PIMCO Advisors Funds
Prospectus February 1, 1996
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PIMCO Advisors Funds (the "Trust") is an open-end series management
investment company offering fifteen diversified portfolios and one
non-diversified portfolio (each a "Fund") with different investment
objectives and strategies. Unless otherwise noted, each of the Funds referred
to below is a "diversified" portfolio. For a discussion of the risks
associated with "non-diversified" portfolios, see "Description and Risks of
Fund Investments" below. PIMCO Advisors Funds, 2187 Atlantic Street,
Stamford, CT 06902.
PIMCO Advisors Equity Funds
Equity Income Fund seeks long-term growth of capital and current income. The
Fund invests primarily in common stocks, preferred stocks and convertible
securities. It may also invest a portion of its assets in bonds and other
fixed-income securities.
Value Fund seeks long-term growth of capital and current income. The Fund
invests primarily in common stocks of companies that are characterized by
having below average price to earnings ("P/E") ratios and/or higher dividend
yields relative to their industry groups.
Growth Fund seeks long-term growth of capital. Income is an incidental
consideration. The Fund invests primarily in common stocks of companies with
medium to large equity capitalizations.
Target Fund seeks capital appreciation. No consideration is given to income.
The Fund invests primarily in common stocks of companies with medium equity
capitalizations.
Discovery Fund seeks capital appreciation. No consideration is given to
income. The Fund invests primarily in common stocks of small companies with
equity capitalizations of $500 million to $1 billion which exhibit favorable
growth characteristics and reasonable valuations.
Opportunity Fund seeks capital appreciation. No consideration is given to
income. The Fund invests primarily in common stocks of companies with small
equity capitalizations, which may include companies without wide market
recognition. The Opportunity Fund is currently closed to new investors.
Innovation Fund seeks capital appreciation. No consideration is given to
income. The Fund invests primarily in common stocks of companies which use
innovative technology to gain a strategic, competitive advantage in their
industry as well as companies that provide and service those technologies.
International Fund seeks capital appreciation through investments in an
international portfolio. Income is an incidental consideration. The Fund
invests primarily in equity securities of companies whose principal
activities are outside of the United States.
Precious Metals Fund seeks capital appreciation. No consideration is given to
income. The Fund concentrates investments in a global portfolio of common
stocks of companies principally engaged in precious metals-related
activities.
PIMCO Advisors Income Funds
Global Income Fund is a non-diversified portfolio that seeks maximum total
return, consistent with preservation of capital. The Fund invests primarily
in investment grade U.S. and foreign fixed-income securities and has an
intermediate duration portfolio.
High Income Fund seeks maximum total return, consistent with preservation of
capital. The Fund invests primarily in higher yielding, lower-rated
fixed-income securities and has an intermediate duration portfolio.
Total Return Income Fund seeks maximum total return, consistent with
preservation of capital. The Fund invests primarily in investment grade
fixed-income securities and has an intermediate duration portfolio.
Tax Exempt Fund seeks high current income exempt from federal income taxes,
consistent with preservation of capital. The Fund invests primarily in
investment grade municipal securities and has an intermediate to long
duration portfolio.
U.S. Government Fund seeks maximum total return, consistent with preservation
of capital. The Fund invests in U.S. government securities and has an
intermediate duration portfolio.
Short-Intermediate Fund seeks current income, consistent with relatively low
volatility of principal. The Fund invests primarily in investment grade
fixed-income securities and has a shorter duration portfolio.
Money Market Fund seeks the maximum current income believed to be consistent
with preservation of capital and maintenance of liquidity. The Fund invests
in high quality, short-term fixed-income instruments.
THE EQUITY INCOME FUND AND THE HIGH INCOME FUND MAY INVEST WITHOUT LIMIT IN
LOWER-RATED BONDS (COMMONLY CALLED "JUNK BONDS"), INCLUDING CONVERTIBLE
BONDS, WHICH MAY BE CONSIDERED HIGHLY SPECULATIVE. INVESTORS SHOULD CONSIDER
THE RISKS ASSOCIATED WITH AN INVESTMENT IN THESE FUNDS--SEE "DESCRIPTION AND
RISKS OF FUND INVESTMENTS--RISKS OF HIGH YIELD BONDS" IN THIS PROSPECTUS.
INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE>
Each Fund (except the Opportunity Fund) currently offers three classes of
shares: Class A shares (generally sold subject to an initial sales load),
Class B Shares (sold subject to a contingent deferred sales charge) and Class
C shares (sold subject to an asset based sales charge). The Opportunity Fund
does not offer Class B shares.
This Prospectus concisely describes the information which investors should
know before investing. Please read this Prospectus carefully and keep it for
further reference.
Information about the investment objective of each Fund, along with a
detailed description of the types of securities in which each Fund may
invest, and of investment policies and restrictions applicable to each Fund,
is set forth in this Prospectus. There can be no assurance that the
investment objective of any Fund will be achieved. Because the market value
of the Funds' investments will change, the net asset value per share of each
Fund will also vary.
A Statement of Additional Information dated February 1, 1996, as supplemented
from time to time, is available free of charge by writing to PIMCO Advisors
Distribution Company (the "Distributor"), 2187 Atlantic Street, Stamford,
Connecticut 06902 or by telephoning 800-426-0107. The Statement of Additional
Information, which contains more detailed information about the Trust, has
been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference in this Prospectus.
Table of Contents
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<TABLE>
<CAPTION>
Page Page
<S> <C> <C> <C>
Prospectus Summary 3 Exchange Privilege 51
Schedule of Fees 4 How to Redeem 52
Financial Highlights 7 Distributor and Distribution and
Investment Objectives and Policies 22 Servicing Plans 55
Equity Funds 22 How Net Asset Value is Determined 57
Income Funds 25 Distributions 58
Description and Risks of Fund Taxes 58
Investments 30 Management of the Trust 60
Performance Information 41 Description of the Trust 64
How to Buy Shares 41 Mailings to Shareholders 64
General 44 Appendix A 64
Alternative Purchase Arrangements 44
</TABLE>
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<PAGE>
PIMCO Advisors Funds 3
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Prospectus Summary
PIMCO Advisors L.P. (the "Manager") is the manager of all of the Funds. PIMCO
Advisors L.P. is one of the largest investment management firms in the U.S.
As of September 30, 1995, PIMCO Advisors L.P. had approximately $87 billion
in assets under management. Each of the PIMCO Advisors Funds also has a
sub-adviser responsible for portfolio investment decisions. All of the Funds'
sub-advisers are affiliates of PIMCO Advisors L.P. except for Van Eck
Associates Corporation, an independent sub-adviser that advises the Precious
Metals Fund. The affiliated sub-advisers are listed below.
<TABLE>
<CAPTION>
PIMCO Advisors Investment Firm Location Funds Managed
- --------------------------------------------------------------------------------
<S> <C> <C>
Columbus Circle Investors Stamford, CT Equity Income, Growth, Target, Opportunity,
Innovation, Tax Exempt, Money Market
Pacific Investment Management Company Newport Beach, CA Global Income, High Income, Total Return Income,
U.S. Government, Short-Intermediate
Cadence Capital Management Boston, MA Discovery
NFJ Investment Group Dallas, TX Value
Blairlogie Capital Management Edinburgh, Scotland International
</TABLE>
Presented in the tables below are some key facts and comparisons of the PIMCO
Advisors Funds.
PIMCO Advisors Equity Funds
Fund Primary Objective
- --------------------------------------------------------------------------------
Equity Income Fund Long-term growth of capital and current income
Value Fund Long-term growth of capital and current income
Growth Fund Long-term growth of capital
Income is incidental
Target Fund Capital appreciation
Discovery Fund Capital appreciation
Opportunity Fund Capital appreciation
Innovation Fund Capital appreciation
International Fund Capital appreciation
Income is incidental
Precious Metals Fund Capital appreciation
<TABLE>
<CAPTION>
Fund Primary Investments Industries Foreign(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Income Fund Income-producing stocks and convertibles Diversified 0-15%
of companies with small, medium and large
equity capitalizations
Value Fund Stocks of companies with small, medium and Diversified 0-15%
large equity capitalizations
Growth Fund Stocks of companies with medium to large Diversified 0-15%
equity capitalizations
Target Fund Stocks of companies with medium equity Diversified 0-15%
capitalizations
Discovery Fund Stocks of small companies with equity Diversified 0-15%
capitalizations of $500 million to $1
billion
Opportunity Fund Stocks of companies with small equity Diversified 0-15%
capitalizations
Innovation Fund Stocks of companies with small, medium and Technology-related 0-15%
large equity capitalizations
International Fund Non-U.S. stocks of companies with small, Diversified 65-100%
medium and large equity capitalizations
Precious Metals Fund U.S. and non-U.S. stocks of companies with Precious Metals- 0-100%
medium and large equity capitalizations related
</TABLE>
- --------------------------------------------------------------------------------
(1)Refers to securities principally traded in securities markets outside the
United States. The Equity Funds may invest without limit in securities of
foreign issuers traded in U.S. securities markets.
<TABLE>
<CAPTION>
PIMCO Advisors Income Funds
Fund Primary Objective Primary Investments
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Global Income Fund Maximum total return, consistent Investment grade U.S. and
with preservation of capital foreign fixed-income
securities
High Income Fund Maximum total return, consistent Higher yielding fixed-income
with preservation of capital securities
Total Return Income Fund Maximum total return, consistent Investment grade fixed-income
with preservation of capital securities
Tax Exempt Fund High current income exempt from Investment grade municipal
federal income taxes, consistent securities
with preservation of capital
U.S. Government Fund Maximum total return, consistent U.S. government securities
with preservation of capital
Short-Intermediate Fund Current income consistent with Short- to Intermediate-term
relatively low volatility of investment grade fixed-income
principal securities
Money Market Fund Maximum current income believed Money market instruments
to be consistent with
preservation of capital and
maintenance of liquidity
</TABLE>
<TABLE>
<CAPTION>
Fund Duration(1) Credit Quality Foreign(2
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Income Fund 3-6 yrs. B to Aaa 25-75%
0-10% below Baa
High Income Fund 2-6 yrs. B to Aaa; min of 0-20%
65% below Baa
Total Return Income Fund 3-6 yrs. B to Aaa; 0-10% 0-20%
below Baa
Tax Exempt Fund 3-10 yrs. Ba to Aaa; 0-20% None
below Baa
U.S. Government Fund 3-6 yrs. Gov't. AAA None
Short-Intermediate Fund 1-3 yrs. B to Aaa; 0-10% 0-20%
below Baa
Money Market Fund less than 1 yr. A-1, P-1 None
- --------------------------------------------------------------------------------
</TABLE>
(1)Based, in the case of callable securities, securities subject to early
repayment and foreign securities, on the relevant sub-adviser's estimates.
(2)Refers to securities denominated in foreign currencies. The Income Funds
may invest beyond these limits in U.S. dollar-denominated securities of
foreign issuers.
<PAGE>
4 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Schedule of Fees
<TABLE>
<CAPTION>
Shareholder Transaction Expenses (All Funds) Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum initial sales charge imposed on purchases (as a percentage of
offering price at time of purchase)
Equity Income, Value, Growth, Target, Discovery, Opportunity,
Innovation, International and Precious Metals Funds 5.50% None None
Global Income, High Income, Total Return Income, Tax Exempt and U.S.
Government Funds 4.75% None None
Short-Intermediate Fund 3.00% None None
Money Market Fund None* None None
Maximum sales charge imposed on reinvested dividends (as a percentage of
net asset value at time of purchase) None None None
Maximum contingent deferred sales charge ("CDSC") (as a percentage of
original purchase price) 1%** 5%*** 1%****
Exchange Fee None* None None
</TABLE>
*Regular sales charges apply when Class A shares of the Money Market Fund
(on which no sales charge was paid at time of purchase) are exchanged for
shares of any other Fund.
**Imposed only in certain circumstances where Class A shares are purchased
without a sales charge at the time of purchase. See "Alternative Purchase
Arrangements" in this Prospectus.
***The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the
schedules set forth under "Deferred Sales Charge Alternative--Class B
Shares" in this Prospectus.
****The CDSC on Class C shares is imposed only on shares redeemed in the
first year.
<TABLE>
<CAPTION>
Example: You would pay the
following expenses on a
$1,000 investment assuming
Annual Fund (1) 5% annual return and
Operating Expenses (2) redemption at the end
Class A Shares (As a percentage of average net assets) of each time period:
- ---------------------- --------------------------------------------- ---------------------------
Total
Fund
Management 12b-1 Other Operating 1 3
Fund Fees Fees(1) Expenses Expenses Year Years 5 Years
- ---------------------- -------- ---------- ------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Income .75% .25% .25% 1.25% $67 $92 $120
Value .70 .25 .25 1.20 67 91 117
Growth .66 .25 .19 1.10 66 88 112
Target .71 .25 .29 1.25 67 92 120
Discovery .75 .25 .25 1.25 67 92 120
Opportunity .71 .25 .19 1.15 66 90 115
Innovation .75 .25 .25 1.25 67 92 120
International .80 .25 .35 1.40 68 97 127
Precious Metals .75 .25 .35 1.35 68 95 125
Global Income .70 .25 .25 1.20 59 84 --
High Income .60 .25 .25 1.10 58 81 105
Total Return Income .60 .25 .25 1.10 58 81 105
Tax Exempt .60 .25 .25 1.10 58 81 105
U.S. Government .58 .25 .17 1.00 57 78 100
Short-Intermediate .50 .25 .20 .95 39 59 81
Money Market .10(2) .10(3) .25 .45(4) 5 14 25
</TABLE>
<TABLE>
<CAPTION>
Example: You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return and
Class A Shares (2) no redemption:
- ---------------------- ------------------------------------
10 1 3 5
Fund Years Year Years Years 10 Years
- ---------------------- ------- ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Equity Income $198 $67 $92 $120 $198
Value 192 67 91 117 192
Growth 182 66 88 112 182
Target 198 67 92 120 198
Discovery 198 67 92 120 198
Opportunity 187 66 90 115 187
Innovation 198 67 92 120 198
International 214 68 97 127 214
Precious Metals 208 68 95 125 208
Global Income -- 59 84 -- --
High Income 175 58 81 105 175
Total Return Income 175 58 81 105 175
Tax Exempt 175 58 81 105 175
U.S. Government 164 57 78 100 164
Short-Intermediate 143 39 59 81 143
Money Market 57 5 14 25 57
</TABLE>
(1)12b-1 fees represent servicing fees which are paid annually to the
Distributor and repaid to participating brokers, certain banks and other
financial intermediaries. See "Distributor and Distribution and Servicing
Plans."
(2)The Manager has voluntarily undertaken to reduce its advisory fee with
respect to the Money Market Fund to .10% of the Fund's average daily net
assets until further notice. Absent such undertaking, the advisory fee
would be .50% of the Fund's average daily net assets.
(3)The Distributor has voluntarily undertaken to reduce the 12b-1 fee it
receives with respect to the Money Market Fund to .10% of the Fund's
average daily net assets until further notice. Absent such undertaking,
the 12b-1 fee would be .20% of the Fund's average daily net assets.
(4)Absent the undertakings noted, the total operating expenses for the Money
Market Fund would be .95% of the Fund's average daily net assets.
<PAGE>
PIMCO Advisors Funds 5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Example: You would pay the
following expenses on a
$1,000 investment assuming
Annual Fund (1) 5% annual return and
Operating Expenses (2) redemption at the end
Class B Shares (As a percentage of average net assets) of each time period:
- ---------------------- -------------------------------------------- ---------------------------
Total
Fund
Management 12b-1 Other Operating 1 3
Fund Fees Fees Expenses Expenses Year Years 5 Years
- ---------------------- -------- --------- ------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Income .75% 1.00% .25% 2.00% $70 $93 $128
Value .70 1.00 .25 1.95 70 91 125
Growth .66 1.00 .19 1.85 69 88 120
Target .71 1.00 .29 2.00 70 93 128
Discovery .75 1.00 .25 2.00 70 93 128
Opportunity .71 1.00 .19 1.90 69 90 123
Innovation .75 1.00 .25 2.00 70 93 128
International .80 1.00 .35 2.15 72 97 135
Precious Metals . .75 1.00 .35 2.10 71 96 133
Global Income .70 1.00 .25 1.95 70 91 --
High Income .60 1.00 .25 1.85 69 88 120
Total Return Income .60 1.00 .25 1.85 69 88 120
Tax Exempt .60 1.00 .25 1.85 69 88 120
U.S. Government .58 1.00 .17 1.75 68 85 115
Short-Intermediate .50 1.00 .20 1.70 67 84 112
Money Market .10(1) 1.00 .25 1.35(2) 64 73 94
</TABLE>
<TABLE>
<CAPTION>
Example: You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return and
Class B Shares (2) no redemption:
- ---------------------- ------------------------------------
10 1 3 5
Fund Years Year Years Years 10 Years
- ---------------------- ------- ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Equity Income $198 $20 $63 $108 $198
Value 192 20 61 105 192
Growth 182 19 58 100 182
Target 198 20 63 108 198
Discovery 198 20 63 108 198
Opportunity 187 19 60 103 187
Innovation 198 20 63 108 198
International 214 22 67 115 214
Precious Metals . 208 21 66 113 208
Global Income -- 20 61 -- --
High Income 175 19 58 100 175
Total Return Income 175 19 58 100 175
Tax Exempt 175 19 58 100 175
U.S. Government 164 18 55 95 164
Short-Intermediate 143 17 54 92 143
Money Market 57 14 43 74 57
</TABLE>
(1)The Manager has voluntarily undertaken to reduce its advisory fee with
respect to the Money Market Fund to .10% of the Fund's average daily net
assets until further notice. Absent such undertaking, the advisory fee
would be .50% of the Fund's average daily net assets.
(2)Absent the undertaking noted, the total operating expenses for the Money
Market Fund would be 1.75% of the Fund's average daily net assets.
<TABLE>
<CAPTION>
Example: You would pay the
following expenses on a
$1,000 investment assuming
Annual Fund (1) 5% annual return and
Operating Expenses (2) redemption at the end
Class C Shares (As a percentage of average net assets) of each time period:
- ---------------------- --------------------------------------------- ---------------------------
Total
Fund
Management 12b-1 Other Operating 1 3
Fund Fees Fees(1) Expenses Expenses Year Years 5 Years
- ---------------------- -------- ---------- ------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Income .75% 1.00% .25% 2.00% $30 $63 $108
Value .70 1.00 .25 1.95 30 61 105
Growth .66 1.00 .19 1.85 29 58 100
Target .71 1.00 .29 2.00 30 63 108
Discovery .75 1.00 .25 2.00 30 63 108
Opportunity .71 1.00 .19 1.90 29 60 103
Innovation .75 1.00 .25 2.00 30 63 108
International .80 1.00 .35 2.15 32 67 115
Precious Metals . .75 1.00 .35 2.10 31 66 113
Global Income .70 1.00 .25 1.95 30 61 --
High Income .60 1.00 .25 1.85 29 58 100
Total Return Income .60 1.00 .25 1.85 29 58 100
Tax Exempt .60 1.00 .25 1.85 29 58 100
U.S. Government . .58 1.00 .17 1.75 28 55 95
Short-Intermediate .50 .75 .20 1.45 25 46 79
Money Market .10(2) .10(3) .25 .45(4) 15 14 25
</TABLE>
<TABLE>
<CAPTION>
Example: You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return and
Class C Shares (2) no redemption:
- ---------------------- ------------------------------------
10 1 3 5
Fund Years Year Years Years 10 Years
- ---------------------- ------- ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Equity Income $233 $20 $63 $108 $233
Value 227 20 61 105 227
Growth 217 19 58 100 217
Target 233 20 63 108 233
Discovery 233 20 63 108 233
Opportunity 222 19 60 103 222
Innovation 233 20 63 108 233
International 248 22 67 115 248
Precious Metals . 243 21 66 113 243
Global Income -- 20 61 -- --
High Income 217 19 58 100 217
Total Return Income 217 19 58 100 217
Tax Exempt 217 19 58 100 217
U.S. Government . 206 18 55 95 206
Short-Intermediate 174 15 46 79 174
Money Market 57 5 14 25 57
</TABLE>
(1)12b-1 fees which equal or are less than .25% represent servicing fees
which are paid annually to the Distributor and repaid by the Distributor
to participating brokers, certain banks and other financial
intermediaries. 12b-1 fees which exceed .25% represent aggregate
distribution and servicing fees. See "Distributor and Distribution and
Servicing Plans."
(2)The Manager has voluntarily undertaken to reduce its advisory fee with
respect to the Money Market Fund to .10% of the Fund's average daily net
assets until further notice. Absent such undertaking, the advisory fee
would be .50% of the Fund's average daily net assets.
(3)The Distributor has voluntarily agreed to reduce the 12b-1 fee it receives
with respect to the Money Market Fund to .10% of the Fund's average daily
net assets until further notice. Absent such undertaking, the 12b-1 fee
would be .20% of the Fund's average daily net assets.
(4)Absent the undertakings noted, the total operating expenses for the Money
Market Fund would be .95% of the Fund's average daily net assets.
<PAGE>
6 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
The purpose of the foregoing tables is to assist investors in understanding
the various costs and expenses of the Trust that are borne directly or
indirectly by shareholders. Except for the Value, Discovery and Global Income
Funds, Annual Fund Operating Expenses are based on actual expenses during the
fiscal year ended September 30, 1995 and Fund average net assets during such
fiscal year. Annual Fund Operating Expenses for the Value, Discovery and
Global Income Funds are based on estimated expenses for the fiscal year
ending September 30, 1996. The Examples for Class A shares assume payment of
the current maximum applicable sales load. Due to the 12b-1 distribution fee
imposed on Class B and Class C shares, a Class B or Class C shareholder of
the Trust may, depending on the length of time the shares are held, pay more
than the economic equivalent of the maximum front-end sales charges permitted
by relevant rules of the National Association of Securities Dealers, Inc.
NOTE: THE FIGURES SHOWN IN THE EXAMPLES ARE ENTIRELY HYPOTHETICAL. THEY ARE
NOT REPRESENTATIONS OF PAST OR FUTURE PERFORMANCE OR EXPENSES; ACTUAL
PERFORMANCE AND/OR EXPENSES MAY BE MORE OR LESS THAN SHOWN.
<PAGE>
PIMCO Advisors Funds 7
- --------------------------------------------------------------------------------
Financial Highlights
The financial highlights set forth below and on the following pages present
certain information and ratios as well as performance information for each of
the Funds. Additional information about the performance of all of the Funds
of the Trust is contained in the Trust's Annual Report to Shareholders which
may he obtained without charge from the Distributor. The information provided
below for each Fund has been audited by Coopers & Lybrand L.L.P., the Trust's
independent accountants, whose report thereon, for the five year period ended
September 30, 1995, appears in the Statement of Additional Information.
Financial Statements and related Notes are also included in the Statement of
Additional Information.
The following schedule of financial highlights for the Equity Income Fund is
for shares outstanding throughout the periods listed. The information
provided reflects results of operations under the Fund's former investment
objective and policies through January 31, 1992; such results would not
necessarily have been achieved had the Fund's current objective and policies
then been in effect.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Equity Income Fund
Class A Class B Class C Class A Class C Class A Class C Class A
------------------------------ --------------------------------------------------
Year Ended September 30,
---------------------------------------------------------------------------------
1995 1995(1) 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 $1O.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 Class C
------------------------------ ------------------------------------
Period Ended
September 30,
1992 1991(2) 1991 1990 1989 1988 (3)
------------------------------------------------------- -------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.91 $ 8.38 $ 8.16 $ 11.17 $ 10.05 $ 10.00
------------------------------ -------------------- ---------------
Income From Investment
Operations
Net investment income 0.29 0.28 0.36 0.49 0.55 0.24
Net gains or losses on
securities (both realized
and unrealized) 0.68 1.54 1.75 (2.32) 1.19 (0.05)
------------------------------ -------------------- ---------------
Total from investment
operations 0.97 1.82 2.11 (1.83) 1.74 0.19
------------------------------ -------------------- ---------------
Less Distributions
Dividends (from net
investment income) (0.32) (0.28) (0.36) (0.49) (0.62) (0.14)
Distributions (from
capital gain) -- -- -- (0.69) -- --
------------------------------ -------------------- ---------------
Total distributions (0.32) (0.28) (0.36) (1.18) (0.62) (0.14)
------------------------------ -------------------- ---------------
Net asset value,
end of period $10.56 $ 9.92 $ 9.91 $ 8.16 $ 11.17 $ 10.05
============================== ==================== ===============
Total Return (without
sales charge) 9.9% 34.8% 26.5% (18.0%) 17.9% 4.3%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $45,101 $15 $22,651 $25,758 $45,168 $47,118
Ratio of expenses to
average net assets 2.1% 1.6%* 2.2% 2.0% 1.9% 2.0%*
Ratio of net investment
income to average net
assets 2.7% 4.4%* 4.2% 5.1% 5.2% 5.4%*
Portfolio turnover rate 149.0% 142.7% 142.7% 70.2% 84.8% 22.9%
</TABLE>
(1) The distribution of Class B shares commenced on May 22, 1995.
(2) The distribution of Class A shares commenced on February 1, 1991.
(3) The Fund commenced operations on April 18, 1988.
* Annualized
<PAGE>
8 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Value Fund is for
shares outstanding thoughout the period listed.
<TABLE>
<CAPTION>
------------------------------------
Value Fund
Class A Class B Class C
------------------------------------
Period Ended September 30,
------------------------------------
1995(4) 1995(4) 1995(4)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00
---------- ---------- ----------
Income from investment operations
Net investment income 0.07 0.05 0.05
Net gains or losses on securities
(both realized and unrealized) 0.68 0.68 0.68
---------- ---------- ----------
Total from investment operations 0.75 0.73 0.73
---------- ---------- ----------
Less Distributions
Dividends (from
net investment income) (0.07) (0.05) (0.05)
Distributions (from capital gain) -- -- --
---------- ---------- ----------
Total distributions (0.07) (0.05) (0.05)
---------- ---------- ----------
Net asset value, end of period $10.68 $10.68 $10.68
========== ========== ==========
Total Return (without sales charge) 7.5% 7.3% 7.3%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $2,492 $3,975 $6,643
Ratio of expenses to average net assets 1.3%* 2.1%* 2.0%*
Ratio of net investment income to average net assets 2.7%* 1.9%* 1.9%*
Portfolio turnover rate 0.5% 0.5% 0.5%
---------------------------------------------------------------- ---------- ---------- ----------
</TABLE>
(4) The Fund commenced operations on June 27, 1995.
* Annualized
<PAGE>
PIMCO Advisors Funds 9
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Growth Fund is for
shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Growth Fund
Class A Class B Class C Class A Class C Class A Class C
---------- ------------------------------------ -------------------- -------------
Year Ended September 30,
----------------------------------------------------------------------------------
1995 1995(6) 1995 1994 1994 1993 1993
----------------------------- ---------- ------------------------------------ -------------------- -------------
<S> <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
---------- ------------------------------------ -------------------- -------------
Income from investment
operations
Net investment income (loss) 0.12 (0.03) (0.04) 0.12 (0.04) 0.09 (0.07)
Net gains or losses on
securities (both realized
and unrealized) 4.79 2.34 4.65 0.12 0.11 3.53 3.49
---------- ------------------------------------ -------------------- -------------
Total from investment
operations 4.91 2.31 4.61 0.24 0.07 3.62 3.42
---------- ------------------------------------ -------------------- -------------
Less Distributions
Dividends (from net
investment income) -- -- -- -- -- -- --
Distributions (from
capital gain) (1.19) -- (1.19) (1.87) (1.87) (0.74) (0.74)
---------- ------------------------------------ -------------------- -------------
Total distributions (1.19) -- (1.19) (1.87) (1.87) (0.74) (0.74)
---------- ------------------------------------ -------------------- -------------
Net asset value, end
of period $25.73 $24.94 $24.94 $22.01 $21.52 $23.64 $23.32
========== ==================================== ==================== =============
Total Return (without
sales charge) 23.7% 10.2% 22.8% 1.3% 0.5% 17.7% 16.9%
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
Ratio of expenses to
average net assets 1.1% 1.9%* 1.9% 1.1% 1.9% 1.1% 1.9%
Ratio of net investment
income (loss) to average
net assets 0.5% (0.4%)* (0.2%) 0.6% (0.2%) 0.4% (0.3%)
Portfolio turnover rate 110.6% 110.6% 110.6% 115.3% 115.3% 109.9% 109.9%
</TABLE>
<TABLE>
<CAPTION>
Class A Class C Class A Class C
---------- ------------------------------------
1992 1992 1991(7) 1991
----------------------------- ---------- ------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $20.63 $20.54 $16.99 $16.93
---------- ------------------------------------
Income from investment
operations
Net investment income (loss) 0.14 (0.01) 0.21 0.12
Net gains or losses on
securities (both realized
and unrealized) 1.38 1.37 5.28 5.32
---------- ------------------------------------
Total from investment
operations 1.52 1.36 5.49 5.44
---------- ------------------------------------
Less Distributions
Dividends (from
net investment income) (0.14) (0.01) (0.19) (0.17)
Distributions (from
capital gain) (1.25) (1.25) (1.66) (1.66)
---------- ------------------------------------
Total distributions (1.39) (1.26) (1.85) (1.83)
---------- ------------------------------------
Net asset value, end
of period $20.76 $20.64 $20.63 $20.54
========== ====================================
Total Return (without
sales charge) 7.7% 6.9% 38.6% 35.1%
Ratios/Supplemental Data
Net assets, end of
period (in 000's) $71,209 $853,121 $17,064 $564,398
Ratio of expenses to
average net assets 1.1% 1.9% 1.2%* 1.8%
Ratio of net investment
income (loss) to average
net assets 0.7% (0.1%) 0.9%* 0.6%
Portfolio turnover rate 92.3% 92.3% 95.3% 95.3%
</TABLE>
(6) The distribution of Class B shares commenced on May 23, 1995.
(7) The distribution of Class A shares commenced on October 26, 1990.
* Annualized
<TABLE>
<CAPTION>
------------------------------------------------------
Growth Fund
Class C
------------------------------------------------------
Year Ended September 30,
------------------------------------------------------
1990 1989 1988 1987 1986
--------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.71 $13.93 $18.04 $14.76 $11.92
---------- ---------- ---------- ---------- ----------
Income from investment operations
Net investment income (loss) 0.19 0.11 0.09 0.14 0.33
Net gains or losses on securities
(both realized and unrealized) (1.67) 5.77 (2.96) 5.24 3.82
---------- ---------- ---------- ---------- ----------
Total from investment operations (1.48) 5.88 (2.87) 5.38 4.15
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from
net investment income) (0.18) (0.10) (0.11) (0.18) (0.43)
Distributions (from capital gain) (1.12) -- (1.13) (1.92) (0.88)
---------- ---------- ---------- ---------- ----------
Total distributions (1.30) (0.10) (1.24) (2.10) (1.31)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $16.93 $19.71 $13.93 $18.04 $14.76
========== ========== ========== ========== ==========
Total Return (without sales charge) (8.0%) 42.4% (14.8%) 41.5% 37.9%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $314,075 $373,490 $338,493 $509,348 $192,325
Ratio of expenses to average net assets 1.7% 1.7% 1.8% 1.6% 1.7%
Ratio of net investment income to average net
assets 1.0% 0.7% 0.6% 0.8% 2.4%
Portfolio turnover rate 88.7% 82.5% 103.6% 128.1% 168.7%
</TABLE>
<PAGE>
10 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Target Fund is for
shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
-------------------------
Target Fund
Class A Class B
------------ ------------
Year Ended September 30,
-------------------------
1995 1995(8)
------------------------------------------------ ------------ ------------
<S> <C> <C>
Net asset value, beginning of period $13.13 $13.93
------------ ------------
Income from Investment Operations
Net investment loss (0.02) (0.05)
Net gains or losses on securities (both realized
and unrealized) 3.45 2.18
------------ ------------
Total from investment operations 3.43 2.13
------------ ------------
Less Distributions
Dividends (from net investment income) -- --
Distributions (from capital gain) (0.16) --
------------ ------------
Total distributions (0.16) --
------------ ------------
Net asset value, end of period $16.40 $16.06
============ ============
Total Return (without sales charge) 26.5% 15.3%
Ratios/Supplemental Data
Net assets, end of peirod (in 000's) $121,915 $7,554
Ratio of expenses to average net assets 1.2% 2.0%*
Ratio of net investment income (loss) to average
net assets (0.1%) (0.9%)*
Portfolio turnover rate 128.3% 128.3%
</TABLE>
<TABLE>
<CAPTION>
Class C Class A Class C Class A Class C
------------ ------------ ------------ ------------ ------------
1995 1994 1994 1993(9) 1993(9)
------------------------------------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.95 $12.72 $12.65 $10.00 $10.00
------------ ------------ ------------ ------------ ------------
Income from Investment Operations
Net investment loss (0.12) (0.04) (0.14) (0.02) (0.09)
Net gains or losses on securities (both realized
and unrealized) 3.38 0.57 0.56 2.74 2.74
------------ ------------ ------------ ------------ ------------
Total from investment operations 3.26 0.53 0.42 2.72 2.65
------------ ------------ ------------ ------------ ------------
Less Distributions
Dividends (from net investment income) -- -- -- -- --
Distributions (from capital gain) (0.16) (0.12) (0.12) -- --
------------ ------------ ------------ ------------ ------------
Total distributions (0.16) (0.12) (0.12) -- --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $16.05 $13.13 $12.95 $12.72 $12.65
============ ============ ============ ============ ============
Total Return (without sales charge) 25.6% 4.2% 3.4% 27.2% 26.5%
Ratios/Supplemental Data
Net assets, end of peirod (in 000's) $780,355 $90,527 $556,043 $48,787 $298,238
Ratio of expenses to average net assets 2.0% 1.2% 2.0% 1.3%* 2.0%*
Ratio of net investment income (loss) to average
net assets (0.9%) (0.3%) (1.1%) (0.3%)* (1.0%)*
Portfolio turnover rate 128.3% 103.5% 103.5% 76.0% 76.0%
</TABLE>
(8) The distribution of Class B shares commenced on May 22, 1995.
(9) The Fund commenced operations on December 17, 1992.
* Annualized
<PAGE>
PIMCO Advisors Funds 11
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Discovery Fund is for
shares outstanding throughout the period listed.
<TABLE>
<CAPTION>
-------------------------------------
Discovery Fund
Class A Class B Class C
------------ ------------ ------------
Period Ended September 30,
-------------------------------------
1995(10) 1995(10) 1995(10)
------------------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00
------------ ------------ ------------
Income from investment operations
Net investment income 0.01 0.01 0.01
Net gains or losses on securities
(both realized and unrealized) 0.88 0.87 0.87
------------ ------------ ------------
Total from investment operations 0.89 0.86 0.86
------------ ------------ ------------
Less Distributions
Dividends (from
net investment income) -- -- --
Distributions (from capital gain) -- -- --
------------ ------------ ------------
Total distributions -- -- --
------------ ------------ ------------
Net asset value, end of period $10.89 $10.86 $10.86
============ ============ ============
Total Return (without sales charge) 8.9% 8.6% 8.6%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $7,658 $10,832 $20,260
Ratio of expenses to average net assets 1.3%* 2.0%* 2.0%*
Ratio of net investment income (loss) to average
net assets 0.2%* (0.5%)* (0.5%)*
Portfolio turnover rate 34.9% 34.9% 34.9%
------------------------------------------------ ------------ ------------ ------------
</TABLE>
(10) The Fund commenced operations on June 27, 1995.
* Annualized
<PAGE>
12 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Opportunity Fund is
for shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Opportunity Fund
Class A Class C Class A Class C Class A Class C Class A
---------- ---------- ---------- ---------- ---------- ---------- ----------
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 income (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 (loss) 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(12) 1991
----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning
of period $ 17.87 $11.78 $ 11.93
---------- ---------- ----------
Income from investment
operations
Net investment income (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 (loss) to average
net assets (1.0%) (0.5%)* (0.8%)
Portfolio turnover rate 93.8% 144.6% 144.6%
</TABLE>
(12) The distribution of Class A shares commenced on December 17, 1990.
* Annualized.
<TABLE>
<CAPTION>
-----------------------------------------------------
Opportunity Fund
Class C
-----------------------------------------------------
Year Ended September 30,
-----------------------------------------------------
1990 1989 1988 1987 1986
----------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $15.78 $11.84 $16.73 $13.18 $12.04
---------- ---------- ---------- ---------- ----------
Income from investment
operations
Net investment income (loss) (0.01) (0.03) 0.03 0.02 (0.03)
Net gains or losses on
securities (both realized
and unrealized) (2.13) 3.97 (2.34) 4.80 2.00
---------- ---------- ---------- ---------- ----------
Total from investment
operations (2.14) 3.94 (2.31) 4.82 1.97
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) -- -- (0.03) -- (0.03)
Distributions (from
capital gain) (1.71) -- (2.55) (1.27) (0.80)
Return of capital
distribution -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions (1.71) -- (2.58) (1.27) (0.83)
---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $11.93 $15.78 $11.84 $16.73 $13.18
========== ========== ========== ========== ==========
Total Return (without
sales charge) (14.8%) 33.3% (9.0%) 40.2% 17.2%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $33,472 $51,680 $51,062 $74,235 $52,233
Ratio of expenses to average
net assets 1.9% 1.9% 2.0% 1.7% 1.8%
Ratio of net investment
income (loss) to average
net assets (0.1%) (0.2%) 0.3% 0.1% (0.3%)
Portfolio turnover rate 106.2% 153.4% 124.9% 188.7% 108.6%
</TABLE>
<PAGE>
PIMCO Advisors Funds 13
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Innovation Fund is for
shares outstanding throughout the period listed.
