<PAGE>
As filed with the Securities and Exchange Commission on June 14, 1996
File No. 33-12113, 811-5028
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 29 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 33 [X]
PIMCO Funds
(Exact Name of Registrant as Specified in Charter)
840 Newport Center Drive
Newport Beach, California 92660
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(714) 640-3031
Paul F. Roye, Esq. R. Wesley Burns
Dechert Price & Rhoads Pacific Investment Management Company
1500 K Street, N.W. 840 Newport Center Drive
Washington, D.C. 20005 Newport Beach, California 92660
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on June 15, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Proposed Maximum
Offering
Title of Number Price per Proposed Amount of
Securities of Shares Share (within Maximum Registration
Being Being 15 days of Offering Fee
Registered Registered filing) Price
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Indefinite* N/A N/A N/A
Beneficial
Interest,
Par Value
$.0001
</TABLE>
* Registrant has elected to register an indefinite number of shares of
beneficial interest pursuant to Rule 24f-2 under the Investment Company Act of
1940. Registrant filed the Notice required by Rule 24f-2 on May 30, 1996.
<PAGE>
CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
The enclosed Prospectus, Statement of Additional Information, and Part C
relate to PIMCO Funds (the "Trust"), an investment company currently consisting
of 20 separate series (the "Funds").
PART A
Information Required in Prospectus
----------------------------------
<TABLE>
<CAPTION>
Item Number Heading
- ----------- -------
<S> <C>
1 Cover Page
2 Prospectus Summary, Expense Information
3 Financial Highlights
4 Investment Objectives and Policies;
Characteristics and Risks of Securities and
Investment Techniques; Other Information
5 Management of the Trust
5A Information Contained in Registrant's Annual Report
6 Dividends, Distributions and Taxes; Other Information
7 Purchase of Shares; Net Asset Value
8 Redemption of Shares
9 Not Applicable
</TABLE>
<PAGE>
PART B
Information Required in Statement of Additional Information
-----------------------------------------------------------
<TABLE>
<CAPTION>
Item Number Heading
- ----------- -------
<S> <C>
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Objectives and Policies; Investment
Restrictions
14 Trustees and Officers
15 Voting Rights
16 Management of the Trust; Distribution of Trust
Shares; Custodian, Transfer Agent and Dividend
Disbursing Agent
17 Portfolio Transactions and Brokerage
18 Other Information
19 Distribution of Trust Shares; Net Asset Value
20 Taxation
21 Distribution of Trust Shares
22 Performance Information
23 Financial Statements
</TABLE>
<PAGE>
[LOGO of PIMCO]
PIMCO FUNDS
Pacific Investment Management Series
FIXED INCOME FUNDS
Money Market Fund
Short-Term Fund
Low Duration Fund
Low Duration Fund II
Low Duration Fund III
Moderate Duration Fund
High Yield Fund
Total Return Fund
Total Return Fund II
Total Return Fund III
Commercial Mortgage Securities Fund
Long-Term U.S. Government Fund
Foreign Fund
Global Fund
International Fund
EQUITY FUNDS
StocksPLUS Fund
StocksPLUS Short Strategy Fund
VersaSTYLE Equity Fund
VersaSTYLE Equity Fund II
BALANCED FUNDS
Strategic Balanced Fund
PROSPECTUS
- --------------------------------------------------------------------------------
June 15, 1996
<PAGE>
PROSPECTUS
June 15, 1996
PIMCO Funds (the "Trust") is a no-load, open-end management investment
company ("mutual fund") consisting of twenty separate investment portfolios
(the "Funds"). Each Fund has its own investment objective and policies. The
Trust is designed to provide access to the professional investment management
services offered by Pacific Investment Management Company ("PIMCO"), which
serves as investment adviser to the Funds.
The PIMCO Funds described in this Prospectus are as follows:
FIXED INCOME FUNDS EQUITY FUNDS BALANCED FUNDS
Money Market Fund* StocksPLUS Fund Strategic Balanced Fund
Short-Term Fund StocksPLUS Short
Low Duration Fund Strategy Fund
Low Duration Fund II VersaSTYLE Equity Fund
Low Duration Fund III VersaSTYLE Equity Fund II
Moderate Duration Fund
High Yield Fund
Total Return Fund
Total Return Fund II
Total Return Fund III
Commercial Mortgage Securities Fund
Long-Term U.S. Government Fund
Foreign Fund
Global Fund
International Fund
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, are 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 investment returns and net asset value per share
of each Fund also will vary.
Each Fund offers two classes of shares: the "Institutional Class" and the
"Administrative Class." Shares of the Institutional Class are offered
primarily for direct investment by investors such as pension and profit
sharing plans, employee benefit trusts, endowments, foundations, corporations,
other institutions, and high net worth individuals. They also are offered
through certain financial intermediaries that charge their customers
transaction or other fees with respect to the customers' investment in the
Funds. Shares of the Administrative Class are offered primarily through
brokers, retirement plan administrators, and other financial intermediaries.
Administrative Class shares pay service fees to such entities for services
they provide to shareholders of that class. Shares of each class of the Funds
are offered for sale at the relevant next determined net asset value for that
class with no sales charge. Shares of the PIMCO International Fund and PIMCO
VersaSTYLE Equity Fund II are offered only to private account clients of
PIMCO.
THE PIMCO HIGH YIELD FUND MAY INVEST ALL OF ITS ASSETS, AND THE PIMCO
COMMERCIAL MORTGAGE SECURITIES FUND MAY INVEST UP TO 35% OF ITS ASSETS, IN
JUNK BONDS, WHICH ARE SUBJECT TO HIGH RISK, AND SPECULATIVE WITH REGARD TO
PAYMENT OF INTEREST AND RETURN OF PRINCIPAL. INVESTORS SHOULD CAREFULLY
CONSIDER THESE RISKS BEFORE INVESTING IN THESE FUNDS. SEE "CHARACTERISTICS AND
RISKS OF SECURITIES AND INVESTMENT TECHNIQUES--HIGH YIELD SECURITIES ("JUNK
BONDS")."
Each of the Funds, except the PIMCO Money Market Fund, may invest all of its
assets in derivative instruments, some of which may be particularly sensitive
to changes in prevailing interest rates. Unexpected changes in interest rates
may adversely affect the value of a Fund's investments in particular
derivative instruments.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. It should be read and retained for
ready reference to information about the Funds. A Statement of Additional
Information, dated June 15, 1996, as supplemented from time to time,
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission and is hereby incorporated
by reference into this Prospectus. It is available without charge and may be
obtained by writing or calling:
PIMCO Funds
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
Telephone: (800) 927-4648 (Current Shareholders)
(800) 800-0952 (New Accounts)
* INVESTMENT IN THE PIMCO MONEY MARKET FUND (OR IN ANY OTHER FUND) IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE
THAT THE MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.
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 FUNDS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................................................... 3
Expense Information..................................................... 6
Financial Highlights.................................................... 8
Investment Objectives and Policies...................................... 12
Investment Restrictions................................................. 19
Characteristics and Risks of Securities and Investment Techniques....... 22
Management of the Trust................................................. 32
Purchase of Shares...................................................... 35
Redemption of Shares.................................................... 36
Portfolio Transactions.................................................. 38
Net Asset Value......................................................... 38
Dividends, Distributions and Taxes...................................... 39
Other Information....................................................... 40
Appendix A--Description of Duration..................................... A-1
Appendix B--Description of Securities Ratings........................... B-1
</TABLE>
<PAGE>
3
PROSPECTUS SUMMARY
PIMCO Funds (the "Trust") is a no-load, open-end management investment
company ("mutual fund"), organized as a Massachusetts business trust on
February 19, 1987. The Trust consists of twenty separate investment portfolios
(the "Funds").
COMPARISON OF PIMCO FUNDS
The following chart provides general information about each of the PIMCO
Funds. It is qualified in its entirety by the more complete descriptions of
the Funds appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FIXED INCOME FUNDS PRIMARY INVESTMENTS DURATION CREDIT QUALITY/1/ FOREIGN/2/
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Money Market Money market instruments [Less than Min 95% Aaa or 0%
or equal to] Prime 1;
90 days [Less than or
dollar- equal to]
weighted 5% Aa
average or Prime 2
maturity
- ------------------------------------------------------------------------------------------
Short-Term Money market instruments 0-1 yr B to Aaa; max 0-5%
and short maturity 10% below Baa
fixed income securities
- ------------------------------------------------------------------------------------------
Low Duration Short and intermediate 1-3 yrs B to Aaa; max 0-20%
maturity fixed income 10% below Baa
securities
- ------------------------------------------------------------------------------------------
Low Duration II Same as Low Duration 1-3 yrs A to Aaa 0%
Fund, with quality and
foreign issuer
restrictions
- ------------------------------------------------------------------------------------------
Low Duration III Same as Low Duration 1-3 yrs B to Aaa; max 0-20%
Fund, with prohibitions 10% below Baa
on firms engaged in
socially sensitive
practices
- ------------------------------------------------------------------------------------------
Moderate Duration Short and intermediate 2-4 yrs B to Aaa; max 0-20%
maturity fixed income 10% below Baa
securities
- ------------------------------------------------------------------------------------------
High Yield Higher yielding fixed 2-6 yrs B to Aaa; min 0%
income securities 65% below Baa
- ------------------------------------------------------------------------------------------
Total Return Intermediate maturity 3-6 yrs B to Aaa; max 0-20%
fixed income securities 10% below Baa
- ------------------------------------------------------------------------------------------
Total Return II Same as Total Return 3-6 yrs Baa to Aaa 0%
Fund, with quality and
foreign issuer
restrictions
- ------------------------------------------------------------------------------------------
Total Return III Same as Total Return 3-6 yrs B to Aaa; max 0-20%
Fund, with prohibitions 10% below Baa
on firms engaged in
socially sensitive
practices
- ------------------------------------------------------------------------------------------
Commercial Mortgage Commercial mortgage- 3-8 yrs B to Aaa; max 0%
Securities backed securities 35% below Baa
- ------------------------------------------------------------------------------------------
Long-Term U.S. Long-term maturity fixed [Greater than A to Aaa 0%
Government income securities or equal to]
8 yrs
- ------------------------------------------------------------------------------------------
Foreign Intermediate maturity 3-6 yrs B to Aaa; max [Greater
foreign fixed income 10% below Baa than or
securities equal to]
85%
- ------------------------------------------------------------------------------------------
Global Intermediate maturity 3-8 yrs B to Aaa; max 25-75%
U.S. and foreign fixed 10% below Baa
income securities
- ------------------------------------------------------------------------------------------
International Foreign fixed income 0-8 yrs Baa to Aaa [Greater
securities (Fund offered than or
only to PIMCO private equal to]
account clients) 65%
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY FUNDS PRIMARY INVESTMENTS DURATION CREDIT QUALITY/1/ FOREIGN/2/
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
StocksPLUS S&P 500 stock index 0-1 yr B to Aaa; max 0-20%
derivatives backed by a 10% below Baa
portfolio of short-term
fixed income securities
- ------------------------------------------------------------------------------------------
StocksPLUS Short Inversely correlated S&P 0-1 yr B to Aaa; max 0-20%
Strategy 500 derivatives backed 10% below Baa
by a portfolio of short-
term fixed income
securities
- ------------------------------------------------------------------------------------------
VersaSTYLE Equity Common stocks invested n/a n/a 0-25%
according to PIMCO's
investment style
rotation strategy
- ------------------------------------------------------------------------------------------
VersaSTYLE Equity Same as VersaSTYLE n/a n/a 0-25%
II Equity Fund (Fund
offered only to PIMCO
private account clients)
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CREDIT
BALANCED FUNDS PRIMARY INVESTMENTS DURATION QUALITY/1/ FOREIGN/2/
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Strategic Same as Total Return and 0-6 yrs B to Aaa; max 0-20%
Balanced StocksPLUS Funds 10% below Baa
according to PIMCO's
allocation strategy
- ------------------------------------------------------------------------------------------
</TABLE>
/1/ As rated by Moody's Investors Services, Inc., or if unrated, determined to
be of comparable quality.
/2/ Percentage limitations relate to foreign currency-denominated securities for
all Funds except the PIMCO Foreign, Global and International Funds.
Percentage limitations for these three Funds relate to securities of foreign
issuers, denominated in any currency. Each Fund (except the Low Duration II
and Total Return II Funds) may invest beyond these limits in U.S. dollar-
denominated securities of foreign issuers. Neither the Low Duration Fund II
nor the Total Return Fund II may invest in any securities of foreign
issuers.
PIMCO FUNDS
<PAGE>
4
INVESTMENT OBJECTIVES OF PIMCO FUNDS
The investment objective of each of the PIMCO Money Market Fund and PIMCO
Short-Term Fund is to seek to obtain maximum current income consistent with
preservation of capital and daily liquidity. The investment objective of each
of the remaining Fixed Income Funds and the PIMCO Strategic Balanced Fund is to
seek to realize maximum total return, consistent with preservation of capital
and prudent investment management. The investment objective of the PIMCO
StocksPLUS Fund, PIMCO VersaSTYLE Equity Fund and PIMCO VersaSTYLE Equity Fund
II 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 investment objective of the PIMCO StocksPLUS Short Strategy Fund is to seek
total return through the implementation of short investment positions on the
S&P 500 Index.
INVESTMENT RISKS AND CONSIDERATIONS
The following are some of the primary risks relevant to an investment in the
Funds and to the securities in which the Funds invest. Investors should read
the Prospectus carefully for a more complete discussion of the risks relating
to an investment in the Funds. The value of all securities and other
instruments held by the Funds will vary from time to time in response to a wide
variety of market factors. Consequently, the net asset value per share of each
Fund will vary, except that the PIMCO Money Market Fund shall attempt to
maintain a net asset value of $1.00 per share, although there can be no
assurance that the Fund will be successful in doing so. The net asset value per
share of any Fund may be less at the time of redemption than it was at the time
of investment. The value of fixed income securities can be expected to vary
inversely with changes in prevailing interest rates, i.e., as interest rates
rise, market value tends to decrease, and vice versa. In addition, certain of
the Funds may invest in securities rated lower than Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard & Poor's ("S&P"). Such securities
carry a high degree of credit risk and are considered speculative by the major
rating agencies.
Certain Funds may invest in securities of foreign issuers, which may be
subject to additional risk factors, including foreign currency and political
risks, not applicable to securities of U.S. issuers. Certain of the Funds'
investment techniques may involve a form of borrowing, which may tend to
exaggerate the effect on net asset value of any increase or decrease in the
market value of a Fund's portfolio and may require liquidation of portfolio
positions when it is not advantageous to do so. Certain Funds may sell
securities short, which exposes the Fund to a risk of loss if the value of the
security sold short should increase.
