------------------------------------------------------------------------------------------------
1995 1995(37) 1995 1994 1994 1993 1993 1992 1992 1991(38) 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment
operations
Net investment
income 0.054(39) 0.007 0.054(39) 0.030(40) 0.030(40) 0.025(41) 0.025(41) 0.032(42) 0.034(42) 0.029 0.053
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less
Distributions
Dividends (from
net investment
income) (0.054) (0.007) (0.054) (0.030) (0.030) (0.025) (0.025) (0.032) (0.034) (0.029) (0.053)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return
(without sales
charge) 5.4% 0.7% 5.4% 3.0% 3.0% 2.5% 2.5% 3.2% 3.4% 2.9% 5.3%
Ratios/Supplemental
Data
Net assets, end
of period (in
000's) $13,553 $21 $69,364 $12,933 $84,064 $3,729 $44,657 $655 $50,761 $275 $63,751
Ratio of
expenses to
average net
assets 0.49% 1.46%* 0.50% 0.75% 0.75% 0.75% 0.75% 0.9% 1.0% 1.1%* 1.5%
Ratio of net
investment
income to
average net
assets 5.40% 4.79%* 5.37% 3.38% 3.18% 2.47% 2.51% 3.2% 3.4% 4.8%* 5.5%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(37) The distribution of Class B shares commenced on July 17, 1995.
(38) The distribution of Class A shares commenced on March 5, 1991.
(39) Reflecting voluntary waiver of investment advisory fee of $23,048 (.000
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements.
(40) Reflecting voluntary waiver of investment advisory fee of $142,336 (.002
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements included in the Statement of Additional Information.
(41) Reflecting voluntary waiver of investment advisory fee of $160,471 (.003
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements included in the Statement of Additional Information.
(42) Reflecting voluntary waiver of investment advisory fee of $31,042 (.001
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements included in the Statement of Additional Information.
* Annualized
<TABLE>
<CAPTION>
----------------------------------------
MONEY MARKET FUND
CLASS C
----------------------------------------
Year ended September 30,
----------------------------------------
1990 1989 1988 1987 1986
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from investment operations
Net investment income 0.069 0.077 0.057 0.043 0.047
------ ------ ------ ------ ------
Less Distributions
Dividends (from net investment
income) (0.069) (0.077) (0.057) (0.043) (0.047)
------ ------ ------ ------ ------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return (without sales charge) 6.9% 7.7% 5.7% 4.3% 4.7%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $104,002 $104,198 $98,896 $64,291 $13,936
Ratio of expenses to average net
assets 1.6% 1.6% 1.6% 1.7% 2.1%
Ratio of net investment income to
average net assets 6.9% 7.7% 5.7% 4.6% 4.6%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
22 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
PIMCO ADVISORS EQUITY FUNDS
The PIMCO Advisors Equity Funds consist of eleven Funds with the objectives and
policies set forth below. Under normal market conditions, each of the Equity
Funds will invest at least 65% of its assets in equity securities (income-pro-
ducing equity securities in the case of the Equity Income Fund), including com-
mon stocks, preferred stocks and securities (including debt securities and war-
rants) convertible into or exercisable for common stocks.
As indicated below, the Equity Funds invest in companies whose equity capital-
izations (i.e., the number of shares times the market price per share) range
from small to medium to large. Generally, small equity capitalization is less
than $1 billion and large equity capitalization is more than $5 billion.
Whether an issuer's equity capitalization is medium is determined by reference
to the capitalization for all issuers whose equity securities are listed on a
United States national securities exchange or which are reported on NASDAQ. Is-
suers with market capitalization within the range of capitalization of compa-
nies included in the S&P Mid Cap 400 Index are regarded as being issuers with
medium equity capitalization.
EQUITY INCOME FUND seeks long-term growth of capital and current income. The
Fund invests primarily in a variety of income-producing equity securities. In-
come-producing equity securities include common stocks that pay dividends, pre-
ferred stocks and securities (including debt securities) that are convertible
into common stocks ("convertible securities"). Under unusual conditions, for
temporary defensive purposes, the Fund may invest up to 100% of its assets in
non-convertible debt securities. The Fund invests in common stocks of companies
with small, medium and large equity capitalizations.
The Fund may invest without limit in preferred stocks and convertible securi-
ties rated at least B by Moody's Investors Service, Inc. ("Moody's") or Stan-
dard & Poor's Corporation ("S&P") (or similarly rated by another Nationally
Recognized Statistical Rating Organization ("NRSRO"), or unrated but determined
by the Fund's sub-adviser to be of comparable quality), and may invest up to
10% of its total assets in convertible securities rated below B by Moody's or
S&P (or similarly rated by another NRSRO or unrated but determined by the sub-
adviser to be of comparable quality). Securities rated Ba or below by Moody's
or BB or below by S&P (or of similar quality) are not considered to be of "in-
vestment grade" quality. These lesser rated debt securities may involve special
risks. See "Description and Risks of Fund Investments -- Risks of High Yield
Bonds." The Fund will not invest in convertible securities that are in default
at the time of acquisition.
The non-convertible debt securities in which the Fund may invest include corpo-
rate or government debt securities of any maturity, including zero coupon secu-
rities. These non-convertible debt securities may be rated B or higher by
Moody's or S&P (or similarly rated by another NRSRO or unrated and determined
by the sub-adviser to be of comparable quality), but no more than 35% of the
Fund's total assets will be invested in non-convertible debt securities rated
below investment grade quality by two NRSROs at the time of purchase (or
unrated but determined by the sub-adviser to be of comparable quality). See
"Description and Risks of Fund Investments -- Credit Ratings and NRSROS" for an
explanation of securities ratings.
See "Additional Investment Techniques Used By The Equity Funds" below for a
list of additional investments that the Fund may make.
VALUE FUND seeks long-term growth of capital and current income. The Fund in-
vests primarily in common stocks of companies that are characterized by having
below-average price to earnings ("P/E") ratios and/or higher dividend yields
relative to their industry groups. In selecting stocks, a universe of approxi-
mately 2,500 stocks, each of companies having minimum capitalizations of $200
million, is classified by industry. The universe is then analyzed to find the
lowest P/E and/or highest yielding stocks in each industry, subject to quality,
earnings and price momentum screens. The stocks with the lowest P/E ratios
and/or highest dividend yields in each industry that meet the quality, earnings
and price momentum criteria are selected for the Fund. Although quarterly
rebalancing is a general rule, replacements are made whenever an alternative
stock within the same industry has a significantly lower P/E ratio or higher
dividend yield than the current Fund holding.
See "Additional Investment Techniques Used By The Equity Funds" below for a
list of additional investments that the Fund may make.
SUMMIT FUND seeks long-term growth of capital. Income is an incidental consid-
eration. The Fund invests primarily in common stocks of companies with medium
and large equity capitalizations that exhibit strong growth fundamentals and
reasonable valuations relative to the stock universe.
<PAGE>
PIMCO Advisors Funds 23
- --------------------------------------------------------------------------------
The Fund expects that substantially all of its assets will be invested in ap-
proximately 60-100 common stocks selected from a universe of the approximately
1,000 companies with the largest equity capitalization at the time of initial
purchase which are listed on a United States national securities exchange. Each
stock in the universe is screened using a proprietary series of growth attri-
butes and valuation measures. The top decile of all stocks screened becomes the
focus list for further research. The sub-adviser's investment team then ana-
lyzes each stock, seeking to determine the sustainability of earnings growth.
Consideration is given to revenue trends, margin trends and balance sheet
strength. The portfolio is reviewed daily for any changes to existing holdings
and new prospective stocks are presented for the team's consideration. The sub-
adviser employs a strict series of sell disciplines designed to respond to
changes in earnings growth expectations, price appreciation and valuation.
See "Additional Investment Techniques Used By The Equity Funds" below for a
list of additional investments that the Fund may make.
GROWTH FUND seeks long-term growth of capital. Income is an incidental consid-
eration. The Fund invests primarily in common stocks of companies with medium
to large equity capitalizations. See "Additional Investment Techniques Used By
The Equity Funds" below for a list of additional investments that the Fund may
make.
TARGET FUND seeks capital appreciation. No consideration is given to income.
The Fund invests primarily in common stocks of companies with medium equity
capitalizations. See "Additional Investment Techniques Used By The Equity
Funds" below for a list of additional investments that the Fund may make.
DISCOVERY FUND seeks capital appreciation. No consideration is given to income.
The Fund invests primarily in common stocks of small companies with equity cap-
italizations of $500 million to $1 billion that exhibit favorable growth char-
acteristics and reasonable valuations. The Fund is intended for equity invest-
ors seeking above average gains who are willing to accept the greater risks as-
sociated therewith. See "Risks of Investment in Companies with Small and Medium
Equity Capitalizations" under "Description and Risks of Fund Investments" for a
description of certain of such risks. See "Additional Investment Techniques
Used By The Equity Funds" below for a list of additional investments that the
Fund may make.
OPPORTUNITY FUND seeks capital appreciation. No consideration is given to in-
come. THE FUND IS CURRENTLY CLOSED TO NEW INVESTORS. The Fund invests primarily
in common stocks of companies with small equity capitalizations. The Fund is
intended for aggressive investors seeking above average gains and willing to
accept the greater risks associated therewith. See "Additional Investment Tech-
niques Used By The Equity Funds" below for a list of additional investments
that the Fund may make.
INNOVATION FUND seeks capital appreciation. No consideration is given to in-
come. The Fund will invest primarily (i.e., at least 65% of its assets) in com-
mon stocks of companies which utilize innovative technologies to gain a strate-
gic competitive advantage in their industry as well as companies that provide
and service those technologies. Securities will be selected with minimal empha-
sis on more traditional factors such as growth potential or value relative to
intrinsic worth. Instead, the Fund will be guided by the theory of Positive Mo-
mentum & Positive Surprise, with special emphasis on common stocks of companies
whose perceived strength lies in their use of innovative technologies in new
products, enhanced distribution systems and improved management techniques. Al-
though the Fund emphasizes the utilization of technologies, it is not re-
stricted to investment in companies in a particular business sector or indus-
try. See "Additional Investment Techniques Used By The Equity Funds" below for
a list of additional investments that the Fund may make.
INTERNATIONAL FUND seeks capital appreciation through investments in an inter-
national portfolio. Income is an incidental consideration. Under normal market
conditions, at least 65% of the International Fund's total assets will be in-
vested in common stocks, which may or may not pay dividends, as well as con-
vertible bonds, convertible preferred stocks, warrants, rights or other equity
securities for a combination of capital appreciation and income. Convertible
securities may include securities convertible only by certain classes of in-
vestors (which may not include the Fund), but the Fund may not invest in con-
vertible securities which are of less than investment grade quality at the time
of purchase. The Fund invests in companies with small, medium and large equity
capitalizations.
The International Fund will normally invest in securities traded in foreign se-
curities markets with particular consideration given to investments principally
traded in North and South American (other than United States), Japanese, Euro-
pean, Pacific and Australian securities markets, and in foreign securities
traded on United States' securities markets. Investing in foreign securities
and securities of foreign issuers presents special risks. See "Risks of Foreign
Investments" under
<PAGE>
24 PIMCO Advisors Funds
- ------------------------------------------------------------------------------
"Description and Risks of Fund Investments" below. The Fund will also invest in
emerging markets, where markets may not yet fully reflect the potential of the
developing economy. There are no prescribed limits on geographic asset distri-
bution and the International Fund has the authority to invest in securities
traded in securities markets of any country in the world. In allocating the In-
ternational Fund's assets among the various securities markets of the world,
the Fund's sub-adviser will consider such factors as the condition and growth
potential of the various economies and securities markets, currency and taxa-
tion considerations and other pertinent financial, social, national and politi-
cal factors. Under certain adverse investment conditions, the International
Fund may restrict the number of securities markets in which its assets will be
invested, although under normal market circumstances the Fund's investments
will involve securities principally traded in at least three different coun-
tries. The Fund will not limit its investments to any particular type or size
of company.
The International Fund may invest up to 10% of its assets in securities of
other investment companies, such as closed-end investment management companies
which invest in foreign markets. See "Description and Risks of Fund Invest-
ments -- Investment in Investment Companies."
The Fund will not normally invest in securities of United States issuers traded
on United States securities markets. However, when the sub-adviser believes
that conditions in international securities markets warrant a defensive invest-
ment strategy, the International Fund may invest up to 100% of its assets in
domestic debt, foreign debt and equity securities principally traded in the
United States, including the money market instruments described under "Descrip-
tion and Risks of Fund Investments -- Money Market Instruments," obligations
issued or guaranteed by the U.S. or a foreign government or their respective
agencies, authorities or instrumentalities or corporate bonds and sponsored
American Depository Receipts ("ADRs").
See "Additional Investment Techniques Used By The Equity Funds" below for a
list of additional investments that the Fund may make.
EMERGING MARKETS FUND seeks capital appreciation. No consideration is given to
income. The Fund invests primarily in an international portfolio of equity se-
curities of companies whose principal activities are in countries with emerging
markets and developing economies. In the opinion of the Fund's sub-adviser,
such countries are currently found in Asia, Latin America, the Middle East,
Eastern Europe and Africa. The Fund is intended for aggressive investors seek-
ing above average gains and willing to accept the greater risks associated
therewith. The Fund should be considered as one aspect of a diversified portfo-
lio and may not be suitable by itself as a balanced investment program.
Under normal market conditions, the Fund invests at least 65% of its total as-
sets in securities of issuers whose principal activities are in countries with
emerging markets. For this purpose, emerging markets will include any countries
(i) having an "emerging stock market" as defined by the International Finance
Corporation; or (ii) with low-to-middle-income economies according to the In-
ternational Bank for Reconstruction and Development (the World Bank); or (iii)
where, in the opinion of the sub-adviser, the markets may not fully reflect the
potential of the developing economy. The countries which the sub-adviser be-
lieves do not constitute emerging markets are the United States, the United
Kingdom, Ireland, France, Germany, Italy,Japan, Canada, Belgium, Switzerland,
Luxembourg,Denmark, The Netherlands and Australia. The sub-adviser determines
whether a particular issuer's principal activities are located in emerging mar-
kets by looking at factors such as the location of its assets, personnel, sales
and earnings. The Fund may also invest up to 35% of its assets in issuers
traded on more established markets not considered as emerging markets as de-
scribed above. These issuers may include companies listed on major markets out-
side of the emerging markets that, based on information obtained by the sub-
adviser, derive a significant portion of their revenues from trade with or pro-
duction in developing countries. Investments in emerging markets may present
greater risks of the types present for foreign investments generally and may
also present special risks. See "Description and Risks of Fund Investments --
Risks of Foreign Investments."
The Fund invests predominantly in individual equity securities listed on emerg-
ing stock exchanges and/or in International and/or American Depositary Receipts
of such stocks listed on markets in industrialized countries or traded in the
international equity market. The Fund may invest in voting and non-voting
shares, preferred shares, and bonds, warrants or rights convertible into equity
securities.
The Fund may invest up to 25% of its total assets in equity securities of com-
panies that are traded in over-the-counter markets or other types of unlisted
securities markets.
Subject to obtaining any necessary local regulatory approvals, the Fund may in-
vest up to 10% of its total
<PAGE>
PIMCO Advisors Funds 25
- -------------------------------------------------------------------------------
assets through other investment companies, pooled accounts or other investment
vehicles designed to permit investments in a portfolio of securities listed in
a particular developing country or region, particularly in the case of coun-
tries in which such an investment vehicle is the exclusive or easiest form of
foreign portfolio investment. See "Description and Risks of Fund Invest-
ments -- Investment in Investment Companies."
When the sub-adviser believes that conditions in international securities mar-
kets warrant a defensive investment strategy, the Fund may invest up to 100%
of its assets in debt and equity securities principally traded in the United
States, and in foreign debt securities principally traded outside of the
United States, including the money market instruments described under "De-
scription and Risks of Fund Investments -- Money Market Instruments," obliga-
tions issued or guaranteed by the U.S. or a foreign government or their re-
spective agencies, authorities or instrumentalities and corporate bonds.
See "Additional Investment Techniques Used By The Equity Funds" below for a
list of additional investments that the Fund may make.
PRECIOUS METALS FUND seeks capital appreciation. No consideration is given to
income. The Fund concentrates investments in a global portfolio of common
stocks of companies principally engaged in precious metals-related activities
which include companies principally engaged in the extraction, processing,
distribution or marketing of precious metals (the "precious metals industry").
A particular company is deemed to be "principally engaged" in the precious
metals industry if at the time of investment the Fund's sub-adviser considers
that at least 50% of the company's assets, revenues or profits are derived
from the precious metals industry. Normally at least 65% of the assets of the
Fund will be invested in the precious metals industry plus securities the
value of which is linked to the price of a precious metal. See "Precious Met-
als" under "Description and Risks of Fund Investments" below. The Fund invests
in companies with small, medium and large equity capitalizations.
The Fund will seek to identify securities of companies which, based upon the
sub-adviser's evaluation of their fundamental investment characteristics, are
undervalued in comparison to the present or anticipated value of the precious
metals relevant to them. Examples of precious metals include gold, silver and
platinum. To the extent permitted by state securities laws and federal tax
law, the Fund may invest directly in gold bullion and other precious metals.
The Fund has no present intention of investing directly in precious metals
other than gold.
The Fund does not presently intend to invest more than 10% of its assets in
either precious metals such as gold bullion or in futures on precious metals,
such as gold futures, and options thereon. The Fund may invest up to 100% of
its assets in securities principally traded on foreign securities markets and
in securities of foreign issuers that are traded on U.S. securities markets,
including ADRs, and may invest up to 100% of its assets in securities of com-
panies whose assets, revenues or profits are derived from a single precious
metal. At the present time, the Fund has no intention of investing more than
5% of its assets in securities the value of which is linked to the price of a
single precious metal.
For temporary defensive purposes, the Fund may invest up to 100% of its net
assets in any combination of high-quality, short- or long-term debt instru-
ments or in common, preferred or convertible securities.
The Fund, because of its emphasis on one industrial sector, should be consid-
ered as one aspect of a diversified portfolio and may not be suitable by it-
self as a balanced investment program. See "Additional Investment Techniques
Used By The Equity Funds" below for a list of additional investments that the
Fund may make.
ADDITIONAL INVESTMENT TECHNIQUES USED BY THE EQUITY FUNDS
All of the Equity Funds may invest in convertible securities (including con-
vertible debt securities) which generally convert into common stock at either
a stated price or stated rate. The International and Emerging Markets Funds
may invest in securities convertible only by certain classes of investors
(which may not include the Fund). The Equity Income Fund may also invest in
so-called "synthetic" convertible securities, which are composed of two or
more different securities whose investment characteristics, taken together,
resemble those of convertible securities. For example the Equity Income Fund
may purchase a non-convertible debt security and a warrant or option.
The Equity Income, Value, Summit, Growth, Target, Discovery, Opportunity, and
Innovation Funds each may invest up to 15% of their assets in securities which
are traded principally in securities markets outside of the United States (Eu-
rodollar certificates of deposit are
<PAGE>
26 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
excluded for purposes of these limitations). The International Fund will nor-
mally invest all of its assets in such securities and the Emerging Markets and
Precious Metals Funds may invest without limit in such securities. Each Equity
Fund may also invest without limit in securities of foreign issuers that are
traded in U.S. securities markets.
Each of the Equity Funds may engage in transactions in options and futures con-
tracts either to adjust the risk/return characteristics of the Funds' portfo-
lios and/or, in the case of written options, to increase current income. Each
of the Equity Funds may write covered call and covered put options on any secu-
rity that it is eligible to purchase. Each Equity Fund may also purchase put
and call options on securities it is eligible to purchase. The Equity Funds may
each buy and sell (write) stock index options. In the case of written call op-
tions on stock indices the Fund(s) will own corresponding securities whose his-
toric volatility correlates with that of the index. The International, Emerging
Markets and Precious Metals Funds may buy and sell stock index futures con-
tracts and options on stock index futures contracts. The Precious Metals Fund
may purchase and sell futures contracts on precious metals (such as gold), and
purchase and write options on commodity indices and on precious metals futures
contracts. Some of the derivative instruments and transactions used by the Eq-
uity Funds described above have speculative and/or leveraging characteristics.
Certain limitations on such transactions are imposed by the Investment Company
Act and the Commodity Exchange Act. See "Derivatives" and "Investment Restric-
tions" in the Statement of Additional Information.
Each of the Equity Funds may buy or sell foreign currencies or may deal in for-
ward foreign currency contracts. The International, Emerging Markets and Pre-
cious Metals Funds may also invest in currency futures contracts and related
options. The Equity Funds will utilize such transactions in foreign currencies
for the purpose of hedging against foreign currency exchange risk arising from
a Fund's investment or anticipated investment in securities denominated in for-
eign currencies, and, in the case of the International Fund, for the purpose of
shifting exposure to foreign currency fluctuations from one currency to anoth-
er. See "Other Foreign Currency Transactions" under "Description and Risks of
Fund Investments" below.
Each of the Equity Funds may lend its portfolio securities to brokers, dealers
and other financial institutions to earn income; purchase warrants on securi-
ties that it is eligible to purchase; enter into repurchase agreements with
banks and broker-dealers; make short sales of securities held in the Fund's
portfolio or which the Fund has the right to acquire without the payment of
further consideration; and purchase and sell securities on a when-issued or de-
layed delivery basis and enter into forward commitments to purchase securities.
Each of the Equity Funds may also purchase "illiquid securities" so long as no
more than 15% of that Fund's net assets would be invested in illiquid securi-
ties after giving effect to the purchase. Each of the Equity Funds may also in-
vest a portion and, for temporary defensive purposes, up to 100% of its assets
in the money market instruments described in "Money Market Instruments" under
"Description and Risks of Fund Investments" below.
For a description of the securities and investment techniques listed above and
the risks associated with them, see "Description and Risks of Fund Investments"
below.
PIMCO ADVISORS INCOME FUNDS
The PIMCO Advisors Income Funds consist of six diversified Funds and one non-
diversified Fund (the Global Income Fund) with the objectives and policies set
forth below. Each of the Income Funds (other than the Tax Exempt and Money Mar-
ket Funds) will invest at least 65% of its assets in the following types of se-
curities which, except as specifically provided otherwise in the description of
the Funds that follow, may be issued by domestic or foreign entities and denom-
inated in U.S. dollars or foreign currencies: securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities ("U.S. Government se-
curities"); corporate debt securities; corporate commercial paper; mortgage and
other asset-backed securities; variable and floating rate debt securities; bank
certificates of deposit, fixed time deposits and bankers' acceptances; repur-
chase agreements and reverse repurchase agreements; obligations of foreign gov-
ernments or their subdivisions, agencies and instrumentalities, international
agencies or supranational entities; and foreign currency exchange-related secu-
rities, including foreign currency warrants. Each of the Income Funds may hold
different percentages of its assets in these various types of securities.
GLOBAL INCOME FUND is a non-diversified portfolio which seeks maximum total re-
turn, consistent with the preservation of capital. The Fund invests primarily
in investment grade U.S. and foreign fixed income securities and seeks an in-
termediate portfolio duration of three to six years. See "Duration" below. "In-
vestment grade" fixed income securities are securities rated in
<PAGE>
PIMCO Advisors Funds 27
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one of the four highest ratings categories by the NRSROs (e.g., Baa or higher
by Moody's or BBB or higher by S&P), or determined to be of comparable quality
by the Fund's sub-adviser. See "Description and Risks of Fund Investments --
Credit Ratings and NRSROs" below. As a non-diversified portfolio, the Fund may
invest a relatively high percentage of its assets in the securities of rela-
tively few issuers which the Fund's sub-adviser deems to be attractive invest-
ments. Such concentration may increase the risk of loss to the Fund should
there be a decline in the market value of any one portfolio security. See "De-
scription and Risks of Fund Investments -- Diversified and Non-Diversified
Portfolios" below.
The Fund invests in a non-diversified portfolio of fixed-income securities de-
nominated in major currencies, baskets of foreign currencies (such as the Euro-
pean Currency Unit, or "ECU"), and the U.S. dollar. Under normal circumstances,
at least 65% of the Fund's assets will be invested in fixed-income securities
of issuers located in at least three countries (one of which may be the United
States). The Fund may purchase put and call options, sell (write) covered op-
tions, and enter into futures contracts and options on futures contracts for
hedging, investment and risk management purposes. The Fund may also write op-
tions in connection with buy-and-write transactions, and use index futures or
foreign indices for investment, anticipatory hedging and risk management. See
"Options on Securities, Securities Indices, and Currencies" and "Futures Con-
tracts and Options on Futures Contracts" under "Description and Risks of Fund
Investments" below. The Fund may also hold foreign currencies in demand depos-
its in order to facilitate trading in non-U.S. dollar-denominated securities,
and may buy and sell currencies and use forward foreign currency exchange con-
tracts, currency futures contracts and related options, currency swap contracts
and options on currencies for hedging and for currency risk management. See
"Description and Risks of Fund Investments -- Other Foreign Currency Transac-
tions" below. In addition, the Fund may use "synthetic bonds" and "synthetic
foreign currency denominated securities" to approximate desired risk/return
profiles where the non-synthetic securities are either unavailable or possess
undesirable characteristics. See the description of "synthetic bonds" and "syn-
thetic foreign currency denominated securities" in "Additional Investment Tech-
niques Used By The Income Funds" below.
Depending on the sub-adviser's current opinion as to the proper allocation of
assets among domestic and foreign issuers, investments in the securities of is-
suers located outside the United States will normally vary between 25% and 75%
of the Fund's total assets. The Fund expects to hedge its foreign currency ex-
posure so that generally no more than 25% of the Fund's total net assets will
be invested in unhedged foreign currency denominated securities. The Fund may
invest up to 10% of its assets in corporate debt securities that are rated be-
low investment grade but rated at least B by Moody's or S&P (or similarly rated
by another NRSRO or, if unrated, determined by the sub-adviser to be of compa-
rable quality). See "Description and Risks of Fund Investments -- Credit Rat-
ings and NRSROs" below.
For an explanation of other investments which the Fund may make, see "Addi-
tional Investment Techniques Used by The Income Funds" below.
HIGH INCOME FUND seeks maximum total return, consistent with preservation of
capital. The Fund seeks a portfolio duration of two to six years. See "Dura-
tion" below. The Fund seeks to achieve its objective by investing primarily in
higher yielding lower-rated fixed-income securities and invests under normal
circumstances at least 65% of its assets in a diversified portfolio of U.S.
dollar-denominated fixed income securities of domestic and foreign issuers
rated below investment grade but rated at least B by Moody's or S&P (or simi-
larly rated by another NRSRO or, if unrated, determined by the Fund's sub-ad-
viser to be of comparable quality). Such securities are colloquially referred
to as "junk bonds," and are referred to herein as "High Yield Securities." The
Fund also may invest in loan participations and engage in hedging strategies
involving equity options (e.g., the Fund may write call options as a partial
hedge -- to the extent of the premium received --or purchase put options on the
stock of companies whose high yield debt instruments are owned by the Fund).
Loan participations may be treated as illiquid securities. The remainder of the
Fund's assets will be invested in U.S. dollar- or foreign currency-denominated
investment grade fixed income securities. See "Credit Ratings and NRSROs" under
"Description and Risks of Fund Investments" below. The Fund may invest up to
20% of its assets in securities denominated in foreign currencies. In addition,
the Fund may use "synthetic bonds" and "synthetic foreign currency denominated
securities" to approximate desired risk/return profiles where the non-synthetic
securities are either unavailable or possess undesirable characteristics. See
the description of "synthetic bonds" and "synthetic foreign currency denomi-
nated securities" in "Additional Investment Techniques Used By The Income
Funds" below.
<PAGE>
28 PIMCO Advisors Funds
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Investments in High Yield Securities, while generally providing greater poten-
tial opportunity for capital appreciation and higher yields than investments in
higher rated securities, also entail greater risk, including the risk of de-
fault or bankruptcy of the issuer of such securities. For a further discussion
of the special risks of investment in lower rated securities, see "Risks of
High Yield Bonds" under "Description and Risks of Fund Investments" below.
For an explanation of other investments which the Fund may make, see "Addi-
tional Investment Techniques Used By The Income Funds" below.
TOTAL RETURN INCOME FUND seeks maximum total return, consistent with preserva-
tion of capital. The Fund invests primarily in investment grade fixed-income
securities and seeks a portfolio duration of three to six years. See "Duration"
below. The Fund may invest up to 10% of its assets in fixed-income securities
that are rated below investment grade but rated at least B by Moody's or S&P
(or similarly rated by another NRSRO or, if unrated, determined by the Fund's
sub-adviser to be of comparable quality). The Fund will maintain an overall
dollar-weighted average quality of at least A (as rated by Moody's or S&P or,
where unrated, determined by the sub-adviser to be of comparable quality). See
"Credit Ratings and NRSROs" under "Description and Risks of Fund Investments"
below. The Fund may also invest up to 20% of its assets in securities denomi-
nated in foreign currencies. In addition, the Fund may use "synthetic bonds"
and "synthetic foreign currency denominated securities" to approximate desired
risk/return profiles where the non-synthetic securities are either unavailable
or possess undesirable characteristics. See the description of "synthetic
bonds" in "Additional Investment Techniques Used By The Income Funds" below.
For an explanation of other investments which the Fund may make, see "Addi-
tional Investment Techniques Used By The Income Funds" below.
TAX EXEMPT FUND seeks high current income exempt from federal income tax, con-
sistent with preservation of capital, by investing in debt securities whose in-
terest is, in the opinion of bond counsel for the issuer at the time of issu-
ance, exempt from federal income tax ("Tax Exempt Bonds"). Tax Exempt Bonds
generally are issued by states and local governments and their agencies, au-
thorities and other instrumentalities. It is a policy of the Fund that, under
normal market conditions, at least 80% of its net assets will be invested in
Tax Exempt Bonds rated Baa or higher by Moody's or BBB or higher by S&P, or
which are similarly rated by another NRSRO or if unrated, determined by the
Fund's sub-adviser to be of quality comparable to obligations so rated. Tax Ex-
empt Bonds rated in the fourth highest rating category (e.g. Baa by Moody's)
may be considered to possess some speculative characteristics by certain
NRSROs. The Fund seeks a portfolio duration of 3 to 10 years. See "Duration"
below.
The Fund may invest up to 20% of its net assets, under normal market condi-
tions, in any combination of (1) Tax Exempt Bonds which are rated at least Ba
by Moody's or BB by S&P (or similarly rated by another NRSRO or, if unrated,
determined by the sub-adviser to be of comparable quality) and (2) U.S. Govern-
ment securities, money market instruments or "private activity" bonds (see
"Taxes"). Securities rated below investment grade and comparable unrated secu-
rities are subject to greater risks than higher quality bonds. See "Risks of
High Yield Bonds" under "Description and Risks of Fund Investments" below. For
temporary defensive purposes the Fund may invest all or a portion of its assets
in U.S. Government securities and money market instruments. Dividends to Fund
shareholders derived from money market instruments and U.S. Government securi-
ties are taxable as ordinary income. The Fund may seek to reduce fluctuations
in its net asset value by engaging in portfolio strategies involving options on
securities, futures contracts, and options on futures contracts as described
below under "Derivatives" under "Description and Risks of Fund Investments "
below. Any gain derived by the Fund from the use of such instruments will be
treated as a combination of short-term and long-term capital gain and, if not
offset by realized capital losses incurred by the Fund, will be distributed to
shareholders and will be taxable to shareholders as a combination of ordinary
income and long-term capital gain.
For an explanation of other investments which the Fund may make, see "Addi-
tional Investment Techniques Used By The Income Funds" below.
U.S. GOVERNMENT FUND seeks maximum total return, consistent with preservation
of capital. It is a policy of the U.S. Government Fund to invest 100% of its
assets in U.S. Government securities, related repurchase agreements, put and
call options on U.S. Government securities and futures contracts with respect
to U.S. Government securities and options thereon. The Fund intends to maintain
a portfolio duration of 3-6 years. See "Duration" below. The Fund may purchase
collateralized mortgage obligations ("CMOs") issued by a U.S. Government in-
strumentality, invest in "zero coupon" U.S. Government securities or in certif-
icates representing rights to receive payments of the interest
<PAGE>
PIMCO Advisors Funds 29
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only or principal only of U.S. Government securities ("IO/PO Strips"). The Fund
may seek to increase its current income and to reduce fluctuation in its net
asset value by engaging in portfolio strategies involving options on U.S. gov-
ernment securities, futures contracts on U.S. Government securities and options
thereon and in repurchase agreements related to U.S. Government securities.
The Fund may use "synthetic bonds" to approximate desired risk/return profiles
where the non-synthetic securities are either unavailable or possess undesir-
able characteristics. See the description of "synthetic bonds" in "Additional
Investment Techniques Used By The Income Funds" below.
Investments in the U.S. Government Fund are neither insured nor guaranteed by
the U.S. Government, and are subject to interest rate risk.
For an explanation of other investments which the Fund may make, see "Addi-
tional Investment Techniques Used By The Income Funds" below.
SHORT-INTERMEDIATE FUND seeks current income, consistent with relatively low
volatility of principal. The Fund invests primarily in a diversified portfolio
of investment grade fixed income securities of varying maturities and seeks a
portfolio duration of one to three years. See "Duration" below. The Fund may
invest up to 10% of its assets in fixed-income securities rated below invest-
ment grade but rated B or higher by Moody's or S&P (or similarly rated by an-
other NRSRO or, if unrated, determined by the Fund's sub-adviser to be of com-
parable quality), and may invest up to 20% of its assets in securities denomi-
nated in foreign currencies. In addition, the Fund may use "synthetic bonds"
and "synthetic foreign currency denominated securities" to approximate desired
risk/return profiles where the non-synthetic securities are either unavailable
or possess undesirable characteristics. See the description of "synthetic
bonds" and "synthetic foreign currency denominated securities" in "Additional
Investment Techniques Used By the Income Funds" below.
The Fund will maintain an overall dollar weighted average quality of at least A
(as rated by Moody's or S&P or, where unrated, determined by the sub-adviser to
be of comparable quality). See "Credit Ratings and NRSROs" under "Description
and Risks of Fund Investments" below.
For an explanation of other investments which the Fund may make, see "Addi-
tional Investment Techniques Used By the Income Funds" below.
MONEY MARKET FUND seeks the maximum current income believed to be consistent
with preservation of capital and maintenance of liquidity by investing in a
portfolio of U.S. dollar-denominated short-term, fixed income instruments which
include:
. short-term U.S. Government securities;
. certificates of deposit and bankers' acceptances;
. prime commercial paper;
. high-quality, short-term corporate obligations; and
. repurchase agreements with respect to U.S. Government securities.
Although the Fund is of the type commonly known as a "money market fund," Class
B and Class C shares of the Fund are intended only as a temporary investment
for investors who are considering in which of the other Funds to invest or
whose investment objectives have changed so that investment in a portfolio such
as that of the Money Market Fund is suitable. Unlike most money market funds,
the Fund imposes a contingent deferred sales charge on certain redemptions of
Class B and Class C shares and does not offer redemption by check or other
services frequently offered by money market funds.
All of the Fund's investments will, at the time of investment, have remaining
maturities of 397 days or less. The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less. The Fund's investments are limited to
those which, in accordance with standards established by the Trust's Trustees,
are believed to present minimal credit risk. The Money Market Fund may invest
up to 100% of its assets in bank obligations. Because of the high quality and
short maturity of the Fund's investments, the Fund's yield may be lower than
that of funds that invest in lower-rated securities and securities of longer
maturities. Unlike investments which pay a fixed yield for a stated period of
time, money market fund yields fluctuate.
ADDITIONAL INVESTMENT TECHNIQUES USED BY THE INCOME FUNDS
Each of the Income Funds (other than the Tax Exempt and Money Market Funds) may
buy and sell interest rate futures contracts, futures contracts on securities
and fixed income securities indices (U.S. Government securities only in the
case of the U.S. Government Fund) and options on such contracts for the purpose
of hedging against changes in the value of securities which a Fund owns or an-
ticipates purchasing due to anticipated changes in interest rates. Each of
these Funds may also purchase put and call options and may write covered call
and covered put options on any security that it is eligible to purchase. The
Tax Exempt Fund may purchase put or call options on U.S. Govern-
<PAGE>
30 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
ment Securities, Tax Exempt Bonds and Tax Exempt Bond indices, purchase and
sell futures contracts on U.S. Government Securities, Tax Exempt Bonds and Tax
Exempt Bond indices, and purchase put and call options on such futures con-
tracts. Each of the Income Funds that may invest in securities denominated in
foreign currencies also may engage in foreign currency exchange transactions by
means of buying or selling foreign currencies on a spot basis, entering into
foreign currency forward contracts, and buying and selling foreign currency op-
tions, foreign currency futures, and options on foreign currency futures. For-
eign currency exchange transactions may be entered into for the purpose of
hedging against foreign currency exchange risk arising from a Fund's investment
or anticipated investment in securities denominated in foreign currencies. The
Global Income, High Income, Total Return Income and Short-Intermediate Funds
also may enter into foreign currency forward contracts and buy or sell foreign
currency options for risk management purposes. Each of the Income Funds (other
than the Tax Exempt and Money Market Funds) may enter into swap agreements for
purposes of attempting to obtain a particular investment return at a lower cost
to the Fund than if the Fund had invested directly in an instrument that pro-
vided the desired return.
Certain of the Income Funds may combine futures contracts or options on fixed
income securities with cash, cash equivalent investments or other fixed income
securities in order to create "synthetic bonds" which approximate desired risk
and return profiles. This may be accomplished where a "non-synthetic" security
having the desired risk/return profile either is unavailable (e.g., short-term
securities of certain foreign governments) or possesses undesirable character-
istics (e.g., interest payments on the security would be subject to foreign
withholding taxes). Certain of the Income Funds may also purchase foreign ex-
change forward contracts in conjunction with U.S. dollar-denominated securities
in order to create a "synthetic foreign currency denominated security" which
approximates desired risk and return characteristics where the non-synthetic
securities either are not available in foreign markets or possess undesirable
characteristics. When a Fund creates a "synthetic bond" with a futures con-
tract, it will maintain in a segregated account with its custodian liquid high-
quality fixed income securities with a value at least equal to the notional
value of the futures contract (less the amount of any initial or variation mar-
gin on deposit).
The Global Income Fund may invest without limit in securities denominated in
foreign currencies and the remaining Income Funds (other than the Tax Exempt,
U.S. Government and Money Market Funds) may invest up to 20% of their assets in
such securities.
Each of the Income Funds may lend its portfolio securities to brokers, dealers
and other financial institutions to earn income; enter into repurchase agree-
ments with banks and broker-dealers; make short sales of securities held in the
Fund's portfolio or which the Fund has the right to acquire without the payment
of further consideration; and purchase and sell securities on a when-issued or
delayed delivery basis and enter into forward commitments to purchase securi-
ties. Each of the Income Funds may also purchase "illiquid securities" so long
as no more than 15% of that Fund's net assets would be invested in illiquid se-
curities immediately after giving effect to the purchase. Each of the Income
Funds may also invest a portion or, for temporary defensive purposes, up to
100% of its assets in the money market instruments described in "Money Market
Instruments" under "Description and Risks of Fund Investments" below.
See "Description and Risks of Fund Investments" for a more complete description
of the securities and investment techniques listed above and the risks atten-
dant with such securities and techniques.
TOTAL RETURN
The "total return" sought by the Income Funds specified above will consist of
interest and dividends from underlying securities, capital appreciation re-
flected in realized or unrealized increases in the value of portfolio securi-
ties, and use of futures and options, or gains from favorable changes in for-
eign currency exchange rates. Generally, over the long term, the total return
obtained by a portfolio investing primarily in fixed income securities is not
expected to be as great as that obtained by a portfolio that invests primarily
in equity securities. At the same time, the market risk and price volatility of
a fixed income portfolio is expected to be less than that of an equity portfo-
lio, so that a fixed income portfolio is generally considered to be a more con-
servative investment. The change in a market value of fixed income securities
(and therefore their capital appreciation or depreciation) is largely a func-
tion of changes in the current level of interest rates. When interest rates are
falling, a portfolio with a shorter duration generally will not generate as
high a level of total return as a portfolio with a longer duration. Conversely,
when interest rates are rising, a portfolio with a shorter duration will gener-
ally outperform longer duration portfolios. When interest rates are flat,
shorter duration portfolios generally will not generate
<PAGE>
PIMCO Advisors Funds 31
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as high a level of total return as longer duration portfolios (assuming that
long-term interest rates are higher than short-term rates, which is commonly
the case). With respect to the composition of any fixed income portfolio, the
longer the duration of the portfolio, the greater the anticipated potential for
total return, with, however, greater attendant market risk and price volatility
than for a portfolio with a shorter duration. The market value of securities
denominated in currencies other than the U.S. dollar also may be affected by
movements in foreign currency exchange rates.
DURATION
Duration is a measure of the expected life of a fixed income security that was
developed as a more precise alternative to the concept of "term to maturity."
Traditionally, a fixed-income security's "term to maturity" has been used as a
proxy for the sensitivity of the security's price to changes in interest rates
(which is the "interest rate risk" or "volatility" of the security). However,
"term to maturity" measures only the time until a fixed-income security pro-
vides its final payment, taking no account of the pattern of the security's
payments prior to maturity. In contrast, duration incorporates a bond's yield,
coupon interest payments, final maturity and call features into one measure.
Duration management is one of the fundamental tools used by the sub-advisers in
portfolio selection for the Income Funds.
Most debt obligations provide interest ("coupon") payments in addition to a fi-
nal ("par") payment at maturity. Some obligations also have call provisions.
Depending on the relative magnitude of these payments, the market values of
debt obligations may respond differently to changes in the level and structure
of interest rates. Duration is a measure of the expected life of a fixed income
security on a present value basis. Duration takes the length of the time inter-
vals between the present time and the time that the interest and principal pay-
ments are scheduled or, in the case of a callable bond, expected to be re-
ceived, and weights them by the present values of the cash to be received at
each future point in time. For any fixed income security with interest payments
occurring prior to the payment of principal, duration is always less than matu-
rity. In general, all other things being equal, the lower the stated or coupon
rate of interest of a fixed income security, the longer the duration of the se-
curity; conversely, the higher the stated or coupon rate of interest of a fixed
income security, the shorter the duration of the security. There are some situ-
ations where the standard
duration calculation does not properly reflect the interest rate exposure of a
security. For example, floating and variable rate securities often have final
maturities of ten or more years; however, their interest rate exposure corre-
sponds to the frequency of the coupon reset.
Futures, options and options on futures have durations which, in general, are
closely related to the duration of the securities which underlie them. Holding
long futures (backed by a segregated account of cash and cash equivalents) or
call option positions will lengthen a Fund's duration by approximately the same
amount that holding an equivalent amount of the underlying securities would.
Short futures or put option positions have durations roughly equal to the nega-
tive duration of the securities that underlie these positions, and have the ef-
fect of reducing portfolio duration by approximately the same amount that sell-
ing an equivalent amount of the underlying securities would.
In some cases, duration cannot be calculated with certainty because certain as-
sumptions have to be factored into the calculation. For example, in the case of
mortgage pass-through securities, the stated final maturity of such securities
is generally 30 years, but current and projected payment rates are more criti-
cal in determining the securities' interest rate exposure. In these and other
similar situations, the sub-adviser will use more sophisticated analytical
techniques that incorporate the anticipated economic life of a security into
the determination of its interest rate exposure. Similarly, in the case of for-
eign securities, the sub-adviser uses fundamental analysis to predict the rela-
tionship of domestic and foreign interest rates for purposes of estimating the
duration of the foreign securities.
DESCRIPTION AND RISKS OF FUND INVESTMENTS
The following describes in greater detail the securities and investment tech-
niques used by the various PIMCO Advisors Funds, describes the risks associated
with them and sets forth certain other information about the Funds. Additional
information about the Funds' investment practices can be found in the Statement
of Additional Information.
RISKS OF INVESTMENT IN COMPANIES WITH SMALL AND MEDIUM EQUITY CAPITALIZATIONS
Many of the Equity Funds may invest in companies with small equity capitaliza-
tions. The Opportunity
<PAGE>
32 PIMCO Advisors Funds
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Fund may invest primarily in such companies. The Discovery Fund invests primar-
ily in small companies with equity capitalizations of $500 million to $1 bil-
lion which present risks similar to those of investments in companies with
small equity capitalizations. These investments may include securities traded
over-the-counter and securities of companies with limited operating histories.
Such companies may have more restricted product lines or more limited financial
resources than larger, more established companies. For these and other reasons,
they may be more severely affected by economic downturns or other adverse de-
velopments than are larger, more established companies. Trading volume of these
companies' securities may also be low and their market values volatile. Many of
the Equity Funds may also invest in companies with medium equity capitaliza-
tions. The Target Fund may invest primarily in such companies. Securities is-
sued by such issuers share some of the risk characteristics of small equity
capitalization securities described above, although medium equity capitaliza-
tion issuers tend to have longer operating histories, broader product lines,
and greater financial resources and their securities tend to be more liquid and
less volatile than those of small equity capitalization issuers.
RISKS OF FOREIGN INVESTMENTS
Many of the Funds may invest a portion of their assets in securities of foreign
issuers, securities traded principally in securities markets outside the United
States and/or securities denominated in foreign currencies ("foreign securi-
ties"). The International Fund will typically invest all of its assets in for-
eign securities and the Precious Metals and Emerging Markets Funds may invest
in such securities without limit. The Global Income Fund will normally invest
between 25% and 75% of its total assets in foreign securities, although the
Fund may invest in such securities without limit. Such investments may involve
certain special risks due to foreign economic, political and legal develop-
ments, including favorable or unfavorable changes in currency exchange rates,
exchange control regulations (including currency blockage), expropriation of
assets or nationalization, imposition of withholding taxes on dividend or in-
terest payments, and possible difficulty in obtaining and enforcing judgments
against foreign entities. Furthermore, foreign issuers are subject to differ-
ent, often less comprehensive, accounting, reporting and disclosure require-
ments than domestic issuers. The securities of some foreign companies and for-
eign securities markets are less liquid and at times more volatile than securi-
ties of comparable U.S. companies and U.S. securities markets. Foreign broker-
age commissions and other fees are also generally higher than in the United
States. There are also special tax considerations which apply to securities of
foreign issuers and securities principally traded overseas.
Investing in developing countries involves certain risks not typically associ-
ated with investing in U.S. securities, and imposes risks greater than, or in
addition to, risks of investing in foreign developed countries. Security prices
in emerging markets can be significantly more volatile than in the more devel-
oped nations of the world, reflecting the greater uncertainties of investing in
less established markets and economies. In particular, countries with emerging
markets may have relatively unstable governments, present the risk of national-
ization of businesses, restrictions on foreign ownership, or prohibitions of
repatriation of assets, and may have less protection of property rights than
more developed countries. The economies of countries with emerging markets may
be predominantly based on only a few industries or dependent on revenues from
particular commodities or on international aid or development assistance, may
be highly vulnerable to changes in local or global trade conditions, and may
suffer from extreme and volatile debt burdens or inflation rates. Local securi-
ties markets may trade a small number of securities and may be unable to re-
spond effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times. Conse-
quently, securities of issuers located in countries with emerging markets may
have limited marketability and may be subject to more abrupt or erratic price
movements. Also, such local markets typically offer less regulatory protections
for investors.
A Fund's investments in foreign currency denominated debt obligations and hedg-
ing activities will likely produce a difference between its book income and its
taxable income. This difference may cause a portion of the Fund's income dis-
tributions to constitute returns of capital for tax purposes or require the
Fund to make distributions exceeding book income to qualify as a regulated in-
vestment company for federal tax purposes.
OTHER FOREIGN CURRENCY TRANSACTIONS
Foreign currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in differ-
ent countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency ex
<PAGE>
PIMCO Advisors Funds 33
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change rates also can be affected unpredictably by intervention by U.S. or for-
eign governments or central banks or the failure to intervene, or by currency
controls or political developments in the U.S. or abroad.
All Funds that may invest in securities denominated in foreign currencies may
enter into forward foreign currency exchange contracts to reduce the risks of
adverse changes in foreign exchange rates. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the con-
tract agreed upon by the parties, at a price set at the time of the contract.
By entering into a forward foreign currency exchange contract, the fund "locks
in" the exchange rate between the currency it will deliver and the currency it
will receive for the duration of the contract. As a result, a Fund reduces its
exposure to changes in the value of the currency it will deliver and increases
its exposure to changes in the value of the currency it will exchange into. The
effect on the value of a Fund is similar to selling securities denominated in
one currency and purchasing securities denominated in another. The Funds may
enter into these contracts for the purpose of hedging against foreign exchange
risks arising from the Funds' investment or anticipated investment in securi-
ties denominated in foreign currencies. Such hedging transactions may not be
successful and may eliminate any chance for a Fund to benefit from favorable
fluctuations in relevant foreign currencies. The International, Emerging Mar-
kets, Global Income, High Income, Total Return Income and Short-Intermediate
Funds may also enter into these contracts for purposes of increasing exposure
to a foreign currency or to shift exposure to foreign currency fluctuations
from one currency to another. To the extent that they do so, the International,
Emerging Markets, Global Income, High Income, Total Return Income and Short-In-
termediate Funds will be subject to the additional risk that the relative value
of currencies will be different than anticipated by the particular Fund's sub-
adviser. Certain Funds may also use foreign currency futures contracts and re-
lated options on foreign currencies for the same reasons for which forward for-
eign currency exchange contracts are used.
Certain Funds also may invest in foreign currency exchange-related securities,
such as foreign currency warrants and other instruments whose return is linked
to foreign currency exchange rates. For a description of these instruments and
their associated risks, see the Statement of Additional Information.
MONEY MARKET INSTRUMENTS
The money market instruments in which the Money Market Fund invests include:
(1) short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other bank obligations
rated in the two highest rating categories by at least two Nationally Recog-
nized Statistical Rating Organizations ("NRSROs"), or, if rated by only one
NRSRO, in such agency's two highest grades, or unrated but determined to be
of comparable quality by the sub-adviser. Bank obligations must be those of a
bank that has deposits in excess of $2 billion or that is a member of the
Federal Deposit Insurance Corporation. The Fund may invest in obligations of
U.S. branches or subsidiaries of foreign banks ("Yankee dollar obligations")
or foreign branches of U.S. banks ("Eurodollar obligations");
(3) commercial paper rated in the two highest rating categories by at least
two NRSROs, or, if rated by only one NRSRO, in such agency's two highest
grades, or if not rated, of comparable quality as determined by the sub-ad-
viser;
(4) corporate obligations with a remaining maturity of 397 days or less whose
issuers have outstanding short-term debt obligations rated in the highest
rating category by at least two NRSROs, or, if rated by only one NRSRO, in
such agency's highest grade, or if not rated, of comparable quality as deter-
mined by the sub-adviser; and
(5) repurchase agreements with domestic commercial banks or registered bro-
ker-dealers. See "Repurchase Agreements" below.
Federal law limits the percentage of the Money Market Fund's assets that may be
invested in instruments that are not rated in the highest rating category (or
that are unrated but determined to be of comparable quality by the sub-advis-
er).
Each of the other Funds may also invest a portion or, for temporary defensive
purposes, up to 100% of its assets in the foregoing kinds of money market
instruments.
In addition, the International Fund may invest in bankers' acceptances or nego-
tiable bank certificates of deposit issued by United States or foreign banks
having outstanding debt rated in the three highest rating categories by any
NRSRO or, if not so rated, of equivalent investment quality as determined by
the sub-adviser of those Funds; prime commercial paper issued by companies hav-
ing an outstanding debt issue rated in the
<PAGE>
34 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
three highest rating categories by any NRSRO or, if not rated, of comparable
quality as determined by the subadviser; and short-term corporate obligations
rated in the three highest rating categories by any NRSRO or, if not rated, of
comparable quality as determined by the sub-adviser.
U.S. GOVERNMENT SECURITIES
"U.S. Government securities" are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. Some U.S. Government securities
(e.g., U.S. Treasury bills, notes and bonds, mortgage participation certifi-
cates guaranteed by the Government National Mortgage Association ("Ginnie Mae")
and Federal Housing Administration debentures) are supported by the full faith
and credit of the United States. Other U.S. Government securities are not
backed by the full faith and credit of the U.S. Government, but instead are
backed only by the credit of an agency or instrumentality, or by the discre-
tionary authority of the U.S. Government to purchase the issuing entity's obli-
gations. Agencies or instrumentalities whose obligations are not backed by the
full faith and credit of the U.S. Government include, among others, the Federal
Home Loan Mortgage Corporation, Federal Home Loan Banks, the Federal National
Mortgage Association ("Fannie Mae"), the Tennessee Valley Authority and the
Bank for Cooperatives.
U.S. Government securities generally do not involve the credit risks associated
with investments in other types of fixed-income securities, although, as a re-
sult, the yields available from U.S. Government securities are generally lower
than the yields available from otherwise comparable corporate fixed-income se-
curities. Like other fixed-income securities, however, the values of U.S. Gov-
ernment securities change as interest rates fluctuate. Fluctuations in the
value of portfolio securities will in many cases not affect interest income on
existing portfolio securities, but will be reflected in a Fund's net asset val-
ue. Because the magnitude of these fluctuations will generally be greater at
times when a Fund's average maturity is longer, under certain market conditions
a Fund may invest in short-term investments yielding lower current income
rather than investing in higher-yielding long-term securities.
U.S. Government securities include mortgage-backed securities that are guaran-
teed by a federal agency or collateralized mortgage obligations ("CMOs") issued
by a U.S. Government instrumentality. See "Mortgage-Related and Other Asset-
Backed Securities" below.
Some U.S. Government securities are "zero coupon" securities (see "Zero Coupon
and Pay-in-Kind Securities" below) or are certificates representing rights to
receive payments of the interest only or the principal only of U.S. Government
securities ("IO/PO Strips"). IO/PO Strips tend to be more volatile than other
types of U.S. Government securities. Mortgage-backed IO Strips involve the ad-
ditional risk of loss of the entire value of the investment if the underlying
mortgages are prepaid.
DIVERSIFIED AND NON-DIVERSIFIED PORTFOLIOS
In order to qualify as a "diversified company" under the Investment Company Act
of 1940 (the "1940 Act"), an investment company may not, immediately after an
investment, (i) have more than 5% of its total assets invested in the securi-
ties of any one issuer, except that up to 25% of the investment company's total
assets may be invested without regard to this restriction or (ii) own more than
10% of the outstanding voting securities of any one issuer.
Each diversified Fund of the Trust (with the exception of the International and
Target Funds) currently observes a more restrictive policy with respect to (i)
above and will not, immediately after an investment, have more than 5% of its
total assets invested in the securities of any one issuer. The International
and Target Funds may invest up to 25% of their total assets in the securities
of any one issuer (in accordance with (i) above). Regarding (ii) above, no di-
versified Fund may, immediately after an investment, own more than 10% of the
outstanding voting securities of any one issuer both with respect to such Fund
and the Trust (with the exception of any non-diversified Fund) in the aggre-
gate.
In contrast, the Global Income Fund is a "non-diversified company" under the
1940 Act and is therefore not subject to the diversification requirements
stated above. As a non-diversified company, the Global Income Fund may invest a
relatively high percentage of its assets in the securities of relatively few
issuers which the Fund's sub-adviser deems to be attractive investments. Such
concentration may, however, increase the risk of loss to the Fund should there
be a decline in the market value of any one portfolio security. Accordingly,
investment in the Global Income Fund may entail greater risks in this regard
than investments in the diversified Funds.
CORPORATE DEBT SECURITIES
Corporate debt securities include corporate bonds, debentures, notes and other
similar corporate debt instru-
<PAGE>
PIMCO Advisors Funds 35
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ments, including convertible securities. Debt securities may be acquired with
warrants attached. Corporate income-producing securities may also include
forms of preferred or preference stock. The rate of return or return of prin-
cipal on some debt obligations may be linked or indexed to the level of ex-
change rates between the U.S. dollar and a foreign currency or currencies, to
the price of certain commodities or to a security or an index of securities.
Investments in corporate debt securities that are below investment grade
(e.g., rated below Baa by Moody's or BBB by S&P) are described as "specula-
tive" both by Moody's and S&P. Such securities are sometimes referred to as
"junk bonds," and may be subject to greater market fluctuations, less liquid-
ity and greater risk of loss of income or principal, including a greater pos-
sibility of default or bankruptcy of the issuer of such securities, than are
more highly rated debt securities. Moody's also describes securities rated Baa
as having speculative characteristics. The Manager and the sub-advisers seek
to minimize the risks associated with lower rated securities through diversi-
fication, in-depth credit analysis and attention to current developments in
interest rates and market conditions. See "Risks of High Yield Bonds" below.
MORTGAGE-RELATED AND OTHER ASSET BACKED SECURITIES
Mortgage backed securities are securities representing interests in "pools" of
mortgage loans secured by residential or commercial real property in which
payments of both interest and principal on the securities are generally made
monthly, in effect "passing through" monthly payments made by the individual
borrowers on the mortgage loans which underlie the securities (net of fees
paid to the issuer or guarantor of the securities). Early repayment of princi-
pal on some mortgage-backed securities (arising from prepayments of principal
due to sale of the underlying property, refinancing, or foreclosure, net of
fees and costs which may be incurred) may expose a Fund to a lower rate of re-
turn upon reinvestment of principal. Also, if a security subject to prepayment
has been purchased at a premium, in the event of prepayment the value of the
premium would be lost. Like other fixed-income securities, when interest rates
rise, the value of a mortgage backed security generally will decline; however,
when interest rates are declining, the value of mortgage backed securities
with prepayment features may not increase as much as other fixed-income secu-
rities.
Payment of principal and interest on some mortgage backed securities (but not
the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed
by GNMA); or guaranteed by agencies or instrumentalities of the U.S. Govern-
ment (in the case of securities guaranteed by FNMA or the Federal Home Loan
Mortgage Corporation ("FHLMC"), which are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations). Mort-
gage backed securities created by nongovernmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported by vari-
ous forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance and letters of credit, which may be issued by governmen-
tal entities, private insurers or the mortgage poolers.
Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-related in-
struments. Interest and prepaid principal on a CMO are paid, in most cases,
semiannually. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage backed securities guaran-
teed by GNMA, FHLMC, or FNMA. CMOs are structured into multiple classes, with
each class bearing a different stated maturity. Monthly payments of principal,
including prepayments, are first returned to investors holding the shortest
maturity class; investors holding the longer maturity classes receive princi-
pal only after the first class has been retired. CMOs that are issued or guar-
anteed by the U.S. Government or by any of its agencies or instrumentalities
will be considered U.S. Government securities by the Funds, while other CMOs,
even if collateralized by U.S. Government securities, will have the same sta-
tus as other privately issued securities for purposes of applying a Fund's di-
versification tests.
Commercial mortgage-related securities are generally structured like pass-
through securities or CMOs, although other structures are possible. They may
pay fixed or adjustable rates of interest. Commercial mortgage-related securi-
ties have been issued in public or private transactions by a variety of public
and private issuers. The commercial mortgage loans that underlie commercial
mortgage-related securities have certain distinct risk characteristics. Com-
mercial mortgage loans generally lack standardized terms, which may complicate
their structure. Commercial properties themselves tend to be unique and are
more difficult to value than single family residential properties. Commercial
mortgage loans also tend to have shorter maturities than residential mortgage
loans, and may not be fully amortizing, meaning that they may have a signifi-
cant principal balance, or "balloon" payment, due on matu-
<PAGE>
36 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
rity. Assets underlying commercial mortgage-related securities may relate only
to a few properties or a single property. The risk involved in single property
financings is highly concentrated.
Other mortgage-related securities include securities other than those described
above that directly or indirectly represent a participation in, or are secured
by and payable from, mortgage loans on real property, such as CMO residuals or
stripped mortgage backed securities, and may be structured in classes with
rights to receive varying proportions of principal and interest. In addition,
the Funds may invest in other asset-backed securities that have been offered to
investors. For a discussion of the characteristics of some of these instru-
ments, see the Statement of Additional Information. The duration of CMOs and
other mortgage-related securities is often difficult to determine because the
underlying mortgages may be subject to early repayment. Thus, the determination
of duration will be dependent on the sub-adviser's assumptions regarding the
likelihood and incidence of prepayment and, to the extent that such assumptions
prove to be incorrect, the duration of a Fund's portfolio, and thus its rela-
tive exposure to fluctuation of interest rates, may be significantly different
than intended and may increase the overall risk of the Fund's portfolio.
TAX EXEMPT SECURITIES
Tax Exempt Bonds generally are issued by states and local governments and their
agencies, authorities and other instrumentalities. Tax Exempt Bonds are subject
to credit and market risk. Credit risk relates to the ability of the issuer to
make payments of principal and interest. The issuer of a Tax Exempt Bond may
make such payments from money raised through a variety of sources, including
(1) the issuer's general taxing power, (2) a specific type of tax, or (3) a
particular facility or project. The ability of an issuer to make such payments
could be affected by litigation, legislation or other political events or the
bankruptcy of the issuer. Market risk relates to changes in a security's value
as a result of changes in interest rates. Lower rated Tax Exempt Bonds gener-
ally provide higher yields but are subject to greater credit and market risk
than higher quality Tax Exempt Bonds.
CONVERTIBLE SECURITIES
Many of the Funds may invest in convertible securities. Convertible securities
are generally preferred stocks or fixed income securities that are convertible
into common stock at either a stated price or a stated rate. The price of the
convertible security will normally vary in some proportion to changes in the
price of the underlying common stock because of this conversion feature. A con-
vertible security will normally also provide a fixed income stream. For this
reason, the convertible security may not decline in price as rapidly as the un-
derlying common stock.
A Fund's sub-adviser will select convertible securities to be purchased by the
Fund based primarily upon its evaluation of the fundamental investment charac-
teristics and growth prospects of the issuer of the security. As a fixed-income
security, a convertible security tends to increase in market value when inter-
est rates decline and to decrease in value when interest rates rise. While con-
vertible securities generally offer lower interest or dividend yields than non-
convertible fixed-income securities of similar quality, their value tends to
increase as the market value of the underlying stock increases and to decrease
when the value of the underlying stock decreases.
The International, Emerging Markets and Global Income Funds may invest in secu-
rities that are convertible only by certain classes of investors (which may not
include the Fund). The Equity Income Fund may invest in so-called "synthetic
convertible securities," which are composed of two or more different securities
whose investment characteristics, taken together, resemble those of convertible
securities. For example, the Equity Income Fund may purchase a non-convertible
debt security and a warrant or option. The synthetic convertible differs from
the true convertible security in several respects. Unlike a true convertible
security, which is a single security having a unitary market value, a synthetic
convertible comprises two or more separate securities, each with its own market
value. Therefore, the "market value" of a synthetic convertible is the sum of
the values of its fixed-income component and its convertible component. For
this reason, the values of a synthetic convertible and a true convertible secu-
rity may respond differently to market fluctuations.
RISKS OF HIGH YIELD BONDS
Certain of the Funds may invest in high-yield/high-risk debt or fixed-income
securities rated below "investment grade," meaning securities that are not
rated in one of the four highest rating categories by an NRSRO (i.e., securi-
ties rated Ba or below by Moody's or BB or below by S&P or, if unrated, deter-
mined by the Manager or relevant sub-adviser to be of comparable quality). Non-
investment grade securities are commonly referred to as "junk bonds," and are
referred to herein as "High Yield Securities." See "Credit Ratings and NRSROs"
below. Also, see Appendix A to this Pro
<PAGE>
PIMCO Advisors Funds 37
- --------------------------------------------------------------------------------
spectus for a description of the rating categories of some NRSROs.
High Yield Securities are subject to credit risk and market risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates. Credit risk relates to the ability of the issuer to make payments of
principal and interest. See "Credit and Market Risk of Fixed-Income Securities"
below. High Yield Securities rated B or lower by Moody's or S&P or of compara-
ble quality are considered to be speculative with respect to the issuer's ca-
pacity to pay interest and repay principal.
High Yield Securities are generally subject to greater credit risk than higher-
rated securities because the issuers are more vulnerable to economic downturns,
higher interest rates or adverse issuer-specific developments. In addition, the
prices of High Yield Securities are generally subject to greater market risk
and therefore react more sharply to changes in interest rates. The value and
liquidity of High Yield Securities may be diminished by adverse publicity and
investor perceptions. Also, legislative proposals limiting the tax benefits to
the issuers or holders of taxable High Yield Securities or requiring federally-
insured savings and loan institutions to reduce their holdings of taxable High
Yield Securities have had and may continue to have an adverse effect on the
market value of these securities.
Because High Yield Securities are frequently traded only in markets where the
number of potential purchasers and sellers, if any, is limited, the ability of
the Funds to sell High Yield Securities at their fair value either to meet re-
demption requests or to respond to changes in the financial markets may be lim-
ited. In such an event, such securities could be regarded as illiquid for the
purposes of the limitation on the purchase of illiquid securities described be-
low. See "Illiquid Securities" below. Thinly-traded High Yield Securities may
be more difficult to value accurately for the purpose of determining a Fund's
net asset value. Also, because the market for certain High Yield Securities is
relatively new, that market may be particularly sensitive to an economic down-
turn or a general increase in interest rates. Recent regulatory developments
and declines in the value of certain High Yield Securities have limited (and
may continue to limit) the ability of important participants in the High Yield
Securities market to maintain orderly markets in certain High Yield Securities.
Particular types of High Yield Securities may present special concerns. Some
High Yield Securities are zero coupon or pay-in-kind securities. See "Zero Cou-
pon and Pay-in-Kind Securities" below. Some High Yield Securities in which a
Fund may invest may be subject to redemption or call provisions that may limit
increases in market value that might otherwise result from lower interest rates
while increasing the risk that the Fund may be required to reinvest redemption
or call proceeds during a period of relatively low interest rates.
The Manager and the sub-advisers have responded to these concerns by attempting
to identify High Yield Securities with relatively favorable investment charac-
teristics. The credit ratings issued by NRSROs are subject to various limita-
tions. For example, while such ratings evaluate credit risk, they ordinarily do
not evaluate the market risk of High Yield Securities. In certain circumstanc-
es, the ratings may not reflect in timely fashion adverse developments affect-
ing an issuer. See "Credit Ratings and NRSROs" below. For these reasons, the
Manager and the sub-advisers conduct their own independent credit analysis of
High Yield Securities. In addition, under ordinary circumstances, the Manager
and the relevant sub-adviser will not purchase a High Yield Security if that
purchase will cause a Fund's holdings of all securities of the issuer of such
security to exceed 5% of the Fund's net assets.
Investment grade debt and convertible securities rated Baa by Moody's or BBB by
S&P (or similarly rated by another NRSRO or determined by the Manager or rele-
vant sub-adviser to be of comparable quality) may share some of the character-
istics of High Yield Securities described above. Certain convertible securities
rated in the fifth or sixth highest rating category or lower by a NRSRO or de-
termined by the Manager or the relevant sub-adviser to be of comparable quality
may possess some or all of the characteristics of nonconvertible High Yield Se-
curities. However, in the view of the Manager and the sub-advisers, most con-
vertible securities are likely to exhibit equity characteristics as well, due
to their conversion feature.
The following chart provides information on the weighted average percentage of
rated and unrated debt or fixed-income securities in the portfolios of each
Fund that invested at least 5% of its average annual assets in High Yield Secu-
rities during the fiscal year ended September 30, 1995. The numerical rating
designations correspond to the associated rating categories. The designation
"1st" corresponds to the top rating category (i.e., Aaa by Moody's and/or AAA
by S&P), "2nd" corresponds to the second highest rating category (i.e., Aa by
Moody's and/or AA by S&P), etc. For further description of these rating catego-
ries, see Appendix A. The columns related to unrated securities present the
percentage of a Fund's total net assets invested during such fiscal year (1) in
unrated High Yield Securities believed by the Manager or the relevant sub-
<PAGE>
38 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
advisers to be equivalent in quality to fixed-income securities of the indi-
cated rating and (2) in all unrated fixed-income securities.
<TABLE>
<CAPTION>
RATED
-----------------------------------------------
1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income -- -- 6.70 6.54 12.19 17.16 -- -- -- --
High Income 1.18 -- -- 4.92 56.46 28.99 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
UNRATED BUT CONSIDERED EQUIVALENT TO
--------------------------------------------------
TOTAL
1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH UNRATED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income -- -- -- -- -- -- -- -- -- -- --
High Income -- -- -- -- 0.72 0.40 -- -- -- -- 1.12
</TABLE>
ZERO COUPON AND PAY-IN-KIND SECURITIES
Certain of the Funds may invest in zero coupon securities and/or "pay-in-kind"
securities. Zero coupon securities are issued at a significant discount from
face value and pay interest only at maturity rather than at intervals during
the life of the security. Pay-in-kind securities pay dividends or interest in
the form of additional securities of the issuer rather than in cash.
The prices of pay-in-kind or zero coupon securities may react more strongly to
changes in interest rates than the prices of many other securities. The Funds
are required to accrue and distribute income from pay-in-kind and zero coupon
securities on a current basis, even though the Funds may not receive the income
currently in cash. Thus, a Fund may have to sell other investments to obtain
cash needed to make distributions of such imputed income.
DERIVATIVES
To the extent permitted by the investment objectives and policies of the Funds
described earlier and in the Statement of Additional Information, the Funds may
purchase and write call and put options on securities, securities indices and
on foreign currencies, and enter into futures contracts and use options on
futures contracts as further described below. Some Funds also may enter into
swap agreements with respect to foreign currencies, interest rates, and securi-
ties indexes. The Funds may use these techniques to hedge against changes in
interest rates, foreign currency exchange rates or securities prices or as part
of their overall investment strategies. The International, Emerging Markets,
Global Income, High Income, Total Return Income and Short-Intermediate Funds
may also purchase and sell options relating to foreign currencies for purposes
of shifting exposure to foreign currency fluctuations from one country to an-
other. See "Other Foreign Currency Transactions" below. Each Fund will maintain
segregated accounts consisting of cash, U.S. Government securities, or other
liquid high grade debt obligations (or, as permitted by applicable regulation,
enter into certain offsetting positions) to cover its obligations under options
and futures contracts and swaps contracts to avoid leveraging of the Fund. Some
of the derivative instruments and transactions described above, in particular
transactions in which the Funds segregate high grade debt obligations with
longer maturities, have speculative and/or leveraging characteristics which
will expose the Funds to greater credit and market risk and volatility. Certain
limitations on such transactions are imposed by the Investment Company Act and
the Commodity Exchange Act. See "Derivatives" and "Investment Restrictions" in
the Statement of Additional Information.
See "Investment Objectives and Policies" to determine which of the Funds may
employ particular derivative instruments. For those Funds that may invest in
one or more derivative instruments, the risks attendant with such instruments
are described below and further in the Statement of Additional Information.
OPTIONS ON SECURITIES, SECURITIES INDICES, AND CURRENCIES A Fund may purchase
put options on securities to protect holdings in an underlying or related secu-
rity against a substantial decline in market value. A Fund may purchase call
options on securities to protect against substantial increases in prices of se-
curities the Fund intends to purchase pending its ability to invest in such se-
curities in an orderly manner. A Fund may sell put or call options it has pre-
viously purchased, which could result in a net gain or loss depending on
whether the amount realized on the sale is more or less than the premium and
other transaction costs paid on the put or call option which is sold. A Fund
may write a call or put option only if the option is "covered" by the Fund
holding a position in the underlying securities or by other means which would
permit immediate satisfaction of the Fund's obligation as writer of the option.
Prior to exercise or expiration, an exchange traded option may be closed out by
an offsetting purchase or sale of an option of the same series.
The purchase and writing of options involves certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying se-
curities above the exercise price, but, as long as its obligation as a writer
continues, has retained the risk of loss should the price of the underlying se-
curity decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing pur-
chase transaction in order to terminate its obli-
<PAGE>
PIMCO Advisors Funds 39
- --------------------------------------------------------------------------------
gation under the option and must deliver the underlying securities at the exer-
cise price. If a put or call option purchased by the Fund is not sold when it
has remaining value, and if the market price of the underlying security, in the
case of a put, remains equal to or greater than the exercise price or, in the
case of a call, remains less than or equal to the exercise price, the Fund will
lose its entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security. There can be no assurance that a liquid market
will exist when a Fund seeks to close out an option position. Furthermore, if
trading restrictions or suspensions are imposed on the options markets, a Fund
may be unable to close out a position.
Funds that invest in foreign currency-denominated securities may buy or sell
put and call options on foreign currencies. Currency options traded on U.S. or
other exchanges may be subject to position limits which may limit the ability
of a Fund to reduce foreign currency risk using such options. Over-the-counter
options differ from traded options in that they are two-party contracts with
price and other terms negotiated between buyer and seller and generally do not
have as much market liquidity as exchanged-traded options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS Certain of the Funds may
invest in interest rate futures contracts, securities index futures contracts
and foreign currency futures contracts and options thereon ("futures options")
that are traded on a United States or foreign exchange or board of trade.
There are several risks associated with the use of futures and futures options
for hedging purposes. There can be no guarantee that there will be a correla-
tion between price movements in the hedging vehicle and in the portfolio secu-
rities being hedged. An incorrect correlation could result in a loss on both
the hedged securities in a Fund and the hedging vehicle so that the portfolio
return might have been greater had hedging not been attempted. There can be no
assurance that a liquid market will exist at a time when a Fund seeks to close
out a futures contract or a futures option position. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single day; once the daily limit has been reached on a particu-
lar contract, no trades may be made that day at a price beyond that limit. In
addition, certain of these instruments are relatively new and without a signif-
icant trading history. As a result, there is no assurance that an active sec-
ondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent a Fund from liquidating an unfavorable position and the
Fund would remain obligated to meet margin requirements until the position is
closed.
The Funds will only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. Each Fund will use
financial futures contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of the Commodity
Futures Trading Commission ("CFTC"), or, with respect to positions in financial
futures and related options that do not qualify as "bona fide hedging" posi-
tions, will enter such non-hedging positions only to the extent that aggregate
initial margin deposits plus premiums paid by it for open futures option posi-
tions, less the amount by which any such positions are "in-the-money," would
not exceed 5% of the Fund's total assets.
SWAP AGREEMENTS The Income Funds (other than the Tax Exempt and Money Market
Funds) may enter into interest rate, index and currency exchange rate swap
agreements for purposes of attempting to obtain a particular desired return at
a lower cost to the Fund than if the Fund had invested directly in an instru-
ment that yielded that desired return. Swap agreements are two-party contracts
entered into primarily by institutional investors for periods ranging from a
few weeks to more than one year. In a standard "swap" transaction, two parties
agree to exchange the returns (or differentials in rates of return) earned or
realized on particular predetermined investments or instruments. The gross re-
turns to be exchanged or "swapped" between the parties are calculated with re-
spect to a "notional amount," i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a particu-
lar foreign currency, or in a "basket" of securities representing a particular
index. Commonly used swap agreements include interest rate caps, under which,
in return for a premium, one party agrees to make payments to the other to the
extent that interest rates exceed a specified rate, or "cap"; interest rate
floors, under which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates fall below a specified level, or
"floor"; and interest rate collars, under which a party simultaneously sells a
cap and purchases a floor (or vice versa) in an attempt to protect itself
against interest rate movements exceeding given minimum or maximum levels.
<PAGE>
40 PIMCO Advisors Funds
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The "notional amount" of the swap agreement is only a fictional basis on which
to calculate the obligations which the parties to a swap agreement have agreed
to exchange. Most swap agreements entered into by a Fund would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's obligations (or rights) under a swap agreement will generally be equal
only to the net amount to be paid or received under the agreement based on the
relative values of the positions described in the swap contract (the "net
amount"). A Fund's obligations under a swap agreement will be accrued daily
(offset against amounts owed to the Fund) and any accrued but unpaid net
amounts owed to a swap counterparty will be covered by the maintenance of a
segregated account consisting of cash, U.S. Government securities, or high
grade debt obligations, to avoid any potential leveraging of the Fund's portfo-
lio. A Fund will not enter into a swap agreement with any single party if the
net amount owed or to be received under existing contracts with that party (to-
gether with all other securities of that issuer) would exceed 5% of the Fund's
total assets.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the sub-adviser's ability to predict cor-
rectly whether certain types of investments are likely to produce greater re-
turns than other investments. Because they are two-party contracts, they may
only be closed out with the swap counterparty. Because swap contracts may have
terms of greater than seven days, swap agreements are generally considered by
the SEC to be illiquid. Moreover, a Fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. A sub-adviser will cause a Fund to
enter into swap agreements only with counterparties that would be eligible for
consideration as repurchase agreement counterparties under the Funds' repur-
chase agreement guidelines. Certain restrictions imposed on the Funds by the
Internal Revenue Code may limit the Funds' ability to use swap agreements. The
swaps market is a relatively new market and is largely unregulated. It is pos-
sible that developments in the swaps market, including potential government
regulation, could adversely affect a Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.
CREDIT RATINGS AND NRSROS
Credit ratings are assigned to many issues of fixed-income, convertible and
preferred equity securities by rating agencies referred to in this Prospectus
as NRSROs. Although ratings assigned by NRSROs are relative and subjective,
such ratings reflect the assessment of the NRSRO at the time of issuance of the
issuer's ability, or the economic viability of the special revenue source, with
respect to the timely payment of interest and the repayment of principal in ac-
cordance with the terms of the obligation.
The use of credit ratings as the sole method of evaluating securities can in-
volve certain risks. For example, while credit ratings evaluate the safety of
principal and interest payments, they do not address the market risk of securi-
ties. Also, the NRSROs undertake no obligation to update their ratings of secu-
rities to reflect events that may occur after a security has obtained a rating.
The Manager and the sub-advisers do not rely solely on credit ratings when se-
lecting securities for the Funds and conduct their own analysis of issuer
credit quality. If an NRSRO changes the rating of a security already contained
in a Fund's portfolio, that Fund may retain the security if the Manager or the
relevant sub-adviser deems it is in the best interest of the Fund.
As used in this Prospectus, securities rated below "investment grade" are secu-
rities that are not rated in one of the four highest rating categories by an
NRSRO (i.e., securities rated Ba or below by Moody's or BB or below by S&P) or,
if unrated, determined to be of comparable quality by the Manager or the rele-
vant sub-adviser. Debt or fixed-income securities rated below investment grade
are generally speculative with respect to the issuer's ability to make interest
and principal payments when due. Securities rated in the lowest investment
grade category (i.e., the fourth highest category) are also considered by some
NRSROs to have speculative characteristics.
See Appendix A to this Prospectus for a description of the rating categories
used by some NRSROs.
INVESTMENT IN INVESTMENT COMPANIES
The International and Emerging Markets Funds may invest in securities of other
investment companies, such as closed-end investment management companies or in
pooled accounts or other investment vehicles which invest in foreign markets.
As a shareholder of an investment company, these Funds may indirectly bear
service and other fees which are in addition to the fees the Funds pay their
service providers.
PRECIOUS METALS
The Precious Metals Fund will concentrate its investments in the precious met-
als industry. Prices of pre-
<PAGE>
PIMCO Advisors Funds 41
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cious metals can be expected to respond to changes in rates of inflation and to
perceptions of economic and political instability. The values of companies en-
gaged in precious metal-related activities whose securities are principally
traded on foreign securities exchanges may also be affected by changes in the
exchange rate between the relevant foreign currency and the dollar. Based on
historical experience, the prices of precious metals and of securities of com-
panies engaged in precious metal-related activities may be subject to extreme
fluctuations, reflecting wider economic or political instability or for other
reasons.
LOANS OF PORTFOLIO SECURITIES
Each Fund (except the Money Market and Tax Exempt Funds) may lend its portfolio
securities to broker-dealers under contracts calling for collateral in cash,
U.S. Government securities or other high quality debt securities equal to at
least the market value of the securities loaned (except that the U.S. Govern-
ment Fund will only accept cash and U.S. Government securities as collateral).
Each Fund's performance will continue to reflect changes in the value of the
securities loaned and will also receive either interest, through investment of
cash collateral by the Fund in permissible investments, or a fee, if the col-
lateral is U.S. Government securities. Securities lending involves the risk of
loss of rights in the collateral or delay in recovery of the collateral should
the borrower fail financially. The Funds will normally pay lending fees to the
broker-dealer arranging the loan.
SHORT SALES
Each Fund except the Money Market Fund may from time to time make short sales
involving securities held in the Fund's portfolio or which the Fund has the
right to acquire without the payment of further consideration. The Short-Inter-
mediate Fund may also make short sales of other securities, but in such case
will maintain in a segregated account, monitored on a daily basis, cash or U.S.
Government securities at such a level that (1) the segregated amount plus the
amount of any collateral deposited with a broker in connection with the trans-
action at least equals the current market value of the securities sold short
and (2) the segregated amount plus the amount deposited with the broker at
least equals the value of the securities at the time they were sold short.
Short sales expose the Fund to the risk that it will be required to purchase
securities to cover its short position at a time when the securities have ap-
preciated in value, thus resulting in a loss to the Fund.
FORWARD COMMITMENTS, WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS
Each Fund may purchase securities which it is eligible to purchase on a when-
issued basis, may purchase and sell such securities for delayed delivery and
may make contracts to purchase such securities for a fixed price at a future
date beyond normal settlement time (forward commitments). When-issued transac-
tions, delayed delivery purchases and forward commitments involve a risk of
loss if the value of the securities declines prior to the settlement date,
which risk is in addition to the risk of decline in the value of the Fund's
other assets. No income accrues to the purchaser of such securities prior to
delivery.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements with banks and broker-
dealers, which are agreements by which a Fund acquires a security (usually an
obligation of the U.S. Government) for cash and obtains a simultaneous commit-
ment from the seller to repurchase the security at an agreed-upon price and
date. The resale price is in excess of the acquisition price and reflects an
agreed-upon market rate unrelated to the coupon rate on the purchased security.
Such transactions afford an opportunity for the Funds to earn a return on tem-
porarily available cash at no market risk, although there is a risk that the
seller may default in its obligation to pay the agreed-upon sum on the redeliv-
ery date. Such a default may subject the Funds to expenses, delays and risks of
loss.
REVERSE REPURCHASE AGREEMENTS AND OTHER
BORROWINGS
A reverse repurchase agreement is a form of leverage that involves the sale of
a security by a Fund and its agreement to repurchase the instrument at a speci-
fied time and price. To the extent required by the 1940 Act, a Fund will main-
tain a segregated account consisting of cash, U.S. Government securities or
other liquid high-grade debt obligations, maturing not later than the expira-
tion of the reverse repurchase agreement, to cover its obligations under re-
verse repurchase agreements. A Fund also may borrow money for investment pur-
poses subject to any policies of the Fund currently described in this Prospec-
tus or in the Statement of Additional Information. Such a practice will result
in leveraging of a Fund's assets. Leverage will tend to exaggerate the effect
on net asset value of any increase or decrease in the value of a Fund's portfo-
lio and may cause a Fund to liquidate portfolio positions when it would not be
advantageous to do so.
<PAGE>
42 PIMCO Advisors Funds
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ILLIQUID SECURITIES
Each Fund may purchase "illiquid securities," defined as securities which can-
not be disposed of in the ordinary course of business within seven days at ap-
proximately the amount at which the Fund has valued such securities, and which
includes certain securities whose disposition is restricted by the securities
laws. Each Fund (with the exception of the Money Market Fund) may purchase "il-
liquid securities" so long as no more than 15% of that Fund's net assets would
be invested in illiquid securities after giving effect to the purchase. The
Money Market Fund is subject to the same restriction with respect to 10% of its
net assets. Illiquid securities at present are considered to include swap
agreements, repurchase agreements maturing in more than seven days, certain
IO/PO Strips and over-the-counter options to the extent described in the State-
ment of Additional Information. Transactions in illiquid securities may involve
relatively higher transaction costs.
PORTFOLIO TURNOVER
Portfolio turnover is not a limiting factor with respect to investment deci-
sions for the Funds. High portfolio turnover (e.g., over 100%) involves corre-
spondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the relevant Funds. Portfolio turnover rates for all
of the Funds except for the Summit, Emerging Markets and Global Income Funds
are set forth under "Financial Highlights." While it is impossible to predict
with certainty, it is not expected that the annual portfolio turnover rate for
the Summit, Emerging Markets and Global Income Funds will exceed 150%.
CREDIT AND MARKET RISK OF FIXED-INCOME SECURITIES
All fixed-income securities are subject to market risk and credit risk. Market
risk relates to changes in a security's value as a result of changes in inter-
est rates. The value of a Fund's investments in fixed-income securities will
change as the general level of interest rates fluctuate. During periods of
falling interest rates, the value of a Fund's fixed-income securities generally
rise. Conversely, during periods of rising interest rates, the value of a
Fund's fixed-income securities generally decline. Credit risk relates to the
ability of the issuer to make payments of principal and interest.
"FUNDAMENTAL" POLICIES Except for any policy explicitly identified as "funda-
mental," the investment objective and policies of each Fund described in this
Prospectus may be changed without shareholder approval. If there is a change in
a Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial po-
sition and needs.
PERFORMANCE INFORMATION
From time to time the Trust may make available certain information about the
performance of the Class A, Class B and Class C shares of some or all of the
Funds. Information about a Fund's performance is based on that Fund's record to
a recent date and is not intended to indicate future performance. Performance
information is computed separately for each Fund's Class A, Class B and Class C
shares in accordance with the formulas described below. Because Class B and
Class C shares bear the expense of the distribution fee attending the deferred
sales charge (Class B) and asset based sales charge (Class C) alternatives and
certain other expenses, it is expected that, under normal circumstances, the
level of performance of a Fund's Class B and Class C shares will be lower than
that of the Fund's Class A shares.
All Funds other than the Money Market Fund may include the Total Return of each
class of shares in advertisements or other written material. When a Fund adver-
tises its Total Return with respect to its Class A, Class B and Class C shares,
it will be calculated for the past year, the past five years, the past ten
years or the period since the establishment of the Fund. Total Return is mea-
sured by comparing the value of an investment in the class at the beginning of
the relevant period (in the case of Class A shares, giving effect to the maxi-
mum initial sales charge) to the redemption value of the investment in the
class at the end of the period (assuming immediate reinvestment of any divi-
dends or capital gains distributions at net asset value and giving effect to
the deduction of any contingent deferred sales charge which would be payable).
Each of the Global Income, High Income, Total Return Income, Tax Exempt, U.S.
Government, Short-Intermediate and Equity Income Funds may advertise its Yield,
accompanied by its Total Return, with respect to each class. The Yield of a
Fund's Class A, Class B and Class C shares will be computed by dividing the net
investment income per share of each class earned during a recent one-month pe-
riod by the maximum offering price per share of each respective class (reduced
by any undeclared earned income expected to be paid shortly as a dividend) on
the last day of the period.
The Tax Exempt Fund may also advertise the tax equivalent yield of its Class A,
Class B and Class C shares, calculated like Yield as described above except
that, for any given tax bracket, net investment income will be calculated as
the sum of (i) any taxable income of the class plus (ii) the tax exempt income
of the class di-
<PAGE>
PIMCO Advisors Funds 43
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vided by the difference between 1 and the effective federal income tax rates
for taxpayers in that tax bracket.
The Money Market Fund may advertise the Yield and the Effective Yield of its
Class A, Class B and Class C shares. The Yield for each class of the Money Mar-
ket Fund is based upon the income earned by each class of the Fund over a sev-
en-day period and then annualized, i.e., the income earned in the period is as-
sumed to be earned every seven days over a 52-week period and stated as a per-
centage of the investment. Effective Yield for each class is calculated simi-
larly but, when annualized, the income earned by the investment is assumed to
be reinvested in each class of Fund shares and thus compounded over the course
of a 52-week period.
HOW TO BUY SHARES
Shares of each Fund of the Trust are continuously offered through the Trust's
principal underwriter, PIMCO Advisors Distribution Company (the "Distributor"),
and through other firms which have dealer agreements with the Distributor
("participating brokers") or which have agreed to act as introducing brokers
for the Distributor ("introducing brokers"). SHARES OF THE OPPORTUNITY FUND ARE
CURRENTLY NOT OFFERED TO NEW SHAREHOLDERS. SEE "RESTRICTIONS ON SALES OF AND
EXCHANGES FOR SHARES OF THE OPPORTUNITY FUND" BELOW.
There are two ways to purchase shares: either 1) through your dealer or broker
which has a dealer agreement or 2) directly by mailing an Account Application
with payment, as described below under the heading Direct Investment, to the
Distributor (if no dealer is named in the application, the Distributor may act
as dealer).
Each Fund (except the Opportunity Fund) currently offers and sells three clas-
ses of shares (Class A, Class B and Class C). The Opportunity Fund does not of-
fer Class B shares. Shares may be purchased at a price equal to their net asset
value per share next determined after receipt of an order, plus a sales charge
which, at the election of the purchaser, may be imposed either (i) at the time
of the purchase in the case of Class A shares (the "initial sales charge alter-
native"), (ii) on a contingent deferred basis in the case of Class B shares
(the "deferred sales charge alternative") or (iii) by the deduction of an ongo-
ing asset based sales charge in the case of Class C shares (the "asset based
sales charge alternative"). In certain circumstances Class A and Class C shares
are also subject to a contingent deferred sales charge. See "Alternative Pur-
chase Arrangements." Purchase payments for Class B and Class C shares are fully
invested at the net asset value next determined after acceptance of the trade.
Purchase payments for Class A shares, less the applicable sales charge, are in-
vested at the net asset value next determined after acceptance of the trade.
All purchase orders received by the Distributor prior to the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time), on a
regular business day, are processed at that day's offering price. However, or-
ders received by the Distributor from dealers or brokers after the offering
price is determined that day will receive such offering price if the orders
were received by the dealer or broker from its customer prior to such determi-
nation and were transmitted to and received by the Distributor prior to its
close of business that day (normally 5:00 p.m. Eastern time) or, in the case of
certain retirement plans, received by the Distributor prior to 10:00 a.m. East-
ern time on the next business day. Purchase orders received on other than a
regular business day will be executed on the next succeeding regular business
day. The Distributor, in its sole discretion, may accept or reject any order
for purchase of Fund shares. The sale of shares will be suspended during any
period in which the New York Stock Exchange (the "Exchange") is closed for
other than weekends or holidays, or if permitted by the rules of the SEC when
trading on the Exchange is restricted or during an emergency which makes it im-
practicable for the Funds to dispose of their securities or to determine fairly
the value of their net assets, or during any other period permitted by the SEC
for the protection of investors.
Except for purchases through the PIMCO Advisors Auto Invest plan, the PIMCO Ad-
visors Auto Exchange plan and tax-qualified programs referred to below, the
minimum initial investment in the Trust is $1,000 and in any Fund is $250, and
the minimum additional investment is $100 per Fund. For information about
dealer commissions, see "Alternative Purchase Arrangements" below. Persons
selling Fund shares may receive different compensation for selling Class A,
Class B or Class C shares. Normally Trust shares purchased through participat-
ing brokers are held in the investor's account with that broker. No share cer-
tificates will be issued unless specifically requested in writing by an in-
vestor or broker-dealer.
DIRECT INVESTMENT Investors who wish to invest in the Trust directly, rather
than through a participating broker, may do so by opening an account with the
Distributor. To open an account, an investor should complete the Account Appli-
cation included with this Prospectus. All shareholders who open direct accounts
with
<PAGE>
44 PIMCO Advisors Funds
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the Distributor will receive from the Distributor individual confirmations of
each purchase, redemption, dividend reinvestment, exchange or transfer of Trust
shares, including the total number of Trust shares owned as of the confirmation
date except that purchases which result from the reinvestment of daily-accrued
dividends and/or distributions will be confirmed
once each calendar quarter. See "Distributions" below. Information regarding
direct investment or any other features or plans offered by the Trust may be
obtained by calling the Distributor at 800-426-0107 or by calling your broker.
PURCHASE BY MAIL Investors who wish to invest directly may send a check payable
to PIMCO Advisors Distribution Company, along with a completed application form
to:
PIMCO Advisors Distribution Company
P.O. Box 5866
Denver, CO 80217-5866
Purchases are accepted subject to collection of checks at full value and con-
version into federal funds. Payment by a check drawn on any member of the Fed-
eral Reserve System can normally be converted into federal funds within two
business days after receipt of the check. Checks drawn on a non-member bank may
take up to 15 days to convert into federal funds. In all cases, the purchase
price is based on the net asset value next determined after the purchase order
and check are accepted, even though the check may not yet have been converted
into federal funds.
SUBSEQUENT PURCHASES OF SHARES Subsequent purchases can be made as indicated
above by mailing a check with a letter describing the investment or with the
additional investment portion of a confirmation statement. Except for subse-
quent purchases through the PIMCO Advisors Auto Invest plan, the PIMCO Advisors
Auto Exchange plan, tax-qualified programs and PIMCO Advisors Fund Link re-
ferred to below, and except during periods when an Automatic Withdrawal plan is
in effect, the minimum subsequent purchase is $100 in any Fund. All payments
should be made payable to PIMCO Advisors Distribution Company and should
clearly indicate the shareholder's account number. Checks should be mailed to
the address above under "Purchase by Mail."
TAX-QUALIFIED RETIREMENT PLANS The Distributor makes available retirement plan
services and documents for Individual Retirement Accounts (IRAs), for which
First National Bank of Boston serves as trustee. These accounts include Simpli-
fied Employee Pension Plan (SEP) and Salary Reduction Simplified Employee Pen-
sion Plan (SAR/SEP) IRA accounts and prototype documents. In addition, proto-
type documents are available for establishing 403(b)(7) Custodial Accounts with
First National Bank of Boston as custodian. This type of plan is available to
employees of certain non-profit organizations.
The Distributor also makes available prototype documents for establishing Money
Purchase and/or Profit Sharing Plans and 401(k) Retirement Savings Plans.
Investors should call the Distributor at 800-426-0107 for further information
about these plans and should consult with their own tax advisers before estab-
lishing any retirement plan. Investors who maintain their accounts with partic-
ipating brokers should consult their broker about similar types of accounts
that may be offered through the broker. The minimum initial and subsequent in-
vestment in any Fund for tax-qualified plans is $25.
PIMCO ADVISORS AUTO INVEST The PIMCO Advisors Auto Invest plan provides for pe-
riodic investments into the shareholder's account with the Trust by means of
automatic transfers of a designated amount from the shareholder's bank account.
Investments may be made monthly or quarterly, and may be in any amount subject
to a minimum of $50 per month for each Fund in which shares are purchased
through the plan. Further information regarding the PIMCO Advisors Auto Invest
plan is available from the Distributor or participating brokers. You may enroll
by completing the appropriate section on the PIMCO Advisors Funds Account Ap-
plication, or you may obtain an Auto-Invest Application by calling the Distrib-
utor or your broker.
PIMCO ADVISORS AUTO EXCHANGE PIMCO Advisors Auto Exchange plan establishes reg-
ular, periodic exchanges from one Fund to another. The plan provides for regu-
lar investments into a shareholder's account in a specific Fund by means of au-
tomatic exchanges of a designated amount from another Fund account of the same
class of shares and with identical account registration. Exchanges for shares
of the Opportunity Fund are currently restricted. See "Restrictions on Sales of
and Exchanges for Shares of the Opportunity Fund" below.