<TABLE>
<CAPTION>
--------------------------------
Innovation Fund
Class A Class B Class C
---------- ---------- ----------
Period Ended September 30,
--------------------------------
1995(13) 1995(14) 1995(13)
----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning
of period $10.00 $11.81 $10.00
---------- ---------- ----------
Income from investment
operations
Net investment income (loss) (0.06)(15) (0.08) (0.13)(15)
Net gains or losses on
securities (both realized
and unrealized) 4.80 2.93 4.78
---------- ---------- ----------
Total from investment
operations 4.74 2.85 4.65
---------- ---------- ----------
Less Distributions
Dividends (from
net investment income) -- -- --
Distributions (from
capital gain) -- -- --
---------- ---------- ----------
Total distributions -- -- --
---------- ---------- ----------
Net asset value, end
of period $14.74 $14.66 $14.65
========== ========== ==========
Total Return (without
sales charge) 47.4% 24.1% 46.5%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $28,239 $6,509 $63,952
Ratio of expenses to average
net assets 1.4%* 2.3%* 2.2%*
Ratio of net investment
income (loss) to average
net assets (0.6%)* (1.7%)* (1.4%)*
Portfolio turnover rate 86.1% 86.1% 86.1%
----------------------------- ---------- ---------- ----------
</TABLE>
(13) The Fund commenced operations on December 22, 1994.
(14) The distribution of Class B shares commenced on May 22, 1995.
(15) Reflecting voluntary waiver of investment advisory fee of $4,666 (.00
per share) by the Manager as more fully described in note 3(a) to the
Financial Statements.
* Annualized
<PAGE>
14 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the International Fund is
for shares outstanding throughout the periods listed. The information
provided reflects results of operations the Fund's former investment
objective and policies through August 31, 1992; such results would not
necessarily have been achieved had the Fund's current objective and policies
been in effect. On November 15, 1994, Blairlogie Capital Management became
the sub-adviser of the Fund.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
International Fund
Class A Class B Class C Class A Class C Class A Class C
---------- ---------- ---------- ---------- ---------- ---------- ----------
Year Ended September 30,
---------------------------------------------------------------------------
1995 1995(16) 1995 1994 1994 1993 1993
----------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations
Net investment income (loss) 0.07 0.00 (0.02) 0.04 (0.06) 0.07 (0.01)
Net gains or losses on
securities (both realized
and unrealized) (0.56) 0.45 (0.55) 0.94 0.93 2.80 2.75
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations (0.49) 0.45 (0.57) 0.98 0.87 2.87 2.74
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) -- -- -- -- -- -- --
Distributions (from
capital gain) (0.24) -- (0.24) (0.23) (0.23) (0.74) (0.74)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.24) -- (0.24) (0.23) (0.23) (0.74) (0.74)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $12.19 $11.75 $11.75 $12.92 $12.56 $12.17 $11.92
========== ========== ========== ========== ========== ========== ==========
Total Return (without
sales charge) (3.7%) 4.0% (4.5%) 8.2% 7.4% 30.4% 29.4%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $17,951 $503 $215,349 $23,289 $294,492 $11,992 $147,194
Ratio of expenses to average
net assets 1.5% 2.3%* 2.2% 1.4% 2.2% 1.4% 2.2%
Ratio of net investment
income (loss) to average
net assets 0.6% (0.1%)* (0.2%) 0.3% (0.5%) 0.6% (0.1%)
Portfolio turnover rate 169.8% 169.8% 169.8% 55.1% 55.1% 67.6% 67.6%
</TABLE>
Class A Class C Class A Class C
---------- ---------- ---------- ----------
1992 1992 1991(17) 1991
----------------------------- ---------- ---------- ---------- ----------
Net asset value, beginning
of period $10.54 $10.49 $ 9.48 $10.04
---------- ---------- ---------- ----------
Income from investment
operations
Net investment income (loss) 0.05 (0.06) 0.02 (0.08)
Net gains or losses on
securities (both realized
and unrealized) (0.37) (0.33) 1.04 1.76
---------- ---------- ---------- ----------
Total from investment
operations (0.32) (0.39) 1.06 1.68
---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) -- -- -- --
Distributions (from
capital gain) (0.18) (0.18) -- (1.23)
---------- ---------- ---------- ----------
Total distributions (0.18) (0.18) -- (1.23)
---------- ---------- ---------- ----------
Net asset value, end
of period $10.04 $ 9.92 $10.54 $ 10.49
========== ========== ========== ==========
Total Return (without
sales charge) (3.1%) (3.8%) 17.3% 18.3%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $471 $28,299 $22 $33,594
Ratio of expenses to average
net assets 1.9% 2.6% 1.9%* 2.6%
Ratio of net investment
income (loss) to average
net assets 0.5% (0.6%) 0.7%* (0.2%)
Portfolio turnover rate 159.6% 159.6% 107.1% 107.1%
(16) The distribution of Class B shares commenced on May 22, 1995.
(17) The distribution of Class A shares commenced on February 1, 1991.
* Annualized
<TABLE>
<CAPTION>
-----------------------------------------------------------
International Fund
Class C
-----------------------------------------------------------
Year Ended September 30,
------------------------------------------
Period Ended
September 30,
1990 1989 1988 1987 1986(18)
----------------------------- ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 13.33 $ 10.07 $ 12.87 $ 9.70 $ 10.00
---------- ---------- ---------- ---------- ----------------
Income from investment
operations
Net investment income (loss) (0.10) (0.18) (0.10) (0.10) --
Net gains or losses on
securities (both realized
and unrealized) (2.02) 3.44 (1.83) 3.27 (0.30)
---------- ---------- ---------- ---------- ----------------
Total from investment
operations (2.12) 3.26 (1.93) 3.17 (0.30)
---------- ---------- ---------- ---------- ----------------
Less Distributions
Dividends (from net
investment income) -- -- -- -- --
Distributions (from
capital gain) (1.17) -- (0.87) -- --
---------- ---------- ---------- ---------- ----------------
Total distributions (1.17) -- (0.87) -- --
---------- ---------- ---------- ---------- ----------------
Net asset value, end
of period $ 10.04 $ 13.33 $ 10.07 $ 12.87 $ 9.70
========== ========== ========== ========== ================
Total Return (without
sales charge) (17.4%) 32.4% (14.0%) 32.7% (26.9%)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $36,282 $56,150 $60,394 $107,584 $67,668
Ratio of expenses to average
net assets 2.3% 2.3% 2.4% 2.4% 2.3%*
Ratio of net investment
income (loss) to average
net assets (0.3%) (0.7%) (0.5%) (0.9%) (0.3%)*
Portfolio turnover rate --
93.0% 83.6% 94.9% 134.0%
</TABLE>
(18) The Fund commenced operations on August 25, 1986.
* Annualized
<PAGE>
PIMCO Advisors Funds 15
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Precious Metals Fund
is for shares outstanding throughout the periods listed. The information
provided reflects results of operations under the Fund's former investment
objective and policies through November 14, 1994; such results would not
necessarily have been achieved had the Fund's current objective and policies
been in effect.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Precious Metals Fund
Class A Class B Class C Class A Class C Class A Class C
---------- ---------- ---------- ---------- ---------- ---------- ----------
Year Ended September 30,
---------------------------------------------------------------------------
1995 1995(19) 1995 1994 1994 1993 1993
----------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income From Investment
Operations
Net investment income (loss) 0.07 (0.01) (0.02) 0.08 (0.02) 0.06 (0.02)
Net gains or losses on
securities (both realized
and unrealized) (1.88) 0.30 (1.83) 3.74 3.66 2.72 2.69
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations (1.81) 0.29 (1.85) 3.82 3.64 2.78 2.67
---------- ---------- ---------- ---------- ---------- ---------- ----------
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
========== ========== ========== ========== ========== ========== ==========
Total Return (without sales
charge) (12.8%) 2.5% (13.5%) 37.0% 36.0% 36.9% 35.9%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $7,670 $251 $42,341 $11,229 $62,825 $3,425 $23,884
Ratio of expenses to average
net assets 1.4% 2.2%* 2.2% 1.3% 2.1% 1.4% 2.2%
Ratio of net investment
income (loss) to average
net assets 0.6% (0.2%)* (0.2%) 0.6% (0.2%) 0.6% (0.2%)
Portfolio turnover rate 8.7% 8.7% 8.7% 11.0% 11.0% 10.0% 10.0%
</TABLE>
<TABLE>
<CAPTION>
Class A Class C Class A Class C
---------- ---------- ------------------------------------------------
Period Ended
September 30,
1992 1992 1991(20) 1991 1990 1989(21)
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 7.51 $ 7.46 $ 7.19 $ 9.40 $ 9.86 $10.00
---------- ---------- ---------- ---------- ---------- ----------------
Income From Investment
Operations
Net investment income (loss) (0.01) (0.06) (0.07) (0.05) (0.05) (0.05)
Net gains or losses on
securities (both realized
and unrealized) 0.04 0.04 0.39 (1.89) (0.41) (0.08)
---------- ---------- ---------- ---------- ---------- ----------------
Total from investment
operations 0.03 (0.02) 0.32 (1.94) (0.46) (0.13)
---------- ---------- ---------- ---------- ---------- ----------------
Less Distributions
Dividends (from net
investment income) -- -- -- -- -- (0.01)
Distributions (from
capital gain) -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------------
Total distributions -- -- -- -- -- (0.01)
---------- ---------- ---------- ---------- ---------- ----------------
Net asset value,
end of period $ 7.54 $ 7.44 $ 7.51 $ 7.46 $ 9.40 $ 9.86
========== ========== ========== ========== ========== ================
Total Return (without
sales charge) 0.4% (0.3%) 6.8% (20.6%) (4.7%) (1.3%)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $668 $6,633 $ 514 $6,995 $9,918 $6,630
Ratio of expenses to average
net assets 1.9% 2.6% 2.1%* 2.4% 2.4% 2.5%*
Ratio of net investment
income (loss) to average
net assets (0.1%) (0.8%) (1.4%)* (0.8%) (0.8%) (0.6%)*
Portfolio turnover rate 29.6% 29.6% 19.4% 19.4% 22.5% 8.8%
</TABLE>
(19) The distribution of Class B shares commenced on June 15, 1995.
(20) The distribution of Class A shares commenced on February 1, 1991.
(21) The Fund commenced operations on October 10, 1988.
* Annualized
<PAGE>
16 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the High Income Fund is
for shares outstanding throughout the periods listed. The information
provided reflects results of operations under the Fund's former investment
objective and policies through November 14, 1994; such results would not
necessarily have been achieved had the Fund's current objective and policies
been in effect.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
High Income Fund
Class A Class B Class C Class A Class C Class A Class C
---------- ---------- ---------- ---------- ---------- ---------- ----------
Year Ended September 30,
---------------------------------------------------------------------------
1995 1995(22) 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) (.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(23) 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>
(22) The distribution of Class B shares commenced on May 22, 1995.
(23) The distribution of Class A shares commenced on February 6, 1991.
* Annualized
<TABLE>
<CAPTION>
-----------------------------------------------------
High Income Fund
Class C
-----------------------------------------------------
Year Ended September 30,
-----------------------------------------------------
1990 1989 1988 1987 1986
----------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 9.31 $ 9.69 $ 9.74 $10.14 $10.00
---------- ---------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.93 0.94 0.97 1.03 1.16
Net gains or losses on
securities (both realized
and unrealized) (0.74) (0.36) (0.04) (0.43) 0.10
---------- ---------- ---------- ---------- ----------
Total from investment
operations 0.19 0.58 0.93 0.60 1.26
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.95) (0.96) (0.98) (1.00) (1.12)
Distributions (from
capital gain) -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions (0.95) (0.96) (0.98) (1.00) (1.12)
---------- ---------- ---------- ---------- ----------
Net asset value, end of
period $ 8.55 $ 9.31 $ 9.69 $ 9.74 $10.14
========== ========== ========== ========== ==========
Total Return (without
sales charge) 2.2% 6.3% 10.1% 5.9% 12.9%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $356,427 $579,254 $524,966 $438,304 $335,404
Ratio of expenses to average
net assets 1.8% 1.6% 1.6% 1.6% 1.6%
Ratio of net investment
income to average net assets 10.5% 9.8% 10.0% 10.1% 11.2%
Portfolio turnover rate 63.8% 94.6% 127.7% 81.7% 59.2%
</TABLE>
<PAGE>
PIMCO Advisors Funds 17
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Total Return Income
Fund is for shares outstanding throughout the period listed.
<TABLE>
<CAPTION>
--------------------------------
Total Return Income Fund
Class A Class B Class C
---------- ---------- ----------
Period Ended September 30,
--------------------------------
1995(25) 1995(26) 1995(25)
----------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning
of period $10.00 $10.48 $ 10.00
---------- ---------- ----------
Income from investment
operations
Net investment income 0.41 0.16 0.35
Net gains or losses on
securities
(both realized and
unrealized) 0.68 0.24 0.69
---------- ---------- ----------
Total from investment
operations 1.09 0.40 1.04
---------- ---------- ----------
Less Distributions
Dividends (from
net investment income) (0.39) (0.15) (0.34)
Distributions (from
capital gain) -- -- --
---------- ---------- ----------
Total distributions (0.39) (0.15) (0.34)
---------- ---------- ----------
Net asset value, end
of period $10.70 $10.73 $ 10.70
========== ========== ==========
Total Return (without
sales charge) 11.1% 3.8% 10.5%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $37,714 $8,805 $45,631
Ratio of expenses to average
net assets 1.2%* 2.0%* 2.0%*
Ratio of net investment
income to average net assets 5.1%* 4.2%* 4.3%*
Portfolio turnover rate 98.0% 98.0% 98.0%
----------------------------- ---------- ---------- ----------
</TABLE>
(25) The Fund commenced operations on December 22, 1994.
(26) The distribution of Class B shares commenced on May 22, 1995.
* Annualized
<PAGE>
18 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Tax Exempt Fund is for
shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Tax Exempt Fund
Class A Class B Class C Class A Class C Class A Class C
---------- ---------- ---------- ---------- ---------- ---------- ----------
Year Ended September 30,
---------------------------------------------------------------------------
1995 1995(27) 1995 1994 1994 1993 1993
----------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, beginning
<S> <C> <C> <C> <C> <C> <C> <C>
of period $11.21 $11.90 $11.21 $12.74 $12.73 $11.94 $11.94
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.57 0.16 0.48 0.56 0.47 0.61 0.52
Net gains or losses on
securities
(both realized and
unrealized) 0.63 (0.07) 0.62 (1.31) (1.30) 1.02 1.01
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations 1.20 0.09 1.10 (0.75) (0.83) 1.63 1.53
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.58) (0.15) (0.49) (0.58) (0.49) (0.64) (0.55)
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)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $11.83 $11.84 $11.82 $11.21 $11.21 $12.74 $12.73
========== ========== ========== ========== ========== ========== ==========
Total Return (without
sales charge) 11.0% 0.8% 10.1% (6.1%) (6.7%) 14.2% 13.3%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $2,701 $288 $54,224 $2,726 $68,214 $2,852 $81,475
Ratio of expenses to average
net assets 1.1% 1.9%* 1.8% 1.1% 1.8% 1.1% 1.8%
Ratio of net investment
income to average net assets 5.0% 4.0%* 4.3% 4.7% 4.0% 5.0% 4.2%
Portfolio turnover rate 35.0% 35.0% 35.0% 63.2% 63.2% 55.9% 55.9%
</TABLE>
<TABLE>
<CAPTION>
Class A Class C Class A Class C
---------- ---------- ---------- ----------
1992 1992 1991(28) 1991
----------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $11.53 $ 11.53 $11.30 $ 10.97
---------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.65 0.58 0.38 0.62
Net gains or losses on
securities
(both realized and
unrealized) 0.42 0.41 0.23 0.56
---------- ---------- ---------- ----------
Total from investment
operations 1.07 0.99 0.61 1.18
---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.66) (0.58) (0.38) (0.62)
Distributions (from
capital gain) -- -- -- --
---------- ---------- ---------- ----------
Total distributions (0.66) (0.58) (0.38) (0.62)
---------- ---------- ---------- ----------
Net asset value, end of
period $11.94 $11.94 $11.53 $11.53
========== ========== ========== ==========
Total Return (without
sales charge) 9.5% 8.8% 10.4% 11.0%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $2,295 $52,113 $ 321 $46,663
Ratio of expenses to average
net assets 1.1% 1.8% 1.1%* 1.8%
Ratio of net investment
income to average net assets 5.6% 4.9% 5.8%* 5.5%
Portfolio turnover rate 107.4% 107.4% 119.0% 119.0%
</TABLE>
(27) The distribution of Class B shares commenced on May 30, 1995.
(28) The distribution of Class A shares commenced on March 14, 1991.
* Annualized
<TABLE>
<CAPTION>
---------------------------------------------------------
Tax Exempt Fund
Class C
---------------------------------------------------------
Year Ended September 30,
------------------------------------------
Period Ended
September 30,
1990 1989 1988 1987 1986(29)
----------------------------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $11.10 $10.82 $10.23 $11.51 $10.00
---------- ---------- ---------- ---------- --------------
Income from investment
operations
Net investment income 0.63 0.65 0.65 0.66 0.61
Net gains or losses on
securities
(both realized and
unrealized) (0.13) 0.28 0.59 (0.84) 1.51
---------- ---------- ---------- ---------- --------------
Total from investment
operations 0.50 0.93 1.24 (0.18) 2.12
---------- ---------- ---------- ---------- --------------
Less Distributions
Dividends (from net
investment income) (0.63) (0.65) (0.65) (0.66) (0.61)
Distributions (from
capital gain) -- -- -- (0.44) --
---------- ---------- ---------- ---------- --------------
Total distributions (0.63) (0.65) (0.65) (1.10) (0.61)
---------- ---------- ---------- ---------- --------------
Net asset value, end of
period $10.97 $11.10 $10.82 $10.23 $11.51
========== ========== ========== ========== ==============
Total Return (without
sales charge) 4.5% 8.8% 12.4% (2.1%) 23.9%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $46,630 $60,609 $63,261 $66,610 $53,370
Ratio of expenses to average
net assets 1.7% 1.7% 1.8% 1.8% 1.8%*
Ratio of net investment
income to average net assets 5.6% 5.9% 6.1% 5.9% 6.1%*
Portfolio turnover rate 77.5% 203.6% 211.3% 204.4% 301.0%
</TABLE>
(29) The Fund commenced operations on November 1, 1985.
* Annualized
<PAGE>
PIMCO Advisors Funds 19
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the U.S. Government Fund
is for shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
U.S. Government Fund
Class A Class B Class C Class A Class C Class A Class C
---------- ---------- ---------- ---------- ---------- ---------- ----------
Year Ended September 30,
---------------------------------------------------------------------------
1995 1995(30) 1995 1994 1994 1993 1993
----------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.58 0.16 0.51 0.60 0.53 0.65 0.58
Net gains or losses on
securities (both realized
and unrealized) 0.47 (0.02) 0.48 (1.03) (1.03) 0.10 0.10
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations 1.05 0.14 0.99 (0.43) (0.50) 0.75 0.68
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.57) (0.16) (0.51) (0.60) (0.53) (0.65) (0.58)
Distributions (from
capital gain) -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.57) (0.16) (0.51) (0.60) (0.53) (0.65) (0.58)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $ 9.16 $ 9.15 $ 9.13 $ 8.68 $ 8.65 $ 9.71 $ 9.68
========== ========== ========== ========== ========== ========== ==========
Total Return (without
sales charge) 12.6% 1.6% 11.8% (4.6%) (5.3%) 8.2% 7.4%
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
Ratio of expenses to average
net assets 1.0% 1.8%* 1.8% 1.0% 1.7% 1.0% 1.7%
Ratio of net investment
income to average net assets 6.5% 5.6%* 5.8% 6.5% 5.8% 6.8% 6.1%
Portfolio turnover rate 120.3% 120.3% 120.3% 121.0% 121.0% 199.7% 199.7%
</TABLE>
<TABLE>
<CAPTION>
Class A Class C Class A Class C
---------- ---------- ---------- ----------
1992 1992 1991(31) 1991
----------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 9.46 $ 9.45 $ 9.31 $ 9.02
---------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.75 0.69 0.65 0.81
Net gains or losses on
securities (both realized
and unrealized) 0.19 0.15 0.15 0.46
---------- ---------- ---------- ----------
Total from investment
operations 0.94 0.84 0.80 1.27
---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.79) (0.71) (0.65) (0.84)
Distributions (from
capital gain) -- -- -- --
---------- ---------- ---------- ----------
Total distributions (0.79) (0.71) (0.65) (0.84)
---------- ---------- ---------- ----------
Net asset value, end
of period $ 9.61 $ 9.58 $ 9.46 $ 9.45
========== ========== ========== ==========
Total Return (without
sales charge) 10.3% 9.2% 12.3% 14.8%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $15,224 $531,310 $3,983 $429,796
Ratio of expenses to average
net assets 1.0% 1.8% 1.1%* 1.8%
Ratio of net investment
income to average net assets 7.8% 7.3% 9.3%* 8.8%
Portfolio turnover rate 156.4% 156.4% 37.1% 37.1%
</TABLE>
(30) The distribution of Class B shares commenced on June 2, 1995.
(31) The distribution of Class A shares commenced on January 3, 1991.
* Annualized
<TABLE>
<CAPTION>
-----------------------------------------------------
U.S. Government Fund
Class C
-----------------------------------------------------
Year Ended September 30,
-----------------------------------------------------
1990 1989 1988 1987 1986
----------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 9.35 $ 9.42 $ 9.32 $10.48 $10.00
---------- ---------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.80 0.84 0.86 0.86 0.94
Net gains or losses on
securities (both realized
and unrealized) (0.31) (0.08) 0.12 (1.00) 0.47
---------- ---------- ---------- ---------- ----------
Total from investment
operations 0.49 0.76 0.98 (0.14) 1.41
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.82) (0.83) (0.88) (0.92) (0.83)
Distributions (from
capital gain) -- -- -- (0.10) (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions (0.82) (0.83) (0.88) (1.02) (0.93)
---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $ 9.02 $ 9.35 $ 9.42 $ 9.32 $10.48
========== ========== ========== ========== ==========
Total Return (without
sales charge) 5.4% 8.5% 10.8% (1.7%) 15.1%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $447,272 $583,667 $733,306 $783,545 $409,482
Ratio of expenses to average
net assets 1.7% 1.7% 1.7% 1.7% 1.7%
Ratio of net investment
income to average net assets 8.6% 9.0% 9.0% 8.5% 8.9%
Portfolio turnover rate 99.1% 188.4% 221.8% 332.0% 252.3%
</TABLE>
<PAGE>
20 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Short-Intermediate
Fund is for shares outstanding throughout the periods listed. The information
provided reflects results of operations under the Fund's former investment
objective and policies through November 14, 1994; such results would not
necessarily have been achieved had the Fund's current objective and policies
been in effect.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Short-Intermediate Fund
Class A Class B Class C Class A Class C Class A Class C
---------- ---------- ---------- ---------- ---------- ---------- ----------
Year Ended September 30,
---------------------------------------------------------------------------
1995 1995(33) 1995 1994 1994 1993 1993
----------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income From Investment
Operations
Net investment income 0.59 0.18 0.54 0.47 0.42 0.48 0.44
Net gains or losses on
securities (both realized
and unrealized) 0.25 0.13 0.23 (0.43) (0.44) (0.15) (0.16)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations 0.84 0.31 0.77 0.04 (0.02) 0.33 0.28
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.59) (0.18) (0.54) (0.48) (0.43) (0.48) (0.43)
Distributions (from
capital gain) -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.59) (0.18) (0.54) (0.48) (0.43) (0.48) (0.43)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $ 9.62 $ 9.62 $ 9.60 $ 9.37 $ 9.37 $ 9.81 $ 9.82
========== ========== ========== ========== ========== ========== ==========
Total Return (without
sales charge) 9.3% 3.3% 8.5% 0.4% (0.2%) 3.4% 2.9%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $6,343 $941 $65,608 $4,913 $88,909 $7,169 $123,857
Ratio of expenses to average
net assets 1.0% 1.7%* 1.5% 0.9% 1.4% 1.0% 1.5%
Ratio of net investment
income to average net assets 6.3% 5.4%* 5.7% 4.9% 4.4% 4.9% 4.4%
Portfolio turnover rate 173.4% 173.4% 173.4% 86.2% 86.2% 112.7% 112.7%
</TABLE>
<TABLE>
<CAPTION>
Class A Class C Class A Class C
---------- ---------- ---------- ----------
Period Ended
September 30,
--------------------
1992 1992 1991(34) 1991(34)
----------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.03 $ 10.03 $10.00 $ 10.00
---------- ---------- ---------- ----------
Income From Investment
Operations
Net investment income 0.60(35) 0.55(35) 0.07(36) 0.07(36)
Net gains or losses on
securities (both realized
and unrealized) (0.04) (0.03) 0.03 0.03
---------- ---------- ---------- ----------
Total from investment
operations 0.56 0.52 0.10 0.10
---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.62) (0.57) (0.07) (0.07)
Distributions (from
capital gain) (0.01) (0.01) -- --
---------- ---------- ---------- ----------
Total distributions (0.63) (0.58) (0.07) (0.07)
---------- ---------- ---------- ----------
Net asset value, end of
period $ 9.96 $ 9.97 $10.03 $ 10.03
========== ========== ========== ==========
Total Return (without
sales charge) 5.8% 5.4% 8.5% 8.6%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $13,535 $135,655 $844 $32,052
Ratio of expenses to average
net assets 0.9% 1.3% 0.4%* 0.9%*
Ratio of net investment
income to average net assets 6.0% 5.5% 5.3%* 5.0%*
Portfolio turnover rate 132.8% 132.8% 114.6% 114.6%
</TABLE>
(33) The distribution of Class B shares commenced on May 22, 1995.
(34) The Fund commenced operations on August 16, 1991.
(35) Reflecting voluntary waiver of investment advisory fee of $138,110 (.02
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements.
(36) Reflecting expense reduction of $2,957 (.00 per share) and voluntary
waiver of investment advisory fee of $29,149 (.01 per share) by the
Manager as more fully described in Note 3(a) to the Financial
Statements.
* Annualized
<PAGE>
PIMCO Advisors Funds 21
- --------------------------------------------------------------------------------
Financial Highlights
The following schedule of financial highlights for the Money Market Fund is
for shares outstanding throughout the periods listed.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Money Market Fund
Class A Class B Class C Class A Class C Class A Class C
---------- ---------- ---------- ---------- ---------- ---------- ----------
Year ended September 30,
---------------------------------------------------------------------------
1995 1995(37) 1995 1994 1994 1993 1993
----------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.054(39) 0.007 0.054(39) 0.030(40) 0.030(40) 0.025(41) 0.025(41)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.054) (0.007) (0.054) (0.030) (0.030) (0.025) (0.025)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ==========
Total Return (without
sales charge) 5.4% 0.7% 5.4% 3.0% 3.0% 2.5% 2.5%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $13,553 $21 $69,364 $12,933 $84,064 $3,729 $44,657
Ratio of expenses to average
net assets 0.49% 1.46%* 0.50% 0.75% 0.75% 0.75% 0.75%
Ratio of net investment
income to average net assets 5.40% 4.79%* 5.37% 3.38% 3.18% 2.47% 2.51%
</TABLE>
<TABLE>
<CAPTION>
Class A Class C Class A Class C
---------- ---------- ---------- ----------
1992 1992 1991(38) 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(42) 0.034(42) 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%
</TABLE>
(37) The distribution of Class B shares commenced on July 17, 1995.
(38) The distribution of Class A shares commenced on March 5, 1991.
(39) Reflecting voluntary waiver of investment advisory fee of $23,048 (.000
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements.
(40) Reflecting voluntary waiver of investment advisory fee of $142,336 (.002
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements included in the Statement of Additional
Information.
(41) Reflecting voluntary waiver of investment advisory fee of $160,471 (.003
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements included in the Statement of Additional
Information.
(42) Reflecting voluntary waiver of investment advisory fee of $31,042 (.001
per share) by the Manager as more fully described in Note 3(a) to the
Financial Statements included in the Statement of Additional
Information.
* Annualized
<TABLE>
<CAPTION>
-----------------------------------------------------
Money Market Fund
Class C
-----------------------------------------------------
Year ended September 30,
-----------------------------------------------------
1990 1989 1988 1987 1986
----------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.069 0.077 0.057 0.043 0.047
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends (from net
investment income) (0.069) (0.077) (0.057) (0.043) (0.047)
---------- ---------- ---------- ---------- ----------
Net asset value, end
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Return (without
sales charge) 6.9% 7.7% 5.7% 4.3% 4.7%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $104,002 $104,198 $98,896 $64,291 $13,936
Ratio of expenses to average
net assets 1.6% 1.6% 1.6% 1.7% 2.1%
Ratio of net investment
income to average net assets 6.9% 7.7% 5.7% 4.6% 4.6%
</TABLE>
<PAGE>
22 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Investment Objectives and Policies
PIMCO Advisors Equity Funds
The PIMCO Advisors Equity Funds consist of nine Funds with the objectives and
policies set forth below. Under normal market conditions, each of the Equity
Funds (other than the Precious Metals Fund) will invest at least 65% of its
assets in equity securities (income-producing equity securities in the case
of the Equity Income Fund), including common stocks, preferred stocks and
securities (including debt securities and warrants) convertible into or
exercisable for common stocks.
As indicated below, the Equity Funds invest in companies whose equity
capitalizations (i.e., the number of shares times the market price per share)
range from small to medium to large. Generally, small equity capitalization
is less than $1 billion and large equity capitalization is more than $5
billion. Whether an issuer's equity capitalization is medium is determined by
reference to the capitalization for all issuers whose equity securities are
listed on a United States national securities exchange or which are reported
on NASDAQ. Issuers with market capitalization within the range of
capitalization of companies included in the S&P Mid Cap 400 Index are regarded
as being issuers with medium equity capitalization.
Equity Income Fund seeks long-term growth of capital and current income. The
Fund invests primarily in a variety of income-producing equity securities.
Income-producing equity securities include common stocks that pay dividends,
preferred stocks and securities (including debt securities) that are
convertible into common stocks ("convertible securities"). Under unusual
conditions, for temporary defensive purposes, the Fund may invest up to 100%
of its assets in non-convertible debt securities. The Fund invests in common
stocks of companies with small, medium and large equity capitalizations.
The Fund may invest without limit in preferred stocks and convertible
securities rated at least B by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") (or similarly rated by another
Nationally Recognized Statistical Rating Organization ("NRSRO"), or unrated
but determined by the Fund's sub-adviser to be of comparable quality), and
may invest up to 10% of its total assets in convertible securities rated
below B by Moody's or S&P (or similarly rated by another NRSRO or unrated but
determined by the sub-adviser to be of comparable quality). Securities rated
Ba or below by Moody's or BB or below by S&P (or of similar quality) are not
considered to be of "investment grade" quality. These lesser rated debt
securities may involve special risks. See "Description and Risks of Fund
Investments -- Risks of High Yield Bonds." The Fund will not invest in
convertible securities that are in default at the time of acquisition.
The non-convertible debt securities in which the Fund may invest include
corporate or government debt securities of any maturity, including zero
coupon securities. These non-convertible debt securities may be rated B or
higher by Moody's or S&P (or similarly rated by another NRSRO or unrated and
determined by the subadviser to be of comparable quality), but no more than
35% of the Fund's total assets will be invested in nonconvertible debt
securities rated below investment grade quality by two NRSROs at the time of
purchase (or unrated but determined by the sub-adviser to be of comparable
quality). See "Description and Risks of Fund Investments -- Credit Ratings
and NRSROS" for an explanation of securities ratings.
See "Additional Investment Techniques Used By The Equity Funds" below for a
list of additional investments that the Fund may make.
Value Fund seeks long-term growth of capital and current income. The Fund
invests primarily in common stocks of companies that are characterized by having
below-average price to earnings ("P/E") ratios and/or higher dividend yields
relative to their industry groups. In selecting stocks, a universe of
approximately 2,500 stocks, each of companies having minimum capitalizations
of $200 million, is classified by industry. The universe is then analyzed to
find the lowest P/E and/or highest yielding stocks in each industry, subject
to quality, earnings and price momentum screens. The stocks with the lowest
P/E ratios and/or highest dividend yields in each industry that meet the
quality, earnings and price momentum criteria are selected for the Fund.
Although quarterly rebalancing is a general rule, replacements are made
whenever an alternative stock within the same industry has a significantly
lower P/E ratio or higher dividend yield than the current Fund holding.
See "Additional Investment Techniques Used By The Equity Funds" below for a
list of additional investments that the Fund may make.
Growth Fund seeks long-term growth of capital. Income is an incidental
consideration. The Fund invests primarily in common stocks of companies with
medium to large equity capitalizations. See "Additional Investment Techniques
Used By The Equity Funds" below for a list of additional investments that the
Fund may make.
<PAGE>
PIMCO Advisors Funds 23
- --------------------------------------------------------------------------------
Target Fund seeks capital appreciation. No consideration is given to income. The
Fund invests primarily in common stocks of companies with medium equity
capitalizations. See "Additional Investment Techniques Used By The Equity Funds"
below for a list of additional investments that the Fund may make.
Discovery Fund seeks capital appreciation. No consideration is given to income.
The Fund invests primarily in common stocks of small companies with equity
capitalizations of $500 million to $1 billion which exhibit favorable growth
characteristics and reasonable valuations. The Fund is intended for equity
investors seeking above average gains who are willing to accept the greater
risks associated therewith. See "Risks of Investment in Companies with Small and
Medium Equity Capitalizations" under "Description and Risks of Fund Investments"
for a description of certain of such risks. See "Additional Investment
Techniques Used By The Equity Funds" below for a list of additional investments
that the Fund may make.
Opportunity Fund seeks capital appreciation. No consideration is given to
income. The Fund is currently closed to new investors. The Fund invests
primarily in common stocks of companies with small equity capitalizations. The
Fund is intended for aggressive investors seeking above average gains and
willing to accept the greater risks associated therewith. See "Additional
Investment Techniques Used By The Equity Funds" below for a list of additional
investments that the Fund may make.
Innovation Fund seeks capital appreciation. No consideration is given to income.
The Fund will invest primarily (i.e. at least 65% of its assets) in common
stocks of companies which utilize innovative technologies to gain a strategic
competitive advantage in their industry as well as companies that provide and
service those technologies. Securities will be selected with minimal emphasis on
more traditional factors such as growth potential or value relative to intrinsic
worth. Instead, the Fund will be guided by the theory of Positive Momentum &
Positive Surprise, with special emphasis on common stocks of companies whose
perceived strength lies in their use of innovative technologies in new products,
enhanced distribution systems and improved management techniques. Although the
Fund emphasizes the utilization of technologies, it is not restricted to
investment in companies in a particular business sector or industry. See
"Additional Investment Techniques Used By The Equity Funds" below for a list of
additional investments that the Fund may make.
International Fund seeks capital appreciation through investments in an
international portfolio. Income is an incidental consideration. Under normal
market conditions, at least 65% of the International Fund's total assets will be
invested in common stocks, which may or may not pay dividends, as well as
convertible bonds, convertible preferred stocks, warrants, rights or other
equity securities for a combination of capital appreciation and income.
Convertible securities may include securities convertible only by certain
classes of investors (which may not include the Fund), but the Fund may not
invest in convertible securities which are of less than investment grade quality
at the time of purchase. The Fund invests in companies with small, medium and
large equity capitalizations.
The International Fund will normally invest in securities traded in foreign
securities markets with particular consideration given to investments
principally traded in North and South American (other than United States),
Japanese, European, Pacific and Australian securities markets, and in foreign
securities traded on United States' securities markets. Investing in foreign
securities and securities of foreign issuers presents special risks. See
"Risks of Foreign Investments" under "Description and Risks of Fund
Investments" below. The Fund will also invest in emerging markets, where
markets may not yet fully reflect the potential of the developing economy.
There are no prescribed limits on geographic asset distribution and the
International Fund has the authority to invest in securities traded in
securities markets of any country in the world. In allocating the
International Fund's assets among the various securities markets of the
world, the Fund's sub-adviser will consider such factors as the condition and
growth potential of the various economies and securities markets, currency
and taxation considerations and other pertinent financial, social, national
and political factors. Under certain adverse investment conditions, the
International Fund may restrict the number of securities markets in which its
assets will be invested, although under normal market circumstances the
Fund's investments will involve securities principally traded in at least
three different countries. The Fund will not limit its investments to any
particular type or size of company.
The International Fund may invest up to 10% of its assets in securities of
other investment companies, such as closed-end investment management
companies which invest in foreign markets. See "Description and Risks of Fund
Investments--Investment in Investment Companies."
The Fund will not normally invest in securities of United States issuers
traded on United States securities
<PAGE>
24 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
markets. However, when the sub-adviser believes that conditions in
international securities markets warrant a defensive investment strategy, the
International Fund may invest up to 100% of its assets in domestic debt,
foreign debt and equity securities principally traded in the United States,
including the money market instruments described under "Description and Risks
of Fund Investments--Money Market Instruments," obligations issued or
guaranteed by the U.S. or a foreign government or their respective agencies,
authorities or instrumentalities or corporate bonds and sponsored American
Depository Receipts.
