<PAGE> front cover
ANNUAL REPORT March 31, 1996
PIMCO
VERSASTYLE EQUITY FUND
<PAGE> 1
INVESTMENT PERFORMANCE
The VersaStyle, Equity Fund enjoyed a strong year of
absolute performance returning 30.53% for the fiscal year
ended March 31, 1996, a year in which domestic stock prices
increased in every quarter. On a relative basis, the Fund
did not keep pace with the booming S & P 500 Index which
returned 32.10%. Nearly all of the Fund's performance
shortfall occurred in the last two months of the fiscal year
when investors favored large-cap, cyclical stocks over the
smaller capitalization growth issues that dominated the
Fund's investment portfolio.
[GRAPH APPEARS HERE]
Cumulative Returns from Inception through March 31, 1996
VersaSTYLE
Equity S&P 500
Month Fund Index
09/30/94 1,000,000 1,000,000
12/31/94 984,955 999,843
12/31/95 1,303,846 1,375,562
03/31/96 1,350,173 1,449,397
The line graph depicts the value of $1,000,000 invested at
the Fund's inception in September 1994 and held through
March 1996, compared to the S & P 500 Index, an unmanaged
market index.
<TABLE>
<CAPTION>
Annualized Returns Ended Since
3/31/96 1 Yr. 3 Yrs. 5 Yrs Inception
<S> <C> <C> <C> <C>
VersaSTYLE Equity Fund (%) 30.53 N/A N/A 22.14
S & P 500 Index (%) 32.10 N/A N/A 28.07
</TABLE>
<PAGE> 2
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
<CAPTION>
Amounts in thousands, except per
share amounts
<S> <C>
Assets:
Investments, at value $6,737
Receivable for investments sold 95
Interest and dividends receivable 7
Other assets 4
6,843
Liabilities:
Payable for investments purchased 86
Accrued investment advisor's fee 2
Accrued administrator's fee 1
Other accrued expenses and 2
liabilities
91
Net Assets $6,752
Net Assets Consist of:
Paid in capital $5,637
Undistributed net investment income 238
Accumulated undistributed net 79
realized gain
Net unrealized appreciation 798
$6,752
Shares Issued and Outstanding 555
Net Asset Value, Offering and
Redemption Price Per $12.17
Share (Net Assets Per Share
Outstanding)
Cost of Investments Owned 5,939
</TABLE>
See Notes to Financial Statements
<PAGE> 3
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the year ended March 31, 1996
$ in thousands
<S> <C>
Investment Income:
Dividends $ 137
Interest 11
Total investment income 148
Expenses:
Investment advisory fees 25
Administration fees 11
Custodian and transfer agent fees 27
Registration fees 1
Audit fees 8
Reimbursement from adviser (33)
Total expenses 39
Net Investment Income 109
Net Realized and Unrealized Gain
Net realized gain on investments 925
Net change in unrealized 544
appreciation on investments
Net Gain 1,469
Net Increase in Assets Resulting $ 1,578
from Operations
</TABLE>
See Notes to Financial Statements
<PAGE> 4
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
$ in thousands
From commencement
Year ended on September 30, 1994
March 31, 1996 through
March 31, 1995
<S> <C> <C>
Increase in Net Assets from:
Operations
Net investment income $ 109 $ 60
Net realized gain (loss) 925 (143)
Net change in unrealized appreciation 544 254
Net increase resulting from operations 1,578 171
Distributions to Shareholders
From net investment income (109) (60)
From net realized capital gains (465) 0
Total distributions (574) (60)
Fund Share Transactions
Receipts for shares sold 0 5,000
Issued as reinvestment of distributions 577 60
Cost of shares redeemed 0 0
Net increase resulting from Fund 577 5,060
share transactions
Total Increase in Net Assets 1,581 5,171
Net Assets
Beginning of period 5,171 0
End of period * $ 6,752 $ 5,171