All Funds (except the PIMCO Money Market Fund) may use derivative
instruments, consisting of futures, options, options on futures, and swap
agreements, for hedging purposes or as part of their investment strategies. Use
of these instruments may involve certain costs and risks, including the risk
that a Fund could not close out a position when it would be most advantageous
to do so, the risk of an imperfect correlation between the value of the
securities being hedged and the value of the particular derivative instrument,
and the risk that unexpected changes in interest rates may adversely affect the
value of a Fund's investments in particular derivative instruments.
The PIMCO Commercial Mortgage Securities, Foreign, Global and International
Funds are "non-diversified" for purposes of the Investment Company Act of 1940,
meaning that they may invest a greater percentage of their assets in the
securities of one issuer than the other Funds. As "non-diversified" portfolios,
these Funds may be more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified portfolio might be. See
"Investment Objectives and Policies" and "Characteristics and Risks of
Securities and Investment Techniques" for additional information.
<PAGE>
5
INVESTMENT ADVISER AND FUND ADMINISTRATOR
Pacific Investment Management Company ("PIMCO") serves as investment adviser
("Adviser") to the Trust, and also serves as the Trust's administrator. The
Adviser is an investment management firm established in 1971 that had
approximately $77.2 billion of assets under management as of April 30, 1996.
The Adviser is a subsidiary of PIMCO Advisors L.P. ("PIMCO Advisors"), which
had approximately $97.7 billion of assets under management as of April 30,
1996. See "Management of the Trust."
PURCHASE OF SHARES
Each Fund offers two classes of shares: the "Institutional Class" and the
"Administrative Class." Shares of the Institutional Class are offered primarily
for direct investment by institutional investors and high net worth
individuals. They also are offered through certain financial intermediaries
that charge their customers transaction or other fees with respect to the
customers' investment in the Funds. Shares of the Administrative Class are
offered primarily through brokers, retirement plan administrators and other
financial intermediaries. Administrative Class shares pay service fees to such
entities for services they provide to shareholders of that class.
Shares of each class of the Funds are offered at the relevant next determined
net asset value with no sales charge. The minimum initial investment for shares
of either class is $1,000,000. Shares of the PIMCO International Fund and PIMCO
VersaSTYLE Equity Fund II are offered only to private account clients of PIMCO.
See "Purchase of Shares."
REDEMPTIONS AND EXCHANGES
Shares of each class of each Fund may be redeemed without cost at the
relevant net asset value per share of the class of that Fund next determined
after receipt of the redemption request. The PIMCO StocksPLUS Short Strategy
Fund imposes a redemption fee, payable to the Fund, of 1% on all shares of the
Fund held for less than three months. The redemption price may be more or less
than the purchase price.
Shares of a class of any Fund may be exchanged for shares of the same class
of any other Fund of the Trust offered generally to the public on the basis of
relative net asset values, except that only private account clients of PIMCO
may purchase shares of the PIMCO International Fund and PIMCO VersaSTYLE Equity
Fund II. Shares of a Fund may also be exchanged for shares of the same class of
a series of the PIMCO Funds: Equity Advisors Series, an affiliated no-load
mutual fund family, comprised primarily of equity portfolios managed by the
subsidiary partnerships of PIMCO Advisors. See "Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS
Each Fund will distribute dividends from net investment income at least
monthly (quarterly in the case of the PIMCO International Fund, PIMCO Strategic
Balanced Fund and Equity Funds), and any net realized capital gains at least
annually. All dividends and distributions will be reinvested automatically at
net asset value in additional shares of the same class of the same Fund, unless
cash payment is requested. Dividends from net investment income with respect to
Administrative Class shares will be lower than those paid with respect to
Institutional Class shares, reflecting the payment of service fees by that
class. See "Dividends, Distributions and Taxes."
PIMCO FUNDS
<PAGE>
6
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES (EACH CLASS):
<TABLE>
<S> <C>
Sales Load Imposed on Purchases.......................................... None
Sales Load Imposed on Reinvested Dividends............................... None
Redemption Fee:
StocksPLUS Short Strategy Fund......................................... 1%*
All Other Funds........................................................ None
Exchange Fee............................................................. None
</TABLE>
*On shares held less than 3 months.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS):
<TABLE>
<CAPTION>
ADVISORY ADMINISTRATIVE TOTAL
INSTITUTIONAL CLASS SHARES FEE FEE EXPENSES
-------------------------------------------- -------- -------------- --------
<S> <C> <C> <C>
Money Market Fund........................... 0.15% 0.20% 0.35%
Short-Term Fund............................. 0.25 0.20 0.45
Low Duration Fund........................... 0.25 0.18 0.43
Low Duration Fund II........................ 0.25 0.25 0.50
Low Duration Fund III....................... 0.25 0.25 0.50
Moderate Duration Fund...................... 0.25 0.25 0.50
High Yield Fund............................. 0.25 0.25 0.50
Total Return Fund........................... 0.25 0.18 0.43
Total Return Fund II........................ 0.25 0.25 0.50
Total Return Fund III....................... 0.25 0.25 0.50
Commercial Mortgage Securities Fund......... 0.40 0.25 0.65
Long-Term U.S. Government Fund.............. 0.25 0.25 0.50
Foreign Fund................................ 0.25 0.25 0.50
Global Fund................................. 0.25 0.30 0.55
International Fund.......................... 0.25 0.25 0.50
StocksPLUS Fund............................. 0.40 0.25 0.65
StocksPLUS Short Strategy Fund.............. 0.40 0.25 0.65
VersaSTYLE Equity Fund...................... 0.40 0.25 0.65
VersaSTYLE Equity Fund II................... 0.40 0.25 0.65
Strategic Balanced Fund..................... 0.40 0.25 0.65
</TABLE>
<TABLE>
<CAPTION>
12B-1
ADVISORY ADMINISTRATIVE (SERVICE) TOTAL
ADMINISTRATIVE CLASS SHARES FEE FEE FEE EXPENSES
------------------------------- -------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Money Market Fund.............. 0.15% 0.20% 0.25% 0.60%
Short-Term Fund................ 0.25 0.20 0.25 0.70
Low Duration Fund.............. 0.25 0.18 0.25 0.68
Low Duration Fund II........... 0.25 0.25 0.25 0.75
Low Duration Fund III.......... 0.25 0.25 0.25 0.75
Moderate Duration Fund......... 0.25 0.25 0.25 0.75
High Yield Fund................ 0.25 0.25 0.25 0.75
Total Return Fund.............. 0.25 0.18 0.25 0.68
Total Return Fund II........... 0.25 0.25 0.25 0.75
Total Return Fund III.......... 0.25 0.25 0.25 0.75
Commercial Mortgage Securities
Fund.......................... 0.40 0.25 0.25 0.90
Long-Term U.S. Government Fund. 0.25 0.25 0.25 0.75
Foreign Fund................... 0.25 0.25 0.25 0.75
Global Fund.................... 0.25 0.30 0.25 0.80
International Fund............. 0.25 0.25 0.25 0.75
StocksPLUS Fund................ 0.40 0.25 0.25 0.90
StocksPLUS Short Strategy Fund. 0.40 0.25 0.25 0.90
VersaSTYLE Equity Fund......... 0.40 0.25 0.25 0.90
VersaSTYLE Equity Fund II...... 0.40 0.25 0.25 0.90
Strategic Balanced Fund........ 0.40 0.25 0.25 0.90
</TABLE>
<PAGE>
7
For a more detailed discussion of the Funds' fees and expenses, see "Fund
Administrator," "Advisory and Administrative Fees," and "Service Fees" under
the caption "Management of the Trust."
EXAMPLE OF FUND EXPENSES:
An investor would pay the following expenses on a $1,000 investment, assuming
(1) a hypothetical 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund............................ $4 $11 $20 $ 44
Short-Term Fund.............................. $5 $14 $25 $ 57
Low Duration Fund............................ $4 $14 $24 $ 54
Low Duration Fund II......................... $5 $16 $28 $ 63
Low Duration Fund III........................ $5 $16 $28 $ 63
Moderate Duration Fund....................... $5 $16 $28 $ 63
High Yield Fund.............................. $5 $16 $28 $ 63
Total Return Fund............................ $4 $14 $24 $ 54
Total Return Fund II......................... $5 $16 $28 $ 63
Total Return Fund III........................ $5 $16 $28 $ 63
Commercial Mortgage Securities Fund.......... $7 $21 $36 $ 81
Long-Term U.S. Government Fund............... $5 $16 $28 $ 63
Foreign Fund................................. $5 $16 $28 $ 63
Global Fund.................................. $6 $18 $31 $ 69
International Fund........................... $5 $16 $28 $ 63
StocksPLUS Fund.............................. $7 $21 $36 $ 81
StocksPLUS Short Strategy Fund............... $7 $21 $36 $ 81
VersaSTYLE Equity Fund....................... $7 $21 $36 $ 81
VersaSTYLE Equity Fund II.................... $7 $21 $36 $ 81
Strategic Balanced Fund...................... $7 $21 $36 $ 81
<CAPTION>
ADMINISTRATIVE CLASS SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund............................ $6 $19 $33 $ 75
Short-Term Fund.............................. $7 $22 $39 $ 87
Low Duration Fund............................ $7 $22 $38 $ 85
Low Duration Fund II......................... $8 $24 $42 $ 93
Low Duration Fund III........................ $8 $24 $42 $ 93
Moderate Duration Fund....................... $8 $24 $42 $ 93
High Yield Fund.............................. $8 $24 $42 $ 93
Total Return Fund............................ $7 $22 $38 $ 85
Total Return Fund II......................... $8 $24 $42 $ 93
Total Return Fund III........................ $8 $24 $42 $ 93
Commercial Mortgage Securities Fund.......... $9 $29 $50 $111
Long-Term U.S. Government Fund............... $8 $24 $42 $ 93
Foreign Fund ................................ $8 $24 $42 $ 93
Global Fund.................................. $8 $26 $44 $ 99
International Fund........................... $8 $24 $42 $ 93
StocksPLUS Fund.............................. $9 $29 $50 $111
StocksPLUS Short Strategy Fund............... $9 $29 $50 $111
VersaSTYLE Equity Fund....................... $9 $29 $50 $111
VersaSTYLE Equity Fund II.................... $9 $29 $50 $111
Strategic Balanced Fund...................... $9 $29 $50 $111
</TABLE>
The above tables are provided to assist investors in understanding the
various expenses which may be borne directly or indirectly in connection with
an investment in the Funds. This example should not be considered a
representation of past or future expenses or performance. Actual expenses may
be higher or lower than those shown. Examples of Fund Expenses for five and ten
year periods are only presented for those Funds with greater than ten months'
operational results.
PIMCO FUNDS
<PAGE>
8
FINANCIAL HIGHLIGHTS
The following information regarding selected per share data and ratios for
shares of the Funds is part of the Trust's financial statements which are
included in the Trust's Annual Report dated March 31, 1996, and incorporated
by reference in the Statement of Additional Information. The Trust's audited
financial statements and selected per share data and ratios appearing below
have been examined by Price Waterhouse LLP, independent accountants, whose
opinion thereon is also included in the Annual Report, which may be obtained
without charge. Information is presented for each Fund, and Class thereof, of
the Trust which had investment operations during the reporting periods.
Information regarding the PIMCO Money Market Fund and PIMCO Total Return Fund
II reflects the operational history of the Money Market Fund and PIMCO Managed
Bond and Income Fund, two former series of PIMCO Funds: Equity Advisors
Series, which were reorganized as series of the Trust as of November 1, 1995.
On that date, the investment advisory responsibilities of Pacific Mutual Life
Insurance Company with respect to the Money Market Fund were assumed by PIMCO.
Information for these Funds for each of the five years in the period ended
October 31, 1995, has been audited by the Funds' former independent
accountants.