Exchanges may be made monthly or quarterly, and may be in any amount subject to
a minimum of $50 for each Fund whose shares are purchased through the plan.
Further information regarding the PIMCO Advisors Auto Exchange plan is avail-
able from the Distributor at 800-426-0107 or participating brokers. You may en-
roll by completing an application which may be obtained from the Distributor or
by telephone request at
<PAGE>
PIMCO Advisors Funds 45
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800-426-0107. For more information on exchanges, see "Exchange Privilege".
PIMCO ADVISORS FUND LINK (Does not apply to shares held in broker "street name"
accounts.) PIMCO Advisors Fund Link ("Fund Link") connects your Fund account
with a bank account. Fund Link may be used for subsequent purchases and for re-
demptions and other transactions described under "How to Redeem." Purchase
transactions are effected by electronic funds transfers from the shareholder's
account at a U.S. bank or other financial institution that is an Automated
Clearing House ("ACH") member. Investors may use Fund Link to make subsequent
purchases of shares in amounts from $50 to $10,000. To initiate such purchases,
call 800-852-8457. All such calls will be recorded. Fund Link is normally es-
tablished within 45 days of receipt of an Application by the Transfer Agent.
The minimum investment by Fund Link is $50 per Fund. Shares will be purchased
on the regular business day the Distributor receives the funds through the ACH
system, provided the funds are received before the close of regular trading on
the New York Stock Exchange. If the funds are received after the close of regu-
lar trading, the shares will be purchased on the next regular business day.
Fund Link privileges must be requested on the PIMCO Advisors Funds Account Ap-
plication. To establish Fund Link on an existing account, complete a Fund Link
Application, which is available from the Distributor or your broker, with sig-
natures guaranteed from all shareholders of record for the account. See "Signa-
ture Guarantee" under "General" below. Such privileges apply to each share-
holder of record for the account unless and until the Distributor receives
written instructions from a shareholder of record cancelling such privileges.
Changes of bank account information must be made by completing a new Fund Link
Application signed by all owners of record of the account, with all signatures
guaranteed. The Distributor, the Transfer Agent and the Fund may rely on any
telephone instructions believed to be genuine and will not be responsible to
shareholders for any damage, loss or expenses arising out of such instructions.
The Fund reserves the right to amend, suspend or discontinue Fund Link
privileges at any time without prior notice.
RESTRICTIONS ON SALES OF AND EXCHANGES FOR SHARES OF THE OPPORTUNITY FUND
Shares of the Opportunity Fund are not available for purchase by new investors
in the Fund. Shareholders who owned shares of the Opportunity Fund on December
31, 1992 will still be permitted to purchase additional shares of the Fund for
as long as they continue to own some shares of the Opportunity Fund. Similarly,
participants in any self-directed qualified benefit plan (for example, 401(k),
403(b) and Keogh Plans, but not IRAs or SEP IRAs) that owned Opportunity Fund
shares on March 1, 1993 for any single plan participant will be eligible to di-
rect the purchase of Opportunity Fund shares by their plan account for so long
as the plan continues to own some shares of the Opportunity Fund for any single
plan participant. In the event a shareholder redeems all of his or her shares
of the Opportunity Fund, or all participants in a self-directed qualified bene-
fit plan described above redeem their shares of the Opportunity Fund, such
shareholder and the participants in such plan will no longer be eligible to
purchase shares of the Opportunity Fund.
Shareholders of other Funds are not permitted to exchange any of their shares
for Opportunity Fund shares unless the shareholders are independently eligible
to purchase Opportunity Fund shares because they already owned shares of the
Opportunity Fund on December 31, 1992 (March 1, 1993, in the case of the self-
directed qualified benefit plans described above).
The Trust reserves the right at any time to modify these restrictions, includ-
ing the suspension of all sales of Opportunity Fund shares or the lifting of
restrictions on different classes of investors and/or transactions.
GENERAL
Changes in registration or account privileges may be made in writing to the
transfer agent (the "Transfer Agent"). Signature guarantees may be required.
See Signature Guarantee below.
All correspondence must include the account number and must be sent to:
PIMCO Advisors Distribution Company
P.O. Box 5866
Denver, CO 80217-5866
SIGNATURE GUARANTEE When a signature guarantee is called for, the shareholder
should have "Signature Guaranteed" stamped under his signature and guaranteed
by any of the following entities: U.S. banks, foreign banks having a U.S. cor-
respondent bank, credit unions, savings associations, U.S. registered dealers
and brokers, municipal securities dealers and brokers, government securities
dealers and brokers, national securities exchanges, registered securities asso-
ciations and
<PAGE>
46 PIMCO Advisors Funds
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clearing agencies (each an "Eligible Guarantor Institution"). The Distributor
reserves the right to reject any signature guarantee pursuant to its written
signature guarantee standards or procedures, which may be revised in the future
to permit it to reject signature guarantees from Eligible Guarantor Institu-
tions that do not, based on credit guidelines, satisfy such written standards
or procedures. The Trust may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be given by means of a new
or supplemented Prospectus.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Trust offers investors three classes of shares (Class A, Class B and Class
C) which bear sales charges in different forms and amounts and which bear dif-
ferent levels of expenses. The alternative purchase arrangements are designed
to enable the investor to choose the method of purchasing Fund shares that is
most beneficial to the investor based on all factors to be considered, which
include: the amount and intended length of the investment, the type of Fund
(i.e., Equity vs. Income) and whether the investor intends to exchange shares
for shares of other Funds. Generally, when making an investment decision, in-
vestors should at least consider the anticipated life of an intended investment
in the Funds, the accumulated distribution and servicing fees plus contingent
deferred sales charges on Class B or Class C shares, the initial sales charge
plus accumulated servicing fees on Class A shares (plus a contingent deferred
sales charge in certain circumstances), the possibility that the anticipated
higher return on Class A shares due to the lower ongoing charges will offset
the initial sales charge paid on such shares, the automatic conversion of Class
B shares to Class A shares and the difference in the contingent deferred sales
charges applicable to Class A, B and C shares.
CLASS A: The initial sales charge alternative (Class A) might be preferred by
investors purchasing shares of sufficient aggregate value to qualify for reduc-
tions in the initial sales charge applicable to such shares. Similar reductions
are not available on the contingent deferred sales charge alternative (Class B)
or the asset based sales charge alternative (Class C). Class A shares are sub-
ject to a servicing fee but are not subject to a distribution fee and, accord-
ingly, such shares are expected to pay correspondingly higher dividends on a
per share basis. However, because initial sales charges are deducted at the
time of purchase, not all of the purchase payment for Class A shares is in-
vested initially. Class B and Class C shares might be preferable to investors
who wish to have all purchase payments invested initially, although remaining
subject to higher distribution and servicing fees and, for certain periods, be-
ing subject to a contingent deferred sales charge. An investor who qualifies
for an elimination of the Class A initial sales charge should also consider
whether he or she anticipates redeeming shares in a time period which will sub-
ject such shares to a contingent deferred sales charge as described below. See
"Initial Sales Charge Alternative -- Class A Shares -- Class A Deferred Sales
Charge" below.
CLASS B: Class B shares might be preferred by investors who intend to invest in
the Funds for longer periods and who do not intend to purchase shares of suffi-
cient aggregate value to qualify for sales charge reductions applicable to
Class A shares. Both Class B and Class C shares can be purchased at net asset
value without an initial sales charge. However, unlike Class C shares, Class B
shares convert into Class A shares after the shares have been held for seven
years. After the conversion takes place, the shares will no longer be subject
to a contingent deferred sales charge, and will be subject to the servicing
fees charged for Class A shares which are lower than the distribution and ser-
vicing fees charged on either Class B or Class C shares. See "Deferred Sales
Charge Alternative -- Class B Shares" below.
CLASS C: Class C shares might be preferred by investors who intend to purchase
shares which are not of sufficient aggregate value to qualify for Class A sales
charges of 1% or less and who wish to have all purchase payments invested ini-
tially. Class C shares are preferable to Class B shares for investors who in-
tend to maintain their investment for intermediate periods and therefore may
also be preferable for investors who are unsure of the intended length of their
investment. Unlike Class B shares, Class C shares are not subject to a contin-
gent deferred sales charge after they have been held for one year and are sub-
ject to only a 1% contingent deferred sales charge during the first year. How-
ever, because Class C shares do not convert into Class A shares, Class B shares
are preferable to Class C shares for investors who intend to maintain their in-
vestment in the Funds for long periods. See "Asset Based Sales Charge Alterna-
tive -- Class C Shares" below.
In determining which class of shares to purchase, an investor should always
consider whether any waiver or reduction of a sales charge or a contingent de-
ferred sales charge is available. See generally "Initial Sales Charge Alterna-
tive -- Class A Shares" and "Waiver of Contingent Deferred Sales Charges" be-
low.
<PAGE>
PIMCO Advisors Funds 47
- --------------------------------------------------------------------------------
There is no size limit on purchases of Class A shares. The maximum single pur-
chase of Class B shares accepted is $249,999. The maximum single purchase of
Class C shares accepted is $999,999. The Funds may refuse any order to purchase
shares.
For a description of the Distribution and Servicing Plans and distribution and
servicing fees payable thereunder with respect to Class A, Class B and Class C
shares, see "Distributor and Distribution and Servicing Plans" below.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES The contingent deferred sales
charge applicable to Class A and C shares is currently waived for (i) any par-
tial or complete redemption in connection with a distribution without penalty
under Section 72(t) of the Internal Revenue Code of 1986, as amended (the
"Code") from a retirement plan, including a 403(b)(7) plan or an IRA (a) upon
attaining age 59 1/2, (b) as part of a series of substantially equal periodic
payments, or (c) in the case of an employer sponsored retirement plan, upon
separation from service and attaining age 55; (ii) any partial or complete re-
demption in connection with a qualifying loan or hardship withdrawal from an
employer sponsored retirement plan; (iii) any complete redemption in connection
with a distribution from a qualified employer retirement plan in connection
with termination of employment or termination of the employer's plan and the
transfer to another employer's plan or to an IRA; (iv) any partial or complete
redemption following death or disability (as defined in the Code) of a share-
holder (including one who owns the shares as joint tenant with his or her
spouse) from an account in which the deceased or disabled is named, provided
the redemption is requested within one year of the death or initial determina-
tion of disability; (v) any redemption resulting from a return of an excess
contribution to a qualified employer retirement plan or an IRA; or (vi) certain
periodic redemptions under an Automatic Withdrawal Plan from an account meeting
certain minimum balance requirements, in amounts meeting certain maximums es-
tablished from time to time by the Distributor; (vii) redemptions by Trustees,
officers and employees of the Trust and by directors, officers and employees of
the Distributor and the Manager; (viii) redemptions effected pursuant to a
Fund's right to involuntarily redeem a shareholder's account if the aggregate
net asset value of shares held in such shareholder's account is less than a
minimum account size specified in such Fund's prospectus; (ix) involuntary re-
demptions caused by operation of law; (x) redemption of shares of any Fund that
is combined with another Fund, investment company, or personal holding company
by virtue of a merger, acquisition or other similar reorganization transaction;
(xi) redemptions by a shareholder who is a participant making periodic pur-
chases of not less than $50 through certain employer sponsored savings plans
that are clients of a broker-dealer with which the Distributor has an agreement
with respect to such purchases; or (xii) redemptions effected by trustees or
other fiduciaries who have purchased shares for employer sponsored plans, the
administrator for which has an agreement with the Distributor with respect to
such purchases.
The contingent deferred sales charge applicable to Class B shares is currently
waived for any partial or complete redemption (a) in connection with a distri-
bution without penalty under Section 72(t) of the Code from a 403(b)(7) plan or
an IRA upon attaining age 59 1/2 and (b) following death or disability (as de-
fined in the Code) of a shareholder (including one who owns the shares as joint
tenant with his or her spouse) from an account in which the deceased or disa-
bled is named, provided the redemption is requested within one year of the
death or initial determination of disability.
The Distributor may require documentation prior to waiver of the contingent de-
ferred sales charge for any class including distribution letters, certification
by plan administrators, applicable tax forms, death certificates, physicians
certificates, etc.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
Class A shares are sold at a public offering price equal to their net asset
value per share plus a sales charge, as set forth below. As indicated below un-
der "Class A Deferred Sales Charge," certain investors that purchase $1,000,000
or more of any Fund's Class A shares (and thus pay no initial sales charge) may
be subject to a 1% contingent deferred sales charge if they redeem such shares
during the first 18 months after their purchase.
EQUITY INCOME FUND, VALUE FUND, SUMMIT FUND, GROWTH FUND, TARGET FUND,
DISCOVERY FUND, OPPORTUNITY FUND, INNOVATION FUND, INTERNATIONAL FUND, EMERGING
MARKETS FUND AND PRECIOUS METALS FUND
<TABLE>
<CAPTION>
DISCOUNT OR
SALES COMMISSION
SALES CHARGE TO DEALERS
CHARGE AS % OF AS % OF
AS % OF THE PUBLIC PUBLIC
AMOUNT OF NET AMOUNT OFFERING OFFERING
PURCHASE INVESTED PRICE PRICE
- --------- ---------- ---------- -----------
<S> <C> <C> <C>
$0-$49,999 5.82% 5.50% 4.75%
$50,000-$99,999 4.71% 4.50% 3.75%
$100,000-$249,999 3.90% 3.75% 3.00%
$250,000-$499,999 2.56% 2.50% 2.00%
$500,000-$999,999 1.78% 1.75% 1.50%
$1,000,000+ 0.00%/1/ 0.00%/1/ 0.75%
</TABLE>
<PAGE>
48 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
GLOBAL INCOME FUND, HIGH INCOME FUND, TOTAL RETURN INCOME FUND, TAX EXEMPT FUND
AND U.S. GOVERNMENT FUND
<TABLE>
<CAPTION>
DISCOUNT OR
SALES COMMISSION
SALES CHARGE TO DEALERS
CHARGE AS % OF AS % OF
AS % OF THE PUBLIC PUBLIC
AMOUNT OF NET AMOUNT OFFERING OFFERING
PURCHASE INVESTED PRICE PRICE
- --------- ---------- ---------- -----------
<S> <C> <C> <C>
$0-$49,999 4.99% 4.75% 4.00%
$50,000-$99,999 4.44% 4.25% 3.50%
$100,000-$249,999 3.90% 3.75% 3.00%
$250,000-$499,999 2.56% 2.50% 2.00%
$500,000-$999,999 1.78% 1.75% 1.50%
$1,000,000+ 0.00%/1/ 0.00%/1/ 0.50%
</TABLE>
SHORT-INTERMEDIATE FUND
<TABLE>
<CAPTION>
DISCOUNT OR
SALES COMMISSION
SALES CHARGE TO DEALERS
CHARGE AS % OF AS % OF
AS % OF THE PUBLIC PUBLIC
AMOUNT OF NET AMOUNT OFFERING OFFERING
PURCHASE INVESTED PRICE PRICE
- --------- ---------- ---------- -----------
<S> <C> <C> <C>
$0-$49,999 3.09% 3.00% 2.50%
$50,000-$99,999 2.56% 2.50% 2.00%
$100,000-$249,999 2.04% 2.00% 1.50%
$250,000-$499,999 1.52% 1.50% 1.25%
$500,000-$999,999 1.27% 1.25% 1.00%
$1,000,000+ 0.00%/1/ 000%/1/ 0.50%
</TABLE>
/1/As shown, investors that purchase more than $1,000,000 of any Fund's Class A
shares will not pay any initial sales charge on such purchase. However, except
with regard to purchases of Class A shares of the Money Market Fund, purchasers
of $1,000,000 or more of Class A shares (other than those purchasers described
below under "Sales at Net Asset Value") will be subject to a contingent de-
ferred sales charge of 1% if such shares are redeemed during the first 18
months after such shares are purchased unless such purchaser is eligible for a
waiver of the contingent deferred sales charge as described under "Waiver of
Contingent Deferred Sales Charge" above. See "Class A Deferred Sales Charge"
below.
Except as described below, the Distributor will pay a commission to dealers who
sell amounts of $1,000,000 or more of Class A shares of each of the Equity
Funds, according to the following schedule: 0.75% of the first $2,000,000,
0.50% of amounts from $2,000,001 to $5,000,000 and 0.25% of amounts over
$5,000,000; and for Class A shares of each of the Income Funds except for the
Money Market Fund for which no payment is made, according to the following
schedule: 0.50% of the first $2,000,000 and 0.25% of amounts over $2,000,000.
The Distributor will pay a commission of 0.25% to dealers in connection with
any size purchase of Class A shares by trustees or other fiduciaries purchasing
such shares for certain employer sponsored plans that have at least 300 eligi-
ble participants or at least $3 million in total plan assets and thus are eli-
gible to purchase Class A shares without any initial sales charge as described
below under "Sales at Net Asset Value." The Distributor will not pay any com-
mission to dealers upon the sale of Class A shares to any of the other purchas-
ers described below under "Sales at Net Asset Value."
No initial sales charge applies to purchases of Class A shares of the Money
Market Fund. However, if a shareholder exchanges Class A shares of the Money
Market Fund, for which no sales load was paid at the time of purchase, for
Class A shares of any other Fund, the sales charge shown above for the other
Fund applies at the time of the exchange.
Each Fund receives the entire net asset value of its Class A shares purchased
by investors. The Distributor receives the sales charge shown above less any
applicable discount or commission "reallowed" to participating brokers in the
amounts indicated in the table above. The Distributor may, however, elect to
reallow the entire sales charge to participating brokers for all sales with re-
spect to which orders are placed with the Distributor for any particular Fund
during a particular period. A participating broker who receives a reallowance
of 90% or more of the sales charge may be deemed to be an "underwriter" under
the Securities Act of 1933. During such periods as may from time to time be
designated by the Distributor, the Distributor will pay an additional amount of
up to 0.50% of the purchase price on sales of Class A shares of all or selected
Funds purchased to each participating broker which obtains purchase orders in
amounts exceeding thresholds established from time to time by the Distributor.
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are issued at net asset value and are not subject
to any sales charges.
Under the circumstances described below, investors may be entitled to pay re-
duced sales charges for Class A shares.
COMBINED PURCHASE PRIVILEGE Investors may qualify for a reduced sales charge by
combining purchases of the Class A shares of one or more Funds (other than the
Money Market Fund) into a "single purchase," if the resulting purchase totals
at least $50,000. The term single purchase refers to: (i) a single purchase by
an individual, or concurrent purchases, which in the aggregate are at least
equal to the prescribed amounts, by an individual, his spouse and their chil-
dren under the age of 21 years purchasing Class A shares of the Funds for his,
her or their own account; (ii) a single purchase by a trustee or other fidu-
ciary purchasing shares for a single trust, estate or fiduciary account al-
though more than one beneficiary is involved; or (iii) a single purchase for
the employee benefit plans of a single employer. For further information, con-
sult the Statement of Additional Information or call the Distributor at
800-426-0107 or your broker.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION)
A purchase of additional Class A shares of any Fund (other than the Money Mar-
ket Fund) may qualify for a Cumulative Quantity Discount at the rate applicable
to the discount bracket obtained by adding:
(i) the investor's current purchase;
<PAGE>
PIMCO Advisors Funds 49
- --------------------------------------------------------------------------------
(ii) the value (at the close of business on the day of the current purchase)
of all Class A shares of any Fund (other than the Money Market Fund) held by
the investor computed at the maximum offering price; and
(iii) the value of all shares described in paragraph (ii) owned by another
shareholder eligible to be combined with the investor's purchase into a
"single purchase" as defined above under "Combined Purchase Privilege."
For example, if you owned Class A shares of the High Income Fund worth $25,000
at the current maximum offering price and wished to purchase Class A shares of
the Growth Fund worth an additional $30,000, the sales charge for the $30,000
purchase would be at the 4.50% rate applicable to a single $55,000 purchase of
shares of the Growth Fund, rather than the 5.50% rate.
An investor or participating broker must notify the Distributor whenever a
quantity discount or reduced sales charge is applicable to a purchase and must
provide the Distributor with sufficient information at the time of purchase to
verify that each purchase qualifies for the privilege or discount. Upon such
notification, the investor will receive the lowest applicable sales charge. The
quantity discounts described above may be modified or terminated at any time.
LETTER OF INTENT An investor may also obtain a reduced sales charge by means
of a written Letter of Intent, which expresses an intention to invest not less
than $50,000 within a period of 13 months in Class A shares of any Fund(s)
(other than the Money Market Fund). Each purchase of shares under a Letter of
Intent will be made at the public offering price or prices applicable at the
time of such purchase to a single transaction of the dollar amount indicated in
the Letter. At the investor's option, a Letter of Intent may include purchases
of Class A shares of any Fund (other than the Money Market Fund) made not more
than 90 days prior to the date the Letter of Intent is signed; however, the 13-
month period during which the Letter is in effect will begin on the date of the
earliest purchase to be included and the sales charge on any purchases prior to
the Letter will not be adjusted.
Investors qualifying for the Combined Purchase Privilege described above may
purchase shares of the Funds under a single Letter of Intent. For example, if
at the time you sign a Letter of Intent to invest at least $100,000 in Class A
shares of any Fund (other than the Money Market Fund), you and your spouse each
purchase Class A shares of the Growth Fund worth $30,000 (for a total of
$60,000), it will only be necessary to invest a total of $40,000 during the
following 13 months in Class A shares of any of the Funds (other than the Money
Market Fund) to qualify for the 3.75% sales charge on the total amount being
invested (the sales charge applicable to an investment of $100,000 in any of
the Funds other than the Money Market and Short-Intermediate Funds).
A Letter of Intent is not a binding obligation to purchase the full amount in-
dicated. The minimum initial investment under a Letter of Intent is 5% of such
amount. Shares purchased with the first 5% of such amount will be held in es-
crow (while remaining registered in your name) to secure payment of the higher
sales charge applicable to the shares actually purchased in the event the full
intended amount is not purchased. If the full amount indicated is not pur-
chased, a sufficient amount of such escrowed shares will be involuntarily re-
deemed to pay the additional sales charge applicable to the amount actually
purchased, if necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released.
If you wish to enter into a Letter of Intent in conjunction with your initial
investment in Class A shares of a Fund, you should complete the appropriate
portion of the Account Application included with this Prospectus. If you are a
current Class A shareholder desiring to do so you can obtain a form of Letter
of Intent by contacting the Distributor at 800-426-0107 or any broker partici-
pating in this program.
REINSTATEMENT PRIVILEGE A Class A shareholder who has caused any or all of his
shares (other than Money Market Fund shares that were not acquired by exchang-
ing Class A shares of another Fund) to be redeemed may reinvest all or any por-
tion of the redemption proceeds in Class A shares of any Fund at net asset
value without any sales charge, provided that such reinvestment is made within
90 calendar days after the redemption or repurchase date. Shares are sold to a
reinvesting shareholder at the net asset value next determined as described
above. A reinstatement pursuant to this privilege will not cancel the redemp-
tion transaction and, consequently, any gain or loss so realized may be recog-
nized for federal tax purposes except that no loss may be recognized to the ex-
tent that the proceeds are reinvested in shares of the same Fund within 30
days. The reinstatement privilege may be utilized by a shareholder only once,
irrespective of the number of shares redeemed, except that the privilege may be
utilized without limit in connection with transactions whose
<PAGE>
50 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
sole purpose is to transfer a shareholder's interest in a Fund to his Individ-
ual Retirement Account or other qualified retirement plan account. An investor
may exercise the reinstatement privilege by written request sent to the Dis-
tributor or to the investor's broker.
SALES AT NET ASSET VALUE Each Fund may sell its Class A shares at net asset
value without a sales charge to a) current or retired officers, trustees, di-
rectors or employees of the Trust, the Manager or the Distributor, to a spouse
or child of such person or to any trust, profitsharing or pension plan for the
benefit of any such person, b) current or retired trustees of Cash Accumulation
Trust, another registered investment company for which the Manager acts as in-
vestment adviser, c) current registered representatives and other full-time em-
ployees of participating brokers or such persons' spouses, d) trustees or other
fiduciaries purchasing shares for certain employer sponsored plans that have at
least 300 eligible participants or at least $3 million in total plan assets, e)
trustees or other fiduciaries purchasing shares for certain employer-sponsored
plans, the trustee, fiduciary or administrator for which has an agreement with
the Distributor with respect to such purchases, f) participants investing
through accounts known as "wrap accounts" established with brokers or dealers
approved by the Distributor where such brokers or dealers are paid a single,
inclusive fee for brokerage and investment management services, g) broker-deal-
ers or registered investment advisers affiliated with such broker-dealers with
which the Distributor has an agreement for the use of PIMCO Advisors Funds in
particular investment products for which a fee is charged, and h) trust ac-
counts for which trust companies affiliated with the Trust or the Manager serve
as trustee. As described above, the Distributor will not pay any initial com-
mission to dealers upon the sale of Class A shares to the purchasers described
in this paragraph except for sales to purchasers described under d) and f) in
this paragraph.
In addition, the U.S. Government Fund may also (subject to appropriate documen-
tation) sell its Class A shares without a sales charge where the amount in-
vested represents proceeds of a redemption from a mutual fund not distributed
by PIMCO Advisors Distribution Company if such redemption occurred no more than
60 days prior to the purchase of the Fund's Class A shares and the shareholder
either (i) paid an initial sales charge on the redeemed shares (or was entitled
to a waiver of the initial sales charge) or (ii) was at some time subject to a
deferred sales charge with respect to the redemption proceeds, whether or not a
deferred sales charge was in fact paid.
CLASS A DEFERRED SALES CHARGE For all Funds except the Money Market Fund, in-
vestors who purchase $1,000,000 or more of Class A shares (and, thus, purchase
such shares without any initial sales charge) may be subject to a 1% contingent
deferred sales charge (the "Class A CDSC") if such shares are redeemed within
18 months of their purchase. The Class A CDSC does not apply to investors pur-
chasing $1,000,000 or more of any Fund's Class A shares if such investors are
otherwise eligible to purchase Class A shares without any sales charge because
they are described under "Sales at Net Asset Value" above.
For purchases subject to the Class A CDSC, a 1% CDSC will apply for any redemp-
tion of such Class A shares that occurs within 18 months of their purchase. No
CDSC will be imposed if the shares redeemed have been acquired through the re-
investment of dividends or capital gains distributions or if the amount re-
deemed is derived from increases in the value of the account above the amount
of purchase payments subject to the CDSC. In determining whether a CDSC is pay-
able, it is assumed that Class A shares acquired through the reinvestment of
dividends and distributions are redeemed first, and thereafter that Class A
shares that have been held by an investor for the longest period of time are
redeemed first.
The Class A CDSC does not apply to Class A shares of the Money Market Fund but,
if Money Market Fund Class A shares are purchased in a transaction that, for
any other Fund, would be subject to the CDSC (i.e., a purchase of $1,000,000 or
more) and are subsequently exchanged for Class A shares of any other Fund, a
Class A CDSC will apply to the shares of the Fund acquired by exchange for a
period of 18 months from the date of the exchange.
The Class A CDSC is currently waived in connection with certain redemptions as
described above under "Alternative Purchase Arrangements -- Waiver of Contin-
gent Deferred Sales Charge."
For more information about the Class A CDSC, call the Distributor at 800-426-
0107.
PARTICIPATING BROKERS Investment dealers and other financial intermediaries
provide varying arrangements for their clients to purchase and redeem Fund
shares. Some may establish higher minimum investment requirements than set
forth above. Firms may arrange with their clients for other investment or ad-
ministrative services and may independently establish and charge additional
amounts to their clients for such services, which charges would reduce clients'
return. Firms
<PAGE>
PIMCO Advisors Funds 51
- --------------------------------------------------------------------------------
also may hold Fund shares in nominee or street name as agent for and on behalf
of their customers. In such instances, the Trust's transfer agent will have no
information with respect to or control over accounts of specific shareholders.
Such shareholders may obtain access to their accounts and information about
their accounts only from their broker. In addition, certain privileges with re-
spect to the purchase and redemption of shares or the reinvestment of dividends
may not be available through such firms. Some firms may participate in a pro-
gram allowing them access to their clients' accounts for servicing including,
without limitation, transfers of registration and dividend payee changes; and
may perform functions such as generation of confirmation statements and dis-
bursement of cash dividends. This Prospectus should be read in connection with
such firms' material regarding their fees and services.
DEFERRED SALES CHARGE ALTERNATIVE --
CLASS B SHARES
Class B shares are sold at their current net asset value without any initial
sales charge. The full amount of an investor's purchase payment will be in-
vested in shares of the Fund(s) selected. A contingent deferred sales charge
("CDSC") will be imposed on Class B shares (including Money Market Fund shares)
if an investor redeems an amount which causes the current value of the invest-
or's account for a Fund to fall below the total dollar amount of purchase pay-
ments subject to the CDSC, except that no CDSC is imposed if the shares re-
deemed have been acquired through the reinvestment of dividends or capital
gains distributions or if the amount redeemed is derived from increases in the
value of the account above the amount of purchase payments subject to the CDSC.
Initial purchases of Class B shares of the Short-Intermediate Fund are suitable
only as a temporary investment for investors who expect to exchange such shares
into Class B shares of another Fund within a short time after purchase. Invest-
ors who expect to hold shares of the Short-Intermediate Fund for longer periods
should purchase Class A or Class C shares.
Class B shares of the Money Market Fund are not offered for initial purchases
but may be obtained through exchanges of Class B shares of other Funds. See
"Exchange Privilege" below.
Class B shares are not available for purchase by employer sponsored retirement
plans.
Whether a CDSC is imposed and the amount of the CDSC will depend on the number
of years since the investor made a purchase payment from which an amount is be-
ing redeemed. Purchases are subject to the CDSC according to the following
schedule:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
- ---------------------------------------------------------- ---------------------
<S> <C>
First..................................................... 5
Second.................................................... 4
Third..................................................... 3
Fourth.................................................... 3
Fifth..................................................... 2
Sixth..................................................... 1
Seventh................................................... 0
Eighth.................................................... *
</TABLE>
* Class B shares convert into Class A shares as described below.
In determining whether a CDSC is payable, it is assumed that the purchase pay-
ment from which a redemption is made is the earliest purchase payment from
which a redemption or exchange has not already been fully effected.
In determining whether an amount is available for redemption without incurring
a CDSC, the purchase payments made for all Class B shares in the shareholder's
account with the particular Fund are aggregated, and the current value of all
such shares is aggregated. Any CDSC imposed on a redemption of Class B shares
is paid to the Distributor.
Class B shares are subject to higher distribution fees than Class A shares for
a fixed period after their purchase, after which they automatically convert to
Class A shares and are no longer subject to such higher distribution fees.
Class B shares of each Fund automatically convert into Class A shares after
they have been held for seven years.
For sales of Class B shares made and services rendered to Class B shareholders,
the Distributor intends to make payments to participating brokers, at the time
a shareholder purchases Class B shares, of 4% of the purchase amount for each
of the Funds. During such periods as may from time to time be designated by the
Distributor, the Distributor will pay selected participating brokers an addi-
tional amount of up to 0.50% of the purchase price on sales of Class B shares
of all or selected Funds purchased to each participating broker which obtains
purchase orders in amounts exceeding thresholds established from time to time
by the Distributor.
The Class B CDSC is currently waived in connection with certain redemptions as
described above under""Alternative Purchase Arrangements -- Waiver of Contin-
gent Deferred Sales Charges."
For more information about the Class B CDSC, call the Distributor at 800-426-
0107.
<PAGE>
52 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
ASSET BASED SALES CHARGE ALTERNATIVE --
CLASS C SHARES
Class C shares are sold at their current net asset value without any initial
sales charge. A CDSC is imposed on Class C shares (including Money Market Fund
shares) if an investor redeems an amount which causes the current value of the
investor's account for a Fund to fall below the total dollar amount of purchase
payments subject to the CDSC, except that no CDSC is imposed if the shares re-
deemed have been acquired through the reinvestment of dividends or capital
gains distributions or if the amount redeemed is derived from increases in the
value of the account above the amount of purchase payments subject to the CDSC.
All of an investor's purchase payments are invested in shares of the Fund(s)
selected.
Whether a CDSC is imposed and the amount of the CDSC will depend on the number
of years since the investor made a purchase payment from which an amount is be-
ing redeemed and the date such purchase payment was made. Purchases are subject
to the CDSC according to the following schedules:
Purchase payments made on or after July 1, 1991:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
------------------- ---------------------
<S> <C>
First........... 1
Thereafter...... 0
</TABLE>
Purchase payments made before July 1, 1991:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
------------------- ---------------------
<S> <C>
Fifth........... 2
Sixth and fol-
lowing......... O
</TABLE>
In determining whether a CDSC is payable, it is assumed that the purchase pay-
ment from which the redemption is made is the earliest purchase payment (from
which a redemption or exchange has not already been effected). If the earliest
purchase from which a redemption has not yet been effected was made on or after
July 1, 1991 and within 12 months before the redemption, then a CDSC at the
rate of 1% will be imposed. If the earliest purchase payment from which a re-
demption has not yet been effected was made before July 1, 1991, then a CDSC of
2% may be imposed, in accordance with the table above.
The following examples will illustrate the operation of the CDSC:
(1) Assume that an individual opens an account and makes a purchase payment
of $10,000 after July 1, 1991 for Class C shares of a Fund and that six
months later the value of the investor's account for that Fund has grown
through investment performance and reinvestment of distributions to $11,000.
The investor then may redeem up to $1,000 from that Fund ($11,000 minus
$10,000) without incurring a CDSC. If the investor should redeem $3,000, a
CDSC would be imposed on $2,000 of the redemption (the amount by which the
investor's account for the Fund was reduced below the amount of the purchase
payment). At the rate of 1%, the CDSC would be $20.
(2) Assume that the same individual in example (1) above had, in addition to
the purchase payment on or after July 1, 1991, also made a purchase payment
of $10,000 before July 1, 1991, and 4 1/2 years before the redemption. Assume
that the value of the $20,000 combined investment has grown to $21,000. As in
example (1) above, the investor may redeem $1,000 without incurring a CDSC.
If the investor redeemed $3,000, the $2,000 subject to a CDSC would be as-
sumed to have come from the purchase payment made before July 1, 1991, which
is in its fifth year since purchase. Therefore, the charge would be at the 2%
rate, according to the CDSC schedule which was in effect at the time of that
purchase payment. The total charge would be $40.
In determining whether an amount is available for redemption without incurring
a CDSC, the purchase payments made for all Class C shares in the shareholder's
account with the particular Fund are aggregated, and the current value of all
such shares is aggregated. Any CDSC imposed on a redemption of Class C shares
is paid to the Distributor.
Unlike Class B shares, Class C shares do not automatically convert to any other
class of shares of the Funds.
Except as described below, for sales of Class C shares made and services ren-
dered to Class C shareholders, the Distributor expects to make payments to par-
ticipating brokers, at the time the shareholder purchases Class C shares, of
1.00% (representing 0.75% distribution fees and 0.25% servicing fees) of the
purchase amount for all Funds except the Short-Intermediate Fund for which the
expected payment is 0.75% (representing 0.50% distribution fees and 0.25% ser-
vicing fees) and the Money Market Fund for which no payment is expected to be
made. For sales of Class C shares made to participants making periodic pur-
chases of not less than $50 through certain employer sponsored savings plans
which are clients of a broker-dealer with which the Distributor has an agree-
ment with respect to such purchases, no payments are made at the time of pur-
chase. At the time shares of the Money Market Fund on which no commission has
been paid are
<PAGE>
PIMCO Advisors Funds 53
- --------------------------------------------------------------------------------
exchanged for shares of another Fund, the Distributor intends to make the pay-
ments to participating brokers that are described above applicable to that
other Fund. During such periods as may from time to time be designated by the
Distributor, the Distributor will pay an additional amount of up to 0.50% of
the purchase price on sales of Class C shares of all or selected Funds pur-
chased to each participating broker which obtains purchase orders in amounts
exceeding thresholds established from time to time by the Distributor.
The Class C CDSC is currently waived in connection with certain redemptions as
described above under "Alternative Purchase Arrangements -- Waiver of Contin-
gent Deferred Sales Charges."
For more information about the Class C CDSC, contact the Distributor at 800-
426-0107.
EXCHANGE PRIVILEGE
Except with respect to exchanges for shares of the Opportunity Fund which cur-
rently are subject to certain restrictions, a shareholder may exchange Class A,
Class B and Class C shares of any Fund for the same Class of shares of any
other Fund in an account with identical registration on the basis of their re-
spective net asset values (except that a sales charge will apply on exchanges
of Class A shares of the Money Market Fund on which no sales load was paid at
the time of purchase). For information on restrictions applicable to exchanges
of shares for shares of the Opportunity Fund, see "How To Buy Shares -- Re-
strictions on Sales of and Exchanges for Shares of the Opportunity Fund" above.
Class A shares of the Money Market Fund may be exchanged for Class A shares of
any other Fund, but the usual sales charges applicable to investments in such
other Fund apply on shares for which no sales load was paid at the time of pur-
chase. There are currently no exchange fees or charges. Except with respect to
tax-qualified programs and exchanges effected through the PIMCO Advisors Auto
Exchange plan, exchanges are subject to the $250 minimum initial purchase re-
quirement for each Fund. An exchange will constitute a taxable sale for federal
income tax purposes.
Investors who maintain their account with the Distributor may exchange shares
by a written exchange request sent to PIMCO Advisors Distribution Company, P.O.
Box 5866, Denver, CO 80217-5866 or, unless the investor has specifically de-
clined telephone exchange privileges on the Account Application or elected in
writing not to utilize telephone exchanges, by a telephone request to the
Transfer Agent at 800-852-8457. The Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and may be li-
able for any losses due to unauthorized or fraudulent instructions if it fails
to employ such procedures. The Trust will require a form of personal identifi-
cation prior to acting on a caller's telephone instructions, will provide writ-
ten confirmations of such transactions and will record telephone instructions.
Exchange forms are available from the Distributor at 800-426-0107 and may be
used if there will be no change in the registered name or address of the share-
holder. Changes in registration information or account privileges may be made
in writing to the Transfer Agent, Shareholder Services, Inc., P.O. Box 5866,
Denver, Colorado 80217-5866, or by use of forms which are available from the
Distributor. A signature guarantee is required. See "Signature Guarantee" under
"General." Telephone exchanges may be made between 9:00 a.m. Eastern time and
the close of regular trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time) on any day the Exchange is open (generally weekdays other than
normal holidays). The Trust reserves the right to refuse exchange purchases if,
in the judgment of the Manager, the purchase would adversely affect the Fund
and its shareholders. In particular, a pattern of exchanges characteristic of
"market-timing" strategies may be deemed by the Manager to be detrimental to
the Fund. Although the Trust has no current intention of terminating or modify-
ing the exchange privilege, it reserves the right to do so at any time. Except
as otherwise permitted by SEC regulations, the Trust will give 60 days' advance
notice to shareholders of any termination or material modification of the ex-
change privilege. For further information about exchange privileges, contact
your participating broker or call the Transfer Agent at 800-426-0107.
With respect to Class B and Class C shares, or Class A shares subject to a
CDSC, if less than all of an investment is exchanged out of a Fund, any portion
of the investment attributable to capital appreciation and/or reinvested divi-
dends or capital gains distributions will be exchanged first, and thereafter
any portions exchanged will be from the earliest investment made in the Fund
from which the exchange was made. Share- holders should take into account the
effect of any exchange on the applicability of any CDSC that may be imposed
upon any subsequent redemption. Although the Class A CDSC does not apply to
Class A shares of the Money Market Fund, if Money Market Fund Class A shares
purchased in a transaction that would other-wise be subject to the Class A CDSC
(i.e. most purchases of $1,000,000 or more) are subsequently exchanged for
Class A shares of any other Fund, a
<PAGE>
54 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Class A CDSC will apply to the shares of the Fund acquired by exchange for a
period of 18 months from the date of the exchange. See "Initial Sales Charge
Alternative -- Class A Shares -- Class A Deferred Sales Charge" above.
AUTO EXCHANGE Investors may also select the PIMCO Advisors Auto Exchange plan
which establishes automatic periodic exchanges. For further information on
automatic exchanges see "PIMCO Advisors Auto Exchange" under "How to Buy
Shares."
HOW TO REDEEM
Shares may be redeemed through a participating broker, by telephone, by submit-
ting a written redemption request directly to the Transfer Agent (for non-bro-
ker accounts) or through an Automatic Withdrawal Plan or PIMCO Advisors Fund
Link. In the event a shareholder redeems all of his or her shares of the Oppor-
tunity Fund after December 31, 1992, or all participants in certain self-di-
rected qualified benefit plans redeem their shares of the Opportunity Fund af-
ter March 31, 1993, such shareholder and the participants in such plans will no
longer be eligible to purchase shares of the Opportunity Fund. See "How to Buy
Shares --Restrictions on Sales of and Exchanges for Shares of the Opportunity
Fund."
A CDSC may apply to a redemption of Class A, Class B or Class C shares. See
"Alternative Purchase Arrangements" above. Shares are redeemed at their net as-
set value next determined after a proper redemption request has been received,
less any applicable CDSC. There is no charge by the Distributor (other than an
applicable CDSC) with respect to a redemption; however, a participating broker
who processes a redemption for an investor may charge customary commissions for
its services. Dealers and other financial services firms are obligated to
transmit orders promptly. Requests for redemption received by dealers or other
firms prior to the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on a regular business day and received by the
Distributor prior to the close of the Distributor's business day will be con-
firmed at the net asset value effective as of the closing of the Exchange on
that day, less any applicable CDSC.
DIRECT REDEMPTION A shareholder's original Account Application permits the
shareholder to redeem by written request and by telephone (unless the share-
holder specifically elects not to utilize telephone redemptions) and to elect
one or more of the additional redemption procedures described below. A share-
holder may change the instructions indicated on his original Account Applica-
tion, or may request additional redemption options, only by transmitting a
written direction to the Transfer Agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
Redemption proceeds will normally be mailed to the redeeming shareholder within
seven days or, in the case of wire transfer or Fund Link redemptions, sent to
the designated bank account within one business day. Fund Link redemptions may
be received by the bank on the second or third business day. In cases where
shares have recently been purchased by personal check, redemption proceeds may
be withheld until the check has been collected, which may take up to 15 days.
To avoid such withholding, investors should purchase shares by certified or
bank check or by wire transfer.
WRITTEN REQUESTS (Does not apply to shares held in broker "street name" ac-
counts.) To redeem shares in writing (whether or not represented by certifi-
cates), a shareholder must send the following items to the Fund's Transfer
Agent, Shareholder Services, Inc., P.O. Box 5866, Denver, Colorado 80217-5866:
(1) a written request for redemption signed by all registered owners exactly as
the account is registered on the Transfer Agent's records, including fiduciary
titles, if any, and specifying the account number and the dollar amount or num-
ber of shares to be redeemed; (2) for certain redemptions described below, a
guarantee of all signatures on the written request or on the share certificate
or accompanying stock power, if required, as described under "Signature Guaran-
tee"; (3) any share certificates issued for any of the shares to be redeemed
(see "Certificated Shares" below); and (4) any additional documents which may
be required by the Transfer Agent for redemption by corporations, partnerships
or other organizations, executors, administrators, trustees, custodians or
guardians, or if the redemption is requested by anyone other than the share-
holder(s) of record. Transfers of shares are subject to the same requirements.
A signature guarantee is not required for redemptions of $50,000 or less, re-
quested by and payable to all shareholders of record for the account, to be
sent to the address of record for that account. To avoid delay in redemption or
transfer, shareholders having any questions about these requirements should
contact the Transfer Agent in writing or by calling 1-800-426-0107 before sub-
mitting a request. REDEMPTION OR TRANSFER REQUESTS WILL NOT BE HONORED UNTIL
ALL REQUIRED DOCUMENTS IN THE PROPER FORM HAVE BEEN RECEIVED BY THE TRANSFER
AGENT.
<PAGE>
PIMCO Advisors Funds 55
- --------------------------------------------------------------------------------
If the proceeds of the redemption (i) exceed $50,000, (ii) are to be paid to a
person other than the record owner, (iii) are to be sent to an address other
than the address of the account on the Transfer Agent's records, or (iv) are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request and on the certificates, if any, or stock power must be
guaranteed as described above, except that the Distributor may waive the signa-
ture guarantee requirement for redemptions up to $2,500 by a trustee of a qual-
ified retirement plan, the administrator for which has an agreement with the
Distributor.
TELEPHONE REDEMPTIONS (Does not apply to shares held in broker "street name"
accounts.) The Trust accepts telephone requests for redemption of
uncertificated shares for amounts up to $50,000 within any 7 calendar day peri-
od, except for investors who have specifically declined telephone redemption
privileges on the Account Application or elected in writing not to utilize tel-
ephone redemptions. The proceeds of a telephone redemption will be sent to the
record shareholder at his record address. Changes in account information must
be made in a written authorization with a signature guarantee. See "Signature
Guarantee" under "General." Telephone redemptions will not be accepted during
the 30-day period following any change in an account's record address.
By completing an Account Application, an investor agrees that the Trust, the
Distributor and the Transfer Agent shall not be liable for any loss incurred by
the investor by reason of the Trust accepting unauthorized telephone redemption
requests for his account if the Trust reasonably believes the instructions to
be genuine. Thus, shareholders risk possible losses in the event of a telephone
redemption not authorized by them. The Trust may accept telephone redemption
instructions from any person identifying himself as the owner of an account or
the owner's broker where the owner has not declined in writing to utilize this
service. The Trust will employ reasonable procedures to confirm that instruc-
tions communicated by telephone are genuine, and may be liable for any losses
due to unauthorized or fraudulent instructions if it fails to employ such pro-
cedures. The Trust will require a form of personal identification prior to act-
ing on a caller's telephone instructions, will provide written confirmations of
such transactions and will record telephone instructions.
A shareholder making a telephone redemption should call the Transfer Agent at
800-852-8457 and state (i) the name of the shareholder as it appears on the
Transfer Agent's records, (ii) his account number with the Trust, (iii) the
amount to be withdrawn and (iv) the name of the person requesting the redemp-
tion. Usually the proceeds are sent to the investor on the next Trust business
day after the redemption is effected, provided the redemption request is re-
ceived prior to the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) that day. If the redemption request is re-
ceived after the closing of the Exchange, the redemption is effected on the
following Trust business day at that day's net asset value and the proceeds are
usually sent to the investor on the second following Trust business day. The
Trust reserves the right to terminate or modify the telephone redemption serv-
ice at any time. During times of severe disruptions in the securities markets,
the volume of calls may make it difficult to redeem by telephone, in which case
a shareholder may wish to send a written request for redemption as described
under "Written Requests" above. Telephone communications may be recorded by the
Distributor or the Transfer Agent.
FUND LINK REDEMPTIONS (Does not apply to shares held in broker "street name"
accounts.) If a shareholder has established Fund Link, the shareholder may re-
deem shares by telephone and have the redemption proceeds sent to a designated
account at a financial institution. Fund Link is normally established within 45
days of receipt of the Application by the Transfer Agent. To use Fund Link for
redemptions, call the Transfer Agent at 800-852-8457. Subject to the limita-
tions set forth above under "Telephone Redemptions," the Distributor, the Trust
and the Transfer Agent may rely on instructions by any registered owner be-
lieved to be genuine and will not be responsible to any shareholder for any
loss, damage or expense arising out of such instructions. Requests received by
the Transfer Agent prior to the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on a business day will be processed
at the net asset value on that day and the proceeds (less any CDSC) will nor-
mally be sent to the designated bank account on the following business day and
received by the bank on the second or third business day. If the redemption re-
quest is received after the close of regular trading on the Exchange, the re-
demption is effected on the following business day. Shares purchased by check
may not be redeemed through Fund Link until such shares have been owned (i.e.,
paid for) for at least 15 days. Fund Link may not be used to redeem shares held
in certificated form. Changes in bank account information must be made by com-
pleting a new Fund Link Application, signed by all owners of record of the ac-
count, with all signatures guaranteed. See "Signature Guarantee" under "Gener-
al." See "PIMCO Advisors
<PAGE>
56 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Fund Link" under "How to Buy Shares" for information on establishing the Fund
Link privilege. The Trust may terminate the Fund Link program at any time with-
out notice to shareholders.
EXPEDITED WIRE TRANSFER REDEMPTIONS (Does not apply to shares held in broker
"street name" accounts.) If a shareholder has given authorization for expedited
wire redemption, shares can be redeemed and the proceeds sent by federal wire
transfer to a single previously designated bank account. Requests received by
the Trust prior to the close of the Exchange will result in shares being re-
deemed that day at the next determined net asset value (less any CDSC) and nor-
mally the proceeds being sent to the designated bank account the following
business day. The bank must be a member of the Federal Reserve wire system. De-
livery of the proceeds of a wire redemption request may be delayed by the Trust
for up to 7 days if the Distributor deems it appropriate under then current
market conditions. Once authorization is on file, the Trust will honor requests
by any person identifying himself as the owner of an account or the owner's
broker by telephone at 800-852-8457 or by written instructions. The Trust can-
not be responsible for the efficiency of the Federal Reserve wire system or the
shareholder's bank. The Trust does not currently charge for wire transfers. The
shareholder is responsible for any charges imposed by the shareholder's bank.
The minimum amount that may be wired is $2,500. The Trust reserves the right to
change this minimum or to terminate the wire redemption privilege. Shares pur-
chased by check may not be redeemed by wire transfer until such shares have
been owned (i.e., paid for) for at least 15 days. Expedited wire transfer re-
demptions may be authorized by completing a form available from the Distribu-
tor. Wire redemptions may not be used to redeem shares in certificated form. To
change the name of the single bank account designated to receive wire redemp-
tion proceeds, it is necessary to send a written request with signatures guar-
anteed to PIMCO Advisors Distribution Company, P.O. Box 5866, Denver, CO 80217-
5866. See "Signature Guarantee" under "General."
CERTIFICATED SHARES To redeem shares for which certificates have been issued,
the certificates must be mailed to or deposited with the Trust, duly endorsed
or accompanied by a duly endorsed stock power or by a written request for re-
demption. Signatures must be guaranteed as described under "Signature Guaran-
tee." Further documentation may be requested from institutions or fiduciary ac-
counts, such as corporations, custodians (e.g., under the Uniform Gifts to Mi-
nors Act), executors, administrators, trustees or guardians ("institutional ac-
count owners"). The redemption request and stock power must be signed exactly
as the account is registered, including indication of any special capacity of
the registered owner.
AUTOMATIC WITHDRAWAL PLAN
An investor who owns or buys shares of a Fund having a net asset value of
$10,000 or more may open an Automatic Withdrawal plan and have a designated sum
of money (not less than $100 per Fund) paid monthly (or quarterly) to the in-
vestor or another person. Such a plan may be established by completing the ap-
propriate section of the PIMCO Advisors Funds Account Application or you may
obtain an Automatic Withdrawal plan Application from the Distributor or your
broker. If an Automatic Withdrawal Plan is set up after the account is estab-
lished providing for payment to a person other than the record shareholder or
to an address other than the address of record, a signature guarantee is re-
quired. See "Signature Guarantee" under "General." Shares of each class of any
Fund are deposited in a plan account and all distributions are reinvested in
additional shares of that class of the Fund at net asset value. Shares in a
plan account are then redeemed at net asset value (less any applicable CDSC) to
make each withdrawal payment. Any applicable CDSC may be waived for certain re-
demptions under an Automatic Withdrawal plan. See "Waiver of Contingent De-
ferred Sales Charges" under "Alternative Purchase Agreements" above.
Redemptions for the purpose of withdrawals are ordinarily made on the business
day preceding the day of payment at that day's closing net asset value and
checks are mailed on the day of payment selected by the shareholder. The Trans-
fer Agent may accelerate the redemption and check mailing date by one day to
avoid weekend delays. Payment will be made to any person the investor desig-
nates; however, if the shares are registered in the name of a trustee or other
fiduciary, payment will be made only to the fiduciary, except in the case of a
profit-sharing or pension plan where payment will be made to the designee. As
withdrawal payments may include a return of principal, they cannot be consid-
ered a guaranteed annuity or actual yield of income to the investor. The re-
demption of shares in connection with an Automatic Withdrawal plan may result
in a gain or loss for tax purposes. Continued withdrawals in excess of income
will reduce and possibly exhaust invested principal, especially in the event of
a market decline. The maintenance of an Automatic Withdrawal plan concurrently
with purchases of additional shares of the Fund would be disadvantageous to the
investor because of the CDSC that may become payable
<PAGE>
PIMCO Advisors Funds 57
- --------------------------------------------------------------------------------
on such withdrawals in the case of Class A, Class B or Class C shares and be-
cause of the initial sales charge in the case of Class A shares. For this rea-
son, the minimum investment accepted for a Fund while an Automatic Withdrawal
plan is in effect for that Fund is $1,000, and an investor may not maintain a
plan for the accumulation of shares of the Fund (other than through reinvest-
ment of distributions) and an Automatic Withdrawal plan at the same time. The
cost of administering the Automatic Withdrawal plans for the benefit of those
shareholders participating in them is borne by the Trust as an expense of all
shareholders. The Trust or the Distributor may terminate or change the terms of
the Automatic Withdrawal plan at any time.
Because the Automatic Withdrawal plan may involve invasion of capital, invest-
ors should consider carefully with their own financial advisers whether the
plan and the specified amounts to be withdrawn are appropriate in their circum-
stances. The Trust and the Distributor make no recommendations or representa-
tions in this regard.
DISTRIBUTOR AND DISTRIBUTION AND SERVICING PLANS
PIMCO Advisors Distribution Company (the "Distributor"), a wholly-owned subsid-
iary of the Manager, is the principal underwriter of the Trust's shares and in
that connection makes distribution and servicing payments to participating bro-
kers and servicing payments to certain banks and other financial intermediaries
in connection with the sale of Class B or Class C shares and servicing payments
to participating brokers, certain banks and other financial intermediaries in
connection with the sale of Class A shares. In the case of Class A shares,
these parties are compensated based on the amount of the front-end sales charge
reallowed by the Distributor, except in cases where Class A shares are sold
without a front-end sales charge. In the case of Class B shares, participating
brokers and other financial intermediaries are compensated by an advance of a
sales commission by the Distributor. In the case of Class C shares, part or all
of the first year's distribution and servicing fee is generally paid at the
time of sale. Pursuant to a Distribution Agreement with the Trust with respect
to each Fund's Class A, Class B and Class C shares, the Distributor bears vari-
ous other promotional and sales related expenses, including the cost of print-
ing and mailing prospectuses to persons other than shareholders.
CLASS A SERVICING FEES: As compensation for services rendered and expenses
borne by the Distributor in connection with personal services rendered to Class
A shareholders of the Trust and the maintenance of Class A shareholder ac-
counts, the Trust pays the Distributor servicing fees up to the annual rates
set forth below (calculated as a percentage of each Fund's average daily net
assets attributable to Class A shares):
<TABLE>
<CAPTION>
SERVICING
FUND FEE
- ---- ---------
<S> <C>
Equity Income, Value, Summit, Growth, Target, Discovery, Opportunity,
Innovation, International, Emerging Markets, Precious Metals, Global
Income, High Income, Total Return Income, Tax Exempt, Short-Interme-
diate and U.S. Government........................................... .25%
Money Market*........................................................ .10%
</TABLE>
* Subject to increase by action of the Trust's Trustees to a rate not exceeding
.25% per annum. Also, subject to increase to a rate not exceeding 0.20% if
the Distributor ceases to voluntarily waive any portion of the fee.
CLASS B DISTRIBUTION AND SERVICING FEES: As compensation for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class B shares of each Fund of the Trust (including the Money Market Fund) and
in connection with personal services rendered to Class B shareholders of the
Trust and the maintenance of Class B shareholder accounts, the Trust pays the
Distributor distribution fees and servicing fees up to the annual rates set
forth below (calculated as a percentage of each Fund's average daily net assets
attributable to Class B shares):
<TABLE>
<CAPTION>
DISTRIBUTION SERVICING
FUND FEE FEE
- ---- ------------ ---------
<S> <C> <C>
All Funds................................................ .75% .25%
</TABLE>
CLASS C DISTRIBUTION AND SERVICING FEES: As compensation for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class C shares of the Trust and in connection with personal services rendered
to Class C shareholders of the Trust and the maintenance of Class C shareholder
accounts, the Trust pays the Distributor distribution and servicing fees up to
the annual rates set forth below (calculated as a percentage of each Fund's av-
erage daily net assets attributable to Class C shares):
<TABLE>
<CAPTION>
DISTRIBUTION SERVICING
FUND FEE FEE
- ---- ------------ ---------
<S> <C> <C>
Equity Income, Value, Summit, Growth, Target, Discovery,
Opportunity, Innovation, International, Emerging Mar-
kets, Precious Metals, Global Income, High Income, To-
tal Return Income, Tax Exempt and U.S. Government...... .75% .25%
Short-Intermediate*..................................... .50% .25%
Money Market*........................................... .00% .10%
</TABLE>
* Subject to increase by action of the Trust's Trustees to a rate not exceeding
.75% per annum with respect to the distribution fee for the Short
Intermediate and Money Market Funds, and .25% per annum with respect to the
servicing fee on shares of the Money Market Fund. Also, with respect to the
servicing fee on shares of the Money Market Fund, such fee is subject to
increase to a rate of 0.20% if the Distributor ceases to voluntarily waive
any portion of the fee.
<PAGE>
58 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
The Class A servicing fees and Class B and C distribution and servicing fees
paid to the Distributor are made under Distribution and Servicing Plans adopted
pursuant to Rule 12b-l under the Investment Company Act of 1940 and are of the
type known as "compensation" plans. This means that, although the Trustees of
the Trust are expected to take into account the expenses of the Distributor and
its predecessors in their periodic review of the Distribution and Servicing
Plans, the fees are payable to compensate the Distributor for services rendered
even if the amount paid exceeds the Distributor's expenses.
The distribution fee applicable to Class B and C shares may be spent by the
Distributor on any activities or expenses primarily intended to result in the
sale of Class B or C shares, respectively, including compensation to, and ex-
penses (including overhead and telephone expenses) of, financial consultants or
other employees of the Distributor or of participating or introducing brokers
who engage in distribution of Class B or C shares, printing of prospectuses and
reports for other than existing Class B or C shareholders, advertising and
preparation, printing and distribution of sales literature. The servicing fee,
applicable to all classes of shares of the Trust, may be spent by the Distribu-
tor on personal services rendered to shareholders of the Trust and the mainte-
nance of shareholder accounts, including compensation to, and expenses (includ-
ing telephone and overhead expenses) of, financial consultants or other employ-
ees of the Distributor or participating or introducing brokers, certain banks
and other financial intermediaries who aid in the processing of purchase or re-
demption requests or the processing of dividend payments, who provide informa-
tion periodically to shareholders showing their positions in a Fund's shares,
who forward communications from the Trust to shareholders, who render ongoing
advice concerning the suitability of particular investment opportunities of-
fered by the Trust in light of the shareholders' needs, who respond to inqui-
ries from shareholders relating to such services, or who train personnel in the
provision of such services. Distribution and servicing fees may also be spent
on interest relating to unreimbursed distribution or servicing expenses from
prior years.
Many of the Distributor's sales and servicing efforts involve the Trust as a
whole, so that fees paid by any class of shares of any Fund may indirectly sup-
port sales and servicing efforts relating to the other Funds' shares of the
same class. In reporting its expenses to the Trustees, the Distributor itemizes
expenses that relate to the distribution and/or servicing of a single Fund's
shares, and allocates other expenses among the Funds based on their relative
net assets. Expenses allocated to each Fund are further allocated among its
classes of shares annually based on the relative sales of each class, except
for any expenses that relate only to the sale or servicing of a single class.
The Distributor may make payments to brokers (and with respect to servicing
fees only, to certain banks and other financial intermediaries) of up to the
following percentages annually of the average daily net assets attributable to
shares in the accounts of their customers or clients:
CLASS A SHARES
<TABLE>
<CAPTION>
SERVICING
FEE
---------
<S> <C>
All Funds except the Money Market Fund................................ 0.25%
Money Market Fund..................................................... 0.10%
</TABLE>
CLASS B SHARES
(Payable only with respect to shares outstanding for one year or more)
<TABLE>
<CAPTION>
SERVICING
FEE
---------
<S> <C>
All Funds............................................................. 0.25%
</TABLE>
CLASS C SHARES -- PURCHASED ON OR AFTER JULY 1, 1991
(Payable only with respect to shares outstanding for one year or more except in
the case of shares for which no payment is made to the party at the time of
sale)
<TABLE>
<CAPTION>
SERVICING DISTRIBUTION
FEE FEE
--------- ------------
<S> <C> <C>
All Funds except the Short-Intermediate and Money Mar-
ket Funds............................................. 0.25% 0.65%
Short-Intermediate Fund................................ 0.25% 0.45%
Money Market Fund...................................... 0.10% --
</TABLE>
CLASS C SHARES -- PURCHASED BEFORE JULY 1, 1991
<TABLE>
<CAPTION>
SERVICING
FEE
---------
<S> <C>
All Funds except the Money Market Fund................................ 0.25%
Money Market Fund..................................................... 0.10%
</TABLE>
The Distributor may from time to time pay additional cash bonuses or other in-
centives to selected participating brokers in connection with the sale or ser-
vicing of all classes of shares of the Funds. On some occasions, such bonuses
or incentives may be conditioned upon the sale of a specified minimum dollar
amount of the shares of a Fund and/or all of the Funds together or a particular
class of shares, during a specific period of time. The Distributor currently
expects that such additional bonuses or incentives will not exceed .50% of the
amount of any sale.
If in any year the Distributor's expenses incurred in connection with the dis-
tribution of Class B and C shares and, for all classes of shares, in connection
with the servicing of shareholders and the maintenance of shareholder accounts
exceed the distribution and/or servicing fees paid by the Trust, the Distribu-
tor would recover such excess only if the Distribution and Servic-
<PAGE>
PIMCO Advisors Funds 59
- --------------------------------------------------------------------------------
ing Plan with respect to such class of shares continues to be in effect in some
later year when the distribution and/or servicing fees exceed the Distributor's
expenses. The Trust is not obligated to repay any unreimbursed expenses that
may exist at such time, if any, as the relevant Distribution and Servicing Plan
terminates.
From time to time, expenses of the Trust's principal underwriters incurred in
connection with the sale of Class B and Class C shares and in connection with
the servicing of Class B and Class C shareholders and the maintenance of share-
holder accounts have exceeded the distribution and servicing fees collected by
the Distributor. As of September 30, 1995, such expenses were approximately
$4,191,000 in excess of payments under the Distribution and Servicing Plan with
respect to Class C shares and $2,298,000 in excess of payments under the Dis-
tribution and Servicing Plan with respect to Class B shares. The allocation of
such excess among the Funds as of September 30, 1995 was as follows:
<TABLE>
<CAPTION>
EXCESS EXPENSES
---------------------------------------------
CLASS B* CLASS C
---------------------- ----------------------
(AS PER- (AS PER-
($ IN CENTAGE OF ($ IN CENTAGE OF
THOUSANDS) NET ASSETS) THOUSANDS) NET ASSETS)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Equity Income Fund............... 73 4.1 183 .10
Value Fund....................... 165 4.1 7 .10
Summit Fund...................... N/A N/A N/A N/A
Growth Fund...................... 319 4.1 1,356 .10
Target Fund...................... 314 4.1 820 .10
Discovery Fund................... 450 4.1 21 .10
Opportunity Fund................. 0 0 751 .10
Innovation Fund.................. 270 4.1 57 .10
International Fund............... 21 4.1 266 .10
Emerging Markets Fund N/A N/A N/A N/A
Precious Metals Fund............. 10 4.1 44 .10
Global Income Fund............... N/A N/A N/A N/A
High Income Fund................. 189 4.1 166 .10
Total Return Income Fund 366 4.1 48 .10
Tax Exempt Fund.................. 12 4.1 57 .10
U.S. Government Fund 69 4.1 302 .10
Short-Intermediate Fund 39 4.1 69 .10
Money Market Fund................ 1 4.1 73 .10
</TABLE>
* Class B shares were offered beginning May 22, 1995.
HOW NET ASSET VALUE IS DETERMINED
The net asset values of each class of shares of each Fund of the Trust will be
determined once on each day on which the New York Stock Exchange is open (a
"Business Day"), as of the close of regular trading on the Exchange. Portfolio
securities for which market quotations are readily available are valued at mar-
ket value. Fixed-income securities are valued on the basis of valuations fur-
nished by a pricing service, which are based on a variety of factors, including
market transactions for institutional-size trading units of such securities.
Short-term obligations having remaining maturities of 60 days or less are val-
ued at amortized cost, which reflects market value. The portfolio investments
of the Money Market Fund are valued using the amortized cost method of valua-
tion, in accordance with Rule 2a-7 under the 1940 Act. Exchange-traded options,
futures and options on futures are valued at the settlement price as determined
by the appropriate clearing corporation. All other securities and assets are
valued at their fair value as determined in good faith by the Trustees or by
persons acting at their direction. Each Fund's liabilities are allocated among
its classes. The total of such liabilities allocated to a class plus that
class' distribution and/or servicing fees and any other expenses specially al-
located to that class are then deducted from the class' proportionate interest
in the Fund's assets, and the resulting amount for each class is divided by the
number of shares of that class outstanding to produce the "net asset value" per
share. Under certain circumstances, the per share net asset value of the Class
B and Class C shares of the Funds that do not declare regular income dividends
on a daily basis may be lower than the per share net asset value of the Class A
shares as a result of the daily expense accruals of the distribution fee appli-
cable to the Class B and Class C shares. Generally, for Funds that pay income
dividends, those dividends are expected to differ over time by approximately
the amount of the expense accrual differential between the three classes.
DISTRIBUTIONS
Each Fund pays out as dividends substantially all of its net investment income
(which comes from dividends and interest it receives or is deemed to receive
from its investments) and net realized short-term capital gains. For these pur-
poses and for federal income tax purposes, a portion of the premiums from cer-
tain expired call or put options written by the Fund, net gains from closing
purchase and sale transactions with respect to such options, and net gains from
futures transactions are treated as short-term capital gains. Each Fund dis-
tributes substantially all of its net realized capital gains, if any, after
giving effect to any available capital loss carry-over.
All dividends and/or distributions will be paid in the form of additional
shares of the class of shares of the Fund to which the dividends and/or distri-
butions relate or, at the election of the shareholder, of another Fund
<PAGE>
60 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
of the Trust as described below, at net asset value of such Fund, unless the
shareholder elects to receive cash (either paid to shareholders directly or
credited to their account with their participating broker). Dividends paid by
each Fund with respect to each class of shares are calculated in the same man-
ner and at the same time and will be in the same amount relative to the aggre-
gate net asset value of the shares in each class, except that dividends on
Class B and Class C shares are expected to be lower than dividends on Class A
shares as a result of the distribution fee applicable to Class B and Class C
shares. Currently, the Global Income, High Income, Total Return Income, Tax Ex-
empt, U.S. Government and Short-Intermediate Funds declare dividends each Busi-
ness Day, pay accrued dividends monthly and distribute capital gains annually;
the Equity Income and Value Funds declare and pay dividends quarterly and dis-
tribute capital gains annually; the Summit, Growth, Discovery, Opportunity,
Target, Innovation, International, Emerging Markets and Precious Metals Funds
declare and pay dividends and distribute capital gains annually; and the Money
Market Fund declares dividends each Business Day and pays accrued dividends
monthly. Dividends and capital gains distributions may be declared more or less
frequently in the discretion of the Trustees. There are no charges on rein-
vested dividends.
Shareholders may elect to invest dividends and/or distributions paid by any
Fund in shares of the same class of any other Fund of the Trust at net asset
value. The shareholder must have an account existing in the Fund selected for
investment with the identical registered name and address and must elect this
option on the Account Application, on a form provided for that purpose or by a
telephone request to the Transfer Agent at 800-426-0107. For further informa-
tion on this option, contact your broker or call the Distributor at 800-426-
0107.
TAXES
Each Fund will be treated as a separate taxable entity for federal income tax
purposes. Each Fund plans to distribute substantially all of its net investment
income and net realized short-term capital gains, if any, to its shareholders.
So long as it does so and otherwise satisfies the requirements for being taxed
as a regulated investment company, the Fund itself does not pay federal income
tax on the amounts distributed. Income dividends and capital gains distribu-
tions are taxable as described below. Shareholders will receive an annual
statement detailing federal tax information about dividends and distributions
paid to shareholders during or with respect to the preceding calendar year.
Dividends paid to shareholders by the Tax Exempt Fund which are derived from
interest on Tax Exempt Bonds are "exempt-interest dividends," and shareholders
may exclude such dividends from gross income for federal income tax purposes.
However, if a shareholder receives social security or railroad retirement bene-
fits, the shareholder may be taxed on a portion of those benefits as a result
of receiving tax-exempt income. In addition, certain exempt-interest dividends
could, as discussed below, cause certain shareholders to become subject to the
alternative minimum tax and may increase the alternative minimum tax liability
of shareholders already subject to this tax.
Other dividends and any short-term capital gains distributions of the Funds,
including the Tax Exempt Fund, are taxable to the shareholder as ordinary in-
come. Distributions of any long-term capital gains are taxable to shareholders
as such, regardless of how long a shareholder may have owned shares in the
Fund.
Dividends derived from interest on certain U.S. Government securities may be
exempt from state and local taxes, although interest on mortgage-backed U.S.
Government securities (which may constitute a substantial portion of the U.S.
Government Fund's assets) may not be so exempt. The distributions of "exempt-
interest dividends" paid by the Tax Exempt Fund may be exempt from state and
local taxation when received by a shareholder to the extent that they are de-
rived from interest on Tax Exempt Bonds issued by the state or political subdi-
vision in which such shareholder resides. The federal exemption for "exempt-in-
terest dividends" attributable to Tax Exempt Bonds does not necessarily result
in exemption of such dividends from income for the purpose of state and local
taxes. The Trust will report annually on a state-by-state basis the source of
income the Tax Exempt Fund receives on Tax Exempt Bonds that was paid out as
dividends during the preceding year.
Shareholders should consult their tax advisers as to the possible application
of state and local income tax laws to Trust dividends and capital gain distri-
butions.
If, at the end of its fiscal year, more than 50% of a Fund's total assets is
represented by securities of foreign corporations, such Fund may make an elec-
tion which allows shareholders who are U.S. citizens or U.S. corporations to
claim a foreign tax credit or deduction (but not both) on their U.S. income tax
returns. As a result, the amounts of foreign income taxes paid by such Fund
would be treated as additional income to
<PAGE>
PIMCO Advisors Funds 61
- --------------------------------------------------------------------------------
shareholders of such Fund from non-U.S. sources and as foreign taxes paid by
shareholders of such Fund for purposes of the foreign tax credit. If eligible
for this election, the International and Emerging Markets Funds intend to make
such election. Investors should consult their tax advisers for further informa-
tion relating to the foreign tax credit and deduction, which are subject to
certain restrictions and limitations. Shareholders who are not U.S. citizens or
which are foreign corporations may be subject to substantially different tax
treatment of distributions by the Funds.
The Internal Revenue Code of 1986, as amended (the "Code"), requires all of the
Funds to distribute prior to calendar year-end virtually all the ordinary in-
come of each Fund on a calendar year basis, and to distribute virtually all the
capital gain net income each Fund realizes in the one-year period ending Octo-
ber 31 and has not previously distributed, in order to avoid a 4% excise tax on
undistributed income that would otherwise be imposed on a Fund. It is each
Fund's intention to make distributions sufficient to avoid the excise tax.
The Code also provides that exempt-interest dividends allocable to interest re-
ceived from "private activity bonds" issued after August 7, 1986 will be an
item of tax preference for individual and corporate alternative minimum tax at
the applicable rate for individuals and corporations. Therefore, if the Tax Ex-
empt Fund invests in such private activity bonds, certain of its shareholders
may become subject to the alternative minimum tax on that part of its distribu-
tions to them that are derived from interest income on such bonds and certain
shareholders already subject to such tax may have increased liability therefor.
However, it is the present policy of the Tax Exempt Fund to invest no more than
20% of its assets in such bonds. Other provisions of the Code affect the tax
treatment of distributions from the Tax Exempt Fund for corporations, casualty
insurance companies and financial institutions. In particular, under the Code,
for corporations, alternative minimum taxable income will be increased by a
percentage of the amount by which the corporation's "adjusted current earnings"
(which includes various items of tax-exempt income) exceeds the amount other-
wise determined to be alternative minimum taxable income. Accordingly, an in-
vestment in the Tax Exempt Fund may cause shareholders to be subject to (or re-
sult in an increased liability under) the alternative minimum tax.
Current federal tax law requires the holder of a Treasury or other fixed-income
zero-coupon security to accrue as income each year a portion of the discount at
which the security was purchased, even though the holder receives no interest
payment in cash on the security during the year. In addition, pay-in-kind secu-
rities will give rise to income which is required to be distributed and is tax-
able even though the Fund holding the security receives no interest payment in
cash on the security during the year. Also, a portion of the yield on certain
High Yield Securities (including certain payment-in-kind securities) issued af-
ter July 10, 1987 may be treated as dividends. Accordingly, each Fund that
holds the foregoing kinds of securities may be required to pay out as an income
distribution each year an amount which is greater than the total amount of cash
interest the Fund actually received. Such distributions may be made from the
cash assets of the Fund or by liquidation of portfolio securities, if neces-
sary. The Fund may realize gains or losses from such liquidations. In the event
the Fund realizes net capital gains from such transactions, its shareholders
may receive a larger capital gain distribution, if any, than they would in the
absence of such transactions.
Distributions will be taxable as described above whether received in cash or in
shares through the reinvestment of distributions. A dividend paid to a share-
holder by a Fund in January of a year generally is deemed to have been paid by
the Fund on December 31 of the preceding year, if the dividend was declared and
payable to shareholders of record on a date in October, November or December of
that preceding year.
MANAGEMENT OF THE TRUST
PIMCO Advisors L.P. (the "Manager") is the investment manager of each of the
PIMCO Advisors Funds. Each of the Funds also has a sub-adviser which, under the
supervision of the Manager and the Trust's trustees, directs the investment of
the Fund's assets. Other than the sub-adviser of the Precious Metals Fund, all
of the sub-advisers are affiliates of PIMCO Advisors L.P. In addition to over-
seeing the sub-advisers, the Manager has agreed to manage, supervise and con-
duct the operations of the Funds, furnish office space and equipment, provide
bookkeeping and certain clerical services (excluding services relating to the
determination of net asset value and shareholder accounting services) and to
pay all salaries, fees and expenses of officers and Trustees of the Trust who
are affiliated with the Manager. The Manager has delegated to Pacific Invest-
ment Management Company the responsibility to provide all organizational, ad-
ministrative and other services necessary for the operations of the Funds other
than the investment management services provided by the Manager and the sub-ad-
visers. See "The Administrator" below. Pursuant to the Trust's Agreement and
Declara
<PAGE>
62 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
tion of Trust and By-laws, the Trustees supervise the affairs of the Trust as
conducted by the Manager.
THE MANAGER The Manager provides management and investment advisory services to
other mutual funds, investment accounts and pension plans. As of May 31, 1996,
the Manager and its affiliates managed approximately $ billion of assets.
The Manager is a Delaware limited partnership. The general partner of the Man-
ager, PIMCO Partners, G.P., has two partners: (i) an indirect wholly-owned sub-
sidiary of Pacific Mutual Life Insurance Company; and (ii) PIMCO Partners,
L.L.C. ("LLC"), a limited liability company, all of the interests of which are
held directly by the Managing Directors of Pacific Investment Management Com-
pany who are: William H. Gross, Dean S. Meiling, James F. Muzzy, William F.
Podlich, III, Frank B. Rabinovitch, Brent R. Harris, John L. Hague, William S.
Thompson, Jr., William C. Powers, David H. Edington and Benjamin L. Trosky
(collectively, the "Managing Directors"). PIMCO Partners, G.P. has substan-
tially delegated its management and control of the Manager to an Equity Board
and an Operating Board of the Manager. The activities of the Manager are con-
trolled by its Operating Board except that certain non- routine or extraordi-
nary actions may not be effected by the Operating Board without the approval of
the Manager's Equity Board. The Operating Board has in turn delegated the au-
thority to manage day-to-day operations and policies to an Operating Committee.
Because of the ability to designate a majority of the Members of the Operating
Board, Pacific Investment Management Company and the Managing Directors could
be said to control the Manager, although the Managing Directors disclaim such
authority.
COLUMBUS CIRCLE INVESTORS ("CCI") CCI serves as the sub-adviser of the Equity
Income Fund, Growth Fund, Target Fund, Opportunity Fund, Innovation Fund,
Tax Exempt Fund and Money Market Fund. CCI also advises other mutual funds and
private accounts and is registered as an investment adviser with the SEC. CCI
is a general partnership with the Manager and a wholly-owned subsidiary of the
Manager as its only partners.
At the center of CCI's equity investment strategy is its theory of Positive Mo-
mentum & Positive Surprise. This theory asserts that a good company doing bet-
ter than generally expected will experience a rise in its stock price, and con-
versely, a company falling short of expectations will experience a drop in its
stock price. Based on this theory, CCI attempts to manage the Funds it sub-ad-
vises (except the Tax Exempt and Money Market Funds) with a view to investing
in growing companies that are surprising the market with business results that
are better than anticipated. The investment decisions made by CCI with respect
to these Funds are made by a committee rather than by a single person acting as
portfolio manager. No person is primarily responsible for making recommenda-
tions to that committee.
Norman Seltzer serves as the portfolio manager of the Tax Exempt Fund and the
Money Market Fund.
PACIFIC INVESTMENT MANAGEMENT COMPANY Pacific Investment Management Company
serves as the sub-adviser of the Global Income Fund, High Income Fund, Total
Return Income Fund, U.S. Government Fund and Short-Intermediate Fund. It also
advises other mutual funds and private accounts. Pacific Investment Management
Company is a general partnership with the Manager and a wholly-owned subsidiary
of the Manager as its only partners and is registered as an investment adviser
with the SEC and as a commodity trading advisor with the CFTC. Pacific Invest-
ment Management Company also provides organizational, administrative and other
services to the Funds pursuant to an agreement with the Manager. See "The Ad-
ministrator" below.
Subject to the investment objective and policies of the various Funds it advis-
es, Pacific Investment Management Company's fixed-income investment strategy
attempts to achieve the highest total return for a portfolio. For a description
of this total return strategy, see "Total Return" under "Investment Objectives
and Policies" above. Further, this sub-adviser closely monitors and actively
manages the duration of the portfolios it advises. See "Duration" under "In-
vestment Objectives and Policies" above. In selecting securities for each of
the Funds it advises, Pacific Investment Management Company utilizes economic
forecasting, interest rate anticipation, credit and call risk analysis, foreign
currency exchange rate forecasting, and other security selection techniques.
The proportion of each Fund's assets committed to investment in securities with
particular characteristics such as maturity, type and coupon rate, will vary
based on this sub-adviser's outlook for the U.S. and foreign economies, the fi-
nancial markets, and other factors.
William H. Gross, the portfolio manager of the Total Return Income Fund and a
Managing Director of Pacific Investment Management Company, also oversees the
portfolio managers of the other Funds sub-advised by this sub-adviser. Informa-
tion about the portfolio managers of each of the Funds sub-advised by Pacific
Investment Management Company, including their occupations for the past five
years, is provided below.
<PAGE>
PIMCO Advisors Funds 63
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND PORTFOLIO MANAGER AND BUSINESS EXPERIENCE
---- -----------------------------------------
<C> <S>
Global Income Fund Lee R. Thomas, III, Executive Vice President and Se-
nior International Portfolio Manager, Pacific Invest-
ment Management Company, has managed the Global In-
come Fund since its inception on October 1, 1995. A
fixed-income portfolio manager, Mr. Thomas has also
managed the Global Fund, a series of PIMCO Funds (an
institutional mutual fund), since July 13, 1995.
Prior to joining Pacific Investment Management Compa-
ny, Mr. Thomas was associated with Investcorp, as a
member of the management committee responsible for
global securities and foreign exchange trading. Prior
to Investcorp, he was associated with Goldman Sachs
as an Executive Director in foreign fixed-income.
High Income Fund Benjamin L. Trosky, Managing Director, Pacific In-
vestment Management Company, has managed the High In-
come Fund since November 15, 1994. A fixed-income
portfolio manager, Mr. Trosky has also managed the
High Yield Fund, a series of PIMCO Funds, since its
inception on December 16, 1992.
Total Return Income Fund William H. Gross, Managing Director, Pacific Invest-
ment Management Company, has managed the Total Return
Income Fund since December 22, 1994. A fixed-
income portfolio manager, Mr. Gross has also managed
the Total Return Fund, a series of PIMCO Funds, since
its inception on May 11, 1987.
U.S. Government Fund Frank B. Rabinovitch, Managing Director, Pacific In-
vestment Management Company, has managed the U.S.
Government Fund since November 15, 1994. A fixed-
income portfolio manager, Mr. Rabinovitch has also
managed the Long-Term U.S. Government Fund, a series
of PIMCO Funds, since its inception on July 1, 1991.
Short-Intermediate Fund David H. Edington, Managing Director, Pacific Invest-
ment Management Company, has managed the Short-Inter-
mediate Fund since November 15, 1994. A fixed-income
portfolio manager, Mr. Edington has also managed the
Short-Term Fund, a series of PIMCO Funds, since its
inception on October 7, 1987.
</TABLE>
BLAIRLOGIE CAPITAL MANAGEMENT ("BLAIRLOGIE") serves as the sub-adviser of the
International and Emerging Market Funds. Blairlogie is a limited partnership
formed under the laws of Scotland in 1994 with the Manager and a wholly-owned
subsidiary of the Manager as its general partners.
Blairlogie also advises other mutual funds and private accounts. Blairlogie is
registered as an investment adviser with the SEC. James G.S. Smith is primarily
responsible for the day-to-day management of the International and Emerging
Markets Funds. Mr. Smith is the Chief Investment Officer of Blairlogie and is
responsible for managing an investment team of seven professionals. He previ-
ously served as a senior portfolio manager at Murray Johnstone in Glasgow,
Scotland, responsible for international investment management for North Ameri-
can clients and at Schroder Investment Management in London. Mr. Smith received
his bachelor's degree in Economics from London University and his MBA from Ed-
inburgh University. He is an Associate of the Institute of Investment Manage-
ment and Research.
CADENCE CAPITAL MANAGEMENT ("CADENCE") serves as the sub-adviser to the Summit
and Discovery Funds. Cadence also advises other mutual funds and private ac-
counts. Cadence is a general partnership, with the Manager and a wholly-owned
subsidiary of the Manager as its only partners. Cadence is registered as an in-
vestment adviser with the SEC.
Cadence utilizes a "growth at a price" style of equity management. This means
that Cadence seeks to discover stocks with favorable prospective earnings
growth selling at reasonable valuations. Cadence analyses holdings on a daily
basis for changes in valuation and seeks to keep all of its clients, including
the Summit and Discovery Funds, fully invested.
David B. Breed, William B. Bannick and Peter B. McManus are responsible for the
overall management of the Summit and Discovery Funds along with a team of in-
vestment professionals.
Mr. Breed is the Chief Investment Officer and a founding partner of Cadence,
and has 22 years of investment management experience. He has been the driving
force in developing Cadence's growth-oriented stock screening and selection
process.
Mr. Bannick is a Managing Director of Cadence and has 10 years of investment
management experience.
<PAGE>
64 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
He previously served as Executive Vice President of George D. Bjurman & Associ-
ates and as Supervising Portfolio Manager of Trinity Investment Management Cor-
poration. Mr. Bannick joined Cadence's predecessor in 1992.
Mr. McManus is Director of Mutual Fund Management of Cadence and has 18 years
of experience in the financial industries. Prior to joining Cadence, he served
with Boston Safe Deposit and Trust and Bank of Boston's Private Bank.
NFJ INVESTMENT GROUP ("NFJ") serves as the sub-adviser to the Value Fund. NFJ
also advises other mutual funds and private accounts. NFJ is a general partner-
ship, with the Manager and a wholly-owned subsidiary of the Manager as its only
partners. NFJ is registered as an investment adviser with the SEC.
NFJ is a value-oriented equity manager specializing in constructing diversified
portfolios consisting of stocks with low P/E ratios. NFJ's philosophy is based
on research concerning the performance of low P/E stocks at all capitalization
levels over extended periods. NFJ's investment style seeks diversification
across numerous industry groups to avoid portfolios heavily concentrated in
particular industries. NFJ has also analyzed the correlation of yield to histo-
ric performance and believes that yield is a major component to valuation
assessments.
NFJ's investment decisions with respect to the Value Fund are made on a team
basis, by a committee comprised of the Managing Directors of NFJ, rather than
by a single person acting as portfolio manager. No person is primarily respon-
sible for making recommendations to the team.
VAN ECK ASSOCIATES CORPORATION ("VAN ECK") is an unaffiliated investment ad-
viser which serves as the sub-adviser of the Precious Metals Fund under the su-
pervision of the Manager. Van Eck is a registered investment adviser which, to-
gether with its affiliates, advises other mutual funds and private accounts.
Van Eck is controlled by John C. Van Eck who, along with members of his immedi-
ate family, owns 100% of the stock of Van Eck. Henry J. Bingham, Executive Man-
aging Director of Van Eck and President of the International Investors series
of Van Eck Funds, has served as the portfolio manager of the Precious Metals
Funds since the Fund commenced operations.
MANAGEMENT AND SUB-ADVISER FEES
Under the Management Contracts between the Trust and the Manager relating to
each Fund, the Manager is paid at the percentages shown below of the relevant
Fund's average daily net assets for its services to the Trust and the Fund.
Pursuant to Sub-adviser Agreements between the Manager and each of the sub-
advisers with respect to the Funds advised by each, the Manager pays to each
sub-adviser, out of the fee received by the Manager under the relevant Manage-
ment Contract, the following percentages of the relevant Fund's average daily
net assets as compensation for the services provided by the sub-adviser:
<PAGE>
PIMCO Advisors Funds 65
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGEMENT FEE SUB-ADVISER FEE PAID BY MANAGER
FUND (AS % OF NET ASSETS) SUB-ADVISER (AS % OF NET ASSETS)
- ---- -------------------- ----------- -------------------------------
<S> <C> <C> <C>
Equity Income 0.75% of first $200 million Columbus Circle Investors 0.375% of first $200 million
0.70% of amounts over $200 million 0.350% of amounts over $200 million
Value 0.70% NFJ Investment Group 0.350%
Summit Fund 0.70% of first $200 million Cadence Capital Management 0.350% of first $200 million
0.65% of amounts over $200 million 0.325% of amounts over $200 million
Growth 0.70% of first $200 million Columbus Circle Investors 0.350% of first $200 million
0.65% of amounts over $200 million 0.325% of amounts over $200 million
Target 0.75% of first $200 million Columbus Circle Investors 0.375% of first $200 million
0.70% of amounts over $200 million 0.350% of amounts over $200 million
Discovery 0.75% of first $200 million Cadence Capital Management 0.375% of first $200 million
0.70% of amounts over $200 million 0.350% of amounts over $200 million
Opportunity 0.75% of first $200 million Columbus Circle Investors 0.375% of first $200 million
0.70% of amounts over $200 million 0.350% of amounts over $200 million
Innovation 0.75% of first $200 million Columbus Circle Investors 0.375% of first $200 million
0.70% of amounts over $200 million 0.350% of amounts over $200 million
International 0.80% Blairlogie Capital Management 0.400%
Emerging Markets N/A Blairlogie Capital Management N/A
Precious Metals 0.75% of first $200 million Van Eck Associates Corporation 0.375% of first $200 million
0.70% of amounts over $200 million 0.350% of amounts over $200 million
Global Income 0.70% of first $250 million Pacific Investment Management Company 0.350% of first $250 million
0.60% of amounts over $250 million 0.300% of amounts over $250 million
High Income 0.60% of first $250 million Pacific Investment Management Company 0.250%
0.50% of amounts over $250 million
Total Return In-
come 0.60% of first $250 million Pacific Investment Management Company 0.250%
0.50% of amounts over $250 million
Short-Intermedi-
ate 0.50% of first $250 million Pacific Investment Management Company 0.250%
0.45% of next $250 million
0.40% of amounts over $500 million
U.S. Government 0.60% of first $250 million Pacific Investment Management Company 0.250%
0.50% of amounts over $250 million
Tax Exempt 0.60% Columbus Circle Investors 0.300%
Money Market* 0.50% of first $250 million Columbus Circle Investors 0.250% of first $250 million
0.40% of amounts over $250 million 0.200% of amounts over $250 million
</TABLE>
* As of November 15, 1994, the Manager agreed to voluntarily reduce its
Management Fee to .10% of the Money Market Fund's average daily net assets
until further notice. Absent such undertaking, the advisory fee would be .5O%
of the Fund's average daily net assets.
The Manager previously served as the sole investment adviser (i.e., with no sub-
adviser) to the Equity Income, Growth, Target, Opportunity, High Income, Short-
Intermedi-ate, U.S. Government, Tax Ex-empt and Money Market Funds. For the
fiscal year ended September 30, 1995, the Man-ager was paid the following
percentages of the average daily net assets of the fol-lowing Funds (which were
in operation for the full fiscal year) for advisory services rendered:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND AVERAGE NET ASSETS
---- ------------------
<S> <C>
Equity Income .75%
Growth .66%
Target .71%
Opportunity .71%
International .80%
Precious Metals .75%
High Income .60%
Short-Intermediate .50%
U.S. Government .58%
Tax Exempt .60%
Money Market .16%
</TABLE>
Pursuant to a Sub-adviser Agreement between the Manager and the former sub-ad-
viser to the International Fund, for the period of October 1, 1994 through No-
vember 15, 1994, the Manager paid the former sub-adviser $159,648 or .40% of
the average daily net assets of the International Fund throughout the period.
Pursuant to a Sub-Adviser Agreement between the Manager and Van Eck, for the
fiscal year ended September 30, 1995, the Manager paid Van Eck $217,162 or
.375% of the average daily net assets of the Precious Metals Fund.
The fees payable by the Discovery, Opportunity, Target, Innovation, Equity In-
come, International and Precious Metals Funds are higher than those normally
charged by mutual funds with other investment objectives.
In addition to the fee described above, the Trust pays all expenses not assumed
by the Manager. These
<PAGE>
66 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
expenses include, without limitation, fees and expenses of Trustees who are not
interested persons of the Manager or the Trust, interest charges, taxes, bro-
kerage commissions, expenses of issue or redemption of shares, distribution and
servicing fees pursuant to the Distribution and Servicing Plans, fees and ex-
penses of registering and qualifying the Trust and each class of shares of the
respective Funds for distribution under federal and state laws and regulations,
charges of custodians, auditing and legal expenses, expenses of determining net
asset value of each class of the Trust's shares, reports to shareholders, ex-
penses of meetings of shareholders, expenses of printing and mailing prospec-
tuses, proxy statements and proxies to existing shareholders, and its propor-
tionate share of insurance premiums and professional association dues or as-
sessments. All general Trust expenses are allocated among and charged to the
assets of each class of shares of each Fund on a basis that the Trustees deem
fair and equitable.
THE ADMINISTRATOR. In addition to serving as a sub-adviser, Pacific Investment
Management Company serves as administrator to the Funds pursuant to an Adminis-
tration Agreement with the Manager (and is referred to herein as the "Adminis-
trator" in such capacity). Subject to the general supervision of the Trustees
and the Manager, the Administrator provides, at its own expense, all organiza-
tional, administrative and other services necessary for the operations of the
Funds other than the investment advisory services provided by the Manager and
the sub-advisers as described above. The Manager pays the Administrator a fee
at an annual rate of .0125% of the average daily net assets of each Fund for
its services under the Administration Agreement.
The Administrator provides various clerical, accounting, bookkeeping and inter-
nal audit services for the Funds. The Administrator also coordinates and par-
ticipates in the preparation, filing and distribution to the Funds' sharehold-
ers of proxy materials and annual and semi-annual reports and in the prepara-
tion and filing of the Trust's registration statements and other federal and
state regulatory filings. In addition, the Administrator provides the Trust
with adequate personnel, office space and communications and other facilities
necessary for the Funds' operations and arranges for the provision, at the
Trust's expense, of necessary legal, accounting, custody, transfer agency and
other services for the Funds. For a more detailed description of the services
provided by the Administrator, see "Management of the Trust -- The Administra-
tor" in the Statement of Additional Information.
As described above, the Trust is responsible for any printing, mailing and fil-
ing fee expenses relating to the preparation, filing and distribution of proxy
materials and financial reports to the Funds' shareholders and in the prepara-
tion and filing of the Trust's registration statements and other regulatory
filings.
The Administration Agreement took effect on January 1, 1996 and, unless sooner
terminated, will remain in effect for two years from such date and will con-
tinue thereafter on an annual basis with respect to each Fund. The Administra-
tion Agreement may be terminated at any time on 60 days' written notice by the
Manager to the Administrator or by the Administrator to the Manager. The Admin-
istration Agreement will automatically terminate as to any Fund if and when the
Management Contract between the Manager and the Trust with respect to such Fund
terminates.
DESCRIPTION OF THE TRUST
The Trust was established in 1983 as a business trust under Massachusetts law.
The Trust has an unlimited authorized number of shares of beneficial interest
which may, without shareholder approval, be divided into an unlimited number of
series of such shares which, in turn, may be subdivided into an unlimited num-
ber of classes of shares. The Trust currently consists of eighteen series of
shares (of which one is currently inactive), each series of which represents a
Fund. With the exception of the Global Income Fund, each Fund is a "diversified
company" under the 1940 Act. The Global Income Fund is a "non-diversified com-
pany" under the 1940 Act. Each Fund is further divided into three classes of
shares designated Class A shares, Class B shares and Class C shares. The Class
A, Class B and Class C shares of each Fund represent interests in the assets of
that Fund and have identical dividend, liquidation and other rights and the
same terms and conditions except that expenses related to the distribution and
shareholder servicing of Class A, Class B and Class C shares are borne solely
by such class and each class may, at the Trustees' discretion, also pay a dif-
ferent share of other expenses, not including advisory or custodial fees or
other expenses related to the management of the Trust's assets, if these ex-
penses are actually incurred in a different amount by that class, or if the
class receives services of a different kind or to a different degree than the
other classes. All
<PAGE>
PIMCO Advisors Funds 67
- --------------------------------------------------------------------------------
other expenses are allocated to each class on the basis of the net asset value
of that class in relation to the net asset value of the particular Fund. Class
A, Class B and Class C shares of each Fund have identical voting rights except
that each class of shares has exclusive voting rights on any matter submitted
to shareholders that relates solely to that class, and has separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class. Each class of shares has
exclusive voting rights with respect to matters pertaining to the Distribution
and Servicing Plan applicable to that class. These shares are entitled to vote
at meetings of shareholders. Matters submitted to shareholder vote must be ap-
proved by each Fund separately except (i) when required by the 1940 Act shares
shall be voted together and (ii) when the Trustees have determined that the
matter does not affect all Funds, then only shareholders of the Fund or Funds
affected shall be entitled to vote on the matter. All three classes of shares
of a Fund will vote together, except with respect to the Distribution and Ser-
vicing Plan applicable to a class of shares or when a class vote is required as
specified above or otherwise by the 1940 Act. Shares are freely transferable,
are entitled to dividends as declared by the Trustees and, in liquidation of
the Trust, are entitled to receive the net assets of their Fund, but not of the
other Funds. The Trust does not generally hold annual meetings of shareholders
and will do so only when required by law. Shareholders may remove Trustees from
office by votes cast in person or by proxy at a meeting of shareholders or by
written consent. Such a meeting will be called at the written request of the
holders of 10% of the Trust's outstanding shares.