* Including undistributed net $ 238 $ 0
investment income of:
</TABLE>
See Notes to Financial Statements
<PAGE> 5
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
From commencement
Selected Per Share Data for on September 30, 1994
the Year or Period Ended: March 31, 1996 through
March 31, 1995
<S> <C> <C>
Net asset value beginning of period $10.22 $10.00
Net investment income 0.63 0.12
Net realized and unrealized gain on 2.44 0.22
investments
Total income from investment 3.07 0.34
operations
Dividends from net investment income (0.21) (0.12)
Distributions from net realized (0.91) 0.00
capital gains
Total distributions (1.12) (0.12)
Net asset value end of period $12.17 $10.22
Total return (%) 30.53 3.44
Net assets end of period (000's) $6,752 $5,171
Ratio of expenses to average net 1.20 0.65 +
assets (%)
Ratio of net investment income to 1.26 2.45 +
average net assets (%)
Portfolio turnover rate (%) 185 159
Average commission rate (%) $0.03
+ Annualized
</TABLE>
See Notes to Financial Statements
<PAGE> 6
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
March 31, 1996
Value
Shares (000's)
<S> <C> <C>
Common Stocks - 99.8%
Automobiles and
Transportation - 2.0%
Burlington Northern Santa Fe Corp. 700 $ 57
Chrysler Corp. 300 18
Delta Air Lines 100 8
General Motors "E" 800 46
Southwest Airlines (b) 100 3
132
Basic Materials - 4.4%
Airgas, Inc. (b) 100 4
Applied Materials, Inc. 900 31
Bemis Co., Inc. (b) 600 19
Hanna M.A. Co. 200 7
Hercules, Inc. 300 18
IMC Global, Inc. 800 29
Kimberly Clark 900 67
Loctite Corp. 300 15
Monsanto Co. (b) 400 61
Union Carbide Corp. 400 20
Westvaco Corp. 900 26
297
Capital Goods - 10.2%
Allied Signal, Inc. 700 41
Boeing Co. 400 35
General Dynamics 400 23
General Electric Corp. 1,500 117
Kaufman & Broad Home Corp. 5,000 80
Loral Corp. 1,500 74
Minnesota Mining & Mfg. 1,300 84
Pulte Corp. 1,300 35
Raychem Corp. (b) 600 39
Raytheon Co. 1,000 51
Rockwell International Corp. 1,400 82
Silicon Valley Group, Inc. (b) 300 7
Thermo Electron Corp. (b) 300 18
686
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (000's)
<S> <C> <C>
Consumer Discretionary - 11.4%
American Greetings "A" 1,000 $ 27
Central Newspapers, Inc. "A" 200 7
Comcast Corp. "A" 200 3
Cooper Tire & Rubber Corp. 300 8
Fleetwood Enterprises, Inc. (b) 200 5
Gannett, Inc. 1,200 81
Gillette Co. 3,200 166
Hasbro, Inc. (b) 800 29
Hilton Hotels Corp. 700 66
McDonalds Corp. 2,600 125
Meredith Corp. 3,400 140
Mirage Resorts (b) 500 23
Nike, Inc. "B" 500 41
Stanley Works 500 28
Walgreen Co. 600 20
769
Consumer Staples - 20.1%
Alza Corp "A" 900 28
American Home Products 500 54
Baxter International,Inc. 600 27
Becton, Dickinson & Co. 400 33
Bergen Brunswig Corp. 1,100 29
Bristol Myers Squibb 200 17
Campbell Soup Co. 1,100 67
Chiron Corp. (b) 300 29
Coca-Cola Co. 1,100 91
CPC International, Inc. 700 49
Dow Chemical 200 17
Eli Lilly & Co. 900 59
Healthcare Property Investors, Inc. 700 22
Healthsouth Corp. (b) 1,555 53
Hershey Foods 800 60
IBP, Inc. 300 8
Johnson & Johnson 938 87
Kellogg Co. 1,100 83
Medtronic, Inc. 1,300 78
Merck & Co. 500 31
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Value
Shares (000's)
<S> <C> <C>
Pepsico, Inc. 500 $ 32
Pfizer, Inc. 800 54
Sara Lee Corp. 2,500 82
Schering Plough Corp. 300 17
St. Jude Medical, Inc. (b) 700 26
Stryker Corp. 1,100 54
U.S. Healthcare, Inc. 400 18
United Healthcare Corp. 500 31
Universal Corp. 2,000 50
UST, Inc. 1,400 45
Wrigley, William Jr. Co. 500 29
1,360
Energy - 9.0%
Amoco Corp. 700 51
Chevron Corp. 500 28
Exxon Corp. 1,700 139
Halliburton Co. 400 23