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET REALIZED TOTAL INCOME DIVIDENDS DIVIDENDS IN DISTRIBUTIONS DISTRIBUTIONS
YEAR OR VALUE NET AND UNREALIZED (LOSS) FROM FROM NET EXCESS OF NET FROM NET IN EXCESS OF
PERIOD BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED NET REALIZED
ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS CAPITAL GAINS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
Institutional
Class
3/31/96 $ 1.00 $0.02 $0.00 $0.02 $(0.02) $ 0.00 $ 0.00 $ 0.00
10/31/95 1.00 0.06 0.00 0.06 (0.06) 0.00 0.00 0.00
10/31/94 1.00 0.03 0.00 0.03 (0.03) 0.00 0.00 0.00
10/31/93 1.00 0.03 0.00 0.03 (0.03) 0.00 0.00 0.00
10/31/92 1.00 0.04 0.00 0.04 (0.04) 0.00 0.00 0.00
10/31/91(a) 1.00 0.04 0.00 0.04 (0.04) 0.00 0.00 0.00
Administrative
Class
3/31/96 1.00 0.02 0.00 0.02 (0.02) 0.00 0.00 0.00
10/31/95(b) 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 0.00
SHORT-TERM FUND
Institutional
Class
3/31/96 $ 9.79 $0.69 $0.12 $0.81 $(0.65) $(0.03) $ 0.00 $ 0.00
3/31/95 9.92 0.56 (0.13) 0.43 (0.55) (0.01) 0.00 0.00
3/31/94 10.03 0.48 (0.12) 0.36 (0.47) 0.00 0.00 0.00
3/31/93 10.01 0.37 0.02 0.39 (0.37) 0.00 0.00 0.00
3/31/92 10.02 0.55 0.00 0.55 (0.55) 0.00 (0.01) 0.00
3/31/91 9.99 0.77 0.04 0.81 (0.78) 0.00 0.00 0.00
3/31/90 10.00 0.86 (0.01) 0.85 (0.86) 0.00 0.00 0.00
3/31/89 10.00 0.81 (0.01) 0.80 (0.80) 0.00 0.00 0.00
3/31/88(c) 10.00 0.33 0.00 0.33 (0.33) 0.00 0.00 0.00
Administrative
Class
3/31/96(d) 9.98 0.11 (0.07) 0.04 (0.10) 0.00 0.00 0.00
LOW DURATION FUND
Institutional
Class
3/31/96 $ 9.76 $0.66 $0.21 $0.87 $(0.68) $ 0.00 $ 0.00 $ 0.00
3/31/95 10.04 0.65 (0.30) 0.35 (0.54) 0.00 0.00 0.00
3/31/94 10.30 0.62 (0.16) 0.46 (0.64) (0.03) (0.05) 0.00
3/31/93 10.20 0.75 0.22 0.97 (0.74) 0.00 (0.13) 0.00
3/31/92 10.02 0.83 0.25 1.08 (0.82) 0.00 (0.08) 0.00
3/31/91 9.89 0.89 0.12 1.01 (0.88) 0.00 0.00 0.00
3/31/90 9.70 0.88 0.20 1.08 (0.88) 0.00 (0.01) 0.00
3/31/89 9.99 0.89 (0.25) 0.64 (0.90) 0.00 (0.03) 0.00
3/31/88(e) 10.00 0.74 (0.01) 0.73 (0.74) 0.00 0.00 0.00
Administrative
Class
3/31/96 9.76 0.63 0.21 0.84 (0.65) 0.00 0.00 0.00
3/31/95(f) 9.67 0.18 0.07 0.25 (0.14) 0.00 0.00 0.00
LOW DURATION FUND
II
Institutional
Class
3/31/96 $ 9.77 $0.66 $0.04 $0.70 $(0.60) $(0.03) $ 0.00 $ 0.00
3/31/95 9.94 0.62 (0.16) 0.46 (0.58) (0.03) 0.00 0.00
3/31/94 10.25 0.60 (0.28) 0.32 (0.58) 0.00 (0.05) 0.00
3/31/93 10.04 0.63 0.25 0.88 (0.64) 0.00 (0.03) 0.00
3/31/92(g) 10.00 0.28 0.03 0.31 (0.27) 0.00 0.00 0.00
HIGH YIELD FUND
Institutional
Class
3/31/96 $10.42 $1.04 $0.54 $1.58 $(1.01) $ 0.00 $(0.05) $ 0.00
3/31/95 10.52 0.99 (0.12) 0.87 (0.93) (0.02) 0.00 (0.02)
3/31/94 10.41 0.90 0.18 1.08 (0.90) 0.00 (0.07) 0.00
3/31/93(h) 10.00 0.24 0.41 0.65 (0.24) 0.00 0.00 0.00
Administrative
Class
3/31/96 10.41 1.02(+) 0.54(+) 1.56 (0.98) 0.00 (0.05) 0.00
3/31/95(i) 10.14 0.23 0.25 0.48 (0.21) 0.00 0.00 0.00
TOTAL RETURN FUND
Institutional
Class
3/31/96 $10.02 $0.81 $0.29 $1.10 $(0.61) $(0.10) $(0.12) $ 0.00
3/31/95 10.25 0.64 (0.24) 0.40 (0.56) (0.05) 0.00 0.00
3/31/94 10.91 0.68 (0.16) 0.52 (0.71) (0.15) (0.30) (0.02)
3/31/93 10.46 0.76 0.76 1.52 (0.76) 0.00 (0.31) 0.00
3/31/92 10.15 0.86 0.60 1.46 (0.86) 0.00 (0.29) 0.00
3/31/91 9.77 0.90 0.39 1.29 (0.90) 0.00 (0.01) 0.00
3/31/90 9.62 0.87 0.21 1.08 (0.87) 0.00 (0.06) 0.00
3/31/89 10.04 0.90 (0.23) 0.67 (0.91) 0.00 (0.18) 0.00
3/31/88(e) 10.00 0.67 0.04 0.71 (0.67) 0.00 0.00 0.00
Administrative
Class
3/31/96 10.01 0.80 0.29 1.09 (0.60) (0.09) (0.12) 0.00
3/31/95(j) 10.00 0.31 0.06 0.37 (0.32) (0.03) 0.00 0.00
</TABLE>
- -------
(a) From commencement of (f) From commencement of
operations, March 1, 1991. operations, December 31,
1994.
(b) From commencement of (g) From commencement of
operations, January 24, operations, November 1,
1995. 1991.
(c) From commencement of (h) From commencement of
operations, October 7, 1987. operations, December 16,
1992.
(d) From commencement of (i) From commencement of
operations, February 1, operations, January 16,
1996. 1995.
(e) From commencement of (j) From commencement of
operations, May 11, 1987. operations, September 7,
1994.
+ Per share amounts based on average number of shares outstanding
during the period.
<PAGE>
9
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
YEAR OR TAX BASIS VALUE END EXPENSES TO INCOME TO PORTFOLIO
PERIOD RETURN TOTAL END TOTAL OF PERIOD AVERAGE AVERAGE TURNOVER
ENDED OF CAPITAL DISTRIBUTIONS OF PERIOD RETURN (000'S) NET ASSETS NET ASSETS RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
Institutional
Class
3/31/96 $ 0.00 $(0.02) $ 1.00 2.58% $ 25,935 0.33%+ 5.44%+ N/A
10/31/95 0.00 (0.06) 1.00 5.67 7,741 0.40 5.53 N/A
10/31/94 0.00 (0.03) 1.00 3.53 7,454 0.40 3.52 N/A
10/31/93 0.00 (0.03) 1.00 2.83 5,836 0.40 2.78 N/A
10/31/92 0.00 (0.04) 1.00 3.85 7,817 0.40 4.02 N/A
10/31/91(a) 0.00 (0.04) 1.00 3.78 45,406 0.53+ 5.20 N/A
Administrative
Class
3/31/96 0.00 (0.02) 1.00 2.47 10 0.61+ 5.95+ N/A
10/31/95(b) 0.00 (0.05) 1.00 4.21 10 0.68+ 5.94+ N/A
SHORT-TERM FUND
Institutional
Class
3/31/96 $ 0.00 $(0.68) $ 9.92 8.49% $ 101,797 0.58% 6.86% 214.78%
3/31/95 0.00 (0.56) 9.79 4.46 90,114 0.50 5.67 79.30
3/31/94 0.00 (0.47) 9.92 3.66 73,176 0.50 4.87 45.81
3/31/93 0.00 (0.37) 10.03 3.94 46,905 0.50 3.67 54.50
3/31/92 0.00 (0.56) 10.01 5.66 44,172 0.50 5.52 94.62
3/31/91 0.00 (0.78) 10.02 8.44 44,820 0.50 7.83 115.26
3/31/90 0.00 (0.86) 9.99 8.86 13,649 0.50 8.61 140.28
3/31/89 0.00 (0.80) 10.00 8.29 14,401 0.50 8.57 178.21
3/31/88(c) 0.00 (0.33) 10.00 7.17+ 5,546 0.50+ 6.99+ 11.57
Administrative
Class
3/31/96(d) 0.00 (0.10) 9.92 0.41 3,999 0.52+ 4.44+ 214.78
LOW DURATION FUND
Institutional
Class
3/31/96 $ 0.00 $(0.68) $ 9.95 9.13% $ 2,677,574 0.42% 6.88% 208.79%
3/31/95 (0.09) (0.63) 9.76 3.60 2,332,032 0.41 6.46 77.14
3/31/94 0.00 (0.72) 10.04 4.56 2,298,255 0.43 6.05 42.69
3/31/93 0.00 (0.87) 10.30 9.91 1,403,594 0.45 7.21 67.51
3/31/92 0.00 (0.90) 10.20 11.30 906,650 0.50 8.08 37.21
3/31/91 0.00 (0.88) 10.02 10.60 516,325 0.57 8.97 44.31
3/31/90 0.00 (0.89) 9.89 11.36 317,425 0.60 8.83 161.91
3/31/89 0.00 (0.93) 9.70 6.49 172,046 0.60 8.83 56.23
3/31/88(e) 0.00 (0.74) 9.99 8.64+ 115,865 0.60+ 8.85+ 77.88
Administrative
Class
3/31/96 0.00 (0.65) 9.95 8.83 2,536 0.69 6.73 208.79
3/31/95(f) (0.02) (0.16) 9.76 2.53 771 0.66+ 6.93+ 77.14
LOW DURATION FUND
II
Institutional
Class
3/31/96 $(0.02) $(0.65) $ 9.82 7.30% $ 253,299 0.48% 6.61% 225.02%
3/31/95 (0.02) (0.63) 9.77 4.80 170,866 0.47 6.35 102.43
3/31/94 0.00 (0.63) 9.94 3.15 141,411 0.50 5.73 53.78
3/31/93 0.00 (0.67) 10.25 8.95 101,025 0.50 6.16 95.33
3/31/92(g) 0.00 (0.27) 10.04 7.72+ 31,027 0.51+ 6.80+ 12.57
HIGH YIELD FUND
Institutional
Class
3/31/96 $ 0.00 $(1.06) $10.94 15.70% $ 536,983 0.47% 9.28% 65.79%
3/31/95 0.00 (0.97) 10.42 8.81 336,310 0.48 9.37 77.60
3/31/94 0.00 (0.97) 10.52 10.65 219,976 0.50 8.40 112.40
3/31/93(h) 0.00 (0.24) 10.41 24.43+ 24,069 0.50+ 8.24+ 29.74
Administrative
Class
3/31/96 0.00 (1.03) 10.94 15.54 1,007 0.80 9.16 65.79
3/31/95(j) 0.00 (0.21) 10.41 4.66 41 0.73+ 10.12+ 77.60
TOTAL RETURN FUND
Institutional
Class
3/31/96 $ 0.00 $(0.83) $10.29 11.14% $10,247,605 0.42% 6.85% 221.13%
3/31/95 (0.02) (0.63) 10.02 4.22 7,239,735 0.41 6.72 98.48
3/31/94 0.00 (1.18) 10.25 4.55 5,008,160 0.41 6.27 176.74
3/31/93 0.00 (1.07) 10.91 15.29 3,155,441 0.43 7.07 89.95
3/31/92 0.00 (1.15) 10.46 14.90 1,813,935 0.46 8.18 110.46
3/31/91 0.00 (0.91) 10.15 13.74 975,619 0.49 9.10 98.68
3/31/90 0.00 (0.93) 9.77 11.36 659,663 0.60 8.60 109.90
3/31/89 0.00 (1.09) 9.62 5.96 192,613 0.60 8.53 195.26
3/31/88(e) 0.00 (0.67) 10.04 8.31+ 45,172 0.60+ 7.66+ 75.34
Administrative
Class
3/31/96 0.00 (0.81) 10.29 10.99 104,618 0.68 6.64 221.13
3/31/95(j) (0.01) (0.36) 10.01 3.76 9,037 0.66+ 6.54+ 98.48
</TABLE>
- -----------
+ Annualized.
PIMCO FUNDS
<PAGE>
10
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET REALIZED TOTAL INCOME DIVIDENDS DIVIDENDS IN DISTRIBUTIONS DISTRIBUTIONS
YEAR OR VALUE NET AND UNREALIZED (LOSS) FROM FROM NET EXCESS OF NET FROM NET IN EXCESS OF
PERIOD BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED NET REALIZED
ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS CAPITAL GAINS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL RETURN FUND
II
Institutional
Class
3/31/96 $10.21 $0.25 $(0.17) $ 0.08 $(0.26) $ 0.00 $(0.09) $(0.05)
10/31/95 9.39 0.69 0.76 1.45 (0.62) 0.00 (0.01) 0.00
10/31/94 10.38 0.51 (0.88) (0.37) (0.51) 0.00 (0.05) 0.00
10/31/93 9.99 0.61 0.74 1.35 (0.61) 0.00 (0.35) 0.00
10/31/92(k) 10.00 0.49 0.23 0.72 (0.49) 0.00 (0.24) 0.00
Administrative Class
3/31/96 10.22 0.24 (0.17) 0.07 (0.26) 0.00 (0.09) (0.05)
10/31/95(l) 9.34 0.56 0.88 1.44 (0.55) 0.00 (0.01) 0.00
TOTAL RETURN FUND III
Institutional
Class
3/31/96 $ 8.99 $0.72 $ 0.17 $ 0.89 $(0.54) $(0.09) $(0.12) $ 0.00
3/31/95 9.18 0.59 (0.16) 0.43 (0.52) (0.02) 0.00 0.00
3/31/94 9.81 0.59 (0.03) 0.56 (0.66) (0.12) (0.20) (0.21)
3/31/93 10.31 0.64 0.75 1.39 (0.64) 0.00 (1.25) 0.00
3/31/92(m) 10.00 0.63 0.58 1.21 (0.63) 0.00 (0.27) 0.00
LONG-TERM U.S.
GOV'T FUND
Institutional
Class
3/31/96 $ 9.85 $0.83 $ 0.66 $ 1.49 $(0.68) $(0.04) $(0.50) $(0.16)
3/31/95 9.96 0.60 (0.09) 0.51 (0.60) (0.02) 0.00 0.00
3/31/94 11.36 0.62 (0.06) 0.56 (1.05) (0.04) (0.70) (0.17)
3/31/93 10.82 0.70 1.66 2.36 (0.70) 0.00 (1.12) 0.00
3/31/92(n) 10.00 0.64 0.85 1.49 (0.64) 0.00 (0.03) 0.00
FOREIGN FUND
Institutional
Class
3/31/96 $ 9.38 $0.96 $ 1.03 $ 1.99 $(0.34) $(0.25) $(0.25) $(0.03)
3/31/95 10.18 0.38 (0.57) (0.19) 0.00 0.00 0.00 0.00
3/31/94 10.34 0.55 0.27 0.82 (0.55) 0.00 (0.06) (0.37)
3/31/93(o) 10.00 0.16 0.34 0.50 (0.16) 0.00 0.00 0.00
GLOBAL FUND
Institutional
Class
3/31/96 $ 9.87 $0.45 $ 0.72 $ 1.17 $(0.61) $ 0.00 $(0.21) $(0.17)
3/31/95 9.85 0.69 (0.14) 0.55 (0.29) (0.24) 0.00 0.00
3/31/94(p) 10.00 0.16 (0.15) 0.01 (0.16) 0.00 0.00 0.00
INTERNATIONAL FUND
Institutional
Class
3/31/96 $ 7.44 $0.63 $ 0.49 $ 1.12 $(0.39) $(0.13) $ 0.00 $ 0.00
3/31/95 9.93 2.18 (2.41) (0.23) (2.26) 0.00 0.00 0.00
3/31/94 10.53 0.47 0.24 0.71 (0.96) 0.00 (0.35) 0.00
3/31/93 10.02 0.62 0.42 1.04 (0.48) 0.00 (0.05) 0.00
3/31/92 9.94 0.79 0.27 1.06 (0.78) 0.00 (0.20)++ 0.00
3/31/91 9.78 0.79 0.30 1.09 (0.83) 0.00 (0.10) 0.00
3/31/90(q) 10.00 0.15 (0.27) (0.12) (0.10) 0.00 0.00 0.00
STOCKSPLUS FUND
Institutional
Class
3/31/96 $10.48 $0.91 $ 2.48 $ 3.39 $(1.05) $ 0.00 $(1.62) $(0.04)
3/31/95 9.52 1.03 0.69 1.72 (0.76) 0.00 0.00 0.00
3/31/94(r) 10.00 0.34 0.10 0.44 (0.34) (0.01) (0.10) (0.47)
VERSASTYLE EQUITY
FUND II
Institutional
Class
3/31/96(#) $10.22 $0.63 $ 2.44 $ 3.07 $(0.21) $ 0.00 $(0.91) $ 0.00
3/31/95(s) 10.00 0.12 0.22 0.34 (0.12) 0.00 0.00 0.00
</TABLE>
- -------
(k) From commencement of (p) From commencement of
operations, December 30, operations, November 23,
1991. 1993.