MAILINGS TO SHAREHOLDERS
To reduce the volume of mail shareholders receive, it is anticipated that only
one copy of most Trust reports, such as the Trust's annual report, will be
mailed to a shareholder's household (same surname, same address). A shareholder
may call (800) 227-7337 if additional shareholder reports are desired.
APPENDIX A
Set forth below is a description of the relevant rating categories used by each
of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corpora-
tion ("S&P"). Other nationally recognized statistical rating organizations
("NRSROs") may also be utilized with regard to portfolio investments for the
Funds. Descriptions of the rating categories used by several of the other
NRSROs are set forth in the Statement of Additional Information.
LONG-TERM DEBT RATINGS (may be assigned, for example, to long-term corporate
and municipal bonds)
MOODY'S (MOODY'S APPLIES NUMERICAL MODIFIERS (1, 2 AND 3) IN EACH RATING CATE-
GORY TO INDICATE THE SECURITIES RANKING WITHIN THE CATEGORY):
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protec-
tive elements may be of greater amplitude or there may be other elements pres-
ent which make the long-term risks appear somewhat larger than in Aaa securi-
ties.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which 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 charac-
terizes bonds in this class.
<PAGE>
68 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
B -- Bonds which are rated B generally lack characteristics of the 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 principalor
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 shortcom-
ings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
S&P (S&P MAY APPLY A PLUS (+) OR A MINUS (-) TO A PARTICULAR RATING CLASSIFICA-
TION TO SHOW RELATIVE STANDING WITHIN THAT CLASSIFICATION):
AAA -- Bonds rated AAA have the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than bonds in higher rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas they normally exhibit 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
bonds in this category than for bonds in higher rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly specu-
lative with respect to the issuer's capacity to pay interest and repay princi-
pal in accordance with the terms of the obligation. While such bonds will
likely have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
CCC -- Bonds rated CCC have a currently identifiable vulnerability to default,
and are 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, they are 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 typically is applied to debt sub- ordinated to senior debt
that is assigned an actual or implied CCC rating.
C -- The rating C typically is applied to debt subordinated to senior debt
which 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.
SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
MOODY'S DESCRIPTION OF ITS THREE HIGHEST SHORT-TERM DEBT RATINGS:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior ca-
pacity for repayment of senior short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by many of the
following characteristics:
--Leading market positions in well-established industries.
--High rates of return on funds employed.
--Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
--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 capac-
ity for repayment of senior short-term debt obligations. This will nor-
mally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alter-
nate liquidity is maintained.
<PAGE>
PIMCO Advisors Funds 69
- --------------------------------------------------------------------------------
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 pro-
nounced. 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.
S&P'S DESCRIPTION OF ITS TWO HIGHEST SHORT-TERM DEBT RATINGS:
A-1 This designation indicates that the degree of safety regarding timely
pay-ment is strong. Those issues determined to have extremely strong
safety characteristics are denoted with a plus sign (+).
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 pay-
ment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS
MOODY'S DESCRIPTION OF ITS TWO HIGHEST SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS:
MIG-1/
VMIG-1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/
VMIG-2
This designation denotes high quality. Mar- gins of protection are ample
although not so large as in the preceding group.
S&P'S DESCRIPTION OF ITS TWO HIGHEST MUNICIPAL NOTE RATINGS:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
<PAGE>
[INTENTIONALLY LEFT BLANK]
<PAGE>
[ART APPEARS HERE]
THE TRUST PIMCO Advisors Funds, 2187 Atlantic Street, Stamford, Connecti-
cut 06902
- --------------------------------------------------------------------------------
MANAGER PIMCO Advisors L.P., 800 Newport Center Drive, Suite 100, New-
port Beach, CA 92660
- --------------------------------------------------------------------------------
ADMINISTRATOR Pacific Investment Management Company, 840 Newport Center Drive,
Suite 360, Newport Beach, CA 92660
- --------------------------------------------------------------------------------
SUB-ADVISERS Columbus Circle Investors, Pacific Investment Management Compa-
ny, Blairlogie Capital Management, Cadence Capital Management,
NFJ Investment Group, Van Eck Associates Corporation
- --------------------------------------------------------------------------------
DISTRIBUTOR PIMCO Advisors Distribution Company, 2187 Atlantic Street, Stam-
ford, Connecticut 06902
- --------------------------------------------------------------------------------
CUSTODIAN The Bank of New York, 48 Wall Street, New York, New York 10005
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
Shareholder Services, Inc, P.O. Box 5866, Denver, Colorado 80217
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.,1301 Avenue of the Americas, New York,
New York 10019
- --------------------------------------------------------------------------------
LEGAL COUNSEL Ropes & Gray, One International Place, Boston, Massachusetts
02110
- --------------------------------------------------------------------------------
For further information about the Trust, call 1-800 426-0107
[PRINTED ON RECYCLED PAPER USING SOY-BASED INKS.]
<PAGE>
<TABLE>
<CAPTION>
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PIMCO ADVISORS FUNDS
PIMCO ACCOUNT APPLICATION
- -----------------------------------------------------------------------------------------------------------------------------------
This application may be used This application may not be MAIL APPLICATION TO:
to purchase Class A, Class B used to establish an IRA. PIMCO ADVISORS DISTRIBUTION COMPANY
or Class C shares and it For an IRA application or P.O. BOX 5866
must be preceded or accompanied for more information, call: DENVER, COLORADO 80217-5866
by the current Fund prospectus. 1-800-426-0107.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Your Account [_] Individual ___________________________________________________________________________________________
Registration First Name Middle Initial Last Name Soc. Sec. No. (for first individual)
[_] Joint Registration ___________________________________________________________________________________________
First Name Middle Initial Last Name
Joint tenancy with rights of survivorship will be presumed unless otherwise specified.
[_] Uniform Gift/ _______________________________________________________________________________________ for
Transfer to Custodian's Name (only one)
Minors
_____________________________________________________________________________________ under
Minor's Name (only one)
Uniform Gift/Transfer to Minors Act of _______________ _______________ ________________
(state) Minor's Soc. Minor's Date of
Sec. No. Birth
[_] Corporation, ___________________________________________________________________________________________
Partnership, Exact Name of Organization/Trustee
Trust
___________________________________________________________________________________________
Exact Name of Trust Date of Trust
___________________________________________________________________________________________
For the Benefit of Tax Identification No.
- -----------------------------------------------------------------------------------------------------------------------------------
( )
2. Your Address, ___________________________________________________________________________________________
Telephone Number Street Address Apt. No. Daytime Telephone
and Employer _________________________________________________________ [_] U.S. Citizen [_] Other______
City State Zip Code
___________________________________________________________________________________________
Name and Address of Employer Occupation
- -----------------------------------------------------------------------------------------------------------------------------------
3. Your Investment Select the Class of shares you are purchasing. See "How to Buy Shares" in the prospectus.
Make checks payable to: PIMCO Advisors Distribution Company
[_] Class A shares (Initial Sales Charge)
[_] Class B shares (Contingent Deferred Sales Charge)
[_] Class C shares (Asset Based Sales Charge)
THE FUNDS YOU WISH TO PURCHASE (MINIMUM INITIAL INVESTMENT $1,000, AT LEAST $250 PER FUND)
[_] Equity Income Fund $ _______________ [_] Global Income Fund $ _____________
[_] Value Fund $ _______________ [_] High Income Fund $ _____________
[_] Summit Fund $ _______________ [_] Total Return Income Fund $ _____________
[_] Growth Fund $ _______________ [_] Tax Exempt Fund $ _____________
[_] Target Fund $ _______________ [_] U.S. Government Fund $ _____________
[_] Discovery Fund $ _______________ [_] Short-Intermediate Fund $ _____________
[_] Innovation Fund $ _______________ [_] Money Market Fund $ _____________
[_] International Fund $ _______________ TOTAL AMOUNT INVESTED $ _____________
[_] Precious Metals Fund $ _______________
Note: The Opportunity Fund is not currently
offered to new shareholders. Money
Market Fund B shares are not available
for initial purchases.
- -----------------------------------------------------------------------------------------------------------------------------------
4. Dividend Choose the way you want your dividend and capital gain distributions paid. Check one box for
and Capital Gain dividends, one box for capital gains. If not specified, dividends and distributions will be
Distributions reinvested in the Fund that pays them.
[_] Dividends [_] Capital Gains Reinvest in the same Fund that pays them
[_] Dividends [_] Capital Gains Reinvest in the following Fund: _________________________
(into established accounts only) Fund Name Account No.
[_] Dividends [_] Capital Gains Deposit in my bank account through Fund Link
(complete Section 6)
[_] Dividends [_] Capital Gains Paid by check [_] To registration address
[_] To third party below:
-------------------------------------------------------------------------------------------
Third Party Name Address
</TABLE>
<PAGE>
<TABLE>
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<S> <C>
5. Telephone You will automatically have certain telephone exchange and re-demption privileges described below for
Privileges-- yourself and your dealer representative unless you decline such privileges by marking one or more of
Exchanges and the boxes below:
Redemptions
I DO NOT want the following transactions to be initiated by telephone:
Exchanges: [_] by myself or any person [_] by my dealer representative
Redemptions: [_] by myself or any person [_] by my dealer representative
If you DO NOT decline the telephone privileges above, PIMCO Advisors Funds may accept telephone
instructions from any person identifying himself as the owner of an account or the owner's dealer
representative provided that PIMCO Advisors Funds follows reasonable procedures and believes the
instructions to be genu-ine, and thus you risk possible losses in the event of a tele-phone request not
authorized by you (See Section 12).
Shares of each Class may only be exchanged for shares of the same Class. The amount of a telephone
redemption shall not ex-ceed $50,000 and the proceeds may be payable only to the share-holder of record
and mailed to the address of record.
- -----------------------------------------------------------------------------------------------------------------------------------
6. Fund Link _______________________________________________
Options Fund Name
A service which "links" [_] PURCHASE PAYMENTS AND REDEMPTIONS
your fund account with Purchase payments and redemptions will be automatically debited or credited to the bank account listed
your bank account to in Section 9 upon written or oral authorization.
conduct a variety of
transactions over the
phone.
Check all options Your dealer representative is automatically authorized to exercise Fund Link privileges unless you check
you want on your below.
account. Check any transaction you DO NOT want your dealer to conduct by Fund Link.
[_] Fund Redemptions via Fund Link [_] Fund Purchases via Fund Link
You must also [_] DISTRIBUTIONS
complete Section 9 Dividend and/or capital gain distributions will be sent to the bank account listed in Section 9 as
of this application. marked below.
[_] Dividends [_] Capital Gains Distributions
[_] AUTO-INVEST -- Please also complete Section 7 of this application.
[_] AUTOMATIC WITHDRAWAL -- Please also complete Section 8 of this application.
- -----------------------------------------------------------------------------------------------------------------------------------
7. Auto- I/We hereby request to automatically invest by check, in the amounts listed below, on or about
Invest the __________________ of each [_] month [_] quarter, in my/our account in the Fund(s) marked below:
(Day of Month)
Authorization Designate the name of the Fund/s and the amount ($50 minimum for each fund selected).
to honor checks
or ACH debits for [_] Class A Shares
automatic investment _____________________ [_] Class B Shares _____________________
in the Funds. Fund Name [_] Class C Shares Amount to Purchase
Also complete [_] Class A Shares
section 9 of _____________________ [_] Class B Shares _____________________
this application. Fund Name [_] Class C Shares Amount to Purchase
[_] Class A Shares
_____________________ [_] Class B Shares _____________________
Fund Name [_] Class C Shares Amount to Purchase
Note: You must have an existing account in the Opportunity Fund to establish Auto-Invest in that Fund.
Auto-Invest is not available for Money Market Fund B shares.
Automatic investments are subject to the following conditions:
. Your account will be charged on or about the date of each investment as shown above.
. The privilege of making investments by Auto-Invest may be revoked by PIMCO Advisors Fund without prior
notice if any check is not paid upon presentation. PIMCO Advisors Funds shall be under no obligation to
notify the undersigned as to the non-payment of any check.
. Auto-Invest may be discontinued by PIMCO Advisors Funds upon thirty (30) days written notice prior to
any investment date or by the undersigned at any time by written notice to PIMCO Advisors Distribution
Company, provided such notice is received at least ten (10) business days prior to the due date of any
investment.
</TABLE>
<PAGE>
<TABLE>
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<S> <C>
8. Automatic I (We) hereby request that you establish a Withdrawal Plan by which I(we) will receive payments
Withdrawal Plan [_] Monthly [_] Quarterly
on ___________________ from ______________________________ for __________________________________________
(Minimum account Day of Month Fund Amount ($100 minimum)
balance $10,000) I (We) would like withdrawals to begin: _______________________. Checks will be mailed on or about the
Day, Month, Year
If withdrawals sent selected day of each month or quarter.
to a bank, also
complete Section 9 Please send the Automatic Withdrawal Plan proceeds to (check one):
of this application. [_] Account registration address [_] Bank account listed in Section 9 [_] Third part payee as follows:
_________________________________________________________________________________________________________
Name
_________________________________________________________________________________________________________
Address City State Zip Code
Withdrawals will be sent to account registration address, or to the bank account in Section 9 below,
unless otherwise specified. If you are authorizing redemption proceeds to be sent to the bank account,
those shares will normally be redeemed three (3) business days prior to the date you have selected to have
your bank account credited. This plan is subject to the terms of the prospectus. PIMCO Advisors
Distribution Company is hereby autho-rized to redeem shares from this account in accordance with the
instructions listed above.
- -----------------------------------------------------------------------------------------------------------------------------------
9. Bank Account Please provide information on the bank you would like to link your PIMCO Advisors Fund account to:
Information Type of Account (Select one):
[_] Checking Account (PLEASE ATTACH A PRE-PRINTED VOIDED CHECK)
[_] Savings Account (PLEASE ATTACH A PRE-PRINTED PERSONALIZED DEPOSIT SLIP WITH YOUR ACCOUNT NUMBER
ENCODED ON IT)
______________________________________________ _________________________________________________________
Bank Account Number Bank Account Name(s) (Print title of your bank account
exactly as it appears on your bank's records)
__________________________________________________________________________________________________________
Bank Name Bank Address Zip Code
______________________________________________ __________________________________________________________
Signature Date Signature (if joint bank account, both must sign) Date
---------------------------------------------------------------------------------------------------------------------
Tape your voided check or deposit slip here
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
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<S> <C>
10. Rights of I own shares in other PIMCO Advisors Funds which may entitle this purchase to have a reduced sales charge
Accumulation under the provisions in the Fund Prospectus. (See "Cumulative Quantity Discount" in the Prospectus.)
(This option __________________________________________________________________________________________________________
available for Existing Account Name Account No.
Class A shares __________________________________________________________________________________________________________
only) Existing Account Name Account No.
__________________________________________________________________________________________________________
Existing Account Name Account No.
- -----------------------------------------------------------------------------------------------------------------------------------
11. Letter of Intent I agree to the Letter of Intent conditions stated in the current Prospectus. I intend to invest, within a
(This option 13-month period beginning on ________ (initial purchase date), in shares of the Fund(s) purchased with this
available for application and one or more of the other Funds listed in Section 3 above, an aggregate amount which,
Class A shares together with the value of shares of any of the Funds owned by me on the initial purchase date, will be at
only) least equal to:
[_] $50,000 [_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000
If no date is specified, the initial purchase date will be the date of this purchase.
- -----------------------------------------------------------------------------------------------------------------------------------
12. Signature and I (we) understand that my (our) account will be automatically subject to certain telephone privileges if
Certification I (we) DO NOT CHECK the appropriate box in Section 5 above and that PIMCO Advisors Funds shall not be
liable for any loss incurred by me (us) by reason of accepting unauthorized telephone requests for my (our)
account provided that PIMCO Advisors Funds follows reasonable procedures and believes the instructions to
be genuine. The undersigned warrant(s) that I (we) have full authority and, if a natural person, I (we) am
(are) of legal age to purchase shares pursuant to this application, have received a current Prospectus and
agree to be bound by all the terms, conditions and account features selected in any and all parts of this
Application and the Prospectus. Further, I (we) understand that I (we) may choose between three share
classes. I (we) am (are) aware of the fee structures for the three share classes and have selected the
class best suited to my (our) investment objectives. I (we) further understand that I (we) may not
exchange from one class to another. Under the penalties of perjury, I certify that: (i) the number shown in
section 1 above is my correct Social Security/Taxpayer Identification Number or I have applied, or will
apply, for such a number and will provide it within sixty (60) days after signing this application [if I
don't supply such number within sixty (60) days, I am subject to withholding tax] and (ii) I am not subject
to backup withholding because the IRS (a) has not notified me that I am subject to backup withholding as a
result of failure to report all interest or dividends, or (b) has rescinded a previously imposed backup
withholding requirement. I am aware that if the Social Security or Tax Identification Number I have
provided is incorrect, I am subject to backup withholding.
If you are subject to backup withholding, please cross out number (ii) above.
SIGN EXACTLY AS ACCOUNT IS TO BE REGISTERED:
_____________________________________________________ ___________________________________________________
Individual Signature Date Signature of Corporate Officer, Date
Trustee, etc. (if applicable)
_____________________________________________________ ___________________________________________________
Joint Registrant Signature (if any) Date Title of Officer, Trustee, etc.
- -----------------------------------------------------------------------------------------------------------------------------------
13. Dealer (Please be sure to complete Representative first name and middle initial.)
Information
_____________________________________________________ ___________________________________________________
Dealer Name Representative's Last Name First Name Middle Initial
Dealer Head Office Address: Representative's Branch Office Address:
_____________________________________________________ ___________________________________________________
Address Address
_____________________________________________________ ___________________________________________________
City State Zip Code City State Zip Code
( ) ( )
_____________________________________________________ _________________________ _______________________
Telephone No. Telephone No. Rep.'s A.E. No.
</TABLE>
<PAGE>
PIMCO ADVISORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
JULY , 1996
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus dated July , 1996, as
supplemented from time to time, and should be read in conjunction therewith. A
copy of the Prospectus may be obtained at no charge from PIMCO Advisors
Distribution Company, 2187 Atlantic Street, Stamford, Connecticut 06902.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
INFORMATION REGARDING FUND INVESTMENTS............................. 1
DERIVATIVES........................................................11
INVESTMENT RESTRICTIONS............................................20
CONTINGENT DEFERRED SALES CHARGE AND INITIAL SALES CHARGE..........24
DISTRIBUTOR AND DISTRIBUTION AND SERVICING PLANS...................25
EXCHANGE PRIVILEGE.................................................29
HOW TO REDEEM......................................................30
HOW NET ASSET VALUE IS DETERMINED..................................30
CALCULATION OF YIELD AND RETURN....................................32
PERFORMANCE COMPARISONS............................................38
DISTRIBUTIONS......................................................47
TAXES..............................................................48
MANAGEMENT OF THE TRUST............................................51
OTHER SERVICES.....................................................59
PORTFOLIO TRANSACTIONS.............................................59
ORGANIZATION AND CAPITALIZATION OF THE TRUST.......................62
CERTAIN OWNERSHIP OF TRUST SHARES..................................63
APPENDIX A.........................................................69
APPENDIX B.........................................................76
FINANCIAL STATEMENTS...............................................77
</TABLE>
<PAGE>
INFORMATION REGARDING FUND INVESTMENTS
--------------------------------------
Debt Securities / High Yield Securities
- ---------------------------------------
Many of the Funds may invest in debt/fixed-income securities of
domestic or foreign issuers that meet minimum ratings criteria set forth for a
Fund, or if unrated, are of comparable quality in the opinion of the Fund's sub-
adviser. A description of the ratings categories used is set forth in Appendix A
to this Statement of Additional Information.
A security is considered to be below "investment grade" quality if it
is either (1) not rated in one of the four highest rating categories by one
of the Nationally Recognized Statistical Rating Organizations ("NRSRO")
(i.e., rated Ba or below by Moody's or BB or below by S&P) or (2) if unrated,
determined by the Manger or relevant sub-adviser to be of comparable quality to
obligations so rated.
Securities rated Baa and BBB are the lowest which are considered
"investment grade" obligations. Moody's describes securities rated Baa as
"medium-grade" obligations; they are "neither highly protected nor poorly
secured... [i]nterest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well." S&P describes securities rated BBB as "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 than in
higher rated categories."
As stated in the Prospectus, many of the Funds may purchase High
Yield Securities (as defined in the Prospectus) rated in either the fifth or
(except for the Tax Exempt Fund) sixth highest rating categories by any NRSRO or
comparable unrated securities, and the Equity Income Fund may purchase High
Yield Securities rated below the sixth highest rating category by any NRSRO or
comparable unrated securities (but will not purchase any security in default on
the date of acquisition). Investment in High Yield Securities generally provides
greater income and increased opportunity for capital appreciation than
investments in higher quality securities, but they also typically entail greater
price volatility and principal and income risk. These High Yield Securities
are regarded as predominantly speculative with respect to the issuer's
continuing ability to meet principal and interest payments. The market for these
securities is relatively new, and many of the outstanding High Yield
Securities have not endured a major business recession. A long-term track record
on default rates, such as that for investment grade corporate bonds, does not
exist for this market. Analysis of the creditworthiness of issuers of High
Yield Securities may be more complex than for issuers of higher quality
debt/fixed-income securities. Each Fund of the Trust that may purchase High
Yield Securities may continue to hold such securities following a decline in
their rating if in the opinion of the Manager or the Fund's sub-adviser, as the
case may be, it would be advantageous to do so. Investments in High Yield
Securities that are eligible for purchase by certain of the Funds, in
particular, by the High Income Fund and Equity Income Fund, are described as
"speculative" by both Moody's and S&P.
High Yield Securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of High Yield Securities have been found to be less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in High Yield Security prices because the
advent of a recession could lessen the ability of a highly leveraged company to
make principal and interest payments on its debt/fixed-income securities. If
an issuer of High Yield Securities defaults, in addition to risking payment of
all or a portion of interest and principal, the Funds may incur additional
expenses to seek recovery. In the case of High Yield Securities structured as
zero-coupon or pay-in-kind securities, their market prices are affected to a
greater extent by interest rate changes, and therefore tend to be more volatile
than securities which pay interest periodically and in cash.
1
<PAGE>
The secondary market on which High Yield Securities are traded may
be less liquid than the market for higher grade securities. Less liquidity in
the secondary trading market could adversely affect the price at which the Funds
could sell a High Yield Security, and could adversely affect the daily net
asset value of the shares. Adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may decrease the values and liquidity of
High Yield Securities especially in a thinly traded market. When secondary
markets for High Yield Securities are less liquid than the market for higher
grade securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is less reliable, objective data available.
The Manager and the sub-advisers will seek to minimize the risks of investing in
all debt/fixed-income securities through diversification, in-depth credit
analysis and attention to current developments in interest rates and market
conditions.
Securities are purchased and sold principally in response to current
assessments of future changes in business conditions and the levels of interest
rates on debt/fixed-income securities of varying maturities, the availability
of new investment opportunities at higher relative yields, and current
evaluations of an issuer's continuing ability to meet its obligations in the
future. The average maturity or duration of the debt/fixed-income securities
in the Fund's portfolio may be varied in response to anticipated changes in
interest rates and to other economic factors, although under normal
circumstances the Fund's debt/fixed-income securities will be primarily those
with more than one year remaining to maturity. Securities may be bought and
sold in anticipation of a decline or a rise in market interest rates. In
addition, a security may be sold and another of comparable quality and maturity
(usually, but not always, of a different issuer) purchased at approximately the
same time to take advantage of what are believed to be short-term differentials
in values or yields.
Participation on Creditors Committees
- -------------------------------------
A Fund may from time to time participate on committees formed by
creditors to negotiate with the management of financially troubled issuers of
securities held by the Fund. Such participation may subject the Fund to expenses
such as legal fees and may make the Fund an "insider" of the issuer for purposes
of the federal securities laws, and therefore may restrict the Fund's ability to
trade in or acquire additional positions in a particular security when it might
otherwise desire to do so. Participation by the Fund on such committees also may
expose the Fund to potential liabilities under the federal bankruptcy laws or
other laws governing the rights of creditors and debtors. The Fund would
participate on such committees only when the Manager and the sub-adviser believe
that such participation is necessary or desirable to enforce the Fund's rights
as a creditor or to protect the value of securities held by the Fund.
Mortgage-Related and Other Asset-Backed Securities
- --------------------------------------------------
Mortgage-related securities are interests in pools of mortgage loans
made to residential home buyers, including mortgage loans made by savings and
loan institutions, mortgage bankers, commercial banks and others. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations (see "Mortgage Pass-
Through Securities"). The Funds may also invest in debt/fixed-income
securities which are secured with collateral consisting of mortgage-related
securities (see "Collateralized Mortgage Obligations"), and in other types of
mortgage-related securities.
MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of mortgage-
related securities differ from other forms of debt/fixed-income securities,
which normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their residential or
commercial mortgage loans, net of any fees paid to the issuer or guarantor of
such securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying property, refinancing or foreclosure,
net of fees or costs which may be incurred. Some mortgage-related securities
(such as securities issued by the Government National Mortgage Association) are
described as "modified pass-through." These securities entitle the holder to
receive all interest and principal payments owed on the mortgage pool, net of
2
<PAGE>
certain fees, at the scheduled payment dates regardless of whether or not the
mortgagor actually makes the payment.
The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a wholly owned
United States Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the United States Government, the timely payment of principal and interest on
securities issued by institutions approved by GNMA (such as savings and loan
institutions, commercial banks and mortgage bankers) and backed by pools of FHA-
insured or guaranteed mortgages.
Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government.
FHLMC was created by Congress in 1970 for the purpose of increasing
the availability of mortgage credit for residential housing. It is a government-
sponsored corporation formerly owned by the twelve Federal Home Loan Banks and
now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("PCS") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCS are not backed by the full faith and
credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Such
issuers may, in addition, be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related
security meets a Fund's investment quality standards. There can be no assurance
that the private insurers or guarantors can meet their obligations under the
insurance policies or guarantee arrangements.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). A CMO is a hybrid between
a mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans, but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.
3
<PAGE>
In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g. A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds
all bear current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid currently. With
some CMOS, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.
FHLMC COLLATERALIZED MORTGAGE OBLIGATIONS. FHLMC CMOs are
debt obligations of FHLMC issued in multiple classes having different maturity
dates which are secured by the pledge of a pool of conventional mortgage loans
purchased by FHLMC. Unlike FHLMC PCS, payments of principal and interest on the
CMOs are made semiannually as opposed to monthly. The amount of principal
payable on each semiannual payment date is determined in accordance with FHLMC's
mandatory sinking fund schedule, which, in turn, is equal to approximately 100%
of FEA prepayment experience applied to the mortgage collateral pool. All
sinking fund payments in the CMOs are allocated to the retirement of the
individual classes of bonds in the order of their stated maturities. Payment of
principal on the mortgage loans in the collateral pool in excess of the amount
of FHLMC's minimum sinking fund obligation for any payment date are paid to the
holders of the CMOs as additional sinking fund payments. Because of the "pass-
through" nature of all principal payments received on the collateral pool in
excess of FHLMC's minimum sinking fund requirement, the rate at which principal
of the CMO is actually repaid is likely to be such that each class of bonds will
be retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage
loans during any semiannual payment period is not sufficient to meet FHLMC's
minimum sinking fund obligation on the next sinking fund payment date, FHLMC
agrees to make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCS. FHLMC has the right to substitute collateral
in the event of delinquencies and/or defaults.
OTHER MORTGAGE-RELATED SECURITIES. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals or stripped mortgage-backed
securities. Other mortgage-related securities may be equity or debt/fixed-
income securities issued by agencies or instrumentalities of the U.S. Government
or by private originators of, or investors in, mortgage loans, including savings
and loan associations, homebuilders, mortgage banks, commercial banks,
investment banks, partnerships, trusts and special purpose entities of the
foregoing.
CMO RESIDUALS. CMO residuals are derivative mortgage securities
issued by agencies or instrumentalities of the U.S. Government or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, homebuilders, mortgage banks, commercial banks, investment banks
and special purpose entities of the foregoing.
The cash flow generated by the mortgage assets underlying a series of
CMOs is applied first to make required payments of principal and interest on the
CMOs and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets.
In particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
interest-only ("IO") class of stripped mortgage-backed securities. See "Other
Mortgage-Related Securities-
4
<PAGE>
Stripped Mortgage-Backed Securities." In addition, if a series of a CMO includes
a class that bears interest at an adjustable rate, the yield to maturity on the
related CMO residual will also be extremely sensitive to changes in the level of
the index upon which interest rate adjustments are based. As described below
with respect to stripped mortgage-backed securities, in certain circumstances a
Fund may fail to recoup fully its initial investment in a CMO residual.
CMO residuals are generally purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers.
The CMO residual market has only very recently developed and CMO residuals
currently may not have the liquidity of other more established securities
trading in other markets. Transactions in CMO residuals are generally completed
only after careful review of the characteristics of the securities in question.
In addition, CMO residuals may or, pursuant to an exemption therefrom, may not
have been registered under the Securities Act of 1933, as amended. CMO
residuals, whether or not registered under such Act, may be subject to certain
restrictions on transferability, and may be deemed "illiquid" and subject to a
Fund's limitations on investment in illiquid securities.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed
securities ("SMBS") are derivative multi-class mortgage securities. SMBS may be
issued by agencies or instrumentalities of the U.S. Government, or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the
interest and most of the principal from the mortgage assets, while the other
class will receive most of the interest and the remainder of the principal. In
the most extreme case, one class will receive all of the interest (the "IO"
class), while the other class will receive all of the principal (the principal-
only or "PO" class) . The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on a Fund's yield to maturity from these
securities. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, a Fund may fail to fully recoup its
initial investment in these securities even if the security is in one of the
highest rating categories.
Although SMBS are purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers, these
securities were only recently developed. As a result, established trading
markets have not yet developed and, accordingly, these securities may be deemed
"illiquid" and subject to a Fund's limitations on investment in illiquid
securities.
DEPOSITARY Receipts
- -------------------
The International, Precious Metals and Emerging Markets Funds may
invest in foreign securities in the form of American Depositary Receipts
(ADR's), European Depositary Receipts (EDR's) or other similar securities
convertible into securities of foreign issuers. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADR's are receipts typically issued by a United States
bank or trust company evidencing ownership of the underlying foreign securities.
EDR's are receipts typically issued by a European bank or trust company
evidencing ownership of the underlying foreign securities. Generally, ADR's, in
registered form, are designed for use in the United States securities markets
and EDR's, in bearer form, are designed for use in European securities markets.
Warrants
- --------
Each of the Global Income, High Income, Total Return Income, Short-
Intermediate, Equity Income, Value, Summit, Growth, Target, Discovery,
Opportunity, Innovation, International, Emerging Markets and Precious
Metals Funds may invest up to 5% of its net assets in warrants or rights (valued
at the lower of cost or market) which entitle the holder to buy equity
securities at a specific price for a specified period of
5
<PAGE>
time, provided that no more than 2% of its net assets are invested in warrants
not listed on the New York or American Stock Exchanges. Each Fund may invest in
warrants or rights acquired by such Fund as part of a unit or attached to
securities at the time of purchase without limitation.
Portfolio Turnover
- ------------------
A change in securities held by a Fund is known as "portfolio turnover"
and almost always involves the payment by the Fund of brokerage commissions or
dealer markup and other transaction costs on the sale of securities as well as
on the reinvestment of the proceeds in other securities. As a result of the
investment policies of the Funds, under certain market conditions their
portfolio turnover may be higher than those of many other investment companies.
It is, however, impossible to predict portfolio turnover in future years. For
purposes of reporting portfolio turnover rates, all securities which at the time
of purchase have maturities of one year or less are excluded, so that it is
expected that the policies of the Money Market Fund will result in a reported
portfolio turnover rate of zero for that Fund, although it is anticipated that,
like other funds with similar portfolios, it will change the securities in its
portfolio frequently. As disclosed in the Prospectus, high portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs, which will be borne directly by the Funds.
Repurchase Agreements
- ---------------------
Each of the Funds may enter into repurchase agreements with domestic
commercial banks or registered broker/dealers with respect to not more than 25%
of its total assets (taken at current value) (20% of total assets in the case of
the Tax Exempt Fund), except that no such limit applies in the case of the Money
Market Fund or as to the other Funds when they are investing for temporary
defensive purposes. A repurchase agreement is a contract under which a Fund
would acquire a security for a relatively short period (usually not more than
one week) subject to the obligation of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the Fund's cost
plus interest). In the case of repurchase agreements with broker-dealers, the
value of the underlying securities (or collateral) will be at least equal at all
times to the total amount of the repurchase obligation, including the interest
factor. The Fund bears a risk of loss in the event that the other party to a
repurchase agreement defaults on its obligations and the Fund is delayed or
prevented from exercising its rights to dispose of the collateral securities.
The Manager and the sub-advisers, as appropriate, will monitor the
creditworthiness of the counterparties.
Securities Loans
- ----------------
With the exception of the U.S. Government and Target Funds, each
Fund may make secured loans of its portfolio securities amounting to no more
than 25% of its total assets (the U.S. Government and Target Funds may make
such loans amounting to no more than 33 1/3% of their total assets). The risks
in lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. However, such loans will be
made only to broker-dealers that are believed by the Manager or the sub-adviser
to be of relatively high credit standing. Securities loans are made to broker-
dealers pursuant to agreements requiring that loans be continuously secured by
collateral in cash, U.S. Government securities or other liquid high grade debt
obligations at least equal at all times to the market value of the securities
lent, provided that such loans made by the U.S. Government Fund will only be
secured by cash and U.S. Government securities. The borrower pays to the lending
Fund an amount equal to any dividends or interest received on the securities
lent. The Fund may invest the cash collateral received in interest-bearing,
short-term securities or receive a fee from the borrower. Although voting rights
or rights to consent with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or
6
<PAGE>
consent to matters materially affecting the investment. The Fund may also call
such loans in order to sell the securities involved.
Forward Commitments and Foreign Currency Transactions
- -----------------------------------------------------
As described in the Prospectus, each Fund may make contracts to
purchase securities for a fixed price at a future date beyond customary
settlement time ("forward commitments") if the Fund either (i) holds, and
maintains until the settlement date in a segregated account, cash, U.S.
Government securities or other liquid high grade debt obligations in an amount
sufficient to meet the purchase price or (ii) enters into an offsetting contract
for the forward sale of securities of equal value that it owns. Each Fund (other
than the Money Market Fund, the Tax Exempt Fund and the U.S. Government Fund)
may enter into forward commitments for the purchase or sale of foreign
currencies. Forward commitments may be considered securities in themselves. They
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, which risk is in addition to the risk of decline
in value of the Fund's other assets. A Fund may dispose of a commitment prior to
settlement and may realize short-term profits or losses upon such disposition.
Many of the Funds may enter into forward foreign currency exchange
contracts or purchase and sell foreign currency options in order to protect
against uncertainty in the level of future foreign exchange rates. Since
investment in foreign securities will usually involve foreign currencies, and
since a Fund may temporarily hold funds in bank deposits in foreign currencies
during the course of investment programs, the value of the assets of a Fund as
measured in United States dollars may be affected by changes in foreign currency
exchange rates and exchange control regulations, and the Fund may incur costs in
connection with conversion between various currencies. The International,
Emerging Markets, Global Income, High Income, Total Return Income and Short-
Intermediate Funds may also use such instruments to shift exposure to foreign
currency fluctuations from one currency to another.
All Funds other than the International, Emerging Markets, Global
Income, High Income, Total Return Income and Short-Intermediate Funds may enter
into forward contracts only under two circumstances. First, when a Fund enters
----
into a contract for the purchase or sale of a security, commodity or Metal-
Indexed Note (see below) denominated in a foreign currency, it may desire to
"lock in" the U.S. dollar price of the security. By entering into a forward
contract for the purchase or sale of the amount of foreign currency involved in
the transactions for a fixed amount of dollars, the Fund may be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date on which the investment is purchased or sold and the
date on which payment is made or received.
Second, when management of the Fund believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio investments denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those investments between the date the forward
contract is entered into and the date it matures.
Of course, the Fund is not required to enter into such transactions
with regard to its foreign currency-denominated securities and will not do so
unless deemed appropriate by the Manager or the sub-adviser. The Funds' ability
to engage in forward contracts may be limited by tax considerations.
When-Issued and Delayed Delivery Transactions
- ---------------------------------------------
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Each Fund may enter into agreements with banks or broker-dealers for
the purchase or sale of securities at an agreed-upon price on a specified future
date. Such agreements might be entered into, for example, when the relevant Fund
anticipates a decline in interest rates and is able to obtain a more
advantageous yield by committing currently to purchase securities to be issued
later. When the Fund purchases securities on a when-issued or delayed delivery
basis, it is required either (i) to create a segregated account with the Fund's
custodian and to maintain in that account cash, U.S. Government securities or
other liquid high grade debt obligations in an amount equal on a daily basis to
the amount of the Fund's when-issued or delayed delivery commitments or (ii) to
enter into an offsetting forward sale of securities it owns equal in value to
those purchased. The Fund will only make commitments to purchase securities on a
when-issued or delayed-delivery basis with the intention of actually acquiring
the securities. However, the Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment strategy.
When the time comes to pay for when-issued or delayed-delivery securities, the
Fund will meet its obligations from then available cash flow or the sale of
securities, or, although it would not normally expect to do so, from the sale of
the when-issued or delayed delivery securities themselves (which may have a
value greater or less than the Fund's payment obligation).
Borrowing
- ---------
Subject to the limitations described under "Investment Restrictions"
in this Statement, a Fund may be permitted to borrow for temporary purposes
and/or for investment purposes. Such a practice will result in leveraging of a
Fund's assets and may cause a Fund to liquidate portfolio positions when it
would not be advantageous to do so. This borrowing may be unsecured. The
Investment Company Act of 1940 (the "1940 Act") requires a Fund to maintain
continuous asset coverage of 300% of the amount borrowed. If the 300% asset
coverage should decline as a result of market fluctuations or other reasons, a
Fund may be required to sell some of its portfolio holdings within three days to
reduce the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
Borrowing will tend to exaggerate the effect on net asset value of any increase
or decrease in the market value of a Fund's portfolio. Money borrowed will be
subject to interest costs which may or may not be recovered by appreciation of
the securities purchased. A Fund also may be required to maintain minimum
average balances in connection with such borrowing or to pay a commitment or
other fee to maintain a line of credit; either of these requirements would
increase the cost of borrowing over the stated interest rate.
Among the forms of borrowing in which some Funds may engage is the
entry into reverse repurchase agreements. Accordingly, a Fund may enter into a
reverse repurchase agreement only to the extent that it is permitted to borrow
in accordance with Fundamental Investment Restricition No. (1) below. A reverse
repurchase agreement involves the sale of a portfolio-eligible security by a
Fund, coupled with its agreement to repurchase the instrument at a specified
time and price. Asset coverage requirements of the 1940 Act require each Fund to
maintain a segregated account with its custodian consisting of cash, U.S.
Government securities or other liquid high grade debt obligations equal (on a
daily mark-to-market basis) to its obligations under reverse repurchase
agreements with broker-dealers (but not banks). Note, however, that all Funds
with the exception of the High Income, U.S. Government and Short-Intermediate
Funds may only enter into reverse repurchase agreements with (i.e., may only
borrow from) banks. See Fundamental Investment Restriciton No. (1) below.
Reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. To the extent
that a Fund collateralizes its obligations under a reverse repurchase agreement,
the asset coverage requirements of the 1940 Act described above will not apply.
Some Funds also may enter into "dollar rolls," such as "mortgage dollar
rolls," which are similar to reverse purchase agreements in certain respects.
In a "dollar role" transaction a Fund sells a mortgage-related security (such as
a GNMA security) to a dealer and simultaneously agrees to repurchase a similar
security (but not the same security) in the future at a pre-determined price. A
"dollar roll" can be viewed, like a reverse repurchase agreement, as a
collateralized borrowing in which a Fund pledges a mortgage-related
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<PAGE>
security to a dealer to obtain cash. Unlike in the case of reverse repurchase
agreements, the dealer with which a Fund enters into a dollar roll transaction
is not obligated to return the same securities as those originally sold by the
Fund, but only securities which are "substantially identical." To be considered
"substantially identical," the securities returned to a Fund generally must: (1)
be collateralized by the same types of underlying mortgages; (2) be issued by
the same agency and be part of the same program; (3) have a similar original
stated maturity; (4) have identical net coupon rates; (5) have similar market
yields (and therefore price) ; and (6) satisfy "good delivery" requirements,
meaning that the aggregate principal amounts of the securities delivered and
received back must be within 2.5% of the initial amount delivered.
A Fund's obligations under a dollar roll agreement must be covered by
cash, U.S. Government securities or other liquid high grade debt obligations
equal in value to the securities subject to repurchase by the Fund, maintained
in a segregated account. To the extent that a Fund collateralizes its
obligations under a dollar roll agreement, the asset coverage requirements of
the 1940 Act will not apply to such transactions. Furthermore, because dollar
roll transactions may be for terms ranging between one and six months, dollar
roll transactions may be deemed "illiquid" and subject to a Fund's overall
limitations on investments in illiquid securities.
Tax Exempt Bonds
- ----------------
As noted in the Prospectus, it is a policy of the Tax Exempt Fund to
have 80% of its net assets invested in debt obligations the interest on which,
in the opinion of bond counsel to the issuer at the time of issuance, is exempt
from federal income tax ("Tax Exempt Bonds") which are rated Baa or higher by
Moody's or BBB or higher by S&P, or in one of the four highest rating categories
of any other NRSRO, or which are unrated and determined by the Manager or the
Fund's sub-adviser to be of quality comparable to obligations so rated. Under
such policy, the Fund may invest up to 20% of its net assets in Tax Exempt Bonds
rated in the fifth highest rating category by any NRSRO, or unrated obligations
determined by the Fund's sub-adviser to be of quality comparable to obligations
so rated. A description of these ratings is set forth in Appendix A hereto. From
time to time, however, the Fund may have less than 80% of its net assets
invested in Tax Exempt Bonds for temporary defensive purposes. The ability of
the Fund to invest in securities other than Tax Exempt Bonds is limited by a
requirement of the Internal Revenue Code that at least 50% of the Fund's total
assets be invested in Tax Exempt Bonds at the end of each calendar quarter. See
"Taxes."
Tax Exempt Bonds share the attributes of debt/fixed-income
securities generally (described elsewhere in this Statement and the Prospectus),
but are generally issued by states, municipalities and other political
subdivisions, agencies, authorities and instrumentalities of states and multi-
state agencies or authorities. The Tax Exempt Bonds which the Tax Exempt Fund
may purchase include general obligation bonds and limited obligation bonds (or
revenue bonds), including industrial development bonds issued pursuant to former
federal tax law. General obligation bonds are obligations involving the credit
of an issuer possessing taxing power and are payable from such issuer's general
revenues and not from any particular source. Limited obligation bonds are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source. Tax-exempt private activity bonds and industrial
development bonds generally are also revenue bonds and thus are not payable from
the issuer's general revenues. The credit and quality of private activity bonds
and industrial development bonds are usually related to the credit of the
corporate user of the facilities. Payment of interest on and repayment of
principal of such bonds is the responsibility of the corporate user (and/or any
guarantor).
Under the Internal Revenue Code of 1986, certain limited obligation
bonds are considered "private activity bonds" and interest paid on such bonds is
treated as an item of tax preference for purposes of calculating federal
alternative minimum tax liability.
As noted in the Prospectus, Tax Exempt Bonds are subject to credit and
market risk. Generally, prices of higher quality issues tend to fluctuate less
with changes in market interest rates than prices of lower
9
<PAGE>
quality issues and prices of longer maturity issues tend to fluctuate more than
prices of shorter maturity issues.
The Tax Exempt Fund may purchase and sell portfolio investments to
take advantage of changes or anticipated changes in yield relationships, markets
or economic conditions. The Fund may also sell Tax Exempt Bonds due to changes
in the sub-adviser's evaluation of the issuer or cash needs resulting from
redemption requests for Fund shares. The secondary market for Tax Exempt Bonds
typically has been less liquid than that for taxable debt/fixed-income
securities, and this may affect the Fund's ability to sell particular Tax Exempt
Bonds at then-current market prices, especially in periods when other investors
are attempting to sell the same securities.
Prices and yields on Tax Exempt Bonds are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the Tax Exempt Bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
A number of these factors, including the ratings of particular issues, are
subject to change from time to time. Information about the financial condition
of an issuer of Tax Exempt Bonds may not be as extensive as that which is made
available by corporations whose securities are publicly traded.
As noted in the Prospectus, obligations of issuers of Tax Exempt Bonds
are subject to the provisions of bankruptcy, insolvency and other laws, such as
the Federal Bankruptcy Reform Act of 1978, affecting the rights and remedies of
creditors. Congress or state legislatures may seek to extend the time for
payment of principal or interest, or both, or to impose other constraints upon
enforcement of such obligations. There is also the possibility that as a result
of litigation or other conditions the power or ability of issuers to meet their
obligations for the payment of interest and principal on their Tax Exempt Bonds
may be materially affected or their obligations may be found to be invalid or
unenforceable. Such litigation or conditions may from time to time have the
effect of introducing uncertainties in the market for Tax Exempt Bonds or
certain segments thereof, or of materially affecting the credit risk with
respect to particular bonds. Adverse economic, business, legal or political
developments might affect all or a substantial portion of the Fund's Tax Exempt
Bonds in the same manner.
Metal-Indexed Notes and Precious Metals
- ---------------------------------------
The Precious Metals Fund may invest in notes, the principal amount or
redemption price of which is indexed to and thus varies directly with changes in
the market price of gold bullion or other precious metals ("Metal-Indexed
Notes"). It is expected that the value of Metal-Indexed Notes will be as
volatile as the price of the underlying metal.
The Precious Metals Fund will only purchase Metal-Indexed Notes which
are rated, or are issued by issuers that have outstanding debt obligations
rated, investment grade or commercial paper rated in the top rating category by
any NRSRO or of issuers that the Manager or the sub-adviser has determined to be
of similar creditworthiness. Debt Obligations rated in the fourth highest rating
category by an NRSRO are considered to have some speculative characteristics.
The Metal-Indexed Notes might be backed by a bank letter of credit, performance
bond or might be otherwise secured, and any such security, which would be held
by the Precious Metals Fund's custodian, would be taken into account in
determining the creditworthiness of the securities. The Precious Metals Fund
might purchase unsecured Metal-Indexed Notes if the issuer thereof met the
Fund's credit standards without any such security. While the principal amount or
redemption price of Metal-Indexed Notes would vary with the price of the
resource, such securities would not be secured by a pledge of the resource or
any other security interest in or claim on the resource. In the case of Metal-
Indexed Notes not backed by a performance bond, letter of credit or similar
security, it is expected that such securities generally would not be secured by
any other specific assets.
The Precious Metals Fund anticipates that if Metal-Indexed senior
securities were to be purchased, such securities would be issued by precious
metals or commodity brokers or dealers, by mining companies, by commercial banks
or by other financial institutions. Such issuers would issue notes to hedge
their
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<PAGE>
inventories and reserves of the resource, or to borrow money at a relatively low
cost (which would include the nominal rate of interest paid on Metal-Indexed
Notes, described below, and the cost of hedging the issuer's Metals exposure).
The Precious Metals Fund would not purchase a Metal-Indexed Note issued by a
broker or dealer if as a result of such purchase more than 5% of the value of
the Precious Metals Fund's total assets would be invested in securities of such
issuer. The Precious Metals Fund might purchase Metal-Indexed Notes from brokers
or dealers which are not also securities brokers or dealers. Precious metals or
commodity brokers or dealers are not subject to supervision or regulation by any
governmental authority or self-regulatory organization in connection with the
issuance of Metal-Indexed Notes.
Until recently, there were no Metal-Indexed Notes outstanding and
consequently there is no secondary trading market for such securities. Although
a limited secondary market might develop among institutional traders, there is
no assurance that such a market will develop. No public market is expected to
develop, since the Precious Metals Fund expects that Metal-Indexed Notes will
not be registered under the Securities Act of 1933 and therefore disposition of
such securities, other than to the issuer thereof (as described below), would be
dependent upon the availability of an exemption from such registration.
Any Metal-Indexed Notes which the Precious Metals Fund might purchase
generally will have maturities of one year or less. Such notes, however, will be
subject to being called for redemption by the issuer on relatively short notice.
In addition, it is expected that the Metal-Indexed Notes will be subject to
being put by the Precious Metals Fund to the issuer or to a stand-by broker
meeting the credit standards set forth above, with payments being received by
the Precious Metals Fund on no more than 7 days notice. A stand-by broker might
be a securities broker-dealer, in which case the Precious Metals Fund's
investment will be limited by applicable regulations of the Securities and
Exchange Commission. The put feature of the Metal-Indexed Notes will ensure
liquidity even in the absence of a secondary trading market. The securities will
be repurchased upon exercise of the holder's put at the price determined in the
manner described above, less repurchase fees, if any, which are not expected to
exceed 1% of the redemption or repurchase proceeds. Depending upon the terms of
particular Metal-Indexed Notes, there might be a period as long as five days
between the date upon which the Precious Metals Fund notifies the issuer of the
exercise of the put and determination of the sale price.
It is expected that any Metal-Indexed Notes which the Precious Metals
Fund might purchase will bear interest or pay preferred dividends at relatively
nominal rates under 2% per annum. The Precious Metals Fund's holdings of such
senior securities therefore would not generate appreciable current income, and
the return from such senior securities would be primarily from any profit on the
sale or maturity thereof at a time when the price of the relevant precious metal
is higher than it was when the senior securities were purchased. The Precious
Metals Fund will not invest in Metal-Indexed Notes that are not publicly traded
until it is certain of how the Internal Revenue Service would characterize
income derived from such notes.
DERIVATIVES
-----------
The Prospectus describes the extent to which the Funds may employ
strategies involving the use of derivative instruments such as options and
futures contracts. The following discussion relates to the use of such
strategies by the Funds which are authorized to employ them.
Options Transactions
- --------------------
No Fund will write options that are not "covered." A written call
option is "covered" if the Fund owns the underlying security subject to the call
or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Fund
holds on a share-for-share basis a call on the same security as the call written
where the exercise price of the call held is equal to or less than the exercise
price of the call written or greater than the exercise price of the call written
if the difference is maintained by the Fund in cash, U.S. Government securities
or other liquid high grade debt obligations in a segregated account with its
custodian. A written put option is
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<PAGE>
"covered" if the Fund maintains cash, U.S. Government securities or other liquid
high grade debt obligations with a value equal to the exercise price in a
segregated account with its custodian, or holds on a share-for-share basis a put
on the same security as the put written where the exercise price of the put held
is equal to or greater than the exercise price of the put written. The premium
paid by the purchaser of an option will reflect, among other things, the
relationship of the exercise price to the market price and volatility of the
underlying security, the remaining term of the option and supply and demand
interest rates.
If the writer of an option wishes to terminate his obligation, he may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he has been notified of the exercise of an option. Likewise, an investor
who is the holder of an option may liquidate his position by effecting a
"closing sale transaction." This is accomplished by selling an option of the
same series as the option previously purchased. There is no guarantee that a
Fund will be able to effect a closing purchase or a closing sale transaction at
any particular time.
Effecting a closing transaction in the case of a written call option
will permit the Fund to write another call option on the underlying security
with either a different exercise price or expiration date or both, or in the
case of a written put option will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by depositing cash or high
grade obligations. Also, effecting a closing transaction will permit the cash or
proceeds from the concurrent sale of any securities subject to the option to be
used for other Fund investments. If the Fund desires to sell a particular
security from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale of the
security.
The Fund will realize a profit from a closing transaction if the price
of the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; the Fund will realize a
loss from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.
The Funds which may write options may do so in connection with
buy-and-write transactions; that is, the Fund will purchase a security and then
write a call option against that security. The exercise price of the call the
Fund determines to write will depend upon the expected price movement of the
underlying security. The exercise price of a call option may be below ("in-the-
money"), equal to ("at-the-money") or above ("out-of-the-money") the current
value of the underlying security at the time the option is written. Buy-and-
write transactions using in-the-money call options may be used when it is
expected that the price of the underlying security will remain flat or decline
moderately during the option period. Buy-and-write transactions using at-the-
money call options may be used when it is expected that the price of the
underlying security will remain fixed or advance moderately during the option
period. Buy-and-write transactions using out-of-the-money call options may be
used when it is expected that the premiums received from writing the call option
plus the appreciation in the market price of the underlying security up to the
exercise price will be greater than the appreciation in the price of the
underlying security alone. If the call options are exercised in such
transactions, the Fund's maximum gain will be the premium received by it for
writing the option, adjusted upwards or downwards by the difference between the
Fund's purchase price of the security and the exercise price. If the options are
not exercised and the price of the underlying security declines, the amount of
such decline will be offset in part, or entirely, by the premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close
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<PAGE>
the position or take delivery of the security at the exercise price. In that
event, the Fund's return will be the premium received from the put option minus
the cost of closing the position or, if it chooses to take delivery of the
security, the premium received from the put option minus the amount by which the
market price of the security is below the exercise price. Out-of-the-money, at-
the-money and in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-and-write
transactions.
The extent to which each Fund will be able to write and purchase call
and put options will also be restricted by the Trust's intention to qualify each
Fund as a regulated investment company under the federal income tax law. See
"Taxes."
OTC OPTIONS. The Funds will enter into over-the-counter ("OTC")
options transactions only with primary dealers in U.S. Government securities and
only pursuant to agreements that will assure that the relevant Fund will at all
times have the right to repurchase the option written by it from the dealer at a
specified formula price. The Funds will treat the amount by which such formula
price exceeds the intrinsic value of the option (i.e., the amount, if any, by
which the market price of the underlying security exceeds the exercise price of
the option) as an illiquid investment.
It is the present policy of each Fund not to enter into any OTC option
transaction if, as a result, more than 15% of that Fund's net assets would be
invested in (i) OTC options purchased by the Fund, (ii) the illiquid portion
(determined under the foregoing formula) of OTC options written by the Fund, and
(iii) other illiquid investments as set forth below under the heading
"Investment Restrictions."
Futures Transactions
- --------------------
Certain of the Funds may sell futures contracts, purchase put
options on futures contracts and write call options on futures contracts for the
purpose of hedging their respective portfolios against the adverse effects of
anticipated movements in interest rates (in the case of fixed-income
securities), currency exchange rates (in the case of foreign securities) or
precious metal prices (in the case of precious metals or securities of precious
metal-related companies). Such Funds may purchase futures contracts and call
options thereon and write put options for the purpose of protecting a Fund
against an increase in the market price of securities (or, in the case of the
Precious Metals Fund, the commodities) it intends to acquire. Information
concerning futures contracts and options on futures contracts is set forth
below.
FUTURES CONTRACTS. A futures contract sale creates an obligation by
the seller to deliver the type of commodity or financial instrument called for
in the contract in a specified delivery month for a stated price. A futures
contract purchase creates an obligation by the purchaser to take delivery of the
underlying commodity or financial instrument in a specified delivery month at a
stated price. The specific instruments delivered or taken, respectively, at
settlement date are not determined until at or near that date. The determination
is made in accordance with the rules of the exchange on which the futures
contract sale or purchase was made. An index futures contract is similar except
that the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the securities index value
at the close of the last trading day of the contract and the price at which the
futures contract is originally struck. Futures contracts are traded only on
commodity exchanges -- known as "contract markets" -- approved for such trading
by the Commodity Futures Trading Commission ("CFTC"), and must be executed
through a futures commission merchant or brokerage firm which is a member of a
contract market.
Although futures contracts by their terms call for actual delivery or
acceptance of commodities or securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a futures contract
for the same aggregate amount of the specific type of financial instrument or
commodity and the same delivery date. If the price of the initial sale of the
futures contract exceeds the price of the offsetting purchase, the seller is
paid the difference and realizes a gain. Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the seller realizes a
loss. Similarly, the closing out of a futures contract purchase is effected by
13
<PAGE>
the purchaser entering into a futures contract sale. If the offsetting sale
price exceeds the purchase price, the purchaser realizes a gain, and if the
purchase price exceeds the offsetting sale price, the purchaser realizes a loss.
The purchase (that is, assuming a long position in) or sale (that is,
assuming a short position in) of a futures contract differs from the purchase or
sale of a security, in that no price or premium is paid or received. Instead,
an amount of cash or U.S. Treasury bills generally not exceeding 5% of the
contract amount must be deposited with the broker. This amount is known as
initial margin. Subsequent payments to and from the broker, known as variation
margin, are made on a daily basis as the price of the underlying futures
contract fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as "marking to market." At any time
prior to the settlement date of the futures contract, the position may be closed
out by taking an opposite position which will operate to terminate the position
in the futures contract. A final determination of variation margin is then
made, additional cash is required to be paid to or released by the broker, and
the purchaser realizes a loss or gain. In addition, a commission is paid on
each completed purchase and sale transaction.
The Funds may engage in transactions in futures contracts for the
purpose of hedging against changes in the values of securities (or, in the case
of the Precious Metals Fund, commodities) they own or intend to acquire. The
Funds may sell such futures contracts in anticipation of a decline in the value
of its investments. The risk of such a decline can be reduced without employing
futures as a hedge by selling long-term securities and either reinvesting the
proceeds in securities with shorter maturities or by holding assets in cash.
This strategy, however, entails increased transaction costs in the form of
brokerage commissions and dealer spreads and will typically reduce a Fund's
average yield (with respect to futures on fixed-income securities) as a result
of the shortening of maturities. The sale of futures contracts provides an
alternative means of hedging a Fund against a decline in the value of its
investments in fixed-income securities. As such values decline, the value of a
Fund's position in the futures contracts will tend to increase, thus offsetting
all or a portion of the depreciation in the market value of a Fund's fixed-
income securities which are being hedged. While the Fund will incur commission
expenses in establishing and closing out futures positions, commissions on
futures transactions may be significantly lower than transaction costs incurred
in the purchase and sale of fixed-income securities. Employing futures as a
hedge may also permit a Fund to assume a defensive posture without reducing its
yield on its investments.
CALL OPTIONS ON FUTURES CONTRACTS. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
underlying debt/fixed-income securities, it may or may not be less risky than
ownership of the futures contract or underlying debt/fixed-income securities.
As with the purchase of a futures contract, the Funds may purchase a call option
on a futures contract to hedge against a market advance when the Fund is not
fully invested.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities or commodities which
are deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings.
PUT OPTIONS ON FUTURES CONTRACTS. The purchase of put options on a
futures contract is similar in some respects to the purchase of protective put
options on portfolio securities. The Funds may purchase put options on futures
contracts to hedge the Fund's portfolio against the risk of rising interest
rates or declines in stock market prices. The Funds may purchase put options on
futures contracts in circumstances where they would sell futures contracts.
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<PAGE>
The Funds may write a put option on a futures contract as a partial
hedge against increasing prices of the assets which are deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of assets that the Fund intends to purchase.
CURRENCY FUTURES AND RELATED OPTIONS. A currency futures contract sale
creates an obligation by the Fund, as seller, to deliver the amount of currency
called for in the contract at a specified future time for a stated price. A
currency futures contract purchase creates an obligation by the Fund, as
purchaser, to take delivery of an amount of currency at a specified future time
at a stated price. Although the terms of currency futures contracts specify
actual delivery or receipt, in most instances the contracts are closed out
before the settlement date without the making or taking of delivery of the
currency. Closing out of a currency futures contract is effected by entering
into an offsetting purchase or sale transaction.
Unlike a currency futures contract, which requires the parties to buy
and sell currency on a set date, an option on a futures contract entitles its
holder to decide on or before a future date whether to enter into such a
contract. If the holder decides not to enter into the contract, the premium paid
for the option is lost. Since the value of the option is fixed at the point of
sale, there are no daily payments of cash in the nature of "variation" or
"maintenance" margin payments to reflect the change in the value of the
underlying contract as there are by a purchaser or seller of a currency futures
contract. The value of the option does not change and is reflected in the net
asset value of the Fund.
The ability to establish and close out positions on options on futures
will be subject to the development and maintenance of a liquid secondary market.
It is not certain that this market will develop or be maintained.
The Funds will write only covered put and call options on currency
futures. This means that each such Fund will provide for its obligations upon
exercise of the option by segregating sufficient cash or short-term obligations
or by holding an offsetting position in the option or underlying currency
future, or a combination of the foregoing. Set forth below is a description of
methods of providing cover that the Funds currently expect to employ, subject to
applicable exchange and regulatory requirements. If other methods of providing
appropriate cover are developed, the Funds reserve the right to employ them to
the extent consistent with applicable regulatory and exchange requirements.
A Fund will, so long as it is obligated as the writer of a call option
on currency futures, own on a contract-for-contract basis an equal long position
in currency futures with the same delivery date or a call option on currency
futures with the difference, if any, between the market value of the call
written and the market value of the call or long currency futures purchased
maintained by the Fund in cash, Treasury bills, or other high-grade short-term
obligations in a segregated account with its custodian. If at the close of
business on any day the market value of the call purchased by the Fund falls
below 100% of the market value of the call written by the Fund, the Fund will so
segregate an amount of cash, U.S. Government securities or other liquid high
grade debt obligations equal in value to the difference. Alternatively, the Fund
may cover the call option by segregating with its custodian an amount of the
particular foreign currency equal to the amount of foreign currency per futures
contract option times the number of options written by the Fund.
In the case of put options on currency futures written by a Fund, the
Fund will hold the aggregate exercise price in cash, U.S. Government securities
or other liquid high grade debt obligations in a segregated account with its
custodian, or own put options on currency futures or short currency futures,
with the difference, if any, between the market value of the put written and the
market value of the puts purchased or the currency futures sold maintained by
the Fund in cash, U.S. Government securities or other liquid high grade debt
obligations in a segregated account with its custodian. If at the close of
business on any day the market value of the put options purchased or the
currency futures sold by the Fund falls below 100% of the market value of the
put options written by the Fund, the Fund will so segregate an amount of cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to the difference.
15
<PAGE>
INDEX FUTURES. A securities index assigns relative values to the
securities comprising the index. An index futures contract is a bilateral
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the index value at the close of the last trading day of the contract and the
price at which the futures contract is originally struck. No physical delivery
of the underlying securities in the index is made.
The Funds will engage in transactions in index futures contracts only
as a hedge against changes resulting from market conditions in the values of
securities held in the Fund's portfolio or which the Fund intends to purchase.
In connection with its purchase of index futures contracts, each Fund will
deposit an amount of cash and cash equivalents, equal to the market value of the
futures contracts, in a segregated account with its custodian and/or in a margin
account with a broker. Each Fund will cover any options it writes on index
futures in the manner described above with respect to currency futures.
COMMODITY FUTURES CONTRACTS AND RELATED OPTIONS. The Precious Metals
Fund may purchase or sell precious metals futures contracts as a hedge against
changes in the price of the underlying metal. Such futures contracts are
standardized exchange-traded obligations. In the United States, futures
contracts trade on one or more commodities exchanges with respect to gold,
silver, platinum, palladium and other commodities.
A commodity futures contract is an agreement between two parties to
buy and sell the commodity on a future date. Although futures contracts by their
terms require actual delivery and acceptance of the underlying asset, in most
cases the contracts are closed out before the settlement date without the making
or taking of delivery.
As an example of how the Precious Metals Fund might use commodity
options, the Fund might purchase and sell gold futures contracts for the purpose
of hedging its holdings of gold stocks, gold-indexed securities and gold
bullion. For example, when a decline in the price of gold is anticipated, the
Precious Metals Fund might seek to preserve its capital by selling gold futures
contracts, buying put options on gold futures or writing a covered call option
on gold futures.
If the Precious Metals Fund were to assume a short position in gold
futures contracts (that is, if it sold gold futures contracts) and the price of
gold decreased, the value of its short position in gold futures contracts would
increase at approximately the same rate, thereby preventing its net asset value
from declining as much as it otherwise would have on account of the decrease in
the price of gold and corresponding decline in the market value of the gold-
related assets in which the Fund invests.
If the Precious Metals Fund believed that gold bullion was undervalued
relative to the price of gold stocks or sought a more rapid exposure to
anticipated increases in the price of gold stocks, gold-indexed securities or
gold bullion than is practical by buying such assets, the Precious Metals Fund
might assume a long position in gold futures contracts (that is, buy gold
futures contracts, purchase call options on gold futures or write a covered put
option on gold futures).
Limitations on the Use of Options and Futures Portfolio Strategies
- ------------------------------------------------------------------
No Fund will "over-hedge," that is, no Fund will maintain open short
positions in futures contracts if, in the aggregate, the value of its open
positions (marked to market) exceeds the current market value of its securities
portfolio plus or minus the unrealized gain or loss on such open positions,
adjusted for the historical volatility relationship between the portfolio and
futures contracts.
In accordance with Commodity Futures Trading Commission Rule 4.5, no
Fund will take positions (other than in bona fide hedging transactions) in
futures or commodity option contracts if the aggregate initial margin and
premium required to establish such positions exceed 5% of the Fund's liquidation
value (after taking into account unrealized profits and losses on any such
contracts). Furthermore, as required by Section 18 of the 1940 Act, no Fund will
take a position in options, futures or other derivative transactions that
16
<PAGE>
obligate the Fund to make future payments unless the position is "covered," or
the Fund segregates cash, U.S. Government securities or other liquid high-grade
debt obligations with a value equal to the Fund's obligation (marked to market
daily).
A Fund's ability to engage in the options and futures strategies
described above will depend on the availability of liquid markets in such
instruments. Markets in certain options and futures are relatively new and still
developing. It is impossible to predict the amount of trading interest that may
exist in various types of options or futures. Therefore no assurance can be
given that a Fund will be able to utilize these instruments effectively for the
purposes set forth above. Furthermore, a Fund's ability to engage in options and
futures transactions may be limited by tax considerations and CFTC rules.
Risk Factors in Options and Futures Transactions
- ------------------------------------------------
OPTIONS TRANSACTIONS. The option writer has no control over when the
underlying securities must be sold, in the case of a call option, or purchased,
in the case of a put option, since the writer may be assigned an exercise notice
at any time prior to the termination of the obligation. If an option expires
unexercised, the writer realizes a gain in the amount of the premium. Such a
gain, of course, may, in the case of a covered call option, be offset by a
decline in the market value of the underlying security during the option period.
If a call option is exercised, the writer realizes a gain or loss from the sale
of the underlying security. If a put option is exercised, the writer must
fulfill the obligation to purchase the underlying security at the exercise
price, which will usually exceed the then market value of the security.
An exchange-traded option may be closed out only on a national
securities exchange (an "Exchange") which generally provides a liquid secondary
market for an option of the same series. An over-the-counter option may be
closed out only with the other party to the option transaction. If a liquid
secondary market for an exchange-traded option does not exist, it might not be
possible to effect a closing transaction with respect to a particular option
with the result that the Fund would have to exercise the option in order to
realize any profit. If the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or until it delivers the underlying security
upon exercise. Reasons for the absence of a liquid secondary market on an
Exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an Exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an Exchange; (v) the facilities
of an Exchange or the Options Clearing Corporation may not at all times be
adequate to handle current trading volume; or (vi) one or more Exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that Exchange (or in that class or series
of options) would cease to exist, although outstanding options on that Exchange
that had been issued by the Options Clearing Corporation as a result of trades
on that Exchange would continue to be exercisable in accordance with their
terms.
The Exchanges have established limitations governing the maximum
number of options which may be written by an investor or group of investors
acting in concert. It is possible that the Trust and other clients of the
Manager may be considered to be such a group. These position limits may restrict
the Funds' ability to purchase or sell options on a particular security.
FUTURES TRANSACTIONS. Investment by a Fund in futures contracts
involves risk. Some of that risk may be caused by an imperfect correlation
between movements in the price of the futures contract and the price of the
security or other investment being hedged. The hedge will not be fully effective
where there is such imperfect correlation. For example, if the price of the
futures contract moves more than the price of the hedged security, a Fund would
experience either a loss or gain on the future which is not completely offset by
movements in the price of the hedged securities. To compensate for imperfect
correlations, a Fund may purchase or sell futures contracts in a greater dollar
amount than the hedged securities if the volatility of the hedged securities is
historically greater than the volatility of the futures contracts. Conversely, a
Fund may
17
<PAGE>
purchase or sell fewer contracts if the volatility of the price of the hedged
securities is historically less than that of the futures contracts. The risk of
imperfect correlation generally tends to diminish as the maturity date of the
futures contract approaches.
Futures contracts on U.S. Government securities historically have
reacted to an increase or decrease in interest rates in a manner similar to that
in which the underlying U.S. Government securities reacted. To the extent,
however, that the Tax Exempt Fund enters into such futures contracts, the value
of such futures will not vary in direct proportion to the value of the Fund's
holdings of Tax Exempt Bonds. Thus, the anticipated spread between the price of
the futures contract and the hedged security may be distorted due to differences
in the nature of the markets. The spread also may be distorted by differences in
initial and variation margin requirements, the liquidity of such markets and the
participation of speculators in such markets.
Futures contracts may be used to hedge against a possible increase in
the price of securities which the Fund anticipates purchasing, or options
thereon. In such instances, it is possible that the market may instead decline.
If the Fund does not then invest in such securities based on concern regarding
possible further market decline or for other reasons, the Fund may realize a
loss on the futures contract that is not offset by a reduction in the price of
the securities purchased.
The amount of risk a Fund assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
The liquidity of a secondary market in a futures contract may be
adversely affected by "daily price fluctuation limits" established by commodity
exchanges which limit the amount of fluctuation in a futures contract price
during a single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. Prices have in the past
exceeded the daily limit on a number of consecutive trading days.
The successful use of transactions in futures and related options also
depends on the ability of the Manager or the Funds' sub-advisers to forecast
correctly the direction and extent of interest rate movements within a given
time frame. To the extent interest rates remain stable during the period in
which a futures contract or related option is held by a Fund or such rates move
in a direction opposite to that anticipated, a Fund may realize a loss on the
hedging transaction which is not fully or partially offset by an increase in the
value of portfolio securities. As a result, a Fund's total return for such
period may be less than if it had not engaged in the hedging transaction.
Swap Agreements
- ---------------
Certain of the Income Funds may enter into interest rate, index and
currency exchange rate swap agreements for purposes of attempting to obtain a
particular desired return at a lower cost to the Fund than if the Fund had
invested directly in an instrument that yielded that desired return. Swap
agreements are two party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments. The gross returns to be exchanged or "swapped"
between the parties are calculated with respect to a "notional amount," i.e. the
return on or increase in value of a particular dollar amount invested at a
particular interest rate, in a particular foreign currency, or in a "basket" of
securities representing a particular index. The "notional amount" of the swap
agreement is only a fictional basis on which to calculate the obligations which
the parties to a swap agreement have agreed to exchange. A Fund's obligations
(or rights) under a swap agreement will generally be equal only to the net
amount to be paid or received under the agreement based on the relative values
of the positions held by each party to the agreement (the "net amount"). A
Fund's obligations under a swap agreement will be accrued daily (offset against
any amounts owing to the Fund) and any accrued but unpaid
18
<PAGE>
net amounts owed to a swap counterparty will be covered by the maintenance of a
segregated account consisting of cash, U.S. Government securities, or other
liquid high grade debt obligations to avoid any potential leveraging of the
Fund's portfolio. A Fund will not enter into a swap agreement with any single
party if the net amount owed or to be received under existing contracts with
that party (together with all other securities of that issuer) would exceed 5%
of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in furthering
its investment objective will depend on the sub-adviser's ability to correctly
predict whether certain types of investments are likely to produce greater
returns than other investments. Because they are two party contracts and
because they may have terms of greater than seven days, swap agreements may be
considered to be illiquid. Moreover, a Fund bears the risk of loss of the
amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. The sub-adviser will
cause a Fund to enter into swap agreements only with counterparties that would
be eligible for consideration as repurchase agreement counterparties under the
Funds' repurchase agreement guidelines. Certain restrictions imposed on the
Funds by the Internal Revenue Code may limit the Funds' ability to use swap
agreements. The swaps market is a relatively new market and is largely
unregulated. It is possible that developments in the swaps market, including
potential government regulation, could adversely affect a Fund's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the CFTC
effective February 22, 1993. To qualify for this exemption, a swap agreement
must be entered into by "eligible participants " which includes the following,
provided the participant's total assets exceed established levels: a bank or
trust company, savings association or credit union, insurance company,
investment company subject to regulation under the 1940 Act, commodity pool,
corporation, partnership, proprietorship, organization, trust or other entity,
employee benefit plan, governmental entity, broker-dealer, futures commission
merchant, natural person, or regulated foreign person. To be eligible, natural
persons and most other entities must have total assets exceeding $10 million.
Commodity pools and employee benefit plans must have assets exceeding $5
million. In addition, an eligible swap transaction must meet three conditions.
First, the swap agreement may not be part of a fungible class of agreements that
are standardized as to their material economic terms. Second, the
creditworthiness of parties with actual or potential obligations under the swap
agreement must be a material consideration in entering into or determining the
terms of the swap agreement, including pricing, cost or credit enhancement
terms. Third, swap agreements may not be entered into and traded on or through
a multilateral transaction execution facility.
This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a safe harbor for swap transactions from regulation as futures
or commodity option transactions under the CEA or its regulations. The Policy
Statement applies to swap transactions settled in cash that (1) have
individually tailored terms, (2) lack exchange-style offset and the use of a
clearing organization or margin system, (3) are undertaken in conjunction with a
line of business, and (4) are not marketed to the public.
Note on Shareholder Approval
- ----------------------------
Unless otherwise indicated, the investment policies and objectives of the
Funds may be changed without shareholder approval.
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<PAGE>
INVESTMENT RESTRICTIONS
-----------------------
Fundamental Investment Restrictions
- -----------------------------------
Without a vote of the majority of the outstanding voting securities of a
Fund, the Trust will not take any of the following actions with respect to such
Fund:
(1) Except with respect to the High Income, U.S. Government and
Short-Intermediate Funds, borrow money in excess of 10% of the value
(taken at the lower of cost or current value) of a Fund's total assets
(not including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio investments or
for extraordinary or emergency purposes. Such borrowings will be
repaid before any additional investments are purchased. The High
Income, U.S. Government and Short-Intermediate Funds may borrow money
from banks, other financial institutions, or other lenders, and
similar investment techniques, so long as after any such transaction,
the net assets of such Fund exceed all liability and indebtedness by
300%; provided, that each of these Funds may also borrow an additional
5% of its total assets without regard to the foregoing limitation for
temporary purposes, such as for the clearance and settlement of
portfolio transactions and to meet shareholder redemption requests.
(2) Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 10% of the Fund's total assets (taken at cost) and
then only to secure borrowings permitted by Restriction 1 above. (The
deposit of securities or cash or cash equivalents in escrow in
connection with the writing of covered call or put options,
respectively, is not deemed to be pledges or other encumbrances.) (For
the purpose of this restriction, collateral arrangements with respect
to the writing of options, futures contracts, options on futures
contracts, and collateral arrangements with respect to initial and
variation margin are not deemed to be a pledge of assets and neither
such arrangements nor the purchase or sale of futures or related
options are deemed to be the issuance of a senior security.)
(3) Underwrite securities issued by other persons except to the
extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under federal
securities
laws.
(4) Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, including securities
of real estate investment trusts, and may purchase securities which
are secured by interests in real estate, except that the Precious
Metals Fund may purchase or sell agricultural land.
(5) Except with respect to the Global Income Fund, acquire more
than 10% of the voting securities of any issuer, both with respect to
any Fund and to the Trust (with the exception of the Global Income
Fund) in the aggregate.
(6) Concentrate more than 25% of the value of its total assets
in any one industry, or, in the case of the Tax Exempt Fund, in
industrial development revenue bonds based, directly or indirectly, on
the credit of private entities in any one industry; except that the
Money Market Fund may invest up to 100% of its assets in certificates
of deposit and bankers' acceptances issued by domestic banks, the
Precious Metals Fund will concentrate more than 25% of its total
assets in securities of companies principally engaged in the
extraction, processing, distribution or marketing of precious metals
and the Innovation Fund will concentrate more than 25% of its assets
in companies which use innovative technology to gain a strategic,
competitive advantage in their industry as well as companies that
provide
20
<PAGE>
and service those technologies. With respect to investments of the Tax
Exempt Fund in utilities, gas, electric, water and telephone companies will
be considered as being in separate industries. The SEC staff takes the
position that investments in government securities of a single foreign
country (including agencies and instrumentalities of such government, to
the extent such obligations are backed by the assets and revenues of such
government) represent investments in a separate industry for these
purposes.
Non-Fundamental Investment Restrictions
- ---------------------------------------
It is contrary to the Trust's present policy with respect to any Fund
created under the Trust, which may be changed by the Trustees without
shareholder approval, to:
(1) Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities the disposition
of which is restricted under federal securities laws, (c) repurchase
agreements maturing in more than seven days (d) OTC options (to the
extent described above), and (e) IO/PO Strips (as defined in the
Prospectus) if, as a result, more than 15% of a Fund's net assets
(10% of net assets in the case of the Money Market Fund), taken at
current value, would then be invested in securities described in (a),
(b), (c), (d) and (e) above. For the purpose of this restriction
securities subject to a 7-day put option or convertible into readily
saleable securities or commodities are not included with subsections
(a) or (b).
(2) With respect to the Tax Exempt Fund, invest less than 80% of
the Fund's net assets in Tax Exempt Bonds rated Baa or higher by
Moody's or BBB or higher by Standard & Poor's or which are unrated and
determined by the Fund's sub-adviser to be of comparable quality.
(3) Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and sales
of securities. (For this purpose, the deposit or payment by a Fund of
initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a
security on margin.)
(4) Make short sales of securities or maintain a short position
for the account of a Fund unless at all times when a short position is
open such Fund owns an equal amount of such securities or owns
securities which, without payment of any further consideration, are
convertible into or exchangeable for securities of the same issue as,
and equal in amount to, the securities sold short, except that the
Short-Intermediate Fund may make short sales of securities or maintain
a short position for the account of the Fund, provided that it
maintains in a segregated account cash, U.S. Government securities or
other liquid high grade debt obligations at such a level that (1) the
segregated amount plus the amount of any collateral deposited with a
broker in connection with the transaction at least equals the current
market value of the securities sold short and (2) the segregated
amount plus the amount deposited with the broker at least equals the
value of the securities at the time they were sold short. In addition,
the U.S. Government Fund will not make short sales of securities or
maintain a short position unless not more than 10% of the Fund's net
assets (taken at market value) is held as collateral for such sales at
any one time. (It is the present intention of management for the U.S.
Government Fund to make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes; such
sales would not be made of securities subject to outstanding options.)
21
<PAGE>
(5) Purchase or sell commodities or commodity contracts except
that the Funds may purchase and sell financial futures contracts and
related options and the Precious Metals Fund may purchase and sell
precious metals and other commodities and futures thereon.
(6) Make loans, except by purchase of debt obligations or by
entering into repurchase agreements (in the case of the Tax Exempt
Fund, with respect to not more than 20% of its total assets) or
through the lending of the Fund's portfolio securities with respect to
not more than 25% of its total assets (33 1/3% in the case of the U.S.
Government and Target Funds).
(7) Invest in securities of any issuer if, to the knowledge of
the Trust, any officers and Trustees of the Trust and officers and
directors of the Manager who individually own beneficially more than
1/2 of 1% of the securities of that issuer, own beneficially in the
aggregate more than 5% of the securities of such issuer.
(8) With the exception of the Global Income Fund, invest in
securities of any issuer if, immediately after such investment, more
than 5% of the total assets of the Fund (taken at current value) would
be invested in the securities of such issuer, except that up to 25% of
the International Fund's and Target Fund's total assets taken at
current value may be invested (without regard to such 5% limitation)
in the securities of an issuer; and provided that this limitation does
not apply to bank certificates of deposit or to obligations issued or
guaranteed as to interest and principal by the U.S. government or its
agencies or instrumentalities. For the purpose of this restriction,
each state and each separate political subdivision, agency, authority
or instrumentality of such state, each multi-state agency or
authority, and each guarantor, if any, are treated as separate issuers
of Tax Exempt Bonds.
(9) Invest in securities of other investment companies, except
by purchase in the open market involving only customary brokers'
commissions except for the International and Emerging Markets Funds,
which may invest up to 10% of its assets in securities of other
investment companies without regard to this restriction. For purposes
of this restriction, foreign banks and foreign insurance companies or
their respective agents or subsidiaries are not considered investment
companies. (Under the 1940 Act no registered investment company may
(a) invest more than 10% of its total assets (taken at current value)
in securities of other investment companies, (b) own securities of any
one investment company having a value in excess of 5% of its total
assets (taken at current value), or (c) own more than 3% of the
outstanding voting stock of any one investment company.)
(10) Purchase securities the disposition of which is restricted
under the federal securities laws (excluding for purposes of this
restriction securities offered and sold pursuant to Rule 144A of the
Securities Act of 1933 and Section 4(2) commercial paper) if, as a
result, such investments would exceed 10% of the value of the net
assets of the relevant Fund; provided, however, that so long as a
similar restriction applies under the Ohio Administrative Code, no
Fund will invest more than 15% of its total assets in the securities
of issuers which together with any predecessors have a record of less
than three years continuous operation or securities of issuers which
are restricted as to disposition (including Rule 144A securities and
Section 4(2) commercial paper).
(11) With respect to the U.S. Government Fund, invest in any
securities other than U.S. Government securities, repurchase
agreements related thereto and put and call options thereon and
futures contracts with respect to U.S. Government securities and
options thereon.
(12) Invest in warrants or rights excluding options (other than
warrants or rights acquired by the Fund as a part of a unit or
attached to securities at the time of purchase) if as
22
<PAGE>
a result such investments (valued at the lower of cost or market)
would exceed 5% of the value of a Fund's net assets; provided that not
more than 2% of the Fund's net assets may be invested in warrants not
listed on the New York or American Stock Exchanges.
(13) Invest in securities of an issuer, which, together with any
predecessors or controlling persons, has been in operation for less
than three consecutive years and in equity securities for which market
quotations are not readily available (excluding restricted securities)
if, as a result, the aggregate of such investments would exceed 5% of
the value of a Fund's net assets; provided, however, that this
restriction shall not apply to any obligation of the U.S. Government
or its instrumentalities or agencies. (Debt securities having equity
features are not considered "equity securities" for purposes of this
restriction.)
(14) Write (sell) or purchase options except that (i) each Fund
other than the Tax Exempt Fund and the Money Market Fund may (a) write
covered call options or covered put options on securities that it is
eligible to purchase (and, with respect to the Equity Income, Value,
Summit, Growth, Discovery, Opportunity, Target, Innovation,
International, Emerging Markets, Global Income and Precious Metals
Funds, on stock indices) and enter into closing purchase transactions
with respect to such options, and (b) in combination therewith, or
separately, purchase put and call options on securities it is eligible
to purchase, and (ii) the Tax Exempt Fund may purchase put options
with respect to all or any part of its portfolio securities and call
options with respect to securities that it is eligible to purchase;
provided that the premiums paid by each Fund on all outstanding
options it has purchased do not exceed 5% of its total assets. Each
Fund may enter into closing sale transactions with respect to options
it has purchased.
(15) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, except that the Precious Metals Fund may purchase
and sell interests in oil, gas and other natural resources (other than
oil, gas or other mineral leases).
(16) Make investments for the purpose of gaining control of a
company's management.
(17) Invest in certificates of deposit of any bank if,
immediately after such investment, more than 5% of the total assets of
the Fund (taken at current value) would be invested in the securities
(including certificates of deposit) of that bank, except that (i) the
Money Market Fund may, to the extent permitted by Rule 2a-7 under the
1940 Act, invest more than 5% of its total assets in the securities
(including certificates of deposit) of any bank , (ii) each other
diversified Fund may invest up to 25% of its total assets without
regard to this restriction and (iii) each non-diversified Fund shall
not be subject to this restriction.
(18) With respect to the Money Market Fund only, invest in
obligations of any bank if, immediately after such investment, more
than 5% of the total assets of the Money Market Fund (taken at current
value) would be invested in the securities (including certificates of
deposit) of such bank, except as otherwise permitted by Rule 2a-7
under the 1940 Act.
(19) Purchase or sell real estate, including investments in
limited partnerships that invest directly in real estate; provided,
however, that the Trust may invest in readily marketable interests in
real estate investment trusts or readily marketable securities of
companies that invest in real estate.
(20) With respect to the Target Fund, invest in commodities or
commodity futures contracts.
23
<PAGE>
(21) Engage in short-term trading as a matter of policy;
provided, however, that in pursuing a Fund's investment objective, the
Fund's sub-adviser will continue to monitor all securities positions
of the Fund and will seek to dispose of any position that it believes
is no longer consistent with achieving optimum performance.
Although Restriction (8) permits the Money Market Fund to invest up to
15% of its total assets in the obligations of any one bank, federal regulations
applicable to the Fund currently prohibit the Fund (with limited exceptions)
from making any investment that would result in more than 5% of the Fund's
assets being invested in obligations of a single issuer.
All percentage limitations on investments set forth herein and in the
Prospectus will apply at the time of the making of an investment and shall not
be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
The phrase "shareholder approval," as used in the Prospectus, and the
phrase a "vote of a majority of the outstanding voting securities," as used
herein, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund or the Trust, as the case may be, or (2) 67% or
more of the shares of the Fund or the Trust, as the case may be, present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
CONTINGENT DEFERRED SALES CHARGE AND INITIAL SALES CHARGE
---------------------------------------------------------
As described in the Prospectus under the caption "How to Redeem," a
contingent deferred sales charge is imposed upon certain redemptions of the
Class A, Class B and Class C shares. Because contingent deferred sales charges
are calculated on a Fund-by-Fund basis, shareholders should consider whether to
exchange shares of one Fund for shares of another Fund prior to redeeming an
investment if such an exchange would reduce the contingent deferred sales charge
applicable to such redemptions.
In certain cases described in the Prospectus, the contingent deferred
sales charge is waived on redemptions of Class A, Class B or Class C shares for
certain classes of individuals or entities on account of (i) the fact that the
Trust's sales-related expenses are lower for certain of such classes than for
classes for which the contingent deferred sales charge is not waived, (ii)
waiver of the contingent deferred sales charge with respect to certain of such
classes is consistent with certain Internal Revenue Code policies concerning the
favored tax treatment of accumulations, and (iii) with respect to certain of
such classes, considerations of fairness, and competitive and administrative
factors.
For the fiscal years ended September 30, 1993, 1994 and 1995, PIMCO
Advisors Distribution Company, the Trust's principal underwriter (the
"Distributor"), received $2,048,185, $1,723,241, and $1,007,285 respectively, in
contingent deferred sales charges on Class C shares. The contingent deferred
sales charge applicable to Class B shares (which were not yet offered) and
certain Class A shares as described in the Prospectus was not in effect through
September 30, 1994. For the fiscal year ended September 30, 1995, the
Distributor received $0 in contingent deferred sales charges on Class A shares
and $13,125 in contingent deferred sales charges on Class B shares.
As described in the Prospectus under the caption "Alternative Purchase
Arrangements -- Initial Sales Charge Alternative - Class A Shares," Class A
shares of the Trust (except with respect to the Money Market Fund) are sold
pursuant to an initial sales charge, which declines as the amount of purchase
reaches certain defined levels. For the fiscal years ended September 30, 1993,
1994 and 1995, the Distributor received $1,004,469, $3,920,611, and $3,708,105
respectively, and retained $242,174, $371,079, and $366,062, respectively, in
initial sales charges.
24
<PAGE>
DISTRIBUTOR AND DISTRIBUTION AND SERVICING PLANS
------------------------------------------------
As stated in the text of the Prospectus under the caption "Distributor
and Distribution and Servicing Plans," shares of the Trust are continuously
offered through firms ("participating brokers") which are members of the
National Association of Securities Dealers, Inc. and which have dealer
agreements with the Distributor, or which have agreed to act as introducing
brokers for the Distributor ("introducing brokers"). Under the Distributor's
Contract between the Trust and the Distributor (the "Distribution Agreement"),
the Distributor is not obligated to sell any specific amount of shares of the
Trust and will purchase shares for resale only against orders for shares.
Pursuant to the Distribution and Servicing Plans described in the
Prospectus, in connection with the distribution of Class B and Class C shares of
the Trust, the Distributor receives certain distribution fees from the Trust,
and in connection with personal services rendered to Class A, Class B and Class
C shareholders of the Trust and the maintenance of shareholder accounts, the
Distributor receives certain servicing fees from the Trust. Subject to the
percentage limitations on these distribution and servicing fees set forth in the
Prospectus, the distribution and servicing fees may be paid in respect of
services rendered and expenses borne in the past with respect to each such class
as to which no distribution and servicing fees were paid on account of such
limitations. As described in the Prospectus, the Distributor pays all or a
portion of the distribution fees it receives from the Trust to participating
and introducing brokers, and all or a portion of the servicing fees it receives
from the Trust to participating and introducing brokers, certain banks and other
financial intermediaries.
Each Distribution and Servicing Plan may be terminated with respect to
the class of shares of any Fund to which the Plan relates by vote of a majority
of the Trustees who are not interested persons of the Trust (as defined in the
1940 Act) and who have no direct or indirect financial interest in the operation
of the Plan or the Distribution Agreement (the "Independent Trustees"), or by
vote of a majority of the outstanding voting securities of that class. Any
change in any Plan that would materially increase the cost to the class of
shares of any Fund to which the Plan relates requires approval by the affected
class of shareholders of that Fund. The Trustees review quarterly a written
report of such costs and the purposes for which such costs have been incurred.
Each Plan may be amended by vote of the Trustees, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose. For so
long as the Plans are in effect, selection and nomination of those Trustees who
are not interested persons of the Trust shall be committed to the discretion of
such disinterested persons.
The Distribution Agreement may be terminated with respect to any Fund
or class of shares thereof at any time on 60 days written notice without payment
of any penalty either by the Distributor or by such Fund by vote of a majority
of the outstanding voting securities of that Fund or that class, as the case may
be, or by vote of a majority of the Independent Trustees.
The Distribution Agreement and the Distribution and Servicing Plans
will continue in effect with respect to each Fund and each class of shares
thereof for successive one-year periods, provided that each such continuance is
specifically approved (i) by the vote of a majority of the Independent Trustees
and (ii) by the vote of a majority of the entire Board of Trustees cast in
person at a meeting called for that purpose.
If the Distribution Agreement or the Distribution and Servicing Plans
are terminated (or not renewed) with respect to one or more Funds, they may
continue in effect with respect to any class of any Fund as to which they have
not been terminated (or have been renewed).
For the fiscal years ended September 30, 1993, 1994 and 1995, the
Trust paid the Distributor $25,971,451, $33,696,037, and $34,667,013,
respectively, pursuant to the Distribution and Servicing Plan applicable to the
Class C shares (the "Class C Plan") allocated among the Funds as follows:
25
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Sept. 30, 1993 Sept. 30, 1994 Sept. 30, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Equity Income $ 628,911 $ 1,475,042 $ 1,694,012
Value N/A N/A 9,948
Summit N/A N/A N/A
Growth 9,799,698 10,702,536 11,397,447
Target 1,073,001 4,419,960 6,402,149
Discovery N/A N/A 31,233
Opportunity 4,129,361 5,720,431 5,976,316
Innovation N/A N/A 229,411
International 566,091 2,493,832 2,422,761
Emerging Markets N/A N/A N/A
Precious Metals 129,784 455,351 490,116
Global Income N/A N/A N/A
High Income 2,464,991 2,175,184 1,548,152
Total Return Income N/A N/A 173,015
Tax Exempt 640,396 786,687 589,843
U.S. Government Fund 5,430,975 4,516,318 3,085,069
Short-Intermediate 1,009,787 813,722 525,319
Money Market 98,456 136,974 92,222
----------- ----------- ------------
Total $25,971,451 $33,696,037 $34,667,013
=========== =========== ===========
</TABLE>
During the fiscal year ended September 30, 1995, the amounts collected
pursuant to the Class C Plan and the contingent deferred sales charge imposed
on Class C shares were used as follows: sales commissions and other
compensation to sales personnel, $25,044,000; preparing, printing and
distributing sales material and advertising (including preparing, printing and
distributing prospectuses to non-shareholders), and other expenses (including
data processing, legal and operations), $9,781,000. The total, if allocated
among the Funds based on the net assets attributable to their Class C shares at
September 30, 1995, would have been as follows:
<TABLE>
<CAPTION> Sales Material
and Other
Compensation Expenses Total
------------ -------- -----
<S> <C> <C> <C>
Equity Income $1,094,000 $427,000 $1,522,000
Value 43,000 17,000 59,000
Summit N/A N/A N/A
Growth 8,102,000 3,164,000 11,266,000
Target 4,901,000 1,914,000 6,815,000
Discovery 128,000 50,000 178,000
Opportunity 4,490,000 1,754,000 6,244,000
Innovation 401,000 166,000 557,000
International 1,352,000 528,000 1,881,000
Emerging Markets N/A N/A N/A
Precious Metals 265,000 104,000 369,000
Global Income N/A N/A N/A
High Income 989,000 386,000 1,376,000
Total Return Income 286,000 112,000 397,000
Tax Exempt 341,000 133,000 474,000
U.S. Government 1,803,000 704,000 2,507,000
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C> <C>
Short-Intermediate 413,000 161,000 575,000
Money Market 436,000 170,000 606,000
------- ------- -------
Total $25,044,000 $ 9,781,000 $34,825,000
=========== =========== ===========
</TABLE>
During the fiscal year ended September 30, 1995, unreimbursed expenses
of the Trust's principal underwriters under the Class C Plan were reduced from
$5,041,000 to $4,191,000.