Helmerich & Payne 3,200 108
Kerr McGee Corp. 100 6
Mobil Corp. 600 70
Phillips Petroleum Co. 300 12
Rowan Companies, Inc. (b) 2,500 32
Royal Dutch Petroleum ADR 700 99
Texaco, Inc. 400 34
Union Texas Petroleum Hldgs, Inc. 600 12
614
Financial Services - 15.5%
Bank of New York, Inc. (b) 500 26
Charles Schwab Corp. (b) 1,100 28
Chemical Banking Corp. 300 21
Cigna Corp. 300 34
CNA Financial Corp. (b) 200 22
Comerica, Inc. 1,400 58
Conseco, Inc. 100 7
Countrywide Credit 600 13
Eastern Enterprises (b) 100 4
Morgan Stanley 800 41
Federal Home Loan Mortgage Corp. (b) 100 9
Federal National Mortgage Assn. 4,400 140
Fifth Third Bancorp. 450 26
First Bank System, Inc. 500 30
First Union Corp. 600 36
Golden West Financial Corp. 200 11
</TABLE>
<TABLE>
<CAPTION>
Value
Share (000's)
<S> <C> <C>
Green Tree Financial Corp. 700 $ 24
J.P. Morgan & Co. 100 8
Jefferson Pilot Corp. 700 38
Marshall & Ilsley Corp. 1,700 45
Mellon Bank Corp. 100 6
Merrill Lynch & Co. 800 49
Norwest Corp. 2,244 82
Southern National Corp. 900 25
Student Loan Marketing Assn. 300 23
Suntrust Banks, Inc. 1,400 98
TCF Financial Corp. 1,300 47
Transamerica Corp. 600 45
Travelers Group, Inc. 700 46
1,042
Services - 1.9%
Alco Standard Corp. 600 31
Kansas City Southern Industries, Inc. 200 9
Norfolk Southern Corp. 400 34
Service Corp.International (b) 300 15
Textron, Inc. 500 40
129
Technology - 10.7%
Adaptec, Inc. (b) 200 10
Altera Corp. (b) 200 11
Analog Devices, Inc.(b) 1,000 28
Cabletron Systems, Inc.(b) 500 33
Cadence Design System,Inc. (b) 600 26
Computer Associates Intl., Inc. 400 29
Computer Sciences (b) 400 28
Data General (b) 3,800 56
EG & G, Inc. 700 16
EMC Corp. (b) 1,200 26
Hewlett Packard Co. 300 28
IBM Corp. (b) 300 33
Lam Resh Corp. (b) 600 21
Linear Technology Corp. 500 21
Microsoft Corp. (b) 500 52
Novellus Systems, Inc.(b) 500 22
Parametric Technology Corp. (b) 600 23
Pitney Bowes, Inc. 600 29
Shared Medical Systems Corp. 1,000 60
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Value
Shares (000's)
<S> <C> <C>
Solectron Corp. (b) 400 $ 18
Sterling Software, Inc.(b) 600 42
Sun Microsystems (b) 700 31
Tellabs, Inc. (b) 500 24
United Technologies Corp. 500 56
723
Utilities/Telecommunications - 14.6%
360 Communications Co.(b) 166 4
AGL Resources (b) 2,800 51
American Electric Power, Inc. 600 25
Ameritech Corp. 1,500 82
AT&T Corp. 100 6
Bell Atlantic Corp. 1,600 99
Bell South Corp. 3,900 144
California Energy Co.,Inc. (b) 700 19
Cinergy Corp. 2,600 78
Emerson Electric Co. 500 40
Frontier Corp. 1,800 57
GTE Corp. 1,300 57
Idaho Power Co. 2,400 69
Nynex Corp. (b) 500 25
Peoples Energy Corp. 1,200 39
SBC Communications, Inc. 1,800 95
Southern Co. 600 14
Sprint Corp. 500 19
Washington Gas Light Co. 2,800 61
984
Total Common Stocks 6,736
(Cost $5,938)
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
<S> <C> <C>
Repurchase Agreements - 0.0%
State Street Bank
4.75% due 04/01/96. $ 1 $ 1
(Dated 03/29/96.
Collateralized by U.S.
Treasury Bond 8.75% 05/15/17
valued at $1,239. Repurchase
proceeds are $1,000.)
Total Repurchase Agreements 1
(Cost $1)
Total Investments (a) - 99.8% $ 6,737
(Cost $5,939)
Other Assets and Liabilities (Net) - 0.2% 15
Net Assets - 100.0% $ 6,752
</TABLE>
Notes to Schedule of Investments
($ in thousands):
(a) At March 31, 1996,the net unrealized appreciation
(depreciation) of investments based on cost for
federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of
value over tax cost. $ 872
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (80)
Unrealized appreciation-net 792
(b) Non-income producing security.