(l) From commencement of (q) From commencement of
operations, November 30, operations, December 13,
1994. 1989.
(m) From commencement of (r) From commencement of
operations, May 1, 1991. operations, May 14, 1993.
(n) From commencement of (s) From commencement of
operations, July 1, 1991. operations, September 30,
1994.
(o) From commencement of # Average commission rate =
operations, December 3, $0.03
1992.
++ Gain distribution includes $0.14 per share characterized for tax
purposes as distributions from ordinary income.
<PAGE>
11
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
YEAR OR TAX BASIS VALUE END EXPENSES TO INCOME TO PORTFOLIO
PERIOD RETURN TOTAL END TOTAL OF PERIOD AVERAGE AVERAGE TURNOVER
ENDED OF CAPITAL DISTRIBUTIONS OF PERIOD RETURN (000'S) NET ASSETS NET ASSETS RATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL RETURN FUND
II
Institutional
Class
3/31/96 $ 0.00 $(0.40) $ 9.89 0.78% $ 455,583 0.51%+ 6.36%+ 73.18%
10/31/95 0.00 (0.63) 10.21 15.96 442,091 0.50 6.47 41.05
10/31/94 (0.06) (0.62) 9.39 (3.58) 357,900 0.50 5.22 99.46
10/31/93 0.00 (0.96) 10.38 13.79 371,260 0.50 5.38 49.71
10/31/92(k) 0.00 (0.73) 9.99 7.52 287,113 0.50+ 5.83+ 133.61
Administrative Class
3/31/96 0.00 (0.40) 9.89 0.57 3,320 0.76+ 6.06+ 73.18
10/31/95(l) 0.00 (0.56) 10.22 15.92 3,163 0.76+ 6.22+ 40.91
TOTAL RETURN FUND III
Institutional
Class
3/31/96 $ 0.00 $(0.75) $ 9.13 10.06% $ 142,223 0.50% 6.82% 176.97%
3/31/95 (0.08) (0.62) 8.99 4.92 99,497 0.50 6.95 145.98
3/31/94 0.00 (1.19) 9.18 5.64 97,522 0.50 6.00 95.21
3/31/93 0.00 (1.89) 9.81 14.47 65,349 0.51 6.06 161.38
3/31/92(m) 0.00 (0.90) 10.31 13.61+ 47,908 0.60+ 6.75+ 521.14
LONG-TERM U.S.
GOV'T FUND
Institutional
Class
3/31/96 $ 0.00 $(1.38) $ 9.96 14.83% $ 32,511 0.56% 6.80% 238.32%
3/31/95 0.00 (0.62) 9.85 5.50 32,349 0.50 6.62 88.92
3/31/94 0.00 (1.96) 9.96 4.13 25,978 0.50 5.37 97.67
3/31/93 0.00 (1.82) 11.36 23.42 22,946 0.50 6.16 320.08
3/31/92(n) 0.00 (0.67) 10.82 20.57+ 15,900 0.50+ 7.91+ 427.81
FOREIGN FUND
Institutional
Class
3/31/96 $ 0.00 $(0.87) $10.50 21.80% $ 258,493 0.52% 5.83% 1,233.71%
3/31/95 (0.61) (0.61) 9.38 (1.85) 232,700 0.47 6.44 299.45
3/31/94 0.00 (0.98) 10.18 7.79 498,521 0.54 5.12 260.34
3/31/93(o) 0.00 (0.16) 10.34 16.23+ 178,895 0.65+ 4.97+ 122.55
GLOBAL FUND
Institutional
Class
3/31/96 $ 0.00 $(0.99) $10.05 12.04% $ 133,833 0.58% 5.88% 1,082.91%
3/31/95 0.00 (0.53) 9.87 10.35 76,476 0.64 5.59 461.46
3/31/94(p) 0.00 (0.16) 9.85 0.08 40,485 0.50+ 4.55+ 132.41
INTERNATIONAL FUND
Institutional
Class
3/31/96 $ 0.00 $(0.52) $ 8.04 15.08% $2,271,940 0.50% 6.09% 1,046.00%
3/31/95 0.00 (2.26) 7.44 (1.27) 45,950 0.43 5.90 674.00
3/31/94 0.00 (1.31) 9.93 6.54 2,296,978 0.43 5.51 370.00
3/31/93 0.00 (0.53) 10.53 10.61 2,589,677 0.46 6.67 301.00
3/31/92 0.00 (0.98) 10.02 10.97 1,314,661 0.51 8.24 201.00
3/31/91 0.00 (0.93) 9.94 11.55 609,660 0.55 8.23 202.00
3/31/90(q) 0.00 (0.10) 9.78 (4.18)+ 407,210 0.75+ 7.94+ 49.00
STOCKSPLUS FUND
Institutional
Class
3/31/96 $ 0.00 $(2.71) $11.16 34.07% $ 151,869 0.70% 15.23% 101.67%
3/31/95 0.00 (0.76) 10.48 18.64 46,498 0.50 11.89 176.98
3/31/94(r) 0.00 (0.92) 9.52 1.55 14,330 0.50+ 4.00+ 33.29
VERSASTYLE EQUITY
FUND II
Institutional
Class
3/31/96(#) $0.00 $(1.12) $12.17 30.53% $ 6,752 1.20% 1.26% 185.00%
3/31/95(s) 0.00 (0.12) 10.22 3.44 5,171 0.65+ 2.45+ 160.00
</TABLE>
- -------
+ Annualized
PIMCO FUNDS
<PAGE>
12
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of each Fund are
described below. There can be no assurance that the investment objective of
any Fund will be achieved. Because the market value of each Fund's investments
will change, the net asset value per share of each Fund (except the PIMCO
Money Market Fund) also will vary. Specific portfolio securities eligible for
purchase by the Funds, investment techniques that may be used by the Funds,
and the risks associated with these securities and techniques are described
more fully under "Characteristics and Risks of Securities and Investment
Techniques" in the Prospectus and "Investment Objectives and Policies" in the
Statement of Additional Information.
FIXED INCOME FUNDS
Each of the Fixed Income Funds differs from the others primarily in the
length of the Fund's duration or the proportion of its investments in certain
types of fixed income securities. For a discussion of the concept of duration,
see "Appendix A--Description of Duration."
The investment objective of the PIMCO Money Market Fund and PIMCO Short-Term
Fund is to seek to obtain maximum current income consistent with preservation
of capital and daily liquidity. The PIMCO Money Market Fund also attempts to
maintain a stable net asset value of $1.00 per share, although there can be no
assurance that it will be successful in doing so. Each of the remaining Fixed
Income Funds seeks to maximize total return, consistent with preservation of
capital and prudent investment management.
In selecting securities for each Fixed Income Fund, the Adviser 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 the Adviser's outlook for the U.S.
and foreign economies, the financial markets, and other factors.
Each of the Fixed Income Funds will invest at least 65% of its assets in the
following types of securities, which, unless specifically provided otherwise
in the description of the Funds that follows, 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,
including convertible securities and corporate commercial paper; mortgage-
backed and other asset-backed securities; structured notes and loan
participations; 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; and obligations of international agencies or supranational
entities. Fixed income securities may have fixed, variable, or floating rates
of interest, including rates of interest that vary inversely at a multiple of
a designated or floating rate, or that vary according to changes in relative
values of currencies. Each of the Fixed Income Funds may hold different
percentages of its assets in these various types of securities, and each Fund,
except the PIMCO Money Market Fund, may invest all of its assets in derivative
instruments or in mortgage- or asset-backed securities.
The compositions of the Fixed Income Funds differ as follows:
PIMCO Money Market Fund seeks maximum current income consistent with the
preservation of capital and daily liquidity. It attempts to achieve this
objective by investing at least 95% of its total assets, measured at the time
of investment, in a diversified portfolio of the highest quality money market
securities. The Fund may also invest up to 5% of its total assets, measured at
the time of investment, in money market securities that are in the second-
highest rating category for short-term obligations. The Fund's investments in
securities will be limited to U.S. dollar-denominated securities that mature
in 13 months or less from the date of purchase. The Fund may invest in the
following: obligations of the U.S. Government (including its agencies and
instrumentalities); short-term corporate debt securities from domestic and
foreign corporations; obligations of domestic and foreign commercial banks,
savings banks, and savings and loan associations; and commercial paper. The
Fund may invest more than 25% of its total assets in securities or obligations
issued by U.S. banks. The dollar-weighted average portfolio maturity of the
Fund will not exceed 90 days.
<PAGE>
13
The PIMCO Money Market Fund may invest only in U.S. dollar-denominated money
market instruments that present minimal credit risk and, with respect to at
least 95% of its total assets, measured at the time of investment, that are of
the highest quality. The Adviser will make a determination as to whether a
security presents minimal credit risk under procedures adopted by the Board of
Trustees. A money market instrument will be considered to be of the highest
quality (1) if rated in the highest rating category (i) by any two nationally
recognized statistical rating organizations ("NRSROs") (e.g., Aaa or Prime-1 by
Moody's, AAA or A-1 by S&P, or, (ii) if rated by only one NRSRO, by that NRSRO,
and whose acquisition is approved or ratified by the Board of Trustees; (2) if
unrated but issued by an issuer that has short-term debt obligations of
comparable maturity, priority, and security, and that are rated in the highest
rating category by (i) any two NRSROs or, (ii) if rated by only one NRSRO, by
that NRSRO, and whose acquisition is approved or ratified by the Board of
Trustees; or (3) an unrated security that is of comparable quality to a
security rated in the highest rating category as determined by the Adviser and
whose acquisition is approved or ratified by the Board of Trustees. With
respect to no more than 5% of its total assets, measured at the time of
investment, the Fund may also invest in money market instruments that are in
the second-highest rating category for short-term debt obligations (e.g., rated
Aa or Prime-2 by Moody's or AA or A-2 by S&P). A money market instrument will
be considered to be in the second-highest rating category under the criteria
described above with respect to instruments considered to be of the highest
quality, as applied to instruments in the second-highest rating category. See
"Appendix B--Description of Securities Ratings" for a description of Moody's
and S&P's ratings applicable to fixed income securities.
The PIMCO Money Market Fund may not invest more than 5% of its total assets,
measured at the time of investment, in securities of any one issuer that are of
the highest quality, except that (1) the Fund may invest more than 5% of its
total assets in the securities of a single issuer if rated in the highest
rating category for a period of up to three business days after purchase,
provided that the Fund may not make more than one investment at a time in
accordance with this exception, and (2) this limitation shall not apply to U.S.
Government securities and repurchase agreements with respect thereto. The Fund
may not invest more than the greater of 1% of its total assets or $1,000,000,
measured at the time of investment, in securities of any one issuer that are in
the second-highest rating category, except that this limitation shall not apply
to U.S. Government securities. In the event that an instrument acquired by the
Fund is downgraded or otherwise ceases to be of the quality that is required
for securities purchased by the Fund, the Adviser, under procedures approved by
the Board of Trustees (or the Board of Trustees itself if the Adviser becomes
aware an unrated security is downgraded below high quality and the Adviser does
not dispose of the security or such security does not mature within five
business days) shall promptly reassess whether such security presents minimal
credit risk and determine whether to retain the instrument.
PIMCO Short-Term Fund invests in a diversified portfolio of fixed income
securities of varying maturities. The average portfolio duration of this Fund
will normally not exceed one year. The Fund may invest up to 10% of its assets
in fixed income securities that are rated below investment grade (rated below
Baa by Moody's or BBB by S&P) but rated B or higher by Moody's or S&P (or, if
unrated, determined by the Adviser to be of comparable quality). Securities
rated below investment grade may be referred to colloquially as "junk bonds."
For information on the risks associated with investments in securities rated
below investment grade, see "Appendix B--Description of Securities Ratings."
The Fund may invest up to 5% of its assets in securities denominated in foreign
currencies, and may invest beyond this limit in U.S. dollar-denominated
securities of foreign issuers.
PIMCO Low Duration Fund invests in a diversified portfolio of fixed income
securities of varying maturities. The average portfolio duration of this Fund
will normally vary within a one- to three-year time frame based on the
Adviser's forecast for interest rates. The Fund may invest up to 10% of its
assets in fixed income securities that are rated below investment grade but
rated B or higher by Moody's or S&P (or, if unrated, determined by the Adviser
to be of comparable quality). For information on the risks associated with
investments in securities rated below investment grade, see "Appendix B--
Description of Securities Ratings." The Fund may invest up to 20% of its assets
in securities denominated in foreign currencies, and may invest beyond this
limit in U.S. dollar-denominated securities of foreign issuers. The total rate
of return for this Fund is expected to exhibit less volatility than that of the
PIMCO Moderate Duration Fund or the PIMCO Total Return Fund because its
duration will be shorter.
PIMCO FUNDS
<PAGE>
14
PIMCO Low Duration Fund II has the same policies as the PIMCO Low Duration
Fund, except that its investments in fixed income securities are limited to
those of domestic (U.S.) issuers that are rated at least A by Moody's or S&P
(or, if unrated, determined by the Adviser to be of comparable quality).
PIMCO Low Duration Fund III has the same policies as the PIMCO Low Duration
Fund, except that it limits its investments with respect to certain socially
sensitive issues. As a matter of non-fundamental policy, the Fund will not
invest in the securities of any issuer determined by the Adviser to be engaged
principally in the provision of healthcare services, the manufacture of
alcoholic beverages, tobacco products, pharmaceuticals or military equipment,
or the operation of gambling casinos. The Fund will also avoid, to the extent
possible on the basis of information available to the Adviser, the purchase of
securities of issuers engaged in the production or trade of pornographic
materials. An issuer will be deemed to be principally engaged in an activity
if it derives more than 10% of its gross revenues from such activities.