For the fiscal years ended September 30, 1993, 1994 and 1995, the
Trust paid the Distributor $537,682, $868,789 and $1,064,958, respectively,
pursuant to the Distribution and Servicing Plan applicable to the Class A shares
(the "Class A Plan"):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Sept. 30, 1993 Sept. 30, 1994 Sept. 30, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Equity Income $ 9,463 $ 28,435 $ 33,249
Value N/A N/A 1,132
Summit N/A N/A N/A
Growth 216,014 247,275 289,263
Target 47,625 175,437 251,511
Discovery N/A N/A 3,359
Opportunity 161,347 247,239 255,940
Innovation N/A N/A 28,918
International 8,785 51,731 49,788
Emerging Markets N/A N/A N/A
Precious Metals 5,914 19,794 22,178
Global Income N/A N/A N/A
High Income 12,846 12,638 12,478
Total Return Income N/A N/A 42,334
Tax Exempt 6,213 7,170 6,485
U.S. Government 42,449 47,012 37,643
Short-Intermediate 22,236 16,560 15,482
Money Market 4,700 15,498 15,198
-------- -------- ----------
Total $537,682 $868,789 $1,064,958
======== ======== ==========
</TABLE>
During the fiscal year ended September 30, 1995, the amounts collected
pursuant to the Class A Plan were used as follows: commissions and other
compensation to dealers, $1,281,000; preparing, printing and distributing
materials to shareholders, and other expenses (including data processing, legal
and operations), $2,436,000. The total, if allocated among the Funds based on
the net assets attributable to their Class A shares at September 30, 1995, would
have been as follows:
<TABLE>
<CAPTION>
Distribution
of Materials
and Other
Compensation Expenses Total
------------ ------------ -----
<S> <C> <C> <C>
Equity Income $31,000 $58,000 $89,000
Value 6,000 11,000 17,000
Summit N/A N/A N/A
Growth 321,000 609,000 930,000
Target 290,000 551,000 841,000
Discovery 18,000 35,000 53,000
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C> <C>
Opportunity 287,000 546,000 833,000
Innovation 67,000 128,000 195,000
International 43,000 81,000 124,000
Emerging Markets N/A N/A N/A
Precious Metals 18,000 35,000 53,000
Global Income N/A N/A N/A
High Income 19,000 35,000 54,000
Total Return Income 90,000 171,000 260,000
Tax Exempt 6,000 12,000 19,000
U.S. Government 39,000 74,000 112,000
Short-Intermediate 15,000 29,000 44,000
Money Market 32,000 61,000 94,000
------ ------ ------
TOTAL $1,281,000 $2,436,000 $3,717,000
========== ========== ==========
</TABLE>
The Distribution and Servicing Plan applicable to the Class B shares
(the "Class B Plan") was not in effect during the fiscal years ended September
30, 1993, and 1994.
For the fiscal year ended September 30, 1995, the Trust paid the
Distributor $87,552 pursuant to the Distribution and Servicing Plan applicable
to the Class B shares (the "Class B Plan") allocated among the Funds as follows:
<TABLE>
<CAPTION>
Year Ended
Sept. 30, 1995
--------------
<S> <C>
Equity Income $ 2,071
Value 6,833
Summit N/A
Growth 12,583
Target 11,816
Discovery 17,516
Opportunity N/A
Innovation 9,364
International 555
Emerging Markets N/A
Precious Metals 270
Global Income N/A
High Income 6,688
Total Return Income 15,137
Tax Exempt 745
U.S. Government Fund 1,900
Short-Intermediate 2,038
Money Market 36
--------
Total $ 87,552
========
</TABLE>
During the fiscal year ended September 30, 1995, the amounts collected
pursuant to the Class B Plan and the contingent deferred sales charge imposed on
Class B shares were used as follows: sales commissions and other compensation to
sales personnel, $2,081,000; preparing, printing and distributing sales
material and advertising (including preparing, printing and distributing
prospectuses to non-shareholders), and other expenses (including data
processing, legal and operations), $318,000. The total, if allocated among the
Funds based on the net assets attributable to their Class B shares at September
30, 1995, would have been as follows:
28
<PAGE>
<TABLE>
<CAPTION>
Sales Material
and Other
Compensation Expenses Total
------------ ---------- -----
<S> <C> <C> <C>
Equity Income $66,000 $ 10,000 $ 76,000
Value 149,000 23,000 172,000
Summit N/A N/A N/A
Growth 288,000 44,000 333,000
Target 284,000 43,000 327,000
Discovery 407,000 62,000 470,000
Opportunity N/A N/A N/A
Innovation 245,000 37,000 282,000
International 19,000 3,000 22,000
Emerging Markets N/A N/A N/A
Precious Metals 9,000 1,000 11,000
Global Income N/A N/A N/A
High Income 171,000 26,000 197,000
Total Return Income 331,000 51,000 382,000
Tax Exempt 11,000 2,000 12,000
U.S. Government 63,000 10,000 72,000
Short-Intermediate 35,000 5,000 41,000
Money Market 1,000 0 1,000
----- ----- -----
Total $2,081,000 $318,000 $2,399,000
========== ======== ==========
</TABLE>
The Trustees believe that the Distribution and Servicing Plans have
provided and will provide benefits to the Trust. The Trustees believe that the
Class A, Class B and Class C Plans have resulted in greater sales and/or fewer
redemptions of Trust shares, although it is impossible to know for certain the
level of sales and redemptions of Trust shares that would have occurred in the
absence of the Plans or under alternative distribution schemes. The Trustees
believe that the effect on sales and/or redemptions benefit the Trust by
reducing Fund expense ratios and/or by affording greater flexibility to Fund
managers.
EXCHANGE PRIVILEGE
------------------
As described in the Prospectus under the caption "Exchange Privilege,"
a shareholder may exchange Class A, Class B and Class C shares of any Fund for
shares of any other Fund within the same class on the basis of their respective
net asset values. The original purchase date(s) of shares exchanged for
purposes of calculating any contingent deferred sales charge will carry over to
the investment in the new Fund. For example, if a shareholder invests in the
Class C shares of one Fund and 6 months later (when the contingent deferred
sales charge upon redemption would be 1%) exchanges his shares for Class C
shares of another Fund, no sales charge would be imposed upon the exchange but
the investment in the other Fund would be subject to the 1% contingent deferred
sales charge until one year after the date of the shareholder's investment in
the first Fund as described in the Prospectus under "Alternative Purchase
Arrangements." With respect to Class B or Class C shares, or Class A shares
subject to a contingent deferred sales charge only, if less than all of an
investment is exchanged out of a Fund, any portion of the investment
attributable to capital appreciation and/or reinvested dividends or capital
gains distributions will be exchanged first, and thereafter any portions
exchanged will be from the earliest investment made in the Fund from which the
exchange was made.
Orders for exchanges accepted by the Distributor prior to the close of
regular trading on the New York Stock Exchange on any day the Trust is open for
business will be executed at the respective net asset values determined as of
the close of business that day. Orders for exchanges received after the close
of regular trading on the Exchange on any business day will be executed at the
respective net asset values determined at the close of the next business day.
29
<PAGE>
An excessive number of exchanges may be disadvantageous to the Trust.
Therefore, the Trust, in addition to its right to reject any exchange, reserves
the right to adopt a policy of terminating the exchange privilege of any
shareholder who makes more than a specified number of exchanges in a 12-month
period or in any calendar quarter; provided, that if such limitation on
exchanges is adopted, exchanges into the Money Market Fund from any other Fund
would not be counted.
The Trust reserves the right to modify or discontinue the exchange
privilege at any time.
HOW TO REDEEM
-------------
The procedures for redemption of Trust shares are summarized in the
text of the Prospectus following the caption "How to Redeem."
The Trust may suspend the right of redemption and may postpone payment
only when the New York Stock Exchange is closed for other than customary
weekends and holidays, or if permitted by the rules of the Securities and
Exchange Commission during periods when trading on the Exchange is restricted or
during any emergency which makes it impracticable for the Trust to dispose of
its securities or to determine fairly the value of its net assets, or during any
other period permitted by order of the Securities and Exchange Commission.
The Trust is committed to paying in cash all requests for redemptions
by any shareholder of record of the Funds, limited in amount with respect to
each shareholder during any 90-day period to the lesser of (i) $250,000, or (ii)
1% of the net asset value of the Trust at the beginning of such period.
Although the Trust will normally redeem all shares for cash, it may, in unusual
circumstances, redeem amounts in excess of the lesser of (i) or (ii) above by
payment in kind of securities held in the Funds' portfolios.
The Trust reserves the right to redeem shares and mail the proceeds to
the shareholder if at any time the net asset value of the shares in the
shareholder's account in any Fund falls below a specified level, currently set
at $250. Shareholders will be notified and will have 30 days to bring the
account up to the required level before any redemption action will be taken by
the Trust. The Trust also reserves the right to redeem shares in a
shareholder's account in excess of an amount set from time to time by the
Trustees. No such limit is presently in effect, but such a limit could be
established at any time and could be applicable to existing as well as future
shareholders.
HOW NET ASSET VALUE IS DETERMINED
---------------------------------
As described in the text of the Prospectus following the caption "How
Net Asset Value is Determined," the net asset values of each class of shares of
each Fund of the Trust will be determined once on each day on which the New York
Stock Exchange is open, as of the close of regular trading on the Exchange. The
Trust expects that the days, other than weekend days, that the Exchange will not
be open are New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Funds'
portfolio securities for which market quotations are readily available are
valued at market value, which is determined by using the last reported sale
price, or, if no sales are reported -- and in the case of certain securities
traded over-the-counter -- the mean between the last reported bid and asked
prices. Many debt/fixed-income securities, including U.S. Government securities
and Tax Exempt Bonds, are traded in the over-the-counter market. The Trust
believes that as a general matter it is not appropriate to value such
debt/fixed-income securities on the basis of the last available bid price.
Therefore, each Fund's holdings of such debt/fixed-income securities are valued
at fair value by a pricing service. In determining the fair value of each such
debt/fixed-income security, the pricing service relies on one or more of the
following factors: valuations obtained from recognized dealers, information on
transactions for similar securities, general market information, and matrix
comparisons of various characteristics of debt/fixed-income securities, such as
quality, yield and maturity. Options, futures and options on futures which are
traded on exchanges are valued at settlement price as determined by the
appropriate clearing corporation.
30
<PAGE>
Over-the-counter options are valued at fair value, as determined in good faith
by the Trustees or by persons acting at their directions. Obligations having
remaining maturities of 60 days or less and securities held in the Money Market
Fund portfolio will be valued at amortized cost by the Board of Trustees or
persons acting pursuant to guidelines established by the Board of Trustees if
the Board of Trustees determine that amortized cost fairly reflects market-based
values. The amortized cost value of a security is determined by valuing it at
cost originally and thereafter amortizing any discount or premium from its face
value at a constant rate until maturity, regardless of the effect of fluctuating
interest rates on the market value of the instrument. Although the amortized
cost method provides certainty in valuation, it may result at times in
determinations of value that are higher or lower than the price the Fund would
receive if the instruments were sold. Consequently, changes in the market value
of portfolio instruments during periods of rising or falling interest rates will
not be reflected either in the computation of the net asset value of the Fund's
portfolio or, in the case of the Money Market Fund, in the daily computation of
net income of each class.
The valuation of the Money Market Fund's portfolio instruments at
amortized cost is permitted in accordance with Rule 2a-7 under the Act. Under
this Rule, the Fund is required to maintain a dollar-weighted average portfolio
maturity of 90 days or less, to purchase only instruments having remaining
maturities of 397 days or less and to invest only in securities determined under
the supervision of the Trustees to present minimal credit risks and which
satisfy certain other quality and diversification tests under Rule 2a-7. The
Fund is further required to establish procedures designed to stabilize, to the
extent reasonably possible, the price per share of each class of the Fund's
shares as computed for the purpose of distribution, redemption and repurchase at
a single value, which the Trustees have determined will be $1.00 per share. Such
procedures will include review of the Fund's portfolio holdings by the Trustees,
at such intervals as they may deem appropriate, to determine whether the net
asset value of any class of the Fund's shares calculated by using readily
available market quotations deviates from $1.00 per share, and, if so, whether
such deviation may result in material dilution or is otherwise unfair to
existing shareholders. In the event the Trustees determine that such a deviation
exists, or in any event if the deviation exceeds .5%, they shall take such
corrective action as they regard as necessary and appropriate, including the
sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends,
redemptions of shares in kind, or establishing a net asset value per share for
each class by using readily available market quotations.
As described in the Prospectus, certain securities and assets of the
Funds are valued at fair value as determined in good faith by the Trustees or by
persons acting at their direction. The fair value of any securities from time to
time held by any Fund of the Trust for which no ready market exists is generally
determined by the Manager and/or relevant sub-adviser in accordance with
procedures approved by the Trustees. Such procedures are reviewed periodically
by the Trustees. The fair value of such securities is generally determined as
the amount which the Trust could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary from case to
case. However, consideration is generally given to the financial position of the
issuer and other fundamental analytical data relating to the investment and to
the nature of the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Trust in connection with such
disposition). In addition, such specific factors are also generally considered
as the cost of the investment, the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any available
analysts' reports regarding the issuer.
Market quotations are not considered to be readily available for
certain debt/fixed-income securities; such investments are stated at fair
value on the basis of valuations furnished by a pricing service approved by the
Trustees, which determines valuations for normal, institutional-size trading
units of such securities using methods based on market transactions for
comparable securities, evaluated mean between bid and asked prices and various
relationships between securities which are generally recognized by institutional
traders.
There are certain debt/fixed-income securities in which the Trust
may invest, however, for which prices from pricing services or agents are
generally not available. The daily fair value of some of such securities may be
determined by the Manager and/or the relevant sub-adviser using the following
procedure: At the time of purchase, the duration of the security is determined,
and a U.S. Treasury security of similar
31
<PAGE>
duration is selected to serve as a proxy for the price movements of the
purchased security. The price of the purchased security will be adjusted with
any fluctuation in the price of the U.S. Treasury security, while maintaining
the differential in price between the purchased security and the proxy U.S.
Treasury security that existed at the time of purchase. The Manager and/or sub-
adviser will review the duration of the purchased security at any time it
believes there may have been a significant change in the security's duration
and, in any case, no less frequently than monthly. If the duration of the
security changes, a new U.S. Treasury security (with appropriate duration) will
be selected as the proxy. Also, the Manager and/or the sub-adviser will monitor
the validity of this pricing procedure by (i) comparing the actual sales
proceeds for the security when sold to the price determined by the method
described here, and (ii) periodically obtaining actual market quotes for the
security.
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments is substantially
completed each day at various times prior to the close of the Exchange. The
values of such securities used in determining the net asset value of each class
of a Fund's shares are computed as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the Exchange
(normally, 4:00 p.m. Eastern time). Occasionally, events affecting the value of
such securities may occur between such times and the close of the Exchange and
such change in value may not be reflected in the computation of the Fund's net
asset value. If events materially affecting the value of securities occur
between the time of their pricing and 4:00 p.m. Eastern time, the Funds' Manager
may, at its discretion, determine if the value of the securities should be
restated to reflect a more current fair market value, and in doing so, may
consult with the relevant portfolio manager. If information becomes known to the
Manager or the Funds' custodian after the time the net asset value is calculated
on any business day, such information may be assessed in determining the net
asset value per share after the time of receipt of such information, but will
not be used to retroactively adjust the price of a security which has already
been valued earlier that day or on a prior day.
Expenses of the Trust directly charged or attributable to any Fund
will be paid from the assets of that Fund. Expenses for shareholder service
arrangements and the distribution of securities of a particular class of shares
will be paid from the assets of that class. Each class may pay a different
share of other expenses, not including advisory or custodial fees or other
expenses related to the management of a Fund's assets, if these expenses are
actually incurred in a different amount by that class, or if the class receives
services of a different kind or to a different degree than the other classes.
General expenses of the Trust will be allocated among and charged to the assets
of each Fund and each class on a basis that the Trustees deem fair and
equitable, which may be based on the relative net assets of each Fund and each
class or the nature of the services performed and relative applicability to each
Fund or class.
CALCULATION OF YIELD AND RETURN
-------------------------------
Yield of the Money Market Fund
- ------------------------------
As summarized in the Prospectus under the heading "Performance
Information," the "Yield" of each class of shares of the Money Market Fund for a
seven-day period (the "base period") will be computed by determining the "net
change in value" of each class (calculated as set forth below) of a hypothetical
account having a balance of one share at the beginning of the period, dividing
the net change in account value by the value of the account at the beginning of
the base period to obtain the base period return, and multiplying the base
period return by 365/7 with the resulting yield figure carried to the nearest
hundredth of one percent. Net changes in value of each class of a hypothetical
account will include the value of additional shares purchased with dividends
from the original share and dividends declared on both the original share and
any such additional shares, but will not include realized gains or losses or
unrealized appreciation or depreciation on portfolio investments. Yield may
also be calculated on a compound basis (the "Effective Yield") which assumes
that net income is reinvested in each class of Fund shares at the same rate as
net income is earned by each class for the base period.
The Money Market Fund's Yield and Effective Yield of each class of its
shares will vary in response to fluctuations in interest rates and in the
expenses of each class of the Money Market Fund. For comparative purposes the
current and Effective Yields of each class should be compared to current and
effective yields
32
<PAGE>
offered by competing financial institutions for that base period only and
calculated by the methods described above. In addition, investors should
recognize that unlike typical money market funds, the Money Market Fund is
specifically intended as a temporary investment for investors who are
considering in which of the other Funds of the Trust to invest or whose
investment objectives have changed so that investment in the Money Market Fund
is suitable. The Money Market Fund's Yield and Effective Yield do not take into
account any applicable contingent deferred sales charges.
Yields of the Equity Income, Global Income, High Income, Total Return Income,
Tax Exempt, U.S. Government and Short-Intermediate Funds
As summarized in the Prospectus under the heading "Performance
Information," Yields of each class of shares of the Equity Income, Global
Income, High Income, Total Return Income, Tax Exempt, U.S. Government and Short-
Intermediate Funds will be computed by annualizing net investment income for
each class for a recent 30-day period and dividing that amount by the maximum
offering price of each class (reduced by any undeclared earned income of each
class expected to be paid shortly as a dividend) on the last trading day of that
period. Net investment income for each class will reflect amortization of any
market value premium or discount of fixed-income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The Yields of these Funds will vary from time to time depending
upon market conditions, the composition of the Funds' portfolios and operating
expenses of the Trust allocated to each Fund or each class of shares. These
factors, possible differences in the methods used in calculating yield and (in
the case of the Tax Exempt Fund) the tax exempt status of distributions should
be considered when comparing a Fund's Yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Funds' various classes of
shares and to the relative risks associated with the investment objectives and
policies of the various Income Funds. These Yields do not take into account any
applicable contingent deferred sales charges.
The Tax Exempt Fund may also advertise a Tax Equivalent Yield of each
class of its shares, calculated as described above except that, for any given
tax bracket, net investment income of each class will be calculated using as
gross investment income an amount equal to the sum of (i) any taxable income of
each class of the Fund plus (ii) the tax exempt income of each class of the Fund
divided by the difference between 1 and the effective federal income tax rates
for taxpayers in that tax bracket. For example, taxpayers with the marginal
federal income tax rates indicated in the following table, which reflects the
changes in marginal tax rates and income tax brackets in effect for 1996,
would have to earn the Tax Equivalent Yields shown in order to realize an
after-tax return equal to the corresponding tax free yield shown.
<TABLE>
<CAPTION>
Filing Status Marginal A tax-exempt yield of
Single Married filing jointly tax rate* 3% 4% 5% 6% 7%
is equivalent to a taxable yield of
Taxable Income
<S> <C> <C> <C> <C> <C> <C> <C>
$23,350 or less $39,000 or less 15% 3.53% 4.71% 5.88% 7.06% 8.24%
Over $23,350 but Over $39,000 but 28% 4.17% 5.56% 6.94% 8.33% 9.72%
not over $56,550 not over $94,250
Over $56,550 but Over $94,250 but 31% 4.35% 5.80% 7.25% 8.70% 10.14%
not over $117,950 not over $143,600
Over $117,950 but Over $143,600 but 36% 4.69% 6.25% 7.81% 9.38% 10.94%
not over $256,500 not over $256,500
Over $256,500 Over $256,500 39.6% 4.97% 6.62% 8.28% 9.93% 11.59%
</TABLE>
* These marginal tax rates do not take into account the effect of the phaseout
of itemized deductions and personal exemptions.
As is shown in the above table, the advantage of tax-free investing
becomes more advantageous to an investor as his or her marginal tax rate
increases.
The Trust, in its advertisements, may refer to pending legislation
from time to time and the possible impact of such legislation on investors,
investment strategy and related matters. This would include any tax proposals
and their effect on marginal tax rates and tax-equivalent yields.
At any time in the future, yields and total return may be higher or
lower than past yields and there can be no assurance that any historical results
will continue.
33
<PAGE>
Investors in the Income Funds are specifically advised that the net
asset values per share of each class will vary just as Yields for each class
will vary. For example, during the twelve months ended December 31, 1995, the
net asset value per share of Class C shares of the U.S. Government Fund was as
high as $9.38 and as low as $8.45. An investor's focus on the Yield of a class
of shares of an Income Fund to the exclusion of the consideration of the share
value of a class of shares of that Fund may result in the investor's
misunderstanding the Total Return he or she may derive from that Fund.
Calculation of Total Return
- ---------------------------
As summarized in the Prospectus under the heading "Performance
Information", Total Return with respect to a Fund's Class A, Class B and Class C
shares is a measure of the change in value of an investment in a class of shares
of a Fund over the period covered (in the case of Class A shares, giving effect
to the maximum initial sales charge), which assumes any dividends or capital
gains distributions are reinvested in that class of the Fund's shares
immediately rather than paid to the investor in cash. The formula for Total
Return used herein includes four steps: (1) adding to the total number of shares
purchased by a hypothetical $1,000 investment in the class (deducting in the
case of Class A shares the maximum applicable initial sales charge) all
additional shares which would have been purchased if all dividends and
distributions paid or distributed during the period had been immediately
reinvested; (2) calculating the value of the hypothetical initial investment of
$1,000 as of the end of the period by multiplying the total number of shares in
the class owned at the end of the period by the net asset value per share of the
class on the last trading day of the period; (3) assuming redemption at the end
of the period (deducting any applicable contingent deferred sales charge); and
(4) dividing this account value for the hypothetical investor by the initial
$1,000 investment and annualizing the result for periods of less than one year.
The manner in which Total Return and Yield of the Class A, Class B and
Class C shares will be calculated for public use is described above. The
following tables summarize the calculation of Total Return and Yield for the
Class A, Class B and Class C shares of each Fund, where applicable, through
September 30, 1995.
34
<PAGE>
PIMCO ADVISORS FUNDS
RECENT PERFORMANCE OF CLASS A SHARES
(based on maximum offering price)
As of September 30, 1995
<TABLE>
<CAPTION>
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Current Inception Year 5 Years 10 Years Lipper
Fund initial SEC to Ended Ended Ended Rank - Year
offering Yield at 9/30/95* 9/30/95* 9/30/95* 9/30/95* Ended
Of Class 9/30/95* 9/30/95*
A Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Income** 02/01/91 1.84 14.52 9.71 NA NA 100/119
Value 6/27/95 2.43 6.11 NA NA NA NA
Growth 10/26/90 NA 15.46 16.88 NA NA 357/550
Target 12/17/92 NA 17.97 19.55 NA NA 46/92
Discovery 6/27/95 NA 11.75 NA NA NA NA
Opportunity 12/17/90 NA 32.81 31.98 NA NA 10/153
Innovation 12/22/94 NA 53.60 NA NA NA NA
International** 02/01/91 NA 7.20 (9.00) NA NA 201/222
Precious Metals** 02/01/91 NA 10.91 (17.60) NA NA 26/38
High Income** 02/06/91 8.08 6.56 9.02 NA NA NA
Total Return Income 12/22/94 4.73 7.59 NA NA NA NA
Tax Exempt 03/14/91 4.18 6.13 5.69 NA NA 40/213
US Government 01/03/91 6.01 6.21 7.24 NA NA 25/90
Short-Intermediate** 08/16/91 5.54 4.00 6.00 NA NA 20/136
Money Market 03/05/91 5.34 NA NA NA NA 39/251
</TABLE>
More recently updated performance figures can be obtained from the Distributor.
* Assumes payment of current maximum sales charge at time of purchase.
** The investment objective and policies of the Equity Income Fund and
International Fund were changed effective February 1, 1992 and September 1,
1992, respectively. The investment objective and policies of the Precious
Metals, High Income and Short-Intermediate Funds were changed effective on
November 15, 1994. Performance information for prior periods does not
necessarily represent results that would have been obtained had the current
investment objective and policies then been in effect.
35
<PAGE>
PIMCO ADVISORS FUNDS
RECENT PERFORMANCE OF CLASS B SHARES
As of September 30, 1995
<TABLE>
<CAPTION>
Average Annual Total Return
- -------------------------------------------------------------------------------------------------------------------------
Fund Date of Current SEC Inception Year Ended 5 Years 10 Years
Initial Yield at to 9/30/95 9/30/95 Ended Ended
Offering 9/30/95 9/30/95 9/30/95
of Class B
Shares
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Income 5/22/95 1.23 13.25 NA NA NA
Value 6/27/95 1.83 7.25 NA NA NA
Growth 5/23/95 NA 10.21 NA NA NA
Target 5/22/95 NA 15.29 NA NA NA
Discovery 6/27/95 NA 8.60 NA NA NA
Innovation 5/22/95 NA 24.13 NA NA NA
International 5/22/95 NA 3.98 NA NA NA
Precious Metals 6/15/95 NA 2.50 NA NA NA
High Income 5/22/95 7.71 4.87 NA NA NA
Total Return 5/22/95 4.19 3.84 NA NA NA
Income
Tax Exempt 5/30/95 3.62 0.79 NA NA NA
US Government 6/2/95 5.54 1.57 NA NA NA
Short-Intermediate 5/22/95 4.96 3.29 NA NA NA
Money Market 7/17/95 4.40 NA NA NA NA
</TABLE>
More recently updated performance figures can be obtained from the Distributor.
36
<PAGE>
PIMCO ADVISORS FUNDS
RECENT PERFORMANCE OF CLASS C SHARES
As of September 30, 1995
<TABLE>
<CAPTION>
Average Annual Total Return
- -------------------------------------------------------------------------------------------------------------------------
Fund Current SEC Inception Year Ended 5 Years 10 Years
Fund Inception Yield at to 9/30/95 9/30/95 Ended Ended
Date 9/30/95 9/30/95 9/30/95
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Income* 04/18/88 1.21 9.55 15.15 14.91 NA
Value 6/27/95 1.84 31.13 NA NA NA
Growth 02/24/84 NA 16.24 22.79 15.80 16.32
Target 12/17/92 NA 19.47 25.55 NA NA
Discovery 6/27/95 NA 37.63 NA NA NA
Opportunity 02/24/84 NA 20.34 38.63 32.26 21.26
Innovation 12/22/94 NA 63.97 NA NA NA
International* 08/25/86 NA 6.86 (4.46) 8.61 NA
Precious Metals* 10/10/88 NA 2.54 (13.46) 4.83 NA
High Income* 02/24/84 7.74 7.81 13.52 6.97 7.19
Total Return Income 12/22/94 4.20 13.79 NA NA NA
Tax Exempt 11/01/85 3.64 7.96 10.05 7.02 NA
US Government 09/16/85 5.55 7.36 11.77 7.32 7.36
Short-Intermediate* 08/16/91 5.20 4.22 8.25 NA NA
Money Market 02/24/84 5.35 NA NA NA NA
Indexes
-------
S&P 500 29.75 17.23 16.04
Russell 2000 23.04 21.60 12.73
Index
Lehman 13.57 9.56 9.66
Government
Index
</TABLE>
More recently updated performance figures can be obtained from the Distributor.
* The investment objective and policies of the Equity Income Fund and
International Fund were changed effective February 1, 1992 and September 1,
1992, respectively. The investment objective and policies of the Precious
Metals, High Income and Short-Intermediate Funds were changed effective on
November 15, 1994. Performance information for prior periods does not
necessarily represent results that would have been obtained had the current
investment objective and policies then been in effect.
37
<PAGE>
PERFORMANCE COMPARISONS
-----------------------
Yield and Total Return
- ----------------------
Performance information is computed separately for each class of a
Fund's shares. Each Fund may from time to time include the Total Return of each
class of its shares in advertisements or in information furnished to present or
prospective shareholders. Each Income Fund may from time to time include the
Yield and Total Return of each class of its shares in advertisements or
information furnished to present or prospective shareholders. Each Fund may from
time to time include in advertisements the Total Return of each class (and Yield
of each class in the case of the Income Funds) and the ranking of those
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services as having the same investment
objectives.
Information provided to any newspaper or similar listing of the Fund's
net asset values and public offering prices will separately present each class
of shares.
The Total Return of each class (and Yield of each class in the case of
the Income Funds) may also be used to compare the performance of each class of a
Fund's shares against certain widely acknowledged standards or indices for stock
and bond market performance, against interest rates on certificates of deposit
and bank accounts, against the yield on money market funds, against the cost of
living (inflation) index, and against hypothetical results based on a fixed rate
of return.
The Standard & Poor's Composite Index of 500 Stocks (the "S&P 500") is
a market value-weighted and unmanaged index showing the changes in the aggregate
market value of 500 stocks relative to the base period 1941-43. The S&P 500 is
composed almost entirely of common stocks of companies listed on the New York
Stock Exchange, although the common stocks of a few companies listed on the
American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 385 industrial, 15 transportation, 45 utilities
and 55 financial services concerns. The S&P 500 represents about 77% of the
market value of all issues traded on the New York Stock Exchange.
The Standard & Poor's 400 Mid-Cap Index (the "S&P 400 Mid-Cap Index")
is a market value-weighted and unmanaged index showing the changes in the
aggregate market value of 400 stocks of companies whose capitalization range
from $100 million to over $5 billion and which represent a wide range of
industries. As of December 31, 1995, approximately 26% of the 400 stocks were
stocks listed on the National Association of Securities Dealers Automated
Quotations ("NASDAQ") system, 72% were stocks listed on the New York Stock
Exchange and 2% were stocks listed on the American Stock Exchange. The Standard
& Poor's Midcap 400 Index P/TR consists of 400 domestic stocks chosen for market
size (median market capitalization of $676 million), liquidity and industry
group representation. It is a market-value weighted index (stock price times
shares outstanding), with each stock affecting the index in proportion to its
market value. The index is comprised of industrials, utilities, financials and
transportation, in size order.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-
weighted and unmanaged index showing the changes in the aggregate market value
of approximately 3,500 stocks relative to the base measure of 100.00 on February
5, 1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
The Russell 2000 Small Stock Index is an unmanaged index of the 2000
smallest securities in the Russell 3000 Index, representing approximately 7% of
the Russell 3000 Index. The Russell 3000 Index represents approximately 98% of
the U.S. equity market by capitalization. The Russell 1000 Index is composed of
the 1,000 largest companies in the Russell 3000 Index. The Russell 1000 Index
represents the universe of stocks from which most active money managers
typically select. This large cap index is highly correlated with the S&P 500
Index. The Russell 1000 Value Index contains stocks from the Russell 1000 Index
with a less-than-average growth orientation. It represents the universe of
stocks from which value managers typically select.
38
<PAGE>
The Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all quasi-
federal corporations; and all corporate debt guaranteed by the U.S. Government.
Mortgage backed securities, flower bonds and foreign targeted issues are not
included in the SL Government Index.
The Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,000 bonds. To be included in the SL Government/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher by a nationally recognized rating
agency.
The Merrill Lynch U.S. Treasury Intermediate-term Index is an
unmanaged index of ten U.S. Treasury securities with maturities ranging from 10
to 14.99 years. Over the ten year period from December 31, 1985 to December 31,
1995, according to the Merrill Lynch U.S. Treasury Intermediate-term Index, 18%
of Total Return was derived from price appreciation and 82% of Total Return
was derived from income.
BanXquote Money Market, a service of Masterfund Inc., provides the
average rate of return paid on 3 month certificates of deposit offered by major
banks and the average rate paid by major banks on bank money market funds. The
Donoghue Organization, Inc. a subsidiary of IBC USA Inc., publishes the Money
Fund Report which lists the 7 day average yield paid on money market funds.
From time to time, the Trust may use, in its advertisements or
information furnished to present or prospective shareholders, data concerning
the performance and ranking of certain countries' stock markets, including
performance and ranking data based on annualized returns over one, three, five
and ten-year periods. The Trust may also use data about the portion of world
equity capitalization represented by U.S. securities. As of December 31, 1995,
the U.S. equity market capitalization represented approximately 30% of the
equity market capitalization of all the world's markets. This compares with 52%
in 1980 and 70% in 1972.
From time to time, the Trust may use, in its advertisements and other
information relating to the Equity Income, Value, Summit, Growth, Target,
Discovery, Opportunity, Innovation, International and Emerging Markets Funds,
data concerning the performance of stocks relative to that of fixed income
investments and relative to the cost of living over various periods of time.
The table below sets forth the annual returns for each calendar year from 1970
through 1994 (as well as a cumulative return and average annual return for that
25 year period) for the
39
<PAGE>
Standard & Poor's 500 Stock Index (the "S&P 500 Index") and Treasury bills
(using the formula set forth after the table) as well as the rates of inflation
(based on the Consumer Price Index) during such periods.
<TABLE>
<CAPTION>
S&P 500 Consumer Price
Period Index Treasury Bills Index
- ------ ----- -------------- ------------
<S> <C> <C> <C>
1971 14.3% 4.4% 3.4%
1972 18.9 3.8 3.4
1973 -14.7 6.9 8.8
1974 -26.5 8.0 12.2
1975 37.2 5.8 7.0
1976 23.8 5.0 4.8
1977 -7.2 5.1 6.8
1978 6.5 7.2 9.0
1979 18.4 10.4 13.3
1980 32.4 11.2 12.4
1981 -4.9 14.7 8.9
1982 21.4 10.5 3.8
1983 22.5 8.8 3.8
1984 6.3 9.9 3.9
1985 32.2 7.7 3.8
1986 18.5 6.1 1.1
1987 5.2 5.5 4.4
1988 16.8 6.3 4.4
1989 31.5 8.4 4.6
1990 -3.2 7.8 6.1
1991 30.5 5.6 3.1
1992 7.7 3.5 2.9
1993 10.1 2.9 2.7
1994 1.3 3.9 2.7
1995 37.4 5.6 2.7
- --------------------------------------------------------------------------------
Cumulative Return
1971-1995 1683.3% 439.5% 286.1%
- --------------------------------------------------------------------------------
Average Annual Return
1971-1995 12.2% 7.2% 5.6%
- --------------------------------------------------------------------------------
</TABLE>
The average returns for Treasury bills were computed using the following
method. For each month during a period, the Treasury bill having the shortest
remaining maturity (but not less than one month) was selected. (Only the
remaining maturity was considered; the bill's original maturity was not
considered). The return for the selected Treasury bill was computed based on
the price of the bill as of the last trading day of the previous month and the
price on the last trading day of the current month. The price of the bill (P)
at each time (t) is given by
P\t\ = [1- rd ]
[ ---- ]
[ 360 ]
where,
r = decimal yield on the bill at time t (the average of bid and ask
quotes); and
d = the number of days to maturity as of time t.
40
<PAGE>
Advertisements and information relating to the Target Fund may use data
comparing the performance of stocks of medium-sized companies to that of other
companies. The following table sets forth the annual returns for each year from
March 1981 (inception of Mid-Cap Index) through 1995 (as well as a cumulative
return and average annual return for this period) for stocks of medium-sized
companies (based on the Standard & Poor's Mid-Cap Index), stocks of small
companies (based on the Russell 2000 Index) and stocks of larger companies
(based on the S&P 500 Index).
<TABLE>
<CAPTION>
Small Mid-Sized Large
Period Companies Companies Companies
- ------ --------- --------- ---------
<S> <C> <C> <C>
1981 (2/28 -12/31) 1.8 10.6 -2.5
1982 25.0 22.7 21.4
1983 29.1 26.1 22.5
1984 -7.3 1.2 6.3
1985 31.1 36.0 32.2
1986 5.7 16.2 18.5
1987 -8.8 -2.0 5.2
1988 24.9 20.9 16.8
1989 16.2 35.6 31.5
1990 -19.5 -5.1 -3.2
1991 46.1 50.1 30.5
1992 18.4 11.9 7.7
1993 18.9 14.0 10.1
1994 -1.8 -3.6 1.3
1995 28.4 30.9 37.6
- -----------------------------------------------------------
Cumulative Return
2/28/81-12/31/95 483.4% 903.6% 714.30%
- -----------------------------------------------------------
Average Annual Return
2/28/81-12/31/95 12.6% 16.8% 15.2%
- -----------------------------------------------------------
</TABLE>
From time to time, the Trust may use, in its advertisements and other
information relating to the Precious Metals Fund, data concerning the relevant
performance and volatility of portfolios consisting of all stocks, portfolios
consisting of all bonds and portfolios consisting of stocks and bonds blended
with stocks of companies engaged in the extraction, processing, distribution or
marketing of gold and other precious metals. The following table shows the
annual returns for each calendar year from 1970 through 1994 (as well as
cumulative return and average annual return for that 25 year period) for an
all-stock portfolio (using the S&P 500 Index), an all-bond portfolio (using the
Salomon Brothers Long Term Corporate Bond Index), and for a hypothetical
portfolio with 45% of its assets in stocks comprising the S&P 500 Index, 45% in
bonds comprising the Salomon Brothers Long Term Corporate Bond Index and 10% in
stocks comprising the Morgan Stanley Capital International Gold Mining Index.
(Information for the calendar year ended 1995 was not available on the date of
this Statement of Additional Information).
41
<PAGE>
<TABLE>
<CAPTION>
Stocks 45%
All All Bonds 45%
Period Stocks Bonds Gold Stocks 10%
- ------ ------ ----- ---------------
<S> <C> <C> <C>
1971 14.3 11.0 10.4
1972 19.0 7.3 15.5
1973 -14.7 1.1 4.2
1974 -26.5 -3.1 -10.9
1975 37.5 14.6 20.4
1976 23.8 18.6 15.0
1977 -7.2 1.7 .5
1978 6.5 0.00 3.4
1979 18.4 -4.2 21.3
1980 32.4 -2.6 19.3
1981 -4.9 -0.1 -6.0
1982 21.4 43.8 33.9
1983 22.5 4.7 12.0
1984 6.3 16.4 7.2
1985 32.2 30.9 26.2
1986 18.5 19.8 18.5
1987 5.2 -0.02 6.6
1988 16.8 10.7 9.1
1989 31.5 16.2 26.4
1990 -3.2 6.8 -1.0
1991 30.5 19.9 21.8
1992 7.7 9.4 4.9
1993 10.1 13.2 23.5
1994 1.3 -5.8 -3.1
1995 37.4 27.2 29.7
- ---------------------------------------------------------------------------
Cumulative Return
1971-1995 1683.3% 899.6% 1504.3%
- ---------------------------------------------------------------------------
Average Annual Return
1971-1995 12.2% 9.6% 11.7%
===========================================================================
</TABLE>
42
<PAGE>
Advertisements and information relating to the Global Income Fund may
use data comparing the total returns of the top foreign bond market as compared
to the total return of the U.S. bond market for a particular year. For instance,
the following table sets forth the total return of the top foreign bond market
compared to the total return for the U.S. bond market for the years 1986 through
1995. Performance is shown in U.S. dollar terms, hedged for currency rate
changes and is no way indicative of the performance of the Global Income
Fund.
<TABLE>
<CAPTION>
Top Foreign
Year Performer U.S.
---- ----------- -----
<S> <C> <C> <C>
1986 +13.1% Japan +15.7%
1987 +12.8 UK +1.9
1988 +15.0 France +7.0
1989 +10.0 Canada +14.4
1990 +11.0 Australia +8.6
1991 +20.0 Australia +15.3
1992 +10.5 UK +7.2
1993 +20.0 Italy +11.0
1994 -0.9 Japan -3.4
1995 +21.0 Netherlands +18.3
</TABLE>
Source: Salomon Brothers World Government Bond Index 1985-1995.
The Trust may use, in its advertisements and other information, data
concerning the projected cost of a college education in future years based on
1993/1994 costs of college and an assumed rate of increase for such costs. For
example, the table below sets forth the projected cost of four years of college
at a public college and a private college assuming a steady increase in both
cases of 7% per year. In presenting this information, the Trust is making no
prediction regarding what will be the actual growth rate in the cost of a
college education, which may be greater or less than 7% per year and may vary
significantly from year to year. The Trust makes no representation that an
investment in any of the Funds will grow at or above the rate of growth of the
cost of a college education. (Information based on 1994/1995 costs was not
available on the date of this Statement of Additional Information).
<TABLE>
<CAPTION>
POTENTIAL COLLEGE COST TABLE
Start Public Private Start Public Private
Year College College Year College College
- ---- ------- ------- ---- ------- -------
<S> <C> <C> <C> <C> <C>
1996 $33,761 $ 86,035 2004 $58,007 $147,817
1997 $36,124 $ 92,057 2005 $62,067 $158,165
1998 $38,653 $ 98,501 2006 $66,412 $169,237
1999 $41,358 $105,396 2007 $71,061 $181,084
2000 $44,253 $112,774 2008 $76,035 $193,761
2001 $47,351 $120,668 2009 $81,357 $207,325
2002 $50,665 $129,115 2010 $87,051 $221,838
2003 $54,212 $138,146 2011 $93,143 $237,367
</TABLE>
Costs assume a steady increase in the annual cost of college of 7% per year
from a 1993-94 base year amount. Actual rates of increase may be more or less
than 7% and may vary.
43
<PAGE>
In its advertisements and other materials, the Trust may compare the returns
over periods of time of investments in stocks, bonds and treasury bills to each
other and to the general rate of inflation. For example, the average annual
return of each during the 25 years from 1971 to 1995 was:
<TABLE>
<S> <C>
*Stocks: 12.2%
Bonds: 9.6%
T-Bills: 7.2%
Inflation: 5.6%
</TABLE>
*Returns of unmanaged indices do not reflect past or future performance of
any of the Funds of PIMCO Advisors Funds. Stocks is represented by Ibbotson's
Common Stock Total Return Index. Bonds are represented by Ibbotson's Long-term
Corporate Bond Index. T-bills are represented by Ibbotson's Treasury Bill
Index and Inflation is represented by the Cost of Living Index. These are all
unmanaged indices, which can not be invested in directly. While Treasury bills
are insured and offer a fixed rate of return, both the principal and yield of
investment securities will fluctuate with changes in market conditions.
Source: Ibbotson, Roger G., and Rex A. Sinquefiled, Stocks, Bonds, Bill and
Inflation (SBBI), 1989, updated in Stocks, Bonds, Bills and Inflation 1996
Yearbook, Ibbotson Associates, Chicago. All rights reserved.
The Trust may also compare the relative historic returns and range of
returns for an investment in each of common stocks, bonds and treasury bills to
a portfolio that blends all three investments. For example, over the 25 years
from 1971-1995, the average annual return of stocks comprising the Ibbotson's
Common Stock Total Return Index ranged from -26.5% to 37.4% while the annual
return of a hypothetical portfolio comprised 40% of such common stocks, 40% of
bonds comprising the Ibbotson's Long-term Corporate bond Index and 20% of
Treasury bills comprising the Ibbottson's Treasury Bill Index (a "mixed
portfolio") would have ranged from -10.2% to 28.2% over the same period. The
average annual returns of each investment for each of the years from 1971
through 1995 is set forth in the following table.
44
<PAGE>
<TABLE>
<CAPTION>
MIXED
YEAR STOCKS BONDS T-BILLS INFLATION PORTFOLIO
- ------ ------ ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
1971 14.31% 11.01% 4.39% 3.36% 11.01%
1972 18.98% 7.26% 3.84% 3.41% 11.26%
1973 -14.66% 1.14% 6.93% 8.80% -4.02%
1974 -26.47% -3.06% 8.00% 12.26% -10.21%
1975 37.20% 14.64% 5.80% 7.01% 21.90%
1976 23.84% 18.65% 5.08% 4.81% 18.01%
1977 -7.18% 1.71% 5.12% 6.77% -1.17%
1978 6.56% -0.07% 7.18% 9.03% 4.03%
1979 18.44% -4.18% 10.38% 13.31% 7.78%
1980 32.42% 2.61% 11.24% 12.40% 14.17%
1981 -4.91% -0.96% 14.71% 8.94% 0.59%
1982 21.41% 43.79% 10.54% 3.87% 28.19%
1983 22.51% 4.70% 8.80% 3.80% 12.64%
1984 6.27% 16.39% 9.85% 3.95% 11.03%
1985 32.16% 30.90% 7.72% 3.77% 26.77%
1986 18.47% 19.85% 6.16% 1.13% 16.56%
1987 5.23% -0.27% 5.46% 4.41% 3.08%
1988 16.81% 10.70% 6.35% 4.42% 12.28%
1989 31.49% 16.23% 8.37% 4.65% 20.76%
1990 -3.17% 6.87% 7.52% 6.11% 2.98%
1991 30.55% 19.79% 5.88% 3.06% 21.31%
1992 7.67% 9.39% 3.51% 2.90% 7.53%
1993 10.06% 13.17% 2.89% 2.75% 9.84%
1994 1.31% -5.76% 3.90% 2.67% -1.00%
1995 37.40% 27.20% 5.60% 2.70% 26.90%
</TABLE>
Returns of unmanaged indices do not reflect past or future performance
of any of the Funds of PIMCO Advisors Funds. Stocks is represented by
Ibbotson's Common Stock Total Return Index. Bonds are represented by
Ibbotson's Long-term Corporate Bond Index. T'bills are represented by
Ibbotson's Treasury Bill Index and Inflation is represented by the Cost
of Living Index. These are all unmanaged indices, which can not be
invested in directly. While Treasury bills are insured and offer a
fixed rate of return, both the principal and yield of investment
securities will fluctuate with changes in market conditions. Source:
Ibbotson, Roger G., and Rex A. Sinquefiled, Stocks, Bonds, Bill and
Inflation (SBBI), 1989, updated in Stocks, Bonds, Bills and Inflation
1996 Yearbook, Ibbotson Associates, Chicago. All rights reserved.
The Trust may use in its advertisement and other materials examples
designed to demonstrate the effect of compounding when an investment is
maintained over several or many years. For example, the following table shows
the annual and total contributions necessary to accumulate $200,000 of savings
(assuming a fixed rate of return) over various periods of time:
45
<PAGE>
<TABLE>
<CAPTION>
Investment Annual Total Total
Period Contribution Contribution Saved
------ ------------ ------------ -----
<S> <C> <C> <C>
30 Years $ 1,979 $ 59,370 $200,000
25 Years $ 2,955 $ 73,875 $200,000
20 Years $ 4,559 $ 91,180 $200,000
15 Years $ 7,438 $111,570 $200,000
10 Years $13,529 $135,290 $200,000
</TABLE>
This hypothetical example assumes a fixed 7% return compounded
annually and a guaranteed return of principal. The example is
intended to show the benefits of a long-term, regular investment
program, and is in no way representative of any past or future
performance of a PIMCO Advisors Fund. There can be no guarantee
that you will be able to find an investment that would provide such
a return at the times you invest and an investor in any of the
PIMCO Advisors Funds should be aware that certain of the PIMCO
Advisors Funds have experienced periods of negative growth in the
past and may again in the future.
The Trust may set forth in its advertisements and other materials
information regarding the relative reliance in recent years on personal savings
for retirement income versus reliance on Social Security benefits and company
sponsored retirement plans. For example, the following table offers such
information for 1990:
<TABLE>
<CAPTION>
% of Income for Individuals
Aged 65 Years and Older in 1990*
-------------------------------
Social Security
Year and Pension Plans Other
- ---- ----------------- -----
<S> <C> <C>
1990 38% 62%
</TABLE>
* For individuals with an annual income of at least $51,000. Other
includes personal savings, earnings and other undisclosed sources of
income. Source: Social Security Administration.
Articles or reports which include information relating to performance,
rankings and other characteristics of the Funds may appear in various national
publications and services including, but not limited to: The Wall Street
Journal, Barron's, Pensions and Investments, Forbes, Smart Money, Mutual Fund
Magazine, The New York Times, Kiplinger's Personal Finance, Fortune, Money
Magazine, Morningstar's Mutual Fund Values, CDA Investment Technologies and The
Donoghue Organization. Some or all of these publications or reports may publish
their own rankings or performance reviews of mutual funds, including the Funds,
and may provide information relating to the Manager and the Funds' sub-advisers,
including descriptions of assets under management and client base, and opinions
of the author(s) regarding the skills of personnel and employees of the Manager
or the Funds' sub-advisers who have portfolio management responsibility. From
time to time, the Trust may include references to or reprints of such
publications or reports in its advertisements and other information relating to
the Funds.
From time to time, the Trust may set forth in its advertisements and
other materials information about the growth of a certain dollar-amount invested
in one or more of the Funds over a specified period of time and may use charts
and graphs to display that growth.
Ibbotson Associates ("Ibbotson") has analyzed the risk and returns of
the Funds and relevant benchmark market indices in a variety of market
conditions. Based on its independent research and analysis, Ibbotson has
developed model portfolios of the Funds which indicate how, in Ibbotson's
opinion, a hypothetical investor with a 5+ year investment horizon might
allocate his or her assets among the Funds. Ibbotson bases its model portfolios
46
<PAGE>
on five levels of investor risk tolerance which it developed and defines as
ranging from "Very Conservative" (low volatility; emphasis on capital
preservation, with some growth potential) to "Very Aggressive" (high volatility;
emphasis on long-term growth potential). For instance, Ibbotson developed the
following model portfolios for the Funds: (1) "Very Conservative" - 10% in
Equity Income Fund, 5% in Value Fund, 5% in Growth Fund, 5% in International
Fund, 15% in U.S. Government Fund and 60% in Short-Intermediate Fund; (2)
"Conservative" - 10% in Value Fund, 5% in Growth Fund, 15% in Target Fund, 10%
in International Fund, 25% in U.S. Government Fund and 35% in Short-Intermediate
Fund; (3) "Moderate"-20% in Value Fund, 10% in Growth Fund, 15% in Target Fund,
15% in International Fund, 15% in Total Return Income Fund and 25% in Short-
Intermediate Fund; (4) "Aggressive" - 15% in Value Fund, 10% in Growth Fund, 15%
in Target Fund, 15% in Discovery Fund, 20% in International Fund, 15% in Total
Return Income Fund and 10% in Short-Intermediate Fund; and (5) "Very
Aggressive" -10% in Value Fund, 10% in Growth Fund, 15% in Target Fund, 30% in
Discovery Fund, 25% in International Fund and 10% in Total Return Income Fund.
From time to time, the Trust may include model portfolios developed by Ibbotson
in its advertisements and other materials relating to the Funds. However,
neither Ibbotson nor the Trust offers Ibbotson's model portfolios as
investments. Moreover, neither the Trust, the Manager, the Funds' sub-advisers
nor Ibbotson represent or guarantee that investors who allocate their assets
according to Ibbotson's models will achieve their desired investment results.
DISTRIBUTIONS
-------------
Distributions from Net Investment Income
- ----------------------------------------
As described in the Prospectus under the caption "Distributions," each
Fund pays out substantially all of its net investment income, dividends and
interest it receives from its investments. It is the current policy of the Trust
to declare distributions from net investment income of the U.S. Government,
Short-Intermediate, High Income, Global Income, Total Return Income, Tax Exempt
and Money Market Funds daily and pay such distributions monthly. If a
shareholder redeems shares before a monthly dividend is paid, redemption
proceeds will include daily dividends which have been declared but not paid. It
is the current policy of the Trust to declare and pay distributions from net
investment income of the Equity Income and Value Funds quarterly, and of the
Summit, Growth, Discovery, Opportunity, Target, Innovation, Precious
Metals, International and Emerging Markets Funds annually.
Distributions of Net Short-Term Capital Gains
- ---------------------------------------------
As described in the Prospectus, it is the Trust's policy to distribute
substantially all the net realized short-term capital gains, if any, of each
Fund. The U.S. Government, Short-Intermediate, High Income, Global Income, Total
Return Income, Equity Income, Summit, Tax Exempt, Value, Growth, International,
Emerging Markets, Precious Metals, Innovation, Discovery, Opportunity, and
Target Funds will distribute their net short-term capital gains annually. The
Money Market Fund will distribute any net realized short-term capital gains
annually but may distribute such gains more frequently if necessary in order to
maintain a net asset value of $1.00 per share for the shares of that Fund.
Distributions from Net Realized Capital Gains.
- ---------------------------------------------
As described in the Prospectus, the Trust's policy is to distribute
substantially all of the net realized capital gain, if any, of each Fund, after
giving effect to any available capital loss carryover. Net realized capital gain
for any Fund is the excess of net realized long-term capital gain over net
realized short-term capital loss. Each Fund of the Trust is treated as a
separate entity for federal income tax purposes and accordingly its net realized
gains or losses will be determined separately, and its capital loss carryovers
will be determined and applied on a separate Fund basis. Each of the Funds
distributes its net realized capital gains annually, although the Money Market
Fund may distribute any net realized long-term capital gains more frequently if
necessary in order to maintain a net asset value of $1.00 per share for the
shares of that Fund.
47
<PAGE>
Sixty percent of any gain or loss realized by any Fund (i) from net
premiums from expired listed options and from closing purchase transactions,
(ii) with respect to listed options upon the exercise thereof, and (iii) from
transactions in futures contracts and listed options thereon generally will
constitute long-term capital gains or losses and the balance will be short-term
gains or losses. Distributions of long-term capital gains, if designated as such
by the Trust, are taxable to shareholders as long-term capital gain, regardless
of how long a shareholder has held shares.
Since Funds which invest in "pay-in-kind" securities or zero coupon
securities will not receive cash interest payments thereon, to the extent
shareholders of these Funds elect to take their distributions in cash, the
relevant Fund may have to generate the required cash from the disposition of
non-zero coupon securities, or possibly from the disposition of some of its zero
coupon securities.
TAXES
-----
The tax status of the Trust and the distributions which it may make
are summarized in the text of the Prospectus immediately following the caption
"Taxes." Except for exempt-interest dividends paid by the Tax Exempt Fund, as
described in the Prospectus, all dividends and distributions of a Fund, whether
received in shares or cash, are taxable and must be reported on each
Shareholder's federal income tax return. A dividend or capital gains
distribution received after the purchase of a Fund's shares reduces the net
asset value of the shares by the amount of the dividend or distribution and will
be subject to federal income taxes.
Each Fund intends to qualify each year as a "regulated investment
company" under Subchapter M of the Internal Revenue Code (the "Code"). In order
so to qualify, each Fund must, among other things, (a) derive at least 90% of
its gross income from dividends, interest, payments with respect to certain
securities loans, and gains from the sale of stock, securities and foreign
currencies, or other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; (b) derive less than 30% of its gross
income from gains from the sale or other disposition of certain assets held for
less than three months; (c) each year distribute at least 90% of its dividend,
interest (including tax-exempt interest), certain other income and the excess,
if any, of its net short-term capital gains over its net long-term capital
losses; and (d) diversify its holdings so that, at the end of each fiscal
quarter (i) at least 50% of the market value of the Fund's assets is represented
by cash items, U.S. Government securities, securities of other regulated
investment companies, and other securities, limited in respect of any one issuer
to a value not greater than 5% of the value of the Fund's total assets and 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its assets is invested in the securities (other than those of
the U.S. Government or other regulated investment companies) of any one issuer
or of two or more issuers which the Fund controls and which are engaged in the
same, similar or related trades or businesses. Under the 30% of gross income
test described above, the Fund will be restricted from selling certain assets
held (or considered under Code rules to have been held) for less than three
months, and in engaging in certain hedging transactions (including hedging
transactions in futures and options) that in some circumstances could cause
certain Fund assets to be treated as held for less than three months. By so
qualifying, each Fund will not be subject to federal income taxes to the extent
that its net investment income, net realized short-term capital gains and net
realized long-term capital gains are distributed.
The Tax Exempt Fund must have at least 50% of its total assets
invested in Tax Exempt Bonds at the end of each calendar quarter so that
dividends derived from its net interest income on Tax Exempt Bonds and so
designated by the Fund will be "exempt-interest dividends," which are exempt
from federal income tax when received by an investor. Certain exempt-interest
dividends, as described in the Prospectus, may increase alternative minimum
taxable income for purposes of determining a shareholder's liability for the
alternative minimum tax. In addition, exempt-interest dividends allocable to
interest from certain "private activity bonds" will not be tax exempt for
purposes of the regular income tax to shareholders who are "substantial users"
of the facilities financed by such obligations or "related persons" of such
"substantial users." The tax-exempt portion of dividends paid for a calendar
year constituting "exempt-interest dividends" will be designated after the end
of that year and will be based upon the ratio of net tax-exempt income to total
net income earned by the Fund during the entire year. That ratio may be
substantially different than the ratio of net tax-exempt income to total net
income
48
<PAGE>
earned during a portion of the year. Thus, an investor who holds shares
for only a part of the year may be allocated more or less tax-exempt interest
dividends than would be the case if the allocation were based on the ratio of
net tax-exempt income to total net income actually earned by the Fund while the
investor was a shareholder. All or a portion of interest on indebtedness
incurred or continued by a shareholder to purchase or carry shares of the Tax
Exempt Fund will not be deductible by the shareholder. The portion of interest
that is not deductible is equal to the total interest paid or accrued on the
indebtedness multiplied by the percentage of the Fund's total distributions (not
including distributions of the excess of net long-term capital gains over net
short-term capital losses) paid to the shareholder that are exempt-interest
dividends. Under rules used by the Internal Revenue Service for determining when
borrowed funds are considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to have been made
with borrowed funds even though such funds are not directly traceable to the
purchase of shares.
Shareholders of the Tax Exempt Fund receiving social security or
railroad retirement benefits may be taxed on a portion of those benefits as a
result of receiving tax exempt income (including exempt-interest dividends
distributed by the Fund). The tax may be imposed on up to 50% of a recipient's
benefits in cases where the sum of the recipient's adjusted gross income (with
certain adjustments, including tax-exempt interest), exceeds a base amount. In
addition, beginning in 1994, up to 85% of a recipient's benefits may be subject
to tax if the recipient's adjusted gross income (with certain adjustments,
including tax-exempt interest), exceeds a higher base amount. Shareholders
receiving social security or railroad retirement benefits should consult with
their tax advisors.
In years when a Fund distributes amounts in excess of its earnings and
profits, such distributions may be treated in part as a return of capital. A
return of capital is not taxable to a shareholder and has the effect of reducing
the shareholder's basis in the shares. Since certain of the Tax Exempt Fund's
expenses attributable to earning tax-exempt income do not reduce such Fund's
current earnings and profits, it is possible that distributions, if any, in
excess of such Fund's net tax-exempt and taxable income will be treated as
taxable dividends to the extent of such Fund's remaining earnings and profits
(i.e., the amount of such expenses).
- -----
The proper tax treatment of income or loss realized by the Precious
Metals Fund from the retirement or sale of a Metal-Indexed Note is unclear. The
Precious Metals Fund will report such income or loss as capital or ordinary
income or loss in a manner consistent with any Internal Revenue Service position
on the subject following the publication of such a position. Gain or loss from
the sale or exchange of preferred stock indexed to the price of a natural
resource is expected to be capital gain or loss to the Precious Metals
Fund.
Hedging Transactions
- --------------------
If a Fund engages in transactions, including hedging transactions, in
options, futures contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including mark-to-market, straddle, wash
sale, and short sale rules), the effect of which may be to accelerate income to
the Fund, defer losses to the Fund, cause adjustments in the holding periods of
the Fund's securities, and convert short-term capital losses into long-term
capital losses. These rules could therefore affect the amount, timing and
character of distributions to shareholders. A Fund engaging in such
transactions will endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interests of the Fund.
Certain of a Fund's hedging activities (including its transactions in
foreign currencies) are likely to produce a difference between its book income
and its taxable income. If a Fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as a dividend to the extent
of the Fund's remaining earnings and profits, and thereafter as a return of
capital or as gain from the sale or exchange of a capital asset, as the case may
be. If the Fund's book income is less than its taxable income, the Fund could be
required to make distributions exceeding book income to qualify as a regulated
investment company that is accorded special tax treatment.
Under the 30% of gross income test described above, a Fund will be
restricted in selling assets held or considered under Code rules to have been
held for less than three months, and in engaging in certain hedging
49
<PAGE>
transactions (including hedging transactions in options and futures) that in
some circumstances could cause certain Fund assets to be treated as held for
less than three months.
Foreign Currency-Denominated Securities and Related Hedging Transactions
- ------------------------------------------------------------------------
A Fund's transactions in foreign currency-denominated debt securities,
certain foreign currency options, futures contracts and forward contracts may
give rise to ordinary income or loss to the extent such income or loss results
from fluctuations in the value of the foreign currency concerned.
For federal income tax purposes, distributions paid from net
investment income and from any net realized short-term capital gain (including
premiums from expired options and gains from any closing purchase transactions
with respect to options written by the Trust for any Fund) are taxable to
shareholders as ordinary income, whether received in cash or in additional
shares.
It is not expected that any of the distributions from the Tax Exempt,
U.S. Government or Money Market Funds will qualify for the dividends-received
deduction for corporations. A portion of the dividends paid by the Value,
Growth, International, Emerging Markets, Innovation, Global Income, High Income,
Total Return Income, Short-Intermediate, Precious Metals, Equity Income, Summit,
Discovery, Opportunity, and Target Funds may qualify for the dividends-received
deduction for corporations to the extent that each such Fund's gross income
(exclusive of net realized capital gains) was derived from qualifying dividends
from domestic corporations and meets the applicable holding period
requirements.
Annually, shareholders will receive information as to the tax status
of distributions made by the Trust in each calendar year.
In general, any gain or loss realized upon a taxable disposition of
Fund shares by a shareholder will be treated as long-term capital gain or loss
if the shares have been held for more than twelve months, and otherwise as
short-term capital gain or loss. However, if a shareholder buys Fund shares and
redeems them at a loss within six months, any loss will be disallowed for
federal income tax purposes to the extent of any exempt-interest dividends
received on such shares. In addition, any loss (not already disallowed as
provided in the preceding sentence) realized upon a taxable disposition of
shares held for six months or less will be treated as long-term, rather than
short-term, capital loss to the extent of any long-term capital gain
distributions received by the shareholder with respect to those shares. All or a
portion of any loss realized upon a taxable disposition of Fund shares will be
disallowed if other Fund shares are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased shares will be
adjusted to reflect the disallowed loss.
The Trust is required to withhold and remit to the U.S. Treasury 31%
of all dividend income earned by any shareholder account for which an incorrect
or no taxpayer identification number has been provided or where the Trust is
notified that the shareholder has under-reported income in the past (or the
shareholder fails to certify that he is not subject to such withholding). In
addition, the Trust will be required to withhold and remit to the U.S. Treasury
31% of the amount of the proceeds of any redemption of shares of a shareholder
account for which an incorrect or no taxpayer identification number has been
provided. However, a Fund will not have to withhold any such amount if it can
reasonably estimate that 95% or more of its income for that year will be
tax-exempt.
The foregoing relates to federal income taxation. Distributions from
investment income and capital gains may also be subject to state and local
taxes. The Trust is organized as a Massachusetts business trust. Under current
law, so long as each Fund qualifies for the federal income tax treatment
described above, it is believed that neither the Trust nor any Fund will be
liable for any income or franchise tax imposed by Massachusetts.
50
<PAGE>
MANAGEMENT OF THE TRUST
-----------------------
Trustees and Officers
- ---------------------
E. Philip Cannon. Trustee of the Trust. Trustee of Cash Accumulation
----------------
Trust. Headmaster, St. John's School, Houston, Texas. Formerly General
Partner, J.B. Poindexter & Co., Houston, Texas (private investment
partnership) and Partner, Iberia Petroleum Company (oil and gas
production).
Donald P. Carter. Trustee of the Trust. Trustee of Cash Accumulation
----------------
Trust. Retired Chairman of Cunningham & Walsh, Inc., Chicago
(advertising agency). Chairman, Modu-Line Industries, Inc.
Gary A. Childress. Trustee of the Trust. Trustee of Cash
-----------------
Accumulation Trust. Chairman and Director, Bellefonte Lime Company,
Inc. Director, Woodings & Verona Toolworks Inc.
Gary L. Light. Trustee of the Trust. Trustee of Cash Accumulation
-------------
Trust. President, E.V.A. Investors (private investments).
Joel Segall. Trustee of the Trust. Trustee of Cash Accumulation
-----------
Trust. Former President, Bernard M. Baruch College, The City
University of New York. Formerly, Deputy Under Secretary for
International Affairs, United States Department of Labor and Professor
of Finance, University of Chicago. Board of Managers, Coffee, Sugar
and Cocoa Exchange.
W. Bryant Stooks. Trustee of the Trust. Trustee of Cash Accumulation
----------------
Trust. Retired President, Director and CEO, Archirodon Group Inc.
Formerly, Partner, Arthur Andersen & Co.
Gerald M. Thorne. Trustee of the Trust. Trustee of Cash Accumulation
----------------
Trust. Retired President and Director, Firstar National Bank of
Milwaukee. Formerly , Chairman, Firstar National Bank of Sheboygan and
Director of other Firstar Banks.
* Robert A. Prindiville. Trustee and President of the Trust. Trustee
---------------------
and President of Cash Accumulation Trust . Vice President, PIMCO
Advisors L.P. Director and Chairman, PIMCO Advisors Distribution
Company ("PADCO"). Formerly, President, Thomson Advisory Group L.P.,
President and Director, Thomson Advisory Group Inc.
* William D. Cvengros. Trustee of the Trust. Trustee of Cash
-------------------
Accumulation Trust. President and CEO of PIMCO Advisors L.P. and
Member of the Equity and Operating Boards (and Chairman of its
Operating Committee) of PIMCO Advisors L.P. Director, PADCO. Trustee
and Chairman, PIMCO Funds: Equity Advisors Series. Formerly, Vice
Chairman, Chief Investment Officer and Director, Pacific Mutual Life
Insurance Company; Director and Chairman, Pacific Financial Asset
Management Company; Director, Mutual Service Corporation; Director,
Pacific Equities Network; Director, PFAMCo UK Limited; Non-Executive
Director, Blairlogie Capital Management Limited; Trustee and Vice
President, PFAMCo Funds; Chairman and Director, Parametric Portfolio
Associates, Inc.; President, Chairman, Chief Executive Officer,
Director and Trustee of various realty group trusts, and PMRealty
Advisors, Inc.; President, Chief Executive Officer and Director, NFJ
Investment Group, Inc.; Vice President and Trustee, Pacific Select
Fund; and Director, Cadence Capital Management Corporation.
51
<PAGE>
Newton B. Schott, Jr. Vice President and Clerk of the Trust and of
--------------------
Cash Accumulation Trust. Senior Vice President and Secretary of PIMCO
Advisors L.P., Director, Senior Vice President and Secretary of PADCO.
Formerly, Executive Vice President, Secretary and General Counsel,
Thomson Advisory Group L.P. and Thomson Advisory Group Inc., Executive
Vice President and Secretary, Thomson Investor Services Inc.,
Director, Executive Vice President, Secretary and General Counsel,
Thomson McKinnon Inc.
John O. Leasure. Vice President of the Trust and of Cash Accumulation
---------------
Trust. Senior Vice President of PIMCO Advisors L.P. Director,
President and Chief Executive Officer of PADCO. Formerly, Executive
Vice President of Thomson Advisory Group L.P.
R. Wesley Burns. Vice President of the Trust and of Cash Accumulation
---------------
Trust. President, PIMCO Funds. Vice President, Pacific Investment
Management Company. President, PIMCO commercial Mortgage Securities
Trust, Inc. Vice President, PIMCO Funds: Equity Advisors Series.
John P. Hardaway. Treasurer of the Trust and of Cash Accumulation
----------------
Trust. Treasurer, PIMCO Funds. Vice President and Manager of Fund
Operations, Pacific Investment Management Company. Treasurer, PIMCO
Commercial Mortgage Securities Trust, Inc. Vice President, PIMCO
Funds: Equity Advisors Series.
Teresa A. Wagner. Vice President and Assistant Clerk of the Trust and
----------------
of Cash Trust. Vice President, PIMCO Funds. Vice President, Pacific
Investment Management Company. Vice President, PIMCO Commercial
Mortgage Securities Trust, Inc. Vice President, PIMCO Funds: Equity
Advisors Series.
_______________
* Trustees who are "interested persons" (as defined in the Act) of
the Trust or the Manager.
The mailing address of each of the officers and Trustees is c/o the
PIMCO Advisors Funds, 2187 Atlantic Street, Stamford, Connecticut 06902.
Except as stated above, the principal occupations of the officers and
Trustees for the last five years have been with the employers as shown above,
although in some cases they have held different positions with such employers.
As noted, each of the Trustees is also a Trustee of Cash Accumulation Trust, a
registered investment company for which PIMCO Advisors L.P. serves as manager
and PIMCO Advisors Distribution Company serves as principal underwriter.
Prindiville, Cvengros, Schott, Leasure, Burns, Wagner And Hardaway, as
directors, officers or security holders of the Manager, the Distributor or their
affiliates, benefitted and will benefit from the management and distribution
fees and contingent deferred sales charges paid or allowed by the Trust but
receive no direct compensation from the Trust or Cash Accumulation Trust.
The Trust's Agreement and Declaration of Trust provides that the Trust
will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with the litigation in which they may be involved because
of their offices with the Trust, except if it is determined in the manner
specified in the Agreement and Declaration of Trust that they have not acted in
good faith in the reasonable belief that their actions were in the best
interests of the Trust or that such indemnification would relieve any officer or
Trustee of any liability to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his or her
duties. The Trust, at its expense, will provide liability insurance for the
benefit of its Trustees and officers.
52
<PAGE>
Board Compensation
- ------------------
The Trust does not pay any remuneration to Trustees who are interested
persons of the Trust or the Manager. The Trust and Cash Accumulation Trust
("CAT") have identical Boards of Trustees which generally hold meetings on the
same dates. During 1995, the Trustees of the Trust and CAT adopted a unified fee
plan, pursuant to which the common disinterested Trustees receive combined fees
for their services on behalf of both the Trust and CAT. The plan went into
effect on July 27, 1995.
For their services on behalf of the Trust and CAT, disinterested Trustees
receive an annual retainer of $35,000 and a fee of $3,000 for each meeting
attended. The Trustee who serves as chairman of the Contract Committees for the
Trust and CAT receives a combined annual fee of $6,000. The Chairman of the
Audit Committees for the Trust and CAT receives a combined annual fee of
$2,000 and each member of such Audit Committees receives a combined annual fee
of $1,000. Under the unified fee plan, Trustees fees and expenses are
allocated between the Trust and CAT, and among their constituent Fund(s), based
on relative net assets.
Fees paid to the disinterested Trustees for their services on behalf of the
Trust during the fiscal year ended September 30, 1995 (including the Trust's
allocable portion of fees paid under the unified fee plan) aggregated $201,990.
The following table sets forth information concerning fees paid (including the
Trust's allocable portion of fees paid under the unified fee plan) and
retirement benefits accrued during the fiscal year ended September 30, 1995 to
persons who served as disinterested Trustees of the Trust and CAT during such
year.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Pension or Retirement
Aggregate Benefits Accrued Estimated Annual Total Compensation
Name of Compensation as Part of Fund Benefits Upon from Trust and
Trustee from Trust/2/ Expenses/3/ Retirement/3/ Fund Complex Paid to
Trustees/4/
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E. Philip Cannon/1/ $ 24,650 $ 8,260 $ 12,000 $ 36,400
- ----------------------------------------------------------------------------------------------------------------------------
Gerald M. Thorne/1/ 24,650 8,260 12,000 36,400
- ----------------------------------------------------------------------------------------------------------------------------
Donald P. Carter 25,250 8,260 12,000 37,400
- ----------------------------------------------------------------------------------------------------------------------------
Gary A. Childress 24,650 8,260 12,000 36,400
- ----------------------------------------------------------------------------------------------------------------------------
Gary L. Light 26,100 8,260 12,000 38,650
- ----------------------------------------------------------------------------------------------------------------------------
Joel Segall 29,100 8,260 12,000 43,650
- ----------------------------------------------------------------------------------------------------------------------------
W. Bryant Stooks 25,250 8,260 12,000 37,400
- ----------------------------------------------------------------------------------------------------------------------------
Emmet Cashin, Jr./5/ 22,340 0 0 23,750/5/
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ All compensation earned by Messrs. Cannon and Thorne for the
fiscal year ended September 30, 1995 was deferred at their election.
/2/ Through September 30, 1995, the following amounts of deferred
compensation had been accrued for the following persons (including
amounts accrued in prior years) for their services on behalf of the
Trust and CAT: E. Philip Cannon - $58,950; Gerald M. Thorne - $74,350;
Donald P. Carter - $82,150; Gary L. Light - $70,159; Joel Segall -
$37,497; Emmet Cashin, Jr. - $91,430. A portion of the deferred
compensation listed for Messrs. Light and Segall
53
<PAGE>
accrued pursuant to 1987 Deferred Fee Agreements with the Trust and
CAT which were terminated effective December 14, 1995. These benefits
will be distributed to Messrs. Light and Segall during 1996.
/3/ The amounts listed in columns (3) and (4) relate to pension or
retirement benefits earned by the Trustees for their services on
behalf of the Trust for the fiscal year ended September 30, 1995
pursuant to a Trustees' Pension Plan (the "Pension Plan"). The Trust's
disinterested Trustees voted to terminate the Pension Plan as of
September 28, 1995 and to receive benefits that had accrued thereunder
in lump-sum payments in January of 1996. Therefore, it is currently
expected that no pension or retirement benefits will accrue for the
disinterested Trustees of the Trust and CAT in subsequent fiscal
periods. Accordingly, columns (3) and (4) of the Trust's Compensation
Tables relating to subsequent fiscal periods are expected to list $0
for each Trustee.
/4/ Includes total compensation paid to the Trustees for their
services on behalf of CAT.
/5/ Emmet Cashin, Jr. retired from the boards of the Trust and CAT
effective September 30, 1994 and received fees for services rendered
as a Trustee Emeritus of the Trust and CAT during the fiscal year
ended September 30, 1995. His total compensation from the Trust and
CAT (listed in column (5) above) includes retirement benefits which
had accrued in prior years under the Pension Plan described in
footnote 3 above.
The Manager
PIMCO Advisors L.P. (the "Manager") is the investment manager of each Fund.
Under written Management Contracts between the Trust and the Manager with
respect to each Fund, and subject to such policies as the Trustees of the Trust
may determine, the Manager has agreed to furnish at its own expense a continuous
investment program for each Fund, to make investment decisions on behalf of each
Fund and to place all orders for the purchase and sale of portfolio securities
for each Fund. Such investment management services will be provided subject to
the investment objective, policies and restrictions applicable to each
Fund.
As described below, the Manager has, in turn, delegated its investment
management responsibility under each Management Contract to a sub-adviser
pursuant to Sub-Adviser Agreements with respect to each Fund. So long as a Sub-
Adviser Agreement for a particular Fund remains in effect, the Manager's
obligation under the Management Contract regarding the investment management of
that Fund is, subject always to the control of the Trustees, generally to
determine, oversee and review with the applicable sub-adviser the investment
policies of the Fund. In the performance of its duties under each Management
Contract, the Manager will comply with the provisions of the Amended and
Restated Agreement and Declaration of Trust and By-laws of the Trust.
In addition to overseeing the sub-advisers, the Manager has agreed pursuant
to the Management Contracts and subject to the control of the Trustees to
manage, supervise and conduct the operations of the Funds, furnish office space
and equipment, provide bookkeeping and certain clerical services (excluding
services relating to the determination of net asset value and shareholder
accounting services ) and to pay all salaries, fees and expenses of officers and
Trustees of the Trust who are affiliated with the Manager. The Manager has, in
turn, delegated to Pacific Investment Management Company the responsibility to
provide all organizational, administrative and other services necessary for the
operations of the Funds as required by the Management Contracts other than the
investment management services required thereunder. See "The Administrator"
below.
As indicated under "Portfolio Transactions -- Brokerage and Research
Services", the Trust's portfolio transactions may be placed with broker-dealers
which furnish the Manager and the sub-advisers, without cost,
54
<PAGE>
certain research, statistical and quotation services of value to them or their
respective affiliates in advising the Funds or their other clients. In so doing,
the Funds may incur greater brokerage commissions than they might otherwise
pay.
The Manager's compensation under the Management Contracts with respect to
each Fund is subject to reduction to the extent that in any year the expenses of
such Fund exceed the limits on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of such Fund
are qualified for offer and sale. The term "expenses" is subject to
interpretation by each of such jurisdictions, and, generally speaking, excludes
brokerage commissions, taxes, interest, distribution-related expenses and
extraordinary expenses. Generally, this means that the distribution fees payable
to the Distributor under the Distribution Agreement would be excluded from
expenses. The most restrictive of such limitations as of the date of this
Statement of Additional Information is believed to be 2 1/2% of the first $30
million, 2% of the next $70 million, and 1 1/2% of any excess over $100
million.
Until November 1, 1994, there were sub-advisers for only the International
and Precious Metals Funds. For the fiscal years ended September 30, 1993, 1994
and 1995, the Manager received the following amounts from the Funds for its
services under the Management Contracts:
<TABLE>
<CAPTION>
Fund 1993 1994 1995
- ---- -------- -------- --------
<S> <C> <C> <C>
Equity Income $ 500,073 $ 1,191,587 $ 1,371,809
Value N/A N/A 14,916
Summit N/A N/A N/A
Growth 7,031,439 7,699,562 8,268,603
Target 938,756 3,685,196 5,294,008
Discovery N/A N/A 46,638
Opportunity 3,442,307 4,796,571 5,000,057
Innovation N/A N/A 265,836
International 480,988 2,160,604 2,097,974
Emerging Markets N/A N/A N/A
Precious Metals 115,085 400,895 434,323
Global Income N/A N/A N/A
High Income 1,504,881 1,334,363 962,851
Total Return N/A N/A 214,491
Tax-Exempt 399,148 489,220 369,918
U.S. Government 3,050,385 2,602,182 1,868,771
Short-Intermediate 717,843 575,600 382,196
Money Market 97,419* 238,845* 146,684
----------- ----------- -----------
Total $18,278,334 $25,174,625 $26,739,075
=========== =========== ===========
</TABLE>
____________
* Excluding a $160,471, $142,336 and $23,048 waiver with respect
to the fiscal years ended September 30, 1993, 1994, and 1995
respectively.
The Sub-Advisers
As described above, the Manager has delegated its investment management
responsibility under each Management Contract to a sub-adviser pursuant to Sub-
Adviser Agreements with respect to each Fund. The sub-advisers to the Funds are:
Columbus Circle Investors ("CCI") for the Equity Income, Growth, Target,
Opportunity, Innovation, Tax Exempt and Money Market Funds; Pacific Investment
Management Company for the Global Income, High Income, Total Return Income, U.S.
Government and Short-Intermediate Funds; Blairlogie Capital Management
("Blairlogie") for the International and Emerging Markets Funds; Van Eck
Associates Corporation ("Van Eck") for the Precious Metals Fund; Cadence Capital
Management ("Cadence") for the Summit and Discovery Funds; and NFJ Investment
Group ("NFJ") for the Value
55
<PAGE>
Fund (CCI, Pacific Investment Management Company, Blairlogie, Van Eck, Cadence
and NFJ are each referred to herein as a "Sub-Adviser," and collectively, as the
"Sub-Advisers"). With the exception of Van Eck, each Sub-Adviser is an affiliate
of the Manager.
Under each Sub-Adviser Agreement, subject always to the control of the
Trustees of the Trust, the Sub-Adviser is obliged to furnish continuously an
investment program for the relevant Fund, to make investment decisions on behalf
of the relevant Fund and to place all orders for the purchase and sale of
portfolio securities and all other investments for the relevant Fund. Each Sub-
Adviser performs its duties under the relevant Sub-Adviser Agreement subject to
the control of the Trustees, the policies determined by the Trustees, the
provisions of the Trust's Agreement and Declaration of Trust and By-laws and the
relevant investment objective, policies and restrictions applicable to each
Fund.
With the exception of Van Eck, none of the Sub-Advisers received advisory
fees from the Manager for services performed with respect to the Funds during
the fiscal years ended September 30, 1993 and 1994. For the fiscal year ended
September 30, 1995, the Sub-Advisers other than Van Eck received the following
amounts from the Manager for services performed on behalf of the Funds:
<TABLE>
<CAPTION>
COLUMBUS CIRCLE INVESTORS
Fund 1995
---- ----
<S> <C>
Equity Income $ 595,500
Growth 3,634,403
Target 2,353,106
Opportunity 2,205,293
Innovation 132,918
Tax Exempt 159,370
Money Market 52,002
<CAPTION>
PACIFIC INVESTMENT MANAGEMENT COMPANY
Fund 1995
---- ----
<S> <C>
Global Income $ NA
High Income 346,427
Total Return Income 72,024
U.S. Government 695,195
Short-Intermediate 147,687
<CAPTION>
BLAIRLOGIE CAPITAL MANAGEMENT
Fund 1995
---- ----
<S> <C>
International $ 889,339
Emerging Markets N/A
<CAPTION>
CADENCE CAPITAL MANAGEMENT
Fund 1995
---- ----
<S> <C>
Summit $ N/A
</TABLE>
56
<PAGE>
<TABLE>
<S> <C>
Discovery 23,319
<CAPTION>
NFJ INVESTMENT GROUP
Fund 1995
---- ----
<S> <C>
Value $ 7,458
</TABLE>
For the fiscal years ended September 30, 1993 and 1994, and for the period
from October 1, 1994 through November 15, 1994, the Manager paid the former sub-
adviser to the International Fund (the sub-adviser served from August 1, 1992 to
November 15, 1994) $240,499, $1,080,302 and $159,648, respectively, for its
services with respect to the International Fund. For the fiscal years ended
September 30, 1993, 1994 and 1995, the Manager paid Van Eck (the sub-adviser to
the Precious Metals Fund) $57,543, $200,448, and $217,162 respectively, for Van
Eck's services with respect to the Precious Metals Fund.
The Management Contracts and the Sub-Adviser Agreements for all of the
Funds were approved by the Trustees of the Trust (including all of the Trustees
who are not "interested persons" of the Manager or the Sub-Advisers). The
Management Contracts and the Sub-Adviser Agreements for the Funds will continue
in force with respect to the relevant Fund for two years from their respective
dates, and from year to year thereafter, but only so long as their continuance
is approved at least annually by (i) vote, cast in person at a meeting called
for that purpose, of a majority of those Trustees who are not "interested
persons" of the Manager, the Sub-Advisers or the Trust, and by (ii) the majority
vote of either the full Board of Trustees or the vote of a majority of the
outstanding shares of all classes of that Fund. Each of the Management Contracts
and the Sub-Adviser Agreements automatically terminates on assignment. The
Management Contracts may be terminated on not more than 60 days' notice by the
Manager to the Trust or by the Trust to the Manager. Each Sub-Adviser Agreement
with Pacific Investment Management Company, CCI, Van Eck, Cadence and NFJ is
terminable upon written notice by the Trust, may be terminated by the Manager on
not less than 60 days' notice to the Sub-Adviser and may be terminated by the
Sub-Adviser on not less than 180 days' notice to the Manager. The Sub-Adviser
Agreements with Blairlogie may be terminated upon notice by the Trust, may be
terminated by the Manager on not less than 45 days notice to the Sub-Adviser and
may be terminated by the Sub-Adviser on not less than 180 days' notice to the
Manager. The management fees and Sub-Adviser fees payable under the Management
Contracts and the Sub-Adviser Agreements are set forth in the Prospectus.
Each Management Contract and Sub-Adviser Agreement provides that the
Manager or Sub-Adviser shall not be subject to any liability in connection with
the performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
The Administrator
In addition to serving as a Sub-Adviser, Pacific Investment Management
Company serves as administrator to the Funds pursuant to an Administration
Agreement with the Manager (and is referred to herein as the "Administrator" in
such capacity). Subject to the general supervision of the Trustees of the Trust
and the Manager, the Administrator provides, at its own expense, all
organizational, administrative and other services necessary for the operations
of each Fund other than the investment management services provided by the
Manager and the Sub-Advisers as described above. The Manager pays the
Administrator a fee at the annual rate of .0125% of the average daily net assets
of each Fund for its services under the Administration Agreement.
The services provided by the Administrator under the Administration
Agreement include, but are not limited to: (i) coordinating matters relating to
the operation of each Fund, including any necessary coordination among the
Manager, the Sub-Advisers, the Custodian, the Transfer Agent, any
57
<PAGE>
dividend disbursing agent and recordkeeping agent (including pricing and
valuation of the Funds), accountants, attorneys, and other parties performing
services or operational functions for the Funds; (ii) providing the Funds with
the services of a sufficient number of persons competent to perform such
administrative and clerical functions as are necessary to ensure compliance with
federal securities laws, as well as other applicable laws, and to provide
effective administration of the Funds; (iii) maintaining, or supervising the
maintenance by third parties, of such books and records of the Trust and the
Funds as may be required by applicable federal or state law other than any
records and ledgers that the Manager maintains under the Management Contracts;
(iv) preparing or supervising the preparation by third parties of all federal,
state, and local tax returns and reports of the Funds required by applicable
law; (v) preparing, filing, and arranging for the distribution of proxy
materials and annual and semi-annual financial statements to shareholders of the
Funds as required by applicable law; (vi) preparing and arranging for the filing
of such registration statements and other documents with the SEC and other
federal and state regulatory authorities as may be required to register the
shares of the Funds and qualify the Trust to do business or as otherwise
required by applicable law; (vii) taking such other action with respect to the
Funds as may be required by applicable law including, without limitation, the
rules and regulations of the SEC and of state securities commissions and other
regulatory agencies; (viii) providing information about the Trust and the Funds;
and (ix) providing the Funds with adequate personnel, office space,
communications facilities, and other facilities necessary for the Funds'
operations. As described below, the Trust is responsible for any printing,
mailing and filing fee expenses relating to (v) and (vi) above.
The Administrator also assists the Trust in procuring at the Trust's
expense a custodian or custodians, a recordkeeping agent, a transfer agent and a
dividend disbursing agent for the Funds, and also makes its officers and
employees available to the Board of Trustees and officers of the Trust for
consultations and discussions regarding the administration of the Funds and the
services provided under the Administration Agreement.
The Administration Agreement took effect on January 1, 1996 and, unless
sooner terminated as provided below, will remain in effect for two years from
such date and will continue thereafter on an annual basis with respect to each
Fund. The Administration Agreement may be terminated at any time on 60 days'
written notice by the Manager to the Administrator or by the Administrator to
the Manager. The Administration Agreement will automatically terminate as to any
Fund if the Management Contract between the Manager and the Trust with respect
to such Fund terminates as provided above.
The Administration Agreement generally provides that the Administrator
shall not be subject to any liability to the Manager in connection with the
performance of its services thereunder in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties.
The Administration Agreement governs only the liability of the Administrator to
the Manager and not to the Trust or any other person.
Expenses
As described in the text of the Prospectus under the caption "Management of
the Trust," the Trust pays, in addition to the management fee described above,
all expenses not assumed by the Manager or the Administrator, including, without
limitation, fees and expenses of Trustees who are not "interested persons" of
the Manager or the Trust, interest charges, taxes, brokerage commissions,
expenses of issue or redemption of shares, distribution and servicing fees
pursuant to the Distribution and Servicing Plans, fees and expenses of
registering and qualifying the Trust and all three classes of shares of the
respective Funds for distribution under federal and state laws and regulations,
charges of custodians, auditing and legal expenses, expenses of determining net
asset value of all three classes of the Trust's shares, reports to shareholders,
expenses of meetings of shareholders, expenses of printing and mailing
prospectuses, proxy statements and proxies to existing shareholders, and its
proportionate share of insurance premiums and professional association dues or
assessments. The Trust is also responsible for such nonrecurring expenses as may
arise, including litigation in which the Trust may be a party, and other
expenses as determined by the Trustees. The Trust may have an
58
<PAGE>
obligation to indemnify its officers and Trustees with respect to such
litigation. The general Trust expenses are allocated among and charged to the
assets of each class of shares of each Fund on a basis that the Trustees deem
fair and equitable, which may be based on the relative net assets of the classes
or the Funds or the nature of the services performed and relative applicability
to each class or each Fund.
OTHER SERVICES
--------------
Custodial Arrangements
- ----------------------
The Bank of New York, 48 Wall Street, New York, New York 10005, is the
custodian for the Trust. As such, The Bank of New York holds in safekeeping
certificated securities and cash belonging to the Trust and, in such capacity,
is the registered owner of securities in book-entry form belonging to the Trust.
Upon instruction, The Bank of New York receives and delivers cash and securities
of the Trust in connection with Fund transactions and collects all dividends and
other distributions made with respect to Fund portfolio securities. The Bank of
New York also maintains certain accounts and records of the Trust. The Bank of
New York has contracted with various foreign banks and depositories to hold
Trust portfolio securities outside of the United States.
Accounting Services
- -------------------
Pursuant to an agreement between The Bank of New York and the Trust, The
Bank of New York calculates the total net asset value, total net income and net
asset value per share of each class on a daily basis (and as otherwise may be
required by the 1940 Act) and performs certain accounting services for the
Trust.
Independent Accountants
- -----------------------
The Trust's independent accountants are Coopers & Lybrand L.L.P., 1301
Avenue of the Americas, New York, New York 10019. Coopers & Lybrand L.L.P.,
conducts an annual audit of the Trust, assists in the preparation of each Fund's
federal and state income tax returns and consults with the Trust as to matters
of accounting and federal and state income taxation.
PORTFOLIO TRANSACTIONS
----------------------
Investment Decisions
- --------------------
Investment decisions for the Trust and for the other investment advisory
clients of the Manager and the Sub-Advisers are made with a view to achieving
their respective investment objectives. The Manager and the Sub-Advisers operate
independently in providing services to their respective clients. Investment
decisions are the product of many factors in addition to basic suitability for
the particular client involved. Thus, for example, a particular security may be
bought or sold for certain clients of the Manager or the Sub-Advisers even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In some instances, one client
may sell a particular security to another client. It also happens that two or
more clients may simultaneously buy or sell the same security, in which event
each day's transactions in such security are, insofar as possible, averaged as
to price and allocated between such clients in a manner which in the opinion of
the Manager or a Sub-Adviser is equitable to each and in accordance with the
amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients.
59
<PAGE>
Brokerage and Research Services
- -------------------------------
Transactions on stock exchanges and other agency transactions involve the
payment by the Trust of negotiated brokerage commissions. Such commissions vary
among different brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size of the
transaction. There is generally no stated commission in the case of securities,
such as U.S. Government securities and Tax Exempt Bonds, traded in the over-the-
counter markets or in the case of gold bullion but the price paid by the Trust
usually includes an undisclosed dealer commission or mark-up. It is anticipated
that most purchases and sales of portfolio securities for the Money Market Fund
will be with the issuer or with major dealers in money market instruments acting
as principals. Accordingly, it is not anticipated that the Global Income, High
Income, Total Return Income, U.S. Government, Short-Intermediate, Tax Exempt or
Money Market Funds will pay significant brokerage commissions. In underwritten
offerings, the price paid includes a disclosed, fixed commission or discount
retained by the underwriter or dealer. Securities firms may receive brokerage
commissions on transactions involving options, futures and options on futures
and the purchase and sale of underlying securities upon exercise of options. The
brokerage commissions associated with buying and selling options may be
proportionately higher than those associated with general securities
transactions.
Where the Manager or a Sub-Adviser places orders for the purchase and sale
of portfolio securities for a particular Fund and buys and sells securities for
such Fund it is anticipated that such transactions will be effected through a
number of brokers and dealers. In so doing, the Manager or the relevant Sub-
Adviser, as the case may be, intends to use its best efforts to obtain for each
Fund the most favorable price and execution available, except to the extent that
it may be permitted to pay higher brokerage commissions as described below. In
seeking the most favorable price and execution, the Manager or the relevant Sub-
Adviser, as the case may be, considers all factors it deems relevant, including,
by way of illustration, price, the size of the transaction, the nature of the
market for the security, the amount of commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker-dealer involved and the quality of service
rendered by the broker-dealer in other transactions.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research, statistical and quotation services from broker-dealers
which execute portfolio transactions for the clients of such advisers.
Consistent with this practice, the Manager and the Sub-Advisers may receive
research, statistical and quotation services from many broker-dealers with which
the Trust's portfolio transactions are placed. These services, which in some
instances could also be purchased for cash, include such matters as general
economic and security market reviews, industry and company reviews, evaluations
of securities and recommendations as to the purchase and sale of securities.
Some of these services may be of value to the Manager or the Sub-Advisers in
advising various of its clients (including the Trust), although not all of these
services are necessarily useful and of value in managing the Trust or any
particular Fund. The fees paid to the Manager and the Sub-Advisers are not
reduced because they receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Management Contracts and the Sub-Adviser Agreements, the Manager and the Sub-
Advisers may cause a Fund to pay a broker-dealer which provides "brokerage and
research services" (as defined in the Act) to the Manager or the Sub-Advisers an
amount of disclosed commission for effecting a securities transaction for a Fund
in excess of the commission which another broker-dealer would have charged for
effecting that transaction. The authority of the Manager and the Sub-Advisers to
cause the Funds to pay any such greater commissions is subject to such policies
as the Trustees may adopt from time to time.
Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Trust as a principal in the purchase and sale of securities.
Since transactions in the over-the-counter market usually involve transactions
with dealers acting as principals for their own accounts, affiliated persons of
the Trust may not serve as the Trust's dealer in connection with such
transaction. However, the Distributor and any other affiliates of the Manager or
the Sub-Advisers may receive and retain compensation for effecting portfolio
transactions for the Trust on a national securities exchange provided that
commissions paid to the principal underwriter of the Trust or its affiliates by
the Trust for exchange transactions not exceed "usual and
60
<PAGE>
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." The Trustees, including those who are not "interested persons" of the
Trust, have adopted procedures for evaluating the reasonableness of commissions
paid to the principal underwriter of the Trust or its affiliates and will review
these procedures periodically.
For the fiscal years ended September 30, 1993, 1994 and 1995, the Trust
paid $6,085,920, $8,489,573 and $11,116,176 in brokerage commissions,
respectively, as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Sept. 30, Sept. 30, Sept. 30,
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Total
Brokerage Commissions
Equity Income $ 173,880 $ 420,738 $ 605,124
Value N/A N/A 17,864
Summit N/A N/A N/A
Growth 3,187,508 3,317,272 3,500,524
Target 660,091 2,156,801 2,289,076
Discovery N/A N/A 42,608
Opportunity 1,143,037 1,130,760 1,728,282
Innovation N/A N/A 84,173
International 782,300 1,277,327 2,727,326
Emerging Markets N/A N/A N/A
Precious Metals 49,144 124,474 48,592
Global Income N/A N/A N/A
High Income 22,475 19,507 12,500
Total Return Income N/A N/A 10,028
Tax-Exempt 0 0 0
U.S. Government 30,866 19,651 41,009
Short-Intermediate 36,619 23,043 9,070
---------- ---------- -----------
Total $6,085,920 $8,489,573 $11,116,176
========== ========== ===========
</TABLE>
Pursuant to conditions set forth in rules of the Securities and Exchange
Commission, the Trust may purchase securities from an underwriting syndicate of
which the principal underwriter of the Trust or its affiliates are members (but
not from the principal underwriter itself). Such conditions relate to the price
and amount of the securities purchased, the commission or spread paid, and the
quality of the issuer. The rules further require that such purchases take place
in accordance with procedures adopted and reviewed periodically by the Trustees,
particularly those Trustees who are not "interested persons" of the Trust.