See Notes to Financial Statements
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
1. Significant Accounting Policies
The VersaSTYLE Equity Fund (the "Fund"), which commenced
operations on September 30, 1994, is a series of the PIMCO
Funds (the "Trust"). The Trust was organized under the laws
of the Commonwealth of Massachusetts on February 19, 1987,
and is registered under the Investment Company Act of 1940,
as amended, as a no-load, open-end investment management
company. The investment objective of the Fund is to seek to
achieve a total return which exceeds the total return
performance of the Standard & Poor"s Composite Stock Price
Index ("S&P 500"). The following is a summary of significant
accounting policies followed in the preparation of the
Fund's financial statements. These policies are in
conformity with generally accepted accounting principles.
Security Valuation. Portfolio securities and other assets
for which market quotations are readily available are stated
at market value. Market value is determined on the basis of
last reported sales prices, or if no sales are reported, as
is the case for most securities traded over-the-counter, the
mean between representative bid and asked quotations
obtained from a quotation reporting system or from
established market makers. Fixed income securities,
including those to be purchased under firm commitment
agreements, are normally valued on the basis of quotes
obtained from brokers and dealers or pricing services.
Foreign currency amounts are converted to U.S. equivalents
using foreign exchange quotations from independent dealers.
Short-term investments having a maturity of sixty days or
less are valued at amortized cost, which approximates market
value. Certain fixed income securities for which daily
market quotations are not available may be valued, pursuant
to guidelines established by the Board of Trustees, with
reference to fixed income securities whose prices are more
readily obtainable.
Securities Transactions and Investment Income. Security
transactions are recorded as of the trade date. Realized
gains and losses from securities sold are recorded on the
identified cost basis. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on the accrual
basis and includes the accretion of discounts and
amortization of premiums.
Dividends and Distributions to Shareholders. The Fund
declares and distributes dividends representing
substantially all net investment income on a quarterly
basis. Net long-term capital gains will be distributed no
less frequently than once each year. Foreign exchange gains
or losses on investments and the income generated from such
investments, arising from fluctuations of exchange rates of
the non-dollar denominated investment relative to the U.S.
dollar, are reported to shareholders as ordinary income
distributions in accordance with the provisions of the
Internal Revenue Code.
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 such items as wash sales, foreign currency transactions
and capital loss carryforwards.
Federal Taxes. It is the Fund's policy to distribute all of
its taxable income to shareholders and otherwise comply with
the provisions of the Internal Revenue Code applicable to
regulated investment companies. Therefore, no provision
has been made for federal income tax on net investment
income and realized or unrealized capital gains.
Futures and Options. The Fund is authorized to enter into
futures contracts and options. The primary risks associated
with the use of futures contracts and options are imperfect
correlation between the change in market value of the
securities held by the Fund and the prices of futures
contracts and options, the possibility of an illiquid market
and the inability of the counter-party to meet the terms of
the contract. Futures contracts and purchased options are
valued based upon their quoted daily settlement prices. The
premium received for a written option is recorded as an
asset with an equal liability which is marked-to-market
based on the option's quoted daily settlement price.
Fluctuations in value of such instruments are recorded as
unrealized appreciation (depreciation)
<PAGE> 10
until terminated, at which time realized gains and losses are
recognized.
Forward Foreign Currency Contracts. The Fund is authorized
to enter into forward foreign exchange contracts as a hedge
against either specific transactions or portfolio positions
or for purposes of increasing exposure to a particular
foreign currency. The aggregate principal amounts of the
contracts for which delivery is anticipated are recorded in
the Fund's accounts, while such amounts are not recorded if
the Fund intends to settle the contract prior to delivery.
The Fund records realized gains or losses at the time the
forward contract is extinguished by entry into a closing
transaction or by delivery of the currency. Risks may arise
upon entering into these contracts from the potential
inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
Estimates. The preparation of financial statements in
accordance with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those
estimates.
2. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management
Company ("PIMCO") serves as investment adviser (the
"Adviser") to the Trust, pursuant to an investment advisory
contract. The Adviser receives a monthly fee from the Fund
at an annual rate of 0.40% of the Fund's average daily net
assets. Prior to October 1, 1995, the Adviser received a
monthly fee based on average daily net assets as follows:
0.45% of the first $150 million, and 0.40% thereafter.
Administration Fee. PIMCO also serves as administrator, (the
"Administrator"), and provides administrative services to
the Fund for which it receives a monthly administrative fee
at the annual rate of 0.25% of the Fund's average daily net
assets. Effective October 1, 1995, the Trust adopted a
"unified fee structure" whereby PIMCO provides services
necessary for the operation of the Fund for a single
administrative fee. Prior to October 1, 1995, the
Administrator received a monthly fee from the Fund at an
annual rate of 0.10% of the Fund's average daily net assets.