See "Additional Investment Techniques Used By The Equity Funds" below for a
list of additional investments that the Fund may make.
Precious Metals Fund seeks capital appreciation. No consideration is given to
income. The Precious Metals Fund concentrates investments in a global portfolio
of common stocks of companies principally engaged in precious metal-related
activities which include companies principally engaged in the extraction,
processing, distribution or marketing of precious metals (the "precious metals
industry"). A particular company is deemed to be "principally engaged" in the
precious metals industry if at the time of investment the Fund's sub-adviser
considers that at least 50% of the company's assets, revenues or profits are
derived from the precious metals industry. Normally at least 65% of the assets
of the Precious Metals Fund will be invested in the precious metals industry
plus securities the value of which is linked to the price of a precious metal.
See "Precious Metals" under "Description and Risks of Fund Investments" below.
The Fund invests in companies with small, medium and large equity
capitalizations.
The Precious Metals Fund will seek to identify securities of companies which,
based upon the sub-adviser's evaluation of their fundamental investment
characteristics, are undervalued in comparison to the present or anticipated
value of the precious metals relevant to them. Examples of precious metals
include gold, silver and platinum. To the extent permitted by state
securities laws and federal tax law, the Precious Metals Fund may invest
directly in gold bullion and other precious metals. The Precious Metals Fund
has no present intention of investing directly in precious metals other than
gold.
The Precious Metals Fund does not presently intend to invest more than 10% of
its assets in either precious metals such as gold bullion or in futures on
precious metals, such as gold futures, and options thereon. The Precious
Metals Fund may invest up to 100% of its assets in securities principally
traded on foreign securities markets and in securities of foreign issuers
that are traded on U.S. securities markets, including American Depository
Receipts, and may invest up to 100% of its assets in securities of companies
whose assets, revenues or profits are derived from a single precious metal.
At the present time, the Precious Metals Fund has no intention of investing
more than 5% of its assets in securities the value of which is linked to the
price of a single precious metal.
For temporary defensive purposes, the Precious Metals Fund may invest up to
100% of its net assets in any combination of high-quality, short- or
long-term debt instruments or in common, preferred or convertible securities.
The Precious Metals Fund, because of its emphasis on one industrial sector,
should be considered as one aspect of a diversified portfolio and may not be
suitable by itself as a balanced investment program. See "Additional
Investment Techniques Used By The Equity Funds" below for a list of
additional investments that the Fund may make.
Additional Investment Techniques Used By The Equity Funds
All of the Equity Funds may invest in convertible securities (including
convertible debt securities) which generally convert into common stock at
either a stated price or stated rate. The International Fund may invest in
securities convertible only by certain classes of investors (which may not
include the Fund). The Equity Income Fund may also invest in so-called
"synthetic" convertible securities, which are composed of two or more
different securities whose investment characteristics, taken together,
resemble those of convertible securities. For example the Equity Income Fund
may purchase a non-convertible debt security and a warrant or option.
The Equity Income, Value, Growth, Target, Discovery, Opportunity, and
Innovation Funds each may invest up to 15% of their assets in securities
which are traded principally in securities markets outside of the United
States (Eurodollar certificates of deposit are excluded for purposes of these
limitations), and may also invest without limit in securities of foreign
issuers that are traded in U.S. securities markets. The International and
Precious Metals Funds may invest primarily in such securities.
Each of the Equity Funds may engage in transactions in options and futures
contracts either to adjust the risk/return characteristics of the Funds'
portfolios and/or, in the case of written options, to increase current
income.
<PAGE>
PIMCO Advisors Funds 25
- --------------------------------------------------------------------------------
Each of the Equity Funds may write covered call and covered put options on
any security that it is eligible to purchase. Each Equity Fund may also
purchase put and call options on securities it is eligible to purchase. The
Equity Funds may each buy and sell (write) stock index options. In the case
of written call options on stock indices the Fund(s) will own corresponding
securities whose historic volatility correlates with that of the index. The
International and Precious Metals Funds may buy and sell stock index futures
contracts and options on stock index futures contracts. The Precious Metals
Fund may purchase and sell futures contracts on precious metals (such as
gold), and purchase and write options on commodity indices and on precious
metals futures contracts. Some of the derivative instruments and transactions
used by the Equity Funds described above have speculative and/or leveraging
characteristics. Certain limitations on such transactions are imposed by the
Investment Company Act and the Commodity Exchange Act. See "Derivatives" and
"Investment Restrictions" in the Statement of Additional Information.
Each of the Equity Funds may buy or sell foreign currencies or may deal in
forward foreign currency contracts. The International and Precious Metals
Funds may also invest in currency futures contracts and related options. The
Equity Funds will utilize such transactions in foreign currencies for the
purpose of hedging against foreign currency exchange risk arising from a
Fund's investment or anticipated investment in securities denominated in
foreign currencies, and, in the case of the International Fund, for the
purpose of shifting exposure to foreign currency fluctuations from one
currency to another. See "Other Foreign Currency Transactions" under
"Description and Risks of Fund Investments" below.
Each of the Equity Funds may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income; purchase warrants on
securities that it is eligible to purchase; enter into repurchase agreements
with banks and broker-dealers; make short sales of securities held in the
Fund's portfolio or which the Fund has the right to acquire without the
payment of further consideration; and purchase and sell securities on a
when-issued or delayed delivery basis and enter into forward commitments to
purchase securities. Each of the Equity Funds may also purchase "illiquid
securities" so long as no more than 15% of that Fund's net assets would be
invested in illiquid securities after giving effect to the purchase. Each of
the Equity Funds may also invest a portion and, for temporary defensive
purposes, up to 100% of its assets in the money market instruments described
in "Money Market Instruments" under "Description and Risks of Fund
Investments" below.
For a description of the securities and investment techniques listed above
and the risks associated with them, see "Description and Risks of Fund
Investments" below.
PIMCO Advisors Income Funds The PIMCO Advisors Income Funds consist of six
diversified Funds and one non-diversified Fund (the Global Income Fund) with the
objectives and policies set forth below. Each of the Income Funds (other than
the Tax Exempt and Money Market Funds) will invest at least 65% of its assets in
the following types of securities which, except as specifically provided
otherwise in the description of the Funds that follow, may be issued by domestic
or foreign entities and denominated in U.S. dollars or foreign currencies:
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government securities"); corporate debt securities;
corporate commercial paper; mortgage and other asset-backed securities; variable
and floating rate debt securities; bank certificates of deposit, fixed time
deposits and bankers' acceptances; repurchase agreements and reverse repurchase
agreements; obligations of foreign governments or their subdivisions, agencies
and instrumentalities, international agencies or supranational entities; and
foreign currency exchange- related securities, including foreign currency
warrants. Each of the Income Funds may hold different percentages of its assets
in these various types of securities.
Global Income Fund is a non-diversified portfolio which seeks maximum total
return, consistent with the preservation of capital. The Fund invests primarily
in investment grade U.S. and foreign fixed-income securities and seeks an
intermediate portfolio duration of three to six years. See "Duration" below.
"Investment grade" fixed-income securities are securities rated in one of the
four highest ratings categories by the NRSROs (e.g., Baa or higher by Moody's
and BBB or higher by S&P), or determined to be of comparable quality by the
Fund's sub-adviser. See "Description and Risks of Fund Investments -- Credit
Ratings and NRSROs" below. As a non-diversified portfolio, the Fund may invest a
relatively high percentage of its assets in the securities of relatively few
issuers which the Fund's sub-adviser deems to be attractive investments. Such
concentration may increase the risk of loss to the Fund should there be a
decline in the market value of any one portfolio security. See "Description and
Risks of Fund Investments -- Diversified and Non-Diversified Portfolios" below.
<PAGE>
26 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
The Fund invests in a non-diversified portfolio of fixed-income securities
denominated in major currencies, baskets of foreign currencies (such as the
European Currency Unit, or "ECU"), and the U.S. dollar. Under normal
circumstances, at least 65% of the Fund's assets will be invested in
fixed-income securities of issuers located in at least three countries (one
of which may be the United States). The Fund may purchase put and call
options, sell (write) covered options, and enter into futures contracts and
options on futures contracts for hedging, investment and risk management
purposes. The Fund may also write options in connection with buy-and-write
transactions, and use index futures or foreign indices for investment,
anticipatory hedging and risk management. See "Options on Securities,
Securities Indices, and Currencies" and "Futures Contracts and Options on
Futures Contracts" under "Description and Risks of Fund Investments" below.
The Fund may also hold foreign currencies in demand deposits in order to
facilitate trading in non-U.S. dollar-denominated securities, and may buy and
sell currencies and use forward foreign currency exchange contracts, currency
futures contracts and related options, currency swap contracts and options on
currencies for hedging and for currency risk management. See "Description and
Risks of Fund Investments -- Other Foreign Currency Transactions" below. In
addition, the Fund may use "synthetic bonds" and "synthetic foreign currency
denominated securities" to approximate desired risk/return profiles where the
non-synthetic securities are either unavailable or possess undesirable
characteristics. See the description of "synthetic bonds" and "synthetic
foreign currency denominated securities" in "Additional Investment Techniques
Used By The Income Funds" below.
Depending on the sub-adviser's current opinion as to the proper allocation of
assets among domestic and foreign issuers, investments in the securities of
issuers located outside the United States will normally vary between 25% and
75% of the Fund's assets. The Fund expects to hedge its foreign currency
exposure so that generally no more than 25% of the Fund's total net assets
will be invested in unhedged foreign currency denominated securities. The
Fund may invest up to 10% of its assets in fixed-income securities that are
rated below investment grade but rated at least B by Moody's or S&P (or
similarly rated by another NRSRO or, if unrated, determined by the
sub-adviser to be of comparable quality). See "Description and Risks of Fund
Investments -- Credit Ratings and NRSROs" below.
For an explanation of other investments which the Fund may make, see
"Additional Investment Techniques Used by The Income Funds" below.
High Income Fund-seeks maximum total return, consistent with preservation of
capital. The Fund seeks a portfolio duration of two to six years. See "Duration"
below. The Fund seeks to achieve its objective by investing primarily in higher
yielding lower-rated fixed-income securities and invests under normal
circumstances at least 65% of its assets in a diversified portfolio of U.S.
dollar-denominated fixed-income securities of domestic and foreign issuers rated
below investment grade but rated at least B by Moody's or S&P (or similarly
rated by another NRSRO or, if unrated, determined by the Fund's sub-adviser to
be of comparable quality). Such securities are colloquially referred to as "junk
bonds," and are referred to herein as "High Yield Securities." The Fund also may
invest in loan participations and engage in hedging strategies involving equity
options (e.g., the Fund may write call options as a partial hedge -- to the
extent of the premium received -- or purchase put options on the stock of
companies whose high yield debt instruments are owned by the Fund). Loan
participations may be treated as illiquid securities. The remainder of the
Fund's assets will be invested in U.S. dollar- or foreign currency-denominated
investment grade fixed-income securities. See "Credit Ratings and NRSROs" under
"Description and Risks of Fund Investments" below. The Fund may invest up to 20%
of its assets in securities denominated in foreign currencies. In addition, the
Fund may use "synthetic bonds" and "synthetic foreign currency denominated
securities" to approximate desired risk/return profiles where the non-synthetic
securities are either unavailable or possess undesirable characteristics. See
the description of "synthetic bonds" and "synthetic foreign currency denominated
securities" in "Additional Investment Techniques Used By The Income Funds"
below.
Investments in High Yield Securities, while generally providing greater
potential opportunity for capital appreciation and higher yields than
investments in higher rated securities, also entail greater risk, including
the risk of default or bankruptcy of the issuer of such securities. For a
further discussion of the special risks of investment in lower rated
securities, see "Risks of High Yield Bonds" under "Description and Risks of
Fund Investments" below.
For an explanation of other investments which the Fund may make, see
"Additional Investment Techniques Used By The Income Funds" below.
Total Return Income Fund seeks maximum total return, consistent with
preservation of capital. The Fund invests primarily in investment grade
fixed-income secu-
<PAGE>
PIMCO Advisors Funds 27
- --------------------------------------------------------------------------------
rities and seeks a portfolio duration of three to six years. See "Duration"
below. The Fund may invest up to 10% of its assets in fixed-income securities
that are rated below investment grade but rated at least B by Moody's or S&P
(or similarly rated by another NRSRO or, if unrated, determined by the Fund's
sub-adviser to be of comparable quality). The Fund will maintain an overall
dollar-weighted average quality of at least A (as rated by Moody's or S&P or
of comparable quality). See "Credit Ratings and NRSROs" under "Description
and Risks of Fund Investments" below. The Fund may also invest up to 20% of
its assets in securities denominated in foreign currencies. In addition, the
Fund may use "synthetic bonds" and "synthetic foreign currency denominated
securities" to approximate desired risk/return profiles where the
non-synthetic securities are either unavailable or possess undesirable
characteristics. See the description of "synthetic bonds" and "synthetic
foreign currency denominated securities" in "Additional Investment Techniques
Used By The Income Funds" below.
For an explanation of other investments which the Fund may make, see
"Additional Investment Techniques Used By The Income Funds" below.
Tax Exempt Fund seeks high current income exempt from federal income tax,
consistent with preservation of capital, by investing in debt securities whose
interest is, in the opinion of bond counsel for the issuer at the time of
issuance, exempt from federal income tax ("Tax Exempt Bonds"). Tax Exempt Bonds
generally are issued by states and local governments and their agencies,
authorities and other instrumentalities. It is a policy of the Fund that, under
normal market conditions, at least 80% of its net assets will be invested in Tax
Exempt Bonds rated Baa or higher by Moody's or BBB or higher by S&P, or which
are similarly rated by another NRSRO or if unrated, determined by the Fund's
sub-adviser to be of quality comparable to obligations so rated. Tax Exempt
Bonds rated in the fourth highest rating category (e.g. Baa by Moody's) may be
considered to possess some speculative characteristics by certain NRSROs. The
Fund seeks a portfolio duration of 3 to 10 years. See "Duration" below.
The Fund may invest up to 20% of its net assets, under normal market
conditions, in any combination of (1) Tax Exempt Bonds which are rated at
least Ba by Moody's or BB by S&P (or similarly rated by another NRSRO or, if
unrated, determined by the sub-adviser to be of comparable quality) and (2)
U.S. Government securities, money market instruments or "private activity"
bonds (see "Taxes"). Securities rated below investment grade and comparable
unrated securities are subject to greater risks than higher quality bonds.
See "Risks of High Yield Bonds" under "Description and Risks of Fund
Investments" below. For temporary defensive purposes the Fund may invest all
or a portion of its assets in U.S. Government securities and money market
instruments. Dividends to Fund shareholders derived from money market
instruments and U.S. Government securities are taxable as ordinary income.
The Fund may seek to reduce fluctuations in its net asset value by engaging
in portfolio strategies involving options on securities, futures contracts,
and options on futures contracts as described below under "Derivatives" under
"Description and Risks of Fund Investments" below. Any gain derived by the
Fund from the use of such instruments will be treated as a combination of
shortterm and long-term capital gain and, if not offset by realized capital
losses incurred by the Fund, will be distributed to shareholders and will be
taxable to shareholders as a combination of ordinary income and long-term
capital gain.
For an explanation of other investments which the Fund may make, see
"Additional Investment Techniques Used By The Income Funds" below.
U.S. Government Fund seeks maximum total return, consistent with preservation of
capital. It is a policy of the U.S. Government Fund to invest 100% of its assets
in U.S. Government securities, related repurchase agreements, put and call
options on U.S. Government securities and futures contracts with respect to U.S.
Government securities and options thereon. The Fund intends to maintain a
portfolio duration of 3-6 years. See "Duration" below. The Fund may purchase
collateralized mortgage obligations ("CMOs") issued by a U.S. Government
instrumentality, invest in "zero coupon" U.S. Government securities or in
certificates representing rights to receive payments of the interest only or
principal only of U.S. Government securities ("IO/PO Strips"). The Fund may seek
to increase its current income and to reduce fluctuation in its net asset value
by engaging in portfolio strategies involving options on U.S. government
securities, futures contracts on U.S. Government securities and options thereon
and in repurchase agreements related to U.S. Government securities.
<PAGE>
28 PIMCO Advisors Funds
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The Fund may use "synthetic bonds" to approximate desired risk/return
profiles where the non-synthetic securities are either unavailable or possess
undesirable characteristics. See the description of "synthetic bonds" in
"Additional Investment Techniques Used By The Income Funds" below.
Investments in the U.S. Government Fund are neither insured nor guaranteed by
the U.S. Government, and are subject to interest rate risk.
For an explanation of other investments which the Fund may make, see
"Additional Investment Techniques Used By The Income Funds" below.
Short-Intermediate Fund seeks current income, consistent with relatively low
volatility of principal. The Fund invests primarily in a diversified portfolio
of investment grade fixed-income securities of varying maturities and seeks a
portfolio duration of one to three years. See "Duration" below. The Fund may
invest up to 10% of its assets in fixed-income securities rated below investment
grade but rated B or higher by Moody's or S&P (or similarly rated by another
NRSRO or, if unrated, determined by the Fund's sub-adviser to be of comparable
quality), and may invest up to 20% of its assets in securities denominated in
foreign currencies. In addition, the Fund may use "synthetic bonds" and
"synthetic foreign currency denominated securities" to approximate desired
risk/return profiles where the non-synthetic securities are either unavailable
or possess undesirable characteristics. See the description of "synthetic bonds"
and "synthetic foreign currency denominated securities" in "Additional
Investment Techniques Used By the Income Funds" below.
The Fund will maintain an overall dollar weighted average quality of at least
A (as rated by Moody's or S&P). See "Credit Ratings and NRSROs" under
"Description and Risks of Fund Investments" below.
For an explanation of other investments which the Fund may make, see
"Additional Investment Techniques Used By the Income Funds" below.
Money Market Fund seeks the maximum current income believed to be consistent
with preservation of capital and maintenance of liquidity by investing in a
portfolio of U.S. dollar-denominated short-term, fixed-income instruments
which include:
(bullet) short-term U.S. Government securities;
(bullet) certificates of deposit and bankers' acceptances;
(bullet) prime commercial paper;
(bullet) high-quality, short-term corporate obligations; and
(bullet) repurchase agreements with respect to U.S. Government securities.
Although the Fund is of the type commonly known as a "money market fund,"
Class B and Class C shares of the Fund are intended only as a temporary
investment for investors who are considering in which of the other Funds to
invest or whose investment objectives have changed so that investment in a
portfolio such as that of the Money Market Fund is suitable. Unlike most
money market funds, the Fund imposes a contingent deferred sales charge on
certain redemptions of Class B and Class C shares and does not offer
redemption by check or other services frequently offered by money market
funds.
All of the Fund's investments will, at the time of investment, have remaining
maturities of 397 days or less. The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less. The Fund's investments are limited
to those which, in accordance with standards established by the Trust's
Trustees, are believed to present minimal credit risk. The Money Market Fund
may invest up to 100% of its assets in bank obligations. Because of the high
quality and short maturity of the Fund's investments, the Fund's yield may be
lower than that of funds that invest in lower-rated securities and securities
of longer maturities. Unlike investments which pay a fixed yield for a stated
period of time, money market fund yields fluctuate.
Additional Investment Techniques Used By The Income Funds
Each of the Income Funds (other than the Tax Exempt and Money Market Funds)
may buy and sell interest rate futures contracts, futures contracts on
securities and fixed-income securities indices (U.S. Government securities
only in the case of the U.S. Government Fund) and options on such contracts
for the purpose of hedging against changes in the value of securities which a
Fund owns or anticipates purchasing due to anticipated changes in interest
rates. Each of these Funds may also purchase put and call options and may
write covered call and covered put options on any security that it is
eligible to purchase. The Tax Exempt Fund may purchase put or call options on
U.S. Government Securities, Tax Exempt Bonds and Tax Exempt Bond indices,
purchase and sell futures contracts on U.S. Government Securities, Tax Exempt
Bonds and Tax Exempt Bond indices, and purchase put and call options on such
futures contracts. Each of the Income Funds that may invest in securities
denominated in foreign currencies also may engage in foreign currency
exchange transactions by means of buying or selling foreign currencies on a
spot basis, entering into foreign currency forward contracts, and buying and
selling foreign currency options, foreign currency futures, and options on
foreign currency futures. Foreign currency
<PAGE>
PIMCO Advisors Funds 29
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exchange transactions may be entered into for the purpose of hedging against
foreign currency exchange risk arising from a Fund's investment or
anticipated investment in securities denominated in foreign currencies. The
Global Income, High Income, Total Return Income and Short-Intermediate Funds
also may enter into foreign currency forward contracts and buy or sell
foreign currency options for risk management purposes. Each of the Income
Funds (other than the Tax Exempt and Money Market Funds) may enter into swap
agreements for purposes of attempting to obtain a particular investment
return at a lower cost to the Fund than if the Fund had invested directly in
an instrument that provided the desired return.
Certain of the Income Funds may combine futures contracts or options on
fixed-income securities with cash, cash equivalent investments or other
fixed-income securities in order to create "synthetic bonds" which
approximate desired risk and return profiles. This may be accomplished where
a "non-synthetic" security having the desired risk/return profile either is
unavailable (e.g., short-term securities of certain foreign governments) or
possesses undesirable characteristics (e.g., interest payments on the
security would be subject to foreign withholding taxes). Certain of the
Income Funds may also purchase foreign exchange forward contracts in
conjunction with U.S. dollar-denominated securities in order to create a
"synthetic foreign currency denominated security" which approximates desired
risk and return characteristics where the non- synthetic securities either
are not available in foreign markets or possess undesirable characteristics.
When a Fund creates a "synthetic bond" with a futures contract, it will
maintain in a segregated account with its custodian liquid high-quality
fixed-income securities with a value at least equal to the notional value of
the futures contract (less the amount of any initial or variation margin on
deposit).
The Global Income Fund may invest without limit in securities denominated in
foreign currencies and the remaining Income Funds (other than the Tax Exempt,
U.S. Government and Money Market Funds) may invest up to 20% of their assets
in such securities.
Each of the Income Funds may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income; enter into
repurchase agreements with banks and broker-dealers; make short sales of
securities held in the Fund's portfolio or which the Fund has the right to
acquire without the payment of further consideration; and purchase and sell
securities on a when-issued or delayed delivery basis and enter into forward
commitments to purchase securities. Each of the Income Funds may also
purchase "illiquid securities" so long as no more than 15% of that Fund's net
assets would be invested in illiquid securities immediately after giving
effect to the purchase. Each of the Income Funds may also invest a portion
or, for temporary defensive purposes, up to 100% of its assets in the money
market instruments described in "Money Market Instruments" under "Description
and Risks of Fund Investments" below.
See "Description and Risks of Fund Investments" for a more complete
description of the securities and investment techniques listed above and the
risks attendant with such securities and techniques.
Total Return
The "total return" sought by the Income Funds specified above will consist of
interest and dividends from underlying securities, capital appreciation
reflected in realized or unrealized increases in the value of portfolio
securities, and use of futures and options, or gains from favorable changes
in foreign currency exchange rates. Generally, over the long term, the total
return obtained by a portfolio investing primarily in fixed-income securities
is not expected to be as great as that obtained by a portfolio that invests
primarily in equity securities. At the same time, the market risk and price
volatility of a fixed-income portfolio is expected to be less than that of an
equity portfolio, so that a fixed-income portfolio is generally considered to
be a more conservative investment. The change in a market value of
fixed-income securities (and therefore their capital appreciation or
depreciation) is largely a function of changes in the current level of
interest rates. When interest rates are falling, a portfolio with a shorter
duration generally will not generate as high a level of total return as a
portfolio with a longer duration. Conversely, when interest rates are rising,
a portfolio with a shorter duration will generally outperform longer duration
portfolios. When interest rates are flat, shorter duration portfolios
generally will not generate as high a level of total return as longer
duration portfolios (assuming that long-term interest rates are higher than
short-term rates, which is commonly the case). With respect to the
composition of any fixed-income portfolio, the longer the duration of the
portfolio, the greater the anticipated potential for total return, with,
however, greater attendant market risk and price volatility than for a
portfolio with a shorter duration. The market value of securities denominated
in currencies other than the U.S. dollar also may be affected by movements in
foreign currency exchange rates.
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30 PIMCO Advisors Funds
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Duration
Duration is a measure of the expected life of a fixed-income security that
was developed as a more precise alternative to the concept of "term to
maturity." Duration incorporates a bond's yield, coupon interest payments,
final maturity and call features into one measure. Duration is one of the
fundamental tools used by the sub-advisers in portfolio selection for the
Income Funds.
Most debt obligations provide interest ("coupon") payments in addition to a
final ("par") payment at maturity. Some obligations also have call
provisions. Depending on the relative magnitude of these payments, the market
values of debt obligations may respond differently to changes in the level
and structure of interest rates.
Traditionally, a debt security's "term to maturity" has been used as a proxy
for the sensitivity of the security's price to changes in interest rates
(which is the "interest rate risk" or "volatility" of the security). However,
"term to maturity" measures only the time until a debt security provides its
final payment, taking no account of the pattern of the security's payments
prior to maturity. Duration is a measure of the expected life of a
fixed-income security on a present value basis. Duration takes the length of the
time intervals between the present time and the time that the interest and
principal payments are scheduled or, in the case of a callable bond, expected
to be received, and weights them by the present values of the cash to be
received at each future point in time. For any fixed-income security with
interest payments occurring prior to the payment of principal, duration is
always less than maturity. In general, all other things being equal, the
lower the stated or coupon rate of interest of a fixed-income security, the
longer the duration of the security; conversely, the higher the stated or
coupon rate of interest of a fixed- income security, the shorter the duration
of the security. There are some situations where the standard duration
calculation does not properly reflect the interest rate exposure of a
security. For example, floating and variable rate securities often have final
maturities of ten or more years; however, their interest rate exposure
corresponds to the frequency of the coupon reset.
Futures, options and options on futures have durations which, in general, are
closely related to the duration of the securities which underlie them.
Holding long futures (backed by a segregated account of cash and cash
equivalents) or call option positions will lengthen a Fund's duration by
approximately the same amount that holding an equivalent amount of the
underlying securities would.
Short futures or put option positions have durations roughly equal to the
negative duration of the securities that underlie these positions, and have
the effect of reducing portfolio duration by approximately the same amount
that selling an equivalent amount of the underlying securities would.
In some cases, duration cannot be calculated with certainty because certain
assumptions have to be factored into the calculation. For example, in the
case of mortgage pass-through securities, the stated final maturity of such
securities is generally 30 years, but current and projected payment rates are
more critical in determining the securities' interest rate exposure. In these
and other similar situations, the sub-adviser will use more sophisticated
analytical techniques that incorporate the anticipated economic life of a
security into the determination of its interest rate exposure. Similarly, in
the case of foreign securities, the sub-adviser uses fundamental analysis to
predict the relationship of domestic and foreign interest rates for purposes
of estimating the duration of the foreign securities.
Description and Risks of
Fund Investments
The following describes in greater detail the securities and investment
techniques used by the various PIMCO Advisors Funds, describes the risks
associated with them and sets forth certain other information about the
Funds. Additional information about the Funds' investment practices can be
found in the Statement of Additional Information.
Risks of Investment in Companies with Small
and Medium Equity Capitalizations
Many of the Equity Funds may invest in companies with small equity
capitalizations. The Opportunity Fund may invest primarily in such companies.
The Discovery Fund invests primarily in small companies with equity
capitalizations of $500 million to $1 billion which present risks similar to
those of investments in companies with small equity capitalizations. These
investments may include securities traded over-the-counter and securities of
companies with limited operating histories.
Such companies may have more restricted product lines or more limited
financial resources than larger, more established companies. For these and
other reasons, they may be more severely affected by economic downturns
<PAGE>
PIMCO Advisors Funds 31
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or other adverse developments than are larger, more established companies.
Trading volume of these companies' securities may also be low and their
market values volatile. Many of the Equity Funds may also invest in companies
with medium equity capitalizations. The Target Fund may invest primarily in
such companies. Securities issued by such issuers share some of the risk
characteristics of small equity capitalization securities described above,
although medium equity capitalization issuers tend to have longer operating
histories, broader product lines, and greater financial resources and their
securities tend to be more liquid and less volatile than those of small
equity capitalization issuers.
Risks of Foreign Investments
Many of the Funds may invest a portion of their assets in securities of
foreign issuers, securities traded principally in securities markets outside
the United States and/or securities denominated in foreign currencies. The
Precious Metals Fund may invest primarily in such securities and the
International and Global Income Funds may invest in such securities without
limit. Such investments may involve certain special risks due to foreign
economic, political and legal developments, including favorable or
unfavorable changes in currency exchange rates, exchange control regulations
(including currency blockage), expropriation of assets or nationalization,
imposition of withholding taxes on dividend or interest payments, and
possible difficulty in obtaining and enforcing judgments against foreign
entities. Furthermore, foreign issuers are subject to different, often less
comprehensive, accounting, reporting and disclosure requirements than
domestic issuers. The securities of some foreign companies and foreign
securities markets are less liquid and at times more volatile than securities
of comparable U.S. companies and U.S. securities markets. Foreign brokerage
commissions and other fees are also generally higher than in the United
States. There are also special tax considerations which apply to securities
of foreign issuers and securities principally traded overseas.
The risks of investing in foreign securities may be intensified in the case of
investments in emerging markets or countries with limited or developing capital
markets. Security prices in emerging markets can be significantly more volatile
than in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions of repatriation of assets, and may have less
protection of property rights than more developed countries. The economies of
countries with emerging markets may be predominantly based on only a few
industries or dependent on revenues from particular commodities or on
international aid or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from extreme and volatile
debt burdens or inflation rates. Local securities markets may trade a small
number of securities and may be unable to respond effectively to increases in
trading volume, potentially making prompt liquidation of substantial holdings
difficult or impossible at times. Consequently, securities of issuers located in
countries with emerging markets may have limited marketability and may be
subject to more abrupt or erratic price movements. Also, such local markets
typically offer less regulatory protections for investors.
A Fund's investments in foreign currency denominated debt obligations and
hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Fund's
income distributions to constitute returns of capital for tax purposes or
require the Fund to make distributions exceeding book income to qualify as a
regulated investment company for federal tax purposes.
Money Market Instruments
The money market instruments in which the Money Market Fund invests include:
(1) short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other bank obligations
rated in the two highest rating categories by at least two Nationally
Recognized Statistical Rating Organizations ("NRSROs"), or, if rated by only
one NRSRO, in such agency's two highest grades, or unrated but determined to
be of comparable quality by the sub-adviser. Bank obligations must be those
of a bank that has deposits in excess of $2 billion or that is a member of
the Federal Deposit Insurance Corporation. The Fund may invest in obligations
of U.S. branches or subsidiaries of foreign banks ("Yankee dollar
obligations") or foreign branches of U.S. banks ("Eurodollar obligations");
(3) commercial paper rated in the two highest rating categories by at least
two NRSROs, or, if rated by only one NRSRO, in such agency's two highest
grades, or if not rated, of comparable quality as determined by the
sub-adviser;
(4) corporate obligations with a remaining maturity of 397 days or less
whose issuers have outstanding
<PAGE>
32 PIMCO Advisors Funds
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short-term debt obligations rated in the highest rating category by at least
two NRSROs, or, if rated by only one NRSRO, in such agency's highest grade,
or if not rated, of comparable quality as determined by the sub-adviser; and
(5) repurchase agreements with domestic commercial banks or registered
broker-dealers. See "Repurchase Agreements" below.
Federal law limits the percentage of the Money Market Fund's assets that may
be invested in instruments that are not rated in the highest rating category
(or that are unrated but determined to be of comparable quality by the
sub-adviser).
Each of the other Funds may also invest a portion or, for temporary defensive
purposes, up to 100% of its assets in the foregoing kinds of money market
instruments.
In addition, the International Fund may invest in bankers' acceptances or
negotiable bank certificates of deposit issued by United States or foreign
banks having outstanding debt rated in the three highest rating categories by
any NRSRO or, if not so rated, of equivalent investment quality as determined
by the sub-adviser of those Funds; prime commercial paper issued by companies
having an outstanding debt issue rated in the three highest rating categories
by any NRSRO or, if not rated, of comparable quality as determined by the
sub-adviser; and short-term corporate obligations rated in the three highest
rating categories by any NRSRO or, if not rated, of comparable quality as
determined by the sub-adviser.
U.S. Government Securities
"U.S. Government securities" are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. Some U.S. Government
securities (e.g., U.S. Treasury bills, notes and bonds, mortgage
participation certificates guaranteed by the Government National Mortgage
Association ("Ginnie Mae") and Federal Housing Administration debentures) are
supported by the full faith and credit of the United States. Other U.S.
Government securities are not backed by the full faith and credit of the U.S.
Government, but instead are backed only by the credit of an agency or
instrumentality, or by the discretionary authority of the U.S. Government to
purchase the issuing entity's obligations. Agencies or instrumentalities
whose obligations are not backed by the full faith and credit of the U.S.
Government include, among others, the Federal Home Loan Mortgage Corporation,
Federal Home Loan Banks, the Federal National Mortgage Association ("Fannie
Mae"), the Tennessee Valley Authority and the Bank for Cooperatives.
U.S. Government securities generally do not involve the credit risks
associated with investments in other types of fixed-income securities,
although, as a result, the yields available from U.S. Government securities
are generally lower than the yields available from otherwise comparable
corporate fixed-income securities. Like other fixed-income securities,
however, the values of U.S. Government securities change as interest rates
fluctuate. Fluctuations in the value of portfolio securities will in many
cases not affect interest income on existing portfolio securities, but will
be reflected in a Fund's net asset value. Because the magnitude of these
fluctuations will generally be greater at times when a Fund's average
maturity is longer, under certain market conditions a Fund may invest in
short-term investments yielding lower current income rather than investing in
higher-yielding long-term securities.
U.S. Government securities include mortgage-backed securities that are
guaranteed by a federal agency or collateralized mortgage obligations
("CMOs") issued by a U.S. Government instrumentality. See "Mortgage-Related
and Other Asset-Backed Securities" below.
Some U.S. Government securities are "zero coupon" securities (see "Zero
Coupon and Pay-in-Kind Securities" below) or are certificates representing
rights to receive payments of the interest only or the principal only of U.S.
Government securities ("IO/PO Strips"). IO/PO Strips tend to be more volatile
than other types of U.S. Government securities. Mortgage-backed I0 Strips
involve the additional risk of loss of the entire value of the investment if
the underlying mortgages are prepaid.
Diversified and Non-Diversified Portfolios
As diversified companies under the Investment Company Act of 1940 (the "1940
Act"), each Fund (other than the Global Income Fund) may (i) invest no more
than 5% of its assets in the securities of any one issuer, although up to 25%
of each Fund's assets may be invested without regard to this restriction and
(ii) may not own more than 10% of the outstanding voting securities of any
single issuer.
In contrast, the Global Income Fund is a "non-diversified company" under the
1940 Act and is therefore not subject to the diversification requirements
stated above. As a non-diversified company, the Global Income Fund may invest
a relatively high percentage of its assets in the securities of relatively
few issuers which the Fund's sub-adviser deems to be attractive investments.
Such concentration may, however, increase the
<PAGE>
PIMCO Advisors Funds 33
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risk of loss to the Fund should there be a decline in the market value of any
one portfolio security. Accordingly, investment in the Global Income Fund may
entail greater risks in this regard than investments in the diversified
Funds.
Corporate Debt Securities
Corporate debt securities include corporate bonds, debentures, notes and
other similar corporate debt instruments, including convertible securities.
Debt securities may be acquired with warrants attached. Corporate
income-producing securities may also include forms of preferred or preference
stock. The rate of return or return of principal on some debt obligations may
be linked or indexed to the level of exchange rates between the U.S. dollar
and a foreign currency or currencies, to the price of certain commodities or
to a security or an index of securities.
Investments in corporate debt securities that are below investment grade
(e.g., rated below Baa by Moody's or BBB by S&P) are described as
"speculative" both by Moody's and S&P. Such securities are sometimes referred
to as "junk bonds," and may be subject to greater market fluctuations, less
liquidity and greater risk of loss of income or principal, including a
greater possibility of default or bankruptcy of the issuer of such
securities, than are more highly rated debt securities. Moody's also
describes securities rated Baa as having speculative characteristics. The
Manager and the sub- advisers seek to minimize the risks associated with
lower rated securities through diversification, in-depth credit analysis and
attention to current developments in interest rates and market conditions.
See "Risks of High Yield Bonds" below.
Mortgage-Related and Other Asset Backed Securities
Mortgage backed securities are securities representing interests in "pools"
of mortgage loans secured by residential or commercial real property in which
payments of both interest and principal on the securities are generally made
monthly, in effect "passing through" monthly payments made by the individual
borrowers on the mortgage loans which underlie the securities (net of fees
paid to the issuer or guarantor of the securities). Early repayment of
principal on some mortgage-backed securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a Fund
to a lower rate of return upon reinvestment of principal. Also, if a security
subject to prepayment has been purchased at a premium, in the event of
prepayment the value of the premium would be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage backed security
generally will decline; however, when interest rates are declining, the value
of mortgage backed securities with prepayment features may not increase as
much as other fixed-income securities.