PIMCO Moderate Duration Fund invests in a diversified portfolio of fixed
income securities of varying maturities. The average portfolio duration of
this Fund will normally vary within a two- to four-year time frame based on
the Adviser's forecast for interest rates. The Fund may invest up to 10% of
its assets in fixed income securities that are rated below investment grade
but rated B or higher by Moody's or S&P (or, if unrated, determined by the
Adviser to be of comparable quality). For information on the risks associated
with investments in securities rated below investment grade, see "Appendix B--
Description of Securities Ratings." The Fund may invest up to 20% of its
assets in securities denominated in foreign currencies, and may invest beyond
this limit in U.S. dollar-denominated securities of foreign issuers. The total
rate of return for this Fund is expected to exhibit less volatility than that
of the PIMCO Total Return Fund because its duration will normally be shorter.
However, the total rate of return for this Fund is expected to exhibit more
volatility than that of the PIMCO Low Duration Fund because its duration will
normally be longer.
PIMCO High Yield Fund invests under normal circumstances at least 65% of its
assets in a diversified portfolio of fixed income securities rated lower than
Baa by Moody's or lower than BBB by S&P but rated at least B by Moody's or S&P
(or, if unrated, determined by the Adviser to be of comparable quality). Such
securities are colloquially referred to as "junk bonds." The remainder of the
Fund's assets may be invested in investment grade fixed income securities
(i.e., securities rated at least Baa by Moody's or BBB by S&P, or, if unrated,
deemed by the Adviser to be of comparable quality). The average portfolio
duration of this Fund will normally vary within a two- to six-year time frame
depending on the Adviser's view of the potential for total return offered by a
particular duration strategy. The Fund may invest in securities of foreign
issuers, but only those that are U.S. dollar-denominated. The Fund may also
engage in hedging strategies involving equity options.
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 possibility of default or bankruptcy of the issuer of such securities.
Risk of default or bankruptcy may be greater in periods of economic
uncertainty or recession, as the issuers of high yield securities may be less
able to withstand general economic downturns. The Adviser seeks to reduce risk
through diversification, credit analysis and attention to current developments
and trends in both the economy and financial markets. The value of all fixed
income securities, including those held by the Fund, can be expected to change
inversely with interest rates. For a further discussion of the special risks
of investing in lower rated securities, see "Characteristics and Risks of
Securities and Investment Techniques--High Yield Securities."
PIMCO Total Return Fund invests under normal circumstances at least 65% of
its assets in a diversified portfolio of fixed income securities of varying
maturities. The average portfolio duration of this Fund will normally vary
within a three- to six-year time frame based on the Adviser's forecast for
interest rates. The Fund may invest up to 10% of its assets in fixed income
securities that are rated below investment grade but rated B or higher by
Moody's or S&P (or, if unrated, determined by the Adviser to be of comparable
quality). For information on the risks associated with investments in
securities rated below investment grade, see "Appendix B--Description of
Securities Ratings." The Fund may also invest up to 20% of its assets in
securities denominated in foreign currencies, and may invest beyond this limit
in U.S. dollar-denominated securities of foreign issuers. Portfolio holdings
will be concentrated in areas of the bond market (based on quality, sector,
coupon or maturity) which the Adviser believes to be relatively undervalued.
The total rate of return for this Fund is expected to exhibit less volatility
than that of the PIMCO Long-Term U.S. Government Fund because its duration
will normally be shorter.
<PAGE>
15
PIMCO Total Return Fund II has the same policies as the PIMCO Total Return
Fund, except that its investments in fixed income securities are limited to
those of domestic (U.S.) issuers that are rated at least Baa by Moody's or BBB
by S&P (or, if unrated, determined by the Adviser to be of comparable quality).
PIMCO Total Return Fund III has the same policies as the PIMCO Total Return
Fund, except that it limits its investments with respect to certain socially
sensitive issues in the same manner as the PIMCO Low Duration Fund III.
PIMCO Commercial Mortgage Securities Fund invests at least 65% of its assets
in commercial mortgage-backed securities rated at least Baa by Moody's or BBB
by S&P (or, if unrated, determined by the Adviser to be of comparable quality).
The Fund also may invest up to 35% of its assets in lower-rated securities (but
rated at least B, or, if unrated, determined by the Adviser to be of comparable
quality) if such securities are considered by the Adviser to have attractive
investment characteristics. For information on the risks associated with
investments in securities rated below investment grade, see "Appendix B--
Description of Securities Ratings." The average portfolio duration of this Fund
will normally vary within a three- to eight-year time frame depending on the
Adviser's view of the potential for total return offered by a particular
duration strategy. The Fund may invest in securities of foreign issuers, but
only those that are U.S. dollar-denominated.
PIMCO Long-Term U.S. Government Fund invests in a diversified portfolio of
primarily U.S. Government securities, which may be represented by futures
contracts (including related options) with respect to such securities, and
options on such securities, when the Adviser deems it appropriate to do so. The
Fund will have a minimum average portfolio duration of eight years. For point
of reference, the dollar-weighted average portfolio maturity of the Fund is
normally expected to be more than ten years. The total rate of return is
expected to exhibit more volatility than that of the other Fixed Income Funds
due to the greater investment risk normally associated with longer duration
investments. The PIMCO Long-Term U.S. Government Fund's investments in fixed
income securities are limited to those of U.S. dollar-denominated securities of
domestic and foreign issuers that are rated at least A by Moody's or S&P (or,
if unrated, determined by the Adviser to be of comparable quality). In
addition, the Fund will not acquire a security if, as a result, more than 10%
of the Fund's total assets would be invested in securities rated below Aa by
Moody's or below AA by S&P, or if more than 25% of the Fund's total assets
would be invested in securities rated Aa by Moody's or AA by S&P.
PIMCO Foreign Fund invests in a portfolio of fixed income securities
primarily denominated in major foreign currencies and baskets of foreign
currencies (such as the European Currency Unit, or "ECU"). The Adviser will
invest the assets of the Fund in a number of international bond markets so
that, under normal circumstances, the Fund will invest at least 85% of its
assets in securities of issuers located outside the United States, representing
at least three foreign countries, which may be represented by futures contracts
(including related options) with respect to such securities, and options on
such securities, when the Adviser deems it appropriate to do so. The Fund may
invest up to 10% of its assets in fixed income securities that are rated below
investment grade but rated B or higher by Moody's or S&P (or, if unrated,
determined by the Adviser to be of comparable quality). For information on the
risks associated with investments in securities rated below investment grade,
see "Appendix B--Description of Securities Ratings." The average portfolio
duration of this Fund will normally vary within a three- to six-year time
frame.
PIMCO Global Fund invests in a portfolio of fixed income securities
denominated in major foreign currencies, baskets of foreign currencies (such as
the ECU), and the U.S. dollar. Under normal circumstances, at least 65% of its
assets will be invested in fixed income securities of issuers located in at
least three countries (one of which may be the United States), which may be
represented by futures contracts (including related options) with respect to
such securities, and options on such securities, when the Adviser deems it
appropriate to do so. Depending on the 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 may invest up to 10% of its
assets in fixed income securities that are rated below investment grade but
rated B or higher by Moody's or S&P (or, if unrated, determined by the Adviser
to be of comparable quality). For information on the risks associated with
investments in securities rated below investment grade, see "Appendix B--
Description of Securities Ratings." The average portfolio duration of this Fund
will normally vary within a three- to eight-year time frame.
PIMCO FUNDS
<PAGE>
16
The PIMCO Foreign and Global Funds differ primarily in the extent to which
assets are invested in the securities of issuers located outside the United
States. The Adviser will select the PIMCO Foreign and Global Funds' foreign
country and currency compositions based on an evaluation of relative interest
rates, exchange rates, monetary and fiscal policies, trade and current account
balances, and any other specific factors the Adviser believes to be relevant.
PIMCO International Fund invests in a portfolio of fixed income securities
denominated in major foreign currencies, baskets of foreign currencies, and
the U.S. dollar. The PIMCO International Fund is available only to private
account clients of PIMCO. The Adviser will invest the assets of the Fund in a
number of international bond markets so that, under normal conditions, the
Fund will invest at least 65% of its assets in fixed income securities of
foreign issuers representing at least three foreign countries or currencies,
which may be represented by futures contracts (including related options) with
respect to such securities, and options on such securities, when the Adviser
deems it appropriate to do so. The PIMCO International Fund will invest only
in investment grade securities, i.e., in securities rated at least Baa by
Moody's or BBB by S&P (or, if unrated, deemed by the Adviser to be of
comparable quality). The average portfolio duration of this Fund will vary
based on the strategy currently being used by the Adviser in managing the
assets of the Fund within the overall PIMCO private account management
program, but is normally not expected to exceed eight years. The Adviser will
select the Fund's foreign country and currency composition based on its
evaluation of relative interest rates, inflation rates, exchange rates,
monetary and fiscal policies, trade and current account balances, and any
other specific factors the Adviser believes to be relevant.
As a non-fundamental, operating policy, the Adviser intends to use foreign
currency-related derivative instruments (currency futures and related options,
currency options, forward contracts and swap agreements) in an effort to hedge
foreign currency risk with respect to at least 75% of the assets of the Fixed
Income Funds (other than the Global Fund) denominated in currencies other than
the U.S. dollar. There can be no assurance that the Adviser will be successful
in doing so. The active use of currency derivatives involves transaction costs
which may adversely effect yield and return.
The PIMCO Commercial Mortgage Securities, Foreign, Global and International
Funds are "non-diversified" for purposes of the Investment Company Act of 1940
("1940 Act"), meaning that they may invest a greater percentage of their
assets in the securities of one issuer than the other Funds. As "non-
diversified" portfolios, these Funds may be more susceptible to risks
associated with a single economic, political or regulatory occurrence than a
diversified portfolio might be.
EQUITY FUNDS
The Equity Funds are the PIMCO StocksPLUS Fund, the PIMCO StocksPLUS Short
Strategy Fund, the PIMCO VersaSTYLE Equity Fund and the PIMCO VersaSTYLE
Equity Fund II. The investment objective of the PIMCO StocksPLUS Short
Strategy Fund is to seek total return through the implementation of short
investment positions on the S&P 500 Index. The investment objective of each of
the remaining Equity Funds is to seek to achieve a total return which exceeds
the total return performance of the S&P 500 Index.
Each of the Equity Funds invests in common stocks, options, futures, options
on futures and swaps consistent with its portfolio management strategy as set
forth below. Assets not invested in equity securities may be invested in
securities eligible for purchase by the Fixed Income Funds. Each of the PIMCO
StocksPLUS and PIMCO StocksPLUS Short Strategy Funds may invest up to 10% of
its assets in fixed income securities that are below "investment grade," i.e.,
rated below Baa by Moody's or BBB by S&P, but at least B (or, if unrated,
determined by the Adviser to be of comparable quality). In addition, each of
the Equity Funds may lend its portfolio securities to brokers, dealers and
other financial institutions in order to earn income. Each of the Equity Funds
may invest all of its assets in derivative instruments, as described below and
under "Characteristics of Securities and Investment Techniques--Derivative
Instruments."
Each of the PIMCO VersaSTYLE Equity and PIMCO VersaSTYLE Equity II Funds may
invest in other equity securities, including securities convertible into
common stocks and warrants, and may invest up to 25% of its assets in the
securities of foreign issuers, primarily in the form of American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") or Global Depositary
Receipts ("GDRs"). Each of the
<PAGE>
17
PIMCO StocksPLUS and PIMCO StocksPLUS Short Strategy Funds may invest up to 20%
of its assets in securities of foreign issuers. Each of the Equity Funds may
purchase and sell options and futures on foreign currencies and enter into
forward currency contracts.
The Equity Funds differ in composition or strategy as follows:
PIMCO StocksPLUS Fund invests only in common stocks that are represented in
the S&P 500 ("S&P 500 stocks"), stock index futures, options on stock indexes,
and options on stock index futures that are based on the S&P 500 and swap
agreements with respect to the S&P 500 ("S&P 500 derivatives"). StocksPLUS is
the name of a proprietary portfolio management strategy which utilizes S&P 500
derivatives in addition to or in place of S&P 500 stocks to equal or exceed the
performance of the S&P 500. The Fund will seek to remain invested in S&P 500
stocks and S&P 500 derivatives even when the S&P 500 is declining.
The percentage of the PIMCO StocksPLUS Fund's assets invested directly in S&P
500 stocks will vary depending primarily on whether S&P 500 derivatives appear,
in the Adviser's opinion, overvalued or undervalued with respect to the stocks
underlying the S&P 500. The Fund may invest up to 100% of its assets in S&P 500
derivatives. The Fund will maintain a segregated account consisting of liquid
assets, such as cash, U.S. Government securities, or high grade debt
obligations or otherwise maintain offsetting positions to cover its open
positions in S&P 500 derivatives. The Adviser will actively manage the fixed
income assets serving as cover for derivatives, as well as any other fixed
income assets held by the Fund, with a view toward enhancing the Fund's total
return investment performance, subject to an overall portfolio duration which
is normally not expected to exceed one year. See "Appendix A--Description of
Duration."
The S&P 500 is composed of 500 selected common stocks, most of which are
listed on the New York Stock Exchange. Standard and Poor's ("S&P") chooses the
stocks to be included in the S&P 500 solely on a statistical basis. The
weightings of stocks in the index are based on each stock's relative total
market value, that is, its market price per share times the number of shares
outstanding. Stocks represented currently in the S&P 500 represent
approximately two-thirds of the total market value of all U.S. common stocks.
The Fund is neither sponsored by nor affiliated with S&P.
When S&P 500 derivatives appear to be overvalued relative to the S&P 500, the
Fund may invest up to 100% of its assets in a "basket" of S&P 500 stocks. The
composition of this basket will be determined by standard statistical
techniques that analyze the historical correlation between the return of every
stock currently in the S&P 500 and the return on the S&P 500 itself. The
Adviser may employ fundamental stock analysis only to choose among stocks that
have already satisfied the statistical correlation tests. Stocks chosen for the
Fund are not limited to those with any particular weighting in the S&P 500.
Positions in S&P 500 futures and options on futures will be entered into only
to the extent they constitute permissible positions for the Fund according to
applicable rules of the Commodity Futures Trading Commission ("CFTC"). From
time to time, the Adviser may be constrained in its ability to use S&P 500
derivatives either by requirements of the Internal Revenue Code or by an
unanticipated inability to close out positions when it would be most
advantageous to do so. A large number of investors use S&P derivatives for both
hedging and speculative purposes, and although generally this helps guarantee a
liquid market in those instruments, at times liquidity may be limited. For more
information about S&P 500 derivatives, see "Characteristics and Risks of
Securities and Investment Techniques--Derivative Instruments."
