Rule 497(e)
File No. 2-87203
PIMCO ADVISORS FUNDS
Supplement dated September 27, 1996
to
Prospectus dated February 1, 1996
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1. Proposed Restructuring. As more fully described below, PIMCO
Advisors L.P. is proposing to consolidate PIMCO Advisors Funds (the "PAF Trust")
with two other existing trusts in the PIMCO fund complex. The resulting fund
complex will operate under the "PIMCO Funds" name, is expected to total over $24
billion in assets under management and will offer five classes of shares to
institutional and retail investors.
On September 17, 1996, the Board of Trustees of the PAF Trust approved
the restructuring of your PAF Trust and two other investment companies
affiliated with the PAF Trust; namely, PIMCO Funds: Equity Advisors Series (the
"PFEAS Trust") and PIMCO Funds: Pacific Investment Management Series (the "PIMS
Trust"). The restructuring is subject to a number of conditions, including
various shareholder approvals, and is expected to occur in January 1997.
As a result of the restructuring, the Equity Funds and the Tax Exempt
Fund of the PAF Trust would become part of the PFEAS Trust either as new funds
or by merging into existing funds of the PFEAS Trust. The PAF Trust's remaining
Income Funds would become part of the PIMS Trust either as new funds or by
merging into existing funds of the PIMS Trust. The mergers would involve funds
of PFEAS Trust and PIMS Trust managed by the same investment manager and having
substantially similar investment objectives as the merging PAF Trust funds
except that: (a) the PAF Trust's Discovery Fund (a small to mid cap equity fund)
would merge with the PFEAS Trust's Cadence Mid Cap Growth Fund (a mid cap equity
fund), (b) the PAF Trust's U.S. Government Fund (a 100% U.S. Government fixed
income fund) would merge with the PIMS Trust's Total Return Fund (a diversified
fixed income fund), and (c) the PAF Trust's Money Market Fund, which is managed
by Columbus Circle Investors ("CCI"), would merge with the PIMS Trust's Money
Market Fund, which is managed by Pacific Investment Management Company.
The mergers and other elements of the proposed restructuring are
expected to change the total level of ongoing expenses borne by shareholders of
the funds of the PAF Trust from the "Total Fund Operating Expenses" set forth on
pages 4 and 5 of the prospectus (the "Prospectus Expense Levels"). Specifically,
(1) the total expenses for shareholders of the Income Funds, Discovery Fund and
Value Fund would decline from the Prospectus Expense Levels (except that the
total expenses of the Money Market Fund would increase by 15 basis points
(0.15%) per annum assuming no management fee waiver agreement from the Manager
comparable to the agreement referred to in note 2 on page 4 (for Class A shares)
and notes 1 (for Class B Shares ) and 2 (for Class C Shares) on page 5 of the
prospectus) and (2) the total expenses for shareholders of the other Equity
Funds would decline or increase from the Prospectus Expense Levels but no such
increase is proposed to exceed the Prospectus Expense Levels by more than 5
basis points (0.05%) per annum, except for the Opportunity Fund for which a 15
basis point (0.15%) per annum increase is proposed.
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2. Retirement of Portfolio Manager for the Tax Exempt and Money Market
Funds. Norman Seltzer has retired from CCI and no longer serves as the portfolio
manager of the Tax Exempt and Money Market Funds of the PAF Trust. Subsequent to
his retirement, the investment decisions made by CCI in its capacity as
sub-adviser to the Tax Exempt and Money Market Funds are made by a committee
rather than a single person acting as portfolio manager. No person will be
primarily responsible for making recommendations to that committee.
3. Alternative Purchase Arrangements -- Initial Sales Charge
Alternative-Class A Shares. Paragraph 3 of footnote 1 to the tables under
"Alternative Purchase Arrangements -- Initial Sales Charge Alternative-Class A
Shares" on page 46 of the Prospectus is deleted and Paragraphs 1 and 2 of such
footnote are amended and restated in their entirety to read as follows:
"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" where no commission is paid) will be subject to a
contingent deferred 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.
"The Distributor will pay a commission to dealers who sell
amounts of $1,000,000 or more of Class A shares (or who sell Class A
shares at net asset value to certain employer-sponsored plans as
outlined in "Sales at Net Asset Value" on page 48) 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."
4. Alternative Purchase Arrangements -- Sales at Net Asset Value.
Clause (d) of the first paragraph of "Alternative Purchase Arrangements -- Sales
at Net Asset Value" on page 48 of the Prospectus is amended and restated in its
entirety to read as follows:
"d) trustees or other fiduciaries purchasing shares for
certain employer-sponsored plans that have 100 eligible
participants or at least $1 million in total plan assets,"
and the last sentence of such paragraph is amended and restated in its entirety
to read as follows:
"As described above, the Distributor will not pay any initial
commission to dealers upon the sale of Class A shares to the
purchasers described in this paragraph except for sales to
purchasers described under either d) or e) in this paragraph."
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