Payment of principal and interest on some mortgage backed securities (but not
the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed
by GNMA); or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by FNMA or the Federal Home
Loan Mortgage Corporation ("FHLMC"), which are supported only by the
discretionary authority of the U.S. Government to purchase the agency's
obligations). Mortgage backed securities created by nongovernmental issuers
(such as commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers) may
be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit,
which may be issued by governmental entities, private insurers or the
mortgage poolers.
Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-related
instruments. Interest and prepaid principal on a CMO are paid, in most cases,
semiannually. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage backed securities
guaranteed by GNMA, FHLMC, or FNMA. CMOs are structured into multiple
classes, with each class bearing a different stated maturity. Monthly
payments of principal, including prepayments, are first returned to investors
holding the shortest maturity class; investors holding the longer maturity
classes receive principal only after the first class has been retired. CMOs
that are issued or guaranteed by the U.S. Government or by any of its
agencies or instrumentalities will be considered U.S. Government securities
by the Funds, while other CMOs, even if collateralized by U.S. Government
securities, will have the same status as other privately issued securities
for purposes of applying a Fund's diversification tests.
Commercial mortgage-related securities are generally structured like
pass-through securities or CMOs, although other structures are possible. They
may pay fixed or adjustable rates of interest. Commercial mortgage-related
securities have been issued in public or private transactions by a variety of
public and private issuers. The commercial mortgage loans that underlie
commercial mortgage-related securities have certain distinct risk
characteristics. Com-
<PAGE>
34 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
mercial mortgage loans generally lack standardized terms, which may
complicate their structure. Commercial properties themselves tend to be
unique and are more difficult to value than single family residential
properties. Commercial mortgage loans also tend to have shorter maturities
than residential mortgage loans, and may not be fully amortizing, meaning
that they may have a significant principal balance, or "balloon" payment, due
on maturity. Assets underlying commercial mortgage-related securities may
relate only to a few properties or a single property. The risk involved in
single property financings is highly concentrated.
Other mortgage-related securities include securities other than those
described above that directly or indirectly represent a participation in, or
are secured by and payable from, mortgage loans on real property, such as CMO
residuals or stripped mortgage backed securities, and may be structured in
classes with rights to receive varying proportions of principal and interest.
In addition, the Funds may invest in other asset-backed securities that have
been offered to investors. For a discussion of the characteristics of some of
these instruments, see the Statement of Additional Information. The duration
of CMOs and other mortgage-related securities is often difficult to determine
because the underlying mortgages may be subject to early repayment. Thus, the
determination of duration will be dependent on the sub-adviser's assumptions
regarding the likelihood and incidence of prepayment and, to the extent that
such assumptions prove to be incorrect, the duration of a Fund's portfolio,
and thus its relative exposure to fluctuation of interest rates, may be
significantly different than intended and may increase the overall risk of
the Fund's portfolio.
Tax Exempt Securities
Tax Exempt Bonds generally are issued by states and local governments and
their agencies, authorities and other instrumentalities. Tax Exempt Bonds are
subject to credit and market risk. Credit risk relates to the ability of the
issuer to make payments of principal and interest. The issuer of a Tax Exempt
Bond may make such payments from money raised through a variety of sources,
including (1) the issuer's general taxing power, (2) a specific type of tax,
or (3) a particular facility or project. The ability of an issuer to make
such payments could be affected by litigation, legislation or other political
events or the bankruptcy of the issuer. Market risk relates to changes in a
security's value as a result of changes in interest rates. Lower rated Tax
Exempt Bonds generally provide higher yields but are subject to greater
credit and market risk than higher quality Tax Exempt Bonds.
Convertible Securities
Many of the Funds may invest in convertible securities. Convertible
securities are generally preferred stocks or fixed-income securities that are
convertible into common stock at either a stated price or a stated rate. The
price of the convertible security will normally vary in some proportion to
changes in the price of the underlying common stock because of this
conversion feature. A convertible security will normally also provide a
fixed- income stream. For this reason, the convertible security may not
decline in price as rapidly as the underlying common stock.
A Fund's sub-adviser will select convertible securities to be purchased by
the Fund based primarily upon its evaluation of the fundamental investment
characteristics and growth prospects of the issuer of the security. As a
fixed-income security, a convertible security tends to increase in market
value when interest rates decline and to decrease in value when interest
rates rise. While convertible securities generally offer lower interest or
dividend yields than non-convertible fixed-income securities of similar
quality, their value tends to increase as the market value of the underlying
stock increases and to decrease when the value of the underlying stock
decreases.
The International and Global Income Funds may invest in securities that are
convertible only by certain classes of investors (which may not include the
Fund). The Equity Income Fund may invest in so-called "synthetic convertible
securities," which are composed of two or more different securities whose
investment characteristics, taken together, resemble those of convertible
securities. For example, the Equity Income Fund may purchase a
non-convertible debt security and a warrant or option. The synthetic
convertible differs from the true convertible security in several respects.
Unlike a true convertible security, which is a single security having a
unitary market value, a synthetic convertible comprises two or more separate
securities, each with its own market value. Therefore, the "market value" of
a synthetic convertible is the sum of the values of its fixed-income
component and its convertible component. For this reason, the values of a
synthetic convertible and a true convertible security may respond differently
to market fluctuations.
Risks of High Yield Bonds
Certain of the Funds may invest in high-yield/high-risk debt or fixed-income
securities rated below "investment grade," meaning securities that are not
rated in one of the four highest rating categories by an NRSRO (i.e.,
<PAGE>
PIMCO Advisors Funds 35
- --------------------------------------------------------------------------------
securities rated Ba or below by Moody's or BB or below by S&P or, if unrated,
determined by the Manager or relevant sub-adviser to be of comparable
quality). Non-investment grade securities are commonly referred to as "junk
bonds," and are referred to herein as "High Yield Securities." See "Credit
Ratings and NRSROs" below. Also, see Appendix A to this Prospectus for a
description of the rating categories of some NRSROs.
High Yield Securities are subject to credit risk and market risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates. Credit risk relates to the ability of the issuer to make payments of
principal and interest. See "Credit and Market Risk of Fixed-Income
Securities" below. High Yield Securities rated B or lower by Moody's or S&P
or of comparable quality are considered to be speculative with respect to the
issuer's capacity to pay interest and repay principal.
High Yield Securities are generally subject to greater credit risk than
higher-rated securities because the issuers are more vulnerable to economic
downturns, higher interest rates or adverse issuer-specific developments. In
addition, the prices of High Yield Securities are generally subject to
greater market risk and therefore react more sharply to changes in interest
rates. The value and liquidity of High Yield Securities may be diminished by
adverse publicity and investor perceptions. Also, legislative proposals
limiting the tax benefits to the issuers or holders of taxable High Yield
Securities or requiring federally-insured savings and loan institutions to
reduce their holdings of taxable High Yield Securities have had and may
continue to have an adverse effect on the market value of these securities.
Because High Yield Securities are frequently traded only in markets where the
number of potential purchasers and sellers, if any, is limited, the ability of
the Funds to sell High Yield Securities at their fair value either to meet
redemption requests or to respond to changes in the financial markets may be
limited. In such an event, such securities could be regarded as illiquid for the
purposes of the limitation on the purchase of illiquid securities described
below. See "Illiquid Securities" below. Thinly-traded High Yield Securities may
be more difficult to value accurately for the purpose of determining a Fund's
net asset value. Also, because the market for certain High Yield Securities is
relatively new, that market may be particularly sensitive to an economic
downturn or a general increase in interest rates. Recent regulatory developments
and declines in the value of certain High Yield Securities have limited (and may
continue to limit) the ability of important participants in the High Yield
Securities market to maintain orderly markets in certain High Yield Securities.
Particular types of High Yield Securities may present special concerns. Some
High Yield Securities are zero coupon or pay-in-kind securities. See "Zero
Coupon and Pay-in-Kind Securities" below. Some High Yield Securities in which
a Fund may invest may be subject to redemption or call provisions that may
limit increases in market value that might otherwise result from lower
interest rates while increasing the risk that the Fund may be required to
reinvest redemption or call proceeds during a period of relatively low
interest rates.
The Manager and the sub-advisers have responded to these concerns by
attempting to identify High Yield Securities with relatively favorable
investment characteristics. The credit ratings issued by NRSROs are subject
to various limitations. For example, while such ratings evaluate credit risk,
they ordinarily do not evaluate the market risk of High Yield Securities. In
certain circumstances, the ratings may not reflect in timely fashion adverse
developments affecting an issuer. See "Credit Ratings and NRSROs" below. For
these reasons, the Manager and the sub-advisers conduct their own independent
credit analysis of High Yield Securities. In addition, under ordinary
circumstances, the Manager and the relevant sub-adviser will not purchase a
High Yield Security if that purchase will cause a Fund's holdings of all
securities of the issuer of such security to exceed 5% of the Fund's net
assets.
Investment grade debt and convertible securities rated Baa by Moody's or BBB
by S&P (or similarly rated by another NRSRO or judged by the Manager or
relevant sub-adviser to be of comparable quality) may share some of the
characteristics of High Yield Securities described above. Certain convertible
securities rated in the fifth or sixth highest rating category or lower by a
NRSRO or judged by the Manager or the relevant sub-adviser to be of
comparable quality may possess some or all of the characteristics of
nonconvertible High Yield Securities. However, in the view of the Manager and
the sub-advisers, most convertible securities are likely to exhibit equity
characteristics as well, due to their conversion feature.
The following chart provides information on the weighted average percentage
of rated and unrated debt or fixed-income securities in the portfolios of
each Fund that invested at least 5% of its average annual assets in High
Yield Securities during the fiscal year ended September 30, 1995. The
numerical rating designations correspond to the associated rating categories.
The designation "1st" corresponds to the top rating category (i.e., Aaa by
Moody's and/or AAA by S&P), "2nd" corresponds to the second highest rating
category (i.e., Aa
<PAGE>
36 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
by Moody's and/or AA by S&P), etc. For further description of these rating
categories, see Appendix A. The columns related to unrated securities present
the percentage of a Fund's total net assets invested during such fiscal year
(1) in unrated High Yield Securities believed by the Manager or the relevant
sub-advisers to be equivalent in quality to fixed-income securities of the
indicated rating and (2) in all unrated fixed-income securities.
<TABLE>
<CAPTION>
Rated
----------------------------------------------------------------------
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income -- -- 6.70 6.54 12.19 17.16 -- -- -- --
High Income 1.18 -- -- 4.92 56.46 28.99 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Unrated but Considered Equivalent to
------------------------------------------------------------------------
Total
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th Unrated
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income -- -- -- -- -- -- -- -- -- -- --
High Income -- -- -- -- 0.72 0.40 -- -- -- -- 1.12
</TABLE>
Zero Coupon and Pay-in-Kind Securities
Certain of the Funds may invest in zero coupon securities and/or
"pay-in-kind" securities. Zero coupon securities are issued at a significant
discount from face value and pay interest only at maturity rather than at
intervals during the life of the security. Pay-in-kind securities pay
dividends or interest in the form of additional securities of the issuer
rather than in cash.
The prices of pay-in-kind or zero coupon securities may react more strongly
to changes in interest rates than the prices of many other securities. The
Funds are required to accrue and distribute income from pay-in-kind and zero
coupon securities on a current basis, even though the Funds may not receive
the income currently in cash. Thus, a Fund may have to sell other investments
to obtain cash needed to make distributions of such imputed income.
Derivatives
To the extent permitted by the investment objectives and policies of the Funds
described earlier and in the Statement of Additional Information, the Funds may
purchase and write call and put options on securities, securities indexes and on
foreign currencies, and enter into futures contracts and use options on futures
contracts as further described below. Some Funds also may enter into swap
agreements with respect to foreign currencies, interest rates, and securities
indexes. The Funds may use these techniques to hedge against changes in interest
rates, foreign currency exchange rates or securities prices or as part of their
overall investment strategies. The International, Global Income, High Income,
Total Return Income and Short-Intermediate Funds may also purchase and sell
options relating to foreign currencies for purposes of shifting exposure to
foreign currency fluctuations from one country to another. See "Other Foreign
Currency Transactions" below. Each Fund will maintain segregated accounts
consisting of cash, U.S. Government securities, or other liquid high grade debt
obligations (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under options and futures
contracts and swaps contracts to avoid leveraging of the Fund. Some of the
derivative instruments and transactions described above, in particular
transactions in which the Funds segregate high grade debt obligations with
longer maturities, have speculative and/or leveraging characteristics which will
expose the Funds to greater credit and market risk and volatility. Certain
limitations on such transactions are imposed by the Investment Company Act and
the Commodity Exchange Act. See "Derivatives" and "Investment Restrictions" in
the Statement of Additional Information.
See "Investment Objectives and Policies" to determine which of the Funds may
employ particular derivative instruments. For those Funds that may invest in
one or more derivative instruments, the risks attendant with such instruments
are described below and further in the Statement of Additional Information.
Options on Securities, Securities Indices, and Currencies
A Fund may purchase put options on securities to protect holdings in an
underlying or related security against a substantial decline in market value.
A Fund may purchase call options on securities to protect against substantial
increases in prices of securities the Fund intends to purchase pending its
ability to invest in such securities in an orderly manner. A Fund may sell
put or call options it has previously purchased, which could result in a net
gain or loss depending on whether the amount realized on the sale is more or
less than the premium and other transaction costs paid on the put or call
option which is sold. A Fund may write a call or put option only if the
option is "covered" by the Fund holding a position in the underlying
securities or by other means which would permit immediate satisfaction of the
Fund's obligation as writer of the option. Prior to exercise or expiration,
an exchange traded option may be closed out by an offsetting purchase or sale
of an option of the same series.
The purchase and writing of options involves certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but, as long as its obligation as a
writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control
<PAGE>
PIMCO Advisors Funds 37
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over the time when it may be required to fulfill its obligation as a writer
of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying securities at the
exercise price. If a put or call option purchased by the Fund is not sold
when it has remaining value, and if the market price of the underlying
security, in the case of a put, remains equal to or greater than the exercise
price or, in the case of a call, remains less than or equal to the exercise
price, the Fund will lose its entire investment in the option. Also, where a
put or call option on a particular security is purchased to hedge against
price movements in a related security, the price of the put or call option
may move more or less than the price of the related security. There can be no
assurance that a liquid market will exist when a Fund seeks to close out an
option position. Furthermore, if trading restrictions or suspensions are
imposed on the options markets, a Fund may be unable to close out a position.
Funds that invest in foreign currency-denominated securities may buy or sell
put and call options on foreign currencies. Currency options traded on U.S.
or other exchanges may be subject to position limits which may limit the
ability of a Fund to reduce foreign currency risk using such options.
Over-the-counter options differ from traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller and generally do not have as much market liquidity as exchanged-traded
options.
Futures Contracts and Options on Futures Contracts
Some Funds may invest in interest rate futures contracts, securities index
futures contracts and foreign currency futures contracts and options thereon
("futures options") that are traded on a United States or foreign exchange or
board of trade.
There are several risks associated with the use of futures and futures
options for hedging purposes. There can be no guarantee that there will be a
correlation between price movements in the hedging vehicle and in the
portfolio securities being hedged. An incorrect correlation could result in a
loss on both the hedged securities in a Fund and the hedging vehicle so that
the portfolio return might have been greater had hedging not been attempted.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily
limit has been reached on a particular contract, no trades may be made that
day at a price beyond that limit. In addition, certain of these instruments
are relatively new and without a significant trading history. As a result,
there is no assurance that an active secondary market will develop or
continue to exist. Lack of a liquid market for any reason may prevent a Fund
from liquidating an unfavorable position and the Fund would remain obligated
to meet margin requirements until the position is closed.
The Funds will only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. Each Fund will
use financial futures contracts and related options only for "bona fide
hedging" purposes, as such term is defined in applicable regulations of the
CFTC, or, with respect to positions in financial futures and related options
that do not qualify as "bona fide hedging" positions, will enter such
non-hedging positions only to the extent that aggregate initial margin
deposits plus premiums paid by it for open futures option positions, less the
amount by which any such positions are "in-the-money," would not exceed 5% of
the Fund's total assets.
Swap Agreements The Income Funds (other than the Tax Exempt and Money Market
Funds) may enter into interest rate, index and currency exchange rate swap
agreements for purposes of attempting to obtain a particular desired return at a
lower cost to the Fund than if the Fund had invested directly in an instrument
that yielded that desired return. Swap agreements are twoparty 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.
Commonly used swap agreements include interest rate caps, under which, in return
for a premium, one party agrees to make payments to the other to the extent that
interest rates exceed a specified rate, or "cap"; interest rate floors, under
which, in return for a premium, one party agrees to make payments to the other
to the extent that interest rates fall below a specified level, or "floor"; and
interest rate collars, under which a party simultaneously sells a cap and
purchases a floor (or vice versa) in an
<PAGE>
38 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictional basis on
which to calculate the obligations which the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by a Fund would
calculate the obligations of the parties to the agreement on a "net basis."
Consequently, a Fund's obligations (or rights) under a swap agreement will
generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions described in the swap
contract (the "net amount"). A Fund's obligations under a swap agreement will
be accrued daily (offset against amounts owed to the Fund) and any accrued
but unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities, or high grade debt obligations, to avoid any potential leveraging
of the Fund's 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 predict
correctly whether certain types of investments are likely to produce greater
returns than other investments. Because they are two-party contracts, they
may only be closed out with the swap counterparty. Because swap contracts may
have terms of greater than seven days, swap agreements are generally
considered by the SEC to be illiquid. Moreover, a Fund bears the risk of loss
of the amount expected to be received under a swap agreement in the event of
the default or bankruptcy of a swap agreement counterparty. A sub-adviser
will cause a Fund to enter into swap agreements only with counterparties that
would be eligible for consideration as repurchase agreement counterparties
under the Funds' 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.
Other Foreign Currency Transactions
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or perceived changes in interest rates and
other complex factors, as seen from an international perspective. Currency
exchange rates also can be affected unpredictably by intervention by U.S. or
foreign governments or central banks or the failure to intervene, or by
currency controls or political developments in the U.S. or abroad.
All Funds that may invest in securities denominated in foreign currencies may
enter into forward foreign currency exchange contracts to reduce the risks of
adverse changes in foreign exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. By entering into a forward foreign currency exchange
contract, the fund "locks in" the exchange rate between the currency it will
deliver and the currency it will receive for the duration of the contract. As
a result, a Fund reduces its exposure to changes in the value of the currency
it will deliver and increases its exposure to changes in the value of the
currency it will exchange into. The effect on the value of a Fund is similar
to selling securities denominated in one currency and purchasing securities
denominated in another. The Funds may enter into these contracts for the
purpose of hedging against foreign exchange risks arising from the Funds'
investment or anticipated investment in securities denominated in foreign
currencies. Such hedging transactions may not be successful and may eliminate
any chance for a Fund to benefit from favorable fluctuations in relevant
foreign currencies. The International, Global Income, High Income, Total
Return Income and Short-Intermediate Funds may also enter into these
contracts for purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one currency to another.
To the extent that they do so, the International, Global Income, High Income,
Total Return Income and Short-Intermediate Funds will be subject to the
additional risk that the relative value of currencies will be different than
anticipated by the particular Fund's sub-adviser. The Funds may also use
foreign currency futures contracts and related options on foreign
<PAGE>
PIMCO Advisors Funds 39
- --------------------------------------------------------------------------------
currencies for the same reasons for which forward foreign currency exchange
contracts are used.
The Funds also may invest in foreign currency exchange-related securities,
such as foreign currency warrants and other instruments whose return is
linked to foreign currency exchange rates. For a description of these
instruments and their associated risks, see the Statement of Additional
Information.
Credit Ratings and NRSROs
Credit ratings are assigned to many issues of fixed-income, convertible and
preferred equity securities by rating agencies referred to in this Prospectus
as NRSROs. Although ratings assigned by NRSROs are relative and subjective,
such ratings reflect the assessment of the NRSRO at the time of issuance of
the issuer's ability, or the economic viability of the special revenue
source, with respect to the timely payment of interest and the repayment of
principal in accordance with the terms of the obligation.
The use of credit ratings as the sole method of evaluating securities can
involve certain risks. For example, while credit ratings evaluate the safety
of principal and interest payments, they do not address the market risk of
securities. Also, the NRSROs undertake no obligation to update their ratings
of securities to reflect events that may occur after a security has obtained
a rating. The Manager and the sub-advisers do not rely solely on credit
ratings when selecting securities for the Funds and conduct their own
analysis of issuer credit quality. If an NRSRO changes the rating of a
security already contained in a Fund's portfolio, that Fund may retain the
security if the Manager or the relevant sub-adviser deems it is in the best
interest of the Fund.
As used in this Prospectus, securities rated below "investment grade" are
securities that are not rated in one of the four highest rating categories by
an NRSRO (i.e., securities rated Ba or below by Moody's or BB or below by
S&P) or, if unrated, determined to be of comparable quality by the Manager or
the relevant sub-adviser. Debt or fixed-income securities rated below
investment grade are generally speculative with respect to the issuer's
ability to make interest and principal payments when due. Securities rated in
the lowest investment grade category (i.e., the fourth highest category) are
also considered by some NRSROs to have speculative characteristics.
See Appendix A to this Prospectus for a description of the rating categories
used by some NRSROs.
Investment in Investment Companies
The International Fund may invest in securities of other investment
companies, such as closed-end investment management companies or in pooled
accounts or other investment vehicles which invest in foreign markets. As a
shareholder of an investment company, these Funds may indirectly bear service
and other fees which are in addition to the fees the Funds pay their service
providers.
Precious Metals
The Precious Metals Fund will concentrate its investments in the precious
metals industry. Prices of precious metals can be expected to respond to
changes in rates of inflation and to perceptions of economic and political
instability. The values of companies engaged in precious metal-related
activities whose securities are principally traded on foreign securities
exchanges may also be affected by changes in the exchange rate between the
relevant foreign currency and the dollar. Based on historical experience, the
prices of precious metals and of securities of companies engaged in precious
metal-related activities may be subject to extreme fluctuations, reflecting
wider economic or political instability or for other reasons.
Loans of Portfolio Securities
Each Fund (except the Money Market and Tax Exempt Funds) may lend its
portfolio securities to broker-dealers under contracts calling for collateral
in cash, U.S. Government securities or other high quality debt securities
equal to at least the market value of the securities loaned (except that the
U.S. Government Fund will only accept cash and U.S. Government securities as
collateral). Each Fund's performance will continue to reflect changes in the
value of the securities loaned and will also receive either interest, through
investment of cash collateral by the Fund in permissible investments, or a
fee, if the collateral is U.S. Government securities. Securities lending
involves the risk of loss of rights in the collateral or delay in recovery of
the collateral should the borrower fail financially. The Funds will normally
pay lending fees to the broker-dealer arranging the loan.
Short Sales
Each Fund except the Money Market Fund may from time to time make short sales
involving securities held in the Fund's portfolio or which the Fund has the
right to acquire without the payment of further consideration. The
Short-Intermediate Fund may also make short sales of other securities, but in
such case will maintain in a segregated account, monitored on a daily basis,
cash or U.S. Government securities at such a level that (1) the segregated
amount plus the
<PAGE>
40 PIMCO Advisors Funds
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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.
Short sales expose the Fund to the risk that it will be required to purchase
securities to cover its short position at a time when the securities have
appreciated in value, thus resulting in a loss to the Fund.
Forward Commitments, When-issued and Delayed Delivery Transactions
Each Fund may purchase securities which it is eligible to purchase on a
when-issued basis, may purchase and sell such securities for delayed delivery
and may make contracts to purchase such securities for a fixed price at a
future date beyond normal settlement time (forward commitments). When-issued
transactions, delayed delivery purchases and forward commitments involve a
risk of loss if the value of the securities declines prior to the settlement
date, which risk is in addition to the risk of decline in the value of the
Fund's other assets. No income accrues to the purchaser of such securities
prior to delivery.
Repurchase Agreements
Each of the Funds may enter into repurchase agree- ments with banks and
broker-dealers, which are agreements by which a Fund acquires a security
(usually an obligation of the U.S. Government) for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an
agreed-upon price and date. The resale price is in excess of the acquisition
price and reflects an agreed-upon market rate unrelated to the coupon rate on
the purchased security. Such transactions afford an opportunity for the Funds
to earn a return on temporarily available cash at no market risk, although
there is a risk that the seller may default in its obligation to pay the
agreed-upon sum on the redelivery date. Such a default may subject the Funds
to expenses, delays and risks of loss.
Reverse Repurchase Agreements and Other Borrowings
A reverse repurchase agreement is a form of leverage that involves the sale
of a security by a Fund and its agreement to repurchase the instrument at a
specified time and price. The Fund will maintain a segregated account
consisting of cash, U.S. Government securities or other liquid high grade
debt obligations, maturing not later than the expiration of the reverse
repurchase agreement, to cover its obligations under reverse repurchase
agreements. A Fund also may borrow money for investment purposes subject to
any policies of the Fund currently described in this Prospectus or in the
Statement of Additional Information. Such a practice will result in
leveraging of a Fund's assets. Leverage will tend to exaggerate the effect on
net asset value of any increase or decrease in the value of a Fund's
portfolio and may cause a Fund to liquidate portfolio positions when it would
not be advantageous to do so.
Illiquid Securities
Each Fund may purchase "illiquid securities," defined as securities which may
not be disposed of in the ordinary course of business at approximately the
value at which the Fund has valued such securities, and which includes
certain securities whose disposition is restricted by the securities laws.
Each Fund may purchase "illiquid securities" so long as no more than 15% of
that Fund's net assets would be invested in illiquid securities after giving
effect to the purchase. Illiquid securities at present are considered to
include swap agreements, repurchase agreements maturing in more than seven
days, certain IO/PO Strips and over-the-counter options to the extent
described in the Statement of Additional Information. Transactions in
illiquid securities may involve relatively higher transaction costs.
Portfolio Turnover
Portfolio turnover is not a limiting factor with respect to investment
decisions for the Funds. High portfolio turnover (e.g., over 100%) involves
correspondingly greater brokerage commissions and other transaction costs,
which will be borne directly by the relevant Funds. Portfolio turnover rates
for all of the Funds except for the Global Income Fund are set forth under
"Financial Highlights." While it is impossible to predict with certainty, it
is not expected that the annual portfolio turnover rate for the Global Income
Fund will exceed 150%.
Credit and Market Risk of Fixed-Income Securities
All fixed-income securities are subject to market risk and credit risk.
Market risk relates to changes in a security's value as a result of changes
in interest rates. The value of a Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuate.
During periods of falling interest rates, the value of a Fund's fixed-income
securities generally rise. Conversely, during periods of rising interest
rates, the value of a Fund's fixed-income securities generally decline.
Credit risk relates to the ability of the issuer to make payments of
principal and interest.
"Fundamental" Policies Except for any policy explicitly identified as
"fundamental," the investment objective and policies of each Fund described in
this
<PAGE>
PIMCO Advisors Funds 41
- --------------------------------------------------------------------------------
Prospectus may be changed without shareholder approval. If there is a change
in a Fund's investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current
financial position and needs.
Performance Information
From time to time the Trust may make available certain information about the
performance of the Class A, Class B and Class C shares of some or all of the
Funds. Information about a Fund's performance is based on that Fund's record
to a recent date and is not intended to indicate future performance.
Performance information is computed separately for each Fund's Class A, Class
B and Class C shares in accordance with the formulas described below. Because
Class B and Class C shares bear the expense of the distribution fee attending
the deferred sales charge (Class B) and asset based sales charge (Class C)
alternatives and certain other expenses, it is expected that, under normal
circumstances, the level of performance of a Fund's Class B and Class C
shares will be lower than that of the Fund's Class A shares.
All Funds other than the Money Market Fund may include the Total Return of
each class of shares in advertisements or other written material. When a Fund
advertises its Total Return with respect to its Class A, Class B and Class C
shares, it will be calculated for the past year, the past five years, the
past ten years or the period since the establishment of the Fund. Total
Return is measured by comparing the value of an investment in the class at
the beginning of the relevant period (in the case of Class A shares, giving
effect to the maximum initial sales charge) to the redemption value of the
investment in the class at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions at net asset
value and giving effect to the deduction of any contingent deferred sales
charge which would be payable).
Each of the Short-Intermediate Fund, the High Income Fund, the Global Income
Fund, the Total Return Income Fund, the U.S. Government Fund, the Tax Exempt
Fund and the Equity Income Fund may advertise its Yield, accompanied by its
Total Return, with respect to each class. The Yield of a Fund's Class A,
Class B and Class C shares will be computed by dividing the net investment
income per share of each class earned during a recent one-month period by
the maximum offering price per share of each respective class (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the
last day of the period.
The Tax Exempt Fund may also advertise the tax equivalent yield of its Class
A, Class B and Class C shares, calculated like Yield as described above
except that, for any given tax bracket, net investment income will be
calculated as the sum of (i) any taxable income of the class plus (ii) the
tax exempt income of the class divided by the difference between 1 and the
effective federal income tax rates for taxpayers in that tax bracket.
The Money Market Fund may advertise the Yield and the Effective Yield of its
Class A, Class B and Class C shares. The Yield for each class of the Money
Market Fund is based upon the income earned by each class of the Fund over a
seven-day period and then annualized, i.e., the income earned in the period
is assumed to be earned every seven days over a 52-week period and stated as
a percentage of the investment. Effective Yield for each class is calculated
similarly but, when annualized, the income earned by the investment is
assumed to be reinvested in each class of Fund shares and thus compounded
over the course of a 52-week period.
How to Buy Shares
Shares of each Fund of the Trust are continuously offered through the Trust's
principal underwriter, PIMCO Advisors Distribution Company (the
"Distributor"), and through other firms which have dealer agreements with the
Distributor ("participating brokers") or which have agreed to act as
introducing brokers for the Distributor ("introducing brokers"). SHARES OF
THE OPPORTUNITY FUND ARE CURRENTLY NOT OFFERED TO NEW SHAREHOLDERS. SEE
"RESTRICTIONS ON SALES OF AND EXCHANGES FOR SHARES OF THE OPPORTUNITY FUND"
BELOW.
There are two ways to purchase shares: either 1) through your dealer or
broker which has a dealer agreement or 2) directly by mailing an Account
Application with payment, as described below under the heading Direct
Investment, to the Distributor (if no dealer is named in the application, the
Distributor may act as dealer).
Each Fund (except the Opportunity Fund) currently offers and sells three
classes of shares (Class A, Class B and Class C). The Opportunity Fund does
not offer Class B shares. Shares may be purchased at a price equal to their
net asset value per share next determined after receipt of an order, plus a
sales charge which, at the election of the purchaser, may be imposed either
(i) at the time of the purchase in the case of Class A shares (the "initial
sales charge alternative"), (ii) on a contingent deferred basis in the case
of Class B shares
<PAGE>
42 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
(the "deferred sales charge alternative") or (iii) by the deduction of an
ongoing asset based sales charge in the case of Class C shares (the "asset
based sales charge alternative"). In certain circumstances Class A and Class
C shares are also subject to a contingent deferred sales charge. See
"Alternative Purchase Arrangements." Purchase payments for Class B and Class
C shares are fully invested at the net asset value next determined after
acceptance of the trade. Purchase payments for Class A shares, less the
applicable sales charge, are invested at the net asset value next determined
after acceptance of the trade.
All purchase orders received by the Distributor prior to the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time), on
a regular business day, are processed at that day's offering price. However,
orders received by the Distributor from dealers or brokers after the offering
price is determined that day will receive such offering price if the orders
were received by the dealer or broker from its customer prior to such
determination and were transmitted to and received by the Distributor prior
to its close of business that day (normally 5:00 p.m. Eastern time) or, in
the case of certain retirement plans, received by the Distributor prior to
10:00 a.m. Eastern time on the next business day. Purchase orders received on
other than a regular business day will be executed on the next succeeding
regular business day. The Distributor, in its sole discretion, may accept or
reject any order for purchase of Fund shares. The sale of shares will be
suspended during any period in which the New York Stock Exchange is closed
for other than weekends or holidays, or if permitted by the rules of the SEC
when trading on the Exchange is restricted or during an emergency which makes
it impracticable for the Funds to dispose of their securities or to determine
fairly the value of their net assets, or during any other period permitted by
the SEC for the protection of investors.
Except for purchases through the PIMCO Advisors Auto Invest plan, the PIMCO
Advisors Auto Exchange plan and tax-qualified programs referred to below, the
minimum initial investment in the Trust is $1,000 and in any Fund is $250,
and the minimum additional investment is $100 per Fund. For information about
dealer commissions, see "Alternative Purchase Arrangements" below. Persons
selling Fund shares may receive different compensation for selling Class A,
Class B or Class C shares. Normally Trust shares purchased through
participating brokers are held in the investor's account with that broker. No
share certificates will be issued unless specifically requested in writing by
an investor or broker-dealer.
Direct Investment Investors who wish to invest in the Trust directly, rather
than through a participating broker, may do so by opening an account with the
Distributor. To open an account, an investor should complete the Account
Application included with this Prospectus. All shareholders who open direct
accounts with the Distributor will receive from the Distributor individual
confirmations of each purchase, redemption, dividend reinvestment, exchange or
transfer of Trust shares, including the total number of Trust shares owned as of
the confirmation date except that purchases which result from the reinvestment
of daily-accrued dividends and/or distributions will be confirmed once each
calendar quarter. See "Distributions" below. Information regarding direct
investment or any other features or plans offered by the Trust may be obtained
by calling the Distributor at 800-426-0107 or by calling your broker.
Purchase by Mail Investors who wish to invest directly may send a check payable
to PIMCO Advisors Distribution Company, along with a completed application form
to:
PIMCO Advisors Distribution Company
P.O. Box 5866
Denver, CO 80217-5866
Purchases are accepted subject to collection of checks at full value and
conversion into federal funds. Payment by a check drawn on any member of the
Federal Reserve System can normally be converted into federal funds within
two business days after receipt of the check. Checks drawn on a non-member
bank may take up to 15 days to convert into federal funds. In all cases, the
purchase price is based on the net asset value next determined after the
purchase order and check are accepted, even though the check may not yet have
been converted into federal funds.
Subsequent Purchases of Shares Subsequent purchases can be made as indicated
above by mailing a check with a letter describing the investment or with the
additional investment portion of a confirmation statement. Except for subsequent
purchases through the PIMCO Advisors Auto Invest plan, the PIMCO Advisors Auto
Exchange plan, tax-qualified programs and PIMCO Advisors Fund Link referred to
below, and except during periods when an Automatic Withdrawal plan is in effect,
the minimum subsequent purchase is $100 in any Fund. All payments should be made
payable to PIMCO Advisors Distribution Company and should clearly indicate the
shareholder's account number. Checks should be mailed to the address above under
"Purchase by Mail."
<PAGE>
PIMCO Advisors Funds 43
- --------------------------------------------------------------------------------
Tax-Qualified Retirement Plans The Distributor makes available retirement plan
services and documents for Individual Retirement Accounts (IRAs), for which
First National Bank of Boston serves as trustee. These accounts include
Simplified Employee Pension Plan (SEP) and Salary Reduction Simplified Employee
Pension Plan (SAR/SEP) IRA accounts and prototype documents. In addition,
prototype documents are available for establishing 403(b)(7) Custodial Accounts
with First National Bank of Boston as custodian. This type of plan is available
to employees of certain non-profit organizations.
The Distributor also makes available prototype documents for establishing
Money Purchase and/or Profit Sharing Plans and 401(k) Retirement Savings
Plans.
Investors should call the Distributor at 800-426-0107 for further information
about these plans and should consult with their own tax advisers before
establishing any retirement plan. Investors who maintain their accounts with
participating brokers should consult their broker about similar types of
accounts that may be offered through the broker. The minimum initial and
subsequent investment in any Fund for tax-qualified plans is $25.
PIMCO Advisors Auto Invest The PIMCO Advisors Auto Invest plan provides for
periodic investments into the shareholder's account with the Trust by means of
automatic transfers of a designated amount from the shareholder's bank account.
Investments may be made monthly or quarterly, and may be in any amount subject
to a minimum of $50 per month for each Fund in which shares are purchased
through the plan. Further information regarding the PIMCO Advisors Auto Invest
plan is available from the Distributor or participating brokers. You may enroll
by completing the appropriate section on the PIMCO Advisors Funds Account
Application, or you may obtain an Auto-Invest Application by calling the
Distributor or your broker.
PIMCO Advisors Auto Exchange PIMCO Advisors Auto Exchange plan establishes
regular, periodic exchanges from one Fund to another. The plan provides for
regular investments into a shareholder's account in a specific Fund by means of
automatic exchanges of a designated amount from another Fund account of the same
class of shares and with identical account registration. Exchanges for shares of
the Opportunity Fund are currently restricted. See "Restrictions on Sales of and
Exchanges for Shares of the Opportunity Fund" below.
Exchanges may be made monthly or quarterly, and may be in any amount subject
to a minimum of $50 for each Fund whose shares are purchased through the
plan. Further information regarding the PIMCO Advisors Auto Exchange plan is
available from the Distributor at 800-426-0107 or participating brokers. You
may enroll by completing an application which may be obtained from the
Distributor or by telephone request at 800-426-0107. For more information on
exchanges, see "Exchange Privilege".