Investments by other clients of the Manager and the Sub-Advisers may limit the
ability of the Trust to purchase securities from such a syndicate.
The Distributor does not currently effect securities transactions for
customers and does not participate in underwriting syndicates. In light of the
foregoing, the Trust does not expect to place purchase or sales orders with or
purchase securities from the Distributor or its affiliates.
61
<PAGE>
ORGANIZATION AND CAPITALIZATION OF THE TRUST
--------------------------------------------
The Trust was established as a Massachusetts business trust by an Agreement
and Declaration of Trust dated October 14, 1983. A copy of the Agreement and
Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts. The Trust's fiscal year ends on September 30.
As described in the text of the Prospectus following the caption
"Description of the Trust," each class of shares of the Trust is entitled to one
vote per share (with proportional voting for fractional shares) on such matters
as shareholders are entitled to vote. Class A, Class B and Class C shares of
each Fund have identical voting rights except that each class of shares has
exclusive voting rights on any matter submitted to shareholders that relates
solely to that class, and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class. Each class of shares has exclusive voting rights with respect
to matters pertaining to the Distribution and Servicing Plan applicable to that
class. These shares are entitled to vote at meetings of shareholders. Matters
submitted to shareholder vote must be approved by each Fund separately except
(i) when required by the 1940 Act shares shall be voted together and (ii) when
the Trustees have determined that the matter does not affect all Funds, then
only shareholders of the Fund or Funds affected shall be entitled to vote on the
matter. All three classes of shares of a Fund will vote together, except with
respect to the Distribution and Servicing Plan applicable to a class of shares
or when a class vote is required as specified above or otherwise by the 1940
Act. There will normally be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees have been elected by the shareholders, at which time the Trustees then
in office will call a shareholders' meeting for the election of Trustees. In
addition, Trustees may be removed from office by a written consent signed by the
holders of two-thirds of each class of the outstanding shares of the Trust and
filed with the Trust's custodian or by a vote of the holders of two-thirds of
each class of the outstanding shares of the Trust at a meeting duly called for
the purpose, which meeting shall be held upon the written request of the holders
of not less than 10% of each class of the outstanding shares. Upon written
request by ten or more shareholders, who have been such for at least six months,
and who hold shares constituting 1% of the outstanding shares, stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
Trustee, the Trust has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders). The Trustees may also remove a Trustee with or without cause.
Except as set forth above, the Trustees shall continue to hold office and may
appoint their successors.
Shareholder Liability
- ---------------------
Under Massachusetts law, shareholders could, under certain circumstances,
be held liable for the obligations of the Trust. However, the Agreement and
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Agreement and Declaration of Trust provides for indemnification
out of a Fund's property for all loss and expense of any shareholder of that
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund of which he or she is or
was a shareholder would be unable to meet its obligations.
62
<PAGE>
CERTAIN OWNERSHIP OF TRUST SHARES
---------------------------------
As of April 8, 1995, the Trustees and officers of the Trust owned the
following amounts of the Class A Shares, Class B Shares and Class C Shares of
each Fund:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
Fund No. of Shares No. of Shares No. of Shares
---- ------------- ------------- -------------
<S> <C> <C> <C>
Equity Income 46,977.701 0 0
Value 19,081.206 0 0
Summit N/A N/A N/A
Growth 145,767.235 0 1,040.410
Target 112,699.714 0 0
Discovery 20,084.704 0 0
Opportunity 67,994.830 0 971.624
Innovation 20,757.382 0 0
International 26,511.064 0 0
Emerging Markets N/A N/A N/A
Global Income 2,425.830 0 0
Precious Metals 0 0 0
High Income 20,486.388 0 0
Total Return Income 15,033.437 0 0
Tax Exempt 80.233 0 0
U.S. Government 0 0 0
Short-Intermediate 0 0 0
Money Market 85,440.870 0 413.690
</TABLE>
Except as set forth below, the Trust believes that no person as of April 8,
1996 owned beneficially or of record 5% or more of the shares of any class of
the Funds:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FUND CLASS NAME AND ADDRESS NO. OF SHARES PERCENT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Target A Merrill Lynch Pierce Fenner & Smith Inc. 1,689,814.315 19.60
Attn: Book Entry Department
4800 Deer Lake Drive E., fl. 3
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 547,634.961 37.77
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 16,981,468.864 30.03
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
Value A Merrill Lynch Pierce Fenner & Smith Inc. 81,569.000 14.30
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 234,269.668 23.94
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 264,117.723 13.54
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
Discovery A Merrill Lynch Pierce Fenner & Smith Inc. 151,749.000 16.76
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 607,209.000 37.71
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 657,648.000 21.67
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Precious Metal A Paine Webber / FBO 33,995.737 5.99
Victor G. Warren Jr.
UAD 07/14/93 for the Victor G. Warren
Trust
724 S. Garfield
Hinsdale, IL 60521-4425
Merrill Lynch Pierce Fenner & Smith Inc. 101,442.000 17.88
(see above)
Danco Cust. 37,091.988 6.53
FBO Foundation A/C 5090770
c/o Trust Department
Attn: E. Springer
Fort Wayne National Bank
P.O. Box 110
Fort Wayne, IN 46801-0110
- ----------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 33,205.000 29.70
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 777,187.000 22.43
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
Equity Income A Merrill Lynch Pierce Fenner & Smith Inc. 147,655.000 14.01
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 79,946.888 20.91
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 2,157,812.201 16.13
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
U.S. Government A Merrill Lynch Pierce Fenner & Smith Inc. 789,938.000 42.58
(see above)
Donaldson Lufkin Jenrette 123,605.327 6.66
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
- ----------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 178,647.000 38.39
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 6,803,400.588 23.20
(see above)
- ----------------------------------------------------------------------------------------------------------------------------
Tax Exempt A Merrill Lynch Pierce Fenner & Smith Inc. 110,585.000 31.64
(see above)
Dowdy Family Investment Co. Ltd. 83,125.225 23.78
A Partnership
3303 Parkview Ct.
Colleyville, TX 76034-4745
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B Prudential-Bache Securities (0GT23747) 14,909.045 11.43
New York, NY 10292
Prudential-Bache Securities (0VG03100) 8,650.000 6.63
New York, NY 10292
Paine Webber FBO
William H. Hoehn 16,529.725 12.68
2906 SW130THTERR
Archer, FL 32618 - 2124
Dain Bosworth Inc. FBO 10,531.000 8.07
Kermit K. Kinsey
2801 NE 14th Street
Ft. Lauderdale, FL 33304
Leroy Scott 8,431.703 6.46
213 Bunch Street
Corinth, MS 38834-4702
Paine Webber FBO
Rose A. Simms 8,161.553 6.26
TTEE F/T Rose A. Simms Living Trust
DTD 11/07/89
4517 Brenda St. NE
Albuquerque, NM 87109-1708
- ---------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 551,392.006 13.27
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
Global Income A Pacific Financial Asset Management Co. 500,000.000 74.68
Attn: Russell F. Murdock
700 Newport Center Dr.
Newport Beach, CA 92660-6307
Bank of California Trust
UA Dec. 31, 1981 36,286.543 5.42
Wholesale Beer Multi Emp. Trust
475 Sansome St. FL11
San Francisco, CA 94111-3103
- ---------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 82,188.000 44.69
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 43,549.000 21.64
(see above)
McDonald & Co. Secs/NC C/FBO 14,338.700 7.12
Grace Doreen Bull IRA R/O
2711 Ridgewood Court
Bloomfield Hills, MI 48302
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Income A Merrill Lynch Pierce Fenner & Smith Inc. 776,909.000 32.05
(see above)
Fifth Third Bank Trust 206,354.999 8.51
FBO Cleveland Glass & Glazing
Ac# 52-2-7001019
P.O. Box 630074
Cincinnati, OH 45263
National City Bank Agent 195,956.694 8.08
FBO Building Laborers Local #310
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank Indiana Cust. 135,162.964 5.57
Illinois Valley Health & Welfare
FD Loc 81 Plumbers/Pipefitters
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
- ---------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 788,366.000 35.68
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 2,578,190.202 11.42
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
Total Return Income A Merrill Lynch Pierce Fenner & Smith Inc. 756,655.000 15.27
(see above)
Trust Co. Bank Tr 649,583.716 13.11
FBO City of Spartanburg
Retirement Plan
P.O. Box 4655
Atlanta, GA 30302-4655
Nationsbank VA TR 318,156.922 6.42
FBO Louise OBICI Hospital
40-90-900-6515001
P.O. Box 831575
Dallas, TX 75283-1575
Tops Appliance City Inc. 268,606.539 5.42
401K Retirement Plan
45 Brunswick Avenue
Edison, NJ 08817-2576
- ---------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 1,000,512.048 31.58
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 1,513,105.849 19.25
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
Growth A Merrill Lynch Pierce Fenner & Smith Inc. 357,824.001 6.33
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 267,316.721 28.52
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 7,531,710.721 13.04
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
Opportunity A Boston Safe Deposit & Trust Co. 652,148.484 18.56
TWA Pilots Directed Account
Plan UA January 1, 1986
1 Cabot Road
Medford, MA 02155-5158
Merrill Lynch Pierce Fenner & Smith Inc. 529,061.000 15.06
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
B None None None
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
C Merrill Lynch Pierce Fenner & Smith Inc. 6,080,106.511 26.36
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
Innovation A Merrill Lynch Pierce Fenner & Smith Inc. 323,119.000 14.12
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 217,542.000 21.50
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 788,464.000 13.52
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
Money Market A JC Bradford & Co. Cust FBO 2,033,754.610 10.98
DCIP Limited Partners II
330 Commerce Street
Nashville, TN 37201-1899
RPSS TR Rollover IRA 1,953,586.680 10.55
FBO James J. Maguire
42 Western Drive
Short Hills, NJ 07078-1910
Trustees of Amherst College Corp. 1,785,953.060 9.64
U/A June 14, 1985
Donald S. Cohan Charitable
Remainder Unitrust
P.O. Box 2221
Amherst, MA 01004-2221
Chemical Bank Trust 1,395,817.530 7.54
PIMCO Advisors Group 401K
Savings: Investment Plan Trust
ATTN: Jerry Capri
4 New York Plaza, Fl. 4
New York, NY 10004-2413
Pembroke Ltd. 1,968,322.370 10.63
Craigmuir Chambers
P.O. Box 71
Road Town Tortola
British Virgin Islands
Investment Co. Institute 1,004,734.180 5.42
Attn: Brian Donnellan
1401 H St. NW
Washington, DC 20005 - 2110
- ---------------------------------------------------------------------------------------------------------------------------
B Prudential-Bache Securities (0WD08940-NY) 80,514.450 27.38
New York, NY 10292
Prudential-Bache Securities (0SFR2208-NY) 50,353.780 17.12
New York, NY 10292
Prudential-Bache Securities (0SFR2959-NY)
New York, NY 10292 31,883.590 10.84
Prudential-Bache Securities (07N24934-NY) 25,270.630 8.59
New York, NY 10292
Paine Webber FBO
Paine Webber CDN 19,981.490 6.79
FBO Robert F Huxtable IRA
P.O. Box 3321
Weehawken, NJ 07087-8154
Carla H. Maitre 16,469.930 5.61
2901 Grant St. Apt. 704
Mobile, Al 36606-4768
- ---------------------------------------------------------------------------------------------------------------------------
C None None None
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International A Merrill Lynch Pierce Fenner & Smith Inc. 223,523.623 14.26
(see above)
Society National Bank TR. 220,655.880 14.08
FBO RPM Retirement Plan
P.O. Box 6147
Cleveland, OH 44101-1147
- ---------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 94,480.000 34.52
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 3,777,912.462 21.83
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
Short Intermediate A Richard J. Steinhelper Trust 4,195,423.858 80.49
Michigan Tooling Association
Benefit Plans Investment Trust
20501 Ford Road
P.O. Box 338
Dearborn, MI 48121-0338
- ---------------------------------------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 26,543.072 12.78
(see above)
NFSC FEBO # 0KS-614432 26,039.805 12.54
Reida Longanecker
1075 Old Harrisburg Rd.
Gettysburg, PA 17325
- ---------------------------------------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 1,714,522.720 25.50
(see above)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
APPENDIX A
----------
The nationally recognized statistical rating organizations (individually, an
"NRSRO") that may be utilized with regard to portfolio investments for the Funds
include Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Corporation ("S&P"), Duff & Phelps, Inc. ("Duff"), Fitch Investors Service, Inc.
("Fitch"), IBCA Limited and its affiliate, IBCA Inc. (collectively, "IBCA"), and
Thomson BankWatch, Inc. ("Thomson"). Set forth below is a description of the
relevant ratings of each such NRSRO. The NRSROs that may be utilized and the
description of each NRSRO's ratings is as of the date of this Statement of
Additional Information, and may subsequently change.
LONG-TERM DEBT RATINGS (may be assigned, for example, to long-term corporate and
- ----------------------
municipal bonds)
Moody's (Moody's applies numerical modifiers (1, 2 and 3) in each rating
- ------------------------------------------------------------------------
category to indicate the securities ranking within the category):
- ----------------------------------------------------------------
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
which make the long-term risks appear somewhat larger than in 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 which 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 the
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.
69
<PAGE>
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.
S&P (S&P may apply a plus (+) or a minus (-) to a particular rating
- -------------------------------------------------------------------
classification to show relative standing within that classification):
- --------------------------------------------------------------------
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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
bonds in this category than for bonds in higher rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominately
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such bonds will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
CCC -- Bonds rated CCC have a currently identifiable vulnerability to
default, and are 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, they are 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 typically is applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C -- The rating C typically is applied to debt subordinated to senior debt
which 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.
Duff:
- ----
AAA Highest credit quality. The risk factors are negligible being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality Protection factors are strong.
AA Risk is modest but may vary slightly from time to time
AA- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress. (Global Income Fund only)
BBB+ Below average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
70
<PAGE>
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors
BB- fluctuate according to industry conditions or company fortunes.
Overall quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will not
B be met when due. Financial protection factors will fluctuate B-
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating grade.
CCC Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with
unfavorable company developments.
Fitch (plus or minus signs are used with a rating symbol to indicate the
- ------------------------------------------------------------------------
relative position of the credit within the rating category):
- -----------------------------------------------------------
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of these issues is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal
is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact
on these bonds, and therefore impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can
be identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
71
<PAGE>
C Bonds are an imminent default in payment of interest or principal.
IBCA:
- ----
AAA Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
significantly.
AA Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic, or financial
conditions may increase investment risk albeit not very
significantly.
A Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic, or financial
conditions may lead to increased investment risk.
BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business,
economic, or financial conditions are more likely to lead to
increased investment risk than for obligations in higher categories.
BB Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest
exists, but is susceptible over time to adverse changes in business,
economic, or financial conditions.
B Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse
changes in business, economic, or financial conditions.
CCC Obligations for which there is a current, perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic, or financial conditions.
CC Obligations which are highly speculative or which have a high risk
of default.
Thomson:
- -------
AAA The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental
risk versus issues rated in the highest category.
A The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations
with higher ratings.
BBB The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are,
however, more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
BB While not investment grade, the "BB" rating suggests the likelihood
of default is considerably less than for lower rated issues.
However, there are significant uncertainties which could impact the
ability to adequately service debt obligations.
72
<PAGE>
B Issues rated "B" show a higher degree of uncertainty and therefore
greater likelihood of default than better rated issues. Adverse
developments could well affect the payment of interest and principal
on a timely basis.
CCC Issues rated "CCC" clearly have a high degree of likelihood of
default with little capacity to address further adverse changes in
financial circumstances.
CC "CC" is applied to issues that are subordinate to other obligations
rated "CCC" and are afforded less protection in the event of
bankruptcy or reorganization.
SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
- -----------------------
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
- ----------------------------------------------------------------
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term promissory
obligations. Prime-1 repayment capacity will normally be
evidenced by many of the following characteristics:
-Leading market positions in well-established
industries.
-High rates of return on funds employed.
-Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
-Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
-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 capacity 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.
S&P's description of its two highest short-term debt ratings:
- ------------------------------------------------------------
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have extremely
strong safety characteristics are denoted with a plus sign (+).
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."
73
<PAGE>
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.
Duff's description of its two highest short-term debt ratings (Duff incorporates
- --------------------------------------------------------------------------------
gradations of "1+" (one plus) and "1-" (one minus) to assist investors in
- -------------------------------------------------------------------------
recognizing quality differences within the highest rating category):
- -------------------------------------------------------------------
Duff 1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1-High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
Duff 2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good.
Risk factors are small.
Fitch's description of its two highest short-term debt ratings:
- --------------------------------------------------------------
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely
payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is
not as great as for issues assigned F-1+ or F-1 ratings.
IBCA's description of its two highest short-term debt ratings:
- -------------------------------------------------------------
A+ Obligations supported by the highest capacity for timely repayment.
A1 Obligations supported by a very strong capacity for timely
repayment.
SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS
- --------------------------------------
Moody's description of its two highest short-term loan/municipal note ratings:
- -----------------------------------------------------------------------------
MIG-1/VMIG-1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
74
<PAGE>
S&P's description of its two highest municipal note ratings:
- -----------------------------------------------------------
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
Thomson's description of its two highest short-term ratings:
- -----------------------------------------------------------
TBW-1 The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.
TBW-2 The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1".
75
<PAGE>
APPENDIX B
----------
DESCRIPTION OF MONEY MARKET FUND INVESTMENTS
Obligations Backed by Full Faith and Credit of the U.S. Government -- are
------------------------------------------------------------------
bills, certificates of indebtedness, notes and bonds issued by (i) the U.S.
Treasury or (ii) agencies, authorities and instrumentalities of the U.S.
Government or other entities and backed by the full faith and credit of the U.S.
Government. Such obligations include, but are not limited to, obligations issued
by the Government National Mortgage Association, Farmers' Home Administration
and the Small Business Administration.
Other U.S. Government Obligations -- are bills, certificates of
---------------------------------
indebtedness, notes, and bonds issued by agencies, authorities and
instrumentalities of the U.S. Government which are supported by the right of the
issuer to borrow from the U.S. Treasury or by the credit of the agency,
authority or instrumentality itself. Such obligations include, but are not
limited to, obligations issued by the Tennessee Valley Authority, the Bank for
Cooperatives, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Land Banks, and the Federal National Mortgage Association.
Repurchase Agreements -- are agreements by which a Fund purchases a U.S.
---------------------
Treasury or agency obligation and obtains a simultaneous commitment from the
seller (a domestic commercial bank or, to the extent permitted by the Investment
Company Act of 1940, a recognized securities dealer) to repurchase the security
at an agreed upon price and date. The resale price is in excess of the purchase
price and reflects an agreed upon market rate unrelated to the coupon rate on
the purchased security. Such transactions afford an opportunity for the Fund to
earn a return on temporarily available cash at no market risk, although the Fund
may be subject to various delays and risks of loss if the seller is unable to
meet its obligation to repurchase.
Certificates of Deposit -- are certificates issued against funds deposited
-----------------------
in a bank, are for a definite period of time, earn a specified rate of return,
and are normally negotiable.
Bankers' Acceptances -- are short-term credit instruments used to finance
--------------------
the import, export, transfer or storage of goods. They are term "accepted" when
a bank guarantees their payment at maturity.
Eurodollar Obligations -- obligations of foreign branches of U.S. banks.
----------------------
Yankeedollar Obligations -- obligations of domestic branches of foreign
------------------------
banks.
Commercial Paper -- refers to promissory notes issued by corporations in
----------------
order to finance their short-term credit needs.
Corporate Obligations -- include bonds and notes issued by corporations in
---------------------
order to finance longer term credit needs.
76
<PAGE>
FINANCIAL STATEMENTS
--------------------
77
<PAGE>
PIMCO Advisors Funds
P I M C O Annual Report
September 30, 1995
EQUITY FUNDS
Equity Income Fund
Value Fund
Growth Fund
Target Fund
Discovery Fund
Opportunity Fund
Innovation Fund
International Fund
Precious Metals Fund
INCOME FUNDS
High Income Fund
Total Return Income Fund
Tax Exempt Fund
U.S. Government Fund
Short-Intermediate Fund
Money Market Fund
<PAGE>
PIMCO ADVISORS EQUITY INCOME FUND 17
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $168,020,013) (Note
2a) $ 192,428,080
Cash 173,572
Dividends receivable 639,229
Interest receivable 348,228
Receivable for investments
sold 3,474,819
Receivable for Fund shares
sold 413,569
Other assets 21,856
--------------
Total assets 197,499,353
LIABILITIES:
Payable for investments
purchased $7,188,612
Payable for Fund shares
redeemed 844,181
Dividends payable 8,245
Accrued expenses:
Investment advisory fee 116,004
Distribution fee 108,042
Servicing fee 38,668
Other 186,591
----------
Total liabilities 8,490,343
--------------
NET ASSETS $ 189,009,010
==============
COMPOSITION OF NET ASSETS:
Capital $ 156,814,031
Undistributed net investment
income 570,020
Undistributed net realized
gain on investments 7,216,892
Net unrealized appreciation on
securities 24,408,067
--------------
Total net assets $ 189,009,010
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($12,933,161
DIVIDED BY 914,725 shares) $14.14
Sales charge--5.50% of public
offering price 0.82
----------
Maximum offering price $14.96
==========
CLASS B SHARES
Net asset value and offering
price per share ($1,759,597
DIVIDED BY 124,502 shares) $14.13
==========
Redemption price per share *
==========
CLASS C SHARES
Net asset value and offering
price per share ($174,316,252
DIVIDED BY 12,367,471 shares) $14.09
==========
Redemption price per share *
==========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 2,750,840
Dividends (including $173,239
in dividends from foreign
securities less $18,163 in
foreign taxes withheld at
source) 4,893,976
--------------
Total investment income 7,644,816
EXPENSES:
Investment advisory fee (Note
3a) $1,371,809
Distribution fee (Class B)
(Note 3b) 1,553
Distribution fee (Class C)
(Note 3b) 1,270,509
Servicing fee (Class A) (Note
3b) 33,249
Servicing fee (Class B) (Note
3b) 518
Servicing fee (Class C) (Note
3b) 423,503
Transfer agent and custody
fees 332,000
Professional fees 61,000
Trustees' fees and expenses
(Note 3c) 15,000
Shareholder reports and
notices 105,000
Miscellaneous 71,015
----------
Total expenses 3,685,156
--------------
Net investment income 3,959,660
--------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on security
transactions 7,637,491
Net realized gain on options
written 63,613
Net unrealized appreciation on
securities 13,910,233
Net unrealized appreciation on
options written 1,393
--------------
Net realized and unrealized
gain on investments 21,612,730
--------------
Net increase in net assets
resulting from operations $ 25,572,390
</TABLE> ==============
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,959,660 $ 3,201,384
Net realized gain on security
transactions 7,637,491 580,367
Net realized gain on options
written 63,613 42,386
Net unrealized appreciation
(depreciation) on securities 13,910,233 (3,119,826)
Net unrealized appreciation
(depreciation) on options
written 1,393 (1,393)
------------ --------------
Net increase in net assets
resulting from operations 25,572,390 702,918
Dividends paid from net
investment income
Class A (343,825) (309,331)
Class B (6,134) --
Class C (3,190,633) (2,978,345)
Distributions paid from net
realized gain on investments
Class A -- (145,600)
Class C -- (2,046,029)
Net equalization credits
(debits)
(Note 2g) (108,468) 212,929
Net increase (decrease) from
Fund share transactions
(Note 5) (26,748,176) 97,822,458
------------ --------------
Net increase (decrease) in
net assets (4,824,846) 93,259,000
NET ASSETS:
Beginning of year 193,833,856 100,574,856
------------ --------------
End of year (including
undistributed net investment
income of $570,020 and
$213,610, respectively) $189,009,010 $ 193,833,856
============ ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
18
PIMCO ADVISORS EQUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
SHORT-TERM NOTES--5.4%
$ 1,700,000 Cooperative Association
of Tractor Dealers,
Inc., 5.72%, 10/6/95 $ 1,698,649
2,500,000 Corporate Asset Funding
Co., Inc., 5.77%,
10/13/95 2,495,192
1,000,000 Dresdner U.S. Finance
Inc., 5.73%, 10/3/95 999,682
2,300,000 Goldman Sachs & Co.,
5.77%, 10/4/95 2,298,894
2,000,000 Preferred Receivables
Funding Corp., 5.74%,
10/6/95 1,998,406
800,000 Sheffield Receivables
Corp., 6.55%, 10/2/95 799,854
--------------
TOTAL SHORT-TERM NOTES
(Cost $10,290,677) 10,290,677
--------------
CONVERTIBLE BONDS AND
NOTES--22.0%
CHEMICALS--1.0%
1,300,000 Altera Corp., 5.75%,
6/15/02 1,808,625
--------------
COMMUNICATION
EQUIPMENT--1.4%
2,050,000 Network Equipment
Technologies, Inc.,
7.25%, 5/15/14 2,708,562
--------------
ELECTRONICS--5.0%
2,250,000 Integrated Device
Technology, Inc.,
5.50%, 6/1/02 2,500,313
5,500,000 Motorola, Inc., 0.00%,
9/27/13 5,005,000
1,850,000 VLSI Technology, Inc.,
8.25%, 10/1/05 1,887,000
--------------
9,392,313
--------------
FINANCIAL SERVICES--1.5%
2,050,000 First Financial
Management Corp.,
5.00%, 12/15/99 2,911,000
--------------
HEALTH MANAGEMENT--1.5%
2,100,000 HEALTHSOUTH
Rehabilitation Corp.,
5.00%, 4/1/01 2,919,000
--------------
LODGING--1.9%
2,500,000 HFS, Inc., 4.50%, 10/1/99 3,640,625
--------------
RESTAURANTS--1.6%
11,950,000 Boston Chicken Inc.,
0.00%, 6/1/15 2,957,625
--------------
RETAIL--4.3%
1,960,000 Baby Superstore, Inc.,
4.875%, 10/1/00 1,969,800
2,000,000 Federated Department
Stores, Inc., 5.00%,
10/1/03 2,050,000
6,040,000 Office Depot Inc., 0.00%,
11/1/08 4,107,200
--------------
8,127,000
--------------
TELECOMMUNICATIONS--2.2%
4,000,000 WorldCom, Inc., 5.00%,
8/15/03 4,090,000
--------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
UTILITIES: ELECTRIC--1.6%
$ 2,900,000 Synoptics Communications,
Inc., 5.25%, 5/15/03 $ 2,997,875
--------------
TOTAL CONVERTIBLE BONDS
AND NOTES
(Cost $37,068,596) 41,552,625
--------------
EXCHANGEABLE NOTES--4.2%
94,275 Allstate Corp.,
Exchangeable into
shares of common stock
of PMI Group Inc.,
6.7647%, 4/15/98 4,018,472
73,500 American Express Co.,
Exchangeable into
shares of common stock
of First Data Corp.,
6.25%, 10/15/96 3,822,000
--------------
TOTAL EXCHANGEABLE NOTES
(Cost $6,525,180) 7,840,472
--------------
<CAPTION>
SHARES
- --------------
<S> <C> <C>
COMMON STOCKS--54.6%
APPAREL--1.6%
118,700 Liz Claiborne, Inc. 2,997,175
--------------
BANKS--4.1%
84,400 Bank of New York Co.,
Inc. 3,924,600
55,000 Bankers Trust Co. (N.Y.) 3,863,750
--------------
7,788,350
--------------
BEVERAGE--2.8%
102,700 Pepsico, Inc. 5,237,700
--------------
FINANCIAL SERVICES--4.5%
130,300 American Express Co. 5,782,062
52,200 Student Loan Marketing
Association 2,818,800
--------------
8,600,862
--------------
FOREST AND PAPER
PRODUCTS--8.6%
47,400 Federal Paper Board Co.,
Inc. 1,818,975
22,600 Georgia-Pacific Corp. 1,977,500
71,300 Kimberly-Clark Corp. 4,786,012
102,100 Sonoco Products Co. 2,833,275
122,800 Williams Cos., Inc. (The) 4,789,200
--------------
16,204,962
--------------
INSURANCE--3.7%
47,600 Cigna Corp. 4,956,350
60,900 Mid Ocean Limited 2,101,050
--------------
7,057,400
--------------
MEDIA--1.4%
89,700 Times Mirror Co., Class A 2,578,875
--------------
MEDICAL SUPPLIES--6.8%
44,900 Bausch & Lomb, Inc. 1,857,737
145,300 Baxter International,
Inc. 5,975,463
68,800 Johnson & Johnson 5,099,800
--------------
12,933,000
--------------
MISCELLANEOUS
MANUFACTURING--1.5%
68,200 Shared Medical Systems
Corp. 2,830,300
--------------
OIL AND GAS--2.0%
59,700 Amoco Corp. 3,828,263
--------------
OIL AND GAS
SERVICES--2.3%
104,100 Halliburton Co. 4,346,175
--------------
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS EQUITY INCOME FUND 19
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- -------------- --------------
<S> <C> <C>
PHARMACEUTICALS--7.5%
82,300 Merck & Co., Inc. $ 4,608,800
150,700 Smithkline Beecham PLC
ADR 7,629,188
41,600 Upjohn Co. 1,856,400
--------------
14,094,388
--------------
PUBLISHING--1.9%
149,720 Jostens, Inc. 3,518,420
--------------
UTILITIES: ELECTRIC--1.5%
102,800 Illinova Corp. 2,788,450
--------------
UTILITIES: GAS--0.9%
99,600 Washington Energy Co. 1,705,650
--------------
UTILITIES: TELEPHONE
SYSTEMS--3.5%
42,900 AT&T Corp. 2,820,675
146,900 MCI Communications Corp. 3,828,581
--------------
6,649,256
--------------
TOTAL COMMON STOCKS
(Cost $90,446,926) 103,159,226
--------------
CONVERTIBLE PREFERRED
STOCKS--15.6%
COMPUTER SERVICES AND
SOFTWARE--3.2%
92,550 General Motors Corp.,
Class E, Series C,
$3.25 6,004,181
--------------
FOREST AND PAPER
PRODUCTS--1.9%
116,550 James River Corp., Series
P, 9.00% 3,554,775
--------------
MACHINERY AND
ENGINEERING--2.2%
44,010 Case Corp., Series A,
$4.50 4,175,449
--------------
VALUE
SHARES (NOTE 2)
- -------------- --------------
OFFICE EQUIPMENT--2.8%
87,250 United Companies
Financial Corp., 6.75% $ 5,365,875
--------------
TELECOMMUNICATIONS--5.5%
88,300 LCI International Inc.,
$1.25 4,558,487
44,500 MFS Communications Co.,
Inc., 8.00% 1,852,313
97,000 Mobile Telecommunications
Technologies Corp.,
$2.25 4,074,000
--------------
10,484,800
--------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $23,688,634) 29,585,080
--------------
TOTAL INVESTMENTS
(Cost $168,020,013+) 101.8% 192,428,080
OTHER ASSETS AND
LIABILITIES, NET (1.8%) (3,419,070)
------- --------------
TOTAL NET ASSETS 100.0% $ 189,009,010
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $168,020,013. At September 30, 1995,
net unrealized appreciation was $24,408,067. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$24,628,112 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$220,045.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
20
PIMCO ADVISORS VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $11,109,534) (Note
2a) $11,594,313
Cash 1,202,664
Dividends receivable 28,298
Interest receivable 5,481
Receivable for Fund shares
sold 449,114
Unamortized organization costs
(Note 2j) 47,395
-----------
Total assets 13,327,265
LIABILITIES:
Payable for investments
purchased $149,644
Payable for Fund shares
redeemed 1,316
Accrued expenses:
Investment advisory fee 6,457
Distribution fee 5,538
Servicing fee 2,306
Organization expense 50,000
Other 2,274
-------
Total liabilities 217,535
-----------
NET ASSETS $13,109,730
===========
COMPOSITION OF NET ASSETS:
Capital $12,603,390
Undistributed net investment
income 21,561
Net unrealized appreciation on
securities 484,779
-----------
Total net assets $13,109,730
===========
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($2,491,813
DIVIDED BY 233,349 shares) $10.68
Sales charge--5.50% of public
offering price 0.62
---------
Maximum offering price $11.30
=========
CLASS B SHARES
Net asset value and offering
price per share ($3,974,939
DIVIDED BY 372,239 shares) $10.68
=========
Redemption price per share *
=========
CLASS C SHARES
Net asset value and offering
price per share ($6,642,978
DIVIDED BY 622,096 shares) $10.68
=========
Redemption price per share *
=========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995*
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 15,508
Dividends (including $403 in
dividends from foreign
securities less $102 in
foreign taxes withheld at
source) 70,143
--------
Total investment income 85,651
EXPENSES:
Investment advisory fee (Note
3a) $14,916
Distribution fee (Class B)
(Note 3b) 5,125
Distribution fee (Class C)
(Note 3b) 7,461
Servicing fee (Class A) (Note
3b) 1,132
Servicing fee (Class B) (Note
3b) 1,708
Servicing fee (Class C) (Note
3b) 2,487
Transfer agent and custody
fees 3,853
Professional fees 600
Organization costs 2,605
Miscellaneous 856
-------
Total expenses 40,743
--------
Net investment income 44,908
--------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on security
transactions 1,147
Net unrealized appreciation on
securities 484,779
--------
Net realized and unrealized
gain on investments 485,926
--------
Net increase in net assets
resulting from operations $530,834
========
</TABLE>
- ------------------
* The Fund commenced operations on June 27, 1995.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER
30,
1995*
------------
<S> <C>
OPERATIONS:
Net investment income $ 44,908
Net realized gain on security
transactions 1,147
Net unrealized appreciation on
securities 484,779
-----------
Net increase in net assets
resulting from operations 530,834
Dividends paid from net
investment income
Class A (12,109)
Class B (12,461)
Class C (21,485)
Return of Capital
Class A (2,772)
Class B (2,852)
Class C (4,919)
Net equalization credits (Note
2g) 21,561
Net increase from Fund share
transactions (Note 5) 12,613,933
-----------
Net increase in net assets 13,109,730
NET ASSETS:
Beginning of period --
-----------
End of period (Including
undistributed net investment
income of $21,561) $13,109,730
===========
</TABLE>
- ------------------
* The Fund commenced operations on June 27, 1995.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS VALUE FUND 21
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ------ --------------
<S> <C> <C>
COMMON STOCKS--88.4%
ADVERTISING--0.3%
700 Omnicom Group, Inc. $ 45,587
--------------
AEROSPACE--4.0%
6,800 Northrop Grumman Corp. 413,950
1,300 Raytheon Co. 110,500
--------------
524,450
--------------
APPAREL--0.3%
1,000 Reebok International Ltd. 34,375
--------------
APPLIANCES--2.5%
13,000 Maytag Corp. 227,500
2,000 Premark International,
Inc. 101,750
--------------
329,250
--------------
AUTOMOTIVE
MANUFACTURING--2.6%
4,400 Chrysler Corp. 233,200
3,500 Ford Motor Co. 108,937
--------------
342,137
--------------
BANKS--6.6%
1,500 Bankers Trust Co. (N.Y.) 105,375
4,800 Chase Manhattan Corp. 293,400
5,400 Mellon Bank Corp. 240,975
4,000 PNC Bancorp 111,500
2,800 Standard Federal
Bancorporation 109,200
--------------
860,450
--------------
BEVERAGE--2.2%
4,600 Anheuser-Busch Cos., Inc. 286,925
--------------
BUILDING MATERIALS AND
CONSTRUCTION--0.4%
2,300 Lennar Corp. 50,025
--------------
CHEMICALS--1.7%
1,800 Olin Corp. 123,750
1,300 Union Carbide Corp. 51,675
1,800 Wellman, Inc. 44,100
--------------
219,525
--------------
COMMERCIAL SERVICES--2.3%
6,600 PHH Corp. 297,000
--------------
COMPUTER SERVICES AND
SOFTWARE--0.9%
2,500 Sterling Software Inc.* 113,750
--------------
COMPUTERS--0.8%
2,400 Seagate Technology* 101,100
--------------
COPPER--2.8%
5,900 Phelps Dodge Corp. 369,487
--------------
COPYING--0.8%
800 Xerox Corp. 107,500
--------------
ELECTRONICS--1.4%
3,800 Advanced Micro Devices,
Inc.* 110,675
3,600 EG&G Inc. 70,200
--------------
180,875
--------------
FINANCIAL SERVICES--1.5%
5,000 Bear Stearns Companies,
Inc. 107,500
4,900 Paine Webber Group Inc. 96,775
--------------
204,275
--------------
FOOD--0.9%
2,200 IBP, Inc. 117,425
--------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ------ --------------
<S> <C> <C>
FOREST AND PAPER
PRODUCTS--1.2%
2,700 Federal Paper Board Co.,
Inc. $ 103,612
800 Willamette Industries,
Inc. 53,400
--------------
157,012
--------------
HEALTH MANAGEMENT--0.4%
2,800 Tenet Healthcare Corp.* 48,650
--------------
INSURANCE--3.8%
1,600 Aetna Life & Casualty Co. 117,400
741 Allstate Corp. 26,213
800 Loews Corp. 116,400
8,600 Provident Life & Accident
Insurance Co. of
America, Class B 233,275
--------------
493,288
--------------
LEISURE--1.7%
11,200 Brunswick Corp. 226,800
--------------
MACHINERY AND
ENGINEERING--3.6%
5,900 Briggs & Stratton Corp. 237,475
2,900 Deere & Co. 235,987
--------------
473,462
--------------
MEDICAL SUPPLIES--1.2%
2,800 Baxter International,
Inc. 115,150
1,500 Beckman Instruments, Inc. 45,375
--------------
160,525
--------------
MULTI-INDUSTRY--1.6%
1,400 Textron Incorporated 95,550
900 Unilever N.V. ADR 117,000
--------------
212,550
--------------
OIL AND GAS--8.0%
2,700 Atlantic Richfield Co. 289,912
1,600 Repsol, S.A. ADR 50,800
4,600 Texaco Inc. 297,275
17,600 Ultramar Corp. 418,000
--------------
1,055,987
--------------
PHARMACEUTICALS--5.0%
3,500 American Home Products
Corp. 297,062
1,600 Bristol-Myers Squibb Co. 116,600
5,300 Upjohn Co. 236,512
--------------
650,174
--------------
PRINTING--2.5%
4,900 Harland (John H.) Co. 108,412
4,100 Harris Corp. 224,988
--------------
333,400
--------------
REAL ESTATE--0.8%
3,200 Meditrust Corp. 110,800
--------------
RETAIL--5.0%
3,500 Fleming Cos., Inc. 84,000
7,400 K mart Corp. 107,300
10,200 Melville Corp. 351,900
2,900 Sears, Roebuck & Co. 106,938
--------------
650,138
--------------
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
22
PIMCO ADVISORS VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ------ --------------
<S> <C> <C>
TELECOMMUNICATIONS--4.1%
10,100 Comsat Corp. $ 227,250
6,700 Pacific Telesis Group 206,025
3,100 Southern New England
Telecommunications
Corp. 109,663
--------------
542,938
--------------
TEXTILES--0.8%
2,800 Springs Industries, Inc. 109,900
--------------
TIRE AND RUBBER--0.8%
2,700 Goodyear Tire & Rubber
Co. (The) 106,313
--------------
TOBACCO--2.6%
2,500 American Brands, Inc. 105,625
2,800 Phillip Morris Cos. 233,800
--------------
339,425
--------------
TRANSPORTATION: AIR--0.9%
1,700 AMR Corp.* 122,613
--------------
TRANSPORTATION:
RAIL--1.7%
1,600 Conrail Inc. 110,000
2,100 GATX Corp. 108,675
--------------
218,675
--------------
UTILITIES: ELECTRIC--6.2%
9,100 Detroit Edison Co. 293,475
9,700 Pacific Gas & Electric
Co. 289,788
3,300 Texas Utilities Co. 115,088
7,100 Washington Water Power
Co. 114,488
--------------
812,839
--------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ------ --------------
<S> <C> <C>
UTILITIES: GAS--2.7%
8,500 NICOR Inc. $ 231,625
4,400 Peoples Energy Corp. 121,000
--------------
352,625
--------------
WHOLESALE--1.8%
7,900 Supervalu, Inc. 232,063
--------------
TOTAL COMMON STOCKS
(Cost $11,109,534) 11,594,313
--------------
TOTAL INVESTMENTS
(Cost $11,109,534+) 88.4% 11,594,313
OTHER ASSETS AND LIABILITIES,
NET 11.6% 1,515,417
------- --------------
TOTAL NET ASSETS 100.0% $ 13,109,730
======== ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $11,109,534. At September 30, 1995, net
unrealized appreciation was $484,779. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of $597,079
and aggregate gross unrealized depreciation of all
investments on which there was an excess of tax
cost over market value of $112,300.
* Non-income producing security.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS GROWTH FUND 23
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C>
ASSETS:
Securities owned, at value
(Cost of $1,211,567,135)
(Note 2a) $1,455,535,238
Cash 194,711
Dividends receivable 1,547,742
Receivable for investments
sold 16,007,712
Receivable for Fund shares
sold 2,473,666
Other assets 134,944
--------------
Total assets 1,475,894,013
LIABILITIES:
Payable for investments
purchased $34,110,310
Payable for Fund shares
redeemed 3,187,669
Outstanding options written,
at value (premiums received
$3,166,613) (Notes 2c and 6) 3,332,275
Accrued expenses:
Investment advisory fee 767,457
Distribution fee 793,625
Servicing fee 292,014
Other 768,630
-----------
Total liabilities 43,251,980
--------------
NET ASSETS $1,432,642,033
==============
COMPOSITION OF NET ASSETS:
Capital $1,037,587,773
Undistributed net realized
gain on investments 151,251,819
Net unrealized appreciation on
securities 243,968,103
Net unrealized depreciation on
options written (165,662)
--------------
Total net assets $1,432,642,033
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($134,818,843
DIVIDED BY 5,239,354 shares) $25.73
Sales charge--5.50% of public
offering price 1.50
---------
Maximum offering price $27.23
=========
CLASS B SHARES
Net asset value and offering
price per share ($7,671,110
DIVIDED BY 307,623 shares) $24.94
=========
Redemption price per share *
=========
CLASS C SHARES
Net asset value and offering
price per share ($1,290,152,080
DIVIDED BY 51,739,024 shares) $24.94
=========
Redemption price per share *
=========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 5,539,259
Dividends (including
$1,889,732 in dividends from
foreign securities less
$187,918 in foreign taxes
withheld at source) 15,544,493
--------------
Total investment income 21,083,752
EXPENSES:
Investment advisory fee (Note
3a) $ 8,268,603
Distribution fee (Class B)
(Note 3b) 9,437
Distribution fee (Class C)
(Note 3b) 8,548,085
Servicing fee (Class A) (Note
3b) 289,263
Servicing fee (Class B) (Note
3b) 3,146
Servicing fee (Class C) (Note
3b) 2,849,362
Transfer agent and custody
fees 1,678,998
Professional fees 135,999
Trustees' fees and expenses
(Note 3c) 85,000
Shareholder reports and
notices 649,999
Miscellaneous 257,993
-----------
Total expenses 22,775,885
--------------
Net investment loss (1,692,133)
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on security
transactions 170,814,216
Net realized loss on options
written (10,517,641)
Net unrealized appreciation on
securities 107,005,178
Net unrealized depreciation on
options written (1,232,651)
--------------
Net realized and unrealized
gain on investments 266,069,102
--------------
Net increase in net assets
resulting from operations $ 264,376,969
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (1,692,133) $ (1,510,561)
Net realized gain on security
transactions 170,814,216 61,977,601
Net realized gain (loss) on
options written (10,517,641) 16,170,895
Net unrealized appreciation
(depreciation) on securities 107,005,178 (70,142,685)
Net unrealized appreciation
(depreciation) on options
written (1,232,651) 62,164
-------------- --------------
Net increase in net assets
resulting from operations 264,376,969 6,557,414
Distributions paid from net
realized gain on investments
Class A (5,788,261) (7,856,845)
Class C (59,479,234) (86,123,172)
Net increase from Fund share
transactions (Note 5) 40,836,714 105,119,489
-------------- --------------
Net increase in net assets 239,946,188 17,696,886
NET ASSETS:
Beginning of year 1,192,695,845 1,174,998,959
-------------- --------------
End of year $1,432,642,033 $1,192,695,845
============== ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
24
PIMCO ADVISORS GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
COMMERCIAL PAPER
GUARANTEED
BY LETTERS OF
CREDIT--0.3%
$ 3,600,000 Matterhorn Capital Corp.,
5.71%, 10/27/95
guaranteed by Union
Bank of Switzerland
(Cost $3,585,154) $ 3,585,154
--------------
SHORT-TERM NOTES--7.3%
10,000,000 Asset Securitization
Corp., 5.73%, 10/10/95 9,985,675
9,400,000 Bell Atlantic Network
Funding, 5.71%,
10/12/95 9,383,600
2,700,000 Ciesco, L.P., 5.77%,
10/23/95 2,690,479
5,000,000 Commonwealth Bank of
Australia, 6.45%,
10/3/95 4,998,208
4,000,000 Cooperative Association
of Tractor Dealers,
Inc., 5.73%, 10/3/95 3,998,727
10,800,000 Corporate Asset Funding
Co., Inc., 5.77%,
10/12/95 10,780,959
10,500,000 Corporate Receivables
Corp., 5.72%, 10/18/95 10,471,638
7,500,000 CXC, Inc., 5.77%,
10/27/95 7,468,746
12,000,000 Golden Managers
Acceptance Corp.,
5.76%, 10/4/95 11,994,240
6,250,000 Preferred Receivables
Funding Corp., 5.74%,
10/5/95 6,246,014
6,000,000 Reed Elsevier Capital
Inc., 5.69%, 10/11/95 5,990,517
10,000,000 Sheffield Receivables
Corp., 5.80%, 10/5/95 9,993,555
10,000,000 USL Capital Corp., 5.70%,
10/26/95 9,960,417
--------------
TOTAL SHORT-TERM NOTES
(Cost $103,962,775) 103,962,775
--------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--0.3%
5,000,000 FNMA, Discount Notes,
5.75%, 10/3/95
(Cost $4,998,403) 4,998,403
--------------
<CAPTION>
SHARES
- --------------
<S> <C> <C>
COMMON STOCKS--93.7%
APPLIANCES--2.3%
975,000 Black & Decker Corp. 33,271,875
--------------
BANKS--6.9%
470,000 Bank of New York Co.,
Inc. 21,855,000
480,000 Chemical Banking Corp. 29,220,000
675,000 Citicorp 47,756,250
--------------
98,831,250
--------------
BEVERAGE--3.1%
860,000 Pepsico, Inc. 43,860,000
--------------
COMMUNICATION
EQUIPMENT--1.0%
200,000 Nokia Corporation ADR 13,950,000
--------------
COMPUTER SERVICES AND
SOFTWARE--14.4%
585,000 (a)Cisco Systems, Inc.* 40,365,000
600,000 Computer Associates
International, Inc. 25,350,000
500,000 Computer Sciences Corp.* 32,187,500
VALUE
SHARES (NOTE 2)
- -------------- --------------
570,000 (a)Electronic Arts Inc.* $ 20,947,500
250,000 First Data Corp. 15,500,000
650,000 (a)Informix Corp.* 21,125,000
375,000 Microsoft Corp.* 33,937,500
450,000 Oracle Systems Corp.* 17,268,750
--------------
206,681,250
--------------
COMPUTERS--1.0%
170,000 Hewlett-Packard Co. 14,173,750
--------------
ELECTRONICS--6.4%
200,000 Applied Materials, Inc.* 20,450,000
825,000 Loral Corp. 47,025,000
425,000 (a)LSI Logic Corp.* 24,543,750
--------------
92,018,750
--------------
ENTERTAINMENT AND
LEISURE--4.3%
440,000 Disney (Walt) Company
(The) 25,245,000
730,000 Viacom, Inc., Class B* 36,317,500
--------------
61,562,500
--------------
FINANCIAL SERVICES--5.1%
680,000 American Express Co. 30,175,000
417,000 Green Tree Financial
Corp. 25,437,000
290,000 MGIC Investment Corp. 16,602,500
--------------
72,214,500
--------------
FOREST AND PAPER
PRODUCTS--5.9%
425,000 Bowater Inc. 19,815,625
320,000 Georgia-Pacific Corp. 28,000,000
550,000 Kimberly-Clark Corp. 36,918,750
--------------
84,734,375
--------------
HEALTH MANAGEMENT--2.6%
780,000 Columbia HCA Healthcare
Corp. 37,927,500
--------------
INSURANCE--4.3%
365,000 American International
Group Inc. 31,025,000
290,000 Cigna Corp. 30,196,250
--------------
61,221,250
--------------
MACHINERY AND
ENGINEERING--1.5%
260,000 Deere & Co. 21,157,500
--------------
MEDIA--3.7%
1,265,000 Comcast Corp. Class A 25,300,000
410,000 Infinity Broadcasting
Corp. Class A* 13,427,500
540,000 Liberty Media
Group-Series A* 14,445,000
--------------
53,172,500
--------------
MEDICAL SUPPLIES--8.2%
520,000 Guidant Corp. 15,210,000
525,000 Heart Technology, Inc.* 14,634,375
600,000 Johnson & Johnson 44,475,000
800,000 Medtronic, Inc. 43,000,000
--------------
117,319,375
--------------
OIL AND GAS--3.4%
500,000 Amoco Corp. 32,062,500
180,000 British Petroleum Co. PLC
ADR 16,177,500
--------------
48,240,000
--------------
OIL AND GAS
SERVICES--2.4%
540,000 Schlumberger Ltd. 35,235,000
--------------
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS GROWTH FUND 25
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- -------------- --------------
<S> <C> <C>
PHARMACEUTICALS--9.3%
1,000,000 Amgen Inc.* $ 49,875,000
750,000 Merck & Co., Inc. 42,000,000
520,000 Smithkline Beecham PLC
ADR 26,325,000
340,000 Upjohn Co. 15,172,500
--------------
133,372,500
--------------
RETAIL--2.8%
760,000 Federated Department
Stores, Inc.* 21,565,000
600,000 Office Depot Inc.* 18,075,000
--------------
39,640,000
--------------
TELECOMMUNICATIONS--2.0%
700,000 Vodafone Group PLC ADR 28,700,000
--------------
UTILITIES: TELEPHONE
SYSTEMS--3.1%
324,000 AT&T Corp. 21,303,000
875,000 MCI Communications Corp. 22,804,687
--------------
44,107,687
--------------
TOTAL COMMON STOCKS
(Cost $1,096,434,198) 1,341,391,562
--------------
CONTRACTS
- --------------
PURCHASED PUT
OPTIONS--0.1%
937 Standard & Poor's 500
Index, expiring October
'95 @ $570 169,831
1,578 Standard & Poor's 500
Index, expiring October
'95 @ $575 384,638
1,545 Standard & Poor's 500
Index, expiring
December '95 @ $575 1,042,875
--------------
TOTAL PURCHASED PUT
OPTIONS
(Cost $2,586,605) 1,597,344
--------------
TOTAL SECURITIES OWNED
(Cost
$1,211,567,135+) 1,455,535,238
--------------
OUTSTANDING PUT OPTIONS WRITTEN--(0.1%)
2,515 Standard & Poor's 500 Index,
expiring October '95 @ $545 (125,750)
1,545 Standard & Poor's 500 Index,
expiring December '95 @ $540 (424,875)
--------------
TOTAL OUTSTANDING PUT OPTIONS
WRITTEN
(Premiums Received $708,074) (550,625)
--------------
VALUE
CONTRACTS (NOTE 2)
- -------------- --------------
<S> <C> <C>
OUTSTANDING CALL OPTIONS
WRITTEN--(0.2%)
350 Cisco Systems, Inc.,
expiring October '95 @
$70 $ (67,812)
2,000 Electronic Arts, Inc.,
expiring October '95 @
$40 (150,000)
700 Informix Corp., expiring
November '95 @ $35 (109,375)
500 LSI Logic Corp., expiring
November '95 @ $65 (125,000)
1,545 Standard & Poor's 500
Index, expiring
December '95 @ $590 (1,757,438)
1,578 Standard & Poor's 500
Index, expiring October
'95 @ $590 (572,025)
--------------
TOTAL OUTSTANDING CALL
OPTIONS WRITTEN
(Premiums Received
$2,458,539) (2,781,650)
--------------
TOTAL INVESTMENTS, NET
OF OUTSTANDING
OPTIONS WRITTEN
(Cost $1,214,733,748) 101.4% 1,452,202,963
OTHER ASSETS AND
LIABILITIES, NET (1.4%) (19,560,930)
------- --------------
TOTAL NET ASSETS 100.0% $1,432,642,033
======== ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $1,211,567,135. At September 30, 1995,
net unrealized appreciation was $243,968,103. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$251,951,868 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$7,983,765
(a) See Outstanding Call Options Written
* Non-income producing securities
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
26
PIMCO ADVISORS TARGET FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $784,970,763) (Note
2a) $ 930,078,268
Cash 16,452,116
Dividends receivable 347,272
Receivable for investments
sold 8,452,783
Receivable for Fund shares
sold 2,887,634
Unamortized organization costs
(Note 2j) 22,150
Other assets 73,463
--------------
Total assets 958,313,686
LIABILITIES:
Payable for investments
purchased $43,392,247
Payable for Fund shares
redeemed 3,271,971
Outstanding options written,
at value (premiums received
$164,097) (Notes 2c and 6) 61,725
Accrued expenses:
Investment advisory fee 531,470
Distribution fee 486,321
Servicing fee 186,875
Other 558,169
----------
Total liabilities 48,488,778
--------------
NET ASSETS $ 909,824,908
==============
COMPOSITION OF NET ASSETS:
Capital $ 666,384,565
Undistributed net realized
gain on investments 98,230,466
Net unrealized appreciation on
securities 145,107,505
Net unrealized appreciation on
options written 102,372
--------------
Total net assets $ 909,824,908
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($121,915,099
DIVIDED BY 7,432,771 shares) $16.40
Sales charge--5.50% of public
offering price 0.95
---------
Maximum offering price $17.35
=========
CLASS B SHARES
Net asset value and offering
price per share ($7,554,310
DIVIDED BY 470,488 shares) $16.06
=========
Redemption price per share *
=========
CLASS C SHARES
Net asset value and offering
price per share ($780,355,499
DIVIDED BY 48,606,379 shares) $16.05
=========
Redemption price per share *
=========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 3,959,769
Dividends (including $376,424
in dividends from foreign
securities less $56,281 in
foreign taxes withheld at
source) 4,232,580
--------------
Total investment income 8,192,349
EXPENSES:
Investment advisory fee (Note
3a) $5,294,008
Distribution fee (Class B)
(Note 3b) 8,862
Distribution fee (Class C)
(Note 3b) 4,801,612
Servicing fee (Class A) (Note
3b) 251,511
Servicing fee (Class B) (Note
3b) 2,954
Servicing fee (Class C) (Note
3b) 1,600,537
Transfer agent and custody
fees 1,239,000
Professional fees 101,000
Trustees' fees and expenses
(Note 3c) 40,000
Shareholder reports and
notices 470,000
Miscellaneous 219,221
--------
Total expenses 14,028,705
--------------
Net investment loss (5,836,356)
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on security
transactions 109,353,427
Net realized gain on options
written 416,535
Net unrealized appreciation on
securities 76,693,775
Net unrealized depreciation on
options written (133,389)
--------------
Net realized and unrealized
gain on investments 186,330,348
--------------
Net increase in net assets
resulting from operations $ 180,493,992
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (5,836,356) $ (5,077,201)
Net realized gain on security
transactions 109,353,427 3,802,971
Net realized gain on options
written 416,535 2,633,738
Net unrealized appreciation on
securities 76,693,775 21,546,914
Net unrealized appreciation
(depreciation) on options
written (133,389) 235,761
----------- --------------
Net increase in net assets
resulting from operations 180,493,992 23,142,183
Distributions paid from net
realized gain on investments
Class A (1,095,474) (557,437)
Class C (7,061,265) (3,425,673)
Net increase from Fund share
transactions (Note 5) 90,917,353 280,386,122
----------- --------------
Net increase in net assets 263,254,606 299,545,195
NET ASSETS:
Beginning of year 646,570,302 347,025,107
----------- --------------
End of year $909,824,908 $ 646,570,302
============ ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS TARGET FUND 27
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
SHORT-TERM NOTES--11.1%
$ 7,000,000 Bass Financial (C.I)
Ltd., 5.80%,11/1/95 $ 6,965,039
7,800,000 Bell Atlantic Network
Funding Corp., 5.85%,
10/25/95 7,769,580
6,500,000 Ciesco, L.P., 5.70%,
10/20/95 6,480,446
6,300,000 Cooperative Association
of Tractor Dealers,
Inc., 5.78%, 10/11/95 6,289,885
6,000,000 Corporate Asset Funding
Co., Inc., 5.77%,
10/13/95 5,988,460
5,000,000 Corporate Receivables
Corp., 5.80%, 11/14/95 4,964,555
7,200,000 CSW Credit Inc., 5.72%,
10/24/95 7,173,688
7,100,000 CXC, Inc., 5.77%,
10/27/95 7,070,413
1,600,000 Dresdner U.S. Finance
Inc., 5.72%, 10/3/95 1,599,492
5,000,000 Eiger Capital Corp.,
5.72%, 10/17/95 4,987,289
4,400,000 Falcon Asset
Securitization Corp.,
5.72%, 10/13/95 4,391,611
4,900,000 Golden Managers
Acceptance Corp.,
5.76%, 10/4/95 4,897,648
5,500,000 Goldman Sachs & Co.,
5.77%, 10/4/95 5,497,355
6,000,000 Koch Industries Inc.,
6.05%, 10/6/95 5,994,958
3,100,000 McKenna Triangle National
Corp., 5.71%, 10/18/95 3,091,641
500,000 National Rural Utilities
Cooperative Finance
Corp., 5.73%, 10/4/95 499,761
5,000,000 Preferred Receivables
Funding Corp., 5.74%,
10/5/95 4,996,811
5,700,000 Sheffield Receivables
Corp., 5.80%, 10/5/95 5,696,327
6,800,000 USL Capital Corp.,
5.74%-5.75%,
10/3/95-10/19/95 6,791,451
--------------
TOTAL SHORT-TERM NOTES
(Cost $101,146,410) 101,146,410
--------------
SHARES
- --------------
COMMON STOCKS AND
WARRANTS--91.1%
APPAREL--2.0%
361,500 Liz Claiborne, Inc. 9,127,875
391,800 Warnaco Group Inc., Class
A* 9,403,200
--------------
18,531,075
--------------
AUTOMOTIVE
MANUFACTURING--2.7%
1,009,000 Harley-Davidson, Inc. 24,594,375
--------------
CHEMICALS--2.9%
243,800 Potash Corporation of
Saskatchewan, Inc. 15,176,550
405,600 Praxair, Inc. 10,849,800
--------------
26,026,350
--------------
COMPUTER SERVICES AND
SOFTWARE--7.1%
184,500 Broderbund Software,
Inc.* 14,045,062
332,200 Ceridian Corp.* 14,741,375
559,400 FIserv, Inc.* 16,152,675
211,800 Peoplesoft, Inc.* 19,247,325
--------------
64,186,437
--------------
COMPUTERS--2.4%
251,000 Dell Computer Corp.* 21,335,000
--------------
ELECTRONICS--11.6%
220,600 AVX Corp.* 7,390,100
547,500 Diebold, Inc. 25,390,312
215,100 KLA Instruments Corp.* 17,261,775
VALUE
SHARES (NOTE 2)
- -------------- --------------
295,300 MEMC Electronic
Materials, Inc.* $ 8,010,012
410,000(a) Teradyne, Inc.* 14,760,000
309,800 UCAR International Inc.* 8,442,050
582,570 Vishay Intertechnology,
Inc.* 24,467,940
--------------
105,722,189
--------------
ENTERTAINMENT AND
LEISURE--1.7%
523,000 GTECH Holdings Corp.* 15,755,375
--------------
FINANCIAL SERVICES--3.2%
886,600 Countrywide Credit
Industries Inc. 20,835,100
350,500 Mercury Finance Corp. 8,543,437
--------------
29,378,537
--------------
FOREST AND PAPER
PRODUCTS--4.7%
386,900 Bowater Inc. 18,039,212
770,500 James River Corp. of
Virginia 24,656,000
--------------
42,695,212
--------------
HEALTH CARE--1.2%
436,800 Lincare Holdings, Inc.* 11,247,600
--------------
HEALTH MANAGEMENT--1.0%
351,700 HEALTHSOUTH
Rehabilitation Corp.* 8,968,350
--------------
HEAVY MACHINERY--1.7%
412,200 Case Corp. 15,148,350
--------------
INSURANCE--6.5%
850,100 Alexander & Alexander
Services Inc. 20,614,925
306,100 American Re Corp. 11,784,850
290,400 Mid Ocean Limited 10,018,800
354,900 PMI Group, Inc. 16,813,388
--------------
59,231,963
--------------
LODGING--3.5%
609,300 HFS, Inc.* 31,912,088
--------------
MEDIA--4.1%
166,900 Clear Channel
Communications, Inc.* 12,642,675
427,300 Gartner Group, Inc.,
Class A* 13,994,075
172,355 Scholastic Corp.* 10,815,276
--------------
37,452,026
--------------
MEDICAL SUPPLIES--5.7%
247,000 Bausch & Lomb, Inc. 10,219,625
1,415,800 Guidant Corp. 41,412,150
--------------
51,631,775
--------------
MISCELLANEOUS
MANUFACTURING--1.3%
308,700 Millipore Corp. 11,576,250
--------------
PHARMACEUTICALS--3.1%
261,700 Genzyme Corp.* 15,178,600
661,800 Mylan Laboratories Inc. 13,236,000
--------------
28,414,600
--------------
RESTAURANTS--4.7%
1,143,100 Boston Chicken, Inc.* 29,863,488
339,400 Starbucks Corp.* 12,854,775
--------------
42,718,263
--------------
RETAIL--9.5%
153,200 Baby Superstore, Inc.* 6,913,150
108,300 CompUSA, Inc.* 4,656,900
577,700 General Nutrition Cos.
Inc.* 26,285,350
264,500 Gymboree Corp.* 7,968,063
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
28
PIMCO ADVISORS TARGET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- -------------- --------------
<S> <C> <C>
909,500 OfficeMax, Inc.* $ 22,055,375
554,300 PetSmart, Inc.* 18,707,625
--------------
86,586,463
--------------
TELECOMMUNICATIONS--9.3%
53,250 American Satellite
Network Inc.
(warrants expire
6/30/99)* 0
258,550 Andrew Corp.* 15,803,870
202,300 MFS Communications Co.* 8,850,625
443,440 Millicom International
Cellular SA* 14,245,510
292,500 Paging Network, Inc.* 14,040,000
244,000 Qualcomm, Inc.* 11,193,500
487,800 Tellabs, Inc.* 20,548,575
--------------
84,682,080
--------------
UTILITIES: GAS--1.2%
675,000 ENSERCH Corp. 11,137,500
--------------
TOTAL COMMON STOCKS AND
WARRANTS
(Cost $683,824,353) 828,931,858
--------------
TOTAL SECURITIES OWNED
(Cost $784,970,763+) 930,078,268
--------------
VALUE
CONTRACTS (NOTE 2)
- -------- --------------
OUTSTANDING CALL OPTIONS
WRITTEN--(0.0%)
823 Teradyne, Inc., expiring
October'95 @ $40
(Premiums Received
$164,097) $ (61,725)
--------------
TOTAL INVESTMENTS, NET OF
OUTSTANDING OPTIONS
WRITTEN
(Cost $784,806,665) 102.2% 930,016,543
OTHER ASSETS AND
LIABILITIES, NET (2.2%) (20,191,635)
------- --------------
TOTAL NET ASSETS 100.0% $ 909,824,908
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $784,970,763. At September 30, 1995,
net unrealized appreciation was $145,107,505. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$150,710,170 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$5,602,665.
(a) See Outstanding Call Options Written
* Non-income producing securities
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS DISCOVERY FUND 29
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $33,613,807) (Note
2a) $ 35,269,270
Cash 5,200,062
Dividends receivable 14,142
Interest receivable 17,880
Receivable for investments
sold 61,595
Receivable for Fund shares
sold 1,088,841
Unamortized organization costs
(Note 2j) 47,395
--------------
Total assets 41,699,185
LIABILITIES:
Payable for investments
purchased $2,815,166
Payable for Fund shares
redeemed 28,174
Accrued expenses:
Investment advisory fee 21,243
Distribution fee 16,905
Servicing fee 7,081
Organization expense 50,000
Other 9,720
--------
Total liabilities 2,948,289
--------------
NET ASSETS $ 38,750,896
==============
COMPOSITION OF NET ASSETS:
Capital $ 37,609,798
Accumulated net realized loss
on investments (514,365)
Net unrealized appreciation on
securities 1,655,463
--------------
Total net assets $ 38,750,896
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($7,658,324
DIVIDED BY 703,423 shares) $10.89
Sales charge--5.50% of public
offering price 0.63
---------
Maximum offering price $11.52
=========
CLASS B SHARES
Net asset value and offering
price per share ($10,832,452
DIVIDED BY 997,019 shares) $10.86
=========
Redemption price per share *
=========
CLASS C SHARES
Net asset value and offering
price per share ($20,260,120
DIVIDED BY 1,864,790 shares) $10.86
=========
Redemption price per share *
=========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995*
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 55,841
Dividends 38,278
--------------
Total investment income 94,119
EXPENSES:
Investment advisory fee (Note
3a) $46,638
Distribution fee (Class B)
(Note 3b) 13,137
Distribution fee (Class C)
(Note 3b) 23,425
Servicing fee (Class A) (Note
3b) 3,359
Servicing fee (Class B) (Note
3b) 4,379
Servicing fee (Class C) (Note
3b) 7,808
Transfer agent and custody
fees 9,825
Professional fees 3,100
Miscellaneous 5,225
------
Total expenses 116,896
--------------
Net investment loss (22,777)
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on security
transactions (514,365)
Net unrealized appreciation on
securities 1,655,463
--------------
Net realized and unrealized
gain on investments 1,141,098
--------------
Net increase in net assets
resulting from operations $ 1,118,321
==============
</TABLE>
- ------------------
* The Fund commenced operations on June 27, 1995.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER
30,
1995*
------------
<S> <C>
OPERATIONS:
Net investment loss $ (22,777)
Net realized loss on security
transactions (514,365)
Net unrealized appreciation on
securities 1,655,463
------------
Net increase in net assets
resulting from operations 1,118,321
Net increase from Fund share
transactions (Note 5) 37,632,575
------------
Net increase in net assets 38,750,896
NET ASSETS:
Beginning of period --
------------
End of period $38,750,896
============
</TABLE>
- ------------------
* The Fund commenced operations on June 27, 1995.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
30
PIMCO ADVISORS DISCOVERY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ------ --------------
<S> <C> <C>
COMMON STOCKS--91.0%
BANKS--8.4%
17,500 Associated Banc-Corp $ 643,125
18,900 Centura Banks Inc. 628,425
42,500 City National Corp. 563,125
11,800 Midlantic Corp. 640,150
24,000 Summit Bancorporation 669,000
2,600 Union Bank/San Francisco,
CA 137,800
--------------
3,281,625
--------------
BEVERAGE--1.6%
12,800 Canandaigua Wine Co.,
Class A* 622,400
--------------
CHEMICALS--1.4%
10,100 Cabot Corp. 536,562
--------------
COMMERCIAL SERVICES--1.2%
16,700 Manpower, Inc. 484,300
--------------
COMMUNICATION
EQUIPMENT--1.9%
18,100 Network Equipment
Technologies, Inc.* 753,413
--------------
COMPUTER SERVICES AND
SOFTWARE--7.7%
15,200 Cadence Design Systems
Inc.* 596,600
22,800 NetManage, Inc.* 541,500
10,900 Parametric Technology
Corp.* 670,350
13,900 Read-Rite Corp.* 507,350
14,900 Softkey International,
Inc.* 659,325
--------------
2,975,125
--------------
CONTAINERS--0.2%
2,100 Ball Corp. 62,213
--------------
ELECTRONICS--20.6%
18,500 Atmel Corp.* 624,375
19,500 Belden, Inc. 511,875
17,500 Credence Systems Corp.* 634,375
18,400 FSI International Inc.* 611,800
13,130 Harman International
Industries, Inc. 643,370
6,800 KLA Instruments Corp.* 545,700
15,700 Kulicke & Soffa
Industries, Inc.* 573,050
12,700 Lattice Semiconductor
Corp.* 515,938
16,900 Methode Electronics Inc.,
Class A 388,700
15,400 S3 Inc.* 537,075
7,200 Sierra Semiconductor
Corp.* 353,700
14,100 Silicon Valley Group
Inc.* 544,613
13,700 Tencor Instruments* 606,225
15,000 Teradyne, Inc.* 540,000
8,300 Wyle Electronics 372,462
--------------
8,003,258
--------------
ENVIRONMENTAL
CONTROL--0.9%
8,800 United Waste Systems,
Inc. 367,400
--------------
FINANCIAL SERVICES--5.6%
13,900 Finova Group Inc. 618,550
10,400 Green Tree Financial
Corp. 634,400
18,950 Money Store, Inc. (The) 897,755
--------------
2,150,705
--------------
FOREST AND PAPER
PRODUCTS--2.6%
11,100 Bowater Inc. 517,537
51,100 Domtar Inc.* 472,675
--------------
990,212
--------------
HEALTH CARE--1.3%
19,400 Lincare Holdings, Inc.* 499,550
--------------
HEALTH MANAGEMENT--5.1%
17,000 Health Management
Associates, Inc.* 546,125
30,100 Ornda HealthCorp* 639,625
11,400 Physician Reliance
Network, Inc.* 421,800
10,500 Universal Health
Services, Inc., Class
B* 359,625
--------------
1,967,175
--------------
VALUE
SHARES (NOTE 2)
- ------ --------------
INDUSTRIAL
COMPONENTS--3.0%
14,200 IDEX Corp. $ 507,650
16,600 Roper Industries Corp. 643,250
--------------
1,150,900
--------------
INSURANCE--9.5%
21,100 Citizens Corp. 400,900
17,800 Mid Ocean Limited 614,100
16,100 National Re Corp. 569,538
16,800 Penncorp Financial Group,
Inc. 401,100
19,100 Protective Life Corp. 558,675
10,900 Reinsurance Group of
America 384,225
10,300 Selective Insurance Group 375,950
9,600 Vesta Insurance Group,
Inc. 372,000
--------------
3,676,488
--------------
MACHINERY AND
ENGINEERING--1.3%
11,100 AGCO Corp. 505,050
--------------
MEDIA--3.2%
7,400 United Television Inc. 660,450
19,400 United Video Satellite
Group, Inc.* 577,150
--------------
1,237,600
--------------
MEDICAL SUPPLIES--4.5%
29,100 Amsco International,
Inc.* 578,363
21,300 Guidant Corp. 623,025
13,500 Sybron International
Corp.* 543,375
--------------
1,744,763
--------------
MISCELLANEOUS
MANUFACTURING--2.0%
16,200 Smith (A.O.) Corp. 419,175
10,200 Standex International
Corp. 371,025
--------------
790,200
--------------
MULTI-INDUSTRY--1.5%
12,700 First Brands Corp. 571,500
--------------
PHARMACEUTICALS--1.6%
15,400 Watson Pharmaceuticals
Inc.* 631,400
--------------
RETAIL--1.2%
21,500 Hollywood Entertainment
Corp.* 460,906
--------------
TELECOMMUNICATIONS--1.5%
21,400 Frontier Corp. 569,775
--------------
TRANSPORTATION:
RAIL--3.2%
11,000 GATX Corp. 569,250
10,000 Wisconsin Central
Transportation Corp.* 667,500
--------------
1,236,750
--------------
TOTAL COMMON STOCKS
(Cost $33,613,807) 35,269,270
--------------
TOTAL INVESTMENTS
(Cost $33,613,807+) 91.0% 35,269,270
OTHER ASSETS AND LIABILITIES,
NET 9.0% 3,481,626
------- --------------
TOTAL NET ASSETS 100.0% $ 38,750,896
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $33,613,807. At September 30, 1995, net
unrealized appreciation was $1,655,463. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$2,213,176 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$557,713.
* Non-income producing securities
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS OPPORTUNITY FUND 31
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $635,128,805) (Note
2a) $ 858,779,919
Cash 2,696,665
Dividends receivable 70,860
Receivable for investments
sold 4,154,635
Receivable for Fund shares
sold 809,178
Other assets 68,004
--------------
Total assets 866,579,261
LIABILITIES:
Payable for investments
purchased $21,732,274
Payable for Fund shares
redeemed 3,411,396
Outstanding options written,
at value (premiums received
$4,970,483) (Notes 2c and 6) 3,898,206
Accrued expenses:
Investment advisory fee 489,764
Distribution fee 441,557
Servicing fee 171,980
Other 413,212
----------
Total liabilities 30,558,389
--------------
NET ASSETS $ 836,020,872
==============
COMPOSITION OF NET ASSETS:
Capital $ 442,701,703
Undistributed net realized
gain on investments 168,595,778
Net unrealized appreciation on
securities 223,651,114
Net unrealized appreciation on
options written 1,072,277
--------------
Total net assets $ 836,020,872
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($120,829,628
DIVIDED BY 3,091,945 shares) $39.08
Sales charge--5.50% of public
offering price 2.27
---------
Maximum offering price $41.35
=========
CLASS C SHARES
Net asset value and offering
price per share ($715,191,244
DIVIDED BY 19,001,617 shares) $37.64
=========
Redemption price per share *
=========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 4,177,221
Dividends 1,456,491
--------------
Total investment income 5,633,712
EXPENSES:
Investment advisory fee (Note
3a) $5,000,057
Distribution fee (Class C)
(Note 3b) 4,482,237
Servicing fee (Class A) (Note
3b) 255,940
Servicing fee (Class C) (Note
3b) 1,494,079
Transfer agent and custody
fees 736,999
Professional fees 84,999
Trustees' fees and expenses
(Note 3c) 65,000
Shareholder reports and
notices 289,999
Miscellaneous 144,490
--------
Total expenses 12,553,800
--------------
Net investment loss (6,920,088)
--------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on security
transactions 194,820,436
Net realized gain on options
written 359,905
Net unrealized appreciation on
securities 45,692,855
Net unrealized appreciation on
options written 3,281,809
--------------
Net realized and unrealized
gain on investments 244,155,005
--------------
Net increase in net assets
resulting from operations $ 237,234,917
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (6,920,088) $ (8,278,826)
Net realized gain on security
transactions 194,820,436 3,975,164
Net realized gain on options
written 359,905 2,956,958
Net unrealized appreciation
(depreciation) on securities 45,692,855 (51,705,843)
Net unrealized appreciation
(depreciation) on options
written 3,281,809 (2,209,532)
----------- --------------
Net increase (decrease) in net
assets resulting from
operations 237,234,917 (55,262,079)
Distributions paid from net
realized gain on investments
Class A (2,828,016) (7,362,399)
Class C (16,835,116) (42,854,271)
Return of Capital
Class A -- (371,797)
Class C -- (2,164,189)
Net increase (decrease) from
Fund share transactions
(Note 5) (30,272,461) 31,877,215
----------- --------------
Net increase (decrease) in
net assets 187,299,324 (76,137,520)
NET ASSETS:
Beginning of year 648,721,548 724,859,068
----------- --------------
End of year $ 836,020,872 $ 648,721,548
=========== ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
32
PIMCO ADVISORS OPPORTUNITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
COMMERCIAL PAPER
GUARANTEED BY
LETTERS OF CREDIT--0.3%
$ 2,000,000 Matterhorn Capital Corp.,
5.71%, 10/27/95
guaranteed by Union
Bank of Switzerland
(Cost $1,991,752) $ 1,991,752
--------------
SHORT-TERM NOTES--8.1%
1,000,000 Canadian Wheat Board,
5.70%,10/6/95 999,208
7,300,000 Cooperative Association
of Tractor Dealers,
Inc., 5.78%, 10/16/95 7,282,419
8,800,000 CSW Credit Inc.,
5.72%-5.73%,
10/23/95-10/24/95 8,768,880
5,700,000 CXC, Inc., 5.77%,
10/27/95 5,676,247
1,400,000 Dresdner U.S. Finance
Inc., 5.72%, 10/3/95 1,399,555
4,200,000 Eiger Capital Corp.,
5.72%, 10/17/95 4,189,323
7,200,000 Goldman Sachs & Co.,
5.77%, 10/4/95 7,196,538
6,500,000 Preferred Receivables
Funding Corp., 5.74%,
10/5/95 6,495,854
3,300,000 Redland Finance Inc.,
5.74%, 10/25/95 3,287,372
10,000,000 Sheffield Receivables
Corp., 6.55%, 10/2/95 9,998,181
2,500,000 Tiger Managers Acceptance
Corp., 5.75%, 10/24/95 2,490,816
10,000,000 USL Capital Corp., 5.74%,
10/19/95 9,971,300
--------------
TOTAL SHORT-TERM NOTES
(Cost $67,755,693) 67,755,693
--------------
SHARES
- --------------
COMMON STOCKS--94.4%
APPAREL--3.1%
800,000 Tommy Hilfiger Corp.* 26,000,000
--------------
AUTOMOTIVE
MANUFACTURING--2.1%
500,050 Wabash National Corp. 17,689,269
--------------
BANKS--4.9%
207,900 BayBanks, Inc. 15,774,412
1,000,000 Glendale Federal Bank
FSB* 16,500,000
540,000 Life Bancorp, Inc. 8,640,000
--------------
40,914,412
--------------
BEVERAGE--3.3%
325,000 Canandaigua Wine Co.* 15,803,125
470,000 Robert Mondavi Corp.
Class A* 11,985,000
--------------
27,788,125
--------------
BUILDING MATERIALS AND
CONSTRUCTION--6.8%
650,000 Centex Construction
Products, Inc.* 8,531,250
435,000 Champion Enterprises,
Inc.* 8,645,625
500,000 Oakwood Homes Corp. 17,625,000
400,000 Pulte Corp. 11,350,000
425,000 U.S. Home Corp.* 10,625,000
--------------
56,776,875
--------------
CHEMICALS--1.3%
400,000 Airgas Inc.* 10,650,000
--------------
COMMERCIAL SERVICES--2.8%
445,000 Norrell Corp. 14,462,500
620,000 Sotheby's Holdings, Inc. 8,680,000
--------------
23,142,500
--------------
VALUE
SHARES (NOTE 2)
- -------------- --------------
COMMUNICATION
EQUIPMENT--9.9%
265,000 Glenayre Technologies,
Inc.* $ 19,080,000
315,000 Spectrian Corp.* 10,749,375
570,000(a) StrataCom, Inc.* 31,492,500
250,000(a) U.S. Robotics Corp.* 21,312,500
--------------
82,634,375
--------------
COMPUTER SERVICES AND
SOFTWARE--9.3%
200,000 Avid Technology Inc.* 8,600,000
325,000(a) Electronics for Imaging,
Inc.* 23,278,125
350,000 Hyperion Software Corp.* 19,862,500
298,000 Sierra On-Line, Inc.* 11,696,500
350,000(a) System Software
Associates Inc. 14,043,750
--------------
77,480,875
--------------
COMPUTERS--4.5%
400,000(a) Boca Research, Inc.* 9,700,000
140,000 Hutchinson Technology
Inc.* 8,715,000
300,000(a) Komag, Inc.* 19,612,500
--------------
38,027,500
--------------
CONTAINERS--0.7%
600,000 Gaylord Container Corp.* 5,662,500
--------------
COSMETICS--1.2%
500,000(a) Thermolase Corp.* 10,187,500
--------------
ELECTRONICS--15.5%
570,000(a) Altera Corp.* 35,553,750
280,000(a) C-Cube Microsystems,
Inc.* 12,810,000
472,500 Harman International
Industries, Inc. 23,152,500
665,600 Integrated Device
Technology, Inc.* 16,640,000
350,000 Integrated Process
Equipment Corp.* 13,934,375
315,000(a) Macromedia Inc.* 17,994,375
300,000 Symbol Technologies,
Inc.* 9,937,500
--------------
130,022,500
--------------
ENTERTAINMENT AND
LEISURE--1.5%
265,000 First Team Sports, Inc.* 4,240,000
221,000(a) Scientific Games Holdings
Corp.* 8,259,875
--------------
12,499,875
--------------
ENVIRONMENTAL
CONTROL--0.5%
250,000 ICC Technologies, Inc.* 3,937,500
--------------
FOREST AND PAPER
PRODUCTS--2.5%
700,000 Fort Howard Corp.* 10,762,500
1,600,000 Repap Enterprises, Inc.* 10,549,920
--------------
21,312,420
--------------
HEALTH CARE--2.3%
550,000 PhyCor, Inc.* 18,837,500
--------------
INSURANCE--1.9%
300,000 CMAC Investment Corp. 15,787,500
--------------
MACHINERY AND
ENGINEERING--1.0%
250,000 Harnischfeger Industries,
Inc. 8,343,750
--------------
MEDIA--1.0%
300,000 Evergreen Media Corp.,
Class A* 8,550,000
--------------
OIL AND GAS--1.4%
500,000 Pogo Producing Co. 11,375,000
--------------
OIL AND GAS
EQUIPMENT--2.3%
600,000 Smith International,
Inc.* 10,425,000
700,000 Weatherford
International, Inc.* 9,100,000
--------------
19,525,000
--------------
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS OPPORTUNITY FUND 33
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- -------------- --------------
<S> <C> <C>
OIL AND GAS
SERVICES--3.0%
2,100,000 Global Marine Inc.* $ 14,962,500
300,000 Sonat Offshore Drilling
Inc. 9,787,500
--------------
24,750,000
--------------
RESTAURANTS--1.6%
500,000 Applebee's International,
Inc. 13,625,000
--------------
RETAIL--1.4%
375,000 Just For Feet, Inc.* 11,531,250
--------------
TELECOMMUNICATIONS--7.2%
699,700 Colonial Data
Technologies Corp.* 12,944,450
495,466 International Cabletel,
Inc.* 13,873,048
350,000 LCI International Inc.* 13,737,500
985,000 WinStar Communications,
Inc.* 19,700,000
--------------
60,254,998
--------------
TRANSPORTATION: AIR--1.4%
442,500 Comair Holdings, Inc. 11,726,250
--------------
TOTAL COMMON STOCKS
(Cost $565,381,360) 789,032,474
--------------
TOTAL SECURITIES OWNED
(Cost $635,128,805+) 858,779,919
--------------
CONTRACTS
- ----------
OUTSTANDING CALL OPTIONS
WRITTEN (0.5%)
2,000 Altera Corp., expiring
October '95 @ $70 (300,000)
1,000 Boca Research, Inc.,
expiring December '95 @
$30 (137,500)
2,800 C-Cube Microsystems,
Inc., expiring October
'95 @ $45 (840,000)
1,296 Electronics for Imaging,
Inc., expiring October
'95 @ $65 (972,000)
956 Komag, Inc., expiring
October '95 @ $75 (59,750)
1,351 Macromedia, Inc.,
expiring October '95 @
$60 (194,206)
VALUE
CONTRACTS (NOTE 2)
- -------------- --------------
250 Scientific Games Holdings
Corp., expiring October
'95 @ $40 $ (25,000)
774 StrataCom, Inc., expiring
October '95 @ $55 (193,500)
1,000 System Software
Associates Inc.,
expiring October '95 @
$40 (256,250)
2,900 Thermolase Corp.,
expiring October '95 @
$22.50 (145,000)
1,000 U.S. Robotics Corp.,
expiring October '95 @
$80 (775,000)
--------------
TOTAL OUTSTANDING CALL
OPTIONS WRITTEN
(Premiums Received
$4,970,483) (3,898,206)
--------------
TOTAL INVESTMENTS, NET OF
OUTSTANDING OPTIONS
WRITTEN
(Cost $630,158,322) 102.3% 854,881,713
OTHER ASSETS AND
LIABILITIES, NET (2.3%) (18,860,841)
------- --------------
TOTAL NET ASSETS 100.0% $ 836,020,872
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $635,128,805. At September 30, 1995,
net unrealized appreciation was $223,651,114. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$234,561,359 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$10,910,245.
(a) See Outstanding Call Options Written
* Non-income producing securities
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
34
PIMCO ADVISORS INNOVATION FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $82,745,808) (Note
2a) $ 99,292,209
Receivable for investments
sold 978,303
Receivable for Fund shares
sold 1,508,191
Unamortized organization costs
(Note 2j) 42,279
Other assets 40,166
--------------
Total assets 101,861,148
LIABILITIES:
Payable for investments
purchased $1,297,846
Cash overdraft 963,528
Payable for Fund shares
redeemed 713,691
Accrued expenses:
Investment advisory fee 57,589
Distribution fee 40,852
Servicing fee 19,196
Other 67,702
--------
Total liabilities 3,160,404
--------------
NET ASSETS $ 98,700,744
==============
COMPOSITION OF NET ASSETS:
Capital $ 80,259,900
Undistributed net realized
gain on investments 1,894,443
Net unrealized appreciation on
securities 16,546,401
--------------
Total net assets $ 98,700,744
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($28,239,136
DIVIDED BY 1,916,268 shares) $14.74
Sales charge--5.50% of public
offering price 0.86
---------
Maximum offering price $15.60
=========
CLASS B SHARES
Net asset value and offering
price per share ($6,509,360
DIVIDED BY 444,103 shares) $14.66
=========
Redemption price per share *
=========
CLASS C SHARES
Net asset value and offering
price per share ($63,952,248
DIVIDED BY 4,363,887 shares) $14.65
=========
Redemption price per share *
=========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995*
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 197,373
Dividends (including $24,453
in dividends from foreign
securities less $3,647 in
foreign taxes withheld at
source) 90,606
--------------
Total investment income 287,979
EXPENSES:
Investment advisory fee (Note
3a) $ 265,836
Distribution fee (Class B)
(Note 3b) 7,023
Distribution fee (Class C)
(Note 3b) 172,058
Servicing fee (Class A) (Note
3b) 28,918
Servicing fee (Class B) (Note
3b) 2,341
Servicing fee (Class C) (Note
3b) 57,353
Transfer agent and custody
fees 64,064
Professional fees 26,500
Trustees' fees and expenses
(Note 3c) 3,500
Shareholder reports and
notices 34,369
Miscellaneous 29,014
-------
Total expenses before waiver
of investment advisory fee 690,976
Waived investment advisory fee
(Note 3a) (4,666)
-------
Total expenses 686,310
--------------
Net investment loss (398,331)
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on security
transactions 2,391,796
Net realized loss on options
written (99,022)
Net unrealized appreciation on
securities 16,546,401
--------------
Net realized and unrealized
gain on investments 18,839,175
--------------
Net increase in net assets
resulting from operations $ 18,440,844
==============
</TABLE>
- ------------------
* The Fund commenced operations on December 22, 1994.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER
30,
1995*
------------
<S> <C>
OPERATIONS:
Net investment loss $ (398,331)
Net realized gain on security
transactions 2,391,796
Net realized loss on options
written (99,022)
Net unrealized appreciation on
securities 16,546,401
------------
Net increase in net assets
resulting from operations 18,440,844
Net increase from Fund share
transactions (Note 5) 80,259,900
--
------------
Net increase in net assets 98,700,744
NET ASSETS:
Beginning of period --
------------
End of period $98,700,744
============
</TABLE>
- ------------------
* The Fund commenced operations on December 22, 1994.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS INNOVATION FUND 35
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
COMMERCIAL PAPER
GUARANTEED
BY LETTERS OF
CREDIT--0.7%
$ 685,000 Matterhorn Capital Corp.,
5.95%,10/2/95
guaranteed by Union
Bank of Switzerland
(Cost $684,887) $ 684,887
--------------
SHORT-TERM NOTES--9.7%
600,000 Bell Atlantic Network
Funding Corp., 5.85%,
10/25/95 597,660
1,000,000 Ciesco, L.P., 5.77%,
10/23/95 996,474
1,800,000 Cooperative Association
of Tractor Dealers,
Inc., 5.72%,10/6/95 1,798,570
1,700,000 CXC, Inc., 5.77%,
10/27/95 1,692,916
500,000 New South Wales Treasury
Corp., 5.71%, 10/12/95 499,127
1,500,000 PepsiCo Inc., 5.75%,
10/23/95 1,494,729
1,000,000 Preferred Receivables
Funding Corp., 5.74%,
10/5/95 999,362
1,500,000 Redland Finance Inc.,
5.73%, 10/4/95 1,499,284
--------------
TOTAL SHORT-TERM NOTES
(Cost $9,578,122) 9,578,122
--------------
SHARES
- --------------
COMMON STOCKS AND
RIGHTS--90.2%
COMMUNICATION
EQUIPMENT--10.7%
40,000 DSC Communications Corp.* 2,370,000
125,000 Ericsson (L.M.) Telephone
Co. ADR, Class B 3,062,500
125,000 Ericsson (L.M.) Telephone
Co. ADR rights expire
10/25/95 0
22,000 Nokia Corp. ADR 1,534,500
24,600 Spectrian Corp.* 839,475
50,000 StrataCom, Inc.* 2,762,500
--------------
10,568,975
--------------
COMPUTER SERVICES AND
SOFTWARE--19.3%
40,000 Computer Associates
International, Inc. 1,690,000
45,000 Computer Sciences Corp.* 2,896,875
110,000 Data Translation, Inc.* 1,952,500
40,000 Davidson and Associates,
Inc.* 1,390,000
37,000 General Motors Corp.,
Class E 1,683,500
90,000 Informix Corp.* 2,925,000
31,000 Learning Company (The)* 1,875,500
46,050 Oracle Systems Corp.* 1,767,169
70,000 PRI Automation, Inc.* 2,870,000
--------------
19,050,544
--------------
COMPUTERS--9.6%
80,000 Bay Networks, Inc.* 4,270,000
20,000 Cabletron Systems, Inc.* 1,317,500
20,000 Compaq Computer Corp.* 967,500
34,000 Dell Computer Corp.* 2,890,000
--------------
9,445,000
--------------
VALUE
SHARES (NOTE 2)
- -------------- --------------
COSMETICS--0.8%
41,000 Thermolase Corp.* $ 835,375
--------------
ELECTRONICS--25.5%
38,000 Altera Corp.* 2,370,250
68,000 ANADIGICS, Inc.* 1,887,000
26,000 Applied Materials, Inc.* 2,658,500
32,000 Diebold, Inc. 1,484,000
63,000 GaSonics International
Corp.* 2,346,750
105,000 Integrated Device
Technology, Inc.* 2,625,000
70,000 Integrated Process
Equipment Corp.* 2,786,875
32,000 KLA Instruments Corp.* 2,568,000
41,000 LSI Logic Corp.* 2,367,750
98,000 Triquint Semiconductor,
Inc.* 2,241,750
44,000 Vishay Intertechnology,
Inc.* 1,848,000
--------------
25,183,875
--------------
MEDICAL SUPPLIES--11.0%
60,000 Boston Scientific Corp.* 2,557,500
55,000 Circon Corp.* 1,106,875
154,500 Guidant Corp. 4,519,125
49,200 Medtronic, Inc. 2,644,500
--------------
10,828,000
--------------
PHARMACEUTICALS--4.8%
58,000 Amgen Inc.* 2,892,750
31,000 Genzyme Corp.* 1,798,000
--------------
4,690,750
--------------
TELECOMMUNICATIONS--8.5%
32,050 Andrew Corp.* 1,959,056
27,000 Qualcomm, Inc.* 1,238,625
56,000 Tellabs, Inc.* 2,359,000
70,000 Vodafone Group PLC ADR 2,870,000
--------------
8,426,681
--------------
TOTAL COMMON STOCKS AND
RIGHTS
(Cost $72,482,799) 89,029,200
--------------
TOTAL INVESTMENTS
(Cost $82,745,808+) 100.6% 99,292,209
OTHER ASSETS AND
LIABILITIES, NET (0.6%) (591,465)
------- --------------
TOTAL NET ASSETS 100.0% $ 98,700,744
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $82,745,808. At September 30, 1995, net
unrealized appreciation was $16,546,401. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$16,720,024 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$173,623.
* Non-income producing securities
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
36
PIMCO ADVISORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $210,511,070) (Note
2a) $ 217,061,449
Foreign currency holdings, at
value (Cost of $6,284,401)
(Note 2b) 6,355,023
Forward foreign currency
contracts purchased (Cost of
$36,844,738) (Notes 2e and
7) 38,973,524
Cash 6,028,296
Dividends receivable 825,410
Interest receivable 27,929
Receivable for investments
sold 11,944,623
Receivable for Fund shares
sold 537,199
Receivable for forward foreign
currency contracts sold
(Notes 2e and 7) 37,841,054
Other assets 38,431
--------------
Total assets 319,632,938
LIABILITIES:
Payable for investments
purchased $ 8,393,344
Payable for forward foreign
currency contracts purchased
(Notes 2e and 7) 36,844,738
Payable for Fund shares
redeemed 1,032,013
Forward foreign currency
contracts sold, at value
(Cost of $37,841,054) (Notes
2e and 7) 38,940,533
Accrued expenses:
Investment advisory fee 154,343
Distribution fee 133,373
Servicing fee 48,232
Other 282,920
----------
Total liabilities 85,829,496
--------------
NET ASSETS $ 233,803,442
==============
COMPOSITION OF NET ASSETS:
Capital $ 231,396,470
Accumulated net investment
loss (1,318,261)
Accumulated net realized loss
on investments (3,925,075)
Net unrealized appreciation on
securities 6,550,379
Net unrealized appreciation on
foreign currency holdings 70,622
Net unrealized appreciation on
forward foreign currency
contracts 1,029,307
--------------
Total net assets $ 233,803,442
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($17,950,770
DIVIDED BY 1,473,104 shares) $12.19
Sales charge--5.50% of public
offering price 0.71
---------
Maximum offering price $12.90
=========
CLASS B SHARES
Net asset value and offering
price per share ($503,405
DIVIDED BY 42,828 shares) $11.75
=========
Redemption price per share *
=========
CLASS C SHARES
Net asset value and offering
price per share ($215,349,267
DIVIDED BY 18,332,103 shares) $11.75
=========
Redemption price per share *
=========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 383,070
Dividends (including
$5,561,662 in dividends from
foreign securities less
$632,598 in foreign taxes
withheld at source) 4,929,064
--------------
Total investment income 5,312,134
EXPENSES:
Investment advisory fee (Note
3a) $2,097,974
Distribution fee (Class B)
(Note 3b) 416
Distribution fee (Class C)
(Note 3b) 1,817,071
Servicing fee (Class A) (Note
3b) 49,788
Servicing fee (Class B) (Note
3b) 139
Servicing fee (Class C) (Note
3b) 605,690
Transfer agent and custody
fees 715,000
Professional fees 70,000
Trustees' fees and expenses
(Note 3c) 24,000
Shareholder reports and
notices 176,000
Miscellaneous 92,205
--------
Total expenses 5,648,283
--------------
Net investment loss (336,149)
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on security
and foreign currency
transactions (9,232,300)
Net realized gain on forward
foreign currency
transactions 4,763,607
Net realized loss on futures
transactions (356,925)
Net unrealized depreciation on
securities (12,734,674)
Net unrealized appreciation on
foreign currency holdings 70,410
Net unrealized depreciation on
forward foreign currency
contracts 758,965
--------------
Net realized and unrealized
loss on investments (16,730,917)
--------------
Net decrease in net assets
resulting from operations $ (17,067,066)
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (336,149) $ (1,061,938)
Net realized gain (loss) on
security and foreign
currency transactions (9,232,300) 7,900,288
Net realized gain on forward
foreign currency contracts 5,759,923 --
Net realized loss on futures
transactions (356,925) --
Net unrealized appreciation
(depreciation) on securities (12,734,674) 7,759,843
Net unrealized appreciation on
foreign currency holdings 70,410 212
Net unrealized appreciation
(depreciation) on forward
foreign currency contracts (237,351) 270,342
------------ --------------
Net increase (decrease) in net
assets resulting from
operations (17,067,066) 14,868,747
Distributions paid from net
realized gain on investments
Class A (428,186) (309,469)
Class C (5,582,804) (3,745,155)
Net increase (decrease) from
Fund share transactions
(Note 5) (60,899,155) 147,780,440
------------ --------------
Net increase (decrease) in
net assets (83,977,211) 158,594,563
NET ASSETS:
Beginning of year 317,780,653 159,186,090
------------ --------------
End of year (including
accumulated net investment
loss of $1,318,261 and
$169,448, respectively) $233,803,442 $ 317,780,653
============ ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS INTERNATIONAL FUND 37
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- -------- ------
<S> <C> <C> <C>
COMMON STOCKS--92.8%
AUTOMOTIVE
MANUFACTURING--3.4%
32,000 Bajaj Auto Ltd. GDR $ 972,160 (IN)
864 Bayerische Motoren Werke
AG 476,644 (GC)
165,900 Fiat SpA 621,793 (IT)
687,000 Mazda Motor Corp. 2,507,000 (JA)
9,800 PSA Peugeot 1,343,216 (FR)
53,500 Tata Engineering &
Locomotive Company Ltd.