PIMCO StocksPLUS Short Strategy Fund invests primarily in S&P 500 short
positions such that the Fund's net asset value is generally expected to vary
inversely to the value of the S&P 500. The Fund is designed for investors
seeking to take advantage of declines in the value of the S&P 500, or investors
wishing to hedge existing long equity positions. The Fund will generally
realize gains only when the price of the S&P 500 Index is declining. When the
S&P 500 is rising, the Fund will generally incur a loss.
The Fund will maintain short positions through the use of a combination of
S&P 500 derivatives, including options, futures and swap agreements. All S&P
500 derivatives will be covered by the maintenance of a segregated account
consisting of liquid assets, such as cash, U.S. Government securities or other
high grade liquid debt obligations, or through the maintenance of offsetting
positions. It is anticipated that the Fund will generally remain fully invested
in S&P 500 short positions at all times, even during periods when the S&P 500
PIMCO FUNDS
<PAGE>
18
is rising. However, the Fund may purchase call options on S&P 500 futures
contracts from time to time in an effort to limit the total potential decline
in the Fund's net asset value. There can be no assurance that the use of such
call options would be effective in limiting the potential decline in net asset
value of the Fund.
PIMCO will actively manage the fixed income portion of the Fund's investment
portfolio that is used as coverage for the S&P 500 derivatives in an attempt
to provide incremental returns. Thus, there will not be a perfect inverse
correlation between the performance of the S&P 500 and the performance of the
Fund. A perfect inverse correlation would exist if the net asset value of the
Fund, including the value of its dividend and capital gains distributions,
increased in exact proportion to decreases in the S&P 500 (or decreased in
exact proportion to increases in the S&P 500). Rather, because of PIMCO's
management of the fixed income securities that are held by the Fund as cover
for the Fund's short positions, it is expected that, if the value of the S&P
500 were to decrease by 10%, for example, the amount by which the Fund's net
asset value would increase would be an amount slightly in excess of 10%.
Conversely, an increase in the S&P 500 of 10% would result in a loss to the
Fund of slightly less than this amount. There can be no assurance that the use
of such active fixed income management techniques will produce the intended
results.
PIMCO VersaSTYLE Equity Fund invests primarily in common stocks of domestic
and foreign issuers. The Fund may invest up to 25% of its assets in securities
denominated in foreign currencies. Although the Adviser will vary the
percentage of assets committed to the equity market based on economic or
market conditions, the PIMCO VersaSTYLE Equity Fund will normally be fully
invested in equity securities or equity derivatives.
VersaSTYLE is a proprietary portfolio management strategy that seeks to
identify the investment style or styles such as "small capitalization,"
"growth," or "value" investing that the Adviser believes are most likely to
provide superior total return at a given time. The Adviser then tailors the
Fund's investment strategy and changes the Fund's holdings in a manner
consistent with the strategy's outlook. The Adviser's methodology of stock
selection utilizes economic and other data in seeking to identify appropriate
investment styles and to select individual securities. "Small capitalization"
investing involves the purchase of securities of relatively small issuers with
little equity and few shares of common stock outstanding, which the Adviser
believes may present the potential for significant growth. Small
capitalization stocks tend to be subject to large price fluctuations, and
therefore the potential for short-term gains and losses is greater. "Growth"
investing involves the purchase of securities of issuers characterized as
having relatively low ratios of book to market value that are expected to have
above-average increases in revenues and earnings. These firms normally retain
most earnings for reinvestment and therefore pay small dividends, emphasizing
growth of capital over time as opposed to current yield or income. "Value"
investing involves the purchase of securities based more upon the value of the
issuer's assets than upon projected earnings. "Value" firms are characterized
as having relatively higher ratios of book to market value. For example, such
an issuer's current assets may exceed its total liabilities on a per share
basis by more than the market price of the stock.
The Fund may take positions in individual equity and index options, index
futures and options on index futures. The Fund may purchase and sell options
and futures on foreign currencies, and may enter into forward currency
contracts. Additionally, the Fund may enter into certain over-the-counter
transactions, including swap agreements. The primary purpose of futures and
derivative positions is to hedge risks arising from current or anticipated
equity positions, or to tailor the Fund's risk profile or to achieve exposure
to particular market sectors in a manner more cost-effective than undertaking
transactions in individual equity securities. See "Characteristics and Risks
of Securities and Investment Techniques" for more details on investment
practices.
PIMCO VersaSTYLE Equity Fund II has the same policies as the PIMCO
VersaSTYLE Equity Fund. The Fund is available only to private account clients
of PIMCO.
BALANCED FUNDS
PIMCO Strategic Balanced Fund has as its investment objective the
maximization of total return, consistent with preservation of capital and
prudent investment management. In seeking to achieve this objective, the Fund
invests in the securities eligible for purchase by the PIMCO StocksPLUS Fund
and the PIMCO Total Return Fund. The percentage of the Fund's assets allocated
to equity or fixed income exposure will vary in accordance with an asset
allocation methodology developed by the Adviser. The methodology builds upon
the
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Adviser's long-standing process of economic forecasting of business cycle
stages by applying to this process a disciplined asset allocation model which
employs certain statistical variance techniques. Depending on the outcome of
this asset allocation methodology, the Fund's equity exposure will vary between
45% and 75% of its total assets, and its fixed income exposure will vary
between 25% and 55%. There can be no assurance that the Adviser's asset
allocation methodology will be successful.
TOTAL RETURN
The "total return" sought by certain of the Funds will consist of interest
and dividends from underlying securities, capital appreciation reflected in
unrealized increases in value of portfolio securities (realized by the
shareholder only upon selling shares), or realized from the purchase and sale
of 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 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 fixed income securities denominated in currencies other than
the U.S. dollar also may be affected by movements in foreign currency exchange
rates.
The change in market value of equity securities (and therefore their capital
appreciation or depreciation) may depend upon a number of factors, including:
conditions in the securities markets, the business success of the security's
issuer, changing interest rates, real or perceived economic and competitive
industry conditions, and foreign currency exchange rates. Historically, the
total return performance of equity-oriented portfolios has generally been
greater over the long term than fixed income portfolios. However, the market
risk and price volatility of an equity portfolio is generally greater than that
of a fixed income portfolio, and is generally considered to be a more
aggressive investment.
INVESTMENT RESTRICTIONS
Each Fund's investment objective, as set forth under "Investment Objectives
and Policies," and the investment restrictions set forth below are fundamental
policies of the Fund and may not be changed with respect to a Fund without
shareholder approval by vote of a majority of the outstanding shares of that
Fund. Under these restrictions, a Fund may not:
(1) invest in a security if, as a result of such investment, more than
25% of its total assets (taken at market value at the time of such
investment) would be invested in the securities of issuers in any
particular industry, except that this restriction does not apply (a) to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (or repurchase agreements with respect thereto) and
(b) with respect to the Money Market Fund, to securities or obligations
issued by U.S. banks;
(2) with respect to 75% of its assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at
market value at the time of such investment) would be invested in the
securities of any one issuer, except that this restriction does not apply
to securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities (This investment restriction is not applicable to the
Commercial Mortgage Securities Fund, the Foreign Fund, the Global Fund or
the International Fund.);
PIMCO FUNDS
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(3) with respect to 75% of its assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the time
of such investment) of the outstanding voting securities of any one issuer
(This restriction is not applicable to the Commercial Mortgage Securities
Fund, the Foreign Fund, the Global Fund or the International Fund.);
(4) purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies which invest in real estate or interests therein;
(5) purchase or sell commodities or commodities contracts or oil, gas or
mineral programs. This restriction shall not prohibit a Fund, subject to
restrictions described in this Prospectus and in the Statement of
Additional Information, from purchasing, selling or entering into futures
contracts, options on futures contracts, foreign currency forward
contracts, foreign currency options, or any interest rate, securities-
related or foreign currency-related hedging instrument, including swap
agreements and other derivative instruments, subject to compliance with any
applicable provisions of the federal securities or commodities laws;
(6) for the High Yield, Total Return III, International and StocksPLUS
Funds: purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but
it may make margin deposits in connection with transactions in options,
futures, and options on futures;
(7) borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that a Fund may (i) borrow from banks or
enter into reverse repurchase agreements, or employ similar investment
techniques, and pledge its assets in connection therewith, but only if
immediately after each borrowing there is asset coverage of 300% and (ii)
enter into transactions in options, futures, options on futures, and other
derivative instruments as described in this Prospectus and in the Statement
of Additional Information (the deposit of assets in escrow in connection
with the writing of covered put and call options and the purchase of
securities on a when-issued or delayed delivery basis, collateral
arrangements with respect to initial or variation margin deposits for
futures contracts, and commitments entered into under swap agreements or
other derivative instruments will not be deemed to be pledges of a Fund's
assets);
(8) lend any funds or other assets, except that a Fund may, consistent
with its investment objective and policies: (a) invest in debt obligations,
including bonds, debentures, or other debt securities, bankers' acceptances
and commercial paper, even though the purchase of such obligations may be
deemed to be the making of loans, (b) enter into repurchase agreements, and
(c) lend its portfolio securities in an amount not to exceed one-third of
the value of its total assets, provided such loans are made in accordance
with applicable guidelines established by the Securities and Exchange
Commission and the Trustees of the Trust;
(9) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities, it
may be deemed to be an underwriter under the federal securities laws; or
(10)(a) for the High Yield, Total Return III, and StocksPLUS Funds:
maintain a short position, or purchase, write or sell puts, calls,
straddles, spreads or combinations thereof, except as set forth in this
Prospectus and in the Statement of Additional Information for transactions
in options, futures, options on futures, and transactions arising under
swap agreements or other derivative instruments;
(b) for the Money Market, Short-Term, Low Duration, Low Duration II, Low
Duration III, Moderate Duration, Total Return, Total Return II, Commercial
Mortgage Securities, Long-Term U.S. Government, Foreign, Global,
International, StocksPLUS Short Strategy, VersaSTYLE Equity, VersaSTYLE
Equity II and Strategic Balanced Funds: maintain a short position, or
purchase, write or sell puts, calls, straddles, spreads or combinations
thereof, except on such conditions as may be set forth in this Prospectus
and in the Statement of Additional Information.
Each Fund is also subject to the following non-fundamental restrictions and
policies (which may be changed without shareholder approval) relating to the
investment of its assets and activities. Unless otherwise indicated, a Fund
may not:
(A) invest for the purpose of exercising control or management;
(B) purchase securities of other investment companies, except that a Fund
may, for temporary purposes, purchase shares of money market mutual funds,
subject to such restrictions as may be imposed
<PAGE>
21
by the Investment Company Act of 1940 and rules thereunder, or by any State
in which shares of the Fund are registered (collateral arrangements with
respect to securities on loan from a Fund are not considered to involve the
purchase of securities by the Fund and are not subject to this
restriction);
(C) invest more than 15% of the net assets of a Fund (10% in the case of
the PIMCO Money Market Fund) (taken at market value at the time of the
investment) in "illiquid securities," illiquid securities being defined to
include securities subject to legal or contractual restrictions on resale
(which may include private placements) repurchase agreements maturing in
more than seven days, certain loan participation interests, fixed time
deposits which are not subject to prepayment or provide for withdrawal
penalties upon prepayment (other than overnight deposits), certain options
traded over the counter that a Fund has purchased, and securities and other
liquid assets being used to cover such options a Fund has written,
securities for which market quotations are not readily available, or other
securities which legally or in the Adviser's opinion may be deemed illiquid
(other than securities issued pursuant to Rule 144A under the Securities
Act of 1933 and certain commercial paper that PIMCO has determined to be
liquid under procedures approved by the Board of Trustees);
(D) invest in a security if, as a result of such investment, more than 5%
of its total assets (taken at market value at the time of such investment)
would be invested in securities of issuers (other than issuers of Federal
agency obligations) having a record, together with predecessors or
unconditional guarantors, of less than three years of continuous operation;
(E) purchase or retain securities of any issuer if 5% of the securities
of such issuer are owned by those officers and Directors of Trustees of the
Trust or of the Adviser who each own beneficially more than one-half of 1%
of its securities;
(F) purchase securities for the Fund from, or sell portfolio securities
to, any of the officers and Directors or Trustees of the Trust or of the
Adviser;
(G) for the PIMCO Money Market, Short-Term, Low Duration, Low Duration
II, Low Duration III, Moderate Duration, Total Return, Total Return II,
Commercial Mortgage Securities, Long-Term U.S. Government, Foreign, Global,
StocksPLUS Short Strategy, VersaSTYLE Equity, VersaSTYLE Equity II and
Strategic Balanced Funds: purchase securities on margin, except for use of
short-term credit necessary for clearance of purchases and sales of
portfolio securities, but it may make margin deposits in connection with
covered transactions in options, futures, options on futures and short
positions;
(H) invest more than 5% of the assets of a Fund (taken at market value at
the time of investment) in any combination of interest only, principal
only, or inverse floating rate securities;
(I) borrow money (excluding dollar rolls and reverse repurchase
agreements, which are subject to the Fund's fundamental borrowing
restriction), except for temporary administrative purposes; or
(J)(a) for the PIMCO Short-Term, Low Duration and Low Duration III Funds,
invest greater than 5% of its assets in the securities of issuers based in
Newly Industrialized Countries ("NICs"); and
(b) for the remaining Fixed Income Funds, invest greater than 10% of its
assets in the securities of issuers based in NICs.
In addition, the Trust has adopted a non-fundamental policy pursuant to which
each Fund that may invest in securities denominated in foreign currencies,
except the PIMCO Global Fund, will hedge at least 75% of its exposure to
foreign currency using the techniques described in this Prospectus. There can
be no assurance that currency hedging techniques will be successful.
Unless otherwise indicated, all limitations applicable to Fund investments
(as stated above and elsewhere in this Prospectus) apply only at the time a
transaction is entered into. Any subsequent change in a rating assigned by any
rating service to a security (or, if unrated, deemed to be of comparable
quality), or change in the percentage of Fund assets invested in certain
securities or other instruments, or change in the average duration of a Fund's
investment portfolio, resulting from market fluctuations or other changes in a
Fund's total assets will not require a Fund to dispose of an investment until
the Adviser determines that it is practicable to sell or close out the
investment without undue market or tax consequences to the Fund. In the event
that ratings services assign different ratings to the same security, the
Adviser will determine which rating it believes best reflects the security's
quality and risk at that time, which may be the higher of the several assigned
ratings.