PIMCO Advisors Fund Link (Does not apply to shares held in broker "street name"
accounts.) PIMCO Advisors Fund Link ("Fund Link") connects your Fund account
with a bank account. Fund Link may be used for subsequent purchases and for
redemptions and other transactions described under "How to Redeem." Purchase
transactions are effected by electronic funds transfers from the shareholder's
account at a U.S. bank or other financial institution that is an Automated
Clearing House ("ACH") member. Investors may use Fund Link to make subsequent
purchases of shares in amounts from $50 to $10,000. To initiate such purchases,
call 800-852-8457. All such calls will be recorded. Fund Link is normally
established within 45 days of receipt of an Application by the Transfer Agent.
The minimum investment by Fund Link is $50 per Fund. Shares will be purchased on
the regular business day the Distributor receives the funds through the ACH
system, provided the funds are received before the close of regular trading on
the New York Stock Exchange. If the funds are received after the close of
regular trading, the shares will be purchased on the next regular business day.
Fund Link privileges must be requested on the PIMCO Advisors Funds Account
Application. To establish Fund Link on an existing account, complete a Fund Link
Application, which is available from the Distributor or your broker, with
signatures guaranteed from all shareholders of record for the account. See
"Signature Guarantee" under "General" below. Such privileges apply to each
shareholder of record for the account unless and until the Distributor receives
written instructions from a shareholder of record cancelling such privileges.
Changes of bank account information must be made by completing a new Fund Link
Application signed by all owners of record of the account, with all signatures
guaranteed. The Distributor, the Transfer Agent and the Fund may rely on any
telephone instructions believed to be genuine and will not be responsible to
shareholders for any damage, loss or expenses arising out of such instructions.
The Fund reserves the right to amend, suspend or discontinue Fund Link
privileges at any time without prior notice.
Restrictions on Sales of and Exchanges for Shares of the Opportunity Fund
Shares of the Opportunity Fund are not available for purchase by new
investors in the Fund. Shareholders
<PAGE>
44 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
who owned shares of the Opportunity Fund on December 31, 1992 will still be
permitted to purchase additional shares of the Fund for as long as they
continue to own some shares of the Opportunity Fund. Similarly, participants
in any self-directed qualified benefit plan (for example, 401(k), 403(b) and
Keogh Plans, but not IRAs or SEP IRAs) that owned Opportunity Fund shares on
March 1, 1993 for any single plan participant will be eligible to direct the
purchase of Opportunity Fund shares by their plan account for so long as the
plan continues to own some shares of the Opportunity Fund for any single plan
participant. In the event a shareholder redeems all of his or her shares of
the Opportunity Fund, or all participants in a self-directed qualified
benefit plan described above redeem their shares of the Opportunity Fund,
such shareholder and the participants in such plan will no longer be eligible
to purchase shares of the Opportunity Fund.
Shareholders of other Funds are not permitted to exchange any of their shares
for Opportunity Fund shares unless the shareholders are independently
eligible to purchase Opportunity Fund shares because they already owned
shares of the Opportunity Fund on December 31, 1992 (March 1, 1993, in the
case of the self-directed qualified benefit plans described above).
The Trust reserves the right at any time to modify these restrictions,
including the suspension of all sales of Opportunity Fund shares or the
lifting of restrictions on different classes of investors and/or
transactions.
General
Changes in registration or account privileges may be made in writing to the
transfer agent (the "Transfer Agent"). Signature guarantees may be required.
See Signature Guarantee below.
All correspondence must include the account number and must be sent to:
PIMCO Advisors Distribution Company
P.O. Box 5866
Denver. CO 80217-5866
Signature Guarantee When a signature guarantee is called for, the shareholder
should have "Signature Guaranteed" stamped under his signature and guaranteed by
any of the following entities: U.S. banks, foreign banks having a U.S.
correspondent bank, credit unions, savings associations, U.S. registered dealers
and brokers, municipal securities dealers and brokers, government securities
dealers and brokers, national securities exchanges, registered securities
associations and clearing agencies (each an "Eligible Guarantor Institution").
The Distributor reserves the right to reject any signature guarantee pursuant to
its written signature guarantee standards or procedures, which may be revised in
the future to permit it to reject signature guarantees from Eligible Guarantor
Institutions that do not, based on credit guidelines, satisfy such written
standards or procedures. The Trust may change the signature guarantee
requirements from time to time upon notice to shareholders, which may be given
by means of a new or supplemented Prospectus.
Alternative Purchase Arrangements
The Trust offers investors three classes of shares (Class A, Class B and Class
C) which bear sales charges in different forms and amounts and which bear
different levels of expenses. The alternative purchase arrangements are designed
to enable the investor to choose the method of purchasing Fund shares that is
most beneficial to the investor based on all factors to be considered, which
include: the amount and intended length of the investment, the type of Fund
(i.e., Equity vs. Income) and whether the investor intends to exchange shares
for shares of other Funds. Generally, when making an investment decision,
investors should at least consider the anticipated life of an intended
investment in the Funds, the accumulated distribution and servicing fees plus
contingent deferred sales charges on Class B or Class C shares, the initial
sales charge plus accumulated servicing fees on Class A shares (plus a
contingent deferred sales charge in certain circumstances), the possibility that
the anticipated higher return on Class A shares due to the lower ongoing charges
will offset the initial sales charge paid on such shares, the automatic
conversion of Class B shares to Class A shares and the difference in the
contingent deferred sales charges applicable to Class A, B and C shares.
Class A: The initial sales charge alternative (Class A) might be preferred by
investors purchasing shares of sufficient aggregate value to qualify for
reductions in the initial sales charge applicable to such shares. Similar
reductions are not available on the contingent deferred sales charge alternative
(Class B) or the asset based sales charge alternative (Class C). Class A shares
are subject to a servicing fee but are not subject to a distribution fee and,
accordingly, such shares are expected to pay correspondingly higher dividends on
a per share basis. However, because initial sales charges are deducted at the
time of purchase, not all of the purchase payment for Class A shares is invested
initially. Class B and Class C shares might be preferable to
<PAGE>
PIMCO Advisors Funds 45
- --------------------------------------------------------------------------------
investors who wish to have all purchase payments invested initially, although
remaining subject to higher distribution and servicing fees and, for certain
periods, being subject to a contingent deferred sales charge. An investor who
qualifies for an elimination of the Class A initial sales charge should also
consider whether he or she anticipates redeeming shares in a time period
which will subject such shares to a contingent deferred sales charge as
described below. See "Initial Sales Charge Alternative -- Class A Shares --
Class A Deferred Sales Charge" below.
Class B: Class B shares might be preferred by investors who intend to invest in
the Funds for longer periods and who do not intend to purchase shares of
sufficient aggregate value to qualify for sales charge reductions applicable to
Class A shares. Both Class B and Class C shares can be purchased at net asset
value without an initial sales charge. However, unlike Class C shares, Class B
shares convert into Class A shares after the shares have been held for seven
years. After the conversion takes place, the shares will no longer be subject to
a contingent deferred sales charge, and will be subject to the servicing fees
charged for Class A shares which are lower than the distribution and servicing
fees charged on either Class B or Class C shares. See "Deferred Sales Charge
Alternative -- Class B Shares" below.
Class C: Class C shares might be preferred by investors who intend to purchase
shares which are not of sufficient aggregate value to qualify for Class A sales
charges of 1% or less and who wish to have all purchase payments invested
initially. Class C shares are preferable to Class B shares for investors who
intend to maintain their investment for intermediate periods and therefore may
also be preferable for investors who are unsure of the intended length of their
investment. Unlike Class B shares, Class C shares are not subject to a
contingent deferred sales charge after they have been held for one year and are
subject to only a 1% contingent deferred sales charge during the first year.
However, because Class C shares do not convert into Class A shares, Class B
shares are preferable to Class C shares for investors who intend to maintain
their investment in the Funds for long periods. See "Asset Based Sales Charge
Alternative -- Class C Shares" below.
In determining which class of shares to purchase, an investor should always
consider whether any waiver or reduction of a sales charge or a contingent
deferred sales charge is available. See generally "Initial Sales Charge
Alternative -- Class A Shares" and "Waiver of Contingent Deferred Sales
Charges" below.
There is no size limit on purchases of Class A shares. The maximum single
purchase of Class B shares accepted is $249,999. The maximum single purchase
of Class C shares accepted is $999,999. The Funds may refuse any order to
purchase shares.
For a description of the Distribution and Servicing Plans and distribution
and servicing fees payable thereunder with respect to Class A, Class B and
Class C shares, see "Distributor and Distribution and Servicing Plans" below.
Waiver of Contingent Deferred Sales Charges The contingent deferred sales charge
applicable to Class A and C shares is currently waived for (i) any partial or
complete redemption in connection with a distribution without penalty under
Section 72(t) of the Internal Revenue Code of 1986, as amended (the "Code") from
a retirement plan, including a 403(b)(7) plan or an IRA (a) upon attaining age
59-1/2, (b) as part of a series of substantially equal periodic payments, or (c)
in the case of an employer sponsored retirement plan, upon separation from
service and attaining age 55; (ii) any partial or complete redemption in
connection with a qualifying loan or hardship withdrawal from an employer
sponsored retirement plan; (iii) any complete redemption in connection with a
distribution from a qualified employer retirement plan in connection with
termination of employment or termination of the employer's plan and the transfer
to another employer's plan or to an IRA; (iv) any partial or complete redemption
following death or disability (as defined in the Code) of a shareholder
(including one who owns the shares as joint tenant with his or her spouse) from
an account in which the deceased or disabled is named, provided the redemption
is requested within one year of the death or initial determination of
disability; (v) any redemption resulting from a return of an excess contribution
to a qualified employer retirement plan or an IRA; or (vi) certain periodic
redemptions under an Automatic Withdrawal Plan from an account meeting certain
minimum balance requirements, in amounts meeting certain maximums established
from time to time by the Distributor; (vii) redemptions by Trustees, officers
and employees of the Trust and by directors, officers and employees of the
Distributor and the Manager; (viii) redemptions effected pursuant to a Fund's
right to involuntarily redeem a shareholder's account if the aggregate net asset
value of shares held in such shareholder's account is less than a minimum
account size specified in such Fund's prospectus; (ix) involuntary redemptions
caused by operation of law; (x) redemption of shares of any Fund that is
combined with another Fund, investment company, or personal holding company by
virtue of a merger, acquisition or other similar reorganization transaction;
(xi) redemptions by a share-
<PAGE>
46 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
holder who is a participant making periodic purchases of not less than $50
through certain employer sponsored savings plans that are clients of a
broker-dealer with which the Distributor has an agreement with respect to
such purchases; or (xii) redemptions effected by trustees or other
fiduciaries who have purchased shares for employer sponsored plans, the
administrator for which has an agreement with the Distributor with respect to
such purchases.
The contingent deferred sales charge applicable to Class B shares is
currently waived for any partial or complete redemption (a) in connection
with a distribution without penalty under Section 72(t) of the Code from a
403(b)(7) plan or an IRA upon attaining age 59-1/2 and (b) following death or
disability (as defined in the Code) of a shareholder (including one who owns
the shares as joint tenant with his or her spouse) from an account in which
the deceased or disabled is named, provided the redemption is requested
within one year of the death or initial determination of disability.
The Distributor may require documentation prior to waiver of the contingent
deferred sales charge for any class including distribution letters,
certification by plan administrators, applicable tax forms, death
certificates, physicians certificates, etc.
Initial Sales Charge Alternative -- Class A Shares
Class A shares are sold at a public offering price equal to their net asset
value per share plus a sales charge, as set forth below. As indicated below
under "Class A Deferred Sales Charge," certain investors that purchase
$1,000,000 or more of any Fund's Class A shares (and thus pay no initial
sales charge) may be subject to a 1% contingent deferred sales charge if they
redeem such shares during the first 18 months after their purchase.
Equity Income Fund, Value Fund, Growth Fund, Target Fund, Discovery Fund,
Opportunity Fund, Innovation Fund, International Fund and Precious Metals
Fund
<TABLE>
<CAPTION>
Discount or
Sales Commission
Sales Charge to Dealers
Charge As % of As % of
As % of the Public Public
Amount of Net Amount Offering Offering
Purchase Invested Price Price
- ---------------- ---------- ----------- -----------
<S> <C> <C> <C>
$0-$49,999 5.82% 5.50% 4.75%
$50,000-$99,999 4.71% 4.50% 3.75%
$100,000-$249,999 3.90% 3.75% 3.00%
$250,000-$499,999 2.56% 2.50% 2.00%
$500,000-$999,999 1.78% 1.75% 1.50%
$1,000,000+ 0.00%(1) 0.00%(1) 0.75%
</TABLE>
Global Income Fund, High Income Fund, Total Return Income Fund, Tax Exempt
Fund and U.S. Government Fund
<TABLE>
<CAPTION>
Discount or
Sales Commission
Sales Charge to Dealers
Charge As % of As % of
As % of the Public Public
Amount of Net Amount Offering Offering
Purchase Invested Price Price
- ---------------- ---------- ----------- -----------
<S> <C> <C> <C>
$0-$49,999 4.99% 4.75% 4.00%
$50,000-$99,999 4.44% 4.25% 3.50%
$100,000-$249,999 3.90% 3.75% 3.00%
$250,000-$499,999 2.56% 2.50% 2.00%
$500,000-$999,999 1.78% 1.75% 1.50%
$1,000,000+ 0.00%(1) 0.00%(1) 0.50%
</TABLE>
Short-lntermediate Fund
<TABLE>
<CAPTION>
Discount or
Sales Commission
Sales Charge to Dealers
Charge As % of As % of
As % of the Public Public
Amount of Net Amount Offering Offering
Purchase Invested Price Price
- ---------------- ---------- ----------- -----------
<S> <C> <C> <C>
$0-$49,999 3.09% 3.00% 2.50%
$50,000-$99,999 2.56% 2.50% 2.00%
$100,000-$249,999 2.04% 2.00% 1.50%
$250,000-$499,999 1.52% 1.50% 1.25%
$500,000-$999,999 1.27% 1.25% 1.00%
$1,000,000+ 0.00%(1) 000%(1) 0.50%
</TABLE>
(1)As shown, investors that purchase more than $1,000,000 of any Fund's Class
A shares will not pay any initial sales charge on such purchase. However,
except with regard to purchases of Class A shares of the Money Market
Fund, purchasers of $1,000,000 or more of Class A shares (other than those
purchasers described below under "Sales at Net Asset Value") will be
subject to a contingent deferred sales charge of 1% if such shares are
redeemed during the first 18 months after such shares are purchased unless
such purchaser is eligible for a waiver of the contingent deferred sales
charge as described under "Waiver of Contingent Deferred Sales Charge"
above. See "Class A Deferred Sales Charge" below.
Except as described below, the Distributor will pay a commission to
dealers who sell amounts of $1,000,000 or more of Class A shares of each
of the Equity Funds, according to the following schedule: 0.75% of the
first $2,000,000, 0.50% of amounts from $2,000,001 to $5,000,000 and 0.25%
of amounts over $5,000,000; and for Class A shares of each of the Income
Funds except for the Money Market Fund for which no payment is made,
according to the following schedule: 0.50% of the first $2,000,000 and
0.25% of amounts over $2,000,000.
The Distributor will pay a commission of 0.25% to dealers in connection
with any size purchase of Class A shares by trustees or other fiduciaries
purchasing such shares for certain employer sponsored plans that have at
least 300 eligible participants or at least $3 million in total plan
assets and thus are eligible to purchase Class A shares without any
initial sales charge as described below under "Sales at Net Asset Value."
The Distributor will not pay any commission to dealers upon the sale of
Class A shares to any of the other purchasers described below under "Sales
at Net Asset Value."
No initial sales charge applies to purchases of Class A shares of the Money
Market Fund. However, if a shareholder exchanges Class A shares of the Money
Market Fund, for which no sales load was paid at the time of purchase, for
Class A shares of any other Fund, the sales charge shown above for the other
Fund applies at the time of the exchange.
<PAGE>
PIMCO Advisors Funds 47
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Each Fund receives the entire net asset value of its Class A shares purchased
by investors. The Distributor receives the sales charge shown above less any
applicable discount or commission "reallowed" to participating brokers in the
amounts indicated in the table above. The Distributor may, however, elect to
reallow the entire sales charge to participating brokers for all sales with
respect to which orders are placed with the Distributor for any particular
Fund during a particular period. A participating broker who receives a
reallowance of 90% or more of the sales charge may be deemed to be an
"underwriter" under the Securities Act of 1933. During such periods as may
from time to time be designated by the Distributor, the Distributor will pay
an additional amount of up to 0.50% of the purchase price on sales of Class A
shares of all or selected Funds purchased to each participating broker which
obtains purchase orders in amounts exceeding thresholds established from time
to time by the Distributor.
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are issued at net asset value and are not subject
to any sales charges.
Under the circumstances described below, investors may be entitled to pay
reduced sales charges for Class A shares.
Combined Purchase Privilege Investors may qualify for a reduced sales charge by
combining purchases of the Class A shares of one or more Funds (other than the
Money Market Fund) into a "single purchase," if the resulting purchase totals at
least $50,000. The term single purchase refers to: (i) a single purchase by an
individual, or concurrent purchases, which in the aggregate are at least equal
to the prescribed amounts, by an individual, his spouse and their children under
the age of 21 years purchasing Class A shares of the Funds for his, her or their
own account; (ii) a single purchase by a trustee or other fiduciary purchasing
shares for a single trust, estate or fiduciary account although more than one
beneficiary is involved; or (iii) a single purchase for the employee benefit
plans of a single employer. For further information, consult the Statement of
Additional Information or call the Distributor at 800-426-0107 or your broker.
Cumulative Quantity Discount (Right of Accumulation)
A purchase of additional Class A shares of any Fund (other than the Money
Market Fund) may qualify for a Cumulative Quantity Discount at the rate
applicable to the discount bracket obtained by adding:
(i) the investor's current purchase;
(ii) the value (at the close of business on the day of the current purchase)
of all Class A shares of any Fund (other than the Money Market Fund) held by
the investor computed at the maximum offering price; and
(iii) the value of all shares described in paragraph (ii) owned by another
shareholder eligible to be combined with the investor's purchase into a
"single purchase" as defined above under "Combined Purchase Privilege."
For example, if you owned Class A shares of the High Income Fund worth
$25,000 at the current maximum offering price and wished to purchase Class A
shares of the Growth Fund worth an additional $30,000, the sales charge for
the $30,000 purchase would be at the 4.50% rate applicable to a single
$55,000 purchase of shares of the Growth Fund, rather than the 5.50% rate.
An investor or participating broker must notify the Distributor whenever a
quantity discount or reduced sales charge is applicable to a purchase and
must provide the Distributor with sufficient information at the time of
purchase to verify that each purchase qualifies for the privilege or
discount. Upon such notification, the investor will receive the lowest
applicable sales charge. The quantity discounts described above may be
modified or terminated at any time.
Letter of Intent An investor may also obtain a reduced sales charge by means of
a written Letter of Intent, which expresses an intention to invest not less than
$50,000 within a period of 13 months in Class A shares of any Fund(s) (other
than the Money Market Fund). Each purchase of shares under a Letter of Intent
will be made at the public offering price or prices applicable at the time of
such purchase to a single transaction of the dollar amount indicated in the
Letter. At the investor's option, a Letter of Intent may include purchases of
Class A shares of any Fund (other than the Money Market Fund) made not more than
90 days prior to the date the Letter of Intent is signed; however, the 13-month
period during which the Letter is in effect will begin on the date of the
earliest purchase to be included and the sales charge on any purchases prior to
the Letter will not be adjusted.
Investors qualifying for the Combined Purchase Privilege described above may
purchase shares of the Funds under a single Letter of Intent. For example, if
at the time you sign a Letter of Intent to invest at least $100,000 in Class
A shares of any Fund (other than the Money Market Fund), you and your spouse
each purchase Class A shares of the Growth Fund worth
<PAGE>
48 PIMCO Advisors Funds
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$30,000 (for a total of $60,000), it will only be necessary to invest a total
of $40,000 during the following 13 months in Class A shares of any of the
Funds (other than the Money Market Fund) to qualify for the 3.75% sales
charge on the total amount being invested (the sales charge applicable to an
investment of $100,000 in any of the Funds other than the Money Market and
Short-lntermediate Funds).
A Letter of Intent is not a binding obligation to purchase the full amount
indicated. The minimum initial investment under a Letter of Intent is 5% of
such amount. Shares purchased with the first 5% of such amount will be held
in escrow (while remaining registered in your name) to secure payment of the
higher sales charge applicable to the shares actually purchased in the event
the full intended amount is not purchased. If the full amount indicated is
not purchased, a sufficient amount of such escrowed shares will be
involuntarily redeemed to pay the additional sales charge applicable to the
amount actually purchased, if necessary. Dividends on escrowed shares,
whether paid in cash or reinvested in additional Fund shares, are not subject
to escrow. When the full amount indicated has been purchased, the escrow will
be released.
If you wish to enter into a Letter of Intent in conjunction with your initial
investment in Class A shares of a Fund, you should complete the appropriate
portion of the Account Application included with this Prospectus. If you are
a current Class A shareholder desiring to do so you can obtain a form of
Letter of Intent by contacting the Distributor at 800-426-0107 or any broker
participating in this program.
Reinstatement Privilege A Class A shareholder who has caused any or all of his
shares (other than Money Market Fund shares that were not acquired by exchanging
Class A shares of another Fund) to be redeemed may reinvest all or any portion
of the redemption proceeds in Class A shares of any Fund at net asset value
without any sales charge, provided that such reinvestment is made within 90
calendar days after the redemption or repurchase date. Shares are sold to a
reinvesting shareholder at the net asset value next determined as described
above. A reinstatement pursuant to this privilege will not cancel the redemption
transaction and, consequently, any gain or loss so realized may be recognized
for federal tax purposes except that no loss may be recognized to the extent
that the proceeds are reinvested in shares of the same Fund within 30 days. The
reinstatement privilege may be utilized by a shareholder only once, irrespective
of the number of shares redeemed, except that the privilege may be utilized
without limit in connection with transactions whose sole purpose is to transfer
a shareholder's interest in a Fund to his Individual Retirement Account or other
qualified retirement plan account. An investor may exercise the reinstatement
privilege by written request sent to the Distributor or to the investor's
broker.
Sales at Net Asset Value Each Fund may sell its Class A shares at net asset
value without a sales charge to a) current or retired officers, trustees,
directors or employees of the Trust, the Manager or the Distributor, to a spouse
or child of such person or to any trust, profitsharing or pension plan for the
benefit of any such person, b) current or retired trustees of Cash Accumulation
Trust, another registered investment company for which the Manager acts as
investment adviser, c) current registered representatives and other full-time
employees of participating brokers or such persons' spouses, d) trustees or
other fiduciaries purchasing shares for certain employer sponsored plans that
have at least 300 eligible participants or at least $3 million in total plan
assets, e) trustees or other fiduciaries purchasing shares for certain
employer-sponsored plans, the trustee, fiduciary or administrator for which has
an agreement with the Distributor with respect to such purchases, f)
participants investing through accounts known as "wrap accounts" established
with brokers or dealers approved by the Distributor where such brokers or
dealers are paid a single, inclusive fee for brokerage and investment management
services, g) broker-dealers or registered investment advisers affiliated with
such broker-dealers with which the Distributor has an agreement for the use of
PIMCO Advisors Funds in particular investment products for which a fee is
charged, and h) trust accounts for which trust companies affiliated with the
Trust or the Manager serve as trustee. As described above, the Distributor will
not pay any initial commission to dealers upon the sale of Class A shares to the
purchasers described in this paragraph except for sales to purchasers described
under d) in this paragraph.
In addition, the PIMCO Advisors U.S. Government Fund may also (subject to
appropriate documentation) sell its Class A shares without a sales charge
where the amount invested represents proceeds of a redemption from a mutual
fund not distributed by PIMCO Advisors Distribution Company if such
redemption occurred no more than 60 days prior to the purchase of the Fund's
Class A shares and the shareholder either (i) paid an initial sales charge on
the redeemed shares (or was entitled to a waiver of the initial sales charge)
or (ii) was at some time subject to a deferred sales charge with respect to
the redemption proceeds, whether or not a deferred sales charge was in fact
paid.
<PAGE>
PIMCO Advisors Funds 49
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Class A Deferred Sales Charge For all Funds except the Money Market Fund,
investors who purchase $1,000,000 or more of Class A shares (and, thus, purchase
such shares without any initial sales charge) may be subject to a 1% contingent
deferred sales charge (the "Class A CDSC") if such shares are redeemed within 18
months of their purchase. The Class A CDSC does not apply to investors
purchasing $1,000,000 or more of any Fund's Class A shares if such investors are
otherwise eligible to purchase Class A shares without any sales charge because
they are described under "Sales at Net Asset Value" above.
For purchases subject to the Class A CDSC, a 1% CDSC will apply for any
redemption of such Class A shares that occurs within 18 months of their
purchase. No CDSC will be imposed if the shares redeemed have been acquired
through the reinvestment of dividends or capital gains distributions or if
the amount redeemed is derived from increases in the value of the account
above the amount of purchase payments subject to the CDSC. In determining
whether a CDSC is payable, it is assumed that Class A shares acquired through
the reinvestment of dividends and distributions are redeemed first, and
thereafter that Class A shares that have been held by an investor for the
longest period of time are redeemed first.
The Class A CDSC does not apply to Class A shares of the Money Market Fund
but, if Money Market Fund Class A shares are purchased in a transaction that,
for any other Fund, would be subject to the CDSC (i.e., a purchase of
$1,000,000 or more) and are subsequently exchanged for Class A shares of any
other Fund, a Class A CDSC will apply to the shares of the Fund acquired by
exchange for a period of 18 months from the date of the exchange.
The Class A CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements -- Waiver of
Contingent Deferred Sales Charges."
For more information about the Class A CDSC, call the Distributor at
800-426-0107.
Participating Brokers Investment dealers and other firms provide varying
arrangements for their clients to purchase and redeem Fund shares. Some may
establish higher minimum investment requirements than set forth above. Firms may
arrange with their clients for other investment or administrative services. Such
firms may independently establish and charge additional amounts to their clients
for such services, which charges would reduce clients' return. Firms also may
hold Fund shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Trust's transfer agent will have no
information with respect to or control over accounts of specific shareholders.
Such shareholders may obtain access to their accounts and information about
their accounts only from their broker. In addition, certain privileges with
respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. This Prospectus should be read in connection
with such firms' material regarding their fees and services.
Deferred Sales Charge Alternative--
Class B Shares
Class B shares are sold at their current net asset value without any initial
sales charge. The full amount of an investor's purchase payment will be
invested in shares of the Fund(s) selected. A contingent deferred sales
charge ("CDSC") will be imposed on Class B shares (including Money Market
Fund shares) if an investor redeems an amount which causes the current value
of the investor's account for a Fund to fall below the total dollar amount of
purchase payments subject to the CDSC, except that no CDSC is imposed if the
shares redeemed have been acquired through the reinvestment of dividends or
capital gains distributions or if the amount redeemed is derived from
increases in the value of the account above the amount of purchase payments
subject to the CDSC.
Initial purchases of Class B shares of the Short-Intermediate Fund are
suitable only as a temporary investment for investors who expect to exchange
such shares into Class B shares of another Fund within a short time after
purchase. Investors who expect to hold shares of the Short-Intermediate Fund
for longer periods should purchase Class A or Class C shares.
Class B shares of the Money Market Fund are not offered for initial purchases
but may be obtained through exchanges of Class B shares of other Funds. See
"Exchange Privilege" below.
Class B shares are not available for purchase by employer sponsored
retirement plans.
Whether a CDSC is imposed and the amount of the CDSC will depend on the
number of years since the
<PAGE>
50 PIMCO Advisors Funds
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investor made a purchase payment from which an amount is being redeemed.
Purchases are subject to the CDSC according to the following schedule:
Year Since Purchase Percentage Contingent
Payment Was Made Deferred Sales Charge
- ---------------------- ------------------------
First 5
Second 4
Third 3
Fourth 3
Fifth 2
Sixth 1
Seventh 0
Eighth *
*Class B shares convert into Class A shares as described below.
In determining whether a CDSC is payable, it is assumed that the purchase
payment from which a redemption is made is the earliest purchase payment from
which a redemption or exchange has not already been fully effected.
In determining whether an amount is available for redemption without
incurring a CDSC, the purchase payments made for all Class B shares in the
shareholder's account with the particular Fund are aggregated, and the
current value of all such shares is aggregated. Any CDSC imposed on a
redemption of Class B shares is paid to the Distributor.
Class B shares are subject to higher distribution fees than Class A shares
for a fixed period after their purchase, after which they automatically
convert to Class A shares and are no longer subject to such higher
distribution fees. Class B shares of each Fund automatically convert into
Class A shares after they have been held for seven years.
For sales of Class B shares made and services rendered to Class B
shareholders, the Distributor intends to make payments to participating
brokers, at the time a shareholder purchases Class B shares, of 4% of the
purchase amount for each of the Funds. During such periods as may from time
to time be designated by the Distributor, the Distributor will pay selected
participating brokers an additional amount of up to 0.50% of the purchase
price on sales of Class B shares of all or selected Funds purchased to each
participating broker which obtains purchase orders in amounts exceeding
thresholds established from time to time by the Distributor.
The Class B CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements -- Waiver of
Contingent Deferred Sales Charges."
For more information about the Class B CDSC, call the Distributor at
800-426-0107.
Asset Based Sales Charge Alternative --
Class C Shares
Class C shares are sold at their current net asset value without any initial
sales charge. A CDSC is imposed on Class C shares (including Money Market
Fund shares) if an investor redeems an amount which causes the current value
of the investor's account for a Fund to fall below the total dollar amount of
purchase payments subject to the CDSC, except that no CDSC is imposed if the
shares redeemed have been acquired through the reinvestment of dividends or
capital gains distributions or if the amount redeemed is derived from
increases in the value of the account above the amount of purchase payments
subject to the CDSC. All of an investor's purchase payments are invested in
shares of the Fund(s) selected.
Whether a CDSC is imposed and the amount of the CDSC will depend on the
number of years since the investor made a purchase payment from which an
amount is being redeemed and the date such purchase payment was made.
Purchases are subject to the CDSC according to the following schedules:
Purchase payments made on or after July 1, 1991:
Year Since Purchase Percentage Contingent
Payment Was Made Deferred Sales Charge
- ------------------------ ------------------------
First 1
Thereafter 0
Purchase payments made before July 1, 1991:
Year Since Purchase Percentage Contingent
Payment Was Made Deferred Sales Charge
- ----------------------- ------------------------
Fifth 2
Sixth and following O
In determining whether a CDSC is payable, it is assumed that the purchase
payment from which the redemption is made is the earliest purchase payment
(from which a redemption or exchange has not already been effected). If the
earliest purchase from which a redemption has not yet been effected was made
on or after July 1, 1991 and within 12 months before the redemption, then a
CDSC at the rate of 1% will be imposed. If the earliest purchase payment from
which a redemption has not yet been effected was made before July 1, 1991,
then a CDSC of 2% may be imposed, in accordance with the table above.
The following examples will illustrate the operation of the CDSC:
(1) Assume that an individual opens an account and makes a purchase payment
of $10,000 after July 1,
<PAGE>
PIMCO Advisors Funds 51
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1991 for Class C shares of a Fund and that six months later the value of the
investor's account for that Fund has grown through investment performance and
reinvestment of distributions to $11,000. The investor then may redeem up to
$1,000 from that Fund ($11,000 minus $10,000) without incurring a CDSC. If
the investor should redeem $3,000, a CDSC would be imposed on $2,000 of the
redemption (the amount by which the investor's account for the Fund was
reduced below the amount of the purchase payment). At the rate of 1%, the
CDSC would be $20.
(2) Assume that the same individual in example (1) above had, in addition to
the purchase payment on or after July 1, 1991, also made a purchase payment
of $10,000 before July 1, 1991, and 4-1/2 years before the redemption. Assume
that the value of the $20,000 combined investment has grown to $21,000. As in
example (1) above, the investor may redeem $1,000 without incurring a CDSC.
If the investor redeemed $3,000, the $2,000 subject to a CDSC would be
assumed to have come from the purchase payment made before July 1, 1991,
which is in its fifth year since purchase. Therefore, the charge would be at
the 2% rate, according to the CDSC schedule which was in effect at the time
of that purchase payment. The total charge would be $40.
In determining whether an amount is available for redemption without
incurring a CDSC, the purchase payments made for all Class C shares in the
shareholder's account with the particular Fund are aggregated, and the
current value of all such shares is aggregated. Any CDSC imposed on a
redemption of Class C shares is paid to the Distributor.
Unlike Class B shares, Class C shares do not automatically convert to any
other class of shares of the Funds.
Except as described below, for sales of Class C shares made and services
rendered to Class C shareholders, the Distributor expects to make payments to
participating brokers, at the time the shareholder purchases Class C shares,
of 1.00% (representing 0.75% distribution fees and 0.25% servicing fees) of
the purchase amount for all Funds except the Short-Intermediate Fund for
which the expected payment is 0.75% (representing 0.50% distribution fees and
0.25% servicing fees) and the Money Market Fund for which no payment is
expected to be made. For sales of Class C shares made to participants making
periodic purchases of not less than $50 through certain employer sponsored
savings plans which are clients of a broker-dealer with which the Distributor
has an agreement with respect to such purchases, no payments are made at the
time of purchase. At the time shares of the Money Market Fund on which no
commission has been paid are exchanged for shares of another Fund, the
Distributor intends to make the payments to participating brokers that are
described above applicable to that other Fund. During such periods as may
from time to time be designated by the Distributor, the Distributor will pay
an additional amount of up to 0.50% of the purchase price on sales of Class C
shares of all or selected Funds purchased to each participating broker which
obtains purchase orders in amounts exceeding thresholds established from time
to time by the Distributor.
The Class C CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements -- Waiver of
Contingent Deferred Sales Charges."
For more information about the Class C CDSC, contact the Distributor at
800-426-0107.
Exchange Privilege
Except with respect to exchanges for shares of the Opportunity Fund which
currently are subject to certain restrictions, a shareholder may exchange
Class A, Class B and Class C shares of any Fund for the same Class of shares
of any other Fund in an account with identical registration on the basis of
their respective net asset values (except that a sales charge will apply on
exchanges of Class A shares of the Money Market Fund on which no sales load
was paid at the time of purchase). For information on restrictions applicable
to exchanges of shares for shares of the Opportunity Fund, see "How To Buy
Shares -- Restrictions on Sales of and Exchanges for Shares of the
Opportunity Fund" above. Class A shares of the Money Market Fund may be
exchanged for Class A shares of any other Fund, but the usual sales charges
applicable to investments in such other Fund apply on shares for which no
sales load was paid at the time of purchase. There are currently no exchange
fees or charges. Except with respect to tax-qualified programs and exchanges
effected through the PIMCO Advisors Auto Exchange plan, exchanges are subject
to the $250 minimum initial purchase requirement for each Fund. An exchange
will constitute a taxable sale for federal income tax purposes.
Investors who maintain their account with the Distributor may exchange shares
by a written exchange request sent to PIMCO Advisors Distribution Company,
P.O. Box 5866, Denver, CO 80217-5866 or, unless the investor has specifically
declined telephone exchange privileges on the
<PAGE>
52 PIMCO Advisors Funds
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Account Application or elected in writing not to utilize telephone exchanges,
by a telephone request to the Transfer Agent at 800-852-8457. The Trust will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and may be liable for any losses due to unauthorized
or fraudulent instructions if it fails to employ such procedures. The Trust
will require a form of personal identification prior to acting on a caller's
telephone instructions, will provide written confirmations of such
transactions and will record telephone instructions. Exchange forms are
available from the Distributor at 800-426-0107 and may be used if there will
be no change in the registered name or address of the shareholder. Changes in
registration information or account privileges may be made in writing to the
Transfer Agent, Shareholder Services, Inc., P.O. Box 5866, Denver, Colorado
80217-5866, or by use of forms which are available from the Distributor. A
signature guarantee is required. See "Signature Guarantee" under "General."
Telephone exchanges may be made between 9:00 a.m. and the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) on
any day the Exchange is open (generally weekdays other than normal holidays).
The Trust reserves the right to refuse exchange purchases if, in the judgment
of the Manager, the purchase would adversely affect the Fund and its
shareholders. In particular, a pattern of exchanges characteristic of
"market-timing" strategies may be deemed by the Manager to be detrimental to
the Fund. Although the Trust has no current intention of terminating or
modifying the exchange privilege, it reserves the right to do so at any time.
Except as otherwise permitted by SEC regulations, the Trust will give 60
days' advance notice to shareholders of any termination or material
modification of the exchange privilege. For further information about
exchange privileges, contact your participating broker or call the Transfer
Agent at 800-426-0107.
With respect to Class B and Class C shares, or Class A shares subject to a
CDSC, if less than all of an investment is exchanged out of a Fund, any
portion of the investment attributable to capital appreciation and/or
reinvested 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. Shareholders should take
into account the effect of any exchange on the applicability of any CDSC that
may be imposed upon any subsequent redemption. Although the Class A CDSC does
not apply to Class A shares of the Money Market Fund, if Money Market Fund
Class A shares purchased in a transaction that would otherwise be subject
to the Class A CDSC (i.e. most purchases of $1,000,000 or more) are
subsequently exchanged for Class A shares of any other Fund, a Class A CDSC
will apply to the shares of the Fund acquired by exchange for a period of 18
months from the date of the exchange. See "Initial Sales Charge Alternative
- -- Class A Shares -- Class A Deferred Sales Charge" above.
Auto Exchange Investors may also select the PIMCO Advisors Auto Exchange plan
which establishes automatic periodic exchanges. For further information on
automatic exchanges see "PIMCO Advisors Auto Exchange" under "How to Buy
Shares."