GDR 1,224,080 (IN)
2,610 Volkswagen AG 849,244 (GC)
--------------
7,994,137
--------------
AUTOMOTIVE PARTS--0.4%
434,000 PT Astra International 861,837 (ID)
--------------
BANKS--10.3%
13,900 ABN AMRO Holdings N.V. 577,671 (NL)
1,452,000 Akbank T.A.S. 376,068 (TK)
72,000 Allied Irish Bank PLC 357,739 (IR)
62,690,000 Banco Bradesco S.A. 595,555 (BR)
579,000 Banco de Credito del Peru 1,082,209 (PR)
33,800 Banco de Galicia SA* 153,131 (AR)
7,070 Banco Popular Espanol SA 1,103,054 (SP)
124,200 Bangkok Bank Co. Ltd. 1,396,492 (TH)
73,000 Bank of Ireland 458,411 (IR)
3,605 Commerzbank AG 822,618 (GC)
17,000 Corporacion Bancaria de
Espana SA (ARGENTARIA) 607,191 (SP)
401,200 Den Norske Bank AS* 1,109,438 (NO)
2,090 Generale de Banque SA 657,816 (BE)
146,200 Hang Seng Bank 1,205,477 (HK)
289,300 Krung Thai Bank Ltd. 1,153,497 (TH)
116,000 Lloyd's Bank PLC 1,266,790 (UK)
294,000 Malayan Banking Berhad 2,377,255 (MY)
74,000 Overseas Union Bank Ltd. 473,889 (SN)
241,000 PT Bank Internasional
Indonesia* 829,546 (ID)
196,000 Sumitomo Bank 3,814,689 (JA)
250,000 Sumitomo Trust & Banking 3,446,525 (JA)
--------------
23,865,061
--------------
BEVERAGE--0.9%
678,000 Erciyas Biracilik Ve Malt
Sanayii 420,021 (TK)
153,700 Guinness PLC 1,260,079 (UK)
12,800 South African Breweries
Ltd. 403,151 (SF)
--------------
2,083,251
--------------
BUILDING MATERIALS--4.4%
1,117,000 Adana Cimento Sanayii 635,238 (TK)
50,500 Cementos Diamante SA ADR 934,250 (CO)
121,600 Corimon C.A. ADR 668,800 (VZ)
102,000 CRH PLC 699,955 (IR)
3,460 Glaverbel S.A. 447,443 (BE)
18,915 Lafarge Coppee 1,247,348 (FR)
391,000 Pilkington PLC 1,231,454 (UK)
360,000 PT Semen Gresik 1,016,748 (ID)
340,000 Sungei Way Holdings
Berhad 1,157,904 (MY)
55,000 Unicem SpA 354,948 (IT)
61,000 Uralita SA 651,144 (SP)
200,000 Wolseley PLC 1,168,020 (UK)
---------------
10,213,252
---------------
CHEMICALS--3.9%
6,700 Akzo Nobel 807,999 (NL)
1,219,000 Bagfas Bandirma
GubreFabrikalari A.S. 507,592 (TK)
2,815 Bayer AG 721,877 (GC)
304,000 Metacorp Berhad 835,514 (MY)
725,000 Mitsubishi Chemical Corp. 3,527,560 (JA)
58,700 Reliance Industries Ltd.
GDS 1,071,275 (IN)
27,700 Sociedad Quimica Y Minera
De Chile ADR $ 1,211,875 (CH)
1,000 Solvay SA 534,553 (BE)
---------------
9,218,245
---------------
COMMERCIAL SERVICES--0.3%
21,900 Royal PTT Nederland NV 776,784 (NL)
---------------
COMMUNICATION
EQUIPMENT--0.4%
12,330 Alcatel Alshtom 1,039,855 (FR)
---------------
CONSTRUCTION--2.4%
67,300 Amur-Autopistas del Mare
Nostrum SA 808,535 (SP)
418,000 Obayashi Corp. 3,305,001 (JA)
236,000 United Engineers Ltd. 1,513,468 (MY)
---------------
5,627,004
---------------
CONTAINERS--0.3%
44,900 Amcor Ltd. 336,184 (AS)
128,000 Jefferson Smurfitt Group 381,171 (IR)
---------------
717,355
---------------
ELECTRICAL
EQUIPMENT--4.0%
354,000 Matsushita Electric Works 3,696,079 (JA)
47,000 Sony Corp. 2,448,855 (JA)
64,000 TDK Corp. 3,308,666 (JA)
---------------
9,453,600
---------------
ELECTRONICS--2.1%
353,000 Hitachi Ltd. 3,864,538 (JA)
20,100 Philips Electronics NV 984,235 (NL)
---------------
4,848,773
---------------
ENTERTAINMENT AND
LEISURE--0.7%
11,372 Polygram NV 742,469 (NL)
1,800 Salomon SA* 952,760 (FR)
---------------
1,695,229
---------------
FINANCIAL SERVICES--5.9%
151,000 Abbey National PLC 1,295,308 (UK)
190,000 Amalgamated Banks of
South Africa 819,584 (SF)
25,200 Banco Frances del Rio de
la Plata S.A. 180,203 (AR)
82,100 Banco Ganadero S.A. 1,149,400 (CO)
16,400 Credit Local de France 1,322,980 (FR)
580,000 Credito Italiano 688,460 (IT)
318,000 Daiwa Securities Co. Ltd. 4,029,378 (JA)
14,616 Fortis Amev NV 856,088 (NL)
89,700 HSBC Holdings PLC 1,273,453 (UK)
93,400 Industrial Finance
Corporation of Thailand
(The) 286,747 (TH)
123,400 United Overseas Bank Ltd. 1,068,138 (SN)
92,200 Westpac Banking Corp.
Ltd. 373,004 (AS)
124,000 Wing Hang Bank Ltd. 419,393 (HK)
---------------
13,762,136
---------------
FOOD--3.5%
72,720 Carulla & Cia SA ADR 700,294 (CO)
93,400 Cerebos Pacific Ltd. 558,691 (SN)
6,900 Groupe Danone 1,118,580 (FR)
53,000 Kerry Group PLC 400,585 (IR)
23,887 Koninklijke Ahold NV 901,247 (NL)
267,200 Mavesa SA ADR 944,231 (VZ)
621,000 Migros Turk 668,569 (TK)
23,500 Molinos Rio de la Plata 143,366 (AR)
850,000 Parmalat Finanziaria SpA 699,380 (IT)
97,000 PT Indofood Sukses Makmur 467,656 (ID)
301,000 Tesco PLC 1,491,094 (UK)
---------------
8,093,693
---------------
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
38
PIMCO ADVISORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- -------------- -------
<S> <C> <C> <C>
FOREST AND PAPER
PRODUCTS--1.3%
253,795 Aracruz Celulose S.A. $ 521,929 (BR)
81,000 Enso-Gutzeit Oy 688,257 (FI)
478,500 Land & General Berhad 1,257,929 (MY)
560,228 PT Indah Pulp & Paper
Corp. 673,674 (ID)
--------------
3,141,789
--------------
HOLDING
COMPANIES--DIVERSIFIED--
3.6%
55,000 Barlow Ltd. 621,363 (SF)
245,000 BTR PLC 1,266,038 (UK)
109,000 C.G. Smith Ltd. 683,626 (SF)
249,130 Hutchison Whampoa Ltd. 1,350,110 (HK)
55,700 Indian Rayon & Industries
Ltd. 793,725 (IN)
534,000 Road Builders (M)
Holdings Berhad 1,701,591 (MY)
468,000 Technology Resources
Industries Berhad* 1,221,012 (MY)
26,100 Valmet Corp. 851,554 (FI)
--------------
8,489,019
--------------
HOME FURNISHINGS AND
APPLIANCES--0.5%
3,025,000 Arcelik A.S. 473,110 (TK)
2,393,000 Brasmotor S.A. 612,608 (BR)
--------------
1,085,718
--------------
INSURANCE--1.0%
406 Allianz AG 736,704 (GC)
22,060 AXA 1,166,762 (FR)
205 Muenchener
Rueckversicherungs-
Gesellschaft 422,117 (GC)
--------------
2,325,583
--------------
LODGING--0.7%
10,330 Club Mediterranee* 1,003,514 (FR)
37,800 East India Hotels ltd.
GDR 737,100 (IN)
--------------
1,740,614
--------------
MACHINERY AND
ENGINEERING--2.9%
61,800 Larsen & Toubro Ltd. GDR 1,244,034 (IN)
3,550 Mannesmann AG 1,165,829 (GC)
1,596,000 Mitsui Engineering
&Shipbuilding 3,850,350 (JA)
16,000 Rauma Oy 386,826 (FI)
--------------
6,647,039
--------------
MEDIA--0.5%
214,000 British Sky Broadcasting
Group PLC 1,293,823 (UK)
--------------
MEDICAL SUPPLIES--0.2%
15,400 Hafslund Nycomed 401,253 (NO)
--------------
METALS AND MINING--3.6%
5,500 Anglo American Gold
Investment Co. Ltd. 497,093 (SF)
24,100 Broken Hill Proprietary
Co. Ltd. 331,790 (AS)
68,800 Comalco Ltd. 340,133 (AS)
29,000 De Beers Centenary AG 784,322 (SF)
26,850 Hindalco Industries Ltd.* 896,253 (IN)
40,305,000 Paranapanema S.A. 628,758 (BR)
88,000 RTZ Corp. 1,291,101 (UK)
415,000 Sumitomo Metal Mining Co. 3,390,633 (JA)
52,300 Western Mining Corp.
Holding Ltd 341,854 (AS)
--------------
8,501,937
--------------
MISCELLANEOUS
MANUFACTURING--1.7%
24,200 Grasim Industries Ltd.
GDR 502,150 (IN)
53,200 Madeco SA ADR 1,250,200 (CH)
16,800 Orkla Borregaard A.S. 765,358 (NO)
133,000 Sasib SpA 346,625 (IT)
2,390 Siemens A.G. 1,206,801 (GC)
--------------
4,071,134
--------------
OIL AND GAS--1.7%
22,000 Compagnie Francaise di
Petroleum Class B $ 1,335,191 (FR)
29,100 Compania Naviera Perez
Company SA ADR 254,366 (AR)
12,248,000 Petroleo Brasileiro
SA-Petrobras 1,297,063 (BR)
14,625 Repsol SA 461,223 (SP)
31,420 YPF Sociedad Anonima ADR 565,560 (AR)
--------------
3,913,403
--------------
OIL AND GAS
SERVICES--1.2%
105,000 Astra CIA Argentina De
Petro 182,721 (AR)
198,000 British Petroleum Co. PLC 1,488,524 (UK)
27,500 VEBA AG 1,094,822 (GC)
--------------
2,766,067
--------------
OIL PIPELINE--0.4%
66,100 Saga Petroleum A.S. 855,843 (NO)
--------------
PHARMACEUTICALS--3.6%
373,000 Fujisawa Pharmaceutical 3,705,419 (JA)
7,535 Roussel-Uclaf 1,172,415 (FR)
199,400 Zeneca Group PLC 3,613,507 (UK)
--------------
8,491,341
--------------
PUBLISHING--1.1%
69,797 Elsevier NV 898,252 (NL)
4,000 VNU-Verenigde Nederlandse
Uitgevbedri Verigd
Bezit 532,358 (NL)
13,500 Werner Soderstrom
Osakeyhtio 1,219,980 (FI)
--------------
2,650,590
--------------
REAL ESTATE--4.0%
160,000 Cheung Kong (Holdings)
Ltd. 871,232 (HK)
209,000 City Developments Ltd. 1,294,295 (SN)
312,000 DBS Land 926,546 (SN)
20,000 IRSA, Inveriones Y
Representaciones S.A. 480,000 (AR)
255,000 Mitsui Fudosan Co. Ltd. 3,076,014 (JA)
223,182 Sun Hung Kai Properties
Ltd. 1,811,367 (HK)
276,000 Wharf (Holdings) Ltd. 860,320 (HK)
--------------
9,319,774
--------------
RETAIL--3.3%
110,000 Boots Company PLC 987,129 (UK)
2,500 Carrefour 1,471,441 (FR)
13,030 G.I.B. Holdings Ltd. 552,759 (BE)
1,900 Karstadt AG 849,223 (GC)
23,013,000 Lojas Americanas S.A. 545,408 (BR)
226,000 Takashimaya Co. 3,321,838 (JA)
--------------
7,727,798
--------------
STEEL AND IRON--4.6%
9,686,000 Companhia Vale Do Rio
Doce 1,620,468 (BR)
1,482,000 NKK Corp. 3,980,948 (JA)
192,000 SA Iron & Steel
Industrial Corp. Ltd. 207,706 (SF)
500,000 Siderurgica Venezolana
Sivensa SA 1,018,900 (VZ)
171,000 Toyko Steel Manufacturing 3,310,782 (JA)
585,540,000 Usinas Siderurgicas de
Minas Gerais
S.A.--USIMINAS 651,243 (BR)
--------------
10,790,047
--------------
TELECOMMUNICATIONS--4.2%
562,000 CPT Telefonica del Peru
S.A. 1,075,443 (PR)
233,600 Hong Kong
Telecommunications Ltd. 424,498 (HK)
1,482,000 Netas Telekomunik 571,904 (TK)
427 Nippon Telegraph &
Telephone Corp. 3,692,153 (JA)
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS INTERNATIONAL FUND 39
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ------------- -------
<S> <C> <C> <C>
281,000 STET-Societa Finanziaria
Telefonica $ 854,409 (IT)
605,000 Telebras S.A. 28,798 (BR)
45,988 Telebras SA ADR 2,193,108 (BR)
142,000 Telekom Malaysia Berhad 1,069,019 (MY)
--------------
9,909,332
--------------
TEXTILES--0.3%
3,024,500 Akal Tekstil Sanayii 349,935 (TK)
17,900 Raymond Ltd. 290,875 (IN)
--------------
640,810
--------------
TIRE AND RUBBER--0.2%
1,396,000 Brisa Bridgestone Sabanci
Lastik San Ve Tic A.S. 396,883 (TK)
--------------
TOBACCO--0.4%
500,000 RJ Reynolds Berhad 1,055,550 (MY)
--------------
TRANSPORTATION: AIR--1.8%
188,000 BAA PLC 1,487,738 (UK)
89,000 Finnair Oy 699,825 (FI)
71,000 Singapore International
Airlines 659,540 (SN)
159,948 Swire Pacific Ltd., Class
A 1,267,124 (HK)
--------------
4,114,227
--------------
TRANSPORTATION:
MARINE--0.3%
16,621 Kvaerner AS 706,723 (NO)
--------------
TRANSPORTATION:
RAIL--1.3%
437,000 Tokyu Corp. 2,959,102 (JA)
--------------
UTILITIES: ELECTRIC--3.3%
6,460,000 Centrais Electricas
Brasileiras
S/A--Electrobras 1,992,264 (BR)
42,000 Central Puerto S.A. 138,617 (AR)
24,528,000 Companhia Paulista de
Forca-e Luz--CPFL 1,400,549 (BR)
17,463 Empresa Nacional de
Electridad SA 898,735 (SP)
36,000 Empresa Nacional de
Electridad SA ADR 724,500 (CH)
20,000 Enersis S.A. ADR 505,000 (CH)
87,000 Iberdrola I SA 659,608 (SP)
175,000 Seeboard PLC 1,362,690 (UK)
--------------
7,681,963
--------------
UTILITIES: GAS--0.4%
3,930 Electrabel 864,517 (BE)
--------------
UTILITIES: TELEPHONE
SYSTEMS--1.4%
200,000 British
Telecommunications PLC $ 1,253,480 (UK)
15,750 Compania Telecomunicacion
Chile ADR 1,088,719 (CH)
19,040 Telefonica De Argentina
ADR 454,580 (AR)
42,000 Telefonica de Espana 579,592 (SP)
--------------
3,376,371
--------------
UTILITIES: WATER--0.4%
9,270 Compagnie Generale des
Eaux 892,987 (FR)
--------------
TOTAL COMMON STOCKS
(Cost $210,511,070) 217,061,449
--------------
TOTAL INVESTMENTS (Cost
$210,511,070+) 92.8% 217,061,449
OTHER ASSETS AND
LIABILITIES, NET 7.2% 16,741,993
----- --------------
TOTAL NET ASSETS 100.0% $ 233,803,442
===== ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $210,511,070. At September 30, 1995,
net unrealized appreciation was $6,550,379. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$17,974,811 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$11,424,432.
COUNTRY COMPOSITION
<TABLE>
<S> <C>
Argentina (AR) 1.09%
Australia (AS) 0.78%
Belgium (BE) 1.31%
Brazil (BR) 5.16%
Chile (CH) 2.04%
Columbia (CO) 1.19%
Finland (FI) 1.65%
France (FR) 6.17%
Germany (GC) 1.92%
Hong Kong (HK) 3.53%
India (IN) 3.31%
Indonesia (ID) 1.90%
Ireland (IR) 1.24%
Italy (IT) 1.53%
Japan (JA) 28.82%
Malaysia (MY) 5.21%
The Netherlands (NL) 3.03%
Norway (NO) 1.64%
Peru (PR) 0.92%
Singapore (SN) 2.13%
South Africa (SF) 1.72%
Spain (SP) 2.47%
Switzerland (SZ) 1.70%
Thailand (TH) 1.21%
Turkey (TK) 1.88%
United Kingdom (UK) 10.21%
United States (US) 5.11%
Venezuela (VZ) 1.13%
-------
Total 100.00%
=======
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
40
PIMCO ADVISORS PRECIOUS METALS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $46,815,076) (Note
2a) $ 50,564,733
Cash 167,443
Dividends receivable 173,806
Receivable for Fund shares
sold 67,105
Other assets 8,263
--------------
Total assets 50,981,350
LIABILITIES:
Payable for investments
purchased $302,675
Payable for Fund shares
redeemed 258,122
Accrued expenses:
Investment advisory fee 32,465
Distribution fee 27,213
Servicing fee 10,821
Other 88,233
--------
Total liabilities 719,529
--------------
NET ASSETS $ 50,261,821
==============
COMPOSITION OF NET ASSETS:
Capital $ 47,053,918
Accumulated net realized loss
on investments (541,754)
Net unrealized appreciation on
securities 3,749,657
--------------
Total net assets $ 50,261,821
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share
($7,669,899 DIVIDED BY 622,078
shares) $12.33
Sales charge--5.50% of public
offering price 0.72
--------
Maximum offering price $13.05
========
CLASS B SHARES
Net asset value and offering
price per share
($250,651 DIVIDED BY 21,059
shares) $11.90
========
Redemption price per share *
========
CLASS C SHARES
Net asset value and offering
price per share
($42,341,271 DIVIDED BY 3,558,960
shares) $11.90
========
Redemption price per share *
========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 185,916
Dividends (including $998,198
in dividends from foreign
securities less $164,018 in
foreign taxes withheld at
source) 955,399
--------------
Total investment income 1,141,315
--------------
EXPENSES:
Investment advisory fee (Note
3a) $ 434,323
Distribution fee (Class B)
(Note 3b) 202
Distribution fee (Class C)
(Note 3b) 367,587
Servicing fee (Class A) (Note
3b) 22,178
Servicing fee (Class B) (Note
3b) 68
Servicing fee (Class C) (Note
3b) 122,529
Transfer agent and custody
fees 126,000
Professional fees 29,000
Trustees' fees and expenses
(Note 3c) 10,000
Shareholder reports and
notices 42,000
Miscellaneous 24,308
-----------
Total expenses 1,178,195
--------------
Net investment loss (36,880)
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on security
and foreign currency
transactions 814,658
Net unrealized depreciation on
securities (10,774,192)
--------------
Net realized and unrealized
loss on investments (9,959,534)
--------------
Net decrease in net assets
resulting from operations $ (9,996,414)
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (36,880) $ (18,427)
Net realized gain on security
and foreign currency
transactions 814,658 1,046,243
Net unrealized appreciation
(depreciation) on securities (10,774,192) 11,826,750
----------- --------------
Net increase (decrease) in net
assets resulting from
operations (9,996,414) 12,854,566
Net increase (decrease) from
Fund share transactions
(Note 5) (13,795,302) 33,889,902
----------- --------------
Net increase (decrease) in
net assets (23,791,716) 46,744,468
NET ASSETS:
Beginning of year 74,053,537 27,309,069
----------- --------------
End of year $ 50,261,821 $ 74,053,537
=========== ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS PRECIOUS METALS FUND 41
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
SHORT-TERM NOTES--2.2%
$ 1,100,000 General Electric Co.,
5.85%, 10/2/95
(Cost $1,099,821) $ 1,099,821
--------------
<CAPTION>
SHARES COUNTRY
- -------------- -------
<S> <C>
COMMON STOCKS--97.8%
MINING SHARES:
LARGE
CAPITALIZATION--61.9%
110,000 Barrick Gold Corp. 2,846,250 (CA)
90,000 Battle Mountain Gold Co. 888,750 (US)
110,000 Driefontein Consolidated
Ltd. ADR* 1,498,750 (SA)
80,030 Echo Bay Mines Ltd. 870,326 (CA)
210,000 Elandsrand Gold Mining
Co., Ltd. ADR 1,207,773 (SA)
140,000 Free State Consolidated
Gold Mines Ltd. ADR 1,592,500 (SA)
1,000,000 Gold Mines of Kalgoorlie
Ltd. 898,100 (AS)
35,000 Goldfields of South
Africa Ltd. ADR 949,375 (SA)
190,000 Hemlo Gold Mines, Inc. 1,900,000 (CA)
150,000 Homestake Mining Co. 2,550,000 (US)
140,000 Kloof Gold Mining Co.,
Ltd. ADR 1,557,500 (SA)
360,000 Newcrest Mining Ltd. 1,575,972 (AS)
70,000 Newmont Mining Corp. 2,975,000 (US)
110,000 Placer Dome Inc. 2,887,500 (CA)
330,000 Placer Pacific Ltd. 692,406 (AS)
120,000 Santa Fe Pacific Gold
Corp.* 1,515,000 (US)
290,000 Sons of Gwalia Ltd. 1,466,530 (AS)
150,000 TVX Gold Inc.* 1,050,000 (CA)
120,000 Vaal Reefs Exploration &
Mining Co. Ltd. ADR 787,500 (SA)
40,000 Western Deep Levels Ltd.
ADR 1,415,000 (SA)
--------------
31,124,232
--------------
MINING SHARES:
MEDIUM
CAPITALIZATION--16.0%
10,000 Ashanti Goldfields Co.,
Ltd. GDR 200,625 (GH)
500,000 Australian Resources Ltd. 449,050 (AS)
160,000 Beatrix Mines Ltd. ADR 1,533,728 (SA)
70,000 Cambior Inc. 740,565 (CA)
50,000 Coeur D'Alene Mines Corp. 1,012,500 (US)
300,000 Deelkraal Gold Mining
Ltd. ADR* 303,960 (SA)
101,000 Great Central Mines N.L. 216,494 (AS)
50,000 Hecla Mining Co.* 606,250 (US)
950,000 Homestake Gold of
Australia Ltd* 1,426,900 (AS)
85,000 Pegasus Gold Inc. 1,158,125 (US)
200,000 Resolute Samantha Ltd. 377,380 (AS)
--------------
8,025,577
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ------------- -------
<S> <C> <C> <C>
MINING SHARES:
SMALL
CAPITALIZATION--19.9%
70,000 Agnico-Eagle Mines Ltd. $ 971,250 (CA)
200,000 Delta Gold N.L. Corp.* 440,780 (AS)
380,000 Eagle Mining Corp. 616,626 (AS)
200,000 Emperor Mines Ltd.* 317,000 (AS)
10,000 Firstmiss Gold Inc. 218,750 (US)
205,000 Herald Resources Ltd.* 181,015 (AS)
100,000 Kidston Gold Mines Ltd. 135,860 (AS)
130,000 Macraes Mining Co. Ltd. 150,124 (AS)
100,000 Miramar Mining Corp.* 593,750 (CA)
200,000 Namibian Minerals Corp.* 225,680 (CA)
100,000 North Flinders Mines Ltd. 596,270 (AS)
340,000 Plutonic Resources Ltd. 1,757,868 (AS)
310,000 Randgold & Exploration
Co. Ltd.* 1,209,837 (SA)
150,000 Richmont Mines, Inc.* 334,080 (CA)
600,000 St. Barbara Mines Ltd.* 425,640 (AS)
105,000 St. Helena Gold Mines
Ltd. ADR 892,500 (SA)
25,000 Stillwater Mining Company 518,750 (US)
100,000 Viceroy Resources Corp.* 436,170 (CA)
--------------
10,021,950
--------------
TOTAL COMMON STOCKS
(Cost $45,357,098) 49,171,759
--------------
PREFERRED STOCKS--0.6%
MINING SHARES:
LARGE
CAPITALIZATION--0.6%
9,090 Echo Bay Finance Corp.
$1.75, Series A
(Cost $358,157) 293,153 (CA)
--------------
TOTAL INVESTMENTS
(Cost $46,815,076+) 100.6% 50,564,733
OTHER ASSETS AND
LIABILITIES, NET (0.6%) (302,912)
------- --------------
TOTAL NET ASSETS 100.0% $ 50,261,821
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $46,815,076. At September 30, 1995, net
unrealized appreciation was $3,749,657. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$7,208,019 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$3,458,362.
COUNTRY COMPOSITION
<TABLE>
<S> <C>
Australia (AS) 23.33%
Canada (CA) 26.16%
Ghana (GH) 0.40%
South Africa (SA) 25.76%
United States (US) 22.77%
Net Other 1.58%
-------
Total 100.00%
=======
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
42
PIMCO ADVISORS HIGH INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $157,028,714) (Note
2a) $ 164,813,228
Cash 1,107,555
Dividends receivable 71,803
Interest receivable 3,723,826
Receivable for investments
sold 5,800,396
Receivable for Fund shares
sold 709,851
Other assets 38,363
--------------
Total assets 176,265,022
LIABILITIES:
Payable for investments
purchased $ 5,420,105
Payable for Fund shares
redeemed 269,278
Outstanding options written,
at value (premiums received
$7,000)
(Notes 2c and 6) 7,125
Dividends payable 283,431
Accrued expenses:
Investment advisory fee 82,460
Distribution fee 98,637
Servicing fee 34,358
Other 219,633
-------------
Total liabilities 6,415,027
--------------
NET ASSETS $ 169,849,995
==============
COMPOSITION OF NET ASSETS:
Capital $ 277,119,972
Undistributed net investment
income 282,818
Accumulated net realized loss
on investments (115,337,184)
Net unrealized appreciation on
securities 7,784,514
Net unrealized depreciation on
options written (125)
--------------
Total net assets $ 169,849,995
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($7,790,604
DIVIDED BY 981,339 shares) $7.94
Sales charge--4.75% of public
offering price 0.40
-----
Maximum offering price $8.34
=====
CLASS B SHARES
Net asset value and offering
price per share ($4,551,913
DIVIDED BY 574,818 shares) $7.92
=====
Redemption price per share *
=====
CLASS C SHARES
Net asset value and offering
price per share ($157,507,478
DIVIDED BY 19.980,092 shares) $7.88
=====
Redemption price per share *
=====
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 14,724,400
Dividends 594,492
--------------
Total investment income 15,318,892
EXPENSES:
Investment advisory fee (Note
3a) $ 962,851
Distribution fee (Class B)
(Note 3b) 5,016
Distribution fee (Class C)
(Note 3b) 1,161,114
Servicing fee (Class A) (Note
3b) 12,478
Servicing fee (Class B) (Note
3b) 1,672
Servicing fee (Class C) (Note
3b) 387,038
Transfer agent and custody
fees 219,000
Professional fees 57,000
Trustees' fees and expenses
(Note 3c) 28,000
Shareholder reports and
notices 95,000
Miscellaneous 49,497
-------------
Total expenses 2,978,666
--------------
Net investment income 12,340,226
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on security
transactions (50,482,353)
Net realized gain on options
written 85,875
Net unrealized appreciation on
securities 57,887,846
Net unrealized depreciation on
options written (125)
--------------
Net realized and unrealized
gain on investments 7,491,243
--------------
Net increase in net assets
resulting from operations $ 19,831,469
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 12,340,226 $ 17,102,378
Net realized loss on security
transactions (50,482,353) (4,958,352)
Net realized gain on options
written 85,875 --
Net realized loss on futures
transactions -- (185,398)
Net unrealized appreciation
(depreciation) on securities 57,887,846 (30,020,739)
Net unrealized depreciation on
futures contracts -- (339,625)
Net unrealized depreciation on
options written (125) --
------------ --------------
Net increase (decrease) in net
assets resulting from
operations 19,831,469 (18,401,736)
Dividends paid from net
investment income
Class A (428,115) (419,430)
Class B (50,434) --
Class C (12,256,029) (16,458,390)
Net increase (decrease) from
Fund share transactions
(Note 5) (20,856,837) (42,052,298)
------------ --------------
Net decrease in net assets (13,759,946) (77,331,854)
NET ASSETS:
Beginning of year 183,609,941 260,941,795
------------ --------------
End of year (including
undistributed net investment
income of $282,818 and
$538,138, respectively) $169,849,995 $ 183,609,941
============ ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS HIGH INCOME FUND 43
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
SHORT-TERM NOTES--4.4%
$ 700,000 Associates Corp. of North
America, 5.69%,
11/16/95 $ 694,911
3,300,000 AT&T Corp., 5.65%-5.72%,
10/20/95-12/8/95 3,280,108
1,700,000 Hewlett-Packard Co.,
5.625%-5.70%,
10/17/95-1/9/96 1,681,609
200,000 Rockwell International
Corp., 5.73%, 10/10/95 199,713
1,600,000 Wal-Mart Stores, Inc.,
5.71%, 10/4/95 1,599,239
--------------
TOTAL SHORT-TERM NOTES
(Cost $7,456,640) 7,455,580
--------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--3.8%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
(FNMA)--0.6%
400,000 FNMA, 5.605%, Discount
Notes, 10/26/95 398,443
4,765,496 FNMA, REMIC 93-126, Class
PH, Interest Only,
7/25/08 691,755
--------------
1,090,198
--------------
RESOLUTION TRUST
CORPORATION (RTC)--3.2%
1,908,268 RTC, Series 95-C1, Class
F, 6.90%, 2/25/27 1,669,735
1,277,621 RTC, Series 92-C3, Class
B, 9.05%, 8/25/23 1,316,350
2,823,597 RTC, Series 94-C1, Class
E, 8.00%, 6/25/26 2,478,145
--------------
5,464,230
--------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Cost $6,505,467) 6,554,428
--------------
CORPORATE BONDS AND
NOTES--81.6%
BUILDING MATERIALS--1.3%
2,000,000 Schuller International
Group, Inc., 10.875%,
12/15/04 2,215,000
--------------
CHEMICALS--1.6%
250,000 Acetex Corp., 9.75%,
10/1/03 249,220
3,500,000 G-I Holdings Inc., 0.00%,
10/1/98 2,537,500
--------------
2,786,720
--------------
CONTAINERS--4.6%
3,000,000 Owens-Illinois Inc.,
11.00%, 12/1/03 3,296,250
2,000,000 Stone Container Corp.,
11.50%, 10/1/04 2,100,000
2,500,000 Sweetheart Cup, Inc.,
9.625%, 9/1/00 2,487,500
--------------
7,883,750
--------------
COSMETICS--0.9%
1,500,000 Revlon Inc., 9.50%,
6/1/99 1,500,000
--------------
DEFENSE--1.0%
1,500,000 Alliant Techsystems Inc.,
11.75%, 3/1/03 1,638,750
--------------
ELECTRONICS--0.9%
1,500,000 Ametek, Inc., 9.75%,
3/15/04 1,597,500
--------------
ENTERTAINMENT AND
LEISURE--4.8%
3,000,000 Bally's Grand, Inc.,
10.375%, 12/15/03 2,955,000
750,000 Bally's Park Place, Inc.,
9.25%, 3/15/04 733,125
3,500,000 Coleman Holdings Inc.,
0.00%, 5/27/98 2,730,000
1,750,000 Showboat, Inc., 9.25%,
5/1/08 1,653,750
--------------
8,071,875
--------------
FINANCIAL SERVICES--1.2%
$ 2,000,000 Navistar Financial Corp.,
8.875%, 11/15/98 $ 2,010,000
--------------
FOOD--1.2%
2,000,000 Doskocil Companies Inc.,
9.75%, 7/15/00 1,965,000
--------------
FOREST AND PAPER
PRODUCTS--2.8%
3,000,000 Repap Wisconsin, Inc.,
9.25%, 2/1/02 2,887,500
1,750,000 Stone Consolidated Corp.,
10.25% 12/15/00 1,846,250
--------------
4,733,750
--------------
HEALTH MANAGEMENT--3.5%
2,750,000 Abbey Healthcare Group
Inc., 9.50%, 11/1/02 2,866,875
2,000,000 Genesis Health Ventures,
Inc., 9.75%, 6/15/05 2,090,000
1,000,000 Tenet Healthcare Corp.,
9.625%, 9/1/02 1,060,000
--------------
6,016,875
--------------
INSURANCE--2.1%
2,000,000 Phoenix Re Corp., 9.75%,
8/15/03 2,080,000
1,500,000 Reliance Group Holdings,
Inc. 9.00%, 11/15/00 1,498,125
--------------
3,578,125
--------------
LODGING--2.5%
3,500,000 Hammons, (J.Q.) Hotels
L.P., 8.875%, 2/15/04 3,272,500
1,000,000 HMH Properties, Inc.,
9.50%, 5/15/05 985,000
--------------
4,257,500
--------------
MEDIA--19.2%
3,500,000 Act III Broadcasting
Inc., 9.625%, 12/15/03 3,552,500
2,000,000 Benedek Broadcasting
Corp., 11.875%, 3/1/05 2,115,000
4,000,000 Cablevision Systems
Corp., 9.875%-10.75%,
4/1/04-4/1/23 4,197,500
2,750,000 Century Communications
Corp., 11.875%,
10/15/03 2,921,875
1,500,000 CF Cable TV Inc., 9.125%,
7/15/07 1,515,000
2,500,000 Continental Cablevision,
Inc., 11.00%, 6/1/07 2,762,500
1,500,000 Granite Broadcasting
Corp., 10.375%, 5/15/05 1,530,000
1,500,000 Infinity Broadcasting
Corp., 10.375%, 3/15/02 1,612,500
1,000,000 Jones Intercable, Inc.,
9.625%, 3/15/02 1,045,000
2,500,000 K-III Communications
Inc., 10.25%, 6/1/04 2,662,500
2,000,000 Rogers Cablesystems of
America, Inc., 10.00%,
3/15/05 2,067,506
3,100,000 SCI Television, Inc.,
11.00%, 6/30/05 3,278,250
750,000 Sinclair Broadcast Group,
Inc., 10.00%, 9/30/05 766,875
2,500,000 TeleWest Communications
PLC, 9.625%, 10/1/06 2,537,500
--------------
32,564,506
--------------
MISCELLANEOUS
MANUFACTURING--4.9%
2,500,000 American Standard Inc.,
11.375%, 5/15/04 2,750,000
2,750,000 Figgie International
Inc., 9.875%, 10/1/99 2,773,053
2,750,000 Sequa Corp.,
8.75%-10.00%,
5/14/01-12/15/01 2,782,590
--------------
8,305,643
--------------
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
44
PIMCO ADVISORS HIGH INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
OIL AND GAS--8.9%
$ 3,000,000 Ferrellgas, Inc., 10.00%,
8/1/01 $ 3,120,000
3,575,000 Gulf Canada Resources
Ltd., 9.25%, 1/15/04 3,539,250
3,395,000 HS Resources, Inc.,
9.875%, 12/1/03 3,339,831
1,500,000 Nuevo Energy Co., 12.50%,
6/15/02 1,627,500
4,000,000 Triton Energy Corp.,
0.00%, 11/1/97 3,425,000
--------------
15,051,581
--------------
PRIVATE ASSET BACKED:
MORTGAGES--1.9%
1,376,350 MBLAC-NY REO Associates
L.P., Loan
Participation, 9.375%,
2/1/98 1,376,350
1,000,000 Nationsbanc Mortgage
Capital Corp., Multi-
Family Trust
Certificate, 95-M2,
Class UC, 8.195%,
5/25/25 687,656
1,350,000 Uniprop, REMIC 93-1,
Class C, 8.43%,
12/15/25 1,220,906
--------------
3,284,912
--------------
PUBLISHING--2.3%
4,000,000 World Color Press, Inc.,
9.125%, 3/15/03 3,990,000
--------------
RETAIL--1.8%
1,000,000 Pathmark Stores, Inc.,
0.00%, until 11/1/99
(10.75% to 11/1/03) 655,000
2,500,000 Pathmark Stores, Inc.,
9.625%, 5/1/03 2,481,250
--------------
3,136,250
--------------
TELECOMMUNICATIONS--3.5%
1,000,000 Metrocall, Inc., 10.375%,
10/1/07 1,015,000
2,000,000 Paging Network, Inc.,
8.875%-10.125%,
2/1/06-8/1/07 2,015,000
2,750,000 Rogers Cantel Mobile
Communications, Inc.,
10.75%, 11/1/01 2,887,500
--------------
5,917,500
--------------
TEXTILES--1.8%
3,000,000 WestPoint Stevens, Inc.,
8.75%, 12/15/01 2,977,500
--------------
UTILITIES: ELECTRIC--7.8%
3,500,000 AES Corp., 9.75%, 6/15/00 3,574,375
2,000,000 California Energy Co.,
9.875%, 6/30/03 2,040,000
1,900,000 California Energy Co.,
Inc., 0.00%, until
1/15/97 (10.25% to
1/15/04) 1,676,750
3,000,000 CTC Mansfield Funding
Corp., 11.125%, 9/30/16 3,080,220
3,000,000 Long Island Lighting Co.,
7.125%, 6/1/05 2,833,938
--------------
13,205,283
--------------
UTILITIES: GAS--1.1%
1,750,000 AmeriGas Partners, L.P.,
10.125%, 4/15/07 1,863,750
--------------
TOTAL CORPORATE BONDS AND
NOTES
(Cost $130,801,160) 138,551,770
--------------
SOVEREIGN ISSUES--3.6%
$ 4,750,000 (a)Republic of Argentina,
Floating Rate Note,
6.812%, 3/31/05 $ 2,945,000
1,000,000 Republic of Argentina,
Floating Rate Note,
5.00%, 3/31/23 480,000
1,500,000 United Mexican States
Tesobonos, 0.00%,
1/18/96 1,464,000
2,000,000 United Mexican States,
Value Recovery Rights,
12/31/19 0
2,000,000 United Mexican States,
Series B, 6.25%,
12/31/19 1,207,500
--------------
TOTAL SOVEREIGN ISSUES
(Cost $6,243,672) 6,096,500
--------------
<CAPTION>
SHARES
- --------------
PREFERRED STOCKS--3.6%
BANKS--1.6%
25,000 First Nationwide Bank
FSB, 11.50% 2,775,000
--------------
MEDIA--2.0%
133,200 Newscorp. Overseas Ltd.,
8.625%, Series A 3,379,950
--------------
TOTAL PREFERRED STOCKS
(Cost $6,021,775) 6,154,950
--------------
TOTAL SECURITIES OWNED
(Cost $157,028,714+) 164,813,228
--------------
<CAPTION>
CONTRACTS
- --------
OUTSTANDING CALL OPTIONS
WRITTEN--(0.0%)
50 Republic of Argentina,
Floating Rate Note,
6.812%, 3/31/05,
expiring November '95 @
$65.125
(Premium Received $7,000) (7,125)
--------------
TOTAL INVESTMENTS, NET OF
OUTSTANDING OPTIONS
WRITTEN
(Cost $157,021,714) 97.0% 164,806,103
OTHER ASSETS AND
LIABILITIES, NET 3.0% 5,043,894
------- --------------
TOTAL NET ASSETS 100.0% $ 169,849,995
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $157,028,714. At September 30, 1995,
net unrealized appreciation was $7,784,514. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$8,204,790 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$420,276.
(a) See Outstanding Call Options Written.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS TOTAL RETURN INCOME FUND 45
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $86,403,605) (Note
2a) $ 87,119,928
Foreign currency holdings, at
value
(Cost of $33,534) (Note 2b) 34,365
Cash 1,944,474
Variation margin on open
futures contracts (Note 2d) 446,170
Interest receivable 544,884
Receivable for investments
sold 661,538
Receivable for Fund shares
sold 1,724,201
Receivable for forward foreign
currency contracts sold
(Notes 2e and 7) 3,048,315
Unamortized organization costs
(Note 2j) 42,279
Other 40,504
--------------
Total assets 95,606,658
LIABILITIES:
Payable for investments
purchased $ 8,383
Payable for Fund shares
redeemed 58,301
Forward foreign currency
contracts sold, at value
(Cost $3,048,315) (Notes 2e
and 7) 3,172,416
Outstanding options written,
at value (premiums received
$31,571)
(Notes 2c and 6) 28,000
Dividends payable 34,204
Accrued expenses:
Investment advisory fee 41,238
Distribution fee 30,143
Servicing fee 17,182
Other 66,418
----------
Total liabilities 3,456,285
--------------
NET ASSETS $ 92,150,373
==============
COMPOSITION OF NET ASSETS:
Capital $ 89,529,908
Undistributed net investment
income 66,840
Undistributed net realized
gain on investments 1,816,227
Net unrealized appreciation on
securities 716,323
Net unrealized appreciation on
foreign currency holdings 831
Net unrealized depreciation on
forward foreign currency
contracts (124,101)
Net unrealized appreciation on
options written 3,571
Net unrealized appreciation on
futures contracts (Note 2d) 140,774
--------------
Total net assets $ 92,150,373
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($37,714,002
DIVIDED BY 3,524,056 shares) $10.70
Sales charge--4.75% of public
offering price 0.53
----------
Maximum offering price $11.23
==========
CLASS B SHARES
Net asset value and offering
price per share ($8,805,374
DIVIDED BY 820,736 shares) $10.73
==========
Redemption price per share *
==========
CLASS C SHARES
Net asset value and offering
price per share ($45,630,997
DIVIDED BY 4,264,605 shares) $10.70
==========
Redemption price per share *
==========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995*
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 2,266,473
EXPENSES:
Investment advisory fee (Note
3a) $ 214,491
Distribution fee (Class B)
(Note 3b) 11,353
Distribution fee (Class C)
(Note 3b) 129,761
Servicing fee (Class A) (Note
3b) 42,334
Servicing fee (Class B) (Note
3b) 3,784
Servicing fee (Class C) (Note
3b) 43,254
Transfer agent and custody
fees 57,640
Professional fees 30,000
Trustees' fees and expenses
(Note 3c) 4,500
Shareholder reports and
notices 15,000
Miscellaneous 31,109
-------
Total expenses 583,226
--------------
Net investment income 1,683,247
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on security
transactions and foreign
currency holdings 173,032
Net realized gain on forward
foreign currency contracts 206,743
Net realized gain on options
written 225,852
Net realized gain on futures
transactions 1,235,669
Net unrealized appreciation on
securities 716,323
Net unrealized appreciation on
foreign currency holdings 831
Net unrealized depreciation on
forward foreign currency
contracts (124,101)
Net unrealized appreciation on
options written 3,571
Net unrealized appreciation on
futures contracts 140,774
--------------
Net realized and unrealized
gain on investments 2,578,694
--------------
Net increase in net assets
resulting from operations $ 4,261,941
==============
</TABLE>
- ------------------
* The Fund commenced operations on December 22, 1994.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
SEPTEMBER
30,
1995*
------------
<S> <C>
OPERATIONS:
Net investment income $1,683,247
Net realized gain on security
transactions and foreign
currency transactions 173,032
Net realized gain on forward
foreign currency contracts 206,743
Net realized gain on options
written 225,852
Net realized gain on futures
transactions 1,235,669
Net unrealized appreciation on
securities 716,323
Net unrealized appreciation on
foreign currency holdings 831
Net unrealized depreciation on
forward foreign currency
contracts (124,101)
Net unrealized appreciation on
options written 3,571
Net unrealized appreciation on
futures contracts 140,774
-
------------
Net increase in net assets
resulting from operations 4,261,941
Dividends paid from net
investment income
Class A (848,158)
Class B (59,051)
Class C (734,267)
Net increase from Fund share
transactions (Note 5) 89,529,908
-
------------
Net increase in net assets 92,150,373
NET ASSETS:
Beginning of period --
------------
End of period (including
undistributed net investment
income of $66,840) $92,150,373
-
-
============
</TABLE>
- ------------------
* The Fund commenced operations on December 22, 1994.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
46
PIMCO ADVISORS TOTAL RETURN INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
SHORT-TERM NOTES--46.7%
$ 4,000,000 Abbott Laboratories,
5.69%,10/11/95* $ 3,993,678
3,800,000 Associates Corp. of North
America, 5.68%-5.69%,
11/16/95-11/27/95* 3,769,615
3,700,000 AT&T Corp., 5.64%-5.69%,
10/20/95-11/21/95* 3,681,290
1,500,000 Coca-Cola Co.,
5.63%-6.07%,
10/11/95-12/4/95* 1,488,577
1,500,000 Commonwealth Bank of
Australia, 5.63%,
10/13/95* 1,497,185
3,000,000 DuPont (E.I.) De Nemours
& Co., 5.66%-6.03%,
10/3/95-11/9/95* 2,987,402
3,400,000 General Electric Capital
Corp., 5.73%-6.50%,
10/2/95-11/10/95* 3,392,510
3,900,000 Hewlett-Packard Co.,
5.59%-5.67%,
10/17/95-1/9/96* 3,870,533
4,000,000 Kellogg Co., 5.70%,
10/25/95* 3,984,800
300,000 Minnesota Mining &
Manufacturing Co.,
5.73%, 11/14/95* 297,899
2,100,000 National Rural Utilities
Cooperative Finance
Corp., 5.72%,
10/10/95-10/12/95* 2,096,679
1,000,000 Ontario Hydro, 5.66%,
12/8/95* 988,780
4,000,000 US West Communications
Inc., 5.72%-5.89%,
10/5/95-10/24/95* 3,991,203
3,500,000 Wal-Mart Stores, Inc.,
5.71%,10/6/95* 3,497,224
3,500,000 Western Australian
Treasury Corp., 5.70%,
10/24/95-11/15/95* 3,485,513
--------------
TOTAL SHORT-TERM NOTES
(Cost $43,024,538) 43,022,888
--------------
U.S. TREASURY
OBLIGATIONS--1.6%
1,455,000 U.S. Treasury Bills,
5.34%-5.76%,
10/26/95-2/8/96*
(Cost $1,436,446) 1,436,761
--------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--31.4%
FEDERAL HOME LOAN
MORTGAGE CORP.
(FHLMC)--6.6%
5,932,075 FHLMC, 30-Year Adjustable
Rate Mortgages,
5.88%-7.061%,
1/1/24-8/1/24* 6,054,925
--------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
(FNMA)--14.1%
6,483,576 FNMA, 30-Year Adjustable
Rate Mortgages,
6.126%-7.476%,
10/1/23-3/1/25* 6,635,230
4,000,000 FNMA, 5.60%, Discount
Notes,
10/26/95-11/2/95* 3,982,650
2,400,420 FNMA, REMIC 91-113, Class
ZC, 8.50%, 11/25/18* 2,407,403
--------------
13,025,283
--------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION
(GNMA)--10.7%
9,736,662 GNMA, 30-Year Adjustable
Rate Mortgages, 6.50%,
3/20/23-1/20/25* 9,871,429
--------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Cost $28,370,166) 28,951,637
--------------
CORPORATE BONDS AND
NOTES--7.1%
FINANCIAL SERVICES--1.8%
1,000,000 General Motors Acceptance
Corp., Medium-Term
Note, 7.75%, 7/18/96 1,012,510
625,000 Morgan Stanley Group
Inc., 7.79%, 2/3/97 637,725
--------------
1,650,235
--------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
MEDIA--1.1%
$ 1,000,000 Time Warner Inc., 7.45%,
2/1/98 $ 1,017,040
--------------
OIL AND GAS--0.9%
800,000 Maxus Energy Corp.,
Medium-Term Note,
10.10%, 10/18/95 800,576
--------------
PRIVATE ASSET BACKED:
MORTGAGES--2.1%
859,826 DLJ Mortgage Acceptance
Corp., REMIC, 94-10,
Class 1A, Floating
Rate, 6.6197%, 5/25/24* 874,605
1,080,938 Ryland Mortgage
Securities Corp.,
REMIC, 93-8, Class A,
Floating Rate, 7.855%,
9/25/23* 1,097,152
--------------
1,971,757
--------------
TRANSPORTATION: AIR--1.2%
1,000,000 Delta Air Lines, Inc.,
10.14%, 8/14/12 1,143,370
--------------
TOTAL CORPORATE BONDS AND
NOTES
(Cost $6,394,490) 6,582,978
--------------
SOVEREIGN ISSUES--7.7%
3,303,002 Deutschland Republic,
6.25%, 1/04/24 2,843,881
2,598,484 Government of Canada,
8.75%, 12/1/05 2,782,171
1,000,000 Republic of Argentina,
Floating Rate Note,
6.812%, 3/31/05 620,000
900,000 United Mexican States
Tesobonos, .00%,
1/18/96 878,400
--------------
TOTAL SOVEREIGN ISSUES
(Cost $7,176,629) 7,124,452
--------------
<CAPTION>
CONTRACTS
- --------------
<S> <C> <C>
PURCHASED PUT
OPTIONS--0.0%
23 Euro Dollar Futures,
expiring June '96 @
$90.75
(Cost $411) 287
--------------
OTC INTEREST RATE
CAPS--0.0%
37 OTC Interest Rate Cap 3
Month LIBOR, expiring
March '96 @ $88
(Cost $925) 925
--------------
TOTAL SECURITIES OWNED
(Cost $86,403,605+) 87,119,928
--------------
OUTSTANDING PUT OPTIONS
WRITTEN--(0.0%)
80 Eurodollar Futures,
expiring March '96 @
$94 (Premium Received
$31,571) (28,000)
--------------
TOTAL INVESTMENTS, NET OF
OUTSTANDING OPTIONS
WRITTEN
(Cost $86,372,034) 94.5% 87,091,928
OTHER ASSETS AND
LIABILITIES, NET 5.5% 5,058,445
------- --------------
TOTAL NET ASSETS 100.0% $ 92,150,373
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $86,403,605. At September 30, 1995, net
unrealized appreciation was $716,323. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of $861,224
and aggregate gross unrealized depreciation of all
investments on which there was an excess of tax
cost over market value of $144,901.
* Either all or a portion of these securities have
been segregated with the custodian to cover forward
foreign currency contracts, futures contracts, and
written options on futures contracts.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS TAX EXEMPT FUND 47
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $53,283,012) (Note
2a) $ 56,273,825
Cash 346,604
Interest receivable 948,306
Receivable for Fund shares
sold 2,663
Other assets 10,502
--------------
Total assets 57,581,900
LIABILITIES:
Payable for Fund shares
redeemed $ 181,646
Dividends payable 36,173
Accrued expenses:
Investment advisory fee 28,571
Distribution fee 34,036
Servicing fee 11,904
Other 76,414
----------
Total liabilities 368,744
--------------
NET ASSETS $ 57,213,156
==============
COMPOSITION OF NET ASSETS:
Capital $ 55,408,658
Accumulated net investment
loss (131,752)
Accumulated net realized loss
on investments (1,054,563)
Net unrealized appreciation on
securities 2,990,813
--------------
Total net assets $ 57,213,156
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($2,700,838
DIVIDED BY 228,256 shares) $11.83
Sales charge--4.75% of public
offering price 0.59
---------
Maximum offering price $12.42
=========
CLASS B SHARES
Net asset value and offering
price per share ($288,258
DIVIDED BY 24,349 shares) $11.84
=========
REDEMPTION PRICE PER SHARE *
=========
CLASS C SHARES
Net asset value and offering
price per share ($54,224,060
DIVIDED BY 4,586,079 shares) $11.82
=========
REDEMPTION PRICE PER SHARE *
=========
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 3,742,211
EXPENSES:
Investment advisory fee (Note
3a) $ 369,918
Distribution fee (Class B)
(Note 3b) 559
Distribution fee (Class C)
(Note 3b) 442,382
Servicing fee (Class A) (Note
3b) 6,485
Servicing fee (Class B) (Note
3b) 186
Servicing fee (Class C) (Note
3b) 147,461
Transfer agent and custody
fees 64,000
Professional fees 34,000
Trustees' fees and expenses 9,000
Shareholder reports and
notices 21,000
Miscellaneous 18,888
-------
Total expenses 1,113,879
--------------
Net investment income 2,628,332
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on security
transactions (507,989)
Net unrealized appreciation on
securities 3,556,291
--------------
Net realized and unrealized
gain on investments 3,048,302
--------------
Net increase in net assets
resulting from operations $ 5,676,634
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
---------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,628,332 $ 3,251,256
Net realized gain (loss) on
security transactions (507,989) 191,890
Net unrealized appreciation
(depreciation) on securities 3,556,291 (9,271,830)
------------ --------------
Net increase (decrease) in net
assets resulting from
operations 5,676,634 (5,828,684)
Dividends paid from net
investment income
Class A (130,153) (139,595)
Class B (2,846) --
Class C (2,539,832) (3,234,994)
Distributions paid from net
realized gain on investments
Class A -- (46,605)
Class C -- (1,353,726)
Net decrease from Fund share
transactions (Note 5) (16,730,623) (2,783,860)
------------ --------------
Net decrease in net assets (13,726,820) (13,387,464)
NET ASSETS:
Beginning of year 70,939,976 84,327,440
------------ --------------
End of year (including
accumulated net investment
loss of $131,752 and
$153,448, respectively) $ 57,213,156 $ 70,939,976
============ ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
48
PIMCO ADVISORS TAX EXEMPT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
MUNICIPAL BONDS AND
NOTES--98.4%
ARIZONA--4.9%
$ 3,000,000 Salt River Agricultural
Improvement and Power
District, Electric
Revenue Bonds, Series
1992 D and 1993 B,
5.25%-5.50%,
1/1/13-1/1/25 $ 2,827,500
--------------
CALIFORNIA--9.7%
500,000 City of San Jose,
Redevelopment Agency,
Merged Area
Redevelopment Project,
Tax Allocation Bonds,
(MBIA Insured). Series
1993, 6.00%, 8/1/15 509,375
3,000,000 Los Angeles Convention
and Exhibition Center
Authority, Certificates
of Participation,
Series 1985,
(Prerefunded 12/1/05),
9.00%, 12/1/10-12/1/20 3,978,749
1,000,000 Los Angeles County
Transportation
Commission, Sales Tax
Revenue Refunding
Bonds, Series 1991 B,
6.50%, 7/1/13 1,033,750
--------------
5,521,874
--------------
DISTRICT OF
COLUMBIA--1.8%
1,000,000 Metropolitan Washington
Airports Authority
System Revenue Bond,
(MBIA Insured), Series
1992 A, 6.625%, 10/1/19 1,040,000
--------------
FLORIDA--3.6%
1,000,000 Jacksonville Electric
Authority, Bulk Power
Supply System Revenue
Bonds, (Prerefunded
10/01/00) (Scherer 4
Project, Issue One,
Series 1991 A), 6.75%,
10/1/21 1,116,250
1,000,000 Jacksonville Electric
Authority, St. Johns
River System Revenue
Bonds, Issue Two,
Series 11, 5.375%,
10/1/13 956,250
--------------
2,072,500
--------------
GEORGIA--3.4%
2,000,000 Atlanta, Georgia, General
Obligation Bonds,
5.60%, 12/1/18 1,937,500
--------------
HAWAII--1.9%
1,000,000 State of Hawaii, Airport
System Revenue Bonds,
Second Series of 1991,
6.90%, 7/1/12 1,098,750
--------------
ILLINOIS--9.1%
1,000,000 Illinois, Educational
Facility Authority,
Northwestern University
Revenue Bonds,
(Prerefunded 12/1/01),
Series 1985, 6.90%,
12/1/21 1,133,750
1,000,000 State of Illinois,
General Obligation
Bonds, Series of March
1992, 6.25%, 10/1/12 1,032,500
1,000,000 State of Illinois,
Highway Authority,
Highway Revenue Bonds,
Series 1992 A, 6.375%,
1/1/15 1,025,000
1,000,000 State of Illinois, Sales
Tax Revenue Refunding
Bonds, Series Q, 6.00%,
6/15/12 1,037,500
1,000,000 University of Illinois
Board of Trustees,
Auxiliary Facility
System Revenue Bonds,
Series 1991, 5.75%,
4/1/22 967,500
--------------
5,196,250
--------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
INDIANA--6.0%
$ 1,000,000 Indiana Municipal Power
Agency, Power Supply
System Revenue Bonds,
(Prerefunded 1/1/00),
Series 1989 A, 7.10%,
1/1/15 $ 1,113,750
1,300,000 Indianapolis, Local
Public Improvement Bond
Bank, Transportation
Revenue Bond, Series
1992 and 1992 D,
6.00%-6.75%,
7/1/10-2/1/14 1,385,625
1,000,000 Petersburg County
Pollution Control
Revenue Refunding
Bonds, Indianapolis
Power & Light, Series
1993 B, 5.40%, 8/1/17 941,250
--------------
3,440,625
--------------
MASSACHUSETTS--1.6%
1,000,000 Massachusetts Water
Resources Authority,
Revenue Bonds, Series
1993 B, 5.50%, 3/1/17 942,500
--------------
MISSISSIPPI--4.4%
2,670,000 State of Mississippi,
General Obligation
Bonds, Series 1994 A,
5.10%,
11/15/11-11/15/12 2,541,669
--------------
NEVADA--1.9%
1,000,000 State of Nevada, General
Purpose Revenue Bonds,
6.50%, 10/1/09 1,061,250
--------------
NEW HAMPSHIRE--1.9%
1,000,000 New Hampshire Turnpike
System, Refunding
Revenue Bonds, (FGIC
Insured), Series 1991
A, 6.75%, 11/1/11 1,096,250
--------------
NEW JERSEY--3.8%
2,000,000 New Jersey Turnpike
Authority, Turnpike
Revenue Bonds, Series
1992 C, 6.50%, 1/1/16 2,162,500
--------------
NEW YORK--11.9%
1,000,000 New York City Municipal
Water Finance
Authority, Series 1992
C, Water & Sewer System
Revenue Bonds, (FGIC
Insured), 4.60%,
6/15/22 1,000,000
1,000,000 New York City Municipal
Water Finance
Authority, Water and
Sewer System Revenue
Bonds, (Prerefunded
6/15/01), Series 1991
C, 7.375%, 6/15/13 1,155,000
1,000,000 New York City, General
Obligation Bonds, (MBIA
Insured), Series B,
4.60%, 8/15/04 1,000,000
650,000 State of New York, Local
Government Assistance
Corp., Sales Tax
Revenue Bonds, Series
1992 C, 6.00%, 4/1/12 663,813
1,500,000 State of New York,
Medical Care Facility
Finance Agency, Revenue
Bonds, (FHA Insured),
Series 1995 A, 6.125%,
2/15/15 1,500,000
1,000,000 State of New York,
Thruway Authority,
Revenue Bonds, (MBIA
Insured), Series 1995
A, 5.50%, 4/1/15 962,500
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS TAX EXEMPT FUND 49
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
$ 500,000 Triborough Bridge &
Tunnel Authority,
General Purpose Revenue
Bonds, Series Y, 6.00%,
1/1/12 $ 518,125
--------------
6,799,438
--------------
NORTH DAKOTA--1.9%
1,000,000 Mercer County Pollution
Control Revenue Bonds,
Series 1991, 6.90%,
2/1/19 1,070,000
--------------
OHIO--1.7%
1,000,000 Cleveland Water and Sewer
Revenue Refunding and
Improvement Revenue
Bonds, (MBIA Insured),
Series 1993 G, Number
1, 5.50%, 1/1/21 971,250
--------------
PENNSYLVANIA--4.3%
1,525,000 City of Pittsburgh,
General Obligation
Bonds, (AMBAC Insured)
Series 1993 A, 5.50%,
9/1/14 1,500,219
1,000,000 State of Pennsylvania,
Industrial Development
Authority Revenue
Bonds, (AMBAC Insured),
5.50%, 1/1/14 960,000
--------------
2,460,219
--------------
SOUTH CAROLINA--3.4%
1,750,000 Charleston County,
Resource Recovery
Revenue Bonds, (Foster
Wheeler Charleston
Resource Recovery
Project), Series 1987
A, 9.25%, 1/1/10 1,925,000
--------------
TEXAS--14.3%
1,000,000 Board of Regents of the
University of Texas
System, Revenue
Financing System
Refunding Bonds, Series
1991 B, 6.75%, 8/15/13 1,076,250
750,000 City of Austin, Public
Improvement Refunding
Bonds, Series 1993 A,
4.80%, 9/1/08 716,250
1,000,000 Dallas Water and Sewer
System Revenue Bonds,
Series 1994, 5.25%,
4/1/13 957,500
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
$ 2,000,000 Houston, Texas, Water and
Sewer System Revenue
Bonds, Series 1993 B,
5.00%, 12/01/18 $ 1,757,500
2,000,000 San Antonio, Texas,
Electric & Gas Revenue
Bonds, Series B, 5.00%,
2/1/16 1,777,500
2,000,000 State of Texas, General
Obligation Bonds,
Series 1992 C, 5.50%,
4/1/20 1,907,500
--------------
8,192,500
--------------
WASHINGTON--3.9%
1,000,000 Kent School District No.
415 King County,
Washington, Unlimited
Tax General Obligation
Bonds, Series 1991 B,
6.70%, 12/1/11 1,108,750
1,000,000 Municipality of
Metropolitan Seattle,
Sewer Revenue Bonds,
(Prerefunded 1/1/00),
Series T, 6.875%,
1/1/31 1,107,500
--------------
2,216,250
--------------
WYOMING--3.0%
1,700,000 Lincoln County Pollution
Industrial Control
Revenue Bonds Variable
Rate Demand Note,
4.60%, 11/1/14 1,700,000
--------------
TOTAL INVESTMENTS
(Cost $53,283,012+) 98.4% 56,273,825
OTHER ASSETS AND
LIABILITIES, NET 1.6% 939,331
------- --------------
TOTAL NET ASSETS 100.0% $ 57,213,156
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $53,000,207. At September 30, 1995, net
unrealized appreciation was $3,273,618. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$3,700,625 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$427,007.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
50
PIMCO ADVISORS U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $325,969,809) (Note
2a) $ 334,100,861
Cash 2,283,249
Variation margin on open
futures contracts (Note 2d) 610,656
Interest receivable 1,677,276
Receivable for investments
sold 219,187
Receivable for Fund shares
sold 607,338
Other assets 67,321
--------------
Total assets 339,565,888
LIABILITIES:
Payable for investments
purchased $ 32,818,251
Payable for Fund shares
redeemed 776,608
Dividends payable 355,107
Outstanding options written,
at value (premiums received
$101,682) (Notes 2c and 6) 8,312
Accrued expenses:
Investment advisory fee 146,241
Distribution fee 178,696
Servicing fee 62,847
Other 214,319
----------
Total liabilities 34,560,381
--------------
NET ASSETS $ 305,005,507
==============
COMPOSITION OF NET ASSETS:
Capital $ 372,486,113
Undistributed net investment
income 279,541
Accumulated net realized loss
on investments (76,180,944)
Net unrealized appreciation on
securities 8,131,052
Net unrealized appreciation on
options written 93,370
Net unrealized appreciation on
futures contracts (Note 2d) 196,375
--------------
Total net assets $ 305,005,507
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($16,248,239
DIVIDED BY 1,773,232 shares) $9.16
Sales charge--4.75% of public
offering price 0.46
-----
Maximum offering price $9.62
=====
CLASS B SHARES
Net asset value and offering
price per share ($1,671,492
DIVIDED BY 182,680 shares) $9.15
=====
Redemption price per share *
=====
CLASS C SHARES
Net asset value and offering
price per share ($287,085,776
DIVIDED BY 31,456,482 shares) $9.13
=====
Redemption price per share *
=====
- ------------------
</TABLE>
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 24,503,958
EXPENSES:
Investment advisory fee (Note
3a) $ 1,868,771
Distribution fee (Class B)
(Note 3b) 1,425
Distribution fee (Class C)
(Note 3b) 2,313,802
Servicing fee (Class A) (Note
3b) 37,643
Servicing fee (Class B) (Note
3b) 475
Servicing fee (Class C) (Note
3b) 771,267
Transfer agent and custody
fees 355,000
Professional fees 50,000
Trustees' fees and expenses
(Note 3c) 36,000
Shareholder reports and
notices 130,000
Miscellaneous 92,215
--------
Total expenses 5,656,598
--------------
Net investment income 18,847,360
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on security
transactions (12,688,130)
Net realized gain on options
written 132,826
Net realized gain on futures
transactions 3,789,704
Net unrealized appreciation on
securities 24,566,750
Net unrealized appreciation on
options written 93,370
Net unrealized appreciation on
futures contracts 285,675
--------------
Net realized and unrealized
gain on investments 16,180,195
--------------
Net increase in net assets
resulting from operations $ 35,027,555
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 18,847,360 $ 27,236,854
Net realized loss on security
transactions (12,688,130) (17,045,982)
Net realized gain on options
written 132,826 --
Net realized gain on futures
transactions 3,789,704 178,429
Net unrealized appreciation
(depreciation) on securities 24,566,750 (35,503,425)
Net unrealized appreciation on
options written 93,370 --
Net unrealized appreciation
(depreciation) on futures
contracts 285,675 (409,067)
------------ --------------
Net increase (decrease) in net
assets resulting from
operations 35,027,555 (25,543,191)
Dividends paid from net
investment income
Class A (980,833) (1,229,984)
Class B (10,127) --
Class C (17,838,344) (26,000,244)
Net decrease from Fund share
transactions (Note 5) (91,487,402) (120,159,223)
------------ --------------
Net decrease in net assets (75,289,151) (172,932,642)
NET ASSETS:
Beginning of year 380,294,658 553,227,300
------------ --------------
End of year (including
undistributed net investment
income of $279,541 and
$32,254, respectively) $305,005,507 $ 380,294,658
============ ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS U.S. GOVERNMENT FUND 51
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
U.S. TREASURY
OBLIGATIONS--0.9%
$ 1,315,000 U.S. Treasury Bills,
5.39%-5.70%,
10/26/95-2/8/96* $ 1,302,022
1,000,000 U.S. Treasury Bonds,
12.375%, 5/15/04 1,404,375
--------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $2,811,187) 2,706,397
--------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--107.7%
FEDERAL HOME LOAN BANK
(FHLB)--0.3%
1,000,000 FHLB, Discount Notes,
5.63%, 10/30/95 995,465
--------------
FEDERAL HOME LOAN
MORTGAGE CORP.
(FHLMC)--11.2%
7,783,529 FHLMC, 30-Year Adjustable
Rate Mortgages, 6.025%,
4/01/24 7,918,573
5,000,000 FHLMC, REMIC 1303, Class
L, 8.25%, 6/15/22* 5,200,780
6,458,000 FHLMC, REMIC 1411, Class
KA, 7.00%, 10/15/03* 6,583,925
4,000,000 FHLMC, REMIC 162, Class
E, 7.00%, 2/15/20* 4,008,276
8,444,266 FHLMC, REMIC 1660, Class
JA, Interest Only,
7/15/07 944,652
10,966,108 FHLMC, REMIC 1702, Class
ZA, 6.50%, 3/15/24 8,875,639
3,996,573 FHLMC, REMIC 32, Class
PT, Interest Only,
2/25/19 551,323
--------------
34,083,168
--------------
FEDERAL HOUSING
ADMINISTRATION
(FHA)--11.8%
1,682,265 FHA, Section #220-221-D4,
Project USGI #190,
9.68%, 5/01/24 1,811,065
12,641,541 FHA, Section #221-D4,
Project BNC #2, 7.316%,
11/01/19 12,858,824
8,312,826 FHA, Section #221-D4,
Project Citibank #99,
7.43%, 10/01/03 8,521,943
4,842,229 FHA, Section #221-D4,
Project Merrill Lynch
#189, 7.43%, 4/1/23 4,970,093
1,928,551 FHA, Section #221-D4,
Project USGI #2012,
7.43%, 9/01/23 1,971,039
4,543,485 FHA, Section #241-F,
Participation
Certificate Jefferson
Township, 7.125%,
2/1/34 4,427,058
1,290,507 FHA, Section #221-D4,
Participation
Certificate Reilly
Dakota MD, 7.43%,
9/1/23 1,328,215
--------------
35,888,237
--------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
(FNMA)--46.6%
28,400,000 FNMA, Discount Notes,
5.59%-5.60%,
10/20/95-10/30/95 28,297,201
2,859,948 FNMA, 30-Year Adjustable
Rate Mortgages, 6.429%,
8/1/28 2,882,390
32,577,230 FNMA, 30-Year Fixed Rate
Mortgages, 6.00%-8.50%,
11/1/03-9/1/24* 32,629,167
10,000,000 FNMA, 7.00% ** 9,809,380
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
$ 6,571,933 FNMA, REMIC 91-134, Class
Z, 7.00%, 10/25/21 $ 6,111,898
4,219,969 FNMA, REMIC 91-18, Class
H, 8.75%, 1/25/07* 4,300,651
15,000,000 FNMA, REMIC 92-138, Class
G, 7.50%, 8/25/22* 15,240,135
2,591,623 FNMA, REMIC 92-31, Class
XZ, 8.00%, 6/25/22 2,695,311
3,965,703 FNMA, REMIC 92-41, Class
ZC, 8.00%, 2/25/22 3,961,365
5,812,111 FNMA, REMIC 92-73, Class
Z, 7.50%, 5/25/22 5,805,887
2,720,370 FNMA, REMIC 93-137, Class
PV, Interest Only,
5/25/12 156,911
14,800,000 FNMA, REMIC 93-17, Class
EA, 6.15%, 10/25/07* 14,512,865
6,700,000 FNMA, REMIC 93-17, Class
H, 7.50%, 5/25/05* 6,726,172
5,306,118 FNMA, REMIC 94-11, Class
Z, 6.50%, 10/17/24 4,082,946
5,037,565 FNMA, SMBS, Class K-1,
6.00% 11/1/08 4,896,266
--------------
142,108,545
--------------
GOVERNMENT NATIONAL
MORTGAGE
ASSOCIATION
(GNMA)--33.6%
75,457,958 GNMA, 30-Year Adjustable
Rate Mortgages,
5.50%-7.50%,
7/20/22-5/20/25* 76,736,859
23,276,508 GNMA, 30-Year Fixed Rate
Mortgages,
9.00%-10.00%,
11/15/09-1/15/20 24,904,136
101,894 GNMA, Graduated Payment
Mortgages, 11.25%,
12/20/15 113,312
803,921 GNMA, Mobile Home
Mortgages, 10.25%,
10/15/98-12/15/99 844,745
--------------
102,599,052
--------------
U.S. DEPARTMENT OF
VETERANS AFFAIRS--
4.2%
6,231,000 Vendee Mortgage Trust,
REMIC 93-1, Class G,
7.00%, 2/15/00 6,271,891
264,571,431 Vendee Mortgage Trust,
REMIC 93-2, Class IO,
Floating Rate, Interest
Only, 6/15/23 6,614,286
--------------
12,886,177
--------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Cost $320,748,310) 328,560,644
--------------
<CAPTION>
MATURITY
AMOUNT
- --------------
<S> <C> <C>
REPURCHASE
AGREEMENT--0.3%
1,000,475 Merrill Lynch Government
Securities, Inc.,
5.70%, dated 9/29/95,
due 10/02/95 (Cost
$1,000,000;
collateralized by
$955,000 U.S. Treasury
Notes, 8.50%, 5/15/97) 1,000,000
--------------
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
52
PIMCO ADVISORS U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
CONTRACTS (NOTE 2)
- -------------- --------------
<S> <C> <C>
PURCHASED OTC CALL
OPTIONS--0.6%
230 U.S. Treasury Note,
6.75%, 6/30/99,
expiring 11/21/95 @
$97.38 $ 1,142,640
140 U.S. Treasury Note,
6.50%, 4/30/99,
expiring 11/20/95 @
$96.66 691,180
--------------
TOTAL PURCHASED OTC CALL
OPTIONS
(Cost $1,410,312) 1,833,820
--------------
TOTAL SECURITIES OWNED
(Cost $325,969,809+) 334,100,861
--------------
OUTSTANDING PUT OPTIONS
WRITTEN--(0.0%)
58 U.S. Treasury 30 Year
Bond Future expiring
11/17/95 @ $106 (3,625)
30 U.S. Treasury 30 Year
Bond Future expiring
12/16/95 @ $108 (4,687)
--------------
TOTAL OUTSTANDING PUT
OPTIONS WRITTEN
(Premiums Received
$101,682) (8,312)
--------------
TOTAL INVESTMENTS, NET OF
OUTSTANDING OPTIONS
WRITTEN
(Cost $325,868,127) 109.5% 334,092,549
OTHER ASSETS AND
LIABILITIES, NET (9.5%) (29,087,042)
----- --------------
TOTAL NET ASSETS 100.0% $ 305,005,507
===== ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $325,969,809. At September 30, 1995,
net unrealized appreciation was $8,131,052. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of
$11,624,420 and aggregate gross unrealized
depreciation of all investments on which there was
an excess of tax cost over market value of
$3,493,368.
* Either all or a portion of these securities have
been segregated with the custodian to cover futures
contracts, written options on futures contracts,
forward commitments and when-issued securities.
** Securities purchased on a to-be-announced basis.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS SHORT-INTERMEDIATE FUND 53
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $79,207,654) (Note
2a) $ 78,694,967
Foreign currency holdings, at
value (Cost of $14,790)
(Note 2b) 14,790
Forward foreign currency
contracts purchased (Cost of
$1,000,005) 1,001,535
Cash 1,382,972
Variation margin on open
futures contracts (Note 2d) 27,313
Interest receivable 928,627
Receivable for investments
sold 3,224,041
Receivable for Fund shares
sold 292,578
Receivable for forward foreign
currency contracts sold
(Notes 2e and 7) 4,128,458
Other assets 18,209
--------------
Total assets 89,713,490
LIABILITIES:
Payable for investments
purchased $ 11,142,558
Payable for forward foreign
currency contracts purchased
(Notes 2e and 7) 1,000,005
Payable for Fund shares
redeemed 310,643
Forward foreign currency
contracts sold, at value
(Cost of $4,128,458) (Notes
2e and 7) 4,162,589
Outstanding options written,
at value (premiums received
$93,796) (Notes 2c and 6) 31,821
Dividends payable 47,783
Accrued expenses:
Investment advisory fee 29,801
Distribution fee 27,414
Servicing fee 14,901
Other 54,204
----------
Total liabilities 16,821,719
--------------
NET ASSETS $ 72,891,771
==============
COMPOSITION OF NET ASSETS:
Capital $ 79,839,305
Undistributed net investment
income 110,640
Accumulated net realized loss
on investments (6,592,002)
Net unrealized depreciation on
securities (512,687)
Net unrealized depreciation on
forward foreign currency
contracts (32,601)
Net unrealized appreciation on
options written 61,975
Net unrealized appreciation on
futures contracts (Note 2d) 17,141
--------------
Total net assets $ 72,891,771
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value and redemption
price per share ($6,342,816
DIVIDED BY 659,157 shares) $9.62
Sales charge--3.00% of public
offering price 0.30
-----
Maximum offering price $9.92
=====
CLASS B SHARES
Net asset value and offering
price per share ($940,616
DIVIDED BY 97,768 shares) $9.62
=====
Redemption price per share *
=====
CLASS C SHARES
Net asset value and offering
price per share ($65,608,339
DIVIDED BY 6,837,252 shares) $9.60
=====
Redemption price per share *
=====
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 5,466,061
EXPENSES:
Investment advisory fee (Note
3a) $ 382,196
Distribution fee (Class B)
(Note 3b) 1,528
Distribution fee (Class C)
(Note 3b) 350,213
Servicing fee (Class A) (Note
3b) 15,482
Servicing fee (Class B) (Note
3b) 510
Servicing fee (Class C) (Note
3b) 175,106
Transfer agent and custody
fees 80,000
Professional fees 22,000
Trustees' fees and expenses
(Note 3c) 3,000
Shareholder reports and
notices 8,000
Miscellaneous 35,222
-------
Total expenses 1,073,257
--------------
Net investment income 4,392,804
--------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on security
transactions (1,523,700)
Net realized loss on forward
foreign currency contracts (22,135)
Net realized gain on options
written 105,276
Net realized gain on futures
transactions 217,491
Net unrealized appreciation on
securities 2,847,204
Net unrealized depreciation on
forward foreign currency
contracts (32,601)
Net unrealized appreciation on
options written 61,975
Net unrealized depreciation on
futures contracts (121,579)
--------------
Net realized and unrealized
gain on investments 1,531,931
--------------
Net increase in net assets
resulting from operations $ 5,924,735
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,392,804 $ 5,114,258
Net realized loss on security
transactions (1,523,700) (4,036,896)
Net realized loss on forward
foreign currency contracts (48,556) --
Net realized gain on options
written 105,276 --
Net realized gain on futures
transactions 217,491 351,540
Net unrealized appreciation
(depreciation) on securities 2,847,204 (1,697,229)
Net unrealized depreciation on
forward foreign currency
contracts (6,180) --
Net unrealized appreciation on
options written 61,975 --
Net unrealized appreciation
(depreciation) on futures
contracts (121,579) 135,495
------------ --------------
Net increase (decrease) in net
assets resulting from
operations 5,924,735 (132,832)
Dividends paid from net
investment income
Class A (384,524) (333,151)
Class B (10,689)
Class C (4,027,560) (4,930,236)
Net decrease from Fund share
transactions (Note 5) (22,432,089) (31,808,527)
------------ --------------
Net decrease in net assets (20,930,127) (37,204,746)
NET ASSETS:
Beginning of year 93,821,898 131,026,644
------------ --------------
End of year (including
undistributed net investment
income of $110,640 and
$58,803, respectively) $ 72,891,771 $ 93,821,898
============ ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
54
PIMCO ADVISORS SHORT-INTERMEDIATE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
SHORT-TERM NOTES--3.9%
$ 1,500,000 Banco Nacional de
Comercio Exterior,
S.N.C., 10.663%,
11/14/95 $ 1,480,450
700,000 General Electric Capital
Corp., 6.50%, 10/2/95 699,874
200,000 National Rural Utilities
Cooperative Finance
Corp., 5.72%, 10/4/95* 199,905
500,000 New South Wales Treasury
Corp., 5.67%, 11/20/95* 496,062
--------------
TOTAL SHORT-TERM NOTES
(Cost $2,876,291) 2,876,291
--------------
U.S. TREASURY
OBLIGATIONS--0.3%
10,000 U.S. Treasury Bills,
5.35%, 2/8/96* 9,809
180,000 U.S. Treasury Notes,
8.125%, 2/15/98* 188,888
--------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $198,132) 198,697
--------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--59.4%
FEDERAL HOME LOAN BANK
(FHLB)--4.1%
3,000,000 FHLB, Floating Rate,
5.58%, 4/19/99* 3,001,890
--------------
FEDERAL HOME LOAN
MORTGAGE CORP.
(FHLMC)--20.1%
4,469,208 FHLMC, Adjustable Rate
Mortgages,
6.077%-8.097%,
3/1/17-3/1/24* 4,583,448
2,157,338 FHLMC, REMIC 1418, Class
G, 7.00%, 7/15/97* 2,173,106
3,000,000 FHLMC, REMIC 1588, Class
PD, 5.40%, 8/15/14* 2,936,817
18,187,938 FHLMC, REMIC 1689, Class
N, Interest Only,
4/15/19 1,951,729
3,000,000 FHLMC, REMIC 1699, Class
B, 5.65%, 11/15/19* 2,964,417
--------------
14,609,517
--------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
(FNMA)--25.9%
398,104 FNMA, 15-Year Fixed Rate
Mortgages, 7.00%,
4/1/02-9/1/04* 400,812
9,617,642 FNMA, Adjustable Rate
Mortgages,
6.282%-7.279%,
7/1/17-10/1/28* 9,775,129
525,901 FNMA, REMIC 92-10, Class
GA, 7.75%, 9/25/96* 528,399
250,000 FNMA, REMIC 92-138, Class
C, 6.00%, 12/25/18* 244,387
799,976 FNMA, REMIC 92-21, Class
F, Floating Rate,
6.475%, 4/25/22* 806,399
3,960,000 FNMA, REMIC 93-186, Class
D, 5.75%, 2/25/05* 3,887,884
2,847,870 FNMA, SMBS, Class K-1,
6.00% 11/1/10* 2,767,990
7,436,100 FNMA, SMBS, Class K-2,
Interest Only, 11/1/08 467,986
--------------
18,878,986
--------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C>
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION
(GNMA)--9.3%
$ 3,000,000 GNMA, 6.00% ** $ 3,002,813
3,772,157 GNMA, Adjustable Rate
Mortgages, 5.50%-6.50%,
1/20/22-7/20/25* 3,774,692
--------------
6,777,505
--------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(Cost $44,302,822) 43,267,898
--------------
CORPORATE BONDS AND
NOTES--33.1%
FINANCIAL SERVICES--10.6%
1,700,000 Capital One Bank, 6.25%,
7/11/96 1,700,000
2,000,000 Chrysler Financial Corp.,
7.93%, 2/3/97 2,040,240
1,000,000 Ford Motor Credit Corp.,
Medium-Term Note,
Floating Rate, 5.495%,
4/5/99 1,002,690
3,000,000 Salomon Inc., Medium-Term
Note, Floating Rate,
6.012%-6.94%,
3/15/96-10/21/96 3,003,472
--------------
7,746,402
--------------
MEDIA--2.8%
2,000,000 Time Warner Inc.,
Floating Rate, 6.835%,
8/15/00 2,003,500
--------------
METALS AND MINING--1.4%
1,000,000 Noranda Inc., Floating
Rate, 6.75%, 8/18/00 1,011,875
--------------
PRIVATE ASSET BACKED:
MORTGAGES--11.8%
2,375,054 Countrywide Mortgage
Backed Securities,
Inc., REMIC 94-C, Class
A2, 6.50%, 3/25/24* 2,362,512
2,346,592 Fleet Mortgage Securities
Inc., REMIC 93-I, Class
C, 7.20%, 10/25/23* 2,322,047
1,572,677 Prudential Home Mortgage
Securities, REMIC
93-63, Class A13,
6.75%, 1/25/24* 1,557,074
1,638,036 Sears Mortgage Securities
Inc., REMIC 92-PR1,
Class A, Floating Rate,
7.591%, 10/25/22 1,647,250
775,000 Uniprop, REMIC 93-1,
Class C, 8.43%,
12/15/25 700,891
--------------
8,589,774
--------------
TRANSPORTATION: AIR--2.0%
1,400,000 Delta Air Lines, Inc.,
8.50%, 3/15/02 1,484,602
--------------
UTILITIES: ELECTRIC--4.5%
1,000,000 Cleveland Electric
Illuminating Co.,
8.17%, 11/30/98 999,860
2,300,000 System Energy Resources,
Inc., 6.12%, 10/1/95 2,300,000
--------------
3,299,860
--------------
TOTAL CORPORATE BONDS AND
NOTES
(Cost $23,919,727) 24,136,013
--------------
SOVEREIGN ISSUES--11.3%
4,005,768 Deutschland Republic,
6.25%, 1/4/24 3,448,962
3,489,393 Government of Canada,
8.75%, 12/1/05 3,736,058
938,898 Government of Finland,
9.50%, 3/15/04 1,031,048
--------------
TOTAL SOVEREIGN ISSUES
(Cost $7,910,682) 8,216,068
--------------
TOTAL SECURITIES OWNED
(Cost $79,207,654+) 78,694,967
--------------
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS SHORT-INTERMEDIATE FUND 55
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
CONTRACTS (NOTE 2)
- ---------- --------------
<S> <C> <C>
OUTSTANDING PUT OPTIONS
WRITTEN--(0.1%)
18 PIBOR Futures, expiring
December '95 @ FRF93.10 $ (16,496)
39 Eurodollar Futures,
expiring December '95 @
$92 (975)
41 Eurodollar Futures,
expiring March '96 @
$94 (14,350)
--------------
TOTAL OUTSTANDING PUT
OPTIONS WRITTEN
(Premiums Received
$93,796) (31,821)
--------------
TOTAL INVESTMENTS, NET OF
OUTSTANDING OPTIONS
WRITTEN
(Cost $79,113,858) 107.9% 78,663,146
OTHER ASSETS AND
LIABILITIES, NET (7.9%) (5,771,375)
------- --------------
TOTAL NET ASSETS 100.0% $ 72,891,771
======= ==============
</TABLE>
+ The cost of investments for federal income tax
purposes is $79,207,654. At September 30, 1995, net
unrealized depreciation was $512,687. This
consisted of aggregate gross unrealized
appreciation for all investments on which there was
an excess of market value over tax cost of $943,216
and aggregate gross unrealized depreciation of all
investments on which there was an excess of tax
cost over market value of $1,455,903.
* Either all or a portion of these securities have
been segregated with the custodian to cover forward
foreign currency contracts, futures contracts,
written options or futures contracts and forward
commitments.
** Securities purchased on a to-be-announced basis.
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
56
PIMCO ADVISORS MONEY MARKET FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Securities owned, at value
(Cost of $81,590,999) (Note
2a) $ 81,590,999
Receivable for Fund shares
sold 2,881,177
Other assets 16,601
--------------
Total assets 84,488,777
LIABILITIES:
Payable for Fund shares
redeemed $ 1,250,699
Cash overdraft 139,368
Dividend payable 46,946
Accrued expenses:
Investment advisory fee 7,209
Distribution fee 25
Servicing fee 7,214
Other 98,984
--------
Total liabilities 1,550,445
--------------
NET ASSETS $ 82,938,332
==============
COMPOSITION OF NET ASSETS:
Capital $ 82,938,332
--------------
Total net assets $ 82,938,332
==============
CALCULATION OF MAXIMUM OFFERING
PRICE
CLASS A SHARES
Net asset value, offering price
and redemption price per share
($13,552,754 DIVIDED BY
13,552,754 shares) $1.00
=====
CLASS B SHARES
Net asset value and offering
price per share ($21,322
DIVIDED BY 21,322 shares) $1.00
=====
Redemption price per share *
=====
CLASS C SHARES
Net asset value and offering
price per share ($69,364,256
DIVIDED BY 69,364,256 shares) $1.00
=====
Redemption price per share *
=====
</TABLE>
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 5,518,181
EXPENSES:
Investment advisory fee (Note
3a) $ 146,684
Distribution fee (Class B)
(Note 3b) 27
Servicing fee (Class A) (Note
3b) 15,198
Servicing fee (Class B) (Note
3b) 9
Servicing fee (Class C) (Note
3b) 92,222
Transfer agent and custody
fees 135,999
Professional fees 29,000
Trustees's fees and expenses
(Note 3c) 9,000
Shareholder reports and
notices 31,000
Miscellaneous 32,495
-------
Total expenses before waiver
of investment advisory fee 491,634
Waived investment advisory fee
(Note 3a) (23,048)
-------
Total expenses 468,586
--------------
Net investment income $ 5,049,595
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,049,595 $ 2,437,738
Dividends paid from net
investment income
Class A (731,116) (263,152)
Class B (163)
Class C (4,318,316) (2,174,586)
Net increase (decrease) from
Fund share transactions
(Note 5) (14,058,202) 48,610,710
------------ --------------
Net increase (decrease) in
net assets (14,058,202) 48,610,710
NET ASSETS:
Beginning of year 96,996,534 48,385,824
------------ --------------
End of year $ 82,938,332 $ 96,996,534
============ ==============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS MONEY MARKET FUND 57
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER
GUARANTEED
BY LETTERS OF
CREDIT--2.7%
$ 2,200,000 Matterhorn Capital Corp.,
5.71%,10/27/95,
guaranteed by Union
Bank of Switzerland
(Cost $2,190,928) $ 2,190,928
--------------
SHORT-TERM NOTES--95.7%
4,000,000 Abbey National North
America, 5.69%, 11/7/95 3,976,608
3,000,000 Apreco Inc., 5.72%,
11/22/95 2,975,213
3,200,000 Bell Atlantic Network
Funding, 5.72%,
10/20/95 3,190,340
2,700,000 Canadian Wheat Board,
5.68%, 11/1/95 2,686,794
4,000,000 Ciesco, L.P., 5.70%,
10/30/95 3,981,633
4,500,000 Cooperative Association
of Tractor Dealers,
Inc., 5.77%,10/25/95 4,482,690
3,100,000 Corporate Asset Funding,
Co. Inc., 5.72%,
10/16/95 3,092,612
5,000,000 CSW Credit Inc., 5.72%,
10/24/95 4,981,728
4,000,000 Delaware Funding Corp.,
5.70%, 10/20/95 3,987,967
4,800,000 General Electric Capital
Corp., 5.68%, 11/17/95 4,764,405
2,700,000 Golden Managers
Acceptance Corp.,
5.76%, 10/4/95 2,698,704
4,500,000 National Rural Utilities
Cooperative Finance
Corp., 5.68%, 10/30/95 4,479,410
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
$ 5,000,000 New South Wales Treasury
Corp., 5.71%, 10/12/95 $ 4,991,276
3,500,000 Pearson Inc., 5.72%,
10/10/95 3,494,995
3,400,000 Preferred Receivables
Funding Corp.,
5.73%-5.74%,
10/5/95-10/17/95 3,395,159
5,000,000 Redland Finance Inc.,
5.74%, 10/25/95 4,980,867
2,500,000 Sheffield Receivables
Corp., 5.70%, 11/6/95 2,485,750
3,000,000 Siemens Corp., 5.70%,
10/13/95 2,994,300
3,000,000 Spiegel Funding Corp.,
5.73%, 11/8/95 2,981,855
3,800,000 Supplier Managers
Acceptance Corp.,
5.77%, 10/18/95 3,789,646
5,000,000 USL Capital Corp.,
5.70%-5.72%,
10/5/95-10/27/95 4,988,119
--------------
TOTAL SHORT-TERM NOTES
(Cost $79,400,071) 79,400,071
--------------
TOTAL INVESTMENTS
(Cost $81,590,999) 98.4% 81,590,999
OTHER ASSETS AND
LIABILITIES, NET 1.6% 1,347,333
------ -------------
TOTAL NET ASSETS 100.0% $ 82,938,332
====== =============
</TABLE>
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
58
PIMCO ADVISORS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS EQUITY INCOME FUND
----------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------
1995 1995(2) 1995 1994 1994 1993 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 12.50 $ 12.55 $ 12.47 $ 12.88 $ 12.85 $ 10.57 $ 10.56 $ 9.92
----- ----- ----- ----- ----- ----- ----- -----
Income From Investment
Operations:
Net Investment Income 0.36 0.11 0.27 0.34 0.24 0.33 0.25 0.34
Net Gains or Losses on
Securities (both realized and
unrealized) 1.61 1.55 1.59 (0.17) (0.16) 2.30 2.29 0.71
----- ----- ----- ----- ----- ----- ----- -----
Total From Investment Operations 1.97 1.66 1.86 0.17 0.08 2.63 2.54 1.05
----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
Dividends (from net investment
income) (0.33) (0.08) (0.24) (0.33) (0.24) (0.32) (0.25) (0.40)
Distributions (from capital
gain) -- -- -- (0.22) (0.22) -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Total Distributions (0.33) (0.08) (0.24) (0.55) (0.46) (0.32) (0.25) (0.40)
----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period $ 14.14 $ 14.13 $ 14.09 $ 12.50 $ 12.47 $ 12.88 $ 12.85 $ 10.57
===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN (without sales
charge) 16.1% 13.3% 15.2% 1.4% 0.7% 25.3% 24.4% 10.7%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $12,933 $1,760 $174,316 $14,942 $178,892 $6,328 $94,247 $2,593
Ratio of Expenses to Average Net
Assets 1.3% 2.1%* 2.1% 1.3% 2.0% 1.3% 2.1% 1.4%
Ratio of Net Investment Income
to Average Net Assets 2.9% 2.2%* 2.1% 2.7% 2.0% 2.9% 2.2% 3.3%
Portfolio Turnover Rate 176.9% 176.9% 176.9% 174.9% 174.9% 167.9% 167.9% 149.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(1) 1991
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 9.91 $ 8.38 $ 8.16
----- ----- -----
Income From Investment
Operations:
Net Investment Income 0.29 0.28 0.36
Net Gains or Losses on
Securities (both realized and
unrealized) 0.68 1.54 1.75
----- ----- -----
Total From Investment Operations 0.97 1.82 2.11
----- ----- -----
Less Distributions:
Dividends (from net investment
income) (0.32) (0.28) (0.36)
Distributions (from capital
gain) -- -- --
----- ----- -----
Total Distributions (0.32) (0.28) (0.36)
----- ----- -----
Net Asset Value, End of Period $ 10.56 $ 9.92 $ 9.91
===== ===== =====
TOTAL RETURN (without sales
charge) 9.9% 34.8% 26.5%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $45,101 $15 $22,651
Ratio of Expenses to Average Net
Assets 2.1% 1.6%* 2.2%
Ratio of Net Investment Income
to Average Net Assets 2.7% 4.4%* 4.2%
Portfolio Turnover Rate 149.0% 142.7% 142.7%
</TABLE>
- ------------------
(1) The distribution of Class A shares commenced on February 1, 1991.