PIMCO FUNDS
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CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES
The following describes in greater detail different types of securities and
investment techniques used by the individual Funds, and discusses certain
concepts relevant to the investment policies of the Funds. Additional
information about the Funds' investments and investment practices may be found
in the Statement of Additional Information.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. The U.S. Government does not
guarantee the net asset value of the Funds' shares. Some U.S. Government
securities, such as Treasury bills, notes and bonds, and securities guaranteed
by the Government National Mortgage Association ("GNMA"), are supported by the
full faith and credit of the United States; others, such as those of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow
from the U.S. Treasury; others, such as those of the Federal National Mortgage
Association ("FNMA"), are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, such as
those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. U.S. Government securities include securities
that have no coupons, or have been stripped of their unmatured interest
coupons, individual interest coupons from such securities that trade
separately, and evidences of receipt of such securities. Such securities may
pay no cash income, and are purchased at a deep discount from their value at
maturity. Because interest on zero coupon securities is not distributed on a
current basis but is, in effect, compounded, zero coupon securities tend to be
subject to greater market risk than interest-paying securities of similar
maturities. Custodial receipts issued in connection with so-called trademark
zero coupon securities, such as CATs and TIGRs, are not issued by the U.S.
Treasury, and are therefore not U.S. Government securities, although the
underlying bond represented by such receipt is a debt obligation of the U.S.
Treasury. Other zero coupon Treasury securities (STRIPs and CUBEs) are direct
obligations of the U.S. Government.
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 interest on a corporate debt security may be fixed, floating or
variable, and may vary inversely with respect to a reference rate. See
"Variable and Floating Rate Securities" below. 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.
Investments in corporate debt securities that are rated below investment
grade (rated below Baa (Moody's) or BBB (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 Adviser seeks to minimize these risks
through diversification, in-depth credit analysis and attention to current
developments in interest rates and market conditions. See "Appendix B--
Description of Securities Ratings." Investments in high yield securities are
discussed separately below, see "High Yield Securities ("Junk Bonds")."
VARIABLE AND FLOATING RATE SECURITIES
Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. The terms of such obligations must
provide that interest rates are adjusted periodically based upon an interest
rate adjustment index as provided in the respective obligations. The
adjustment intervals may be regular, and range from daily up to annually, or
may be event based, such as based on a change in the prime rate.
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23
Each of the Fixed Income Funds may invest in floating rate debt instruments
("floaters"). The interest rate on a floater is a variable rate which is tied
to another interest rate, such as a money-market index or Treasury bill rate.
The interest rate on a floater resets periodically, typically every six months.
While, because of the interest rate reset feature, floaters provide a Fund with
a certain degree of protection against rises in interest rates, a Fund will
participate in any declines in interest rates as well.
Each of the Fixed Income Funds (except the PIMCO Money Market Fund) may also
invest in inverse floating rate debt instruments ("inverse floaters"). The
interest rate on an inverse floater resets in the opposite direction from the
market rate of interest to which the inverse floater is indexed. An inverse
floating rate security may exhibit greater price volatility than a fixed rate
obligation of similar credit quality. The Funds have adopted a policy under
which no Fund will invest more than 5% of its net assets in any combination of
inverse floater, interest only ("IO"), or principal only ("PO") securities. See
"Mortgage-Related and Other Asset-Backed Securities" for a discussion of IOs
and POs.
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES
Each of the Funds (except the PIMCO Money Market Fund) may invest all of its
assets in mortgage- or asset-backed securities. The value of some mortgage- or
asset-backed securities in which the Funds invest may be particularly sensitive
to changes in prevailing interest rates, and, like the other investments of the
Funds, the ability of a Fund to successfully utilize these instruments may
depend in part upon the ability of the Adviser to forecast interest rates and
other economic factors correctly.
Mortgage Pass-Through 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-related 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, the value of the premium would be
lost in the event of prepayment. Like other fixed income securities, when
interest rates rise, the value of a mortgage-related security generally will
decline; however, when interest rates are declining, the value of mortgage-
related securities with prepayment features may not increase as much as other
fixed income securities.
Payment of principal and interest on some mortgage pass-through 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-related securities created by non-governmental 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. Similar to a bond, interest and pre-paid principal on a CMO are
paid, in most cases, semi-annually. 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. 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.
PIMCO FUNDS
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Commercial Mortgage-Backed Securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property.
The market for commercial mortgage-backed securities developed more recently
and in terms of total outstanding principal amount of issues is relatively
small compared to the market for residential single-family mortgage-backed
securities. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans. These risks reflect the effects of local and other
economic conditions on real estate markets, the ability of tenants to make
loan payments, and the ability of a property to attract and retain tenants.
Commercial mortgage-backed securities may be less liquid and exhibit greater
price volatility than other types of mortgage- or asset-backed securities.
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 ("SMBS"), and may be structured in classes
with rights to receive varying proportions of principal and interest.
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.
The Funds have adopted a policy under which no Fund will invest more than 5%
of its net assets in any combination of IO, PO, or inverse floater securities.
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.
REPURCHASE AGREEMENTS
For the purpose of achieving income, each of the Funds may enter into
repurchase agreements, which entail the purchase of a portfolio eligible
security from a bank or broker-dealer that agrees to repurchase the security
at the Fund's cost plus interest within a specified time (normally one day).
If the party agreeing to repurchase should default, as a result of bankruptcy
or otherwise, the Fund will seek to sell the securities which it holds, which
action could involve procedural costs or delays in addition to a loss on the
securities if their value should fall below their repurchase price. No Fund
will invest more than 15% of its net assets (10% in the case of the PIMCO
Money Market Fund) (taken at current market value) in repurchase agreements
maturing in more than seven days.
REVERSE REPURCHASE AGREEMENTS, DOLLAR ROLLS, 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 liquid assets, such as cash, U.S. Government securities or 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 may enter into dollar rolls, in which the Fund sells mortgage-backed
or other securities for delivery in the current month and simultaneously
contracts to purchase substantially similar securities on a specified future
date. In the case of dollar rolls involving mortgage-backed securities, the
mortgage-backed securities that are purchased will be of the same type and
will have the same interest rate as those sold, but will be supported by
different pools of mortgages. The Fund forgoes principal and interest paid
during the roll period on the securities sold in a dollar roll, but the Fund
is compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any interest earned on the
proceeds of the securities sold. The Fund also could be compensated through
the receipt of fee income equivalent to a lower forward price. The Fund will
maintain a segregated account consisting of liquid assets, such as cash, U.S.
Government securities or high-grade debt obligations, to cover its obligations
under dollar rolls.
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Dollar rolls and reverse repurchase agreements will be subject to the Funds'
limitations on borrowings, which will restrict the aggregate of such
transactions (plus any other borrowings) to 33 1/3% of a Fund's total assets.
Apart from transactions involving reverse repurchase agreements and dollar
rolls, a Fund will not borrow money, except for temporary administrative
purposes.
LOANS OF PORTFOLIO SECURITIES
For the purpose of achieving income, the Funds may lend their portfolio
securities to brokers, dealers, and other financial institutions, provided: (i)
the loan is secured continuously by collateral consisting of U.S. Government
securities, cash or cash equivalents (negotiable certificates of deposit,
bankers' acceptances or letters of credit) maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (ii) the Fund may at any time call the loan and obtain the return of
the securities loaned; (iii) the Fund will receive any interest or dividends
paid on the loaned securities; and (iv) the aggregate market value of
securities loaned will not at any time exceed 33 1/3% of the total assets of
the Fund.
DELAYED DELIVERY, WHEN-ISSUED, AND FORWARD COMMITMENT TRANSACTIONS
Each of the Funds may purchase or sell securities on a when-issued, delayed
delivery, or forward commitment basis. These transactions involve a commitment
by the Fund to purchase or sell securities for a predetermined price or yield,
with payment and delivery taking place more than seven days in the future, or
after a period longer than the customary settlement period for that type of
security. When such purchases are outstanding, the Fund will set aside and
maintain until the settlement date in a segregated account, liquid assets, such
as cash, U.S. Government securities or high grade debt obligations in an amount
sufficient to meet the purchase price. Typically, no income accrues on
securities a Fund has committed to purchase prior to the time delivery of the
securities is made, although a Fund may earn income on securities it has
deposited in a segregated account. When purchasing a security on a when-issued,
delayed delivery, or forward commitment basis, the Fund assumes the rights and
risks of ownership of the security, including the risk of price and yield
fluctuations, and takes such fluctuations into account when determining its net
asset value. Because the Fund is not required to pay for the security until the
delivery date, these risks are in addition to the risks associated with the
Fund's other investments. If the Fund remains substantially fully invested at a
time when when-issued, delayed delivery, or forward commitment purchases are
outstanding, the purchases may result in a form of leverage. When the Fund has
sold a security on a when-issued, delayed delivery, or forward commitment
basis, the Fund does not participate in future gains or losses with respect to
the security. If the other party to a transaction fails to deliver or pay for
the securities, the Fund could miss a favorable price or yield opportunity or
could suffer a loss. A Fund may dispose of or renegotiate a transaction after
it is entered into, and may sell when-issued or forward commitment securities
before they are delivered, which may result in a capital gain or loss. There is
no percentage limitation on the extent to which the Funds may purchase or sell
securities on a when-issued, delayed delivery, or forward commitment basis.
SHORT SALES
Each of the Funds (except the PIMCO High Yield, Total Return III and
StocksPLUS Funds), and particularly the PIMCO StocksPLUS Short Strategy Fund,
may from time to time effect short sales as part of their overall portfolio
management strategies, including the use of derivative instruments, or to
offset potential declines in value of long positions in similar securities as
those sold short. A short sale (other than a short sale against the box) is a
transaction in which a Fund sells a security it does not own at the time of the
sale in anticipation that the market price of that security will decline. To
the extent that a Fund engages in short sales, it must (except in the case of
short sales "against the box") maintain asset coverage in the form of liquid
assets, such as cash, U.S. Government securities or high grade debt obligations
in a segregated account, or otherwise cover its position in a permissible
manner. A short sale is "against the box" to the extent that the Fund
contemporaneously owns, or has the right to obtain at no added cost, securities
identical to those sold short.
FOREIGN SECURITIES
Each of the Funds (except the PIMCO Low Duration II and Total Return II
Funds) may invest directly in fixed income securities of non-U.S. issuers. The
PIMCO Money Market, High Yield, Commercial Mortgage Securities and Long-Term
U.S. Government Funds may only invest in U.S. dollar-denominated fixed income
PIMCO FUNDS
<PAGE>
26
securities of non-U.S. issuers. Each of the Equity Funds may invest directly
in foreign equity securities. The PIMCO VersaSTYLE Equity and VersaSTYLE
Equity II Funds may invest in securities represented by ADRs, EDRs or GDRs.
ADRs are dollar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign issuer, and
are publicly traded on exchanges or over-the-counter in the United States.
EDRs are receipts similar to ADRs and are issued and traded in Europe. GDRs
may be offered privately in the United States and also trade in public or
private markets in other countries.
Each of the Funds (except the PIMCO VersaSTYLE Equity and VersaSTYLE Equity
II Funds) will limit its foreign investments to securities of issuers based in
developed countries (including Newly Industrialized Countries ("NICs"), such
as Taiwan, South Korea and Mexico). The PIMCO Short-Term, Low Duration and Low
Duration III Funds limit their investments in securities of issuers based in
NICs to 5% of their net assets, and the remaining Fixed Income Funds limit
their investments in securities of issuers based in NICs to 10% of their net
assets. Investing in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing in
U.S. companies. Shareholders should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations. These risks include: differences in accounting, auditing and
financial reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or exchange control
regulations (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Additionally, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes,
including taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Additional costs associated
with an investment in foreign securities may include higher custodial fees
than apply to domestic custodial arrangements and transaction costs of foreign
currency conversions. Changes in foreign exchange rates also will affect the
value of securities denominated or quoted in currencies other than the U.S.
dollar.
The PIMCO VersaSTYLE Equity and VersaSTYLE Equity II Funds may invest in the
securities of issuers based in countries with developing economies. Investing
in developing countries involves certain risks not typically associated with
investing in U.S. securities, and imposes risks greater than, or in addition
to, risks of investing in foreign, developed countries. These risks include:
greater risk of nationalization or expropriation of assets or confiscatory
taxation; currency devaluations and other currency exchange rate fluctuations;
greater social, economic and political uncertainty and instability (including
the risk of war); more substantial government involvement in the economy;
higher rates of inflation; less government supervision and regulation of the
securities markets and participants in those markets; controls on foreign
investment and limitations on repatriation of invested capital and on a Fund's
ability to exchange local currencies for U.S. dollars; unavailability of
currency hedging techniques in certain developing countries; the fact that
companies in developing countries may be smaller, less seasoned and newly
organized companies; the difference in, or lack of, auditing and financial
reporting standards, which may result in unavailability of material
information about issuers; the risk that it may be more difficult to obtain
and/or enforce a judgment in a court outside the United States; and greater
price volatility, substantially less liquidity and significantly smaller
market capitalization of securities markets.
Each of the Fixed Income Funds (except the PIMCO Low Duration II and Total
Return II Funds) may invest in Brady Bonds. Brady Bonds are securities created
through the exchange of existing commercial bank loans to sovereign entities
for new obligations in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady. Brady Bonds have been issued only recently, and for that
reason do not have a long payment history. Brady Bonds may be collateralized
or uncollateralized, are issued in various currencies (but primarily the U.S.
dollar), and are actively traded in the over-the-counter secondary market.
Brady Bonds are not considered to be U.S. Government securities. In light of
the residual risk of Brady Bonds and, among other factors, the history of
defaults with respect to commercial bank loans by public and private entities
in countries issuing Brady Bonds, investments in Brady Bonds may be viewed as
speculative. There can be no assurance that Brady Bonds acquired by a Fund
will not be subject to restructuring arrangements or to requests for new
credit, which may cause the Fund to suffer a loss of interest or principal on
any of its holdings. For further information, see the Statement of Additional
Information.
<PAGE>
27
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 (or the failure to
intervene) by U.S. or foreign governments or central banks, by currency
controls or political developments in the U.S. or abroad. Currencies in which
the Funds' assets are denominated may be devalued against the U.S. dollar,
resulting in a loss to the Funds.
All Funds that may invest in securities denominated in foreign currencies may
buy and sell foreign currencies on a spot and forward basis 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 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. Contracts to
sell foreign currency would limit any potential gain which might be realized by
a Fund if the value of the hedged currency increases. A Fund may enter into
these contracts for the purpose of hedging against foreign exchange risk
arising from the Fund's investment or anticipated investment in securities
denominated in foreign currencies. A Fund also may enter into these contracts
for purposes of increasing exposure to a foreign currency or to shift exposure
to foreign currency fluctuations from one country to another. A Fund may use
one currency (or a basket of currencies) to hedge against adverse changes in
the value of another currency (or a basket of currencies) when exchange rates
between the two currencies are positively correlated. A Fund will segregate
liquid assets, such as cash or high grade debt obligations, in a segregated
account to cover forward currency contracts entered into for non-hedging
purposes.