How to Redeem
Shares may be redeemed through a participating broker, by telephone, by
submitting a written redemption request directly to the Transfer Agent (for
non-broker accounts) or through an Automatic Withdrawal Plan or PIMCO
Advisors Fund Link. In the event a shareholder redeems all of his or her
shares of the Opportunity Fund after December 31, 1992, or all participants
in certain self-directed qualified benefit plans redeem their shares of the
Opportunity Fund after March 31, 1993, such shareholder and the participants
in such plans will no longer be eligible to purchase shares of the
Opportunity Fund. See "How to Buy Shares -- Restrictions on Sales of and
Exchanges for Shares of the Opportunity Fund."
A CDSC may apply to a redemption of Class A, Class B or Class C shares. See
"Alternative Purchase Arrangements" above. Shares are redeemed at their net
asset value next determined after a proper redemption request has been
received, less any applicable CDSC. There is no charge by the Distributor
(other than an applicable CDSC) with respect to a redemption; however, a
participating broker who processes a redemption for an investor may charge
customary commissions for its services. Dealers and other financial services
firms are obligated to transmit orders promptly. Requests for redemption
received by dealers or other firms prior to the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) on a regular
business day and received by the Distributor prior to the close of the
Distributor's business day will be confirmed at the net asset value effective
as of the closing of the Exchange on that day, less any applicable CDSC.
Direct Redemption A shareholder's original Account Application permits the
shareholder to redeem by written request and by telephone (unless the
shareholder specifically elects not to utilize telephone redemptions) and to
elect one or more of the additional redemption
<PAGE>
PIMCO Advisors Funds 53
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procedures described below. A shareholder may change the instructions
indicated on his original Account Application, or may request additional
redemption options, only by transmitting a written direction to the Transfer
Agent. Requests to institute or change any of the additional redemption
procedures will require a signature guarantee.
Redemption proceeds will normally be mailed to the redeeming shareholder
within seven days or, in the case of wire transfer or Fund Link redemptions,
sent to the designated bank account within one business day. Fund Link
redemptions may be received by the bank on the second or third business day.
In cases where shares have recently been purchased by personal check,
redemption proceeds may be withheld until the check has been collected, which
may take up to 15 days. To avoid such withholding, investors should purchase
shares by certified or bank check or by wire transfer.
Written Requests (Does not apply to shares held in broker "street name"
accounts.) To redeem shares in writing (whether or not represented by
certificates), a shareholder must send the following items to the Fund's
Transfer Agent, Shareholder Services, Inc., P.O. Box 5866, Denver, Colorado
80217-5866: (1) a written request for redemption signed by all registered owners
exactly as the account is registered on the Transfer Agent's records, including
fiduciary titles, if any, and specifying the account number and the dollar
amount or number of shares to be redeemed; (2) for certain redemptions described
below, a guarantee of all signatures on the written request or on the share
certificate or accompanying stock power, if required, as described under
"Signature Guarantee"; (3) any share certificates issued for any of the shares
to be redeemed (see "Certificated Shares" below); and (4) any additional
documents which may be required by the Transfer Agent for redemption by
corporations, partnerships or other organizations, executors, administrators,
trustees, custodians or guardians, or if the redemption is requested by anyone
other than the shareholder(s) of record. Transfers of shares are subject to the
same requirements. A signature guarantee is not required for redemptions of
$50,000 or less, requested by and payable to all shareholders of record for the
account, to be sent to the address of record for that account. To avoid delay in
redemption or transfer, shareholders having any questions about these
requirements should contact the Transfer Agent in writing or by calling
1-800-426-0107 before submitting a request. REDEMPTION OR TRANSFER REQUESTS WILL
NOT BE HONORED UNTIL ALL REQUIRED DOCUMENTS IN THE PROPER FORM HAVE BEEN
RECEIVED BY THE TRANSFER AGENT.
If the proceeds of the redemption (i) exceed $50,000, (ii) are to be paid to
a person other than the record owner, (iii) are to be sent to an address
other than the address of the account on the Transfer Agent's records, or
(iv) are to be paid to a corporation, partnership, trust or fiduciary, the
signature(s) on the redemption request and on the certificates, if any, or
stock power must be guaranteed as described above, except that the
Distributor may waive the signature guarantee requirement for redemptions up
to $2,500 by a trustee of a qualified retirement plan, the administrator for
which has an agreement with the Distributor.
Telephone Redemptions (Does not apply to shares held in broker "street name"
accounts.) The Trust accepts telephone requests for redemption of uncertificated
shares for amounts up to $50,000 within any 7 calendar day period, except for
investors who have specifically declined telephone redemption privileges on the
Account Application or elected in writing not to utilize telephone redemptions.
The proceeds of a telephone redemption will be sent to the record shareholder at
his record address. Changes in account information must be made in a written
authorization with a signature guarantee. See "Signature Guarantee" under
"General." Telephone redemptions will not be accepted during the 30-day period
following any change in an account's record address.
By completing an Account Application, an investor agrees that the Trust, the
Distributor and the Transfer Agent shall not be liable for any loss incurred
by the investor by reason of the Trust accepting unauthorized telephone
redemption requests for his account if the Trust reasonably believes the
instructions to be genuine. Thus, shareholders risk possible losses in the
event of a telephone redemption not authorized by them. The Trust may accept
telephone redemption instructions from any person identifying himself as the
owner of an account or the owner's broker where the owner has not declined in
writing to utilize this service. The Trust will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, and may
be liable for any losses due to unauthorized or fraudulent instructions if it
fails to employ such procedures. The Trust will require a form of personal
identification prior to acting on a caller's telephone instructions, will
provide written confirmations of such transactions and will record telephone
instructions.
A shareholder making a telephone redemption should call the Transfer Agent at
800-852-8457 and state (i) the name of the shareholder as it appears on the
Transfer Agent's records, (ii) his account number with the Trust, (iii) the
amount to be withdrawn and (iv) the name of the person requesting the
redemption. Usually the proceeds are sent to the investor on the next Trust
<PAGE>
54 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
business day after the redemption is effected, provided the redemption
request is received prior to the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m. Eastern time) that day. If the redemption
request is received after the closing of the Exchange, the redemption is
effected on the following Trust business day at that day's net asset value
and the proceeds are usually sent to the investor on the second following
Trust business day. The Trust reserves the right to terminate or modify the
telephone redemption service at any time. During times of severe disruptions
in the securities markets, the volume of calls may make it difficult to
redeem by telephone, in which case a shareholder may wish to send a written
request for redemption as described under "Written Requests" above. Telephone
communications may be recorded by the Distributor or the Transfer Agent.
Fund Link Redemptions (Does not apply to shares held in broker "street name"
accounts.) If a shareholder has established Fund Link, the shareholder may
redeem shares by telephone and have the redemption proceeds sent to a designated
account at a financial institution. Fund Link is normally established within 45
days of receipt of the Application by the Transfer Agent. To use Fund Link for
redemptions, call the Transfer Agent at 800-852-8457. Subject to the limitations
set forth above under "Telephone Redemptions," the Distributor, the Trust and
the Transfer Agent may rely on instructions by any registered owner believed to
be genuine and will not be responsible to any shareholder for any loss, damage
or expense arising out of such instructions. Requests received by the Transfer
Agent prior to the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on a business day will be processed at the net
asset value on that day and the proceeds (less any CDSC) will normally be sent
to the designated bank account on the following business day and received by the
bank on the second or third business day. If the redemption request is received
after the close of regular trading on the Exchange, the redemption is effected
on the following business day. Shares purchased by check may not be redeemed
through Fund Link until such shares have been owned (i.e., paid for) for at
least 15 days. Fund Link may not be used to redeem shares held in certificated
form. Changes in bank account information must be made by completing a new Fund
Link Application, signed by all owners of record of the account, with all
signatures guaranteed. See "Signature Guarantee" under "General." See "PIMCO
Advisors Fund Link" under "How to Buy Shares" for information on establishing
the Fund Link privilege. The Trust may terminate the Fund Link program at any
time without notice to shareholders.
Expedited Wire Transfer Redemptions (Does not apply to shares held in broker
"street name" accounts.) If a shareholder has given authorization for expedited
wire redemption, shares can be redeemed and the proceeds sent by federal wire
transfer to a single previously designated bank account. Requests received by
the Trust prior to the close of the Exchange will result in shares being
redeemed that day at the next determined net asset value (less any CDSC) and
normally the proceeds being sent to the designated bank account the following
business day. The bank must be a member of the Federal Reserve wire system.
Delivery of the proceeds of a wire redemption request may be delayed by the
Trust for up to 7 days if the Distributor deems it appropriate under then
current market conditions. Once authorization is on file, the Trust will honor
requests by any person identifying himself as the owner of an account or the
owner's broker by telephone at 800-852-8457 or by written instructions. The
Trust cannot be responsible for the efficiency of the Federal Reserve wire
system or the shareholder's bank. The Trust does not currently charge for wire
transfers. The shareholder is responsible for any charges imposed by the
shareholder's bank. The minimum amount that may be wired is $2,500. The Trust
reserves the right to change this minimum or to terminate the wire redemption
privilege. Shares purchased by check may not be redeemed by wire transfer until
such shares have been owned (i.e., paid for) for at least 15 days. Expedited
wire transfer redemptions may be authorized by completing a form available from
the Distributor. Wire redemptions may not be used to redeem shares in
certificated form. To change the name of the single bank account designated to
receive wire redemption proceeds, it is necessary to send a written request with
signatures guaranteed to PIMCO Advisors Distribution Company, P.O. Box 5866,
Denver, CO 80217-5866. See "Signature Guarantee" under "General."
Certificated Shares To redeem shares for which certificates have been issued,
the certificates must be mailed to or deposited with the Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "Signature
Guarantee." Further documentation may be requested from institutions or
fiduciary accounts, such as corporations, custodians (e.g., under the Uniform
Gifts to Minors Act), executors, administrators, trustees or guardians
("institutional account owners"). The redemption request and stock power must be
signed exactly as the account is registered, including indication of any special
capacity of the registered owner.
<PAGE>
PIMCO Advisors Funds 55
- --------------------------------------------------------------------------------
Automatic Withdrawal Plan
An investor who owns or buys shares of a Fund having a net asset value of
$10,000 or more may open an Automatic Withdrawal plan and have a designated
sum of money (not less than $100 per Fund) paid monthly (or quarterly) to the
investor or another person. Such a plan may be established by completing the
appropriate section of the PIMCO Advisors Funds Account Application or you
may obtain an Automatic Withdrawal plan Application from the Distributor or
your broker. If an Automatic Withdrawal Plan is set up after the account is
established providing for payment to a person other than the record
shareholder or to an address other than the address of record, a signature
guarantee is required. See "Signature Guarantee" under "General." Shares of
each class of any Fund are deposited in a plan account and all distributions
are reinvested in additional shares of that class of the Fund at net asset
value. Shares in a plan account are then redeemed at net asset value (less
any applicable CDSC) to make each withdrawal payment. Any applicable CDSC may
be waived for certain redemptions under an Automatic Withdrawal plan. See
"Waiver of Contingent Deferred Sales Charges" under "Alternative Purchase
Agreements" above.
Redemptions for the purpose of withdrawals are ordinarily made on the
business day preceding the day of payment at that day's closing net asset
value and checks are mailed on the day of payment selected by the
shareholder. The Transfer Agent may accelerate the redemption and check
mailing date by one day to avoid weekend delays. Payment will be made to any
person the investor designates; however, if the shares are registered in the
name of a trustee or other fiduciary, payment will be made only to the
fiduciary, except in the case of a profit-sharing or pension plan where
payment will be made to the designee. As withdrawal payments may include a
return of principal, they cannot be considered a guaranteed annuity or actual
yield of income to the investor. The redemption of shares in connection with
an Automatic Withdrawal plan may result in a gain or loss for tax purposes.
Continued withdrawals in excess of income will reduce and possibly exhaust
invested principal, especially in the event of a market decline. The
maintenance of an Automatic Withdrawal plan concurrently with purchases of
additional shares of the Fund would be disadvantageous to the investor
because of the CDSC that may become payable on such withdrawals in the case
of Class A, Class B or Class C shares and because of the initial sales charge
in the case of Class A shares. For this reason, the minimum investment
accepted for a Fund while an Automatic Withdrawal plan is in effect for that
Fund is $1,000, and an investor may not maintain a plan for the accumulation
of shares of the Fund (other than through reinvestment of distributions) and
an Automatic Withdrawal plan at the same time. The cost of administering the
Automatic Withdrawal plans for the benefit of those shareholders
participating in them is borne by the Trust as an expense of all
shareholders. The Trust or the Distributor may terminate or change the terms
of the Automatic Withdrawal plan at any time.
Because the Automatic Withdrawal plan may involve invasion of capital,
investors should consider carefully with their own financial advisers whether
the plan and the specified amounts to be withdrawn are appropriate in their
circumstances. The Trust and the Distributor make no recommendations or
representations in this regard.
Distributor and Distribution and Servicing Plans
PIMCO Advisors Distribution Company (the "Distributor"), a wholly-owned
subsidiary of the Manager, is the principal underwriter of the Trust's shares
and in that connection makes distribution and servicing payments to
participating brokers and servicing payments to certain banks and other
financial intermediaries in connection with the sale of Class B or Class C
shares and servicing payments to participating brokers, certain banks and
other financial intermediaries in connection with the sale of Class A shares.
In the case of Class A shares, these parties are compensated based on the
amount of the front-end sales charge reallowed by the Distributor, except in
cases where Class A shares are sold without a front-end sales charge. In the
case of Class B shares, participating brokers are compensated by an advance
of a sales commission by the Distributor. In the case of Class C shares, part
or all of the first year's distribution and servicing fee is generally paid
at the time of sale. Pursuant to a Distribution Agreement with the Trust with
respect to each Fund's Class A, Class B and Class C shares, the Distributor
bears various other promotional and sales related expenses, including the
cost of printing and mailing prospectuses to persons other than shareholders.
Class A Servicing Fees: As compensation for services rendered and expenses borne
by the Distributor in connection with personal services rendered to Class A
shareholders of the Trust and the maintenance of Class A shareholder accounts,
the Trust pays the Distributor
<PAGE>
56 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
servicing fees up to the annual rates set forth below (calculated as a
percentage of each Fund's average daily net assets attributable to Class A
shares):
<TABLE>
<CAPTION>
Servicing
Fund Fee
- --------------------------------------------------------------- -----------
<S> <C>
Equity Income, Value, Growth, Target, Discovery, Opportunity,
Innovation, International, Precious Metals, Global Income,
High Income, Total Return Income, Tax-Exempt, U.S. Government
and Short-Intermediate .25%
Money Market* .10%
*Subject to increase by action of the Trust's Trustees to a rate not
exceeding .25% per annum. Also, subject to increase to a rate not exceeding
0.20% if the Distributor ceases to voluntarily waive any portion of the fee.
</TABLE>
Class B Distribution and Servicing Fees: As compensation for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class B shares of each Fund of the Trust (including the Money Market Fund) and
in connection with personal services rendered to Class B shareholders of the
Trust and the maintenance of Class B shareholder accounts, the Trust pays the
Distributor distribution fees and servicing fees up to the annual rate of .75%
and .25% respectively (calculated as a percentage of each Fund's average daily
net assets attributable to Class B shares).
Class C Distribution and Servicing Fees: As compensation for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class C shares of the Trust and in connection with personal services rendered to
Class C shareholders of the Trust and the maintenance of Class C shareholder
accounts, the Trust pays the Distributor distribution and servicing fees up to
the annual rates set forth below (calculated as a percentage of each Fund's
average daily net assets attributable to Class C shares):
<TABLE>
<CAPTION>
Distribution Servicing
Fund Fee Fee
- --------------------------------------------------- ------------ -----------
<S> <C> <C>
Equity Income, Value, Growth, Target, Discovery,
Opportunity, Innovation, International, Precious
Metals, Global Income, High Income, Total Return
Income, Tax Exempt and U.S. Government .75% .25%
Short-Intermediate* .50% .25%
Money Market* .00% .10%
*Subject to increase by action of the Trust's Trustees to a rate not exceeding
.75% per annum with respect to the distribution fee for the Short Intermediate
and Money Market Funds, and .25% per annum with respect to the servicing fee
on shares of the Money Market Fund. Also, with respect to the servicing fee on
shares of the Money Market Fund, such fee is subject to increase to a rate not
exceeding 0.20% if the Distributor ceases to voluntarily waive any portion of
the fee.
</TABLE>
The Class A servicing fees and Class B and C distribution and servicing fees
paid to the Distributor are made under Distribution and Servicing Plans
adopted pursuant to Rule 12b-l under the Investment Company Act of 1940 and
are of the type known as "compensation" plans. This means that, although the
Trustees of the Trust are expected to take into account the expenses of the
Distributor and its predecessors in their periodic review of the Distribution
and Servicing Plans, the fees are payable to compensate the Distributor for
services rendered even if the amount paid exceeds the Distributor's expenses.
The distribution fee applicable to Class B and C shares may be spent by the
Distributor on any activities or expenses primarily intended to result in the
sale of Class B or C shares, respectively, including compensation to, and
expenses (including overhead and telephone expenses) of, financial
consultants or other employees of the Distributor or of participating or
introducing brokers who engage in distribution of Class B or C shares,
printing of prospectuses and reports for other than existing Class B or C
shareholders, advertising and preparation, printing and distribution of sales
literature. The servicing fee, applicable to all classes of shares of the
Trust, may be spent by the Distributor on personal services rendered to
shareholders of the Trust and the maintenance of shareholder accounts,
including compensation to, and expenses (including telephone and overhead
expenses) of, financial consultants or other employees of the Distributor or
participating or introducing brokers, certain banks and other financial
intermediaries who aid in the processing of purchase or redemption requests
or the processing of dividend payments, who provide information periodically
to shareholders showing their positions in a Fund's shares, who forward
communications from the Trust to shareholders, who render ongoing advice
concerning the suitability of particular investment opportunities offered by
the Trust in light of the shareholders' needs, who respond to inquiries from
shareholders relating to such services, or who train personnel in the
provision of such services. Distribution and servicing fees may also be spent
on interest relating to unreimbursed distribution or servicing expenses from
prior years.
Many of the Distributor's sales and servicing efforts involve the Trust as a
whole, so that fees paid by any class of shares of any Fund may indirectly
support sales and servicing efforts relating to the other Funds' shares of
the same class. In reporting its expenses to the Trustees, the Distributor
itemizes expenses that relate to the distribution and/or servicing of a
single Fund's shares, and allocates other expenses among the Funds based on
their relative net assets. Expenses allocated to each Fund are further
allocated among its classes of shares annually based on the relative sales of
each class, except for any expenses that relate only to the sale or servicing
of a single class. The Distributor may make payments to brokers (and with
respect to servicing fees only, to certain banks and other financial
intermediar-
<PAGE>
PIMCO Advisors Funds 57
- --------------------------------------------------------------------------------
ies) of up to the following percentages annually of the average daily net
assets attributable to shares in the accounts of their customers or clients:
Class A Shares
Servicing
Fee
------------
All Funds except the Money Market Fund 0.25%
Money Market Fund 0.10%
Class B Shares
(Payable only with respect to shares outstanding for one year or more)
Servicing
Fee
----------
All Funds 0.25%
Class C Shares -- purchased on or after July 1, 1991
(Payable only with respect to shares outstanding for one year or more except
in the case of shares for which no payment is made to the party at the time
of sale)
Servicing Distribution
Fee Fee
-------- -------------
All Funds except the Short-Intermediate and
Money Market Funds 0.25% 0.65%
Short-lntermediate Fund 0.25% 0.45%
Money Market Fund --
0.10%
Class C Shares -- purchased before July 1, 1991
Servicing
Fee
----------
All Funds except the Money Market Fund 0.25%
Money Market Fund 0.10%
The Distributor may from time to time pay additional cash bonuses or other
incentives to selected participating brokers in connection with the sale or
servicing of all classes of shares of the Funds. On some occasions, such
bonuses or incentives may be conditioned upon the sale of a specified minimum
dollar amount of the shares of a Fund and/or all of the Funds together or a
particular class of shares, during a specific period of time. The Distributor
currently expects that such additional bonuses or incentives will not exceed
..50% of the amount of any sale.
If in any year the Distributor's expenses incurred in connection with the
distribution of Class B and C shares and, for all classes of shares, in
connection with the servicing of shareholders and the maintenance of
shareholder accounts exceed the distribution and/or servicing fees paid by
the Trust, the Distributor would recover such excess only if the Distribution
and Servicing Plan with respect to such class of shares continues to be in
effect in some later year when the distribution and/or servicing fees exceed
the Distributor's expenses. The Trust is not obligated to repay any
unreimbursed expenses that may exist at such time, if any, as the relevant
Distribution and Servicing Plan terminates.
From time to time, expenses of the Trust's principal underwriters incurred in
connection with the sale of Class B and Class C shares and in connection with
the servicing of Class B and Class C shareholders and the maintenance of
shareholder accounts have exceeded the distribution and servicing fees
collected by the Distributor. As of September 30, 1995, such expenses were
approximately $4,191,000 in excess of payments under the Distribution and
Servicing Plan with respect to Class C shares and $2,298,000 in excess of
payments under the Distribution and Servicing Plan with respect to Class B
shares. The allocation of such excess among the Funds as of September 30,
1995 was as follows:
<TABLE>
<CAPTION>
Excess Expenses
----------------------------------------------------
Class B* Class C
------------------------- -----------------------
(as Per- (as Per-
($ in centage of ($ in centage of
Thousands) Net Assets) Thousands Net Assets)
-------- ------------- -------- -----------
<S> <C> <C> <C> <C>
Equity Income Fund 73 4.1 183 .10
Value Fund 165 4.1 7 .10
Growth Fund 319 4.1 1,356 .10
Target Fund 314 4.1 820 .10
Discovery Fund 450 4.1 21 .10
Opportunity Fund 0 0 751 .10
Innovation Fund 270 4.1 67 .10
International Fund 21 4.1 266 .10
Precious Metals Fund 10 4.1 44 .10
Global Income Fund N/A N/A N/A N/A
High Income Fund 189 4.1 166 .10
Total Return Income Fund 366 4.1 48 .10
Tax Exempt Fund 12 4.1 57 .10
U.S. Government Fund 69 4.1 302 .10
Short-Intermediate Fund 39 4.1 69 .10
Money Market Fund 1 4.1 73 .10
</TABLE>
*Class B shares were offered beginning May 22, 1995.
How Net Asset Value is Determined
The net asset values of each class of shares of each Fund of the Trust will
be determined once on each day on which the New York Stock Exchange is open
(a "Business Day"), as of the close of regular trading on the Exchange.
Portfolio securities for which market quotations are readily available are
valued at market value. Fixed-income securities are valued on the basis of
valuations furnished by a pricing service, which are based on a variety of
factors, including market transactions for institutional-size trading units
of such securities. Short-term obligations having remaining maturities of 60
days or less are valued at amortized cost, which reflects market value. The
portfolio investments of the Money Market Fund are valued using the amortized
cost method of valuation, in accordance with Rule 2a-7 under the Investment
Company Act of 1940. Exchange-traded options, futures and options on futures
are valued at the settlement
<PAGE>
58 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
price as determined by the appropriate clearing corporation. All other
securities and assets are valued at their fair value as determined in good
faith by the Trustees or by persons acting at their direction. Each Fund's
liabilities are allocated among its classes. The total of such liabilities
allocated to a class plus that class' distribution and/or servicing fees and
any other expenses specially allocated to that class are then deducted from
the class' proportionate interest in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that class
outstanding to produce the "net asset value" per share. Under certain
circumstances, the per share net asset value of the Class B and Class C
shares of the Funds that do not declare regular income dividends on a daily
basis may be lower than the per share net asset value of the Class A shares
as a result of the daily expense accruals of the distribution fee applicable
to the Class B and Class C shares. Generally, for Funds that pay income
dividends, those dividends are expected to differ over time by approximately
the amount of the expense accrual differential between the three classes.
Distributions
Each Fund pays out as dividends substantially all of its net investment
income (which comes from dividends and interest it receives or is deemed to
receive from its investments) and net realized short-term capital gains. For
these purposes and for federal income tax purposes, a portion of the premiums
from certain expired call or put options written by the Fund, net gains from
closing purchase and sale transactions with respect to such options, and net
gains from futures transactions are treated as short-term capital gains. Each
Fund distributes substantially all of its net realized capital gains, if any,
after giving effect to any available capital loss carry-over.
All dividends and/or distributions will be paid in the form of additional
shares of the class of shares of the Fund to which the dividends and/or
distributions relate or, at the election of the shareholder, of another Fund
of the Trust as described below, at net asset value of such Fund, unless the
shareholder elects to receive cash (either paid to shareholders directly or
credited to their account with their participating broker). Dividends paid by
each Fund with respect to each class of shares are calculated in the same
manner and at the same time and will be in the same amount relative to the
aggregate net asset value of the shares in each class, except that dividends
on Class B and Class C shares are expected to be lower than dividends on
Class A shares as a result of the distribution fee applicable to Class B and
Class C shares. Currently, the Global Income, High Income, Total Return
Income, Tax Exempt, U.S. Government and Short-Intermediate Funds declare
dividends each Business Day, pay accrued dividends monthly and distribute
capital gains annually; the Equity Income and Value Funds declare and pay
dividends quarterly and distribute capital gains annually; the Growth,
Discovery, Opportunity, Target, Innovation, International and Precious Metals
Funds declare and pay dividends and distribute capital gains annually; and
the Money Market Fund declares dividends each Business Day and pays accrued
dividends monthly. Dividends and capital gains distributions may be declared
more or less frequently in the discretion of the Trustees. There are no
charges on reinvested dividends.
Shareholders may elect to invest dividends and/or distributions paid by any
Fund in shares of the same class of any other Fund of the Trust at net asset
value. The shareholder must have an account existing in the Fund selected for
investment with the identical registered name and address and must elect this
option on the Account Application, on a form provided for that purpose or by
a telephone request to the Transfer Agent at 800-426-0107. For further
information on this option, contact your broker or call the Distributor at
800-426-0107.
Taxes
Each Fund will be treated as a separate taxable entity for federal income tax
purposes. Each Fund plans to distribute substantially all of its net
investment income and net realized short-term capital gains, if any, to its
shareholders. So long as it does so and otherwise satisfies the requirements
for being taxed as a regulated investment company, the Fund itself does not
pay federal income tax on the amounts distributed. Income dividends and
capital gains distributions are taxable as described below. Shareholders will
receive an annual statement detailing federal tax information about dividends
and distributions paid to shareholders during or with respect to the
preceding calendar year.
Dividends paid to shareholders by the Tax Exempt Fund which are derived from
interest on Tax Exempt Bonds are "exempt-interest dividends," and
shareholders may exclude such dividends from gross income for federal income
tax purposes. However, if a shareholder receives social security or railroad
retirement benefits, the shareholder may be taxed on a portion of those
benefits as a result of receiving tax-exempt income. In addition, certain
exempt-interest dividends could, as discussed below,
<PAGE>
PIMCO Advisors Funds 59
- --------------------------------------------------------------------------------
cause certain shareholders to become subject to the alternative minimum tax
and may increase the alternative minimum tax liability of shareholders
already subject to this tax.
Other dividends and any short-term capital gains distributions of the Funds,
including the Tax Exempt Fund, are taxable to the shareholder as ordinary
income. Distributions of any long-term capital gains are taxable to
shareholders as such, regardless of how long a shareholder may have owned
shares in the Fund.
Dividends derived from interest on certain U.S. Government securities may be
exempt from state and local taxes, although interest on mortgage-backed U.S.
Government securities (which may constitute a substantial portion of the U.S.
Government Fund's assets) may not be so exempt. The distributions of
"exempt-interest dividends" paid by the Tax Exempt Fund may be exempt from
state and local taxation when received by a shareholder to the extent that
they are derived from interest on Tax Exempt Bonds issued by the state or
political subdivision in which such shareholder resides. The federal
exemption for "exempt-interest dividends" attributable to Tax Exempt Bonds
does not necessarily result in exemption of such dividends from income for
the purpose of state and local taxes. The Trust will report annually on a
state-by-state basis the source of income the Tax Exempt Fund receives on Tax
Exempt Bonds that was paid out as dividends during the preceding year.
Shareholders should consult their tax advisers as to the possible application
of state and local income tax laws to Trust dividends and capital gain
distributions.
If, at the end of its fiscal year, more than 50% of a Fund's total assets is
represented by securities of foreign corporations, such Fund may make an
election which allows shareholders who are U.S. citizens or U.S. corporations
to claim a foreign tax credit or deduction (but not both) on their U.S.
income tax returns. As a result, the amounts of foreign income taxes paid by
such Fund would be treated as additional income to shareholders of such Fund
from non-U.S. sources and as foreign taxes paid by shareholders of such Fund
for purposes of the foreign tax credit. If eligible for this election, the
International Fund intends to make such election. Investors should consult
their tax advisers for further information relating to the foreign tax credit
and deduction, which are subject to certain restrictions and limitations.
Shareholders who are not U.S. citizens or which are foreign corporations may
be subject to substantially different tax treatment of distributions by the
Funds.
The Internal Revenue Code of 1986, as amended (the "Code"), requires all of
the Funds to distribute prior to calendar year-end virtually all the ordinary
income of each Fund on a calendar year basis, and to distribute virtually all
the capital gain net income each Fund realizes in the one-year period ending
October 31 and has not previously distributed, in order to avoid a 4% excise
tax on undistributed income that would otherwise be imposed on a Fund. It is
each Fund's intention to make distributions sufficient to avoid the excise
tax.
The Code also provides that exempt-interest dividends allocable to interest
received from "private activity bonds" issued after August 7, 1986 will be an
item of tax preference for individual and corporate alternative minimum tax
at the applicable rate for individuals and corporations. Therefore, if the
Tax Exempt Fund invests in such private activity bonds, certain of its
shareholders may become subject to the alternative minimum tax on that part
of its distributions to them that are derived from interest income on such
bonds and certain shareholders already subject to such tax may have
increased liability therefor. However, it is the present policy of the Tax
Exempt Fund to invest no more than 20% of its assets in such bonds. Other
provisions of the Code affect the tax treatment of distributions from the Tax
Exempt Fund for corporations, casualty insurance companies and financial
institutions. In particular, under the Code, for corporations, alternative
minimum taxable income will be increased by a percentage of the amount by
which the corporation's "adjusted current earnings" (which includes various
items of tax-exempt income) exceeds the amount otherwise determined to be
alternative minimum taxable income. Accordingly, an investment in the Tax
Exempt Fund may cause shareholders to be subject to (or result in an
increased liability under) the alternative minimum tax.
Current federal tax law requires the holder of a Treasury or other
fixed-income zero-coupon security to accrue as income each year a portion of
the discount at which the security was purchased, even though the holder
receives no interest payment in cash on the security during the year. In
addition, pay-in-kind securities will give rise to income which is required
to be distributed and is taxable even though the Fund holding the security
receives no interest payment in cash on the security during the year. Also, a
portion of the yield on certain High Yield Securities (including certain
payment-in-kind securities) issued after July 10, 1987 may be treated as
dividends. Accordingly, each Fund that holds the foregoing kinds of
securities may be required to pay out as an income distribution each year an
amount which is greater than the total amount of cash interest the Fund
actually received. Such
<PAGE>
60 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
distributions may be made from the cash assets of the Fund or by liquidation
of portfolio securities, if necessary. The Fund may realize gains or losses
from such liquidations. In the event the Fund realizes net capital gains from
such transactions, its shareholders may receive a larger capital gain
distribution, if any, than they would in the absence of such transactions.
Distributions will be taxable as described above whether received in cash or
in shares through the reinvestment of distributions. A dividend paid to a
shareholder by a Fund in January of a year generally is deemed to have been
paid by the Fund on December 31 of the preceding year, if the dividend was
declared and payable to shareholders of record on a date in October, November
or December of that preceding year.
Management of the Trust
PIMCO Advisors L.P. (the "Manager") is the investment manager of each of the
PIMCO Advisors Funds. Each of the Funds also has a sub-adviser which, under
the supervision of the Manager and the Trust's trustees, directs the
investment of the Fund's assets. Other than the sub-adviser of the Precious
Metals Fund, all of the sub-advisers are affiliates of PIMCO Advisors L.P. In
addition to overseeing the sub-advisers, the Manager also provides executive
and other personnel for management of the Trust. Pursuant to the Trust's
Agreement and Declaration of Trust, the Trustees supervise the affairs of the
Trust as conducted by the Manager.
The Manager The Manager provides management and investment advisory services to
other mutual funds, investment accounts and pension plans. As of September 30,
1995, the Manager and its affiliates managed approximately $87 billion of
assets.
The Manager is a Delaware limited partnership. The general partner of the
Manager, PIMCO Partners, G.P., has two partners: (i) an indirect wholly-owned
subsidiary of Pacific Mutual Life Insurance Company; and (ii) PIMCO Partners,
L.L.C. ("LLC"), a limited liability company, all of the interests of which
are held directly by the Managing Directors of Pacific Investment Management
Company who are: William H. Gross, Dean S. Meiling, James F. Muzzy, William
F. Podlich, III, Frank B. Rabinovitch, Brent R. Harris, John L. Hague,
William S. Thompson, Jr., William C. Powers and David H. Edington
(collectively, the "Managing Directors"). PIMCO Partners, G.P. has
substantially delegated its management and control of the Manager to an
Equity Board and an Operating Board of the Manager. The activities of the
Manager are controlled by its Operating Board except that certain non-routine
or extraordinary actions may not be effected by the Operating Board without
the approval of the Manager's Equity Board. The Operating Board has in turn
delegated the authority to manage day-to-day operations and policies to an
Operating Committee. Because of the ability to designate a majority of the
Members of the Operating Board, Pacific Investment Management Company and the
Managing Directors could be said to control the Manager, although the
Managing Directors disclaim such authority.
Columbus Circle Investors ("CCI") CCI serves as the sub-adviser of the Equity
Income Fund, Growth Fund, Target Fund, Opportunity Fund, Innovation Fund, Tax
Exempt Fund and Money Market Fund. CCI also advises other mutual funds and
private accounts and is registered as an investment adviser with the SEC. CCI is
a general partnership with the Manager and a wholly-owned subsidiary of the
Manager as its only partners.
At the center of CCI's equity investment strategy is its theory of Positive
Momentum & Positive Surprise. This theory asserts that a good company doing
better than generally expected will experience a rise in its stock price, and
conversely, a company falling short of expectations will experience a drop in
its stock price. Based on this theory, CCI attempts to manage the Funds it
sub-advises (except the Tax Exempt and Money Market Funds) with a view to
investing in growing companies that are surprising the market with business
results that are better than anticipated. The investment decisions made by
CCI with respect to these Funds are made by a committee rather than by a
single person acting as portfolio manager. No person is primarily responsible
for making recommendations to that committee.
Norman Seltzer serves as the portfolio manager of the Tax Exempt Fund and the
Money Market Fund.
Pacific Investment Management Company Pacific Investment Management Company
serves as the sub-adviser of the Global Income Fund, High Income Fund, Total
Return Income Fund, U.S. Government Fund and Short-Intermediate Fund. It also
advises other mutual funds and private accounts. Pacific Investment Management
Company is a general partnership with the Manager and a wholly-owned subsidiary
of the Manager as its only partners and is registered as an investment adviser
with the SEC and as a commodity trading advisor with the CFTC.
Subject to the investment objective and policies of the various Funds it
advises, Pacific Investment Manage-
<PAGE>
PIMCO Advisors Funds 61
- --------------------------------------------------------------------------------
ment Company's fixed-income investment strategy attempts to achieve the
highest total return for a portfolio. For a description of this total return
strategy, see "Total Return" under "Investment Objectives and Policies"
above. Further, this sub-adviser closely monitors and actively manages the
duration of the portfolios it advises. See "Duration" under "Investment
Objectives and Policies" above. In selecting securities for each of the Funds
it advises, Pacific Investment Management Company utilizes economic
forecasting, interest rate anticipation, credit and call risk analysis,
foreign currency exchange rate forecasting, and other security selection
techniques. The proportion of each Fund's assets committed to investment in
securities with particular characteristics such as maturity, type and coupon
rate, will vary based on this sub-adviser's outlook for the U.S. and foreign
economies, the financial markets, and other factors.
William H. Gross, the portfolio manager of the Total Return Income Fund and a
Managing Director of Pacific Investment Management Company, also oversees the
portfolio managers of the other Funds sub-advised by this sub-adviser.
Information about the portfolio managers of each of the Funds sub-advised by
Pacific Investment Management Company, including their occupations for the
past five years, is provided below.
<TABLE>
<CAPTION>
Fund Portfolio Manager and Business Experience
- --------------------------- -----------------------------------------------------------------------------
<S> <C>
Global Income Fund Lee R. Thomas, III, Vice President and Senior International Portfolio
Manager, Pacific Investment Management Company, has managed the Global Income
Fund since its inception on October 1, 1995. A fixed-income portfolio
manager, Mr. Thomas has also managed the Global Fund, a series of PIMCO Funds
(an institutional mutual fund), since July 13, 1995. Prior to joining Pacific
Investment Management Company, Mr. Thomas was associated with Investcorp, as
a member of the management committee responsible for global securities and
foreign exchange trading. Prior to Investcorp, he was associated with
Goldman, Sachs as an Executive Director in foreign fixed-income.
