<PAGE>
PIMCO ADVISORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
July 12, 1996
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Prospectus dated
February 1, 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
- -----------------------------------------------------------------------------
INFORMATION REGARDING FUND INVESTMENTS......................................1
DERIVATIVES................................................................11
INVESTMENT RESTRICTIONS....................................................19
CONTINGENT DEFERRED SALES CHARGE AND INITIAL SALES CHARGE..................24
DISTRIBUTOR AND DISTRIBUTION AND SERVICING PLANS...........................24
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....................................................50
OTHER SERVICES.............................................................58
PORTFOLIO TRANSACTIONS.....................................................59
ORGANIZATION AND CAPITALIZATION OF THE TRUST...............................61
CERTAIN OWNERSHIP OF TRUST SHARES..........................................63
APPENDIX A.................................................................69
APPENDIX B.................................................................76
FINANCIAL STATEMENTS.......................................................77
<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 and Precious Metals 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, Growth, Target, Discovery,
Opportunity, Innovation, International 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 time, provided that no more than
5
<PAGE>
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 consent to matters
materially affecting the investment. The Fund may also call such loans in order
to sell the securities involved.
6
<PAGE>
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, 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, 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
- ---------------------------------------------
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
7
<PAGE>
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 Restriction 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 (i.e., may only borrow
from) banks. See Fundamental Investment Restriction 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 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
8
<PAGE>
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 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
9
<PAGE>
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 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
10
<PAGE>
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 "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.
11
<PAGE>
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 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.
12
<PAGE>
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 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
13
<PAGE>
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.
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
14
<PAGE>
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.
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
15
<PAGE>
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
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
16
<PAGE>
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 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
17
<PAGE>
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 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
18
<PAGE>
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.
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
19
<PAGE>
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 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:
20
<PAGE>
(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.)
(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.
21
<PAGE>
(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 Fund, 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 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,
Growth, Discovery, Opportunity, Target, Innovation, International,
Global Income and Precious Metals Funds, on stock indices) and enter
into closing purchase transactions
22
<PAGE>
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.
(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.
Nothwithstanding the exception applicable to the Money Market Fund
described in (17)(i) above, federal regulations applicable to the Money Market
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 (including a particular bank).
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
23
<PAGE>
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.
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
24
<PAGE>
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
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
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
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
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
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>
26
<PAGE>
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
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
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
Growth 321,000 609,000 930,000
Target 290,000 551,000 841,000
Discovery 18,000 35,000 53,000
Opportunity 287,000 546,000 833,000
Innovation 67,000 128,000 195,000
International 43,000 81,000 124,000
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
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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
Growth 12,583
Target 11,816
Discovery 17,516
Opportunity N/A
Innovation 9,364
International 555
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
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
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.
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
29
<PAGE>
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. 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
30
<PAGE>
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 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
31
<PAGE>
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 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
32
<PAGE>
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.
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
33
<PAGE>
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 of 9/30/95 9/30/95 9/30/95
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, Growth, Target, Discovery,
Opportunity, Innovation and International 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 Standard &
Poor's 500 Stock
39
<PAGE>
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\\L\\= 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).
Potential College Cost Table
<TABLE>
<CAPTION>
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.
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:
43
<PAGE>
<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:
% of Income for Individuals
Aged 65 Years and Older in 1990*
-------------------------------
Social Security
Year and Pension Plans Other
---- ----------------- -----
1990 38% 62%
* 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
Growth, Discovery, Opportunity, Target, Innovation, Precious Metals and
International 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, Tax Exempt, Value, Growth, International, 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.
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
47
<PAGE>
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 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
48
<PAGE>
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 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
- ------------------------------------------------------------------------
49
<PAGE>
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, Innovation, Global Income, High Income, Total Return
Income, Short-Intermediate, Precious Metals, Equity Income, 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.
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).
50
<PAGE>
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.
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.
51
<PAGE>
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 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 Accumulation 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.
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.
52
<PAGE>
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.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------
(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 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
53
<PAGE>
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, 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
54
<PAGE>
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
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
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 Market Funds; Van Eck
Associates Corporation ("Van Eck") for the Precious Metals Fund; Cadence Capital
Management ("Cadence") for the Discovery Fund; and NFJ Investment Group ("NFJ")
for the Value 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.
55
<PAGE>
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
---- ----
<C> <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
<CAPTION>
Cadence Capital Management
Fund 1995
---- ----
<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,
56
<PAGE>
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 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
57
<PAGE>
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 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.
58
<PAGE>
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.
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
59
<PAGE>
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 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
---------- ---------- ----------
Total
Brokerage Commissions
- ---------------------
<S> <C> <C> <C>
Equity Income $ 173,880 $ 420,738 $ 605,124
Value N/A N/A 17,864
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
</TABLE>
60
<PAGE>
<TABLE>
<S> <C> <C> <C>
Innovation N/A N/A 84,173
International 782,300 1,277,327 2,727,326
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.
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
61
<PAGE>
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
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
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 Metals 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)
New York, NY 10292 8,650,000 6.63
Paine Webber FBO
William H. Hoehn 16,529,725 12.68
2906 SW130THTERR
Archer, FL 32618-2124
Dain Bosworth Inc. FBO
Kermit K. Kinsey 10,531,000 8.07
2801 NE 14th Street
Ft. Lauderdale, FL 33304
Leroy Scott
213 Bunch Street 8,431,703 6.46
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 36,286,543 5.42
UA Dec. 31, 1981
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.
U/A June 14, 1985 1,785,953,060 9.64
Donald S. Cohan Charitable
Remainder Unitrust
P.O. Box 2221
Amherst, MA 01004-2221
Chemical Bank Trust
PIMCO Advisors Group 401K
Savings: Investment Plan Trust 1,395,817,530 7.54
ATTN: Jerry Capri
4 New York Plaza, Fl. 4
New York, NY 10004-2413
Pembroke Ltd.
Craigmuir Chambers
P.O. Box 71 1,968,322,370 10.63
Road Town Tortola
British Virgin Islands
Investment Co. Institute
Attn: Brian Donnellan
1401 H St. NW 1,004,734,180 5.42
Washington, DC 20005-2110
- ----------------------------------------------------------------------------------------------------------------------
B Prudential-Bache Securities (0WD08940-NY) 80,514,450 27.38
New York, NY 10292
Prudential-Bache Securities (0SFR2208-NY)
New York, NY 10292 50,353,780 17.12
Prudential-Bache Securities (0SFR2959-NY)
New York, NY 10292 31,883,590 10.84
Prudential-Bache Securities (07N24934-NY)
New York, NY 10292 25,270,630 8.59
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
2901 Grant St. Apt. 704 16,469,930 5.61
Mobile, Al 36606-4768
- ----------------------------------------------------------------------------------------------------------------------
C None None None
- ----------------------------------------------------------------------------------------------------------------------
International A Merrill Lynch Pierce Fenner & Smith Inc. 223,523,623 14.26
(see above)
Society National Bank TR.
FBO RPM Retirement Plan 220,655,880 14.08
P.O. Box 6147
Cleveland, OH 44101-1147
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
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
Reida Longanecker 26,039,805 12.54
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
BBB sufficient for prudent investment. Considerable variability
BBB- in risk during economic cycles.
70
<PAGE>
BB+ Below investment grade but deemed likely to meet obligations
BB when 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
B will not be met when due. Financial protection factors will
B- fluctuate 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