(2) The distribution of Class B shares commenced on May 22, 1995.
* Annualized
<TABLE>
<CAPTION>
PIMCO ADVISORS VALUE FUND
----------------------------------
CLASS A CLASS B CLASS C
---------- ---------- ----------
PERIOD ENDED SEPTEMBER 30,
----------------------------------
1995(3) 1995(3) 1995(3)
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.00 $ 10.00
----- ----- -----
Income From Investment Operations:
Net Investment Income 0.07 0.05 0.05
Net Gains or Losses on Securities (both realized and unrealized) 0.68 0.68 0.68
----- ----- -----
Total From Investment Operations 0.75 0.73 0.73
----- ----- -----
Less Distributions:
Dividends (from net investment income) (0.06) (0.04) (0.04)
Distributions (from capital gain) -- -- --
Return of capital distribution (0.01) (0.01) (0.01)
----- ----- -----
Total Distributions (0.07) (0.05) (0.05)
----- ----- -----
Net Asset Value, End of Period $ 10.68 $ 10.68 $ 10.68
===== ===== =====
TOTAL RETURN (without sales charge) 7.5% 7.3% 7.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $ 2,492 $ 3,975 $ 6,643
Ratio of Expenses to Average Net Assets 1.3%* 2.1%* 2.0%*
Ratio of Net Investment Income to Average Net Assets 2.7%* 1.9%* 1.9%*
Portfolio Turnover Rate 0.5% 0.5% 0.5%
</TABLE>
- ------------------
(3) The fund commenced operations on June 27, 1995.
* Annualized
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS FUNDS 59
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS GROWTH FUND
--------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
---------- ---------- ---------- ---------- ------------ ---------- ------------ ----------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------
1995 1995(5) 1995 1994 1994 1993 1993 1992
---------- ---------- ---------- ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 22.01 $ 22.63 $ 21.52 $ 23.64 $ 23.32 $ 20.76 $ 20.64 $ 20.63
--------- --------- --------- --------- --------- --------- --------- ---------
Income From Investment
Operations:
Net Investment Income (Loss) 0.12 (0.03) (0.04) 0.12 (0.04) 0.09 (0.07) 0.14
Net Gains or Losses on
Securities (both realized
and unrealized) 4.79 2.34 4.65 0.12 0.11 3.53 3.49 1.38
--------- --------- --------- --------- --------- --------- --------- ---------
Total From Investment
Operations 4.91 2.31 4.61 0.24 0.07 3.62 3.42 1.52
--------- --------- --------- --------- --------- --------- --------- ---------
Less Distributions:
Dividends (from net investment
income) -- -- -- -- -- -- -- (0.14)
Distributions (from capital
gain) (1.19) -- (1.19) (1.87) (1.87) (0.74) (0.74) (1.25)
--------- --------- --------- --------- --------- --------- --------- ---------
Total Distributions (1.19) -- (1.19) (1.87) (1.87) (0.74) (0.74) (1.39)
--------- --------- --------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period $ 25.73 $ 24.94 $ 24.94 $ 22.01 $ 21.52 $ 23.64 $ 23.32 $ 20.76
========= ========= ========= ========= ========= ========= ========= =========
TOTAL RETURN (without sales
charge) 23.7% 10.2% 22.8% 1.3% 0.5% 17.7% 16.9% 7.7%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $134,819 $7,671 $1,290,152 $107,269 $1,085,427 $97,509 $1,077,490 $71,209
Ratio of Expenses to Average
Net Assets 1.1% 1.9%* 1.9% 1.1% 1.9% 1.1% 1.9% 1.1%
Ratio of Net Investment Income
to Average Net Assets 0.5% (0.4)%* (0.2)% 0.6% (0.2)% 0.4% (0.3)% 0.7%
Portfolio Turnover Rate 110.6% 110.6% 110.6% 115.3% 115.3% 109.9% 109.9% 92.3%
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(4) 1991
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 20.54 $ 16.99 $ 16.93
--------- --------- ---------
Income From Investment
Operations:
Net Investment Income (Loss) (0.01) 0.21 0.12
Net Gains or Losses on
Securities (both realized
and unrealized) 1.37 5.28 5.32
--------- --------- ---------
Total From Investment
Operations 1.36 5.49 5.44
--------- --------- ---------
Less Distributions:
Dividends (from net investment
income) (0.01) (0.19) (0.17)
Distributions (from capital
gain) (1.25) (1.66) (1.66)
--------- --------- ---------
Total Distributions (1.26) (1.85) (1.83)
--------- --------- ---------
Net Asset Value, End of Period $ 20.64 $ 20.63 $ 20.54
========= ========= =========
TOTAL RETURN (without sales
charge) 6.9% 38.6% 35.1%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $853,121 $17,064 $564,398
Ratio of Expenses to Average
Net Assets 1.9% 1.2%* 1.8%
Ratio of Net Investment Income
to Average Net Assets (0.1)% 0.9%* 0.6%
Portfolio Turnover Rate 92.3% 95.3% 95.3%
</TABLE>
- ------------------
(4) The distribution of Class A shares commenced on October 26, 1990.
(5) The distribution of Class B shares commenced on May 23, 1995.
* Annualized
<TABLE>
<CAPTION>
PIMCO ADVISORS TARGET FUND
----------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A
---------- ---------- ---------- ---------- ---------- ----------
PERIOD
ENDED
SEPTEMBER
YEAR ENDED SEPTEMBER 30, 30,
---------------------------------------------------------- ----------
1995 1995(7) 1995 1994 1994 1993(6)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.13 $13.93 $ 12.95 $ 12.72 $ 12.65 $ 10.00
-------- ------ -------- ------- -------- -------
Income From Investment Operations:
Net Investment Loss (0.02) (0.05) (0.12) (0.04) (0.14) (0.02)
Net Gains or Losses on Securities (both realized and
unrealized) 3.45 2.18 3.38 0.57 0.56 2.74
-------- ------ -------- ------- -------- -------
Total From Investment Operations 3.43 2.13 3.26 0.53 0.42 2.72
-------- ------ -------- ------- -------- -------
Less Distributions:
Dividends (from net investment income) -- -- -- -- -- --
Distributions (from capital gain) (0.16) -- (0.16) (0.12) (0.12) --
-------- ------ -------- ------- -------- -------
Total Distributions (0.16) -- (0.16) (0.12) (0.12) --
-------- ------ -------- ------- -------- -------
Net Asset Value, End of Period $ 16.40 $16.06 $ 16.05 $ 13.13 $ 12.95 $ 12.72
======== ====== ======== ======= ======== =======
TOTAL RETURN (without sales charge) 26.5% 15.3% 25.6% 4.2% 3.4% 27.2%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $121,915 $7,554 $780,355 $90,527 $556,043 $48,787
Ratio of Expenses to Average Net Assets 1.2% 2.0%* 2.0% 1.2% 2.0% 1.3%*
Ratio of Net Investment Income to Average Net Assets (0.1)% (0.9)%* (0.9)% (0.3)% (1.1)% (0.3)%*
Portfolio Turnover Rate 128.3% 128.3% 128.3% 103.5% 103.5% 76.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------
1993(6)
----------
<S> <C>
Net Asset Value, Beginning of Period $ 10.00
--------
Income From Investment Operations:
Net Investment Loss (0.09)
Net Gains or Losses on Securities (both realized and
unrealized) 2.74
--------
Total From Investment Operations 2.65
--------
Less Distributions:
Dividends (from net investment income) --
Distributions (from capital gain) --
--------
Total Distributions --
--------
Net Asset Value, End of Period $ 12.65
========
TOTAL RETURN (without sales charge) 26.5%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $298,238
Ratio of Expenses to Average Net Assets 2.0%*
Ratio of Net Investment Income to Average Net Assets (1.0)%*
Portfolio Turnover Rate 76.0%
</TABLE>
- ------------------
(6) The fund commenced operations on December 17, 1992.
(7) The distribution of Class B shares commenced on May 22, 1995.
* Annualized
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
60
PIMCO ADVISORS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS DISCOVERY FUND
----------------------------------
CLASS A CLASS B CLASS C
---------- ---------- ----------
PERIOD ENDED SEPTEMBER 30,
----------------------------------
1995(8) 1995(8) 1995(8)
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $ 10.00 $ 10.00
------ ------- -------
Income From Investment Operations:
Net Investment Income (Loss) 0.01 (0.01) (0.01)
Net Gains or Losses on Securities (both realized and unrealized) 0.88 0.87 0.87
------ ------- -------
Total From Investment Operations 0.89 0.86 0.86
------ ------- -------
Less Distributions:
Dividends (from net investment income) -- -- --
Distributions (from capital gain) -- -- --
------ ------- -------
Total Distributions -- -- --
------ ------- -------
Net Asset Value, End of Period $10.89 $ 10.86 $ 10.86
====== ======= =======
TOTAL RETURN (without sales charge) 8.9% 8.6% 8.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $7,658 $10,832 $20,260
Ratio of Expenses to Average Net Assets 1.3%* 2.0%* 2.0%*
Ratio of Net Investment Income to Average Net Assets 0.2%* (0.5)%* (0.5)%*
Portfolio Turnover Rate 34.9% 34.9% 34.9%
</TABLE>
- ------------------
(8) The fund commenced operations on June 27, 1995.
* Annualized
<TABLE>
<CAPTION>
PIMCO ADVISORS OPPORTUNITY FUND
----------------------------------------------------------------------------------
CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
---------- ---------- ---------- ---------- ---------- ---------- ----------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------
1995 1995 1994 1994 1993 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 28.87 $ 28.04 $ 33.43 $ 32.77 $ 19.84 $ 19.60 $ 17.95
-------- -------- ------- -------- -------- -------- -------
Income From Investment Operations:
Net Investment Loss (0.11) (0.34) (0.17) (0.38) (0.15) (0.34) (0.04)
Net Gains or Losses on Securities (both
realized and unrealized) 11.19 10.81 (2.02) (1.98) 14.00 13.77 3.61
-------- -------- ------- -------- -------- -------- -------
Total From Investment Operations 11.08 10.47 (2.19) (2.36) 13.85 13.43 3.57
-------- -------- ------- -------- -------- -------- -------
Less Distributions:
Dividends (from net investment income) -- -- -- -- -- -- --
Distributions (from capital gain) (0.87) (0.87) (2.26) (2.26) (0.26) (0.26) (1.68)
Return of capital distribution -- -- (.11) (.11) -- -- --
-------- -------- ------- -------- -------- -------- -------
Total Distributions (0.87) (0.87) (2.37) (2.37) (0.26) (0.26) (1.68)
-------- -------- ------- -------- -------- -------- -------
Net Asset Value, End of Period $ 39.08 $ 37.64 $ 28.87 $ 28.04 $ 33.43 $ 32.77 $ 19.84
======== ======== ======= ======== ======== ======== =======
TOTAL RETURN (without sales charge) 39.7% 38.6% (6.7)% (7.4)% 70.4% 69.1% 21.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $120,830 $715,191 $95,261 $553,460 $106,666 $618,193 $22,454
Ratio of Expenses to Average Net Assets 1.2% 1.9% 1.1% 1.9% 1.2% 2.0% 1.3%
Ratio of Net Investment Income to
Average Net Assets (0.4)% (1.1)% (0.6)% (1.4)% (0.6)% (1.3)% (0.2)%
Portfolio Turnover Rate 101.6% 101.6% 78.4% 78.4% 105.4% 105.4% 93.8%
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(9) 1991
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 17.87 $11.78 $ 11.93
-------- ------ -------
Income From Investment Operations:
Net Investment Loss (0.18) (0.03) (0.11)
Net Gains or Losses on Securities (both
realized and unrealized) 3.59 6.20 6.42
-------- ------ -------
Total From Investment Operations 3.41 6.17 6.31
-------- ------ -------
Less Distributions:
Dividends (from net investment income) -- -- --
Distributions (from capital gain) (1.68) -- (0.37)
Return of capital distribution -- -- --
-------- ------ -------
Total Distributions (1.68) -- (0.37)
-------- ------ -------
Net Asset Value, End of Period $ 19.60 $17.95 $ 17.87
======== ====== =======
TOTAL RETURN (without sales charge) 20.8% 70.9% 54.4%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $179,081 $1,623 $58,656
Ratio of Expenses to Average Net Assets 2.0% 1.4%* 2.0%
Ratio of Net Investment Income to
Average Net Assets (1.0)% (0.5)%* (0.8)%
Portfolio Turnover Rate 93.8% 144.6% 144.6%
</TABLE>
- ------------------
(9) The distribution of Class A shares commenced on December 17, 1990.
* Annualized
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS FUND 61
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS INNOVATION FUND
--------------------------------------
CLASS A CLASS B CLASS C
---------- ---------- ----------
PERIOD ENDED SEPTEMBER 30,
--------------------------------------
1995(10) 1995(11) 1995(10)
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $11.81 $ 10.00
------- ------ -------
Income From Investment Operations:
Net Investment Loss (0.06)(12) (0.08) (0.13)(12)
Net Gains or Losses on Securities (both realized and unrealized) 4.80 2.93 4.78
------- ------ -------
Total From Investment Operations 4.74 2.85 4.65
------- ------ -------
Less Distributions:
Dividends (from net investment income) -- -- --
Distributions (from capital gain) -- -- --
------- ------ -------
Total Distributions -- -- --
------- ------ -------
Net Asset Value, End of Period $ 14.74 $14.66 $ 14.65
======= ====== =======
TOTAL RETURN (without sales charge) 47.4% 24.1% 46.5%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $28,239 $6,509 $63,952
Ratio of Expenses to Average Net Assets 1.4%* 2.3%* 2.2%*
Ratio of Net Investment Income to Average Net Assets (0.6)%* (1.7)%* (1.4)%*
Portfolio Turnover Rate 86.1% 86.1% 86.1%
</TABLE>
- ------------------
(10) The fund commenced operations on December 22, 1994.
(11) The distribution of Class B shares commenced on May 22, 1995.
(12) Reflecting voluntary waiver of investment advisory fee of $4,666 (.00 per
share) by the Manager as more fully described in Note 3(a) to the Financial
Statements.
* Annualized
<TABLE>
<CAPTION>
PIMCO ADVISORS INTERNATIONAL FUND
----------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------
1995 1995(14) 1995 1994 1994 1993 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 12.92 $11.30 $ 12.56 $ 12.17 $ 11.92 $ 10.04 $ 9.92 $10.54
------- ------ -------- ------- -------- ------- -------- ------
Income From Investment
Operations:
Net Investment Income (Loss) 0.07 0.00 (0.02) 0.04 (0.06) 0.07 (0.01) 0.05
Net Gains or Losses on
Securities (both realized and
unrealized) (0.56) 0.45 (0.55) 0.94 0.93 2.80 2.75 (0.37)
------- ------ -------- ------- -------- ------- -------- ------
Total From Investment Operations (0.49) 0.45 (0.57) 0.98 0.87 2.87 2.74 (0.32)
------- ------ -------- ------- -------- ------- -------- ------
Less Distributions:
Dividends (from net investment
income) -- -- -- -- -- -- -- --
Distributions (from capital
gain) (0.24) -- (0.24) (0.23) (0.23) (0.74) (0.74) (0.18)
------- ------ -------- ------- -------- ------- -------- ------
Total Distributions (0.24) -- (0.24) (0.23) (0.23) (0.74) (0.74) (0.18)
------- ------ -------- ------- -------- ------- -------- ------
Net Asset Value, End of Period $ 12.19 $11.75 $ 11.75 $ 12.92 $ 12.56 $ 12.17 $ 11.92 $10.04
======= ====== ======== ======= ======== ======= ======== ======
TOTAL RETURN (without sales
charge) (3.7)% 4.0% (4.5)% 8.2% 7.4% 30.4% 29.4% (3.1)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $17,951 $ 503 $215,349 $23,289 $294,492 $11,992 $147,194 $ 471
Ratio of Expenses to Average Net
Assets 1.5% 2.3%* 2.2% 1.4% 2.2% 1.4% 2.2% 1.9%
Ratio of Net Investment Income
to Average Net Assets 0.6% (0.1)%* (0.2)% 0.3% (0.5)% 0.6% (0.1)% 0.5%
Portfolio Turnover Rate 169.8% 169.8% 169.8% 55.1% 55.1% 67.6% 67.6% 159.6%
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(13) 1991
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 10.49 $ 9.48 $ 10.04
------- ------- -------
Income From Investment
Operations:
Net Investment Income (Loss) (0.06) 0.02 (0.08)
Net Gains or Losses on
Securities (both realized and
unrealized) (0.33) 1.04 1.76
------- ------- -------
Total From Investment Operations (0.39) 1.06 1.68
------- ------- -------
Less Distributions:
Dividends (from net investment
income) -- -- --
Distributions (from capital
gain) (0.18) -- (1.23)
------- ------- -------
Total Distributions (0.18) -- (1.23)
------- ------- -------
Net Asset Value, End of Period $ 9.92 $ 10.54 $ 10.49
======= ======= =======
TOTAL RETURN (without sales
charge) (3.8)% 17.3% 18.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $28,299 $22 $33,594
Ratio of Expenses to Average Net
Assets 2.6% 1.9%* 2.6%
Ratio of Net Investment Income
to Average Net Assets (0.6)% 0.7%* (0.2)%
Portfolio Turnover Rate 159.6% 107.1% 107.1%
</TABLE>
- ------------------
(13) The distribution of Class A shares commenced on February 1, 1991.
(14) The distribution of Class B shares commenced on May 22, 1995.
* Annualized
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
62
PIMCO ADVISORS FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS PRECIOUS METALS FUND
----------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------
1995 1995(16) 1995 1994 1994 1993 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $14.14 $11.61 $ 13.75 $ 10.32 $ 10.11 $ 7.54 $ 7.44 $7.51
------ ------ ------- ------- ------- ------ ------- -----
Income From Investment
Operations:
Net Investment Income (Loss) 0.07 (0.01) (0.02) 0.08 (0.02) 0.06 (0.02) (0.01)
Net Gains or Losses on
Securities (both realized and
unrealized) (1.88) 0.30 (1.83) 3.74 3.66 2.72 2.69 0.04
------ ------ ------- ------- ------- ------ ------- -----
Total From Investment Operations (1.81) 0.29 (1.85) 3.82 3.64 2.78 2.67 0.03
------ ------ ------- ------- ------- ------ ------- -----
Less Distributions:
Dividends (from net investment
income) -- -- -- -- -- -- -- --
Distributions (from capital
gain) -- -- -- -- -- -- -- --
------ ------ ------- ------- ------- ------ ------- -----
Total Distributions -- -- -- -- -- -- -- --
------ ------ ------- ------- ------- ------ ------- -----
Net Asset Value, End of Period $12.33 $11.90 $ 11.90 $ 14.14 $ 13.75 $10.32 $ 10.11 $7.54
====== ====== ======= ======= ======= ====== ======= =====
TOTAL RETURN (without sales
charge) (12.8)% 2.5% (13.5)% 37.0% 36.0% 36.9% 35.9% 0.4%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $7,670 $ 251 $42,341 $11,229 $62,825 $3,425 $23,884 $ 668
Ratio of Expenses to Average Net
Assets 1.4% 2.2%* 2.2% 1.3% 2.1% 1.4% 2.2% 1.9%
Ratio of Net Investment Income
(loss) to Average Net Assets 0.6% (0.2)%* (0.2)% 0.6% (0.2)% 0.6% (0.2)% (0.1)%
Portfolio Turnover Rate 8.7% 8.7% 8.7% 11.0% 11.0% 10.0% 10.0% 29.6%
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(15) 1991
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 7.46 $7.19 $ 9.40
------ ----- ------
Income From Investment
Operations:
Net Investment Income (Loss) (0.06) (0.07) (0.05)
Net Gains or Losses on
Securities (both realized and
unrealized) 0.04 0.39 (1.89)
------ ----- ------
Total From Investment Operations (0.02) 0.32 (1.94)
------ ----- ------
Less Distributions:
Dividends (from net investment
income) -- -- --
Distributions (from capital
gain) -- -- --
------ ----- ------
Total Distributions -- -- --
------ ----- ------
Net Asset Value, End of Period $ 7.44 $7.51 $ 7.46
====== ===== ======
TOTAL RETURN (without sales
charge) (0.3)% 6.8% (20.6)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $6,633 $ 514 $6,995
Ratio of Expenses to Average Net
Assets 2.6% 2.1%* 2.4%
Ratio of Net Investment Income
(loss) to Average Net Assets (0.8)% (1.4)%* (0.8)%
Portfolio Turnover Rate 29.6% 19.4% 19.4%
</TABLE>
- ------------------
(15) The distribution of Class A shares commenced on February 1, 1991.
(16) The distribution of Class B shares commenced on June 15, 1995.
* Annualized
<TABLE>
<CAPTION>
PIMCO ADVISORS HIGH INCOME FUND
----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C
----------- ----------- ----------- ----------- ---------- ----------- -----------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------
1995 1995(18) 1995 1994 1994 1993 1993
----------- ----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 7.56 $ 7.75 $ 7.51 $ 8.78 $ 8.75 $ 8.68 $ 8.65
------ ------ -------- ------ -------- ------ --------
Income From Investment
Operations:
Net Investment Income 0.65 0.22 0.58 0.68 0.62 0.75 0.68
Net Gains or Losses on Securities
(both realized and unrealized) 0.39 0.16 0.39 (1.23) (1.26) 0.10 0.10
------ ------ -------- ------ -------- ------ --------
Total From Investment Operations 1.04 0.38 0.97 (0.55) (0.64) 0.85 0.78
------ ------ -------- ------ -------- ------ --------
Less Distributions:
Dividends (from net investment
income) (0.66) (0.21) (0.60) (0.67) (0.60) (0.75) (0.68)
Distributions (from capital gain) -- -- -- -- -- -- --
------ ------ -------- ------ -------- ------ --------
Total Distributions (0.66) (0.21) (0.60) (0.67) (0.60) (0.75) (0.68)
------ ------ -------- ------ -------- ------ --------
Net Asset Value, End of Period $ 7.94 $ 7.92 $ 7.88 $ 7.56 $ 7.51 $ 8.78 $ 8.75
------ ------ -------- ------ -------- ------ --------
TOTAL RETURN (without sales
charge) 14.5% 4.9% 13.5% (6.5)% (7.5)% 10.3% 9.5%
------ ------ -------- ------ -------- ------ --------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $7,791 $4,552 $157,507 $4,336 $179,274 $5,675 $255,266
Ratio of Expenses to Average Net
Assets 1.1% 1.9%* 1.9% 1.1% 1.9% 1.2% 2.0%
Ratio of Net Investment Income to
Average Net Assets 8.5% 7.8%* 7.7% 8.4% 7.7% 8.7% 8.0%
Portfolio Turnover Rate 162.5% 162.5% 162.5% 133.9% 133.9% 124.1% 124.1%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS A CLASS C
----------- ----------- ----------- -----------
1992 1992 1991(17) 1991
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 8.36 $ 8.36 $ 8.56 $ 8.55
------ -------- ------ --------
Income From Investment
Operations:
Net Investment Income 0.79 0.74 0.57 0.85
Net Gains or Losses on Securities
(both realized and unrealized) 0.29 0.25 (0.14) (0.17)
------ -------- ------ --------
Total From Investment Operations 1.08 0.99 0.43 0.68
------ -------- ------ --------
Less Distributions:
Dividends (from net investment
income) (0.76) (0.70) (0.63) (0.87)
Distributions (from capital gain) -- -- -- --
------ -------- ------ --------
Total Distributions (0.76) (0.70) (0.63) (0.87)
------ -------- ------ --------
Net Asset Value, End of Period $ 8.68 $ 8.65 $ 8.36 $ 8.36
====== ======== ====== ========
TOTAL RETURN (without sales
charge) 13.5% 12.4% 8.2% 8.5%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $4,257 $242,160 $1,456 $270,622
Ratio of Expenses to Average Net
Assets 1.2% 1.9% 1.2%* 1.9%
Ratio of Net Investment Income to
Average Net Assets 9.3% 8.7% 10.5%* 10.1%
Portfolio Turnover Rate 162.8% 162.8% 124.0% 124.0%
</TABLE>
- ------------------
(17) The distribution of Class A shares commenced on February 6, 1991.
(18) The distribution of Class B shares commenced on May 22, 1995.
* Annualized
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS FUND 63
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS
TOTAL RETURN INCOME FUND
----------------------------------
CLASS A CLASS B CLASS C
---------- ---------- ----------
PERIOD ENDED SEPTEMBER 30,
----------------------------------
1995(19) 1995(20) 1995(19)
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.48 $ 10.00
------- ------- -------
Income From Investment Operations:
Net Investment Income 0.41 0.16 0.35
Net Gains or Losses on Securities (both realized and unrealized) 0.68 0.24 0.69
------- ------- -------
Total From Investment Operations 1.09 0.40 1.04
------- ------- -------
Less Distributions:
Dividends (from net investment income) (0.39) (0.15) (0.34)
Distributions (from capital gain) -- -- --
------- ------- -------
Total Distributions (0.39) (0.15) (0.34)
------- ------- -------
Net Asset Value, End of Period $ 10.70 $ 10.73 $ 10.70
======= ======= =======
TOTAL RETURN (without sales charge) 11.1% 3.8% 10.5%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $37,714 $8,805 $45,631
Ratio of Expenses to Average Net Assets 1.2%* 2.0%* 2.0%*
Ratio of Net Investment Income to Average Net Assets 5.1%* 4.2%* 4.3%*
Portfolio Turnover Rate 98.0% 98.0% 98.0%
</TABLE>
- ------------------
(19) The fund commenced operations on December 22, 1994.
(20) The distribution of Class B shares commenced on May 22, 1995.
* Annualized
<TABLE>
<CAPTION>
PIMCO ADVISORS TAX EXEMPT FUND
----------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------
1995 1995(22) 1995 1994 1994 1993 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 11.21 $ 11.90 $ 11.21 $ 12.74 $ 12.73 $ 11.94 $ 11.94 $ 11.53
------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income 0.57 0.16 0.48 0.56 0.47 0.61 0.52 0.65
Net Gains or Losses on Securities
(both realized and unrealized) 0.63 (0.07) 0.62 (1.31) (1.30) 1.02 1.01 0.42
------- ------- ------- ------- ------- ------- ------- -------
Total From Investment Operations 1.20 0.09 1.10 (0.75) (0.83) 1.63 1.53 1.07
------- ------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends (from net investment
income) (0.58) (0.15) (0.49) (0.58) (0.49) (0.64) (0.55) (0.66)
Distributions (from capital gain) -- -- -- (0.20) (0.20) (0.19) (0.19) --
------- ------- ------- ------- ------- ------- ------- -------
Total Distributions (0.58) (0.15) (0.49) (0.78) (0.69) (0.83) (0.74) (0.66)
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 11.83 $ 11.84 $ 11.82 $ 11.21 $ 11.21 $ 12.74 $ 12.73 $ 11.94
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN (without sales
charge) 11.0% 0.8% 10.1% (6.1)% (6.7)% 14.2% 13.3% 9.5%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $ 2,701 $ 288 $54,224 $ 2,726 $68,214 $ 2,852 $81,475 $ 2,295
Ratio of Expenses to Average Net
Assets 1.1% 1.9%* 1.8% 1.1% 1.8% 1.1% 1.8% 1.1%
Ratio of Net Investment Income to
Average Net Assets 5.0% 4.0%* 4.3% 4.7% 4.0% 5.0% 4.2% 5.6%
Portfolio Turnover Rate 35.0% 35.0% 35.0% 63.2% 63.2% 55.9% 55.9% 107.4%
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(21) 1991
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 11.53 $ 11.30 $ 10.97
------- ------- -------
Income From Investment
Operations:
Net Investment Income 0.58 0.38 0.62
Net Gains or Losses on Securities
(both realized and unrealized) 0.41 0.23 0.56
------- ------- -------
Total From Investment Operations 0.99 0.61 1.18
------- ------- -------
Less Distributions:
Dividends (from net investment
income) (0.58) (0.38) (0.62)
Distributions (from capital gain) -- -- --
------- ------- -------
Total Distributions (0.58) (0.38) (0.62)
------- ------- -------
Net Asset Value, End of Period $ 11.94 $ 11.53 $ 11.53
======= ======= =======
TOTAL RETURN (without sales
charge) 8.8% 10.4% 11.0%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $52,113 $ 321 $46,663
Ratio of Expenses to Average Net
Assets 1.8% 1.1%* 1.8%
Ratio of Net Investment Income to
Average Net Assets 4.9% 5.8%* 5.5%
Portfolio Turnover Rate 107.4% 119.0% 119.0%
</TABLE>
- ------------------
(21) The distribution of Class A shares commenced on March 14, 1991.
(22) The distribution of Class B shares commenced on May 30, 1995.
* Annualized
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
64
PIMCO ADVISORS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS U.S. GOVERNMENT FUND
--------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A CLASS C
------- -------- -------- ------- -------- ------- -------- ------- -------- -------- --------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------------
1995 1995(24) 1995 1994 1994 1993 1993 1992 1992 1991(23) 1991
------- -------- -------- ------- -------- ------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $ 8.68 $ 9.17 $ 8.65 $ 9.71 $ 9.68 $ 9.61 $ 9.58 $ 9.46 $ 9.45 $ 9.31 $ 9.02
------- -------- -------- ------- -------- ------- -------- ------- -------- -------- --------
Income From
Investment
Operations:
Net Investment
Income 0.58 0.16 0.51 0.60 0.53 0.65 0.58 0.75 0.69 0.65 0.81
Net Gains or Losses
on Securities
(both realized and
unrealized) 0.47 (0.02) 0.48 (1.03) (1.03) 0.10 0.10 0.19 0.15 0.15 0.46
------- -------- -------- ------- -------- ------- -------- ------- -------- -------- --------
Total From
Investment
Operations 1.05 0.14 0.99 (0.43) (0.50) 0.75 0.68 0.94 0.84 0.80 1.27
------- -------- -------- ------- -------- ------- -------- ------- -------- -------- --------
Less Distributions:
Dividends (from net
investment income) (0.57) (0.16) (0.51) (0.60) (0.53) (0.65) (0.58) (0.79) (0.71) (0.65) (0.84)
Distributions (from
capital gain) -- -- -- -- -- -- -- -- -- -- --
------- -------- -------- ------- -------- ------- -------- ------- -------- -------- --------
Total Distributions (0.57) (0.16) (0.51) (0.60) (0.53) (0.65) (0.58) (0.79) (0.71) (0.65) (0.84)
------- -------- -------- ------- -------- ------- -------- ------- -------- -------- --------
Net Asset Value, End
of Period $ 9.16 $ 9.15 $ 9.13 $ 8.68 $ 8.65 $ 9.71 $ 9.68 $ 9.61 $ 9.58 $ 9.46 $ 9.45
======= ======== ======== ======= ======== ======= ======== ======= ======== ======== ========
TOTAL RETURN
(without sales
charge) 12.6% 1.6% 11.8% (4.6)% (5.3)% 8.2% 7.4% 10.3% 9.2% 12.3% 14.8%
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (in 000's) $16,248 $ 1,671 $287,086 $15,250 $365,044 $19,939 $533,288 $15,224 $531,310 $ 3,983 $429,796
Ratio of Expenses to
Average Net Assets 1.0% 1.8%* 1.8% 1.0% 1.7% 1.0% 1.7% 1.0% 1.8% 1.1%* 1.8%
Ratio of Net
Investment Income
to Average Net
Assets 6.5% 5.6%* 5.8% 6.5% 5.8% 6.8% 6.1% 7.8% 7.3% 9.3%* 8.8%
Portfolio Turnover
Rate 115.0% 115.0% 115.0% 121.0% 121.0% 199.7% 199.7% 156.4% 156.4% 37.1% 37.1%
</TABLE>
- ------------------------------
(23) The distribution of Class A shares commenced on January 3, 1991.
(24) The distribution of Class B shares commenced on June 2, 1995.
* Annualized
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS SHORT-INTERMEDIATE FUND
--------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
-------- -------- -------- ------- --------- ------- --------- ---------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------
1995 1995(26) 1995 1994 1994 1993 1993 1992
-------- -------- -------- ------- --------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.37 $ 9.49 $ 9.37 $ 9.81 $ 9.82 $ 9.96 $ 9.97 $ 10.03
-------- -------- -------- ------- --------- ------- --------- --------
Income From Investment Operations:
Net Investment Income 0.59 0.18 0.54 0.47 0.42 0.48 0.44 0.60(28)
Net Gains or Losses on Securities
(both realized and unrealized) 0.25 0.13 0.23 (0.43) (0.44) (0.15) (0.16) (0.04)
-------- -------- -------- ------- --------- ------- --------- --------
Total From Investment Operations 0.84 0.31 0.77 0.04 (0.02) 0.33 0.28 0.56
-------- -------- -------- ------- --------- ------- --------- --------
Less Distributions:
Dividends (from net investment
income) (0.59) (0.18) (0.54) (0.48) (0.43) (0.48) (0.43) (0.62)
Distributions (from capital gain) -- -- -- -- -- -- -- (0.01)
-------- -------- -------- ------- --------- ------- --------- --------
Total Distributions (0.59) (0.18) (0.54) (0.48) (0.43) (0.48) (0.43) (0.63)
-------- -------- -------- ------- --------- ------- --------- --------
Net Asset Value, End of Period $ 9.62 $ 9.62 $ 9.60 $ 9.37 $ 9.37 $ 9.81 $ 9.82 $ 9.96
======== ======== ======== ======= ========= ======= ========= ========
TOTAL RETURN (without sales charge) 9.3% 3.3% 8.5% 0.4% (0.2)% 3.4% 2.9% 5.8%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $ 6,343 $ 941 $ 65,608 $ 4,913 $ 88,909 $ 7,169 $ 123,857 $ 13,535
Ratio of Expenses to Average Net
Assets 1.0% 1.7%* 1.5% 0.9% 1.4% 1.0% 1.5% 0.9%
Ratio of Net Investment Income to
Average Net Assets 6.3% 5.4%* 5.7% 4.9% 4.4% 4.9% 4.4% 6.0%
Portfolio Turnover Rate 173.4% 173.4% 173.4% 86.2% 86.2% 112.7% 112.7% 132.8%
</TABLE>
<TABLE>
<CAPTION>
CLASS C CLASS A CLASS C
------------ ---------- -----------
PERIOD ENDED SEPTEMBER 30,
---------------------------------------
1992 1991(25) 1991(25)
------------ ---------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.03 $ 10.00 $ 10.00
--------- ------- --------
Income From Investment Operations:
Net Investment Income 0.55(28) 0.07(27) 0.07(27)
Net Gains or Losses on Securities
(both realized and unrealized) (0.03) 0.03 0.03
--------- ------- --------
Total From Investment Operations 0.52 0.10 0.10
--------- ------- --------
Less Distributions:
Dividends (from net investment
income) (0.57) (0.07) (0.07)
Distributions (from capital gain) (0.01) -- --
--------- ------- --------
Total Distributions (0.58) (0.07) (0.07)
--------- ------- --------
Net Asset Value, End of Period $ 9.97 $ 10.03 $ 10.03
========= ======= ========
TOTAL RETURN (without sales charge) 5.4% 8.5% 8.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's) $135,655 $ 844 $32,052
Ratio of Expenses to Average Net
Assets 1.3% 0.4%* 0.9%*
Ratio of Net Investment Income to
Average Net Assets 5.5% 5.3%* 5.0%*
Portfolio Turnover Rate 132.8% 114.6% 114.6%
</TABLE>
- ------------------------------
(25) The fund commenced operations on August 16, 1991.
(26) The distribution of Class B shares commenced on May 22, 1995.
(27) Reflecting expense reduction of $2,957 (.00 per share) and voluntary waiver
of investment advisory fee of $29,149 (.01 per share) by the Manager as
more fully described in Note 3(a) to the Financial Statements.
(28) Reflecting voluntary waiver of investment advisory fee of $138,110 (.02 per
share) by the Manager as more fully described in Note 3(a) to the Financial
Statements.
* Annualized
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS FUNDS 65
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS MONEY MARKET FUND
----------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS C
------------ ---------- ------------ ------------ ------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1995 1995(30) 1995 1994 1994
------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income From Investment Operations:
Net Investment Income 0.054(34) 0.007 0.054(34) 0.030(33) 0.030(33)
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment
income) (0.054) (0.007) (0.054) (0.030) (0.030)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
TOTAL RETURN (without sales
charge) 5.4% 0.7% 5.4% 3.0% 3.0%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $13,553 $ 21 $69,364 $12,933 $84,064
Ratio of Expenses to Average Net
Assets 0.49% 1.46%* 0.50% 0.75% 0.75%
Ratio of Net Investment Income to
Average Net Assets 5.40% 4.79%* 5.37% 3.38% 3.18%
Portfolio Turnover Rate -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C
------------ ------------
1993 1993
------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of
Period $ 1.00 $ 1.00
-------- --------
Income From Investment Operations:
Net Investment Income 0.025(32) 0.025(32)
-------- --------
Less Distributions:
Dividends (from net investment
income) (0.025) (0.025)
-------- --------
Net Asset Value, End of Period $ 1.00 $ 1.00
======== ========
TOTAL RETURN (without sales
charge) 2 .5% 2.5%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $ 3,729 $ 44,657
Ratio of Expenses to Average Net
Assets 0.75% 0.75%
Ratio of Net Investment Income to
Average Net Assets 2.47% 2.51%
Portfolio Turnover Rate -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS A CLASS C
------------ ------------ ---------- ---------
1992 1992 1991(29) 1991
------------ ------------ ---------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Income From Investment Operations:
Net Investment Income 0.032(31) 0.034(31) 0.029 0.053
-------- -------- -------- --------
Less Distributions:
Dividends (from net investment
income) (0.032) (0.034) (0.029) (0.053)
-------- -------- -------- --------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
TOTAL RETURN (without sales
charge) 3.2% 3.4% 2.9% 5.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's) $ 655 $ 50,761 $ 275 $ 63,751
Ratio of Expenses to Average Net
Assets 0.9% 1.0% 1.1%* 1.5%
Ratio of Net Investment Income to
Average Net Assets 3.2% 3.4% 4.8%* 5.5%
Portfolio Turnover Rate -- -- -- --
</TABLE>
- ------------------------------
(29) The distribution of Class A shares commenced on March 5, 1991.
(30) The distribution of Class B shares commenced on July 17, 1995.
(31) Reflecting voluntary waiver of investment advisory fee of $31,042 (.001 per
share) by the Manager as more fully described in Note 3(a) to the Financial
Statements.
(32) Reflecting voluntary waiver of investment advisory fee of $160,471 (.003
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements.
(33) Reflecting voluntary waiver of investment advisory fee of $142,336 (.002
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements.
(34) Reflecting voluntary waiver of investment advisory fee of $23,048 (.000 per
share) by the Manager as more fully described in Note 3(a) to the Financial
Statements.
* Annualized
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
66 PIMCO ADVISORS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1 ORGANIZATION AND BUSINESS
PIMCO Advisors Funds (the "Trust") is an investment company registered under
the Investment Company Act of 1940, as amended. It is organized as a
Massachusetts business trust and is an open-end, diversified, management, series
investment company which currently consists of fifteen Funds: PIMCO Advisors
Equity Income Fund, PIMCO Advisors Value Fund, PIMCO Advisors Growth Fund, PIMCO
Advisors Target Fund, PIMCO Advisors Discovery Fund, PIMCO Advisors Opportunity
Fund, PIMCO Advisors Innovation Fund, PIMCO Advisors International Fund, PIMCO
Advisors Precious Metals Fund, PIMCO Advisors High Income Fund, PIMCO Advisors
Total Return Income Fund, PIMCO Advisors Tax Exempt Fund, PIMCO Advisors U.S.
Government Fund, PIMCO Advisors Short=Intermediate Fund and PIMCO Advisors Money
Market Fund.
The Trust offers Class A, Class B and Class C shares of each Fund with the
exception of the Opportunity Fund which does not offer Class B shares. Class A
shares are sold with an initial sales charge. Class B and Class C shares are
sold with a contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan.
2 SIGNIFICANT ACCOUNTING POLICIES
A)PORTFOLIO VALUATIONS: The portfolio investments of the Money Market Fund are
valued at either amortized cost or original cost plus accrued interest
receivable, both of which approximate market value. The amortized cost of a
security is determined by valuing it at original cost and thereafter amortizing
any discount or premium from its face value at a constant rate until maturity.
Since this method does not give consideration to fluctuating interest rates it
may at times result in book valuations that are higher or lower than the current
market price.
For the other Funds, securities for which market quotations are readily
available are valued at market value, which is determined by using the last
reported sale price, or, if no sales are reported--and in the case of certain
securities traded over-the-counter--the mean between the last reported bid and
asked prices. U.S. Government Securities are traded over-the-counter. Short-term
obligations having remaining maturities of 60 days or less are valued at either
amortized cost or original cost plus accrued interest receivable, both of which
approximate market value. All other securities and assets, including any
restricted and/or illiquid securities, will be valued at their fair value as
determined pursuant to procedures adopted by the Trustees.
Each Fund may enter into repurchase agreements with domestic commercial banks
and registered broker/dealers whereby the Fund, through its custodian, receives
delivery of the underlying securities. The market value of these securities will
be at least equal at all times to the total amount of the repurchase obligation,
including the interest factor. The Fund bears a risk of loss in the event that
the other party to a repurchase agreement defaults on its obligations and the
Fund is delayed or prevented from exercising its right to dispose of the
underlying securities including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assure its
rights. Each Fund's investment adviser, acting under supervision of the Board of
Trustees, reviews the value of the collateral and the creditworthiness of those
banks and dealers with which the Fund enters into repurchase agreements to
evaluate potential risks. In the event of counterparty default, the Fund has the
right to use the underlying securities to offset the loss.
B)FOREIGN CURRENCY TRANSACTIONS: With respect to the Funds that invest in
foreign securities, transactions denominated in foreign currencies are recorded
in the Fund's records at the current prevailing exchange rate. Asset and
liability accounts that are denominated in a foreign currency are adjusted to
reflect the current exchange rate at the end of the period. Transaction gains or
losses resulting from changes in the exchange rate during the reporting period
or upon settlement of the foreign currency transaction are reported in
operations for the current period. Investing in securities of foreign companies
and foreign governments involves special risks and considerations not typically
associated with investing in U.S. companies and the U.S. Government. These risks
include reevaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. Government.
It is not practicable to isolate the portion of the results of operations
arising as a result of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of securities during the period.
C)OPTIONS: When a Fund writes a covered call or a put option, an amount equal to
the premium received by it is included in the Fund's Statement of Assets and
Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently "marked to market" to reflect the current market value
of the option written. The current market value of a written option is the last
reported sale price on the principal exchange on which such option is traded or,
if no sales are reported, the mean between the last reported bid and asked
prices. If an option which the Fund has written either expires on its stipulated
expiration date, or if the Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss if the cost of the closing transaction exceeds the
premium received when the option was written) without regard to any unrealized
gain or loss on the underlying security, and the liability related to such
option is extinguished. If a call option which the Fund has written is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds from such sale are increased by the premium originally
received. If a put option which the Fund has written is exercised, the amount of
the premium originally received will reduce the cost of the security which the
Fund purchases upon exercise of the option.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's Statement of Assets and Liabilities as an investment and
subsequently "marked to market" to reflect the current market value of the
option purchased. The current market value of a purchased option is the last
reported sale price on the principal exchange on which such option is traded or,
if no sales are reported, the mean between the last reported bid and asked
prices.
<PAGE>
PIMCO ADVISORS FUNDS 67
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
If an option which the Fund has purchased expires on its stipulated expiration
date, the Fund realizes a loss in the amount of the cost of the option. If the
Fund enters into a closing transaction, it realizes a gain or loss, depending on
whether the proceeds from the sale are greater or less than the cost of the
option. If the Fund exercises a put option, it realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. If the Fund exercises a call option,
the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
D)FUTURES CONTRACTS: Initial margin deposits made upon entering into futures
contracts are recognized as assets due from the broker (the Fund's agent in
acquiring the futures position). During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading.
Variation margin payments are received or made, depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
Open futures contracts at September 30, 1995 were as follows:
<TABLE>
<CAPTION>
Unrealized
Market Appreciation
Type Cost Value (Depreciation)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL RETURN INCOME FUND:
Long U.S. Treasury 5 Year Note (12/95) $14,993,750 $15,032,500 $ 38,750
Long U.S. Treasury 10 Year Note (12/95) 35,934,000 35,941,500 7,500
Long U.S. Treasury 30 Year Bond (12/95) 13,069,063 13,149,532 80,469
Long German Gov't 10 Year DM (12/95) 1,659,758 1,673,813 14,055
--------
$140,774
========
U.S. GOVERNMENT FUND:
Long U.S. Treasury 5 Year Note (12/95) $ 2,041,906 $ 2,040,125 $ (1,781)
Long U.S. Treasury 10 Year Note (12/95) 54,055,188 54,132,750 77,562
Long U.S. Treasury 30 Year Bond (12/95) 21,947,750 22,068,344 120,594
--------
$196,375
========
SHORT-INTERMEDIATE FUND:
Long U.S. Treasury 2 Year Note (12/95) $ 8,277,500 $ 8,288,750 $ 11,250
Long U.S. Treasury 5 Year Note (12/95) 3,429,859 3,436,000 6,141
--------
17,391
--------
Short U.S. Treasury 10 Year Note (12/95) $ (110,000) $ (110,250) (250)
--------
$ 17,141
========
</TABLE>
E)FORWARD FOREIGN CURRENCY CONTRACTS: Forward foreign currency contracts are
valued at the forward rate, and are marked to market daily. The change in market
value is recorded by the Fund as an unrealized gain or loss. When the contract
is closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed.
Forward foreign currency contracts are contracts for delayed delivery of
financial interests in which the seller agrees to make delivery at a specified
future date of a specified financial instrument, at a specified price or yield.
Risks arise from changes in the market value of the underlying instruments and
from the possible inability of counterparties to meet the terms of their
contracts. Credit risk is limited to amounts recorded as unrealized appreciation
on open contracts.
F)DERIVATIVES AND OFF BALANCE SHEET RISK: A Fund's use of futures contracts,
forward foreign currency contracts and options may involve, to varying degrees,
elements of market risk in excess of the amount recognized in the Statement of
Assets and Liabilities. These derivative financial instruments ("derivatives")
are used to adjust the risk and return characteristics of a Fund's portfolio.
Derivatives are not used for the purpose of leverage. The objective in buying or
selling a derivative instrument is to increase or decrease a Fund's exposure to
changing security prices, interest rates or currency exchange rates. If the
Manager misjudges market conditions or employs a strategy that does not
correlate well with the Fund's other investments, use of these derivatives could
result in a loss, regardless of the Manager's original intent to reduce risk.
G)SECURITY TRANSACTIONS: Security transactions are recorded on trade=date.
Interest income is recorded on the accrual basis.
Realized gains or losses on sales of investments are determined on the
identified cost basis for accounting and tax purposes.
Purchases of securities under agreements to resell are carried at cost, and
the related accrued interest is included in interest receivable.
H)FEDERAL TAXES: Each of the Funds is a separate entity for federal income tax
purposes. It is each Fund's policy to qualify as a regulated investment company
by complying with the requirements of the Internal Revenue Code applicable to
regulated investment companies, and to pay out all its net investment income and
net capital gains to its shareholders. Therefore, no federal income tax
provision is required.
I)EQUALIZATION: Certain Funds follow the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
redemptions of shares of beneficial interest, equivalent on a per share basis to
the amount of undistributed net investment income on the date of the
transaction, is credited or charged to undistributed net investment income. As a
result, undistributed net investment income per share is unaffected by sales or
redemptions of Fund shares.
J)EXPENSES: Expenses directly attributable to each Fund are charged to that
Fund's operations; expenses which are applicable to all Funds are allocated
among such Funds on a basis deemed fair and equitable by the Trustees, usually
on the basis of relative net assets.
K)ORGANIZATION COSTS: Costs incurred in connection with each Fund's organization
and registration are amortized on a straight=line basis over the period of
benefit, not to exceed 60 months.
L)DIVIDENDS AND DISTRIBUTIONS: Dividend income and distributions to shareholders
are recorded on the ex=dividend date. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for foreign currency transactions,
<PAGE>
68 PIMCO ADVISORS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
original issue discount, market discount and net operating losses. The effect of
these differences for the year ended September 30, 1995 are as follows:
<TABLE>
<CAPTION>
Undistributed
Net Accumulated
Investment Realized
Income Gain/(Loss)
- -----------------------------------------------------------------------
<S> <C> <C>
Equity Income $ 45,810 $ (45,810)
Value 1,147 (1,147)
International (812,664) 812,664
High Income 139,032 (139,032)
Total Return Income 25,069 (25,069)
Tax Exempt 66,195 (66,195)
U.S. Government 229,231 (229,231)
Short-Intermediate 81,806 (81,806)
</TABLE>
The current year's net investment losses of the following Funds have been
charged to undistributed net realized gain on investments of the respective
Funds:
<TABLE>
<S> <C>
Growth $ 1,692,133
Target 5,836,356
Opportunity 6,920,088
Innovation 398,331
</TABLE>
The current year's net investment losses of the Discovery and Precious Metals
Funds in the amounts of $22,777 and $36,880, respectively, have been charged to
the capital of those Funds.
In addition, the capital loss carryforwards of the U.S. Government Fund in the
amount of $44,567,716 which expired in 1995 have been charged to capital of that
Fund.
3 FEES AND RELATED PARTY TRANSACTIONS
A)INVESTMENT ADVISORY FEES: PIMCO Advisors L.P. (the "Manager") is the
investment manager of each of the PIMCO Advisors Funds. The Manager manages the
day=to=day investment affairs and establishes investment policies for the Trust,
and pays all salaries, fees and expenses of officers and trustees of the Trust
who are affiliated with the Manager. Each of the Funds also has a sub=adviser
which, under the supervision of the Manager, directs the investments of the
Fund's assets. Other than the sub=adviser of the Precious Metals Fund, all of
the sub=advisers are affiliates of the Manager. Columbus Circle Investors serves
as the sub=adviser of the Equity Income Fund, Growth Fund, Target Fund,
Opportunity Fund, Innovation Fund, Tax Exempt Fund and Money Market Fund.
Under the Management Contracts between the Trust and the Manager relating to
each Fund, the Manager is paid at the percentages shown below of the relevant
Fund's average daily net assets for its services to the Trust and the Fund.
Pursuant to Sub=adviser Agreements between the Manager and each of the sub=
advisers with respect to the Funds advised by each, the Manager pays to each
sub=adviser, out of the fee received by the Manager under the relevant
Management Contract, the following percentages of the relevant Fund's average
daily net assets as compensation for the services provided by the sub=adviser.
<TABLE>
<CAPTION>
SUB=ADVISER FEE PAID BY
MANAGEMENT FEE MANAGER
FUND (AS % OF NET ASSETS) SUB=ADVISER (AS % OF NET ASSETS)
=============== ============================ ================================ =============================
<S> <C> <C> <C>
Equity Income .75% of first $200 million Columbus Circle Investors .375% of first $200 million
.70% of amounts over $200 .350% of amounts over $200
million million
Value .70% NFJ Investment Group .350%
Growth .70% of first $200 million Columbus Circle Investors .350% of first $200 million
.65% of amounts over $200 .325% of amounts over $200
million million
Target .75% of first $200 million Columbus Circle Investors .375% of first $200 million
.70% of amounts over $200 .350% of amounts over $200
million million
Discovery .75% of first $200 million Cadence Capital Management .375% of first $200 million
.70% of amounts over $200 .350% of amounts over $200
million million
Opportunity .75% of first $200 million Columbus Circle Investors .375% of first $200 million
.70% of amounts over $200 .350% of amounts over $200
million million
Innovation .75% of first $200 million Columbus Circle Investors .375% of first $200 million
.70% of amounts over $200 .350% of amounts over $200
million million
International .80% Blairlogie Capital Management .40%
Precious Metals .75% of first $200 million Van Eck Associates Corporation .375% of first $200 million
.70% of amounts over $200 .350% of amounts over $200
million million
High Income .60% of first $250 million Pacific Investment Management .25%
.50% of amounts over $250 Company
million
Total Return .60% of first $250 million Pacific Investment Management .25%
Income .50% of amounts over $250 Company
million
Short= .50% of first $250 million Pacific Investment Management .25%
Intermediate .45% of next $250 million Company
.40% of amounts over $500
million
U.S. Government .60 of first $250 million Pacific Investment Management .25%
.50 of amounts over $250 Company
million
Tax Exempt .60% Columbus Circle Investors .30%
Money Market .50% of first $250 million Columbus Circle Investors .25% of first $250 million
.40% of amounts over $250 .20% of amounts over $250
million million
</TABLE>
The Manager's compensation with respect to any Fund is subject to reduction to
the extent in any year that the expenses (generally excluding brokerage
commissions, taxes, interest, distribution=related expenses and extraordinary
expenses) of such Fund exceed the statutory limits of any jurisdiction in which
shares of such Fund are qualified for offer and sale. The most restrictive of
such limitations as of the date of these financial statements is 2 1/2% of the
first $30 million of average net assets, 2% of the next $70 million and 1 1/2%
of any excess over $100 million.
The Manager has voluntarily undertaken to reduce its investment advisory fee
with respect to the Money Market Fund to .10% of the Fund's daily net assets
until further notice.
The Manager voluntarily waived the investment advisory fee for Innovation Fund
for the period from inception to December 31, 1994.
B)DISTRIBUTION AND SERVICING FEES: Pursuant to Distribution and
Servicing Plans adopted by the Trust, the Trust compensates the distributor,
PIMCO Advisors Distribution Company for services
<PAGE>
PIMCO ADVISORS FUNDS 69
================================================================================
NOTES TO FINANCIAL STATEMENTS==CONTINUED
provided and expenses incurred in connection with assistance rendered in the
sale of Trust shares and services rendered to shareholders and for maintenance
of shareholder accounts. As compensation, the Trust pays the distributor a
distribution fee with respect to the Class B and Class C shares of each Fund
with the exception of the Opportunity Fund which does not offer Class B shares
equal to .75% of the Fund's average daily net assets attributable to the
respective class of shares, except that the fee is .50% per annum in the case of
Class C shares of the Short=Intermediate Fund and the fee is not charged in the
case of the Money Market Fund (subject to increase by action of the Trustees to
a rate not exceeding .75% per annum). The Trust pays the distributor a servicing
fee with respect to both Class A, Class B and Class C shares of each Fund equal
to .25% of the average daily net asset value of Class A, Class B and Class C
shares (.10% per annum in the case of the Money Market Fund, subject to increase
by action of the Trustees to a rate not exceeding .25% per annum).
C)TRUSTEE FEES: Effective July 27, 1995, the Trustees approved a unified fee
plan, covering compensation from both of the Trusts for which they serve as
independent Trustees, the PIMCO Advisors Funds and the Cash Accumulation Trust.
The fee is allocated between the Trusts and among the Fund's of the Trusts based
on relative net assets. Trustees other than those affiliated with the Manager
are compensated as follows:
<TABLE>
<S> <C>
Annual Retainer $ 35,000
Meeting Fee (each meeting attended) 3,000
Committees:
Contract Chairman 6,000
Audit Chairman 2,000
Audit Member 1,000
</TABLE>
In addition, the Trustees receive reimbursement for travel and out=of=pocket
costs.
The Trust has an unfunded defined benefit plan for its independent Trustees.
For the year ended September 30, 1995, a net periodic expense of $28,911 was
charged to the Funds.
D)CONTINGENT DEFERRED SALES CHARGE: A contingent deferred sales charge is
imposed on Class B and Class C shares if an investor redeems an amount which
causes the current value of the investor's account for a Fund to fall below the
total dollar amount of investments made subject to a deferred sales charge,
except that no sales charge is imposed if the portion of the investment redeemed
is attributable to reinvested dividends or capital gains distributions or is
derived from increases in the value of the account above the amount invested
subject to a deferred sales charge. Whether a contingent deferred sales charge
is imposed and the amount of the charge will depend on the number of years since
the investor made an investment from which an amount is being redeemed and the
date such investment was made. Investments made in Class C shares on or after
July 1, 1991 are subject to a contingent deferred sales charge of 1% during the
first 12 months after the purchase. For investments made in Class C shares prior
to July 1, 1991 the redemption price per share in the first year following
purchase is 95% of the net asset value per share. In years two, three, four and
five following purchase, the redemption price per share as a percentage of the
net asset value per share increases to 96%, 97%, 98% and 98%, respectively. For
investments made in Class B shares the redemption price per share in the first
year following purchase is 95% of the net asset value per share. In years two,
three, four, five and six following purchase the redemption price increases to
96%, 97%, 97%, 98% and 99%, respectively. Any sales charges imposed on
redemptions are paid to the distributor of shares of the Trust. For the year
ended September 30, 1995, those charges amounted to $1,020,410.
E)INITIAL SALES CHARGE: For the year ended September 30, 1995, sales charges on
Class A shares amounted to $3,708,105, of which $390,319 was retained by the
Trust's distributor.
4 PURCHASES AND SALES OF SECURITIES
During the year ended September 30, 1995, purchases and sales of securities,
other than securities subject to repurchase transactions and short=term interest
bearing securities, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Equity Income Fund $ 306,297,545 $ 326,196,005
Value Fund 11,135,887 27,500
Growth Fund 1,294,022,903 1,341,305,133
Target Fund 904,675,098 868,003,697
Discovery Fund 39,677,740 5,549,568
Opportunity Fund 642,898,891 664,930,492
Innovation Fund 103,510,200 33,419,208
International Fund 427,053,936 480,568,573
Precious Metals Fund 4,703,438 12,088,479
High Income Fund 249,280,987 281,371,721
Total Return Income Fund 58,303,886 22,203,803
Tax Exempt Fund 21,367,064 38,589,035
U.S. Government Fund 348,465,097 437,002,374
Short=Intermediate Fund 128,510,303 146,975,305
</TABLE>
5 SHARE CAPITAL
The Trust has an unlimited authorized number of shares of beneficial
interest (par value of $.00001) which may, without shareholder approval, be
divided into an unlimited number of series of such shares, and which are
presently divided into fifteen series of shares, one series underlying each
Fund. Each of the Funds are further divided into three classes, designated Class
A, Class B and Class C shares.
Class A transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
EQUITY INCOME FUND
Sold 260,686 $ 3,289,140 876,807 $ 11,060,492
Issued as reinvestment of dividends 23,331 292,288 31,231 387,381
Reacquired (564,570) (7,089,481) (204,166) (2,527,895)
----------- ------------- ----------- -------------
Net increase (decrease) (280,553) $ (3,508,053) 703,872 $ 8,919,978
=========== ============= =========== =============
</TABLE>
<TABLE>
<S> <C> <C>
VALUE FUND
Sold 242,130 $ 2,472,689
Issued as reinvestment of dividends 1,295 13,750
Reacquired (10,076) (101,150)
----------- -------------
Net increase 233,349 $ 2,385,289
=========== =============
</TABLE>
<PAGE>
70 PIMCO ADVISORS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
GROWTH FUND
<S> <C> <C> <C> <C>
Sold 1,409,045 $ 32,050,531 1,747,778 $ 38,332,332
Issued as reinvestment of distributions 262,751 5,386,396 344,061 7,285,504
Reacquired (1,306,192) (29,329,665) (1,342,561) (29,410,714)
----------- ------------- ----------- -------------
Net increase 365,604 $ 8,107,262 749,278 $ 16,207,122
=========== ============= =========== =============
TARGET FUND
Sold 13,544,331 $ 191,128,896 5,428,996 $ 68,479,509
Issued as reinvestment of distributions 79,693 1,004,929 41,677 512,212
Reacquired (13,086,848) (185,118,962) (2,410,151) (30,702,236)
----------- ------------- ----------- -------------
Net increase 537,176 $ 7,014,863 3,060,522 $ 38,289,485
=========== ============= =========== =============
DISCOVERY FUND
Sold 729,683 $ 7,663,000
Issued as reinvestment of distributions -- --
Reacquired (26,260) (285,707)
----------- -------------
Net increase 703,423 $ 7,377,293
=========== =============
OPPORTUNITY FUND
Sold 807,312 $ 24,963,687 1,288,435 $ 38,856,097
Issued as reinvestment of distributions 92,711 2,556,964 237,523 7,006,929
Reacquired (1,108,072) (34,506,453) (1,416,938) (42,418,991)
----------- ------------- ----------- -------------
Net increase (decrease) (208,049) $ (6,985,802) 109,020 $ 3,444,035
=========== ============= =========== =============
INNOVATION FUND
Sold 2,584,850 $ 30,962,017
Issued as reinvestment of distributions -- --
Reacquired (668,582) (8,735,963)
----------- -------------
Net increase 1,916,268 $ 22,226,054
=========== =============
Sold 2,229,678 $ 26,177,560 1,331,394 $ 16,856,412
Issued as reinvestment of distributions 33,274 393,303 23,281 285,897
Reacquired (2,591,891) (30,562,066) (537,984) (6,823,493)
----------- ------------- ----------- -------------
Net increase (decrease) (328,939) $ (3,991,203) 816,691 $ 10,318,816
=========== ============= =========== =============
PRECIOUS METALS FUND
Sold 6,547,890 $ 77,229,258 1,525,289 $ 19,720,125
Issued as reinvestment of distributions -- -- -- --
Reacquired (6,719,897) (79,720,976) (1,063,098) (13,573,919)
----------- ------------- ----------- -------------
Net increase (decrease) (172,007) $ (2,491,718) 462,191 $ 6,146,206
=========== ============= =========== =============
HIGH INCOME FUND
Sold 869,750 $ 6,731,116 174,010 $ 1,437,578
Issued as reinvestment of dividends 29,547 226,492 23,615 190,380
Reacquired (491,881) (3,774,217) (269,774) (2,186,106)
----------- ------------- ----------- -------------
Net increase (decrease) 407,416 $ 3,183,391 (72,149) $ (558,148)
=========== ============= =========== =============
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
TOTAL RETURN INCOME FUND
Sold 4,276,042 $ 44,172,293
Issued as reinvestment of dividends 43,918 461,985
Reacquired (795,904) (8,270,797)
----------- -------------
Net increase 3,524,056 $ 36,363,481
=========== =============
TAX EXEMPT FUND
Sold 58,949 $ 677,966 91,386 $ 1,121,373
Issued as reinvestment of dividends 4,474 50,794 7,646 91,876
Reacquired (78,342) (890,547) (79,724) (977,571)
----------- ------------- ----------- -------------
Net increase (decrease) (14,919) $ (161,787) 19,308 $ 235,678
=========== ============= =========== =============
U.S. GOVERNMENT FUND
Sold 504,540 $ 4,468,418 398,997 $ 3,705,902
Issued as reinvestment of dividends 77,231 684,126 70,314 641,243
Reacquired (564,845) (4,959,223) (765,925) (6,971,886)
----------- ------------- ----------- -------------
Net increase (decrease) 16,926 $ 193,321 (296,614) $ (2,624,741)
=========== ============= =========== =============
SHORT=INTERMEDIATE FUND
Sold 529,986 $ 4,930,172 298,908 $ 2,894,877
Issued as reinvestment of dividends 38,583 363,593 30,172 289,251
Reacquired (433,667) (4,037,826) (535,613) (5,141,556)
----------- ------------- ----------- -------------
Net increase (decrease) 134,902 $ 1,255,939 (206,533) $ (1,957,428)
=========== ============= =========== =============
MONEY MARKET FUND
Sold $ 259,219,711 $ 50,982,630
Issued as reinvestment of dividends 475,312 207,109
Reacquired (259,075,167) (41,985,995)
------------- -------------
Net increase $ 619,856 $ 9,203,744
============= =============
</TABLE>
Class B transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1995
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C>
EQUITY INCOME FUND
Sold 126,736 $ 1,721,926
Issued as reinvestment of dividends 374 5,242
Reacquired (2,608) (33,787)
----------- -------------
Net increase 124,502 $ 1,693,381
----------- -------------
----------- -------------
VALUE FUND
Sold 376,302 $ 3,853,479
Issued as reinvestment of dividends 1,246 13,228
Reacquired (5,309) (54,180)
----------- -------------
Net increase 372,239 $ 3,812,527
=========== =============
</TABLE>
<PAGE>
PIMCO ADVISORS FUNDS 71
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1995
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C>
GROWTH FUND
Sold 313,608 $ 7,525,840
Issued as reinvestment of dividends -- --
Reacquired (5,985) (143,794)
----------- -------------
Net increase 307,623 $ 7,382,046
=========== =============
TARGET FUND
Sold 474,550 $ 7,270,317
Issued as reinvestment of dividends -- --
Reacquired (4,062) (62,809)
----------- -------------
Net increase 470,488 $ 7,207,508
=========== =============
DISCOVERY FUND
Sold 1,011,338 $ 10,648,871
Issued as reinvestment of distributions -- --
Reacquired (14,319) (149,648)
----------- -------------
Net increase 997,019 $ 10,499,223
----------- -------------
INNOVATION FUND
Sold 458,064 $ 6,371,957
Issued as reinvestment of distributions -- --
Reacquired (13,961) (197,256)
----------- -------------
Net increase 444,103 $ 6,174,701
=========== =============
INTERNATIONAL FUND
Sold 42,828 $ 499,329
Issued as reinvestment of distributions -- --
Reacquired -- --
----------- -------------
Net increase 42,828 $ 499,329
----------- -------------
PRECIOUS METALS FUND
Sold 27,731 $ 327,905
Issued as reinvestment of distributions -- --
Reacquired (6,672) (80,735)
----------- -------------
Net increase 21,059 $ 247,170
----------- -------------
HIGH INCOME FUND
Sold 571,478 $ 4,490,849
Issued as reinvestment of dividends 3,341 26,309
Reacquired (1) (8)
----------- -------------
Net increase 574,818 $ 4,517,150
=========== =============
TOTAL RETURN INCOME FUND
Sold 825,334 $ 8,779,866
Issued as reinvestment of dividends 4,233 44,985
Reacquired (8,831) (94,122)
----------- -------------
Net increase 820,736 $ 8,730,729
=========== =============
TAX EXEMPT FUND
Sold 26,915 $ 317,716
Issued as reinvestment of dividends 27 313
Reacquired (2,593) (30,389)
----------- -------------
Net increase 24,349 $ 287,640
=========== =============
U.S. GOVERNMENT FUND
Sold 182,930 $ 1,657,741
Issued as reinvestment of dividends 847 7,668
Reacquired (1,097) (10,003)
----------- -------------
Net increase 182,680 $ 1,655,406
=========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1995
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C>
SHORT-INTERMEDIATE FUND
Sold 108,970 $ 1,042,993
Issued as reinvestment of dividends 893 8,546
Reacquired (12,095) (116,038)
----------- -------------
Net increase 97,768 $ 935,501
----------- -------------
MONEY MARKET FUND
Sold $ 103,621
Issued as reinvestment of dividends 74
Reacquired (82,373)
-------------
Net increase $ 21,322
=============
</TABLE>
Class C transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
EQUITY INCOME FUND
Sold 2,571,367 $ 32,020,403 8,994,413 $ 113,486,307
Issued as reinvestment of dividends 224,502 2,833,038 358,535 4,447,570
Reacquired (4,776,986) (59,786,945) (2,339,811) (29,031,397)
----------- ------------- ----------- -------------
Net increase (decrease) (1,981,117) $ (24,933,504) 7,013,137 $ 88,902,480
=========== ============= ========== =============
VALUE FUND
Sold 631,709 $ 6,515,474
Issued as reinvestment of dividends 2,414 25,622
Reacquired (12,027) (124,979)
----------- -------------
Net increase 622,096 $ 6,416,117
=========== =============
GROWTH FUND
Sold 11,099,885 $ 244,928,637 13,716,328 $ 295,715,920
Issued as reinvestment of distributions 2,780,151 55,575,222 3,855,707 81,085,569
Reacquired (12,581,564) (275,156,453) (13,335,554) (287,889,122)
----------- ------------- ----------- -------------
Net increase 1,298,472 $ 25,347,406 4,236,481 $ 88,912,367
=========== ============= ========== =============
TARGET FUND
Sold 20,640,964 $ 283,138,655 31,091,030 $ 388,700,813
Issued as reinvestment of distributions 536,905 6,668,387 265,460 3,235,957
Reacquired (15,505,248) (213,112,060) (12,007,794) (149,840,133)
----------- ------------- ----------- -------------
Net increase 5,672,621 $ 76,694,982 19,348,696 $ 242,096,637
=========== ============= ========== =============
DISCOVERY FUND
Sold 1,929,823 $ 20,459,380
Issued as reinvestment of distributions -- --
Reacquired (65,033) (703,321)
----------- -------------
Net increase 1,864,790 $ 19,756,059
=========== =============
</TABLE>
<PAGE>
72 PIMCO ADVISORS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
OPPORTUNITY FUND
<S> <C> <C> <C> <C>
Sold 7,303,147 $ 227,266,003 7,278,376 $ 208,671,118
Issued as reinvestment of distributions 576,403 15,401,480 1,397,467 40,288,961
Reacquired (8,616,263) (265,954,142) (7,801,930) (220,526,899)
----------- ------------- ----------- -------------
Net increase (decrease) (736,713) $ (23,286,659) 873,913 $ 28,433,180
=========== ============= ========== =============
INNOVATION FUND
Sold 5,445,029 $ 66,151,548
Issued as reinvestment of distributions -- --
Reacquired (1,081,142) (14,292,403)
----------- -------------
Net increase 4,363,887 $ 51,859,145
=========== =============
INTERNATIONAL FUND
Sold 6,696,696 $ 76,414,972 18,022,566 $ 223,207,042
Issued as reinvestment of distributions 454,401 5,207,438 289,913 3,478,958
Reacquired (12,262,848) (139,029,691) (7,214,407) (89,224,376)
----------- ------------- ----------- -------------
Net increase (decrease) (5,111,751) $ (57,407,281) 11,098,072 $ 137,461,624
=========== ============= ========== =============
PRECIOUS METALS FUND
Sold 10,551,298 $ 120,945,392 10,050,521 $ 123,823,376
Issued as reinvestment of distributions -- -- -- --
Reacquired (11,560,915) (132,496,146) (7,844,150) (96,079,680)
----------- ------------- ----------- -------------
Net increase (decrease) (1,009,617) $ (11,550,754) 2,206,371 $ 27,743,696
=========== ============= ========== =============
HIGH INCOME FUND
Sold 3,378,818 $ 25,818,186 4,088,705 $ 33,792,382
Issued as reinvestment of dividends 871,819 6,583,106 1,092,460 8,793,314
Reacquired (8,148,200) (60,958,670) (10,469,847) (84,079,846)
----------- ------------- ----------- -------------
Net decrease (3,897,563) $ (28,557,378) (5,288,682) $ (41,494,150)
=========== ============= ========== =============
TOTAL RETURN INCOME FUND
Sold 4,809,126 $ 50,147,828
Issued as reinvestment of dividends 59,161 623,013
Reacquired (603,682) (6,335,143)
----------- -------------
Net increase 4,264,605 $ 44,435,698
=========== =============
TAX EXEMPT FUND
Sold 362,394 $ 4,117,901 1,387,810 $ 16,983,091
Issued as reinvestment of dividends 156,616 1,783,829 279,514 3,369,278
Reacquired (2,019,443) (22,758,206) (1,978,686) (23,371,907)
----------- ------------- ----------- -------------
Net decrease (1,500,433) $ (16,856,476) (311,362) $ (3,019,538)
=========== ============= ========== =============
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT FUND
Sold 2,045,550 $ 18,036,632 5,144,665 $ 47,808,617
Issued as reinvestment of dividends 1,164,038 10,236,547 1,677,086 15,367,544
Reacquired (13,958,860) (121,609,308) (19,679,368) (180,710,643)
----------- ------------- ----------- -------------
Net decrease (10,749,272) $ (93,336,129) (12,857,617) $(117,534,482)
=========== ============= ========== =============
SHORT-INTERMEDIATE FUND
Sold 5,707,988 $ 53,690,051 6,141,687 $ 58,888,483
Issued as reinvestment of dividends 320,647 3,012,585 379,765 3,637,852
Reacquired (8,681,649) (81,326,165) (9,646,819) (92,377,434)
----------- ------------- ----------- -------------
Net decrease (2,653,014) $ (24,623,529) (3,125,367) $ (29,851,099)
=========== ============= ========== =============
MONEY MARKET FUND
Sold 554,884,511 $ 456,010,094
Issued as reinvestment of dividends 3,480,343 1,817,085
Reacquired (573,064,234) (418,420,213)
------------- -------------
Net increase (decrease) $ (14,699,380) $ 39,406,966
============= =============
</TABLE>
6 WRITTEN OPTION ACTIVITY Written option activity for the year
ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
---------- -----------
<S> <C> <C>
EQUITY INCOME FUND:
Options outstanding at September 30, 1994 $ 15,007 64
Options written during the year ended
September 30, 1995 223,437 1251
Options cancelled in closing purchase
transactions (123,092) (641)
Options expired prior to exercise (77,714) (477)
Options exercised (37,639) (197)
---------- -----------
Options outstanding at September 30, 1995 -- --
=========== ==========
</TABLE>
The cost of cancelling options in closing purchase transactions was $137,193
resulting in a net short-term loss of $14,101.
<TABLE>
<S> <C> <C>
GROWTH FUND:
Options outstanding at September 30, 1994 $ 3,806,502 9,926
Options written during the year ended
September 30, 1995 42,712,362 125,185
Options cancelled in closing purchase
transactions (34,429,051) (83,417)
Options expired prior to exercise (7,078,453) (31,673)
Options exercised (1,844,747) (9,288)
------------ ---------
Options outstanding at September 30, 1995 $ 3,166,613 10,733
=========== ==========
</TABLE>
The cost of cancelling options in closing purchase transactions was
$52,025,145 resulting in a net short-term loss of $17,596,094.
<PAGE>
PIMCO ADVISORS FUNDS 73
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
<S> <C> <C>
TARGET FUND:
Options outstanding at September 30, 1994 $ 1,177,942 6,860
Options written during the year ended
September 30, 1995 3,255,894 18,079
Options cancelled in closing purchase
transactions (2,311,567) (13,446)
Options expired prior to exercise (521,641) (3,558)
Options exercised (1,436,531) (7,112)
------------ ---------
Options outstanding at September 30, 1995 $ 164,097 823
=========== ==========
</TABLE>
The cost of cancelling options in closing purchase transactions was $2,416,673
resulting in a net short-term loss of $105,106.
<TABLE>
<CAPTION>
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
<S> <C> <C>
OPPORTUNITY FUND:
Options outstanding at September 30, 1994 $ 2,692,443 13,527
Options written during the year ended
September 30, 1995 24,370,978 101,627
Options cancelled in closing purchase
transactions (14,071,399) (58,508)
Options expired prior to exercise (2,480,431) (13,852)
Options exercised (5,541,108) (27,467)
------------ ---------
Options outstanding at September 30, 1995 $ 4,970,483 15,327
=========== ==========
</TABLE>
The cost of cancelling options in closing purchase transactions was
$16,191,925 resulting in a net short-term loss of $2,120,526.
<TABLE>
<CAPTION>
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
<S> <C> <C>
INNOVATION FUND:
Options outstanding at September 30, 1994 $ -- --
Options written during the year ended
September 30, 1995 153,791 668
Options cancelled in closing purchase
transactions (124,180) (512)
Options expired prior to exercise (11,580) (44)
Options exercised (18,031) (112)
------------ ---------
Options outstanding at September 30, 1995 -- --
=========== ==========
</TABLE>
The cost of cancelling options in closing purchase transactions was $234,782
resulting in a net short-term loss of $110,602.
<TABLE>
<CAPTION>
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
<S> <C> <C>
HIGH INCOME FUND:
Options outstanding at September 30, 1994 $ -- --
Options written during the year ended
September 30, 1995 113,875 875
Options cancelled in closing purchase
transactions 0 0
Options expired prior to exercise (85,875) (625)
Options exercised (21,000) (200)
------------ ---------
Options outstanding at September 30, 1995 $ 7,000 50
=========== ==========
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
TOTAL RETURN INCOME FUND:
Options outstanding at September 30, 1994 $ -- --
Options written during the year ended
September 30, 1995 257,423 480
Options cancelled in closing purchase
transactions 0 0
Options expired prior to exercise (225,852) (400)
Options exercised 0 0
------------ ---------
Options outstanding at September 30, 1995 $ 31,571 80
=========== ==========
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
U.S. GOVERNMENT FUND:
Options outstanding at September 30, 1994 $ -- --
Options written during the year ended
September 30, 1995 348,585 388
Options cancelled in closing purchase
transactions 0 0
Options expired prior to exercise (132,826) (150)
Options exercised (114,077) (150)
------------ ---------
Options outstanding at September 30, 1995 $ 101,682 88
============ =========
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
SHORT INTERMEDIATE FUND:
Options outstanding at September 30, 1994 $ -- --
Options written during the year ended
September 30, 1995 207,467 219
Options cancelled in closing purchase
transactions (113,671) (121)
Options expired prior to exercise 0 0
Options exercised 0 0
------------ ---------
Options outstanding at September 30, 1995 $ 93,796 98
============ =========
</TABLE>
The cost of cancelling options in closing purchase transactions was $8,395
resulting in a net short-term gain of $105,276.
<PAGE>
74 PIMCO ADVISORS FUNDS
- --------------------------------------------------------------------------------
7 OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Outstanding forward foreign currency contracts at September 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Unrealized
Market Settlement Appreciation
Value Date (Depreciation)
----------- ---------- --------------
<S> <C> <C> <C>
INTERNATIONAL FUND
Contracts to Buy:
10,399,988 CHF $ 8,994,024 10/16/95 $ 350,834
25,000,000 FRF 5,091,500 10/16/95 6,885
800,000,000 JPY 8,296,000 10/01/95 590,356
1,600,000,000 JPY 16,592,000 10/16/95 1,180,711
----------- --------------
Total contracts to Buy (Payable Amount
$36,844,738) $38,973,524 $ 2,128,786
=========== ==============
Contracts to Sell:
5,903,188 CHF $ 5,105,142 10/16/95 $ 63,166
25,000,000 FRF 5,091,500 10/16/95 (185,497)
800,000,000 JPY 8,296,000 10/01/95 (286,148)
1,600,000,000 JPY 16,592,000 10/16/95 (572,297)
5,500,000 DM 3,855,891 10/16/95 (118,703)
----------- --------------
Total contracts to Sell (Receivable
Amount $37,841,054) $38,940,533 $(1,099,479)
=========== ==============
TOTAL RETURN INCOME FUND
Contracts to Sell:
295,920 DM $ 207,483 10/16/95 $ (7,483)
4,226,899 DM 2,964,933 10/24/95 (116,618)
=========== ==============
Total contracts to Sell (Receivable
amount $3,048,315) $ 3,172,416 $ (124,101)
=========== ==============
SHORT-INTERMEDIATE FUND
Contracts to Buy:
13,835 CDN $ 10,309 10/16/95 $ 141
4,222,944 FIM 991,226 10/04/95 1,389
----------- --------------
Total contracts to Buy (Payable Amount
$1,000,005) $ 1,001,535 $ 1,530
=========== ==============
Contracts to Sell:
2,929,792 CDN $ 2,183,249 10/12/95 $ (7,860)
4,222,944 FIM 991,226 10/04/95 (27,809)
4,222,944 FIM 988,114 11/06/95 1,538
----------- --------------
Total contracts to Sell (Receivable
Amount $4,128,458) $ 4,162,589 $ (34,131)
=========== ==============
</TABLE>
8 FEDERAL INCOME TAXES
For federal income tax purposes, the funds indicated below have capital loss
carryforwards as of September 30, 1995, which are available to offset future
capital gains, if any.
<TABLE>
<CAPTION>
Capital
Loss
Carryforward Expiration
------------ ----------
<S> <C> <C>
Discovery Fund $ 514,000 2003
Precious Metals Fund 529,000 2000
18,000 2001
High Income Fund 14,400,000 1997
16,088,000 1998
28,820,000 1999
5,495,000 2002
50,541,000 2003
Tax-Exempt Fund 1,055,000 2003
U.S. Government Fund 24,887,000 1996
12,490,000 1997
12,622,000 1998
17,277,000 2002
8,501,000 2003
Short-Intermediate Fund 1,598,000 2000
3,550,000 2002
1,170,000 2003
</TABLE>
<PAGE>
PIMCO ADVISORS FUNDS 75
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND SHAREHOLDERS OF
PIMCO ADVISORS FUNDS:
We have audited the accompanying statements of assets and liabilities of PIMCO
Advisors Funds (comprised of the PIMCO Advisors Equity Income Fund, PIMCO
Advisors Value Fund, PIMCO Advisors Growth Fund, PIMCO Advisors Target Fund,
PIMCO Advisors Discovery Fund, PIMCO Advisors Opportunity Fund, PIMCO Advisors
Innovation Fund, PIMCO Advisors International Fund, PIMCO Advisors Precious
Metals Fund, PIMCO Advisors High Income Fund, PIMCO Advisors Total Return Income
Fund, PIMCO Advisors Tax Exempt Fund, PIMCO Advisors U.S. Government Fund, PIMCO
Advisors Short-Intermediate Fund, and PIMCO Advisors Money Market Fund),
including the portfolios of investments, as of September 30, 1995 and the
related statements of operations, and changes in net assets for the year then
ended for all Funds other than the PIMCO Advisors Innovation Fund and PIMCO
Advisors Total Return Income Fund for which the period was December 22, 1994,
commencement of operations, to September 30, 1995, and the PIMCO Advisors Value
Fund and PIMCO Advisors Discovery Fund for which the period was June 27, 1995,
commencement of operations, to September 30, 1995, and the statements of changes
in net assets for the year ended September 30, 1994 for all Funds other than the
PIMCO Advisors Innovation Fund, PIMCO Advisors Total Return Income Fund, PIMCO
Advisors Value Fund, and PIMCO Advisors Discovery Fund and selected per share
data and ratios for the periods shown in the "Financial Highlights". The
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting the PIMCO Advisors Funds as of September
30, 1995 and the results of their operations, the changes in their net assets
and their financial highlights for the periods referred to above, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
November 16, 1995
<PAGE>
PIMCO ADVISORS FUNDS
REGISTRATION STATEMENT ON FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements (included in Parts A and B) :
1. Included in Part A:
a. Condensed Financial Information required by Item 3 relating to
each Fund.
2. Included in Part B:
a. Audited Statement of Assets and Liabilities as of September 30,
1995 relating to each Fund.
b. Audited Statement of Operations for the year ended September 30,
1995 relating to each Fund.
c. Audited Statement of Changes in Net Assets for the periods ended
September 30, 1994 and 1995 relating to each Fund.
d. Audited Portfolio of Investments as of September 30, 1995
relating to each Fund.
e. Notes to Audited Financial Statements for the year ended
September 30, 1995.
(b) Exhibits:
1. The Trust's Amended and Restated Agreement and Declaration of
Trust (the "Declaration of Trust") incorporated by reference to
Exhibit 1 to Post-Effective Amendment No. 33 to the Trust's
Registration Statement on Form N-1A (the "Registration
Statement") filed on November 30, 1995.
2. Amended and Restated Bylaws of the Trust incorporated by
reference to Exhibit 2 to Post-Effective Amendment No. 33 to the
Registration Statement filed on November 30, 1995.
3. None.
<PAGE>
4a. Specimen Share Certificates for Class A, Class B and Class C
shares of each Fund with the exception of the Summit and Emerging
Markets Funds incorporated by reference to Exhibit 4 to Post-
Effective Amendment No. 33 to the Registration Statement filed on
November 30, 1995.
4b. Specimen Share Certificates for Class A, Class B, and Class C
shares of the Summit Fund filed herewith.
5a. Management Contracts for Equity Income Fund, Value Fund, Growth
Fund, Target Fund, Discovery Fund, Opportunity Fund, Innovation
Fund, International Fund, Precious Metals Fund, Global Income
Fund, High Income Fund, Total Return Income Fund, Tax Exempt
Fund, U.S. Government Fund, Short-Intermediate Fund and Money
Market Fund incorporated by reference to Exhibit 5a to Post-
Effective Amendment No. 33 to the Registration Statement filed on
November 30, 1995.
5b. Form of Management Contract for Summit Fund filed herewith.
5c. Sub-Adviser Agreements for Equity Income Fund, Value Fund, Growth
Fund, Target Fund, Discovery Fund, Opportunity Fund, Innovation
Fund, International Fund, Precious Metals Fund, Global Income
Fund, High Income Fund, Total Return Income Fund, Tax Exempt
Fund, U.S. Government Fund, Short-Intermediate Fund and Money
Market Fund incorporated by reference to Exhibit 5b to Post-
Effective Amendment No. 33 to the Registration Statement filed on
November 30, 1995.
5d. Form of Sub-Adviser Agreement for Summit Fund filed
herewith.
6. Distributor's Contract dated as of May 11, 1995 between the Trust
and PIMCO Advisors Distribution Company as amended through
September 28, 1995 incorporated by reference to Exhibit 6 to
Post-Effective Amendment No. 33 to the Registration Statement
filed on November 30, 1995.
7. None.
-2-
<PAGE>
8. Amended and Restated Custodian Agreement between the Trust and
The Bank of New York, N.A. dated as of September 13, 1985,
Amendment No. 1 thereto dated as of February 14, 1992 and
Amendment No. 2 thereto dated as of July 14, 1995, each
incorporated by reference to Exhibit 8 to Post-Effective
Amendment No. 33 to the Registration Statement filed on November
30, 1995.
9a. Transfer Agency Agreement dated October 1, 1990 among the Trust,
Shareholder Services Inc. and Oppenheimer Management Corporation,
an Addendum thereto dated as of March 31, 1994 and a Second
Addendum thereto dated as of August 1, 1995, each incorporated by
reference to Exhibit 9a to Post-Effective Amendment No. 33 to the
Registration Statement filed on November 30, 1995.
9b. Fund Accounting Agreement between the Trust and The Bank of New
York dated as of February 23, 1984 incorporated by reference to
Exhibit 9b to Post-Effective Amendment No. 33 to the Registration
Statement filed on November 30, 1995.
9c. Amended and Restated Blue Sky Service Agreement dated as of March
30, 1995 with respect to each Fund between the Trust and PIMCO
Advisors L.P. incorporated by reference to Exhibit 9c to Post-
Effective Amendment No. 33 to the Registration Statement filed on
November 30, 1995.
9d. Administration Agreement dated as of January 1, 1996 between
PIMCO Advisors L.P. and Pacific Investment Management Company
filed herewith.
9e. Organizational Expense Reimbursement Agreement dated as of July
31, 1991 for the Short-Intermediate Government Fund (now the
Short-Intermediate Fund) between the Trust and Thomson Advisory
Group L.P. (now PIMCO Advisors L.P.) incorporated by reference to
Exhibit 9d to Post-Effective Amendment No. 33 to the Registration
Statement filed on November 30, 1995.
9f. Organizational Expense Reimbursement Agreement dated as of August
10, 1992 for the Target Fund between the Trust and Thomson
Advisory Group L.P. (now PIMCO Advisors L.P.) incorporated by
reference to Exhibit 9e to Post-Effective
-3-
<PAGE>
Amendment No. 33 to the Registration Statement filed on November
30, 1995.
9g. Organizational Expense Reimbursement Agreements dated as of
September 29, 1994 for the Total Return Income Fund and the
Innovation Fund between the Trust and Thomson Advisory Group L.P.
(now PIMCO Advisors L.P.) incorporated by reference to Exhibit 9f
to Post-Effective Amendment No. 33 to the Registration Statement
filed on November 30, 1995.
9h. Organizational Expense Reimbursement Agreements dated as of March
30, 1995 for the Discovery Fund and the Value Fund between the
Trust and PIMCO Advisors L.P. incorporated by reference to
Exhibit 9g to Post-Effective Amendment No. 33 to the Registration
Statement filed on November 30, 1995.
9i. Organizational Expense Reimbursement Agreement dated as of
September 28, 1995 for the Global Income Fund between the Trust
and PIMCO Advisors L.P. incorporated by reference to Exhibit 9h
to Post-Effective Amendment No. 33 to the Registration Statement
filed on November 30, 1995.
9j. Form of Organizational Expense Reimbursement Agreement dated as
of , 1996 for Summit Fund between the Trust and PIMCO
Advisors L.P. filed herewith.
10. Opinion and Consent of Counsel filed with Trust's Rule 24f-2
Notice on November 20, 1995 incorporated by reference to Exhibit
10 to Post-Effective Amendment No. 33 to the Registration
Statement filed on November 30, 1995.
11. Consent of Independent Accountants filed herewith.
12. None.
13. None.
14. None.
15a. PIMCO Advisors Funds Amended and Restated Distribution and
Servicing Plan for Class A
-4-
<PAGE>
Shares dated as of September 11, 1990 and revised through
February 8, 1996 filed herewith.
15b. PIMCO Advisors Funds Distribution and Servicing Plan for Class B
Shares revised through February 8, 1996 filed herewith.
15c. PIMCO Advisors Funds Fourth Amended and Restated Distribution and
Servicing Plan for Class C Shares (formerly Class B shares) dated
as of April 23, 1987 and revised through February 8, 1996 filed
herewith.
16. Schedule for Computation of Performance Information incorporated
by reference to Exhibit 16 to Post-Effective Amendment No. 33 to
the Registration Statement filed on November 30, 1995.
17. Financial Data Schedule for the fiscal year ended
September 30, 1995 filed herewith.
18. Multi-Class Plan entered into by the Trust pursuant to Rule 18f-3
dated as of July 27, 1995 incorporated by reference to Exhibit 18
to Post-Effective Amendment No. 33 (filed as Exhibit 27 for EDGAR
purposes) to the Registration Statement filed on November 30,
1995.
19a. Powers of Attorney for Robert A. Prindiville, Gary L. Light, Joel
Segall, Donald P. Carter, E. Philip Cannon, W. Bryant Stooks,
Gary A. Childress, Gerald M. Thorne and William D. Cvengros
incorporated by reference to Exhibit 19 to Post-Effective
Amendment No. 33 to the Registration Statement filed on November
30, 1995.
19b. Power of Attorney for John P. Hardaway filed herewith.
Item 25. Persons Controlled by or under Common Control
---------------------------------------------
with Registrant.
---------------
None.
-5-
<PAGE>
Item 26. Number of Holders of Securities.
-------------------------------
The following table sets forth the number of holders of each class of
securities of each Fund of the Trust as of March 29, 1996:
<TABLE>
<CAPTION>
Number of
Holders
Title of Class Class A Class B Class C
-------------- ------- ------- -------
<S> <C> <C> <C>
Shares of beneficial interest, 1,283 464 17,860
Equity Income Fund
Shares of beneficial interest, 0 0 0
Summit Fund
Shares of beneficial interest, 504 918 2,817
Value Fund
Shares of beneficial interest, 9,443 1,918 107,576
Growth Fund
Shares of beneficial interest, 10,816 2,325 81,764
Target Fund
Shares of beneficial interest, 1,145 1,876 4,882
Discovery Fund
Shares of beneficial interest, 5,491 0 38,981
Opportunity Fund
Shares of beneficial interest, 3,341 1,885 10,963
Innovation Fund
Shares of beneficial interest, 2,051 365 27,564
International Fund
Shares of beneficial interest, NA NA NA
Emerging Markets Fund
Shares of beneficial interest, 722 198 5,405
Precious Metals Fund
Shares of beneficial interest, 84 117 133
Global Income Fund
Shares of beneficial interest, 689 869 15,547
High Income Fund
Shares of beneficial interest, 1,535 1,728 4,458
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Total Return Income Fund
Shares of beneficial interest, 105 41 2,303
Tax Exempt Fund
Shares of beneficial interest, 586 161 18,293
U.S. Government Fund
Shares of beneficial interest, 218 123 3,759
Short-Intermediate Fund
Shares of beneficial interest, 459 27 5,402
Money Market Fund
</TABLE>
Item 27. Indemnification.
---------------
See Item 4 of Part II to Pre-Effective Amendment No. 1 to the
Registration Statement filed on December 28, 1983, which is in-corporated
herein by reference. The provisions of Article VIII of the Registrant's
Declaration of Trust set forth in such Item 4 remain in effect as part of the
Registrant's Amended and Restated Agreement and Declaration of Trust which is
incorporated herein by reference to Exhibit 1 to Post-Effective Amendment No. 33
to the Registration Statement filed on November 30, 1995.
Item 28. Business and Other Connections of Investment
--------------------------------------------
Advisers.
--------
(a) PIMCO Advisors L.P.(referred to herein as either the "Manager" or
PIMCO Advisors L.P.) was organized as a limited partnership under Delaware law
in 1987 and is registered as an investment adviser under the Investment Advisers
Act of 1940. The Manager manages two mutual fund complexes other than the
Trust, Cash Accumulation Trust ("CAT") and PIMCO Funds: Equity Advisors
Series. The Manager also has various subsidiary partnerships which advise and
manage mutual funds, individual accounts, profit-sharing and pension funds and
institutional accounts and act as sub-advisers to certain mutual funds. Five of
its affiliated advisory firms serve as sub-advisers to the Registrant's
Funds.
PIMCO Partners, G.P. ("PIMCO GP"), the Manager's general partner, is a
general partnership with two partners: (i) an indirect wholly-owned subsidiary
of Pacific Mutual Life Insurance Company; and (ii) PIMCO Partners, L.L.C.
("LLC"), a limited liability company, all of the interests of which are held
directly by the Managing Directors of Pacific Investment Management Company who
are William H. Gross, Dean S. Meiling, James F. Muzzy, William F. Podlich, III,
Frank B. Rabinovitch, Brent R. Harris, John L. Hague, William S. Thompson, Jr.,
William C. Powers , David H. Edington and Benjamin L. Trosky (collectively, the
"Managing Directors"). PIMCO Partners, G.P. has
-7-
<PAGE>
substantially delegated its management and control of the Manager to an Equity
Board and an Operating Board of the Manager. The activities of the Manager are
controlled by its Operating Board except that certain non-routine or
extraordinary actions may not be effected by the Operating Board without the
approval of the Manager's Equity Board. The Operating Board has in turn
delegated the authority to manage day-to-day operations and policies to an
Operating Committee. The Operating Board is composed of twelve members, of which
seven (including the chairman) are designated by Pacific Investment Management
Company, a subsidiary general partnership of the Manager and a sub-adviser to
several of the Funds. The Equity Board is composed of twelve members including
the chief executive officer of the Manager, three members designated by Pacific
Financial Asset Management Company, the chairman of the Operating Board, two
members designated by LLC, two members designated by holders of Series B
Preferred Stock of Thomson Advisory Group Inc., the former general partner of
the Manager, and three independent members. Because of the ability to designate
a majority of the Members of the Operating Board, Pacific Investment Management
Company and the Managing Directors could be said to control the Manager,
although the Managing Directors disclaim such authority.