High Income Fund Benjamin Trosky, Executive Vice President, Pacific Investment Management
Company, has managed the High Income Fund since November 15, 1994. A
fixed-income portfolio manager, Mr. Trosky has also managed the High Yield
Fund, a series of PIMCO Funds, since its inception on December 15, 1992. Mr.
Trosky was previously a high yield portfolio manager for Merrill Lynch Asset
Management.
Total Return Icome Fund William H. Gross, Managing Director, Pacific Investment Management Com- pany,
has managed the Total Return Income Fund since December 22, 1994. A
fixed-income portfolio manager, Mr. Gross has also managed the Total Return
Fund, a series of PIMCO Funds, since its inception on May 11, 1987.
U.S. Government Fund Frank B. Rabinovitch, Managing Director, Pacific Investment Management
Company, has managed the U.S. Government Fund since November 15, 1994. A
fixed-income portfolio manager, Mr. Rabinovitch has also managed the
Long-Term U.S. Government Fund, a series of PIMCO Funds, since its inception
on July 1, 1991.
Short-Intermediate Fund David H. Edington, Managing Director, Pacific Investment Management Company,
has managed the Short-Intermediate Fund since November 15, 1994. A
fixed-income portfolio manager, Mr. Edington has also managed the Short- Term
Fund, a series of PIMCO Funds, since its inception on October 7, 1987.
</TABLE>
<PAGE>
62 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
Blairlogie Capital Management ("Blairlogie") serves as the sub-adviser of the
International Fund. Blairlogie is a limited partnership formed under the laws of
Scotland in 1994 with the Manager and a wholly-owned subsidiary of the Manager
as its general partners.
Blairlogie also provides investment advice to other mutual funds and to
private clients. Blairlogie is registered as an investment adviser with the
SEC. James G.S. Smith is primarily responsible for the day-to-day management
of the International Fund. Mr. Smith is the Chief Investment Officer of
Blairlogie and is responsible for managing an investment team of seven
professionals. He previously served as a senior portfolio manager at Murray
Johnstone in Glasgow, Scotland, responsible for international investment
management for North American clients and at Schroder Investment Management
in London. Mr. Smith received his bachelor's degree in Economics from London
University and his MBA from Edinburgh University. He is an Associate of the
Institute of Investment Management and Research.
Cadence Capital Management ("Cadence") serves as the sub-adviser to the
Discovery Fund. Cadence also advises other mutual funds and private accounts.
Cadence is a general partnership, with the Manager and a wholly-owned subsidiary
of the Manager as its only partners. Cadence is registered as an investment
adviser with the SEC.
Cadence utilizes a "growth at a price" style of equity management. This means
that Cadence seeks to discover stocks with favorable prospective earnings
growth selling at reasonable valuations. Cadence analyses holdings on a
daily basis for changes in valuation and seeks to keep all of its clients,
including the Discovery Fund, fully invested.
David B. Breed, William B. Bannick and Peter B. McManus are responsible for
the overall management of the Discovery Fund along with a team of investment
professionals.
Mr. Breed is the Chief Investment Officer and a founding partner of Cadence,
and has 22 years of investment management experience. He has been the driving
force in developing Cadence's growth-oriented stock screening and selection
process.
Mr. Bannick is a Managing Director of Cadence and has 10 years of investment
management experience. He previously served as Executive Vice President of
George D. Bjurman & Associates and as Supervising Portfolio Manager of
Trinity Investment Management Corporation. Mr. Bannick joined Cadence's
predecessor in 1992.
Mr. McManus is Director of Mutual Fund Services of Cadence and has 18 years
of experience in the financial industries. Prior to joining Cadence, he
served with Boston Safe Deposit and Trust and Bank of Boston's Private Bank.
NFJ Investment Group ("NFJ") serves as the sub-adviser to the Value Fund. NFJ
also advises other mutual funds and private accounts. NFJ is a general
partnership, with the Manager and a wholly-owned subsidiary of the Manager as
its only partners. NFJ is registered as an investment adviser with the SEC.
NFJ is a value-oriented equity manager specializing in constructing
diversified portfolios consisting of stocks with low P/E ratios. NFJ's
philosophy is based on research concerning the performance of low P/E stocks
at all capitalization levels over extended periods. NFJ's investment style
seeks diversification across numerous industry groups to avoid portfolios
heavily concentrated in particular industries. NFJ has also analyzed the
correlation of yield to historic performance and believes that yield is a
maior component to valuation assessments.
NFJ's investment decisions with respect to the Value Fund are made on a team
basis, by a committee comprised of the Managing Directors of NFJ, rather than
by a single person acting as portfolio manager. No person is primarily
responsible for making recommendations to the team.
Van Eck Associates Corporation ("Van Eck") is an unaffiliated investment adviser
which serves as the sub-adviser of the Precious Metals Fund under the
supervision of the Manager. Van Eck is a registered investment adviser which,
together with its affiliates, advises other mutual funds and private accounts.
Van Eck is controlled by John C. Van Eck who, along with members of his
immediate family, owns 100% of the stock of Van Eck. Henry J. Bingham, Executive
Managing Director of Van Eck and President of the International Investors Gold
series of Van Eck Funds, has served as the portfolio manager of the Precious
Metals Funds since the Fund commenced operations.
Management and Sub-adviser Fees
Under the Management Contracts between the Trust and the Manager relating to
each Fund, the Manager is paid at the percentages shown below of the relevant
Fund's average daily net assets for its services to the Trust and the Fund.
Pursuant to Sub-adviser Agreements between the Manager and each of the
sub-advisers with respect to the Funds advised by each, the Manager pays to each
sub-adviser, out of the fee received by the Manager under the relevant
Management Contract, the following percentages of the relevant Fund's
average daily net assets as compensation for the services provided by the
sub-adviser:
<PAGE>
PIMCO Advisors Funds 63
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Management Fee
Fund (as % of net assets)
- ---- --------------------
<S> <C>
Equity Income 0.75% of first $200 million
0.70% of amounts over $200 million
Value 0.70%
Growth 0.70% of first $200 million
0.65% of amounts over $200 million
Target 0.75% of first $200 million
0.70% of amounts over $200 million
Discovery 0.75% of first $200 million
0.70% of amounts over $200 million
Opportunity 0.75% of first $200 million
0.70% of amounts over $200 million
Innovation 0.75% of first $200 million
0.70% of amounts over $200 million
International 0.80%
Precious Metals 0.75% of first $200 million
0.70% of amounts over $200 million
Global Income 0.70% of first $250 million
0.60% of amounts over $250 million
High Income 0.60% of first $250 million
0.50% of amounts over $250 million
Total Return Income 0.60% of first $250 million
0.50% of amounts over $250 million
Short-Intermediate 0.50% of first $250 million
0.45% of next $250 million
0.40% of amounts over S500 million
U.S. Government 0.60% of first S250 million
0.50% of amounts over $250 million
Tax Exempt 0.60%
Money Market* 0.50% of first $250 million
0.40% of amounts over $250 million
</TABLE>
<TABLE>
<CAPTION>
Sub-adviser Fee Paid By Manager
Fund Sub-Adviser (as % of net assets)
- ---- ----------- -------------------------------
<S> <C> <C>
Equity Income Columbus Circle Investors 0.375% of first $200 million
0.350% of amounts over $200 million
Value NFJ Investment Group 0.350%
Growth Columbus Circle Investors 0.350% of first $200 million
0.325% of amounts over $200 million
Target Columbus Circle Investors 0.375% of first $200 million
0.350% of amounts over $200 million
Discovery Cadence Capital Management 0.375% of first $200 million
0.350% of amounts over $200 million
Opportunity Columbus Circle Investors 0.375% of first $200 million
0.350% of amounts over $200 million
Innovation Columbus Circle Investors 0.375% of first $200 million
0.350% of amounts over $200 million
International Blairlogie Capital Management 0.400%
Precious Metals Van Eck Associates Corporation 0.375% of first $200 million
0.350% of amounts over $200 million
Global Income Pacific Investment Management Company 0.350% of first $250 million
0.300% of amounts over $250 million
High Income Pacific Investment Management Company 0.250%
Total Return Income Pacific Investment Management Company 0.250%
Short-Intermediate Pacific Investment Management Company 0.250%
U.S. Government Pacific Investment Management Company 0.250%
Tax Exempt Columbus Circle Investors 0.300%
Money Market* Columbus Circle Investors 0.250% of first $250 million
0.200% of amounts over $250 million
</TABLE>
* As of November 15, 1994, the Manager agreed to voluntarily reduce its
Management Fee to .10% of the Money Market Fund's average daily net assets
until further notice. Absent such undertaking, the advisory fee would be .5O%
of the Fund's average daily net assets.
The Manager previously served as the sole investment adviser (i.e., with no
sub-adviser) to the Equity Income, Growth, Target, Opportunity, High Income,
Short-Intermediate, U.S. Government, Tax Exempt and Money Market Funds. For
the fiscal year ended September 30, 1995, the Manager was paid the following
percentages of the average daily net assets of the following Funds (which
were in operation for the full fiscal year) for advisory services rendered:
<TABLE>
<CAPTION>
Percentage of
Fund Average Net Assets
- --------------------- ---------------------
<S> <C>
Equity Income .75%
Growth .66%
Target .71%
Opportunity .71%
International .80%
Precious Metals .75%
High Income .60%
Short-Intermediate .50%
U.S. Government .58%
Tax Exempt .60%
Money Market .16%
</TABLE>
Pursuant to a Sub-adviser Agreement between the Man- ager and the former
sub-adviser to the International Fund, for the period of October 1, 1994
through November 15, 1994, the Manager paid the former sub-adviser $159,648
or .40% of the average daily net assets of the International Fund throughout
the period.
Pursuant to a Sub-adviser Agreement between the Manager and Van Eck, for the
fiscal year ended September 30, 1995, the Manager paid Van Eck $217,162 or
..375% of the average daily net assets of the Precious Metals Fund.
The fees payable by the Discovery, Opportunity, Target, Innovation, Equity
Income, International and Precious Metals Funds are higher than those
normally charged by mutual funds with other investment objectives.
In addition to the fee described above, the Trust pays all expenses not
assumed by the Manager. These expenses include, without limitation, fees and
expenses of Trustees who are not interested persons of the Manager or the
Trust, interest charges, taxes, brokerage
<PAGE>
64 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
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 each class of shares
of the respective Funds for distribution under federal and state laws and
regulations, charges of custodians, auditing and legal expenses, expenses
of determining net asset value of each class of the Trust's shares, reports
to shareholders, 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. All general Trust expenses are
allocated among and charged to the assets of each class of shares of each
Fund on a basis that the Trustees deem fair and equitable.
Description of the Trust
The Trust was established in 1983 as a business trust under Massachusetts
law. The Trust has an unlimited authorized number of shares of beneficial
interest which may, without shareholder approval, be divided into an
unlimited number of series of such shares which, in turn, may be subdivided
into an unlimited number of classes of shares. The Trust currently consists
of seventeen series of shares (of which one is currently inactive), each
series of which represents a Fund. With the exception of the Global Income
Fund, each Fund is a "diversified company" under the Investment Company Act
of 1940 (the "1940 Act"). The Global Income Fund is a "non-diversified
company" under the 1940 Act. Each Fund is further divided into three classes
of shares designated Class A shares, Class B shares and Class C shares. The
Class A, Class B and Class C shares of each Fund represent interests in the
assets of that Fund and have identical dividend, liquidation and other rights
and the same terms and conditions except that expenses related to the
distribution and shareholder servicing of Class A, Class B and Class C shares
are borne solely by such class and each class may, at the Trustees'
discretion, also pay a different share of other expenses, not including
advisory or custodial fees or other expenses related to the management of the
Trust'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. All other expenses are allocated to
each class on the basis of the net asset value of that class in relation to
the net asset value of the particular Fund. Class A, Class B and Class C
shares of each Fund have identical voting rights except that each class of
shares has exclusive voting rights on any matter submitted to shareholders
that relates solely to that class, and has separate voting rights on any
matter submitted to shareholders in which the interests of one class differ
from the interests of any other class. Each class of shares has exclusive
voting rights with respect to matters pertaining to the Distribution and
Servicing Plan applicable to that class. These shares are entitled to vote at
meetings of shareholders. Matters submitted to shareholder vote must be
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.
Shares are freely transferable, are entitled to dividends as declared by the
Trustees and, in liquidation of the Trust, are entitled to receive the net
assets of their Fund, but not of the other Funds. The Trust does not
generally hold annual meetings of shareholders and will do so only when
required by law. Shareholders may remove Trustees from office by votes cast
in person or by proxy at a meeting of shareholders or by written consent.
Such a meeting will be called at the written request of the holders of 10% of
the Trust's outstanding shares.
Mailings to Shareholders
To reduce the volume of mail shareholders receive, it is anticipated that
only one copy of most Trust reports, such as the Trust's annual report, will
be mailed to a shareholder's household (same surname, same address). A
shareholder may call (800) 227-7337 if additional shareholder reports are
desired.
Appendix A
Set forth below is a description of the relevant rating categories used by
each of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Corporation ("S&P"). Other nationally recognized statistical rating
organizations ("NRSROs") may also be utilized with regard to portfolio
investments for the Funds. Descriptions of the rating categories used by
several of the other NRSROs are set forth in the Statement of Additional
Information.
LONG-TERM DEBT RATINGS
(may be assigned, for example, to long-term corporate and municipal bonds)
<PAGE>
PIMCO Advisors Funds 65
- --------------------------------------------------------------------------------
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.
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 predominantly
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.
<PAGE>
66 PIMCO Advisors Funds
- --------------------------------------------------------------------------------
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.
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 institu- tions) 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."
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.
SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS
Moody's description of its two highest short-term loan/municipal note
ratings:
MIG-1/ This designation denotes best quality. There is present strong
VMIG-1 protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/ This designation denotes high quality. Margins of protection are
VMIG-2 ample although not so large as in the preceding group.
S&P's description of its two highest municipal note ratings:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will
be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
<PAGE>
[INTENTIONALLY LEFT BLANK]
<PAGE>
PIMCO
The Trust PIMCO Advisors Funds, 2187 Atlantic Street, Stamford,
Connecticut 06902
Manager PIMCO Advisors L.P., 800 Newport Center Drive, Suite 100,
Newport Beach, CA 92660
Sub-Advisers Columbus Circle Investors, Pacific Investment Management
Company, Blairlogie Capital Management, Cadence Capital
Management, NFJ Investment Group, Van Eck Associates
Corporation
Distributor PIMCO Advisors Distribution Company, 2187 Atlantic
Street, Stamford, Connecticut 06902
Custodian The Bank of New York, 48 Wall Street, New York, New York
10005
Shareholder Shareholder Services, Inc, P.O. Box 5866, Denver,
Servicing Agent Colorado 80217
and Transfer Agent
Independent Coopers & Lybrand L.L.P.,1301 Avenue of the Americas, New
Accountants York, New York 10019
Legal Counsel Ropes & Gray, One International Place, Boston,
Massachusetts 02110
For further information about the Trust, call 1-800-426-0107
(Recycled Logo) Printed on Recycled Paper Using Soy-Based Inks.
<PAGE>
PIMCO Advisors Funds
PIMCO Account Application
This application may be used to purchase Class A, Class B or Class C shares
and it must be preceded or accompanied by the current Fund prospectus.
This application may not be used to establish an IRA. For an IRA application
or for more information, call: 1-800-426-0107.
Mail Application to:
PIMCO Advisors Distribution Company
P.O. Box 5866
Denver, Colorado 80217-5866
1. Your Account
Registration
[ ] Individual
_____________________________________________________________________________
First Name Middle Initial Last Name Soc. Sec. No.
(for first
individual)
[ ] Joint Registration
_____________________________________________________________________________
First Name Middle Initial Last Name
Joint tenancy with rights of survivorship will be presumed unless otherwise
specified.
[ ] Uniform Gift/
Transfer to Minors
_________________________________________________________________________ for
Custodian's Name (only one)
_________________________________________________________________________ under
Minor's Name (only one)
Uniform Gift/Transfer to Minors Act of ______________________________________
(state) Minor's Soc. Minor's Date
Sec. No. of Birth
[ ] Corporation,
Partnership, Trust
_____________________________________________________________________________
Exact Name of Organization/Trustee
_____________________________________________________________________________
Exact Name of Trust Date of Trust
_____________________________________________________________________________
For the Benefit of Tax Identification No.
2. Your Address,
Telephone Number
and Employer
_______________________________________________ ( )__________________________
Street Address Apt. No. Daytime Telephone
______________________________________[ ] U.S. Citizen [ ] Other ____________
City State Zip Code
_____________________________________________________________________________
Name and Address of Employer Occupation
3. Your Investment
Select the Class of shares you are purchasing. See "How to Buy Shares" in the
prospectus.
Make checks payable to: PIMCO Advisors Distribution Company
[ ] Class A shares (Initial Sales Charge)
[ ] Class B shares (Contingent Deferred Sales Charge)
[ ] Class C shares (Asset Based Sales Charge)
The Funds you wish to purchase (minimum initial investment $1,000, at least
$250 per fund)
[ ] Equity Income Fund $_______ [ ] Global Income Fund $_______
[ ] Value Fund $_______ [ ] High Income Fund $_______
[ ] Growth Fund $_______ [ ] Total Return Income Fund $_______
[ ] Target Fund $_______ [ ] Tax Exempt Fund $_______
[ ] Discovery Fund $_______ [ ] U.S. Government Fund $_______
[ ] Innovation Fund $_______ [ ] Money Market Fund $_______
[ ] International Fund $_______ [ ] Short-Intermediate Fund $_______
[ ] Precious Metals Fund $_______ Total Amount Invested $_______
Note: The Opportunity Fund is not
currently offered to new
shareholders. Money Market
Fund B shares are not
available for initial
purchases.
4. Dividend
and Capital Gain
Distributions
Choose the way you want your dividend and capital gain distributions paid.
Check one box for dividends, one box for capital gains. If not specified,
dividends and distributions will be reinvested in the Fund that pays them.
<TABLE>
<CAPTION>
<S> <C> <C>
[ ] Dividends [ ] Capital Gains Reinvest in the same Fund that pays them
[ ] Dividends [ ] Capital Gains Reinvest in the following Fund:_____________________________________________
(into established accounts only) Fund Name Account No.
[ ] Dividends [ ] Capital Gains Deposit in my bank account through Fund Link (complete Section 6)
[ ] Dividends [ ] Capital Gains Paid by check [ ] To registration address [ ] To third party below:
________________________________________________________________________________________________________________
Third Party Name Address
</TABLE>
<PAGE>
5. Telephone
Privileges --
Exchanges and
Redemptions
You will automatically have certain telephone exchange and redemption
privileges described below for yourself and your dealer representative unless
you decline such privileges by marking one or more of the boxes below:
I do not want the following transactions to be initiated by telephone:
Exchanges: [ ] by myself or any person [ ] by my dealer representative
Redemptions: [ ] by myself or any person [ ] by my dealer representative
If you do not decline the telephone privileges above, PIMCO Advisors Funds
may accept telephone instructions from any person identifying himself as the
owner of an account or the owner's dealer representative provided that PIMCO
Advisors Funds follows reasonable procedures and believes the instructions to
be genuine, and thus you risk possible losses in the event of a telephone
request not authorized by you (See Section 12).
Shares of each Class may only be exchanged for shares of the same Class. The
amount of a telephone redemption shall not exceed $50,000 and the proceeds
may be payable only to the shareholder of record and mailed to the address of
record.
6. Fund Link
Options
A service which "links" your
fund account with your bank
account to conduct a variety
of transactions over the
phone.
Check all options you want
on your account.
You must also complete
Section 9 of this application.
____________________________________________________________________
Fund Name
[ ] Purchase Payments and Redemptions
Purchase payments and redemptions will be automatically debited or credited
to the bank account listed in Section 9 upon written or oral authorization.
Your dealer representative is automatically authorized to exercise Fund Link
privileges unless you check below.
Check any transaction you do not want your dealer to conduct by Fund Link.
[ ] Fund Redemptions via Fund Link [ ] Fund Purchases via Fund Link
[ ] Distributions
Dividend and/or capital gain distributions will be sent to the bank account
listed in Section 9 as marked below.
[ ] Dividends [ ] Capital Gains Distributions
[ ] Auto-Invest -- Please also complete Section 7 of this application.
[ ] Automatic Withdrawal -- Please also complete Section 8 of this application.
7. Auto-
Invest
Authorization to honor
checks or ACH debits for
automatic investment
in the Funds.
Also complete section 9
of this application.
I/We hereby request to automatically invest by check, in the amounts listed
below, on or about the ______________________________________________________
(Day of Month)
of each [ ] month [ ] quarter, in my/our account in the Fund(s) marked below:
Designate the name of the Fund/s and the amount ($50 minimum for each fund
selected).
[ ] Class A Shares
______________ [ ] Class B Shares __________________
Fund Name [ ] Class C Shares Amount to Purchase
[ ] Class A Shares
______________ [ ] Class B Shares __________________
Fund Name [ ] Class C Shares Amount to Purchase
[ ] Class A Shares
______________ [ ] Class B Shares __________________
Fund Name [ ] Class C Shares Amount to Purchase
Note: You must have an existing account in the Opportunity Fund to establish
Auto-Invest in that Fund. Auto-Invest is not available for Money Market
Fund B shares.
Automatic investments are subject to the following conditions:
(bullet) Your account will be charged on or about the date of each investment
as shown above.
(bullet) The privilege of making investments by Auto-Invest may be revoked by
PIMCO Advisors Fund without prior notice if any check is not paid
upon presentation. PIMCO Advisors Funds shall be under no obligation
to notify the undersigned as to the non-payment of any check.
(bullet) Auto-Invest may be discontinued by PIMCO Advisors Funds upon thirty
(30) days written notice prior to any investment date or by the
undersigned at any time by written notice to PIMCO Advisors
Distribution Company, provided such notice is received at least ten
(10) business days prior to the due date of any investment.
<PAGE>
8. Automatic
Withdrawal Plan
(Minimum account
balance $10,000)
If withdrawals sent to
a bank, also complete
Section 9 of this
application.
I (We) hereby request that you establish a Withdrawal Plan by which I(we)
will receive payments
[ ] Monthly [ ] Quarterly
on _____________________ from _____________________ for _____________________
Day of Month Fund Amount ($100 minimum)
I (We) would like withdrawals to begin:_______________________ . Checks
will be mailed on or about the selected Day, Month, Year
day of each month or quarter.
Please send the Automatic Withdrawal Plan proceeds to (check one):
[ ] Account registration address [ ] Bank account listed in Section
[ ] Third part payee as follows:
_____________________________________________________________________________
Name
_____________________________________________________________________________
Address City State Zip Code
Withdrawals will be sent to account registration address, or to the bank
account in Section 9 below, unless otherwise specified. If you are
authorizing redemption proceeds to be sent to the bank account, those shares
will normally be redeemed three business days prior to the date you have
selected to have your bank account credited. This plan is subject to the
terms of the prospectus. PIMCO Advisors Distribution Company is hereby
authorized to redeem shares from this account in accordance with the
instructions listed above.
9. Bank Account
Information
Please provide information on the bank you would like to link you PIMCO
Advisors Fund account to:
Type of Account (Select one):
[ ] Checking Account (Please attach a pre-printed voided check)
[ ] Savings Account (Please attach a pre-printed personalized deposit slip
with your account number encoded on it)
_______________________________ ______________________________________________
Bank Account Number Bank Account Name(s) (Print title of your
bank account exactly as it appears on your
bank's records)
_____________________________________________________________________________
Bank Name Bank Address Zip Code
______________________________________ ______________________________________
Signature Date Signature (if joint bank Date
account, both must sign)
- --------------------------------------------------------------------------------
Tape your voided check or deposit slip here
- --------------------------------------------------------------------------------
<PAGE>
10. Rights of
Accumulation
(This option available for
Class A shares only)
I own shares in other PIMCO Advisors Funds which may entitle this purchase to
have a reduced sales charge under the provisions in the Fund Prospectus. (See
"Cumulative Quantity Discount" in the Prospectus.)
_____________________________________________________________________________
Existing Account Name Account No.
_____________________________________________________________________________
Existing Account Name Account No.
_____________________________________________________________________________
Existing Account Name Account No.
11. Letter of Intent
(This option available for
Class A shares only)
I agree to the Letter of Intent conditions stated in the current Prospectus.
I intend to invest, within a 13-month period beginning on _________ (initial
purchase date), in shares of the Fund(s) purchased with this application and
one or more of the other Funds listed in Section 3 above, an aggregate amount
which, together with the value of shares of any of the Funds owned by me on
the initial purchase date, will be at least equal to:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
If no date is specified, the initial purchase date will be the date of this
purchase.
12. Signature and
Certification
I (we) understand that my (our) account will be automatically subject to
certain telephone privileges if I (we) do not check the appropriate box in
Section 5 above and that PIMCO Advisors Funds shall not be liable for any
loss incurred by me(us) by reason of accepting unauthorized telephone
requests for my (our) account provided that PIMCO Advisors Funds follows
reasonable procedures and believes the instructions to be genuine. The
undersigned warrant(s) that I (we) have full authority and, if a natural
person, I (we) am (are) of legal age to purchase shares pursuant to this
application, have received a current Prospectus and agree to be bound by all
the terms, conditions and account features selected in any and all parts of
this Application and the Prospectus. Further, I (we) understand that I (we)
may choose between three share classes. I (we) am (are) aware of the fee
structures for the three share classes and have selected the class best
suited to my (our) investment objectives. I (we) further understand that I
(we) may not exchange from one class to another. Under the penalties of
perjury, I certify that: (i) the number shown in section 1 above is my
correct Social Security/Taxpayer Identification Number or I have applied, or
will apply, for such a number and will provide it within sixty (60) days
after signing this application [if I don't supply such number within sixty
(60) days, I am subject to withholding tax] and (ii) I am not subject to
backup withholding because the IRS (a) has not notified me that I am subject
to backup withholding as a result of failure to report all interest or
dividends, or (b) has rescinded a previously imposed backup withholding
requirement. I am aware that if the Social Security or Tax Identification
Number I have provided is incorrect, I am subject to backup withholding.
If you are subject to backup withholding, please cross out number (ii) above.
Sign exactly as account is to be registered:
______________________________________ ______________________________________
Individual Signature Date Signature of Corporate Date
Officer, Trustee, etc.
(if applicable)
______________________________________ ______________________________________
Joint Registrant Date Title of Officer, Trustee, etc.
Signature (if any)
13. Dealer
Information
(Please be sure to complete Representative first name and middle initial.)
_____________________ _______________________________________________________
Dealer Name Representative's Last Name First Name Middle Initial
Dealer Head Office Address: Representative's Branch Office Address:
_____________________ _______________________________________________________
Address Address
_____________________ _______________________________________________________
City State Zip Code City State Zip Code
( ) ( )
____________________________________ ________________________________________
Telephone No. Telephone No. Rep.'s A.E. No.
<PAGE>
PIMCO ADVISORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 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 from
PIMCO Advisors Distribution Company, 2187 Atlantic Street, Stamford,
Connecticut 06902.
3031617.07
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
INFORMATION REGARDING FUND INVESTMENTS........................................1
DERIVATIVES..................................................................13
INVESTMENT RESTRICTIONS......................................................22
CONTINGENT DEFERRED SALES CHARGE AND INITIAL SALES CHARGE ...................27
DISTRIBUTOR AND DISTRIBUTION AND SERVICING PLANS.............................28
EXCHANGE PRIVILEGE...........................................................33
HOW TO REDEEM................................................................34
HOW NET ASSET VALUE IS DETERMINED............................................34
CALCULATION OF YIELD AND RETURN..............................................37
RECENT PERFORMANCE OF CLASS A SHARES.........................................40
RECENT PERFORMANCE OF CLASS B SHARES.........................................41
RECENT PERFORMANCE OF CLASS C SHARES.........................................42
PERFORMANCE COMPARISONS......................................................43
DISTRIBUTIONS................................................................53
TAXES .....................................................................54
MANAGEMENT OF THE TRUST......................................................57
OTHER SERVICES...............................................................66
PORTFOLIO TRANSACTIONS.......................................................66
ORGANIZATION AND CAPITALIZATION OF THE TRUST.................................69
CERTAIN OWNERSHIP OF TRUST SHARES............................................71
3031617.07
<PAGE>
APPENDIX A...................................................................79
APPENDIX B...................................................................87
FINANCIAL STATEMENTS.........................................................88
3031617.07
<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 a
Nationally Recognized Statistical Rating Organization ("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 Funds' 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
3031617.07
1
<PAGE>
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.
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
3031617.07
2
<PAGE>
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
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
3031617.07
3
<PAGE>
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.
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
3031617.07
4
<PAGE>
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-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
3031617.07
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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.
Depository Receipts
The International Fund 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, Discovery, Opportunity,
Target, Precious Metals and International 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 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.
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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
Each Fund may make secured loans of its portfolio securities amounting
to no more than 33 1/3% of its 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.
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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
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Each Fund may enter into agreements with banks or broker-dealers for the
purchase or sale of securities at an agreed-upon price on a specified future
date. Such agreements might be entered into, for example, when the relevant Fund
anticipates a decline in interest rates and is able to obtain a more
advantageous yield by committing currently to purchase securities to be issued
later. When the Fund purchases securities on a when-issued or delayed delivery
basis, it is required either (i) to create a segregated account with the Fund's
custodian and to maintain in that account cash, U.S. Government securities or
other liquid high grade debt obligations in an amount equal on a daily basis to
the amount of the Fund's when-issued or delayed delivery commitments or (ii) to
enter into an offsetting forward sale of securities it owns equal in value to
those purchased. The Fund will only make commitments to purchase securities on a
when-issued or delayed-delivery basis with the intention of actually acquiring
the securities. However, the Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment strategy.
When the time comes to pay for when-issued or delayed-delivery securities, the
Fund will meet its obligations from then available cash flow or the sale of
securities, or, although it would not normally expect to do so, from the sale of
the when-issued or delayed delivery securities themselves (which may have a
value greater or less than the Fund's payment obligation).
Borrowing
Subject to the limitations described under "Investment Restrictions" in
this Statement, a Fund may be permitted to borrow for temporary purposes and/or
for investment purposes. Such a practice will result in leveraging of a Fund's
assets and may cause a Fund to liquidate portfolio positions when it would not
be advantageous to do so. This borrowing may be unsecured. The Investment
Company Act of 1940 (the "1940 Act") requires a Fund to maintain continuous
asset coverage of 300% of the amount borrowed. If the 300% asset coverage should
decline as a result of market fluctuations or other reasons, a Fund may be
required to sell some of its portfolio holdings within three days to reduce the
debt and restore the 300% asset coverage, even though it may be disadvantageous
from an investment standpoint to sell securities at that time. Borrowing will
tend to exaggerate the effect on net asset value of any increase or decrease in
the market value of a Fund's portfolio. Money borrowed will be subject to
interest costs which may or may not be recovered by appreciation of the
securities purchased. A Fund also may be required to maintain minimum average
balances in connection with such borrowing or to pay a commitment or other fee
to maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate.
Among the forms of borrowing in which some Funds may engage is the entry
into reverse repurchase agreements. 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). However, 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-
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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 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
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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
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.
3031617.07
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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 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
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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.
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
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<PAGE>
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.
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
3031617.07
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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
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). The 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
3031617.07
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received. Instead, an amount of cash or U.S. Treasury bills generally not
exceeding 5% of the contract amount must be deposited with the broker. This
amount is known as initial margin. Subsequent payments to and from the broker,
known as variation margin, are made on a daily basis as the price of the
underlying futures contract fluctuates making the long and short positions in
the futures contract more or less valuable, a process known as "marking to
market." At any time prior to the settlement date of the futures contract, the
position may be closed out by taking an opposite position which will operate to
terminate the position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid to or
released by the broker, and the purchaser realizes a loss or gain. In addition,
a commission is paid on each completed purchase and sale transaction.
The Funds may engage in transactions in futures contracts for the
purpose of hedging against changes in the values of securities (or, in the case
of the Precious Metals Fund, commodities) they own or intend to acquire. The
Funds may sell such futures contracts in anticipation of a decline in the value
of its investments. The risk of such a decline can be reduced without employing
futures as a hedge by selling long-term securities and either reinvesting the
proceeds in securities with shorter maturities or by holding assets in cash.
This strategy, however, entails increased transaction costs in the form of
brokerage commissions and dealer spreads and will typically reduce a Fund's
average yield (with respect to futures on fixed-income securities) as a result
of the shortening of maturities. The sale of futures contracts provides an
alternative means of hedging a Fund against a decline in the value of its
investments in fixed-income securities. As such values decline, the value of a
Fund's position in the futures contracts will tend to increase, thus offsetting
all or a portion of the depreciation in the market value of a Fund's
fixed-income securities which are being hedged. While the Fund will incur
commission expenses in establishing and closing out futures positions,
commissions on futures transactions may be significantly lower than transaction
costs incurred in the purchase and sale of fixed-income securities. Employing
futures as a hedge may also permit a Fund to assume a defensive posture without
reducing its yield on its investments.
Call Options on Futures Contracts. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
underlying debt/fixed-income securities, it may or may not be less risky than
ownership of the futures contract or underlying debt/fixed-income securities. As
with the purchase of a futures contract, the Funds may purchase a call option on
a futures contract to hedge against a market advance when the Fund is not fully
invested.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the securities or commodities which are
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings.
Put Options on Futures Contracts. The purchase of put options on a
futures contract is similar in some respects to the purchase of protective put
options on portfolio securities. The Funds may purchase put options on futures
contracts to hedge the Fund's portfolio against the risk of rising interest
rates or declines in stock market prices. The Funds may purchase put options on
futures contracts in circumstances where they would sell futures contracts.
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The Funds may write a put option on a futures contract as a partial
hedge against increasing prices of the assets which are deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of assets that the Fund intends to purchase.
Currency Futures and Related Options. A currency futures contract sale
creates an obligation by the Fund, as seller, to deliver the amount of currency
called for in the contract at a specified future time for a stated price. A
currency futures contract purchase creates an obligation by the Fund, as
purchaser, to take delivery of an amount of currency at a specified future time
at a stated price. Although the terms of currency futures contracts specify
actual delivery or receipt, in most instances the contracts are closed out
before the settlement date without the making or taking of delivery of the
currency. Closing out of a currency futures contract is effected by entering
into an offsetting purchase or sale transaction.
Unlike a currency futures contract, which requires the parties to buy
and sell currency on a set date, an option on a futures contract entitles its
holder to decide on or before a future date whether to enter into such a
contract. If the holder decides not to enter into the contract, the premium paid
for the option is lost. Since the value of the option is fixed at the point of
sale, there are no daily payments of cash in the nature of "variation" or
"maintenance" margin payments to reflect the change in the value of the
underlying contract as there are by a purchaser or seller of a currency futures
contract. The value of the option does not change and is reflected in the net
asset value of the Fund.
The ability to establish and close out positions on options on futures
will be subject to the development and maintenance of a liquid secondary market.
It is not certain that this market will develop or be maintained.
The Funds will write only covered put and call options on currency
futures. This means that each such Fund will provide for its obligations upon
exercise of the option by segregating sufficient cash or short-term obligations
or by holding an offsetting position in the option or underlying currency
future, or a combination of the foregoing. Set forth below is a description of
methods of providing cover that the Funds currently expect to employ, subject to
applicable exchange and regulatory requirements. If other methods of providing
appropriate cover are developed, the Funds reserve the right to employ them to
the extent consistent with applicable regulatory and exchange requirements.
A Fund will, so long as it is obligated as the writer of a call option
on currency futures, own on a contract-for-contract basis an equal long position
in currency futures with the same delivery date or a call option on currency
futures with the difference, if any, between the market value of the call
written and the market value of the call or long currency futures purchased
maintained by the Fund in cash, Treasury bills, or other high-grade short-term
obligations in a segregated account with its custodian. If at the close of
business on any day the market value of the call purchased by the Fund falls
below 100% of the market value of the call written by the Fund, the Fund will so
segregate an amount of cash, U.S. Government securities or other liquid high
grade debt obligations equal in value to the difference. Alternatively, the Fund
may cover the call option by segregating with its custodian an amount of the
particular foreign currency equal to the amount of foreign currency per futures
contract option times the number of options written by the Fund.
In the case of put options on currency futures written by a Fund, the
Fund will hold the aggregate
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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 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 exchange 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-
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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 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)
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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 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
3031617.07
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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 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
3031617.07
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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 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
3031617.07
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<PAGE>
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 takes the position
that invests 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.
3031617.07
23
<PAGE>
Non-Fundamental Investment Restrictions
It is contrary to the Trust's present policy with respect to any Fund
created under the Trust, which may be changed by the Trustees without
shareholder approval, to:
(1) Invest in (a) securities which at the time of such investment
are not readily marketable, (b) securities the disposition of which is
restricted under federal securities laws, (c) repurchase agreements
maturing in more than seven days (d) OTC options (to the extent
described above), and (e) IO/PO Strips (as defined in the Prospectus)
if, as a result, more than 15% of a Fund's net assets (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.
3031617.07
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<PAGE>
(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%.
(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 15% of
the Money Market Fund's total assets taken at current value may be
invested (without regard to such 5% limitation) in the obligations of
any one bank and 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 their 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%
3031617.07
25
<PAGE>
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 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-diversifed 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
3031617.07
26
<PAGE>
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) Make any additional investment if, immediately after such
investment, the Fund's outstanding borrowings of money would exceed 5%
of the current value of the Fund's total assets.
