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President's Letter
DEAR FELLOW SHAREHOLDER
During the past year the financial markets have certainly had their share of ups
and downs. For those long-term investors who remained focused on the bigger
picture, however, this year brought its rewards. The year-to-date ended
September 30, 1996, saw the stock market, as measured by the Standard & Poor's
500 Index, up a healthy 13.5%. And after early-year losses, the bond market, as
measured by the Lehman Aggregate Bond Index, rebounded and was up 0.6%. For a
detailed review of the stock and bond markets, please refer to the discussion on
the following page.
A VOLATILE YEAR Uncertainty over the strength of the economy has been one of the
driving forces behind the market performance over the last twelve months. Each
new piece of economic data was closely scrutinized in the hope of determining
where the economy was moving. But the data has often been conflicting, confusing
investors and leading to market fluctuations.
The most visible example of the focus on the economy and short-term
events occurred this past March, when the government announced that over 700,000
new jobs were created the previous month. This announcement led to concerns of
rising inflation and interest rates, which in turn led to a 171 point (3%) drop
in the Dow Jones Industrial Average and a 3.5% drop in the average price of
bonds.
LOOKING AHEAD Unfortunately, no clear economic picture has yet evolved and the
market still appears fixated on very short-term events, meaning market
volatility is likely to continue. We at PIMCO Advisors believe investors should
avoid making rash decisions during this type of volatile period and should
instead remain focused on longer-term investment goals.
We also urge our shareholders to have realistic expectations for
investment performance, especially in the stock market. After a record-setting
six-year bull market, it will be increasingly difficult for stocks to post
annual double-digit gains. The article on page four provides a number of
strategies to consider with your financial advisor given this situation and
current market conditions.
As an investor in the PIMCO Advisors Funds, you have received a proxy
statement and ballot concerning a proposal to consolidate and restructure the
PIMCO Advisors Funds with the institutional PIMCO Funds family. We're very
excited about the $24 billion fund family which can result from this transaction
and the potential benefits to our shareholders. We urge you to cast your vote as
soon as possible, if you have not already done so.
If approved, the PIMCO Funds would combine with two existing trusts:
PIMCO Funds: Multi-Manager Series and the PIMCO Funds: Pacific Investment
Management Series. These trusts will be led by two experienced investment
management professionals, Stephen Treadway and Brent Harris, respectively. As
the PIMCO Advisors Funds will cease to exist, I will no longer serve as
President, but I am standing for election as a Trustee of the PIMCO Advisors
Funds will cease to exist, I will no longer serve as President, but I am
standing for election as a Trustee of the PIMCO Funds: Multi-Manager Series.
This will allow me to continue working for the interests of our shareholders. I
would like to thank you for the support you have placed in PIMCO Advisors by
entrusting us with your investment dollars.
Sincerely,
/s/ Robert A. Prindiville
Robert A. Prindiville
President
November 15, 1996
IN THE NEWS
PIMCO Proposes
Consolidation of Fund Families
We're pleased to announce a proposal to restructure and consolidate the PIMCO
Advisors Funds with the institutional PIMCO Funds family. If approved by
shareholders, all of the funds will fall under the "PIMCO Funds" banner. Each of
our stock and bond funds will continue to utilize the same PIMCO Advisors
investment firms.* If the consolidation is approved you'll experience a host of
potential benefits.
STRONG PERFORMANCE HISTORIES To avoid duplication and confusion, several of our
Funds will merge into existing institutional PIMCO Funds. In almost all cases,
the funds' manager will stay the same. By and large, the institutional funds
have strong track records and longer performance histories.
BOND FUND EXPENSES REDUCED In the future, the total expenses incurred by retail
investors in our taxable bond funds will be substantially lower than they have
been in the past.
EXPANDED FUND FAMILY By offering nine additional institutional PIMCO funds that
have established track records our fund family will grow to 25 funds. That would
give you added flexibility should your investment objectives change, or if you
wish to make an exchange among our funds.
INVESTMENT CLOUT The consolidated fund family will be one of the largest fund
complexes in the country. With the initial assets of $24 billion (based on
current values), this size can mean greater cost efficiencies when buying and
selling portfolio securities and negotiating fees.
CONSOLIDATION TIMING By now, all investors who owned shares of PIMCO Advisors
Funds as of October 18, 1996 should have received one or more proxy statements
and ballots. To avoid the cost of follow-up mailings, we urge these shareholders
to cast their ballot as soon as possible. If the consolidation is approved, its
anticipated that the changes would occur in mid-January.
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* If approved, the PIMCO Advisors Money Market Fund will be merged into the
PIMCO Money Market Fund managed by PIMCO Advisors Pacific Investment Management
Company.