The directors and officers of Pacific Investment Management Company,
Columbus Circle Investors ("CCI"), Blairlogie Capital Management ("Blairlogie"),
Cadence Capital Management ("Cadence") and NFJ Investment Group ("NFJ"),
subsidiaries of the Manager that serve as sub-advisers to the Registrant's
Funds, and their significant business connections are described elsewhere in
this Part C.
Set forth below are the substantial business engagements during at least
the two past fiscal years of each director or officer of the Manager and of each
member of the Manager's Operating and Equity Boards:
<TABLE>
<CAPTION>
NAME AND POSITION BUSINESS AND
WITH MANAGER OTHER CONNECTIONS
<S> <C>
William D. Cvengros Trustee of the Trust; Trustee of Cash
President, Chief Accumulation Trust ("CAT"); Trustee
Executive Officer, and Chairman, PIMCO Funds: Equity
Member of Equity and Advisors Series; Director, PIMCO
Operating Boards and Advisors Distribution Company
Operating Committee ("PADCO")
Irwin F. Smith Chairman, Managing Director, Chief
Member of Operating Executive Officer and Chief
and Equity Boards Investment Officer, CCI; Director
and Operating Committee and Chairman, Columbus Circle
Investors Management, Inc.
Robert A. Prindiville Trustee and President of the Trust
and
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C>
Vice President CAT; Director and Chairman,
PADCO. Formerly, President of TAGLP,
President and Director, TAG Inc.
Donald K. Miller Chairman, Greylock Financial Inc.;
Member of Equity Director of Huffy Corporation, RPM,
Board Inc. and Christensen Boyles
Corporation; Director, President and
Chief Executive Officer, TAG Inc.
Formerly, Vice Chairman, TAGLP, and
Director and Vice Chairman of TIS
John O. Leasure Director, President and Chief
Senior Vice President Executive Officer of PADCO. Formerly,
Executive Vice President, TAGLP
Newton B. Schott, Jr. Vice President and Clerk of the Trust
Senior Vice President and of CAT; Senior Vice President,
- Legal, and Director, Secretary, PADCO; Formerly,
Secretary Executive Vice President, Secretary
and General Counsel, TAGLP, Executive
Vice President, Secretary and General
Counsel, TAG Inc., Executive Vice
President and Secretary, TIS
Robert M. Fitzgerald Chief Financial Officer, Senior Vice
Chief Financial President - Finance, and Controller,
Officer, Senior Vice PADCO. Formerly, Chief Financial
President - Finance, Officer, TPM Financial, Vice
and Controller President, Mechanics National Bank,
and Partner, Price Waterhouse.
Donald A. Chiboucas Managing Director and President, CCI;
Member of Operating Director and President, Columbus
Board Circle Investors Management, Inc.
Walter E. Auch, Sr. Outside business consultant; Director
Member of Equity of Fort Dearborn Fund, Shearson VIP
Board Fund, Shearson Advisors Fund,
Shearson TRAK Fund, Banyan Land
Trust, Banyan Land Fund II, Banyan
Mortgage Fund, Allied Healthcare
Products, Inc., First Western Inc.,
DHR Group and Geotech Industries
David B. Breed Director, Managing Director and Chief
Member of Operating Executive Officer, Cadence Capital
Board Management; Managing Director and
Chief Executive Officer, Cadence
Donald R. Kurtz Formerly, Vice President of General
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C>
Member of Equity Motors Investment Management Corp.
Board and Director, TAG Inc.
Kenneth M. Poovey Partner, Latham & Watkins
General Counsel and
Board Secretary
Walter B. Gerken Director, Mullin Consulting Inc.;
Chairman of Equity Director, Executive Services Corp. of
Board Southern California. Formerly Chairman,
Pacific Mutual Life Insurance Company
William H. Gross Managing Director, Pacific Investment
Member of Equity Management Company; Director, PIMCO
Board and Operating Management, Inc.; Director and Vice
Board President, StocksPLUS Management,
Inc.; Senior Vice President, PIMCO
Funds
Brent R. Harris Managing Director, Pacific Investment
Member of Operating Management Company; Director, PIMCO
Board Management, Inc.; Trustee and
Chairman, PIMCO Funds and PIMCO
Commercial Mortgage Securities Trust,
Inc; Director and Vice President, Stocks
Plus Management, Inc.
Amy M. Hogan Managing Director, CCI; Director,
Member of Operating Columbus Circle Investors Management,
Board Inc.
Dean S. Meiling Managing Director, Pacific Investment
Member of Operating Management Company; Director, PIMCO
Board Management, Inc.; Director,
StocksPLUS Management, Inc.; Vice
President, PIMCO Funds and PIMCO
Commercial Mortgage Securities Trust,
Inc.
James F. Muzzy Managing Director, Pacific Investment
Member of Operating Management Company; Director, PIMCO
Board Management, Inc.; Director and Vice
President, StocksPLUS Management,
Inc.; Vice President, PIMCO Funds
William F. Podlich Managing Director, Pacific Investment
III Management Company; Director, PIMCO
Member of Equity Management, Inc.; Vice President, PIMCO
Board and Operating Commercial Mortgage Securities Trust,
Board Inc.
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C>
William C. Powers Managing Director, Pacific Investment
Member of Operating Management Company; Director, PIMCO
Board Management, Inc.; Senior Vice President,
PIMCO Commercial Mortgage Securities
Trust, Inc.
Glenn S. Schafer President and Director, Pacific
Member of Equity Mutual Life Insurance Company;
Board Chairman and Director, Mutual Service
Corporation, United Planners Group,
Inc., Pacific Equities Network and
Pacific Financial Holding Company
Thomas C. Sutton Director, Chairman and Chief
Member of Equity Executive Officer, Pacific Mutual
Board Life Insurance Company; Chairman,
Trustee and President, Pacific Select
Fund; Director, United Planners Group
Inc., Pacific Equities Network, Mutual
Service Corporation and Pacific
Financial Holding Company
William S. Thompson, Jr. Chief Executive Officer and Managing
Member of Equity Director, Pacific Investment
Board; Chairman and Management Company; Director , and
Member of Operating Chief Executive Officer, PIMCO
Board; Member of Management, Inc.; Vice President,
Operating Committee PIMCO Funds and PIMCO Commercial
Mortgage Securities Trust, Inc.;
Director and President, StocksPlus
Management, Inc.
Richard Weil Formerly, Vice President -Global
Senior Vice Asset Management Group, Bankers Trust
President - Legal Company
</TABLE>
The principal business address of PIMCO Advisors L.P. is 800 Newport Center
Drive, Suite 100, Newport Beach, CA 92660. The address of PIMCO and CAT is 2187
Atlantic Street, Stamford, CT 06902. The address of CCI is One Station Place,
Stamford, CT 06902.
The address of Pacific Investment Management Company is 840 Newport Center
Drive, Newport Beach, CA 92660.
The address of Mutual Service Corporation is 7108 Fairway Drive, Palm Beach
Gardens, FL 33418.
The address of United Planners Group, Inc. is 7333 East Double Tree Ranch
Road, Scottsdale, AZ 85258.
(b) Columbus Circle Investors ("CCI") is a general partnership formed
on September 9, 1994 which is registered as an investment adviser under the
Investment Advisers Act of 1940. The
-11-
<PAGE>
Manager and Columbus Circle Investors Management Inc.("CCI, Inc."), a wholly-
owned subsidiary of the Manager, are the general partners of CCI. CCI consists
of the personnel of the former Columbus Circle Investors Division of TAGLP and
the investment personnel of the former Mutual Funds Division of TAGLP. CCI acts
as sub-adviser to other mutual funds and also advises and manages individual
accounts, profit sharing and pension funds and institutional accounts.
Set forth below are the substantial business engagements during at least
the two past fiscal years of each director or officer of CCI:
<TABLE>
<CAPTION>
NAME AND POSITION BUSINESS AND
WITH CCI OTHER CONNECTIONS
<S> <C>
Irwin F. Smith Member of Equity and Operating Boards
Chairman, Managing and Operating Committee, PIMCO
Director, Chief Advisors L.P.; Director and
Executive Officer and Chairman, Columbus Circle Investors
Chief Investment Management, Inc., Director, Columbus
Officer Circle Trust Company
Donald A. Chiboucas Member of Operating Board, PIMCO
President and Advisors L.P.; Director and
Managing Director President, Columbus Circle Investors
Management Inc.
Louis P. Celentano Director and Vice President,
Managing Director Columbus Circle Investors Management,
Inc., Director and Chairman, Columbus
Circle Trust Company
Daniel S. Pickett Member of Operating Board, PIMCO
Managing Director Advisors L.P. (1995); Director, Columbus
Circle Investors Management, Inc.
Amy M. Hogan Member of Operating Board, PIMCO
Managing Director Advisors L.P. (1995); Director,
Columbus Circle Investors
Management Inc.
Robert W. Fehrmann Director, Columbus Circle Investors
Managing Director Management Inc.
</TABLE>
The address of CCI, Columbus Circle Trust Company and Columbus Circle
Investors Management Inc. is One Station Place, Stamford, CT 06902.
(c) Pacific Investment Management Company is a general partnership formed
on September 15, 1994 which is registered as an
-12-
<PAGE>
investment adviser under the Investment Advisers Act of 1940. The Manager and
PIMCO Management Inc. are the general partners of Pacific Investment Management
Company. The Manager serves as the supervising partner, and PIMCO Management
Inc. serves as the managing partner. The predecessor investment adviser to
Pacific Investment Management Company commenced operations in 1971. Pacific
Investment Management Company advises and manages other mutual funds and
accounts consisting of proceeds from pension and profit sharing plans. Pacific
Investment Management Company is the successor to the former business of Pacific
Investment Management Company, a California corporation and an indirect
subsidiary of Pacific Mutual Life Insurance Company ("Pacific Mutual").
Pacific Investment Management Company also provides organizational,
administrative and other services to the Funds pursuant to an Administration
Agreement with the Manager.
Set forth below are the substantial business engagements during at least
the two past fiscal years of each director or officer of Pacific Investment
Management Company:
NAME AND POSITION BUSINESS AND
OTHER CONNECTIONS
William H. Gross Member of Equity Board and Operating
Managing Director Board, PIMCO Advisors L.P.; Director, PIMCO
Management Inc.; Director and Vice President,
StocksPLUS Management, Inc.; Senior Vice President,
PIMCO Funds
Brent R. Harris Member of Operating Board, PIMCO Advisors
Managing Director L.P.; Director , PIMCO Management Inc.; Director
and Vice President, StocksPLUS Management, Inc.;
Trustee and Chairman, PIMCO Funds and PIMCO
Commercial Mortgage Securities Trust, Inc.
Dean S. Meiling Member of Operating Board, PIMCO Advisors
Managing Director L.P.; Director, PIMCO Management Inc.; Director,
StocksPLUS Management, Inc.; Vice President, PIMCO
Funds and PIMCO Commercial Mortgage Securities
Trust, Inc.
James F. Muzzy Member of Operating Board, PIMCO Advisors
Managing Director L.P.; Director, PIMCO Management Inc.; Director and
Vice President, StocksPLUS Management, Inc.; Vice
President, PIMCO Funds
William F. Podlich III Member of Equity Board and Operating Board,
Managing Director
-13-
<PAGE>
<TABLE>
<S> <C>
Board, PIMCO Advisors L.P.; Director, PIMCO
Management Inc.; Vice President, PIMCO Commercial
Securities Trust, Inc.
William C. Powers Member of Operating Board, PIMCO Advisors
Managing Director L.P.; Director, PIMCO Management Inc.; Senior Vice
President, PIMCO Commercial Securities Trust, Inc.
William S. Thompson, Member of Equity Board, Chairman and Member of
Jr. Operating Board and Member of Operating Committee,
Chief Executive PIMCO Advisors L.P.; Director and Chief Executive
Officer and Managing Officer, PIMCO Management Inc.; Vice President,
Director PIMCO Funds and PIMCO Commercial Mortgage
Securities Trust, Inc.; Director and President,
StocksPlus Management, Inc.
Benjamin L. Trosky Senior Vice President, PIMCO Commercial Mortgage
Managing Director Securities Trust, Inc. Formerly, Portfolio Manager,
Merrill Lynch Asset Management
Frank B. Rabinovitch Director, PIMCO Management Inc.
Managing Director
John L. Hague Director, PIMCO Management Inc.
Managing Director
David H. Edington Managing Director, PIMCO Management Inc.
Managing Director
George C. Allan None
Vice President
Tamara J. Arnold None
Vice President
Leslie A. Barbi None
Vice President
William R. Benz None
Executive Vice
President
John B. Brynjolfsson None
Vice President
Wesley R. Burns Vice President of the Trust and
Executive Vice CAT; President, PIMCO Funds and PIMCO Commercial
President Mortgage Securities Trust, Inc.; Vice President,
PIMCO Funds: Equity Advisers Series
Wendy W. Cupps Formerly, Consultant, William M. Mercer
Vice President
Charles M. Daniels, III None
Executive Vice
President
</TABLE>
-14-
<PAGE>
Anita Dunn None
Vice President
Robert A. Ettl Formerly, Global Finance Department,
Vice President Salomon Brothers
Robert M. Fitzgerald Senior Vice President-Finance and
Treasurer Controller, PIMCO Advisors L.P. and
PADCO. Formerly, Chief Financial
Officer, TPM Financial, Vice
President, Mechanics National Bank
and Partner, Price Waterhouse
Sherri A. Fraizer None
Assistant Secretary
Gordon C. Hally None
Executive Vice
President
Pasi M. Hamalainen None
Vice President
John P. Hardaway Treasurer of the Trust and CAT;
Vice President Treasurer, PIMCO Funds and PIMCO Commercial
Mortgage Securities Trust, Inc.; Vice President,
PIMCO Funds: Equity Advisors Series
Douglas M. Hodge None
Senior Vice President
Brent L. Holden None
Executive Vice
President
Dwight F. Holloway, Jr. None
Vice President
Jane T. Howe None
Vice President
Margaret E. Isberg Senior Vice President, PIMCO Funds
Executive Vice
President
John S. Loftus None
Executive Vice
President
Thomas J. Otterbein None
Vice President
-15-
<PAGE>
Edward P. Rennie None
Senior Vice President
Scott L. Roney None
Vice President
Jeffrey M. Sargent Vice President, PIMCO Funds, PIMCO
Vice President Commercial Securities Trust, Inc. and
PIMCO Funds: Equity Advisors Series
Michael J. Rosborough None
Vice President
Ernest L. Schmider Vice President - Legal and Assistant
Senior Vice President, Secretary, PIMCO Advisors L.P.
Secretary, Chief
Administrative and
Legal Officer
Jeffrey M. Saye None
Vice President
Leland T. Scholey Senior Vice President, PIMCO Funds
Senior Vice President
Denise C. Seliga None
Vice President
Rita J. Seymour None
Vice President
Lee R. Thomas Formerly, Member of Management
Executive Vice Committee, Investcorp., Executive
President Director of Foreign Fixed-Income,
Goldman, Sachs
Teresa A. Wagner Vice President and Assistant Clerk of
Vice President the Trust and CAT; Vice
President, PIMCO Funds, PIMCO Funds:
Equity Advisors Series and PIMCO
Commercial Mortgage Securities Trust,
Inc.
Robert S. Venable None
Vice President
Andrew C. Ward Senior Vice President, PIMCO Funds
Vice President
Ram Willner None
Vice President
Kristen M. Wilsey Vice President, PIMCO Funds
Vice President
-16-
<PAGE>
George H. Wood None
Vice President
Michael A. Yetter None
Vice President
The address of Pacific Investment Management Company is 840 Newport Center
Drive, Newport Beach, CA 92660.
(d) Blairlogie Capital Management ("Blairlogie") is a United Kingdom
limited partnership formed in 1994 which is registered as an investment adviser
under the Investment Advisers Act of 1940. Blairlogie has two general partners,
the Manager (which holds a 74.9% interest) and Blairlogie Holdings Limited
(which holds a 0.1% interest), a wholly-owned subsidiary of the Manager, and one
limited partner, Blairlogie Partners L.P. (which holds a 25% interest), a
limited partnership the partners of which are PFAMCO as the general partner, and
James G. Smith, James R. Stephens and Gavin R. Dobson as limited partners.
Blairlogie also acts as sub-adviser to other mutual funds and advises
institutional accounts.
Set forth below are the substantial business engagements during at least
the two past fiscal years of each director or officer of Blairlogie or
Blairlogie Holdings Limited:
-17-
<PAGE>
NAME BUSINESS AND
OTHER CONNECTIONS
James G. Smith Managing Director and Chief Investment
Managing Director Officer of Blairlogie Holdings Limited
and Chief Investment (U.K.)
Officer
James R. Stephens Managing Director and Chief
Managing Director Financial Officer of Blairlogie
and Chief Financial Holdings Limited (U.K.)
Officer
Gavin R. Dobson Director and Chief Executive Officer
Managing Director of Blairlogie Holdings Limited (U.K.)
and Chief Executive
Officer
The principal offices of Blairlogie and Blairlogie Holdings Limited are
located at 125 Princes Street, 4th Floor, Edinburgh EH2 4AD, Scotland.
(e) Van Eck Associates Corporation ("Van Eck") is a Delaware corporation
registered as an investment adviser under the Investment Advisers Act of 1940.
Van Eck also provides investment advice as adviser to other mutual funds,
individuals and institutional accounts.
Set forth below are the substantial business engagements during at least the
two past fiscal years of each director or officer of Van Eck:
-18-
<PAGE>
NAME AND POSITION
WITH VAN ECK BUSINESS AND OTHER CONNECTIONS
John C. Van Eck Chairman of the Board and President,
Chairman of the Van Eck Funds ("VEF") and Van Eck
Board Worldwide Insurance Trust ("WWIT");
Chairman of the Board, Van Eck
Securities Corporation ("VESC");
Director, Eclipse Financial Asset
Trust. Formerly, Director Abex Inc.,
Director, The Henley Group, Inc.
Fred M. Van Eck Trustee, VEF and WWIT; Private
Director Investor, Director, VESC
Sigrid S. Van Eck Vice President, Assistant Treasurer
Director, Vice and Director of VESC
President and
Assistant
Treasurer
Henry J. Bingham Executive Vice President VEF and
Executive WWIT; President, International
Managing Investors Gold Series of VEF
Director
Jan Van Eck Director and Executive Vice President
Director of VESC
Michael G. Doorley Vice President, Treasurer, Controller
Vice President, and Chief Financial Officer of VESC;
Treasurer, Vice President, VEF and WWIT
Controller and Chief
Financial Officer
Bruce J. Smith Vice President and Treasurer of VEF
Senior Managing and WWIT; Senior Managing Director of
Director, Operations, VESC
Portfolio
Accounting
William A. Vice President of VEF; Formerly,
Trebilcock Director, Corner Bay Explorations
Director, Mining Ltd. Formerly, Director, Precambrian
Research Explorations Inc.
Thaddeus M. Vice President and Secretary of VEF
Leszcynski and WWIT; Vice President, Secretary
and General Counsel of VESC
-19-
<PAGE>
Vice President,
Secretary and
General Counsel
Derek M. Van Eck Director of VESC; President, Global
Director and Hard Assets and World Trends Series
Executive Vice of the Van Eck Funds
President,
Global
Investments
Roger A. Lawson Trustee, VEF and WWIT; Director,
Director, President and Chief Executive
President and Officer, VESC. Formerly, Managing
Chief Executive Director and Head of Global Private
Officer Banking and Mutual Funds, Bankers
Trust Company, Managing Director, Member
of the Management Committee, President
and Chief Executive Officer, Fidelity
Investments Retail Group, FMR Corp.,
Corporate Officer, Member of the
Management Committee and Head of Retail
and Institutional Businesses, Dreyfus
Corporation
The principal business address of VEF, VESC, VEAC and WWIT is 99 Park Avenue,
New York, NY 1001.
(f) Cadence Capital Management ("Cadence") is a general partnership which
is registered as an investment adviser under the Investment Advisers Act of
1940. The Manager and Cadence Capital Management Inc., a wholly-owned
subsidiary of the Manager, are the only partners of Cadence. Cadence Capital
Management Corporation, the predecessor investment adviser to Cadence, commenced
operations in 1988. Cadence acts as sub-adviser to other mutual funds and also
advises institutional accounts.
Set forth below are the substantial business engagements during at least
the two past fiscal years of each director or officer of Cadence:
NAME AND POSITION
WITH CADENCE BUSINESS AND OTHER CONNECTIONS
David B. Breed, Member of Operating Board, PIMCO
Managing Director, Advisors L.P.; Director
Chief Executive and Chief Executive
Officer and Chief Officer, Cadence Capital
Investment Officer
Management Inc.
-20-
<PAGE>
<TABLE>
<S> <C>
Willian B. Bannick, Director, Cadence Capital
Managing Director and Management Inc.
Executive Vice President
Peter B. McManus, None
Vice President, Client
Relations and Marketing
Barbara M. Green, None
Treasurer and Operations
Manager
Katherine A. Burdon, None
Managing Director
Eric M. Wetlaufer, None
Managing Director
</TABLE>
The principal business address of Cadence is Exchange Place, Boston, MA
02109.
(g) NFJ Investment Group ("NFJ") is a general partnership which is
registered as an investment adviser under the Investment Advisers Act of 1940.
The Manager and NFJ Management Inc., a wholly-owned subsidiary of the Manager,
are the only partners of NFJ. NFJ Investment Group, Inc., the predecessor
investment adviser to NFJ, commenced operations in 1989.
In addition to providing investment advice to the mutual funds named above,
NFJ provides investment advice to other mutual funds, individuals and
institutional accounts.
Set forth below are the substantial business engagements during at least
the two past fiscal years of each director or officer of NFJ:
NAME AND POSITION
WITH NFJ BUSINESS AND OTHER CONNECTIONS
Jack Christopher Najork, Chairman, NFJ Management Inc.
Managing Director
Benno J. Fischer, Director, NFJ Management Inc.
Managing Director
and Chief Financial
Officer
John L. Johnson, Director, NFJ Management Inc.
Managing Director
-21-
<PAGE>
The principal business address of NFJ and NFJ Management Inc. is 2121 San
Jacinto, Suite 1440, Dallas, TX 75201.
Item 29. Principal Underwriters.
----------------------
(a) PIMCO Advisors Distribution Company ("PADCO"), the Registrant's
principal underwriter, also serves as underwriter for the Trust, CAT, PIMCO
Funds and PIMCO Funds: Equity Advisors Series. PADCO is a wholly-owned
subsidiary of the Manager.
(b) Information with respect to directors and officers of PADCO is as
follows:
<TABLE>
<CAPTION>
Positions and Offices Positions and
Names and Principal with Principal Offices with
Business Addresses Underwriter Registrant
- ------------------ ------------------ --------------
<S> <C> <C>
Robert A. Prindiville Director and Chairman Trustee and
President
John O. Leasure Director, President Vice President
and Chief Executive
Officer
William D. Cvengros Director Trustee
Robert M. Fitzgerald Chief Financial Officer, None
Senior Vice President of
Finance and Controller
Newton B. Schott, Jr. Director, Senior Vice Vice President
President and and Clerk
Secretary
Andrew J. Meyers Executive Vice President None
Brian F. Trumbore Senior Vice President None
Paul R. Moody Regional Vice President None
William E. Lynch Regional Vice President None
Paul H. Troyer Regional Vice President None
William H. Thomas, Jr. Regional Vice President None
Edward W. Janeczek, Jr. Vice President None
</TABLE>
-22-
<PAGE>
<TABLE>
<S> <C> <C>
Matthew M. Russell Vice President None
Jeffrey L. Booth Vice President None
Jaishree B. Kemraj Assistant Vice None
President and
Assistant Controller
Mark Porterfield Compliance Officer None
Jacquline A. McCarthy Vice President None
William Duff Badgley Vice President None
James D. Bosch Vice President None
Michael J. Gallagher Vice President None
Ronald H. Gray Vice President None
Jonathan C. Jones Vice President None
Richard J. McLaughlin Vice President None
Fiora Moyer Vice President None
Joffrey H. Pearlman Vice President None
Glynne Pisapia Vice President None
David P. Stone Vice President None
</TABLE>
The principal business address of each such individual is either 2187
Atlantic Street, Stamford, CT 06902 or 840 Newport Center Drive, Newport Beach,
CA 92660.
(c) The Registrant has no principal underwriter that is not an affiliated
person of the Registrant or an affiliated person of such an affiliated person.
Item 30. Location of Accounts and Records.
--------------------------------
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder include Registrant's
Administrator, Pacific Investment Management Company; Registrant's Clerk, Newton
B. Schott, Jr.; Registrant's Investment Manager, PIMCO Advisors L.P.;
Registrant's
-23-
<PAGE>
Custodian, The Bank of New York; and Registrant's Transfer Agent and Shareholder
Servicing Agent, Shareholder Services, Inc. The address of the Administrator is
840 Newport Center Drive, Suite 360, Newport Beach, CA 92660; the address of the
Clerk is 2187 Atlantic Street, Stamford, Connecticut 06902; the address of the
Manager is 800 Newport Center Drive, Newport Beach, CA 92660; the address of The
Bank of New York is 48 Wall Street, New York, New York 10015; and the address of
Shareholder Services, Inc. is 3410 South Galena Street, Denver, Colorado
80231.
Item 31. Management Services.
-------------------
None.
Item 32. Undertakings.
------------
(a) The Trust hereby undertakes to call a meeting of the shareholders for
the purpose of voting upon the question of removal of one or more trustees when
requested to do so by the holders of at least 10% of the outstanding shares of
the Trust and to comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder communication.
(b) The Trust undertakes to furnish to any person to whom a prospectus is
delivered a copy of the Trust's latest annual report upon request and without
charge.
-24-
<PAGE>
NOTICE
------
A copy of the Amended and Restated Agreement and Declaration of Trust of
PIMCO Advisors Funds (the "Trust") is on file with the Secretary of State of The
Commonwealth of Massachusetts and notice is hereby given that this instrument is
executed on behalf of the Trust by an officer of the Trust as an officer and not
individually and that the obligations of or arising out of this instrument are
not binding upon any of the Trustees of the Trust or shareholders of any series
of the Trust individually but are binding only upon the assets and property of
the Trust or the respective series.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No. 34 to this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Stamford, and
the State of Connecticut on the 19th day of April, 1996.
PIMCO ADVISORS FUNDS
By: /s/ Robert A. Prindiville
---------------------------------
Robert A. Prindiville,
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 34 has been signed below by the following persons in the
capacities and on the dates indicated.
Name Capacity Date
- ---- -------- ----
/s/ Robert A. Prindiville Trustee, President and April 19, 1996
- --------------------------- Principal Executive Officer
Robert A. Prindiville
<PAGE>
John P. Hardaway* Treasurer and Principal
- --------------------------- Financial and
John P. Hardaway Accounting
Officer
William D. Cvengros* Trustee
- ---------------------------
William D. Cvengros
Gary L. Light* Trustee
- ---------------------------
Gary L. Light
Joel Segall* Trustee
- ---------------------------
Joel Segall
Donald P. Carter* Trustee
- ---------------------------
Donald P. Carter
E. Philip Cannon* Trustee
- ---------------------------
E. Philip Cannon
Gary A. Childress* Trustee
- ---------------------------
Gary A. Childress
W. Bryant Stooks* Trustee
- ---------------------------
W. Bryant Stooks
Gerald M. Thorne* Trustee
- ---------------------------
Gerald M. Thorne
* By: /s/ Robert A. Prindiville
-----------------------------
Robert A. Prindiville
Attorney-In-Fact
Date: April 19, 1996
<PAGE>
EXHIBIT LIST
------------
4b. Specimen Share Certificates for Class A, Class B, and Class C shares
of Summit Fund.
5b. Form of Management Contract for Summit Fund.
5d. Form of Sub-Adviser Agreement for Summit Fund.
9d. Administration Agreement dated as of January 1, 1996 between PIMCO
Advisors L.P. and Pacific Investment Management Company.
9j. Organizational Expense Reimbursement Agreement dated as of April 19,
1996 for Summit Fund between the Trust and PIMCO Advisors L.P.
11. Consent of Independent Accountants.
15a. PIMCO Advisors Funds Amended and Restated Distribution and Servicing
Plan for Class A Shares.
15b. PIMCO Advisors Funds Distribution and Servicing Plan for Class B
Shares.
15c. PIMCO Advisors Funds Forth Amended and Restated Distribution and
Servicing Plan for Class C Shares.
17. Financial Data Schedule for the fiscal year ended September 30, 1995
(file as Exhibit 27 for EDGAR purposes).
19b. Power of Attorney for John P. Hardaway.
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<NAME> PIMCO ADVISORS HIGH INCOME FUND
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<NAME> CLASS A
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<S> <C>
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<CIK> 0000730674
<NAME> PIMCO ADVISORS HIGH INCOME FUND
<SERIES>
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<NAME> CLASS C
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<PAGE>
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<CIK> 0000730674
<NAME> PIMCO ADVISORS TOTAL RETURN INCOME FUND
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<PAGE>
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<CIK> 0000730674
<NAME> PIMCO ADVISORS TOTAL RETURN INCOME FUND
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<CIK> 0000730674
<NAME> PIMCO ADVISORS TOTAL RETURN INCOME FUND
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<PAGE>
<ARTICLE> 6
<CIK> 0000730674
<NAME> PIMCO ADVISORS TAX EXEMPT FUND
<SERIES>
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<PAGE>
<ARTICLE> 6
<CIK> 0000730674
<NAME> PIMCO ADVISORS TAX EXEMPT FUND
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<PAGE>
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<CIK> 0000730674
<NAME> PIMCO ADVISORS TAX EXEMPT FUND
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<NAME> CLASS C
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,489
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,550
<TOTAL-LIABILITIES> 1,550
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82,938
<SHARES-COMMON-STOCK> 69,364
<SHARES-COMMON-PRIOR> 84,064
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 82,938
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,518
<OTHER-INCOME> 0
<EXPENSES-NET> (468)
<NET-INVESTMENT-INCOME> 5,050
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,318)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 554,885
<NUMBER-OF-SHARES-REDEEMED> 573,064
<SHARES-REINVESTED> 3,480
<NET-CHANGE-IN-ASSETS> (14,058)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 147
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 491
<AVERAGE-NET-ASSETS> 93,984
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .054
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.054)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<PAGE>
Exhibit 4b.
-----------
Specimen Share Certificates for Class A, Class B
and Class C Shares of the Summit Fund
<PAGE>
PIMCO ADVISORS FUNDS
Description of Share Certificate for:
PIMCO ADVISORS SUMMIT FUND CLASS A SHARES
Class Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner)- box with heading:NUMBER [of shares]
(upper center) - heading: CLASS A SHARES
(upper right corner)- heading: CP - [number]
(directly below upper right
corner heading:- box with heading: SHARES [amt. of shares]
(centered below boxes)
line 1: single line heading: [appx. 8 pt.]
ESTABLISHED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
line 2: single line heading: [appx. 18pt.]
PIMCO ADVISORS FUNDS
line 3: single line heading: [appx. 18pt.]
CLASS A SHARES
line 4: single line heading: [appx. 8 pt]
PAR VALUE $.00001 PER SHARE
(at left) single line heading: [appx. 11 pt.]
THIS IS TO CERTIFY THAT
(at right)two line heading: [appx. 10 pt.]
SEE REVERSE FOR
CERTAIN DEFINITIONS
(at right directly below two line heading - box with content)
CUSIP 693387755
(at left appx half way down width of cert. - single line heading)
is the owner of
(at right appx half way down width of cert. - single line heading)
Class A Shares
(centered - text appx. 11pt)
of benficial interest in PIMCO Advisors Funds - PIMCO Advisors
Summit Fund, par value $.00001 per share, fully paid and
nonassessable, which shares have been issued and are held under
and subject to terms and provisions of the Amended and Restated
Agreement and Declaration of Trust dated September 11, 1990, of
PIMCO Advisors Funds, and all amendments thereto, heretofore or
hereafter made, copies of which are on file with the Secretary of
the Commonwealth of Massachusetts. [indent] No transfer hereof
will be of any effect as regards the Trustees of PIMCO Advisors
Funds until this certificate, properly endorsed or assigned, has
been surrendered and the transfer recorded upon the books of said
Trustees. [indent] This certificate is executed on behalf of the
Trustees as Trustees and not individually and the obligations
hereof are not binding only upon the assets and property of the
Fund. [indent] IN WITNESS WHEREOF the Trustees under said
Agreement and Declaration of Trust have caused the following
facsimile signatures to be affixed to this certificate and a
facsimile of their common seal to be hereto affixed by the
Transfer Agent.
(at right of text, printed vertically)
line 1: [appx 8 pt. bold]
Countersigned
line 2: [indented under line 1 appx 8 pt.]
SHAREHOLDER SERVICES INC.
line 3: [indented under line 2 appx 8 pt. bold]
Denver (Colo.) [space] Transfer Agent
line 4: [to left aligned under line 1 appx. 8 pt.]
By:
line 5: [spaced from line 4 indented under line 3 appx. 8 pt.]
Authorized Signature
(bottom left of certificate)
1-1/2" diameter facsimile seal
(top of seal: semicircle)
PIMCO ADVISORS FUNDS
(center of seal - two line text)
1983
MASSACHUSETTS
(bottom right - across from seal)
[text appx. 11 pt. bold]
Dated:
[spaced from text - signature line with text below line to
right] President FOR THE TRUSTEES
[spaced from text - signature line with text below line to
right] Treasurer
II. BACK OF CERTIFICATE (text reads from top to bottom of 8"x11" portrait
dimension)
[text appx. 8 pt.]
[indented] The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
[text appearing left side of page indented under above paragraph appx 8 pt.] TEN
COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
[text appearing right side of page across from above text appx 8 pt.]
UNIF GIFT/TRANSFER MIN ACT - Custodian
------------------ ------------------
(Cust) (Minor)
UNDER UGMA/UTMA
--------------------
(State)
[text - centered appx 8 pt.]
Additional abbreviations may also be used though
not in the above list.
[text - centered appx. 10 pt.]
For Value Received ................ hereby
sell(s), assign(s), and transfer(s) unto
[text appearing left of page appx. 8 pt]
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION
BY TRANSFEREE
[graphic: box for identifying number]
<PAGE>
PAGE 2 Back of certificate continued.
[Directly below graphic box: double spaced]
[line 1: with text centered under line]
- ---------------------------------------------------------------------
(Please print or type name and address of assignee)
[line 2: no text under line]
- ---------------------------------------------------------------------
[line 3: no text under line]
- ---------------------------------------------------------------------
[line 4: with text centered under line
- ---------------------------------------------------------------------
Class A Shares of beneficial interest represented by the within Certificate, and
do hereby irrevocably constitute and appoint [line 5: with text centered under
line
- ---------------------------------------------------------------------
Attorney to transfer the said shares on the books of the within named Fund
with full power of substitution in the premises.
[line 6: aligned left - text and line appx. 10 pt.]
Dated____________________________
[line 7: aligned right - text and line appx. 10 pt.]
Signed__________________________
[line 8: aligned right centered text under line appx. 8 pt.]
- --------------------------------
(Both must sign if joint owners)
[line 9, 10 and 11: aligned right 3 lines of text right of lines with centered
text]
Signature(s)
----------------------------
guaranteed Name of Guarantor
by:
----------------------------
Signature of Officer/Title
[aligned left of lines 9-11
graphic box containing text appx. 8 pt.]
Signatures must be guaranteed by a financial institution of
the type described in the prospectus of the Fund.
[aligned right of lines 4-8 printed vertically appx. 8 pt.]
NOTICE: The signature(s) to this assignment must correspond
with the name(s) as written upon face of the certificate in every
particular without alteration or enlargement or any change
whatever.
[single line of text alinged left appx. 10 pt. bold]
PLEASE NOTE: This document contains a watermark when viewed at
an angle. It is invalid without this watermark:
[directly below text above aligned left appx. 18 pt. bold]
P I M C O
[Watermark in five rows vertically across page: PIMCO PIMCO
PIMCO
[bottom of certificate: line with text centered under appx.
16 pt.]
- -----------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE>
PIMCO ADVISORS FUNDS
Description of Share Certificate for:
PIMCO ADVISORS SUMMIT FUND CLASS B SHARES
Class Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner)- box with heading:NUMBER [of shares]
(upper center) - heading: CLASS B SHARES
(upper right corner)- heading: CP - [number]
(directly below upper right
corner heading:- box with heading: SHARES [amt. of shares]
(centered below boxes)
line 1: single line heading: [appx. 8 pt.]
ESTABLISHED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
line 2: single line heading: [appx. 18pt.]
PIMCO ADVISORS FUNDS
line 3: single line heading: [appx. 18pt.]
CLASS B SHARES
line 4: single line heading: [appx. 8 pt]
PAR VALUE $.00001 PER SHARE
(at left) single line heading: [appx. 11 pt.]
THIS IS TO CERTIFY THAT
(at right)two line heading: [appx. 10 pt.]
SEE REVERSE FOR
CERTAIN DEFINITIONS
(at right directly below two line heading - box with content)
CUSIP 693387680
(at left appx half way down width of cert. - single line heading)
is the owner of
(at right appx half way down width of cert. - single line heading)
Class B Shares
(centered - text appx. 11pt)
of benficial interest in PIMCO Advisors Funds - PIMCO Advisors
Summit Fund, par value $.00001 per share, fully paid and
nonassessable, which shares have been issued and are held under
and subject to terms and provisions of the Amended and Restated
Agreement and Declaration of Trust dated September 11, 1990, of
PIMCO Advisors Funds, and all amendments thereto, heretofore or
hereafter made, copies of which are on file with the Secretary of
the Commonwealth of Massachusetts. [indent] No transfer hereof
will be of any effect as regards the Trustees of PIMCO Advisors
Funds until this certificate, properly endorsed or assigned, has
been surrendered and the transfer recorded upon the books of said
Trustees. [indent] This certificate is executed on behalf of the
Trustees as Trustees and not individually and the obligations
hereof are not binding only upon the assets and property of the
Fund. [indent] IN WITNESS WHEREOF the Trustees under said
Agreement and Declaration of Trust have caused the following
facsimile signatures to be affixed to this certificate and a
facsimile of their common seal to be hereto affixed by the
Transfer Agent.
(at right of text, printed vertically)
line 1: [appx 8 pt. bold]
Countersigned
line 2: [indented under line 1 appx 8 pt.]
SHAREHOLDER SERVICES INC.
line 3: [indented under line 2 appx 8 pt. bold]
Denver (Colo.) [space] Transfer Agent
line 4: [to left aligned under line 1 appx. 8 pt.]
By:
line 5: [spaced from line 4 indented under line 3 appx. 8 pt.]
Authorized Signature
(bottom left of certificate)
1-1/2" diameter facsimile seal
(top of seal: semicircle)
PIMCO ADVISORS FUNDS
(center of seal - two line text)
1983
MASSACHUSETTS
(bottom right - across from seal)
[text appx. 11 pt. bold]
Dated:
[spaced from text - signature line with text below line to
right] President FOR THE TRUSTEES
[spaced from text - signature line with text below line to
right] Treasurer
II. BACK OF CERTIFICATE (text reads from top to bottom of 8"x11" portrait
dimension)
[text appx. 8 pt.]
[indented] The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
[text appearing left side of page indented under above paragraph appx 8 pt.] TEN
COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
[text appearing right side of page across from above text appx 8 pt.]
UNIF GIFT/TRANSFER MIN ACT - Custodian
---------------- ----------------
(Cust) (Minor)
UNDER UGMA/UTMA
--------------------------
(State)
[text - centered appx 8 pt.]
Additional abbreviations may also be used though
not in the above list.
[text - centered appx. 10 pt.]
For Value Received....................... hereby
sell(s), assign(s), and transfer(s) unto
[text appearing left of page appx. 8 pt]
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION
BY TRANSFEREE
[graphic: box for identifying number]
<PAGE>
PAGE 2 Back of certificate continued.
[Directly below graphic box: double spaced]
[line 1: with text centered under line]
- ---------------------------------------------------------------------
(Please print or type name and address of assignee)
[line 2: no text under line]
- ---------------------------------------------------------------------
[line 3: no text under line]
- ---------------------------------------------------------------------
[line 4: with text centered under line
- ---------------------------------------------------------------------
Class B Shares of beneficial interest represented by the within Certificate, and
do hereby irrevocably constitute and appoint [line 5: with text centered under
line
- ---------------------------------------------------------------------
Attorney to transfer the said shares on the books of the within named Fund
with full power of substitution in the premises.
[line 6: aligned left - text and line appx. 10 pt.]
Dated
------------------------
[line 7: aligned right - text and line appx. 10 pt.]
Signed
-----------------------
[line 8: aligned right centered text under line appx. 8 pt.]
- --------------------------------
(Both must sign if joint owners)
[line 9, 10 and 11: aligned right 3 lines of text right of lines with centered
text]
Signature(s)
----------------------------
guaranteed Name of Guarantor
by:
----------------------------
Signature of Officer/Title
[aligned left of lines 9-11
graphic box containing text appx. 8 pt.]
Signatures must be guaranteed by a financial institution of
the type described in the prospectus of the Fund.
[aligned right of lines 4-8 printed vertically appx. 8 pt.]
NOTICE: The signature(s) to this assignment must correspond
with the name(s) as written upon face of the certificate in every
particular without alteration or enlargement or any change
whatever.
[single line of text alinged left appx. 10 pt. bold]
PLEASE NOTE: This document contains a watermark when viewed at
an angle. It is invalid without this watermark:
[directly below text above aligned left appx. 18 pt. bold]
P I M C O
[Watermark in five rows vertically across page: PIMCO PIMCO
PIMCO
[bottom of certificate: line with text centered under appx.
16 pt.]
- ------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE>
PIMCO ADVISORS FUNDS
Description of Share Certificate for:
PIMCO ADVISORS SUMMIT FUND CLASS C SHARES
Class Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner)- box with heading:NUMBER [of shares]
(upper center) - heading: CLASS C SHARES
(upper right corner)- heading: CP - [number]
(directly below upper right
corner heading:- box with heading: SHARES [amt. of shares]
(centered below boxes)
line 1: single line heading: [appx. 8 pt.]
ESTABLISHED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
line 2: single line heading: [appx. 18pt.]
PIMCO ADVISORS FUNDS
line 3: single line heading: [appx. 18pt.]
CLASS C SHARES
line 4: single line heading: [appx. 8 pt]
PAR VALUE $.00001 PER SHARE
(at left) single line heading: [appx. 11 pt.]
THIS IS TO CERTIFY THAT
(at right)two line heading: [appx. 10 pt.]
SEE REVERSE FOR
CERTAIN DEFINITIONS
(at right directly below two line heading - box with content)
CUSIP 693387748
(at left appx half way down width of cert. - single line heading)
is the owner of
(at right appx half way down width of cert. - single line heading)
Class C Shares
(centered - text appx. 11pt)
of benficial interest in PIMCO Advisors Funds - PIMCO Advisors
Summit Fund, par value $.00001 per share, fully paid and
nonassessable, which shares have been issued and are held under
and subject to terms and provisions of the Amended and Restated
Agreement and Declaration of Trust dated September 11, 1990, of
PIMCO Advisors Funds, and all amendments thereto, heretofore or
hereafter made, copies of which are on file with the Secretary of
the Commonwealth of Massachusetts. [indent] No transfer hereof
will be of any effect as regards the Trustees of PIMCO Advisors
Funds until this certificate, properly endorsed or assigned, has
been surrendered and the transfer recorded upon the books of said
Trustees. [indent] This certificate is executed on behalf of the
Trustees as Trustees and not individually and the obligations
hereof are not binding only upon the assets and property of the
Fund. [indent] IN WITNESS WHEREOF the Trustees under said
Agreement and Declaration of Trust have caused the following
facsimile signatures to be affixed to this certificate and a
facsimile of their common seal to be hereto affixed by the
Transfer Agent.
(at right of text, printed vertically)
line 1: [appx 8 pt. bold]
Countersigned
line 2: [indented under line 1 appx 8 pt.]
SHAREHOLDER SERVICES INC.
line 3: [indented under line 2 appx 8 pt. bold]
Denver (Colo.) [space] Transfer Agent
line 4: [to left aligned under line 1 appx. 8 pt.]
By:
line 5: [spaced from line 4 indented under line 3 appx. 8 pt.]
Authorized Signature
(bottom left of certificate)
1-1/2" diameter facsimile seal
(top of seal: semicircle)
PIMCO ADVISORS FUNDS
(center of seal - two line text)
1983
MASSACHUSETTS
(bottom right - across from seal)
[text appx. 11 pt. bold]
Dated:
[spaced from text - signature line with text below line to
right] President FOR THE TRUSTEES
[spaced from text - signature line with text below line to
right] Treasurer
II. BACK OF CERTIFICATE (text reads from top to bottom of 8"x11" portrait
dimension)
[text appx. 8 pt.]
[indented] The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
[text appearing left side of page indented under above paragraph appx 8 pt.] TEN
COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
[text appearing right side of page across from above text appx 8 pt.]
UNIF GIFT/TRANSFER MIN ACT - Custodian
---------------- -------------------
(Cust) (Minor)
UNDER UGMA/UTMA
----------------------
(State)
[text - centered appx 8 pt.]
Additional abbreviations may also be used though
not in the above list.
[text - centered appx. 10 pt.]
For Value Received ................ hereby
sell(s), assign(s), and transfer(s) unto
[text appearing left of page appx. 8 pt]
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION
BY TRANSFEREE
[graphic: box for identifying number]
<PAGE>
PAGE 2 Back of certificate continued.
[Directly below graphic box: double spaced]
[line 1: with text centered under line]
- ---------------------------------------------------------------------
(Please print or type name and address of assignee)
[line 2: no text under line]
- ---------------------------------------------------------------------
[line 3: no text under line]
- ---------------------------------------------------------------------
[line 4: with text centered under line
- ---------------------------------------------------------------------
Class B Shares of beneficial interest represented by the within Certificate, and
do hereby irrevocably constitute and appoint [line 5: with text centered under
line
- ---------------------------------------------------------------------
Attorney to transfer the said shares on the books of the within named Fund
with full power of substitution in the premises.
[line 6: aligned left - text and line appx. 10 pt.]
Dated
------------------------
[line 7: aligned right - text and line appx. 10 pt.]
Signed
-----------------------
[line 8: aligned right centered text under line appx. 8 pt.]
- --------------------------------
(Both must sign if joint owners)
[line 9, 10 and 11: aligned right 3 lines of text right of lines with centered
text]
Signature(s)
----------------------------
guaranteed Name of Guarantor
by:
----------------------------
Signature of Officer/Title
[aligned left of lines 9-11
graphic box containing text appx. 8 pt.]
Signatures must be guaranteed by a financial institution of
the type described in the prospectus of the Fund.
[aligned right of lines 4-8 printed vertically appx. 8 pt.]
NOTICE: The signature(s) to this assignment must correspond
with the name(s) as written upon face of the certificate in every
particular without alteration or enlargement or any change
whatever.
[single line of text alinged left appx. 10 pt. bold]
PLEASE NOTE: This document contains a watermark when viewed at
an angle. It is invalid without this watermark:
[directly below text above aligned left appx. 18 pt. bold]
P I M C O
[Watermark in five rows vertically across page: PIMCO PIMCO
PIMCO
[bottom of certificate: line with text centered under appx.
16 pt.]
- ------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE>
MANAGEMENT CONTRACT
SUMMIT FUND
Management Contract executed as of July __, 1996 between PIMCO ADVISORS
FUNDS, a Massachusetts business trust (the "Trust"), on behalf of its Summit
-----
Fund (the "Fund"), and PIMCO ADVISORS L.P., a Delaware limited partnership (the
----
"Manager").
-------
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) Subject always to the control of the Trustees of the Trust and to such
policies as the Trustees may determine, the Manager will, at its expense, (i)
furnish continuously an investment program for the Fund and will make investment
decisions on behalf of the Fund and place all orders for the purchase and sale
of portfolio securities and (ii) furnish office space and equipment, provide
bookkeeping and clerical services (excluding determination of net asset value
and shareholder accounting services) and pay all salaries, fees and expenses of
officers and Trustees of the Trust who are affiliated with the Manager. In the
performance of its duties, the Manager will comply with the provisions of the
Amended and Restated Agreement and Declaration of Trust and By-laws of the Trust
and its stated investment objectives, policies and restrictions.
(b) In the selection of brokers or dealers and the placing of orders for
the purchase and sale of portfolio investments for the Fund, the Manager shall
seek to obtain for the Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best efforts
to obtain for the Fund the most favorable price and execution available, the
Manager, bearing in mind the Fund's best interests at all times, shall consider
all factors it deems relevant, including by way of illustration, price, the size
of the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees may determine, the
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Contract or otherwise solely by reason of its having caused
the Fund to pay a broker or dealer that provides brokerage and research services
to the
<PAGE>
Manager an amount of commission for effecting a portfolio investment transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Manager determines in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Manager's overall
responsibilities with respect to the Trust and to other clients of the Manager
as to which the Manager exercises investment discretion. The Trust hereby agrees
with the Manager and with any Sub-Adviser selected by the Manager as provided in
Section 1(c) hereof that any entity or person associated with the Manager which
is a member of a national securities exchange is authorized to effect any
transaction on such exchange for the account of the Trust and the Fund which is
permitted by Section 11(a) of the Securities Exchange Act of 1934.
(c) Subject to the provisions of the Agreement and Declaration of Trust of
the Trust and the Investment Company Act of 1940, the Manager, at its expense,
may select and contract with investment advisers (the "Sub-Advisers") for the
------------
Fund. So long as Cadence Capital Management serves as Sub-Adviser to the Fund
pursuant to a Sub-Adviser Agreement in substantially the form attached hereto as
Exhibit A (the "Sub-Adviser Agreement"), the obligation of the Manager under
---------------------
this Contract with respect to the Fund shall be subject in any event to the
control of the Trustees of the Trust, to determine and review with investment
policies of the Fund and Cadence Capital Management shall have the obligation of
furnishing continuously an investment program and making investment decisions
for the Fund, adhering to applicable investment objectives, policies and
restrictions and placing all orders for the purchase and sale of portfolio
securities for the Fund. The Manager will compensate any Sub-Adviser of the
Fund for its services to the Fund. The Manager may terminate the services of
the Sub-Adviser at any time in its sole discretion, and shall at such time
assume the responsibilities of such Sub-Adviser unless and until a successor
Sub-Adviser is selected.
(d) The Manager shall not be obligated to pay any expenses of or for the
Trust not expressly assumed by the Manager pursuant to this Section 1 other than
as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
-2-
<PAGE>
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust. It is also understood that the Manager and persons controlled by or
under common control with the Manager have and may have advisory, management
service, distribution or other contracts with other organizations and persons,
and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust will pay to the Manager as compensation for the Manager's
services rendered, for the facilities furnished and for the expenses borne by
the Manager pursuant to Section 1, a fee, computed and paid monthly at the
annual rate of 0.70% of the average daily net asset value of the Fund up to $200
million and 0.65% of such net asset value in excess of $200 million. The
average daily net asset value of the Fund shall be determined by taking an
average of all of the determinations of such net asset value during such month
at the close of business on each business day during such month while this
Contract is in effect. Such fee shall be payable for each month within five (5)
business days after the end of such month.
In the event that expenses of the Fund for any fiscal year should exceed
the expense limitation on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Trust are
qualified for offer and sale, the compensation due the Manager for such fiscal
year shall be reduced by the amount of such excess by a reduction or refund
thereof. In the event that the expenses with respect to the Fund could exceed
any expense limitation which the Manager may, by written notice to the Trust,
voluntarily declare to be effective subject to such terms and conditions as the
Manager may prescribe in such notice, the compensation due the Manager shall be
reduced, and, if necessary, the Manager shall bear expenses with respect to the
Fund, to the extent required by such expense limitation.
If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
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<PAGE>
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
as to the Fund unless such amendment is approved at a meeting by the affirmative
vote of a majority of the outstanding shares of the Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall remain
in full force and effect as to each Fund continuously thereafter (unless
terminated automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract by
not more than sixty days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of the Fund, and
(ii) a majority of the Trustees of the Trust who are not interested persons
of the Trust or of the Manager, by vote cast in person at a meeting called
for the purpose of voting on such approval, do not specifically approve at
least annually the continuance of this Contract, then this Contract shall
automatically terminate at the close of business on the second anniversary
of its execution, or upon the expiration of one year from the effective
date of the last such continuance, whichever is later; provided, however,
that if the continuance of this Contract is submitted to the shareholders
of the Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager may continue
to serve hereunder in a manner consistent with the Investment Company Act
of 1940 and the Rules and Regulations thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of a
majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be without
the payment of any penalty.
-4-
<PAGE>
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority of
the outstanding shares" means the affirmative vote, at a duly called and held
meeting of shareholders, (a) of the holders of 67% or more of the shares of the
Fund present (in person or by proxy) and entitled to vote at such meeting, if
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting are present in person or by proxy, or (b) of the holders of
more than 50% of the outstanding shares of the Fund entitled to vote at such
meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
Investment Company Act of 1940 and the Rules and Regulations thereunder; and the
term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934 and the Rules and Regulations thereunder.
7. NONLIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust, or to
any shareholder of the Trust, for any act or omission in the course of, or
connected with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Amended and Restated Agreement and Declaration of Trust of
the Trust is on file with the Secretary of The Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
9. THE WORDS "CCI," "PACIFIC INVESTMENT MANAGEMENT COMPANY," "PIMCO ADVISORS
INSTITUTIONAL," "PIMCO," "PIMCO ADVISORS," "NFJ," "CADENCE" OR "THOMSON".
-5-
<PAGE>
The Manager owns the words "CCI," "Pacific Investment Management Company,"
"PIMCO Advisors Institutional," "PIMCO," "PIMCO Advisors," "NFJ," "Cadence" and
"Thomson" which may be used by the Trust only with the consent of the Manager.
The Manager consents to the use of the Trust of the words "CCI," "Pacific
Investment Management Company," "PIMCO Advisors Institutional, "PIMCO," "PIMCO
Advisors," "NFJ," "Cadence" and "Thomson," in such forms as the Manager shall in
writing approve, but only on condition and so long as (i) this Contract shall
remain in full force and (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Contract expressed herein to be performed, fulfilled
or complied with by it. No such name shall be used by the Trust at any time or
in any place or for any purposes or under any conditions except as in this
section provided. The foregoing authorization by the Manager to the Trust to
use said name as part of a business or name is not exclusive of the right of the
Manager itself to use, or to authorize others to use, the same; the Trust
acknowledges and agrees that as between the Manager and the Trust, the Manager
has the exclusive right to so authorize others to use the same; the Trust
acknowledges and agrees that as between the Manager and the Trust, the Manager
has the exclusive right to so use, or authorize others to use, said words and
the Trust agrees to take such action as may reasonably be requested by the
Manager to give full effect to the provisions of this section (including,
without limitation, consenting to such use of said words). Without limiting the
generality of the foregoing, the Trust agrees that, upon any termination of this
Contract by either party or upon the violation of any of its provisions by the
Trust, the Trust will, at the request of the Manager made within six months
after the Manager has knowledge of such termination or violation, use its best
efforts to change the name of the Trust so as to eliminate all reference, if
any, to the words "CCI," "Pacific Investment Management Company, " "PIMCO
Advisors Institutional," "PIMCO," "PIMCO Advisors," "NFJ," "Cadence" and
"Thomson" and will not thereafter transact any business in a name containing the
words "CCI," "Pacific Investment Management Company," "PIMCO Advisors
Institutional," "PIMCO," "PIMCO Advisors," "NFJ," "Cadence" or "Thomson" in any
form or combination whatsoever, or designate itself as the same entity as or
successor to an entity of such name, or otherwise use the words "CCI," "Pacific
Investment Management Company," "PIMCO Advisors Institutional," "PIMCO," "PIMCO
Advisors," "NFJ," "Cadence" or "Thomson" or any other reference to the Manager.
Such covenants on the part of the Trust shall be binding upon it, its trustees,
officers, stockholders, creditors and all other persons claiming under or
through it.
IN WITNESS WHEREOF, PIMCO ADVISORS FUNDS and PIMCO ADVISORS L.P. have each
caused this instrument to be signed in duplicate in its behalf by its duly
authorized representative, all as of the day and year first above written.
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<PAGE>
PIMCO ADVISORS FUNDS
By: _________________________
Name: _________________________
Title: _________________________
PIMCO ADVISORS L.P.
By: _________________________
Name: _________________________
Title: _________________________
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<PAGE>
EXHIBIT 5D
SUB-ADVISER AGREEMENT
[SUMMIT FUND]
<PAGE>
SUB-ADVISER AGREEMENT
[SUMMIT FUND]
Sub-Adviser Agreement executed as of July __, 1996 between PIMCO ADVISORS
L.P., a Delaware limited partnership (the "Manager"), and CADENCE CAPITAL
-------
MANAGEMENT, a Delaware general partnership (the "Sub-Adviser").
-----------
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST.
(a) Subject always to the control of the Trustees of PIMCO Advisors Funds
(the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
-----
expense, will furnish continuously an investment program for the
Summit Fund series of the Trust (the "Fund") and will make investment
----
decisions on behalf of the Fund and place all orders for the purchase
and sale of portfolio securities and all other investments. In the
performance of its duties, the Sub-Adviser (1) will comply with the
provisions of the Trust's Agreement and Declaration of Trust and
By-laws, including any amendments thereto (upon receipt of such
amendments by the Sub-Adviser), and the investment objectives,
policies and restrictions of the Fund as set forth in its current
Prospectus and Statement of Additional Information (copies of which
will be supplied to the Sub-Adviser upon filing with the SEC), (2)
will use its best efforts to safeguard and promote the welfare of the
Fund, (3) will comply with other policies which the Trustees or the
Manager, as the case may be, may from time to time determine as
promptly as practicable after such policies have been communicated to
the Sub-Adviser in writing, and (4) shall exercise the same care and
diligence expected of the Trustees. The Sub-Adviser and the Manager
shall each make its officers and employees available to the other from
time to time at reasonable times to review investment policies of the
Fund and to consult with each other regarding investment affairs of
the Fund.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel,
required for it to execute its duties hereunder faithfully and (ii)
administrative facilities, including bookkeeping, clerical personnel
and equipment necessary for the efficient conduct of the investment
affairs of the Fund, including verification and oversight of the
pricing of the Fund's portfolio (but excluding determination of net
asset value and shareholder accounting services).
(c) In the selection of brokers or dealers and the placing of orders for
the purchase and sale of portfolio investments for the Fund, the
Sub-Adviser shall use its best efforts to obtain for the Fund the most
favorable price and execution available,
<PAGE>
except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described below. In
using its best efforts to obtain for the Fund the most favorable price
and execution available, the Sub-Adviser, bearing in mind the Fund's
best interests at all times, shall consider all factors it deems
relevant, including, by way of illustration, price, the size of the
transaction, the nature of the market for the security, the amount of
the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial
stability of the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject to
such policies as the Trustees of the Trust may determine and
communicate to the Sub-Adviser in writing, the Sub-Adviser shall not
be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having
caused the Trust to pay a broker or dealer that provides brokerage and
research services to the Sub-Adviser or its affiliates an amount of
commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction, if the Sub-Adviser determines
in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided
by such broker or dealer, viewed in terms of either that particular
transaction or the Sub-Adviser's overall responsibilities with respect
to the Trust and to other clients of the Sub-Adviser and its
affiliates as to which the Sub-Adviser and its affiliates exercise
investment discretion. The Trust agrees that any entity or person
associated with the Sub-Adviser or its affiliates which is a member of
a national securities exchange is expressly authorized to effect any
transaction on such exchange for the account of the Trust and any Fund
thereof which is permitted by Section 11(a) of the Securities Exchange
Act of 1934.
(d) The Sub-Adviser shall not be obligated to pay any expenses of or for
the Fund not expressly assumed by the Sub-Adviser pursuant to this
Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, director, officer or employee
of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the
Sub-Adviser and any person controlled by or under common control with the
Sub-Adviser may have an interest in the Trust. It is also understood that
the Sub-Adviser and persons controlled by or under common control with the
Sub-Adviser have and may have advisory, management service or other
contracts with other organizations and persons, and may have other
interests and businesses.
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<PAGE>
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER.
The Manager will pay the Sub-Adviser as compensation for the Sub-Adviser's
services rendered and for the expenses borne by the Sub-Adviser pursuant to
Section 1, a fee computed and paid monthly at the annual rate of 0.350% of
the average daily net asset value of the Fund up to $200 million and 0.325%
of such net assets in excess of $200 million. Such fee shall be payable for
each month within 10 business days after the end of such month.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS CONTRACT.
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment or in the event that the Management
Contract between the Manager and the Trust shall have terminated for any
reason; and this Agreement shall not be amended unless such amendment be
approved at a meeting by the affirmative vote of a majority of the
outstanding shares of the Fund, and by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not interested persons of the Trust or of
the Manager or the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall remain
in full force and effect as to the Fund continuously thereafter (unless
terminated automatically as set forth in Section 4) until terminated as
follows:
(a) The Trust may at any time terminate this Agreement by written notice
delivered or mailed by registered mail, postage prepaid, to the
Manager and the Sub-Adviser, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of the Fund,
and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the Sub-
Adviser, by vote cast in person at a meeting called for the purpose of
voting on such approval, do not specifically approve at least annually
the continuance of this Agreement, then this Agreement shall
automatically terminate at the close of business on the second
anniversary of its execution, or upon the expiration of one year from
the effective date of the last such continuance,
-3-
<PAGE>
whichever is later; provided, however, that if the continuance of this
Agreement is submitted to the shareholders of the Fund for their
approval and such shareholders fail to approve such continuance of
this Agreement as provided herein, the Sub-Adviser may continue to
serve hereunder in a manner consistent with the Investment Company Act
of 1940, as amended from time to time, and the rules and regulations
thereunder (the "1940 Act"), or
--------
(c) The Manager may at any time terminate this Agreement by not less than
60 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Sub-Adviser, and the Sub-Adviser may at any
time terminate this Agreement by not less than 180 days' written
notice delivered or mailed by registered mail, postage prepaid, to the
Manager.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of the Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Sub-Adviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Sub-Adviser shall fail
to be registered as an investment adviser under the Investment Advisers Act
of 1940, as amended from time to time, and under the laws of any
jurisdiction in which the Sub-Adviser is required to be registered as an
investment adviser in order to perform its obligations under this agreement
or any other agreement concerning the provision of investment advisory
services to the Trust, (b) the Sub-Adviser shall have been served or
otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust, (c) there is a change in control
of the Sub-Adviser or any parent of the Sub-Adviser within the meaning of
the 1940 Act, (d) there is a material adverse change in the business or
financial position of the Sub-Adviser or (e) the Chairman of the Sub-
Adviser or the portfolio manager of the Fund shall have been changed.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding shares" means the affirmative vote, at a duly called and
held meeting of shareholders, (a) of the holders of 67% or more of the
shares of the Fund, as the case may be, present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Fund, as the case may be, entitled to vote at
such meeting
-4-
<PAGE>
are present in person or by proxy, or (b) of the holders of more than 50%
of the outstanding shares of the Fund, as the case may be, entitled to vote
at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their respective
meanings defined in the 1940 Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder, subject, however, to such exemptions
as may be granted by the Securities and Exchange Commission under the 1940
Act and the rules and regulations thereunder; and the term "brokerage and
research services" shall be the meaning given in the 1934 Act and the rules
and regulations thereunder.
8. NONLIABILITY OF SUB-ADVISER.
Notwithstanding any other provisions of this Agreement, in the absence of
willful misfeasance, bad faith or gross negligence on the part of the Sub-
Adviser, or reckless disregard of its obligations and duties hereunder, the
Sub-Adviser, including its officers, directors and shareholders, shall not
be subject to any liability to the Manager, to the Trust, to the Fund, or
to any shareholder, officer, director or Trustee thereof, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. EXERCISE OF VOTING RIGHTS.
Except with the agreement or on the specific instructions of the Trustees
of the Trust or the Manager, the Sub-Adviser shall not exercise or procure
the exercise of any voting right attaching to investments of the Fund.
-5-
<PAGE>
IN WITNESS WHEREOF, PIMCO ADVISORS L.P. and CADENCE CAPITAL MANAGEMENT have
each caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative, all as of the day and year first above written.
PIMCO ADVISORS L.P. CADENCE CAPITAL MANAGEMENT
By: ______________________ By: _____________________
Title: Title:
Accepted and agreed to as of the
day and year first above written:
PIMCO ADVISORS FUNDS
By: ___________________________
Title:
A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding upon the assets property of the Fund.
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<PAGE>
EXHIBIT 9D
ADMINISTRATION AGREEMENT
<PAGE>
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made as of the 1st day of January 1996, between
PIMCO Advisors L.P., a Delaware limited partnership ("PALP"), and Pacific
Investment Management Company, a Delaware general partnership (the
"Administrator" or "PIMCO").
WITNESSETH
WHEREAS, PALP has management contracts (the "Management Contracts") with
PIMCO Advisors Funds, a Massachusetts business trust ("PAF"), and Cash
Accumulation Trust, a Massachusetts business trust ("CAT") (PAF and CAT are each
a "Trust" and, collectively, the "Trusts");
WHEREAS, each Trust is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, PAF has established multiple series including its Equity Income
Fund, Value Fund, Growth Fund, Target Fund, Discovery Fund, Opportunity Fund,
Innovation Fund, International Fund, Precious Metals Fund, Global Income Fund,
High Income Fund, Total Return Income Fund, Tax Exempt Fund, U.S. Government
Fund, Short-Intermediate Fund and Money Market Fund and CAT has established its
National Money Market Fund (each such series a "Fund" and, collectively the
"Funds");
WHEREAS, PALP, pursuant to the Management Contracts, provides various
investment advisory, administrative and other services to the Trusts;
WHEREAS, PALP wishes to retain PIMCO to provide administrative and other
services (but not investment advisory services) to the Trusts with respect to
the Funds in the manner and on the terms hereinafter set forth;
WHEREAS, PIMCO is willing to furnish such services in the manner and on the
terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Appointment. PALP hereby appoints PIMCO as the Administrator to
-----------
provide the administrative and other services set forth in Section 2 with
respect to the Funds for the period and on the terms set forth in this
Agreement. The Administrator accepts such appointment and agrees during
such period to render the services herein set forth for the compensation
provided in Section 5.
<PAGE>
In the event any Trust establishes and designates additional series with
respect to which PALP desires to retain the Administrator to render
administrative and other services hereunder, PALP shall notify the
Administrator in writing, whereupon such additional series shall become a
Fund hereunder unless the Administrator is not willing to render such
services and it so notifies PALP in writing within five (5) days of
receiving such notice.
2. Duties. Subject to the general supervision of the Board of Trustees of
------
each Trust and PALP, the Administrator shall provide all organizational,
administrative and other services reasonably necessary for the operation of
the Funds other than the investment advisory services provided by PALP
and/or various sub-advisors pursuant to the Management Contract(s) with
each Trust and the sub-advisory agreements between PALP and the sub-
advisors.
(a) Administrative Services. Subject to the general supervision of
-----------------------
Board of Trustees of each Trust and PALP, the Administrator shall provide
or procure, at the Administrator's expense, services to include the
following: (i) coordinating matters relating to the operation of the
Funds, including any necessary coordination among the advisor or advisors
to the Funds, the custodian, transfer agent, dividend disbursing agent
and record keeping agent (including pricing and valuation of the Funds),
accountants, attorneys, and other parties performing services or
operational functions for the Funds; (ii) providing the Funds with the
services of a sufficient number of persons competent to perform such
administrative and clerical functions as are necessary to ensure
compliance with federal securities laws, as well as other applicable
laws, and to provide effective administration of the Funds; (iii)
maintaining, or supervising the maintenance by third parties, of such
books and records of the Trusts and the Funds as may be required by
applicable federal or state law other than any records and ledgers that
PALP indicates it will maintain under the Management Contracts; (iv)
preparing or supervising the preparation by third parties of all federal,
state, and local tax returns and reports of the Funds required by
applicable law; (v) preparing, filing, and arranging for the distribution
of proxy materials and annual and semi-annual financial statements to
shareholders of the Funds as required by applicable law; (vi) preparing
and arranging for the filing of such registration statements and other
documents with the SEC and other federal and state regulatory authorities
as may be required to register the shares of the Funds and qualify the
Trusts to do business or as otherwise required by applicable law; (vii)
taking such other action with respect to the Funds as may be required by
applicable law, including, without limitation, the rules and
regulations of the SEC and of state securities commissions and other
regulatory agencies; and (viii) providing information about the Trusts
and their Funds; and (ix) providing the Funds with adequate personnel,
office space, communications facilities, and other facilities necessary
for the Funds' operations as contemplated in this Agreement. It is
understood and agreed that any printing, mailing and filing fee expenses
in connection with items (v) and/or (vi) above shall not be the
responsibility of the Administrator.
-2-
<PAGE>
(b) Other Services. The Administrator shall assist each Trust and the
--------------
Funds to procure at the expense of the respective Trust the following
persons to provide services to the Funds: (i) a custodian or custodians
for the Funds to provide for the safekeeping of the Funds' assets; (ii) a
recordkeeping agent to maintain the fund accounting records for the
Funds; (iii) a transfer agent for the Funds; and (iv) a dividend
disbursing agent for the Funds.
(c) The Administrator shall also make its officers and employees
available to the Board of Trustees and officers of each Trust for
consultation and discussions regarding the administration of the Funds
and services provided to the Funds under this Agreement.
(d) In performing these services, the Administrator:
(i) Shall conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state
laws and regulations, with any applicable procedures adopted by
each Trust's Board of Trustees, with the provisions of each
Trust's Registration Statement filed on Form N-1A as supplemented
or amended from time to time, and with the Agreement and
Declaration of Trust and Bylaws of each Trust, as amended and/or
restated from time to time.
(ii) Will make available to each Trust, promptly upon request,
any of the Fund's books and records as are maintained under this
Agreement, and will furnish to regulatory authorities having the
requisite authority any such books and records and any
information or reports in connection with the Administrator's
services under this Agreement that may be requested in order to
ascertain whether the operations of such Trust are being
conducted in a manner consistent with applicable laws and
regulations.
(iii) Will regularly report to each Trust's Board of Trustees
(including in connection with each approval of a Management
Contract pursuant to Section 15 of the 1940 Act) on the services
provided under this Agreement and will furnish each Trust's Board
of Trustees with respect to the Funds such periodic and special
reports as the Trustees may reasonably request.
3. Documentation. PALP has delivered copies of each of the following
--------------
documents with respect to each Trust to the Administrator and will deliver
to it all future amendments and supplements thereto, if any:
(a) each Trust's Registration Statement as filed with the SEC and any
amendments thereto;
(b) exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration
Statement described above; and
-3-
<PAGE>
(c) copies of the Agreement and Declaration of Trust and Bylaws of
each Trust, as amended and restated through the date hereof.
4. Independent Contractor. The Administrator shall for all purposes
----------------------
herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Board of Trustees
of a Trust from time to time, have no authority to act for or represent any
Trust in any way or otherwise be deemed its agent.
5. Compensation. As compensation for the services rendered under this
------------
Agreement, PALP shall pay to the Administrator a fee at an annual rate of
.0125% of the average daily net assets of each of the Funds. The average
daily net asset value of each Fund shall be determined by taking an average
of all of the determinations of such net asset value during such month at
the close of business on each business day during such month while this
Agreement is in effect. The fees payable to the Administrator for all of
the Funds shall be paid monthly within five (5) business days after the end
of such month. If for any calendar year during the term of this Agreement,
the aggregate compensation payable to the Administrator hereunder is less
than $500,000, then on or before January 15th of the subsequent year, PALP
shall pay the Administrator a special fee equal to the difference between
$500,000 and the aggregate compensation payable to the Administrator for
such prior year. If the Administrator shall serve for less than any whole
month or less than any whole year, the foregoing compensation shall be
prorated.
6. Non-Exclusivity. It is understood that the services of the
---------------
Administrator hereunder are not exclusive, and the Administrator shall be
free to render similar services to other investment companies and other
clients.
7. Expenses. During the term of this Agreement, the Administrator will
--------
pay all expenses (except those to be borne by the Trusts pursuant to the
Management Contracts) incurred by it in connection with its obligations
under this Agreement, which shall include the expenses of maintaining its
staff and personnel and providing the equipment, office space, and
facilities necessary to perform its obligations under this Agreement.
8. Liability. The Administrator shall give PALP and each Trust the
---------
benefit of the Administrator's best efforts in rendering services under
this Agreement. The Administrator may rely on information reasonably
believed by it to be accurate and reliable. As an inducement for the
Administrator's undertaking to render services under this Agreement, PALP
agrees that neither the Administrator nor its officers, directors, or
employees shall be subject to any liability for, or any damages, expenses
or losses incurred in connection with, any act or omission or mistake in
judgment connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or
negligence in performance of the Administrator's duties, or by reason of
reckless disregard of the Administrator's obligations and duties under this
Agreement. This provision shall govern only the liability to PALP of the
Administrator and that of its officers, directors, and employees, and shall
in no way govern any other liability to either Trust or the Administrator
or provide a defense for any other person.
-4-
<PAGE>
9. Term and Continuation. This Agreement shall take effect as of January
---------------------
1, 1996 and shall remain in effect, unless sooner terminated as provided
herein, for two years from such date, and shall continue thereafter on an
annual basis with respect to each Fund, unless terminated as set forth
below.
This Agreement may be terminated:
(a) by PALP at any time, without the payment of any penalty, upon 60 days'
written notice to the Administrator; or
(b) by the Administrator at any time, without the payment of any penalty,
upon 60 days' written notice to PALP.
This Agreement shall automatically terminate as to any Fund if the
Management Contract with respect to such Fund between PALP and the
applicable Trust shall terminate.
10. Notices. Notices of any kind to be given to the Administrator by PALP
-------
shall be in writing and shall be duly given if mailed or delivered to the
Administrator at 840 Newport Center Drive, Newport Beach, California 92660,
or to such other address or to such individual as shall be specified by the
Administrator. Notices of any kind to be given to PALP by the Administrator
shall be in writing and shall be duly given if mailed or delivered to PALP
at 800 Newport Center Drive, Suite 100, Newport Beach, California 92660, or
to such other address or to such individual as shall be specified by PALP.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original.
12. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or order of the SEC
thereunder.
(b) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable. To the
extent that any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise with regard to any party
hereunder, such provisions with respect to other parties hereto shall not
be affected thereby.
(c) The captions in this Agreement are included for convenience only and
in no way define any of the provisions hereof or otherwise affect their
construction or effect.
-5-
<PAGE>
(d) This Agreement may not be assigned by PALP or the Administrator
without the consent of the other party.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
PIMCO ADVISORS L.P.
By: /s/ William D. Cvengros
----------------------------
Name: William D. Cvengros
----------------------------
Title: Chief Executive Officer
---------------------------
PACIFIC INVESTMENT
MANAGEMENT COMPANY
By: /s/ Brent R. Harris
----------------------------
Name: Brent R. Harris
----------------------------
Title: Managing Director
---------------------------
-6-
<PAGE>
Ex-99.B9(f)
ORGANIZATIONAL EXPENSE REIMBURSEMENT AGREEMENT
Exhibit 99.B9(j)
Organizational Expense Reimbursement Agreement
for the PIMCO Advisors Summit Fund
<PAGE>
Form of Organizational Expense Reimbursement Agreement
PIMCO Advisors Summit Fund
PIMCO Advisors L.P.
This Agreement is made as of this ____ day of _______, 1996, by and between
PIMCO Advisors Funds (the "Trust") on behalf of PIMCO Advisors Summit Fund (the
"Fund") and PIMCO Advisors L.P. ("PALP").
WHEREAS, the Trust is registered as an open-end management series investment
company under the Investment Company Act of 1940 and is in the process of
registering and organizing the Fund;
WHEREAS, there have been and will be certain organizational expenses incurred as
a part of such registration and organization, which are properly expenses of the
Fund, that have been and will in the future be paid by PALP by reason of the
fact that the Fund was not or will not be capitalized when such expenses
otherwise became or become due and payable;
WHEREAS, such organizational expenses include expenses necessary to organize and
establish the Funds and to create the necessary relationships and legal
qualifications to enable it to commence business and operations, including, but
not by way of limitation, such expenses as outside legal counsel's fees and
independent public accountant fees (such expenses are hereinafter referred to as
"Organizational Expenses"):
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed as follows:
1. Upon this issuance and sale of shares of the Fund to the public, the
Trust shall reimburse and pay to PALP up to $50,000 of the amount
expended by PALP for organizational Expenses for the Fund.
<PAGE>
Organizational Expense
Reimbursement Agreement Page 2
2. Such reimbursement shall be paid by the Trust, out of the assets of
the Fund, to PALP upon demand, without interest, and in no event
later than five years from the commencement of operations of the Fund.
Upon demand for payment, PALP shall present copies of invoices or
receipts, and copies of canceled checks or other evidence of payment
by PALP of the Organization Expenses for which it is demanding
reimbursement.
3. A copy of the Amended and Restated Agreement and Declaration of Trust
of the Trust is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Trust as Trustees and not
individually, and the obligations of or arising out of this instrument
are not binding upon any of the Trustees or shareholders individually
but are binding only upon the assets and property of the Fund.
PIMCO Advisors Funds
By: Robert A. Prindiville
President
PIMCO Advisors L.P.
By: William D. Cvengros
President and
Chief Executive Officer
<PAGE>
EXHIBIT 5Bii
CONTENT OF COOPERS & LYBRAND L.L.P.
<PAGE>
Exhibit 99.B11
Consent of Independent Accountants
Coopers | Coopers & Lybrand L.L.P.
& Lybrand | a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendement No. 34 to
the Registration Statement (Form N-1A) of our report dated November 16, 1995 on
our audits of the financial statements and financial highlights of PIMCO
Advisors Funds to be filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company Act of 1940,
as amended. We also consent to the reference to our Firm under the heading
Independent Accountants in the Statement of Additional Information which is part
of this Registration Statement.
Coopers & Lybrand L.L.P.
New York, New York
April 18, 1996
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland.
<PAGE>
DISTRIBUTION AND SERVICING PLAN (CLASS A)
Exhibit 99.B15 (a)
Class A Distribution and Servicing Plan
<PAGE>
EXHIBIT A
---------
<PAGE>
PIMCO ADVISORS FUNDS
--------------------
Amended and Restated
Distribution and Servicing Plan (Class A)
Revised through February 8, 1996
This Plan (the "Plan") dated as of September 11, 1990, and amended
thereafter, constitutes the Distribution and Servicing Plan with respect to the
Class A shares of PIMCO ADVISORS FUNDS, a Massachusetts business trust (the
"Trust").
Section 1. The Trust will pay to the principal distributor of the
Trust's shares (the "Distributor") a fee (the "Servicing Fee") for services
rendered and expenses borne by the Distributor in connection with personal
service rendered to Class A shareholders of the Trust and/or maintenance of
Class A shareholder accounts, at an annual rate with respect to each Fund
(series) of the Trust (a "Fund") not to exceed 0.25% of the Fund's average daily
net assets attributable to its Class A shares. Subject to such limit and
subject to the provisions of Section 9 hereof, the Servicing Fee shall be as
approved from time to time by (a) the Trustees of the Trust and (b) the
Independent Trustees of the Trust and may be paid in respect of services
rendered and expenses borne in the past as to which no Servicing Fee was paid on
account of such limitation. If at any time this Plan shall not be in effect with
respect to all Funds of the Trust, the Servicing Fee shall be computed on the
basis of net assets attributable to Class A shares of those Funds for which the
Plan is in effect. The Servicing Fee shall be accrued daily and paid monthly or
at such other intervals as the Trustees shall determine.
Section 2. The Servicing Fee may be spent by the Distributor on personal
services rendered to Class A shareholders of the Trust and/or maintenance of
Class A shareholder accounts (but may not be spent on record keeping charges,
accounting expenses, transfer costs, or custodian fees). The Distributor's
expenditures may include, but shall not be limited to, compensation to, and
expenses (including telephone and overhead expenses) of, financial consultants
or other employees of the Distributor or of participating or introducing
brokers, certain banks and other financial intermediaries who aid in the
processing of purchase or redemption requests for Class A shares or the
processing of dividend payments with respect to Class A shares, who provide
information periodically to shareholders showing their positions in a Fund's
Class A shares, who forward communication from the Trust to Class A
shareholders, who render ongoing advice concerning the suitability of particular
investment opportunities offered by the Trust in light of the shareholder's
needs, who respond to inquiries from Class A shareholders relating to such
services, or who train personnel in the provision of such services.
-2-
<PAGE>
Section 3. This Plan shall not take effect with respect to any Fund of the
Trust until it has been approved by a vote of at least a majority of the
outstanding Class A voting securities of that Fund. This Plan shall be deemed to
have been effectively approved with respect to any Fund if a majority of the
outstanding Class A voting securities of that Fund votes for the approval of
this Plan, notwithstanding that this Plan has not been approved by a majority of
the outstanding Class A voting securities of any other Fund or that this Plan
has not been approved by a majority of the outstanding Class A voting securities
of the Trust.
Section 4. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 5. This Plan shall continue in effect for a period of more than one
year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 4. It is acknowledged that the Distributor may expend or impute interest
expense in respect of its activities or expenses under this Plan and the
Trustees and the Independent Trustees may give such weight to such interest
expense as they determine in their discretion.
Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
Section 7. This Plan may be terminated at any time with respect to the
Class A shares of any Fund by vote of a majority of the Independent Trustees, or
by vote of a majority of the outstanding Class A voting securities of that Fund.
Section 8. All agreements with any person relating to implementation of
this Plan with respect to any Fund shall be in writing, and any agreement
related to this Plan with respect to any Fund shall provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of majority of the outstanding Class A voting securities of such
Fund, on not more than 60 days' written notice to any other party to
the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
-3-
<PAGE>
Section 9. This Plan may not be amended to increase materially the amount
of Servicing Fees permitted pursuant to Section 1 hereof without approval in the
manner provided in Section 3 hereof, and all material amendments to this Plan
shall be approved in the manner provided for approval of this Plan in Section 4
hereof.
Section 10. As used in this Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, (b) the terms "assignment", "interested person"
and "majority of the outstanding voting securities" shall have the respective
meanings specified in the Act and the rules and regulations thereunder, subject
to such exemptions as may be granted by the Securities and Exchange Commission,
(c) the term "introducing broker" shall mean any broker or dealer who is a
member of the National Association of Securities Dealers, Inc. and who is acting
as an introducing broker pursuant to clearing agreements with the Distributor;
and (d) the term "participating broker" shall mean any broker or dealer which is
a member of the National Association of Securities Dealers, Inc. and who has
entered into a selling or dealer agreement with the Distributor.
Section 11. This Plan has been adopted pursuant to Rule 12b-1 under the Act
and is designed to comply with all applicable requirements imposed under such
Rule. To the extent that any or all of the Servicing Fees may be deemed to have
been primarily intended to result in the sale of the Trust's shares (within the
meaning of Rule 12b-1), all those Servicing Fees paid by the Trust shall be
deemed to be made under this Plan and pursuant to clause (b) of such Rule.
Dated: February 8, 1996
----------------
-4-
<PAGE>
DISTRIBUTION AND SERVICING PLAN (CLASS B)
Exhibit 99.B15 (b)
Class B Distribution and Servicing Plan
<PAGE>
EXHIBIT B
---------
<PAGE>
PIMCO ADVISORS FUNDS
--------------------
Distribution and Servicing Plan (Class B)
Revised through February 8, 1996
This Plan (the "Plan"), as amended from time to time, constitutes the
Distribution and Servicing Plan with respect to the Class B shares of PIMCO
ADVISORS FUNDS, a Massachusetts business trust (the "Trust").
Section 1. The Trust will pay to the principal distributor of the Trust's
shares (the "Distributor") a fee (the "Distribution Fee") for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class B shares of the Trust and another fee (the "Servicing Fee") in connection
with personal services rendered to Class B shareholders of the Trust and/or
maintenance of Class B shareholder accounts. The Distribution Fee shall be paid
at an annual rate with respect to each Fund (series) of the Trust (a "Fund") not
to exceed 0.75 of 1% of the Fund's average daily net assets attributable to its
Class B shares, and the Servicing Fee shall be paid at an annual rate not to
exceed 0.25 of 1% of the Fund's average daily net assets attributable to Class B
shares. Subject to such limits and subject to the provisions of Section 9
hereof, the Distribution and Servicing Fees shall be as approved from time to
time by (a) the Trustees of the Trust and (b) the Independent Trustees of the
Trust and may be paid in respect of services rendered and expenses borne in the
past as to which no Distribution and Servicing Fees were paid on account of such
limitation. If at any time this Plan shall not be in effect with respect to all
Funds of the Trust, the Distribution and Servicing Fees shall be computed on the
basis of sales of Class B shares or net assets attributable to Class B shares
(as applicable) of those Funds for which the Plan is in effect. The
Distribution and Servicing Fees shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
Section 2. The Distribution Fee may be spent by the Distributor on any
activities or expenses primarily intended to result in the sale of Class B
shares of the Trust, including, but not limited to compensation to, and expenses
(including overhead and telephone expenses) of, financial consultants or other
employees of the Distributor or of participating or introducing brokers who
engage in distribution of Class B shares, printing of prospectuses and reports
for other than existing Class B shareholders, advertising and preparation,
printing and distribution of sales literature. The Servicing Fee may be spent
by the Distributor on personal services rendered to Class B shareholders of the
Trust and/or maintenance of Class B shareholder accounts (but may not be spent
on recordkeeping charges, accounting expenses, transfer costs, or custodian
fees). The Distributor's expenditures may include, but shall not be limited to,
compensation to, and expenses (including telephone and overhead expenses) of,
financial consultants or other employees of the Distributor or of participating
or introducing brokers, certain banks and other financial intermediaries who aid
in the processing of purchase or redemption requests for Class B
-2-
<PAGE>
shares or the processing of dividend payments with respect to Class B shares,
who provide information periodically to shareholders showing their positions in
a Fund's Class B shares, who forward communications from the Trust to Class B
shareholders, who render ongoing advice concerning the suitability of particular
investment opportunities offered by the Trust in light of the shareholder's
needs, who respond to inquiries from Class B shareholders relating to such
services, or who train personnel in the provision of such services.
Section 3. This Plan shall not take effect with respect to any Fund of the
Trust until it has been approved by a vote of at least a majority of the
outstanding Class B voting securities of that Fund. This Plan shall be deemed
to have been effectively approved with respect to any Fund if a majority of the
outstanding Class B voting securities of that Fund votes for the approval of
this Plan, notwithstanding that this Plan has not been approved by a majority of
the outstanding Class B voting securities of any other Fund or that this Plan
has not been approved by a majority of the outstanding Class B voting securities
of the Trust.
Section 4. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 5. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 4. It is acknowledged that the Distributor may expend or impute
interest expense in respect of its activities or expenses under this Plan and
the Trustees and the Independent Trustees may give such weight to such interest
expense as they determine in their discretion.
Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
Section 7. This Plan may be terminated at any time with respect to the
Class B shares of any Fund by vote of a majority of the Independent Trustees, or
by vote of a majority of the outstanding Class B voting securities of that Fund.
Section 8. All agreements with any person relating to implementation of
this Plan with respect to any Fund shall be in writing, and any agreement
related to this Plan with respect to any Fund shall provide:
-3-
<PAGE>
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Class B voting securities of
such Fund, on not more than 60 days' written notice to any other party
to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 9. This Plan may not be amended to increase materially the
aggregate amount of Distribution and Servicing Fees permitted pursuant to
Section 1 hereof without approval in the manner provided in Section 3 hereof,
and all material amendments to this Plan shall be approved in the manner
provided for approval of this Plan in Section 4 hereof.
Section 10. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission, (c) the term "introducing broker" shall mean any broker or
dealer who is a member of the National Association of Securities Dealers, Inc.
and who is acting as an introducing broker pursuant to clearing agreements with
the Distributor; and (d) the term "participating broker" shall mean any broker
or dealer which is a member of the National Association of Securities Dealers,
Inc. and who has entered into a selling or dealer agreement with the
Distributor.
Section 11. This Plan has been adopted pursuant to Rule 12b-1 under the
Act and is designed to comply with all applicable requirements imposed under
such Rule. All Distribution Fees and, to the extent that any or all of the
Servicing Fees may be deemed to have been primarily intended to result in the
sale of the Trust's shares (within the meaning of Rule 12b-1), those Servicing
Fees shall be deemed to have been paid under this Plan and pursuant to clause
(b) of such Rule.
Dated: February 8, 1996
----------------
-4-
<PAGE>
DISTRIBUTION AND SERVICING PLAN (CLASS C)
Exhibit 99.B15(c)
Class C Distribution and Servicing Plan
<PAGE>
EXHIBIT C
---------
<PAGE>
PIMCO ADVISORS FUNDS
--------------------
Fourth Amended and Restated
Distribution and Servicing Plan (Class C)
Revised through February 8, 1996
This Plan (the "Plan"), dated as of April 23, 1987, and amended thereafter,
constitutes the Distribution and Servicing Plan with respect to the Class C
shares of PIMCO ADVISORS FUNDS, a Massachusetts business trust (the "Trust").
Section 1. The Trust will pay to the principal distributor of the Trust's
shares (the "Distributor") a fee (the "Distribution Fee") for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class C shares of the Trust and another fee (the "Servicing Fee") in connection
with personal services rendered to Class C shareholders of the Trust and/or
maintenance of Class C shareholder accounts. The Distribution Fee shall be paid
at an annual rate with respect to each Fund (series) of the Trust (a "Fund") not
to exceed 0.75 of 1% of the Fund's average daily net assets attributable to its
Class C shares, and the Servicing Fee shall be paid at an annual rate not to
exceed 0.25 of 1% of the Fund's average daily net assets attributable to Class C
shares. Subject to such limits and subject to the provisions of Section 9
hereof, the Distribution and Servicing Fees shall be as approved from time to
time by (a) the Trustees of the Trust and (b) the Independent Trustees of the
Trust and may be paid in respect of services rendered and expenses borne in the
past as to which no Distribution and Servicing Fees were paid on account of such
limitation. If at any time this Plan shall not be in effect with respect to all
Funds of the Trust, the Distribution and Servicing Fees shall be computed on the
basis of sales of Class C shares or net assets attributable to Class C shares
(as applicable) of those Funds for which the Plan is in effect. The
Distribution and Servicing Fees shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
Section 2. The Distribution Fee may be spent by the Distributor on any
activities or expenses primarily intended to result in the sale of Class C
shares of the Trust, including, but not limited to compensation to, and expenses
(including overhead and telephone expenses) of, financial consultants or other
employees of the Distributor or of participating or introducing brokers who
engage in distribution of Class C shares, printing of prospectuses and reports
for other than existing Class C shareholders, advertising and preparation,
printing and distribution of sales literature. The Servicing Fee may be spent
by the Distributor on personal services rendered to Class C shareholders of the
Trust and/or maintenance of Class C shareholder accounts (but may not be spent
on record keeping charges, accounting expenses, transfer costs, or custodian
fees). The Distributor's expenditures may include, but shall not be limited to,
compensation to, and expenses (including telephone and overhead expenses) of,
financial consultants or other employees of the Distributor or of participating
or introducing brokers, certain banks and other financial intermediaries who aid
in the processing of purchase or redemption requests for Class C
-2-
<PAGE>
shares or the processing of dividend payments with respect to Class C shares,
who provide information periodically to shareholders showing their positions in
a Fund's Class C shares, who forward communications from the Trust to Class C
shareholders, who render ongoing advice concerning the suitability of particular
investment opportunities offered by the Trust in light of the shareholder's
needs, who respond to inquiries from Class C shareholders relating to such
services, or who train personnel in the provision of such services.
Section 3. This Plan shall not take effect with respect to any Fund of the
Trust until it has been approved by a vote of at least a majority of the
outstanding Class C voting securities of that Fund. This Plan shall be deemed
to have been effectively approved with respect to any Fund if a majority of the
outstanding Class C voting securities of that Fund votes for the approval of
this Plan, notwithstanding that this Plan has not been approved by a majority of
the outstanding Class C voting securities of any other Fund or that this Plan
has not been approved by a majority of the outstanding Class C voting securities
of the Trust.
Section 4. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 5. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 4. It is acknowledged that the Distributor may expend or impute
interest expense in respect of its activities or expenses under this Plan and
the Trustees and the Independent Trustees may give such weight to such interest
expense as they determine in their discretion.
Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
Section 7. This Plan may be terminated at any time with respect to the
Class C shares of any Fund by vote of a majority of the Independent Trustees, or
by vote of a majority of the outstanding Class C voting securities of that Fund.
Section 8. All agreements with any person relating to implementation of
this Plan with respect to any Fund shall be in writing, and any agreement
related to this Plan with respect to any Fund shall provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of majority
-3-
<PAGE>
of the outstanding Class C voting securities of such Fund, on not more
than 60 days' written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 9. This Plan may not be amended to increase materially the
aggregate amount of Distribution and Servicing Fees permitted pursuant to
Section 1 hereof without approval in the manner provided in Section 3 hereof,
and all material amendments to this Plan shall be approved in the manner
provided for approval of this Plan in Section 4 hereof.
Section 10. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission, (c) the term "introducing broker" shall mean any broker or
dealer who is a member of the National Association of Securities Dealers, Inc.
and who is acting as an introducing broker pursuant to clearing agreements with
the Distributor; and (d) the term "participating broker" shall mean any broker
or dealer which is a member of the National Association of Securities Dealers,
Inc. and who has entered into a selling or dealer agreement with the
Distributor.
Section 11. This Plan has been adopted pursuant to Rule 12b-1 under the
Act and is designed to comply with all applicable requirements imposed under
such Rule. All Distribution Fees and, to the extent that any or all of the
Servicing Fees may be deemed to have been primarily intended to result in the
sale of the Trust's shares (within the meaning of Rule 12b-1), those Servicing
Fees shall be deemed to have been paid under this Plan and pursuant to clause
(b) of such Rule.
Dated: February 8, 1996
----------------
-4-
<PAGE>
Exhibit 19b
Power of Attorney
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned Treasurer and Principal Financial and Accounting Officer
of PIMCO Advisors Funds and Cash Accumulation Trust, hereby constitute and
appoint Robert A. Prindiville, Newton B. Schott, Jr. and Joseph B. Kittredge,
Jr., and each of them singly, my true and lawful attorneys, with full power to
them and each of them, to sign for me, and in my name and in the capacities
indicated below, any and all amendments (including post-effective amendments) to
the Registration Statements of PIMCO Advisors Funds and Cash Accumulation Trust
on Form N-1A and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys full power and authority to do and perform each and
every act and thing requisite or necessary to be done in the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys or any of them lawfully could do or cause
to be done by virtue hereof.
Name: Capacity: Date:
- ---- -------- ----
/s/ John P. Hardaway Treasurer and Principal 2/8/96
- -------------------------
John P. Hardaway Financial and Accounting
Officer