(21) With respect to the Target Fund, invest in commodities or
commodity futures contracts.
(22) Engage in short-term trading as a matter of policy;
provided, however, that in pursuing a Fund's investment objective, the
Fund's sub-adviser will continue to monitor all securities positions of
the Fund and will seek to dispose of any position that it believes is no
longer consistent with achieving optimum performance.
Although Restriction (8) permits the Money Market Fund to invest up to
15% of its total assets in the obligations of any one bank, federal regulations
applicable to the Fund currently prohibit the Fund (with limited exceptions)
from making any investment that would result in more than 5% of the Fund's
assets being invested in obligations of a single issuer.
All percentage limitations on investments set forth herein and in the
Prospectus will apply at the time of the making of an investment and shall not
be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
The phrase "shareholder approval," as used in the Prospectus, and the
phrase a "vote of a majority of the outstanding voting securities," as used
herein, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund or the Trust, as the case may be, or (2) 67% or
more of the shares of the Fund or the Trust, as the case may be, present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
CONTINGENT DEFERRED SALES CHARGE
AND INITIAL SALES CHARGE
As described in the Prospectus under the caption "How to Redeem," a
contingent deferred sales charge is imposed upon certain redemptions of the
Class A, Class B and Class C shares. Because contingent deferred sales charges
are calculated on a Fund-by-Fund basis, shareholders should consider whether to
exchange shares of one Fund for shares of another Fund prior to redeeming an
investment if such an exchange would reduce the contingent deferred sales charge
applicable to such redemptions.
In certain cases described in the Prospectus, the contingent deferred
sales charge is waived on redemptions of Class A, Class B or Class C shares for
certain classes of individuals or entities on account of (i) the fact that the
Trust's sales-related expenses are lower for certain of such classes than for
classes for which the contingent deferred sales charge is not waived, (ii)
waiver of the contingent deferred sales charge with respect to certain of such
classes is consistent with certain Internal Revenue Code policies concerning the
favored tax treatment of accumulations, and (iii) with respect to certain of
such classes, considerations of fairness, and competitive and administrative
factors.
3031617.07
27
<PAGE>
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 the servicing fees it receives from the Trust to
participating and introducing brokers, certain banks and other financial
intermediaries.
Each Distribution and Servicing Plan may be terminated with respect to
the class of shares of any Fund to which the Plan relates by vote of a majority
of the Trustees who are not interested persons of the Trust (as defined in the
1940 Act) and who have no direct or indirect financial interest in the operation
of the Plan or the Distribution Agreement (the "Independent Trustees"), or by
vote of a majority of the outstanding voting securities of that class. Any
change in any Plan that would materially increase the cost to the class of
shares of any Fund to which the Plan relates requires approval by the affected
class of shareholders of that Fund. The Trustees review quarterly a written
report of such costs and the purposes for which such costs have been incurred.
Each Plan may be amended by vote of the Trustees, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose. For so
long as the Plans are in effect, selection and nomination of those Trustees who
are not interested persons of the Trust shall be committed to the discretion of
such disinterested persons.
3031617.07
28
<PAGE>
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:
<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 $ 1,514,948
Value N/A N/A 58,934
Growth 9,799,698 10,702,536 11,214,779
Target 1,073,001 4,419,960 6,784,334
Discovery N/A N/A 176,802
Opportunity 4,129,361 5,720,431 6,215,795
Innovation N/A N/A 554,672
International 566,091 2,493,832 1,872,019
Precious Metals 129,784 455,351 367,470
Global Income N/A N/A N/A
High Income 2,464,991 2,175,184 1,369,347
Total Return Income N/A N/A 395,204
Tax Exempt 640,396 786,687 471,471
U.S. Government Fund 5,430,975 4,516,318 2,496,025
Short-Intermediate 1,009,787 813,722 572,006
Money Market 98,456 136,974 603,206
------ ------- -------
Total $25,971,451 $33,696,037 $34,667,013
=========== =========== ===========
</TABLE>
3031617.07
29
<PAGE>
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:
Sales Material
and Other
Compensation Expenses Total
------------ -------- -----
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
=========== ========== ===========
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.
3031617.07
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<PAGE>
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 $ 25,559
Value N/A N/A 4,899
Growth 216,014 247,275 266,452
Target 47,625 175,437 240,893
Discovery N/A N/A 15,122
Opportunity 161,347 247,239 238,764
Innovation N/A N/A 55,804
International 8,785 51,731 35,463
Precious Metals 5,914 19,794 15,122
Global Income N/A N/A N/A
High Income 12,846 12,638 15,442
Total Return Income N/A N/A 74,547
Tax Exempt 6,213 7,170 5,325
U.S. Government 42,449 47,012 32,162
Short-Intermediate 22,236 16,560 12,567
Money Market 4,700 15,498 26,837
----- ------ ------
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
3031617.07
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<PAGE>
High Income 19,000 35,000 54,000
Total Return Income 90,000 171,000 260,000
Tax Exempt 6,000 12,000 19,000
U.S. Government 39,000 74,000 112,000
Short-Intermediate 15,000 29,000 44,000
Money Market 32,000 61,000 94,000
------ ------ ------
Total $1,281,000 $2,436,000 $3,717,000
========== ========== ==========
</TABLE>
The Distribution and Servicing Plan applicable to the Class B shares
(the "Class B Plan") was not in effect during the fiscal years ended September
30, 1993, and 1994.
For the fiscal year ended September 30, 1995, the Trust paid the
Distributor $87,552 pursuant to the Distribution and Servicing Plan applicable
to the Class B shares (the "Class B Plan") allocated among the Funds as follows:
Year Ended
Sept. 30, 1995
--------------
Equity Income $ 2,784
Value 6,286
Growth 12,135
Target 11,951
Discovery 17,143
Opportunity N/A
Innovation 10,296
International 797
Precious Metals 394
Global Income N/A
High Income 7,206
Total Return Income 13,930
Tax Exempt 455
U.S. Government Fund 2,644
Short-Intermediate 1,488
Money Market 44
------------
Total $ 87,552
============
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:
3031617.07
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<PAGE>
Sales Material
and Other
Compensation Expenses Total
------------ -------- -----
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
========== ======== ==========
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.
3031617.07
33
<PAGE>
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 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
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<PAGE>
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 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
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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 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 know 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
PIMCO ADVISORS FUNDS
RECENT PERFORMANCE OF CLASS A SHARES
(based on maximum offering price)
As of September 30, 1995
Average Annual Total Return
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Inception Current Inception Year 5 Years 10 Years Lipper
Fund Date SEC to Ended Ended Ended Rank -
Yield at 9/30/95* 9/30/95* 9/30/95* 9/30/95* Year Ended
9/30/95* 9/30/95*
- --------------------------------------------------------------------------------------------------------------
<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.
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<PAGE>
PIMCO ADVISORS FUNDS
RECENT PERFORMANCE OF CLASS B SHARES
As of September 30, 1995
<TABLE>
<CAPTION>
Average Annual Total Return
- ----------------------------------------------------------------------------------------
Inception Current SEC Inception Year 5 Years 10 Years
Fund Date Yield at to 9/30/95 Ended Ended Ended
9/30/95 9/30/95 9/30/95 9/30/95
- ----------------------------------------------------------------------------------------
<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-Intermediate5/22/95 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.
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<PAGE>
PIMCO ADVISORS FUNDS
RECENT PERFORMANCE OF CLASS C SHARES
As of September 30, 1995
<TABLE>
<CAPTION>
Average Annual Total Return
- -------------------------------------------------------------------------------------------
Current SEC Inception Year 5 Years 10 Years
Fund Inception Yield at to 9/30/95 Ended Ended Ended
Date 9/30/95 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.
3031617.07
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<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.
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<PAGE>
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.
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, 1984 to December 31, 1994,
according to the Merrill Lynch U.S. Treasury Intermediate-term Index, 24% of
Total Return was derived from price appreciation and 76% of Total Return was
derived from income. (Information for the calendar year ended 1995 was not
available on the date of this Statement of Additional Information).
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
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<PAGE>
capitalization represented by U.S. securities. As of December 31, 1994, the U.S.
equity market capitalization represented approximately 33% of the equity market
capitalization of all the world's markets. This compares with 52% in 1980 and
70% in 1972. (Information for the calendar year ended 1995 was not available on
the date of this Statement of Additional Information).
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 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. (Information for the calendar
year ended 1995 was not available on the date of this Statement of Additional
Information).
3031617.07
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<PAGE>
S&P 500
Consumer Price
Period Index Treasury Bills Index
- ------ ----- -------------- -----
1970 4.0% 6.5% 5.5%
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
- --------------------------------------------------------------------------------
Cumulative Return
1970-1994 1249.6 % 444.3% 297.2%
- --------------------------------------------------------------------------------
Average Annual Return
1970-1994 11.0% 7.0% 5.7%
- --------------------------------------------------------------------------------
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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
Pt = |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.
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).
Small Mid-Sized Large
Period Companies Companies Companies
- ------ --------- --------- ---------
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%
- --------------------------------------------------------------------------------
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
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<PAGE>
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).
Stocks 45%
All All Bonds 45%
Period Stocks Bonds Gold Stocks 10%
1970 4.0 18.4 12.7
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
- --------------------------------------------------------------------------------
Cumulative Return
1970-1994 1249.6% 830.3% 1294.4%
- --------------------------------------------------------------------------------
Average Annual Return
1970-1994 11.0% 9.3% 11.1%
- --------------------------------------------------------------------------------
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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
Start Public Private Start Public Private
Year College College Year College College
- ---- ------- ------- ---- ------- -------
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
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 1970 to 1994 was:
*Stocks: 11.0%
Bonds: 9.3%
T-Bills: 7.0%
Inflation: 5.7%
*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 1994 Yearbook, Ibbotson Associates,
Chicago. All rights reserved. (Information through the calendar year ended
1995 was not available on the date of this Statement of Additional
3031617.07
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<PAGE>
Information).
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 1970-1994, the average annual return of stocks comprising the Ibbotson's
Common Stock Total Return Index ranged from -26.5% to 37.2% 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 1970
through 1994 is set forth in the following table (information for the calendar
year ended 1995 was not available on the date of this Statement of Additional
Information).
MIXED
YEAR STOCKS BONDS T-BILLS INFLATION PORTFOLIO
- ---- ------ ----- ------- --------- ---------
1970 4.01% 18.95% 6.53% 5.49% 10.49%
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%
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
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<PAGE>
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 1994 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:
Investment Annual Total Total
Period Contribution Contribution Saved
------ ------------ ------------ -----
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
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.
Rankings of the various PIMCO Advisors Funds in terms of their relative
risk and/or aggressiveness as investments may from time to time appear in
advertisements or other materials
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<PAGE>
describing the Funds.
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
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.
3031617.07
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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 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
3031617.07
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<PAGE>
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
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<PAGE>
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
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
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<PAGE>
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
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
3031617.07
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<PAGE>
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).
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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 . Executive 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., Director and Chairman,
Thomson Investor Services Inc., Director and Executive Vice President,
Thomson McKinnon Securities 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 Advisors Institutional Funds. Director, Furon Corporation.
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;
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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. and President and Director of Thomson
Investor Services Inc.
R. Wesley Burns. Vice President of the Trust and of Cash Accumulation
Trust. President, PIMCO Funds. Vice President, Pacific Investment
Management Company.
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.
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.
---------------
*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
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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.
Messrs. Prindiville, Cvengros, Schott, Leasure, Molloy and Newman, 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.
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 $210,990.
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.
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COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Pension or
Aggregate Retirement Estimated Annual Total Compensation
Name of Compensation Benefits Accrued Benefits Upon from Trust and
Trustee from Trust(2) as Part of Fund Retirement(3) Fund Complex Paid to
Expenses(3) 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 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.
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(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 and the Sub-Advisers
PIMCO Advisors L.P. is the investment manager of each Fund. Under written
management contracts between the Trust and the Manager, subject to such policies
as the Trustees of the Trust may determine, the Manager, at its expense, will
furnish continuously an investment program for the Trust and will make
investment decisions on behalf of the Funds and place all orders for the
purchase and sale of portfolio securities subject always to applicable
investment objectives, policies and restrictions; provided that, so long as a
sub-adviser serves as the sub-adviser for a Fund, the Manager's obligation under
the Management Contract with respect to that Fund is, subject always to the
control of the Trustees, to determine and review with the sub-adviser the
investment policies of the Fund.
Subject to the control of the Trustees, the Manager also manages, supervises
and conducts the other affairs and business of the Trust, furnishes office space
and equipment, provides bookkeeping and certain clerical services (excluding
determination of the net asset value of each class of shares of each Fund,
shareholder accounting services and the accounting services for all Funds of the
Trust being provided by The Bank of New York) and pays all salaries, fees and
expenses of officers and Trustees of the Trust who are affiliated with the
Manager. 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 Trust or their other clients. In so doing, a Fund may
incur greater brokerage commissions than it might otherwise pay.
The Manager's compensation under the management contracts with respect to each
Fund is subject to reduction to the extent that in any year the expenses of such
Fund exceed the limits on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of such Fund are
qualified for offer and sale. The term "expenses" is subject to interpretation
by each of such jurisdictions, and, generally speaking, excludes brokerage
commissions, taxes, interest, distribution-related expenses and extraordinary
expenses. Generally, this means that the distribution fees payable to the
Distributor under the Distribution Agreement would be excluded from expenses.
The most restrictive of such limitations as of the date of this Statement 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.
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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
as the investment manager:
Fund 1993 1994 1995
- ---- ---- ---- ----
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
- ----------
* Excluding a $160,471, $142,336 and $23,048 waiver with respect to
the fiscal years ended September 30, 1993,1994, and 1995
respectively.
For the fiscal years ended September 30, 1993 and 1994, and for the
period from October 1, 1994 through November 15, 1994, the Manager paid the
former sub-adviser to the International Fund (the sub-adviser served from August
1, 1992 to November 15, 1994) $240,499, $1,080,302 and $159,648, respectively,
for its services with respect to the International Fund. For the fiscal years
ended September 30, 1993, 1994 and 1995, the Manager paid Van Eck (the
sub-adviser to the Precious Metals Fund) $57,543, $200,448, and $217,162
respectively, for Van Eck's services with respect to the Precious Metals Fund.
PIMCO Advisors L.P. (the "Manager") serves as the investment manager of
all of the Funds. Each of the Funds also has a sub-adviser, each of which
(except for the sub-adviser of the Precious Metals Fund) is an affiliate of the
Manager. The sub-advisers 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 Fund; Van Eck Associates
Corporation ("Van Eck") for the Precious Metals Fund; Cadence Capital Management
("Cadence") for the Discovery Fund; and NFJ Investment
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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." Each Sub-Adviser serves
pursuant to a Sub-Adviser Agreement between the Manager and the Sub- Adviser.
With the exception of Van Eck, none of the Sub-Advisers received
advisory fees from the Manager for services performed with respect to the
above-referenced 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
with respect to the above-referenced funds:
Columbus Circle Investors
Fund 1995
---- ----
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
Pacific Investment Management Company
Fund 1995
---- ----
Global Income $ NA
High Income 346,427
Total Return Income 72,024
U.S. Government 695,195
Short-Intermediate 147,687
Blairlogie Capital Management
Fund 1995
---- ----
International $ 889,339
Cadence Capital Management
Fund 1995
---- ----
Discovery $ 23,319
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NFJ Investment Group
Fund 1995
---- ----
Value $ 7,458
Under each Sub-Adviser Agreement, subject always to the control of the
Trustees of the Trust, the Sub-Adviser's obligation is 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, its By-Laws and
the relevant investment objectives, policies and restrictions stated in the
Prospectus.
The management contracts for all of the Funds and the Sub-Adviser
Agreements 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 for the Funds and the Sub-Adviser Agreements 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 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 is set forth in the Prospectus.
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, 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
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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.
Each management contract provides that the Manager 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.
OTHER SERVICES
Custodial Arrangements
The Bank of New York, 48 Wall Street, New York, New York 10005, is the
custodian for the Trust. As such, The Bank of New York holds in safekeeping
certificated securities and cash belonging to the Trust and, in such capacity,
is the registered owner of securities in book-entry form belonging to the Trust.
Upon instruction, The Bank of New York receives and delivers cash and securities
of the Trust in connection with Fund transactions and collects all dividends and
other distributions made with respect to Fund portfolio securities. The Bank of
New York also maintains certain accounts and records of the Trust. The Bank of
New York has contracted with various foreign banks and depositories to hold
Trust portfolio securities outside of the United States.
Accounting Services
Pursuant to an agreement between The Bank of New York and the Trust, The
Bank of New York calculates the total net asset value, total net income and net
asset value per share of each class on a daily basis (and as otherwise may be
required by the 1940 Act) and performs certain accounting services for the
Trust.
Independent Accountants
The Trust's independent accountants are Coopers & Lybrand L.L.P., 1301
Avenue of the Americas, New York, New York 10019. Coopers & Lybrand L.L.P.,
conducts an annual audit of the Trust, assists in the preparation of each Fund's
federal and state income tax returns and consults with the Trust as to matters
of accounting and federal and state income taxation.
PORTFOLIO TRANSACTIONS
Investment Decisions
Investment decisions for the Trust and for the other investment advisory
clients of the Manager and the Sub-Advisers are made with a view to achieving
their respective investment objectives. The Manager and the Sub-Advisers operate
independently in providing services to their respective clients. Investment
decisions are the product of many factors in addition to basic suitability for
the particular client involved. Thus, for example, a particular security may be
bought or sold for certain clients of the Manager or the Sub-Advisers even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In some instances, one client
may sell a particular security to another client. It also happens that two or
more clients may simultaneously buy or sell the same security, in
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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 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
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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:
Year Ended Year Ended Year Ended
Sept. 30, Sept. 30, Sept. 30,
1993 1994 1995
---- ---- ----
Total
Brokerage Commissions
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
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
========== ========== ===========
68
<PAGE>
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 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.
3031617.07
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<PAGE>
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.
3031617.07
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<PAGE>
CERTAIN OWNERSHIP OF TRUST SHARES
As of October 31, 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:
CLASS A CLASS B CLASS C
Fund No. of Shares No. of Shares No. of Shares
- ---- ------------- ------------- -------------
Equity Income 33,159.606 0 0
Value 15,485.433 0 0
Growth 56,675.579 0 921.844
Target 77,815.301 0 0
Discovery 12,500.000 0 0
Opportunity 27,150.540 0 777.441
Innovation 20,101.010 0 0
International 26,888.693 0 0
Global Income 0 0 0
Precious Metals 0 0 0
High Income 15,096.312 0 0
Total Return Income 12,569.797 0 0
Tax Exempt 39.624 0 0
U.S. Government 5,254.318 0 0
Short-Intermediate 37.062 0 0
Money Market 83,636.120 0 404.880
Except as set forth below, the Trust believes that no person as of
October 31, 1995 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. 1,574,434.799 20.97
Attn: Book Entry Department
4800 Deer Lake Drive E., fl. 3
Jacksonville, FL 32246-6484
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 225,984.000 42.05
(see above)
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 15,132,815.072 30.86
(see above)
- ------------------------------------------------------------------------------------------
Value A Merrill Lynch Pierce Fenner & Smith Inc. 29,170.000 11.10
(see above)
- ------------------------------------------------------------------------------------------
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<PAGE>
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 134,829.000 29.57
(see above)
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 96,157.000 12.14
(see above)
- ------------------------------------------------------------------------------------------
Discovery A Merrill Lynch Pierce Fenner & Smith Inc. 143,618.000 19.13
(see above)
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 407,518.000 35.40
(see above)
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 418,216.280 19.58
(see above)
- ------------------------------------------------------------------------------------------
Precious Metals A Paine Webber / FBO 32,885.000 5.33
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. 112,624.000 18.28
(see above)
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 12,793.000 51.25
(see above)
Smith Barney Inc. 2,188.000 8.76
00145819198
388 Greenwich Street
New York, NY 10013
Smith Barney Inc. 1,711.000 6.85
00145866496
388 Greenwich Street
New York, NY 10013
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 765,155.000 22.47
(see above)
- ------------------------------------------------------------------------------------------
Equity Income A Merrill Lynch Pierce Fenner & Smith Inc. 161,454.000 17.60
(see above)
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 21,612.000 14.86
(see above)
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 2,150,956.874 17.47
(see above)
- ------------------------------------------------------------------------------------------
U.S. Government A Merrill Lynch Pierce Fenner & Smith Inc. 760,669.000 42.50
(see above)
Donaldson Lufkin Jenrette 121,317.662 6.77
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
- ------------------------------------------------------------------------------------------
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<PAGE>
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 85,523.000 35.97
(see above)
NFSC FEBO # OKS-614432 16,610.906 6.98
Reida Longanecker
1075 Old Harrisburg Rd.
Gettysburg, PA 17325
Prudential-Bache Securities 14,007.000 5.89
ABT08634
New York, NY 10292
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 7,293,677.423 23.48
(see above)
- ------------------------------------------------------------------------------------------
Tax Exempt A Merrill Lynch Pierce Fenner & Smith Inc. 95,403.000 39.84
(see above)
Smith Barney Inc. 12,306.000 5.13
(see above)
- ------------------------------------------------------------------------------------------
B Prudential-Bache Securities 14,909.045 27.13
New York, NY 10292
Prudential-Bache Securities 5,005.000 9.10
New York, NY 10292
Prudential-Bache Securities 5,005.000 9.10
New York, NY 10292
Prudential-Bache Securities 3,472.019 6.31
New York, NY 10292
Donaldson Lufkin Jenrette 6,732.082 12.25
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Leroy Scott 8,431.703 15.34
213 Bunch Street
Corinth, MS 38834-4702
Wheat First FBO A/C 8677-3450 3,015.545 5.48
Eugene H. Zimmer
P.O. Box 495
Parkersburg, WV 26102-0495
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 655,885.000 14.41
(see above)
- ------------------------------------------------------------------------------------------
Global Income A Pacific Asset Management Co. 500,000.000 100
Attn: Russell F. Murdock
700 Newport Center Dr.
Newport Beach, CA 92660-6307
- ------------------------------------------------------------------------------------------
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<PAGE>
- ------------------------------------------------------------------------------------------
B PIMCO Advisors Group, L.P. 1,002.566 100
Attn: Jaishree Kemraj
2187 Atlantic Street
Stamford, CT 06902-6880
- ------------------------------------------------------------------------------------------
C PIMCO Advisors Group, L.P. 1,002.566 100
Attn: Jaishree Kemraj
2187 Atlantic Street
Stamford, CT 06902-6880
- ------------------------------------------------------------------------------------------
High Income A Merrill Lynch Pierce Fenner & Smith Inc. 232,380.000 21.97
(see above)
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 297,141.000 41.03
(see above)
Smith Barney Inc. 49,618.000 6.85
00114904921
388 Greenwich Street
New York, NY 10013
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 2,003,754.336 9.96
(see above)
- ------------------------------------------------------------------------------------------
Total Return Income A Merrill Lynch Pierce Fenner & Smith Inc. 423,111.000 11.42
(see above)
Trust Co. Bank Tr 605,599.088 16.35
FBO City of Spartanburg
Retirement Plan
P.O. Box 4655
Atlanta, GA 30302-4655
Nationsbank VA TR 307,931.504 8.31
FBO Louise OBICI Hospital
40-90-900-6515001
P.O. Box 831575
Dallas, TX 75283-1575
Tops Appliance City Inc. 261,309.184 7.05
401K Retirement Plan
45 Brunswick Avenue
Edison, NJ 08817-2576
Paine Webber FBO 189,488.638 5.11
L&L Products Inc.
Profit Sharing Plan & Trust
Attn: Peggy Domenick Muscat
160 McClean Drive
Romeo, MI 48
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 263,601.000 24.95
(see above)
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 561,791.461 11.91
(see above)
- ------------------------------------------------------------------------------------------
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<PAGE>
- ------------------------------------------------------------------------------------------
Growth A Merrill Lynch Pierce Fenner & Smith Inc. 431,678.000 8.22
(see above)
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 118,468.000 33.04
(see above)
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 6,572,464.444 12.77
(see above)
- ------------------------------------------------------------------------------------------
Opportunity A Boston Safe Deposit & Trust Co. 672,765.374 21.86
TWA Pilots Directed Account
Plan UA January 1, 1986
1 Cabot Road
Medford, MA 02155-5158
Merrill Lynch Pierce Fenner & Smith Inc. 456,433.000 14.83
(see above)
- ------------------------------------------------------------------------------------------
B None
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 5,093,077.303 26.75
(see above)
- ------------------------------------------------------------------------------------------
Innovation A Merrill Lynch Pierce Fenner & Smith Inc. 254,859.000 13.76
(see above)
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 127,417.076 24.72
(see above)
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 579,848.547 13.59
(see above)
- ------------------------------------------------------------------------------------------
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<PAGE>
- ------------------------------------------------------------------------------------------
Money Market A JC Bradford & Co. Cust FBO 1,474,861.840 10.78
DCIP Limited Partners II
330 Commerce Street
Nashville, TN 37201-1899
RPSS TR Rollover IRA 2,084,141.230 15.24
FBO James J. Maguire
42 Western Drive
Short Hills, NJ 07078-1910
Trustees of Amherst College Corp. 1,785,953.060 13.06
U/A June 14, 1985
Donald S. Cohan Charitable
Remainder Unitrust
P.O. Box 2221
Amherst, MA 01004-2221
Chemical Bank Trust 1,097,281.780 8.02
PIMCO Advisors Group 401K
Savings: Investment Plan Trust
ATTN: Jerry Capri
4 New York Plaza, Fl. 4
New York, NY 10004-2413
Prudential-Bache Securities 1,046,086.360 7.65
Edward F. Goodman &
Judith Goodman JTTEN
234 Worthen Rd. E
Lexington, MA 02173
Oxford Realty Financial Group 904,514.126 6.61
401K Plan
7200 Wisconsin Ave., Suite 1100
Bethesda, MD 20814-4815
- ------------------------------------------------------------------------------------------
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<PAGE>
- ------------------------------------------------------------------------------------------
B Donaldson Lufkin Jenrette 16,935.230 10.90
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Smith Barney Inc. 26,175.000 16.85
00116563043
388 Greenwhich Street
New York, NY 10013
Prudential-Bache Securities 73,070.560 47.05
New York, NY 10292
A.G. Edwards & Sons Inc. COF 25,759.880 16.58
Christopher Christopher
IRA Account
P.O. Box 86
Sherborn, MA 01770-0086
A.G. Edwards & Sons Inc. COF 9,102.330 5.86
Stephen S.J. Hall
Rollover IRA Account
C/O Peggy Rauch
8742 Misty Creek Drive
Sarasota, FL 34241-9561
- ------------------------------------------------------------------------------------------
C None
- ------------------------------------------------------------------------------------------
International A Merrill Lynch Pierce Fenner & Smith Inc. 221,829.000 14.26
(see above)
Society National Bank TR. 173,313.998 11.14
FBO RPM Retirement Plan
P.O. Box 6147
Cleveland, OH 44101-1147
Resources Trust Company 103,335.054 6.64
FBO IMS Clients
P.O. Box 3865
Englewood, CO 80155-3865
- ------------------------------------------------------------------------------------------
B Merrill Lynch Pierce Fenner & Smith Inc. 18,786.000 30.87
(see above)
Prudential-Bache Securities 4,909.000 8.06
New York, NY 10292
Prudential-Bache Securities 4,288.165 7.04
New York, NY 10292
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 4,012,628,695 22.53
(see above)
- ------------------------------------------------------------------------------------------
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<PAGE>
- ------------------------------------------------------------------------------------------
Short Intermediate A Bank of California Trust 57,429.097 6.65
UA Dec 31, 1981
Wholesale Beer Multi Employee Trust
A/C 23161622
475 Sansome Street, Fl. 11
San Francisco, CA 94111-3103
Prudential-Bache Securities 250,879.375 29.08
(Transmission Account)
Merrill Lynch Pierce Fenner & Smith Inc. 160,402.000 18.59
(see above)
- ------------------------------------------------------------------------------------------
B NFSC FEBO # 0KS-614432 25,480.780 20.27
Reida Longanecker
1075 Old Harrisburg Rd.
Gettysburg, PA 17325
Paine Weber FBO 12,987.501 10.33
Paine Weber CDN FBO
Robert M. Kwass - IRA Rollover
P.O. Box 3321
Weehawken, NJ 07087-8154
Merrill Lynch Pierce Fenner & Smith Inc. 12,501.000 9.94
(see above)
- ------------------------------------------------------------------------------------------
C Merrill Lynch Pierce Fenner & Smith Inc. 1,743,969.301 25.27
(see above)
- ------------------------------------------------------------------------------------------
</TABLE>
3031617.07
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<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
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<PAGE>
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.
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.
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<PAGE>
Duff:
AAA Highest credit quality. The risk factors are negligible being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality Protection factors are strong.
AA Risk is modest but may vary slightly from time to time
AA- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress. (Global Income Fund only)
BBB+ Below average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors
BB- fluctuate according to industry conditions or company fortunes.
Overall quality may move up or down frequently within this
category.
B+ Below investment grade and possessing risk that obligations will
not
B be met when due. Financial protection factors will fluctuate B-
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating
grade.
CCC Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.
Fitch (plus or minus signs are used with a rating symbol to indicate the
relative position of the credit within the rating category):
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated "AAA." Because bonds rated in the "AAA" and "AA" categories
are not significantly vulnerable to foreseeable future
developments, short-term debt of these issues is generally rated
"F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher
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<PAGE>
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.
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.
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<PAGE>
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.
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)
3031617.07
83
<PAGE>
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."
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.
3031617.07
84
<PAGE>
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.
3031617.07
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<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".
3031617.07
86
<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.
3031617.07
87
<PAGE>
FINANCIAL HIGHLIGHTS
<PAGE>
<PAGE>
Financial Statements
<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
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 *
=========
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
==============
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
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
=========== ==============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
18
PIMCO ADVISORS EQUITY INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
SHARES
- --------------
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
--------------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS EQUITY INCOME FUND 19
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- -------------- --------------
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
======= ==============
+ 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
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 *
=========
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995*
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
========
- ------------------
* The Fund commenced operations on June 27, 1995.
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
SEPTEMBER
30,
1995*
------------
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
============
- ------------------
* 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
VALUE
SHARES (NOTE 2)
- ------ --------------
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
--------------
VALUE
SHARES (NOTE 2)
- ------ --------------
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
--------------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
22
PIMCO ADVISORS VALUE FUND
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- ------ --------------
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
--------------
VALUE
SHARES (NOTE 2)
- ------ --------------
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
======== ==============
+ 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
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 *
=========
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
==============
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
------------- --------------
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
============= ==============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
24
PIMCO ADVISORS GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
SHARES
- --------------
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
--------------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS GROWTH FUND 25
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- -------------- --------------
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)
- ------------ --------------
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
======== =============
+ 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
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 *
---------
---------
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
==============
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
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
============ ==============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS TARGET FUND 27
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
28
PIMCO ADVISORS TARGET FUND
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- -------------- --------------
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
======= ==============
+ 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
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 *
=========
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995*
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
==============
- ------------------
* The Fund commenced operations on June 27, 1995.
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
SEPTEMBER
30,
1995*
------------
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
============
- ------------------
* 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
VALUE
SHARES (NOTE 2)
- ------ --------------
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
======= ==============
+ 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
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 *
=========
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
==============
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
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
=========== ==============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
32
PIMCO ADVISORS OPPORTUNITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS OPPORTUNITY FUND 33
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- -------------- --------------
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
======= ==============
+ 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
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 *
=========
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995*
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
==============
- ------------------
* The Fund commenced operations on December 22, 1994.
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
SEPTEMBER
30,
1995*
------------
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
============
- ------------------
* 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
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
======= ==============
+ 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
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 *
=========
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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)
==============
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
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
=========== ==============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS INTERNATIONAL FUND 37
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ----------------
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)
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ----------------
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
---------------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
38
PIMCO ADVISORS INTERNATIONAL FUND
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ----------------
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
--------------
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ----------------
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)
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS INTERNATIONAL FUND 39
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ----------------
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
--------------
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ----------------
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
======= ==============
+ 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
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%
-------
-------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
40
PIMCO ADVISORS PRECIOUS METALS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
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 *
---------
---------
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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)
--------------
--------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
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
=========== ==============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS PRECIOUS METALS FUND 41
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
SHORT-TERM NOTES--2.2%
$ 1,100,000 General Electric Co.,
5.85%, 10/2/95
(Cost $1,099,821) $ 1,099,821
--------------
SHARES COUNTRY
- -------------- --
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
--------------
VALUE
SHARES (NOTE 2) COUNTRY
- -------------- ----------------
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
======= ==============
+ 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
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%
=======
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
42
PIMCO ADVISORS HIGH INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
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 *
---
---
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
--------------
--------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
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
=========== ==============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS HIGH INCOME FUND 43
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
44
PIMCO ADVISORS HIGH INCOME FUND
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
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
--------------
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
======= ==============
+ 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
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 *
---------
---------
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Period Ended September 30, 1995*
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
--------------
--------------
- ------------------
* The Fund commenced operations on December 22, 1994.
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
SEPTEMBER
30,
1995*
------------
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
-
-
------------
------------
- ------------------
* 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
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
CONTRACTS
- --------------
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
======= ==============
+ 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
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 *
---------
---------
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
--------------
--------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
---------- --------------
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
========== =============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
48
PIMCO ADVISORS TAX EXEMPT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS TAX EXEMPT FUND 49
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
$ 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
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
$ 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
======= ==============
+ 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
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 *
---
---
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
--------------
--------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
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
=========== =============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS U.S. GOVERNMENT FUND 51
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
$ 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
--------------
MATURITY
AMOUNT
- --------------
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
--------------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
52
PIMCO ADVISORS U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------
VALUE
CONTRACTS (NOTE 2)
- -------------- --------------
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
======== ==============
+ 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
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 *
---
---
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
--------------
--------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
---------- --------------
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
========== =============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
54
PIMCO ADVISORS SHORT-INTERMEDIATE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
--------------
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS SHORT-INTERMEDIATE FUND 55
- --------------------------------------------------------------------------------
VALUE
CONTRACTS (NOTE 2)
- ---------- --------------
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
======= ==============
+ 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
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 *
---------
---------
- ------------------
* Varies by length of time shares are held (Note 3d)
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1995
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
--------------
--------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994
----------- --------------
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
=========== =============
PIMCO Advisors Funds SEE ACCOMPANYING NOTES
<PAGE>
PIMCO ADVISORS MONEY MARKET FUND 57
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- -------------- --------------
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
======= =============
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>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(1) 1991
---------- ---------- ----------
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%
- ------------------
(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>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(4) 1991
---------- ---------- ----------
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%
- ------------------
(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>
CLASS C
----------
1993(6)
----------
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%
- ------------------
(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>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(9) 1991
---------- ---------- ----------
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%
- ------------------
(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>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(13) 1991
---------- ---------- ----------
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%
- ------------------
(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>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(15) 1991
---------- ---------- ----------
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%
- ------------------
(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>
CLASS C CLASS A CLASS C
---------- ---------- ----------
1992 1991(21) 1991
---------- ---------- ----------
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%
- ------------------
(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
<PAGE>
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<TABLE>
<CAPTION>
PIMCO ADVISORS SHORT-INTERMEDIATE FUND
----------------------------------------------------------------------------------------
CLASS B CLASS C CLASS A CLASS C CLASS A CLASS C CLASS A
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>
CLASS A CLASS C
------------ ------------
1993 1993
------------ ------------
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>
<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:
Undistributed
Net Accumulated
Investment Realized
Income Gain/(Loss)
- -----------------------------------------------------------------------
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)
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:
Growth $ 1,692,133
Target 5,836,356
Opportunity 6,920,088
Innovation 398,331
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=Intermediate .50% of first $250 million Pacific Investment Management .25%
.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:
Annual Retainer $ 35,000
Meeting Fee (each meeting attended) 3,000
Committees:
Contract Chairman 6,000
Audit Chairman 2,000
Audit Member 1,000
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:
PURCHASES SALES
-------------- --------------
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
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>
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
=========== =============
<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:
YEAR ENDED
SEPTEMBER 30, 1995
--------------------------
SHARES AMOUNT
----------- -------------
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
=========== =============
<PAGE>
PIMCO ADVISORS FUNDS 71
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
YEAR ENDED
SEPTEMBER 30, 1995
--------------------------
SHARES AMOUNT
----------- -------------
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
=========== =============
YEAR ENDED
SEPTEMBER 30, 1995
--------------------------
SHARES AMOUNT
----------- -------------
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
=============
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:
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
---------- -----------
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 -- --
=========== ==========
The cost of cancelling options in closing purchase transactions was $137,193
resulting in a net short-term loss of $14,101.
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
=========== ==========
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
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
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
=========== ==========
The cost of cancelling options in closing purchase transactions was $2,416,673
resulting in a net short-term loss of $105,106.
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
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
=========== ==========
The cost of cancelling options in closing purchase transactions was
$16,191,925 resulting in a net short-term loss of $2,120,526.
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
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 -- --
=========== ==========
The cost of cancelling options in closing purchase transactions was $234,782
resulting in a net short-term loss of $110,602.
AMOUNT OF NUMBER OF
PREMIUMS OPTIONS
------------ ---------
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
============ =========
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.
Capital
Loss
Carryforward Expiration
----------- ---------
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
<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