Expenses. Effective October 1, 1995, under the unified fee
structure, the Fund is responsible for the following
expenses: (i) salaries and other compensation of any of the
Trust's executive officers and employees who are not
officers, directors, stockholders or employees of PIMCO or
its subsidiaries or affiliates; (ii) taxes and governmental
fees; (iii) brokerage fees and commissions and other
portfolio transaction expenses; (iv) the costs of borrowing
money, including interest expenses; (v) fees and expenses of
the Trustees who are not "interested persons" of PIMCO or
the Trust, and any counsel retained exclusively for their
benefit; (vi) extraordinary expenses, including costs of
litigation and indemnification expenses; and (vii) expenses,
such as organizational expenses, which are capitalized in
accordance with generally accepted accounting principles.
Each unaffiliated Trustee receives an annual retainer of
$20,000, plus $2,500 for each Board of Trustees meeting
attended, plus reimbursement of related expenses. These
expenses are allocated to the Funds of the Trust according
to their respective net assets. Prior to October 1, 1995,
each unaffiliated Trustee received an annual retainer of
$7,000, plus $2,000 for each Board of Trustees meeting
attended, plus reimbursement of related expenses.
Expense Limitation. Prior to adoption of the unified fee
structure, the Adviser and the Administrator, in the
interest of limiting expenses of the Fund, limited the
expenses of the Fund, including advisory and administrative
fees, to 0.65% of its average net assets on an annual basis.
Prior to October 1, 1995, the Adviser or Administrator would
have been reimbursed for fees foregone (or other expenses
paid by them pursuant to the expense limitation) at a later
date when the Fund reached a sufficient asset size; however,
no such later payment would have been made if that payment
caused the annual expense ratio of the Fund to exceed the
amount of the relevant expense limitation. The cumulative
unreimbursed amount as of September 30, 1995 was $49,073.
This amount has been waived as a result of the adoption of
the unified fee.
Related Party Transactions. PIMCO Advisors Distribution
Company ("PADCO"), an indirect wholly-owned
<PAGE> 11
subsidiary of PIMCO Advisors L.P., serves as the distributor
of the Fund's shares. Under the contract, all expenses relating
to the distribution of Fund shares will be paid by the Adviser,
the Administrator or PADCO out of past profits and resources
which may include fees received by the Adviser.
3. Purchases and Sales of Securities
Purchases and sales of investment securities (excluding
short-term instruments) for the Fund for the year ended
March 31, 1996 were as follows ($ in thousands):
Purchases Sales
U.S. Government Other U.S. Government Other
$126 $11,137 $ 0 $11,138
4. Shares of Beneficial Interest
The Fund may issue an unlimited number of shares of
beneficial interest with a $.0001 par value. Changes in
shares of beneficial interest were as follows (in
thousands):
<TABLE>
<CAPTION>
Year ended Period ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Shares sold 0 500
Shares issued as reinvestment
of dividends 49 6
Shares redeemed 0 0
Net increase 49 506
</TABLE>
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of the
VersaSTYLE Equity Fund (a series of the PIMCO Funds)
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and the
related statements of operations and of changes in net
assets and the financial highlights present fairly, in all
material respects, the financial position of the VersaSTYLE
Equity Fund (the "Fund") at March 31, 1996, the results of
its operations, the changes in its net assets and the
financial highlights for the periods indicated, in
conformity with generally accepted accounting principles.
These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of portfolio positions
at March 31, 1996 by correspondence with the custodian and
brokers and the application of alternative auditing
procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Kansas City, Missouri
May 10, 1996
<PAGE> inside back cover
Trustees and Officers
Brent R. Harris, Chairman and Trustee
Guilford C. Babcock, Trustee
Vern O. Curtis, Trustee
Thomas P. Kemp, Trustee
William J. Popejoy, Trustee
R. Wesley Burns, President
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Advisor and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
Transfer Agent and Custodian
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Counsel
Dechert Price & Rhoads
1500 K Street N.W.
Washington, D.C. 20005
Independent Accountants
Price Waterhouse LLP
1055 Broadway
Kansas City, Missouri 64105
This report is submitted for the general information of the
shareholders of the PIMCO Funds. It is not authorized for
distribution to prospective investors unless accompanied or
preceded by an effective Prospectus for the PIMCO Funds,
which contains information covering its investment policies
as well as other pertinent information.