All Funds that may invest in securities denominated in foreign currencies may
invest in options on foreign currencies and foreign currency futures and
options thereon. 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. Each Fund that may invest
in securities denominated in foreign currencies, except the PIMCO Global Fund,
will use these techniques to hedge at least 75% of its exposure to foreign
currency. For a description of these instruments, see "Derivative Instruments"
below and the Statement of Additional Information.
HIGH YIELD SECURITIES ("JUNK BONDS")
The PIMCO High Yield Fund invests at least 65% of its assets, and the PIMCO
Commercial Mortgage Securities Fund may invest up to 35% of its assets, in
fixed income securities rated lower than Baa by Moody's or lower than BBB by
S&P but rated at least B by Moody's or S&P (or, if not rated, of comparable
quality). In addition, each of the PIMCO Short-Term, Low Duration, Low Duration
III, Moderate Duration, Total Return, Total Return III, Foreign, Global,
StocksPLUS, StocksPLUS Short Strategy and Strategic Balanced Funds may invest
up to 10% of its assets in such securities. Securities rated lower than Baa by
Moody's or lower than BBB by S&P are sometimes referred to as "high yield" or
"junk" bonds. Securities rated Baa are considered by Moody's to have some
speculative characteristics. Investors should consider the following risks
associated with high yield securities before investing in these Funds.
Investing in high yield securities involves special risks in addition to the
risks associated with investments in higher rated fixed income securities. High
yield securities may be regarded as predominately speculative with respect to
the issuer's continuing ability to meet principal and interest payments.
Analysis of the creditworthiness of issuers of high yield securities may be
more complex than for issuers of higher quality debt securities, and the
ability of a Fund to achieve its investment objective may, to the extent of its
investments in high yield securities, be more dependent upon such
creditworthiness analysis than would be the case if the Fund were investing in
higher quality securities.
PIMCO FUNDS
<PAGE>
28
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities. The
prices of high yield securities have been found to be less sensitive to
interest rate changes than more highly rated investments, but more sensitive
to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates,
for example, could cause a decline in high yield security prices because the
advent of a recession could lessen the ability of a highly leveraged company
to make principal and interest payments on its debt securities. If the issuer
of high yield securities defaults, a Fund may incur additional expenses to
seek recovery. In the case of high yield securities structured as zero coupon
or payment-in-kind securities, the market prices of such securities 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 markets on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect and cause large fluctuations
in the daily net asset value of a Fund's 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.
The use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield securities. Also, credit rating agencies may fail to change credit
ratings in a timely fashion to reflect events since the security was last
rated. The Adviser does not rely solely on credit ratings when selecting
securities for the Funds, and develops its own independent analysis of issuer
credit quality. If a credit rating agency changes the rating of a portfolio
security held by a Fund, the Fund may retain the portfolio security if the
Adviser deems it in the best interest of shareholders.
During the year ended March 31, 1996, based upon the dollar-weighted average
ratings of the Funds' portfolio holdings at the end of each month in the
Funds' fiscal year, each operational Fund that may invest greater than 5% of
its assets in securities rated below investment grade had the following
percentages of its net assets invested in securities rated in the categories
indicated as rated by Moody's (or, if unrated, determined by the Adviser to be
of comparable quality). See "Appendix B--Description of Securities Ratings,"
for further information.
<TABLE>
<CAPTION>
RATING
--------------------------------------------------------------
BELOW
FUND PRIME 1 Aaa Aa A PRIME 1 Baa Ba B Caa
- ---- ------- ----- ----- ----- ------- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term 12.89% 46.13% 2.85% 17.35% 0.00% 10.96% 6.63% 2.87% 0.31%
Low Duration 9.65 58.17 2.80 10.10 0.00 8.02 10.71 0.54 0.00
High Yield 2.66 1.20 0.00 0.90 0.00 4.17 41.24 49.84 0.00
Total Return 9.80 62.57 6.12 7.35 0.00 5.92 6.23 2.00 0.01
Total Return III 10.22 69.93 1.91 6.49 0.00 4.78 5.36 1.31 0.00
Foreign 2.72 46.26 30.18 8.62 0.51 2.88 5.18 3.65 0.00
Global 15.05 40.36 29.03 5.45 0.50 2.62 2.06 4.92 0.00
StocksPLUS 10.17 59.79 4.28 6.45 0.00 11.00 7.60 0.72 0.00
</TABLE>
These figures are intended solely to provide disclosure about each Fund's
asset composition during its fiscal year ended March 31, 1996. The asset
composition after this time may or may not be approximately the same as
represented by such figures. In addition, the categories reflect ratings by
Moody's, and ratings assigned by S&P may not be consistent with ratings
assigned by Moody's or other credit ratings services, and the Adviser may not
necessarily agree with a rating assigned by any credit rating agency.
<PAGE>
29
DERIVATIVE INSTRUMENTS
To the extent permitted by the investment objectives and policies of the
Funds, the Funds may (except the PIMCO Money Market Fund) purchase and write
call and put options on securities, securities indexes and foreign currencies,
and enter into futures contracts and use options on futures contracts as
further described below. The Funds (except the PIMCO Money Market Fund) 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 Funds
(except the PIMCO Money Market Fund) may also purchase and sell options
relating to foreign currencies for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one country
to another. Each Fund will maintain segregated accounts consisting of liquid
assets, such as cash, U.S. Government securities, or other high-grade debt
obligations (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under options, futures, and
swaps to avoid leveraging of the Fund.
The Funds consider derivative instruments to consist of securities or other
instruments whose value is derived from or related to the value of some other
instrument or asset, and not to include those securities whose payment of
principal and/or interest depend upon cash flows from underlying assets, such
as mortgage- or asset-backed securities. Each Fund (except the PIMCO Money
Market Fund) may invest all of its assets in derivative instruments, subject
only to the Fund's investment objective and policies. The value of some
derivative instruments in which the Funds invest may be particularly sensitive
to changes in prevailing interest rates, and, like the other investments of the
Funds, the ability of a Fund to successfully utilize these instruments may
depend in part upon the ability of the Adviser to forecast interest rates and
other economic factors correctly. If the Adviser incorrectly forecasts such
factors and has taken positions in derivative instruments contrary to
prevailing market trends, the Funds could be exposed to the risk of loss.
The Funds might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If the Adviser
incorrectly forecasts interest rates, market values or other economic factors
in utilizing a derivatives strategy for a Fund, the Fund might have been in a
better position if it had not entered into the transaction at all. The use of
these strategies involves certain special risks, including a possible imperfect
correlation, or even no correlation, between price movements of derivative
instruments and price movements of related investments. While some strategies
involving derivative instruments can reduce the risk of loss, they can also
reduce the opportunity for gain or even result in losses by offsetting
favorable price movements in related investments, or due to the possible
inability of a Fund to purchase or sell a portfolio security at a time that
otherwise would be favorable for it to do so, or the possible need for a Fund
to sell a portfolio security at a disadvantageous time, because the Fund is
required to maintain asset coverage or offsetting positions in connection with
transactions in derivative instruments and the possible inability of a Fund to
close out or to liquidate its derivatives positions.
Options on Securities, Securities Indexes, and Currencies A Fund may purchase
put options on securities and indexes. One purpose of purchasing put options is
to protect holdings in an underlying or related security against a substantial
decline in market value. A Fund may also purchase call options on securities
and indexes. One purpose of purchasing call options is 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. An
option on a security (or index) is a contract that gives the holder of the
option, in return for a premium, the right to buy from (in the case of a call)
or sell to (in the case of a put) the writer of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at any time during the term of the option. The writer of an option on a
security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security. Upon exercise, the writer of an
option on an index is obligated to pay the difference between the cash value of
the index and the exercise price multiplied by the specified multiplier for the
index option. An index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial instruments or
securities, or certain economic indicators.
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
PIMCO FUNDS
<PAGE>
30
"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 option may be
closed out by an offsetting purchase or sale of an option of the same series.
The Funds may write covered straddles consisting of a combination of a call
and a put written on the same underlying security. A straddle will be covered
when sufficient assets are deposited to meet the Funds' immediate obligations.
The Funds may use the same liquid assets to cover both the call and put
options where the exercise price of the call and put are the same, or the
exercise price of the call is higher than that of the put. In such cases, the
Funds will also segregate liquid assets equivalent to the amount, if any, by
which the put is "in the money."
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 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 remains
equal to or greater than the exercise price (in the case of a put), or remains
less than or equal to the exercise price (in the case of a call), 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 exchange-traded options. The Funds may be
required to treat as illiquid over-the-counter options purchased and
securities being used to cover certain written over-the-counter options.
Swap Agreements The Funds may enter into interest rate, index, equity and
currency exchange rate swap agreements. These transactions would be entered
into in an attempt to obtain a particular return when it is considered
desirable to do so, possibly at a lower cost to the Fund than if the Fund had
invested directly in the asset that yielded the 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, which may be adjusted for an
interest factor. The gross returns to be exchanged or "swapped" between the
parties are generally 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. Forms of 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 sells a cap and purchases a floor or vice versa
in an attempt to protect itself against interest rate movements exceeding
given minimum or maximum levels.
Most swap agreements entered into by the Funds would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current 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 current obligations under a swap
agreement will be accrued daily (offset against amounts owed to the Fund), and
any accrued but unpaid
<PAGE>
31
net amounts owed to a swap counterparty will be covered by the maintenance of a
segregated account consisting of liquid assets such as cash, U.S. Government
securities, or high grade debt obligations, to avoid any potential leveraging
of the Fund's portfolio. Obligations under swap agreements so covered will not
be construed to be "senior securities" for purposes of the Funds' investment
restriction concerning senior securities. 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 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 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 and because they may
have terms of greater than seven days, swap agreements may be considered to be
illiquid investments. 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 Funds will enter into swap
agreements only with counterparties that meet certain standards for
creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of 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.
Futures Contracts and Options on Futures Contracts Each of the Fixed Income
Funds (except the PIMCO Money Market Fund) may invest in interest rate futures
contracts and options thereon ("futures options"), and to the extent they can
invest in foreign currency-denominated securities, may also invest in foreign
currency futures contracts and options thereon. Each of the Equity Funds and
the PIMCO Strategic Balanced Fund may invest in interest rate, stock index and
foreign currency futures contracts and options thereon.
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 may write covered straddles consisting of a call and a put written
on the same underlying futures contract. A straddle will be covered when
sufficient assets are deposited to meet the Funds' immediate obligations. A
Fund may use the same liquid assets to cover both the call and put options
where the exercise price of the call and put are the same, or the exercise
price of the call is higher than that of the put. In such cases, the Funds will
also segregate liquid assets equivalent to the amount, if any, by which the put
is "in the money."
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 Commodity
Futures Trading Commission ("CFTC"), or, with respect to positions in financial
futures and related options that do not qualify as "bona fide hedging"
positions, will enter such 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 net assets.
PIMCO FUNDS
<PAGE>
32
ILLIQUID SECURITIES
Each of the Funds may invest up to 15% of its net assets in illiquid
securities (10% in the case of the PIMCO Money Market Fund). The term
"illiquid securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which a Fund has valued the securities. Illiquid
securities are considered to include, among other things, written over-the-
counter options, securities or other liquid assets being used as cover for
such options, repurchase agreements with maturities in excess of seven days,
certain loan participation interests, fixed time deposits which are not
subject to prepayment or provide for withdrawal penalties upon prepayment
(other than overnight deposits), securities that are subject to legal or
contractual restrictions on resale (such as privately placed debt securities)
and other securities whose disposition is restricted under the federal
securities laws (other than securities issued pursuant to Rule 144A under the
Securities Act of 1933 and certain commercial paper that PIMCO has determined
to be liquid under procedures approved by the Board of Trustees).
MANAGEMENT OF THE TRUST
The business affairs of the Trust are managed under the direction of the
Board of Trustees. The Trustees are Guilford C. Babcock, Thomas P. Kemp, Brent
R. Harris, Vern O. Curtis, and William J. Popejoy. Additional information
about the Trustees and the Trust's executive officers may be found in the
Statement of Additional Information under the heading "Management--Trustees
and Officers."
INVESTMENT ADVISER
Pacific Investment Management Company ("PIMCO") serves as investment adviser
("Adviser") to the Funds pursuant to an investment advisory contract. The
Adviser is an investment counseling firm founded in 1971, and had
approximately $77.2 billion in assets under management as of April 30, 1996.
PIMCO is a subsidiary partnership of PIMCO Advisors L.P. ("PIMCO Advisors"). A
majority interest in PIMCO Advisors is held by PIMCO Partners, G.P., a general
partnership between Pacific Investment Management Company, a California
corporation and indirect wholly owned subsidiary of Pacific Mutual Life
Insurance Company ("Pacific Mutual"), and PIMCO Partners, LLC, a limited
liability company controlled by the PIMCO Managing Directors. PIMCO's address
is 840 Newport Center Drive, Suite 360, Newport Beach, California 92660. PIMCO
is registered as an investment adviser with the Securities and Exchange
Commission ("SEC") and as a commodity trading advisor with the CFTC.
The Adviser manages the investment and reinvestment of the assets of each
Fund. The Adviser is responsible for placing orders for the purchase and sale
of each Fund's investments directly with brokers or dealers selected by it in
its discretion. See "Portfolio Transactions."
Information about the individual portfolio managers responsible for
management of the Trust's currently operational Funds, including their
occupations for the past five years, is provided below.
<TABLE>
<CAPTION>
FUND PORTFOLIO MANAGER AND BUSINESS EXPERIENCE (PAST FIVE YEARS)
---- -----------------------------------------------------------
<C> <S>
Money Market Fund Leslie Barbi, Vice President, PIMCO. A Fixed Income
Portfolio Manager, Ms. Barbi has managed the PIMCO Money
Market Fund since November 1, 1995. Prior to joining PIMCO
in 1993, Ms. Barbi was associated with Salomon Brothers as a
proprietary Portfolio Manager.
Short-Term Fund David H. Edington, Managing Director, PIMCO. A Fixed Income
StocksPLUS Fund Portfolio Manager, Mr. Edington joined PIMCO in 1987 and has
managed the PIMCO Short-Term and StocksPLUS Funds since
their inception, October 7, 1987 and May 14, 1993,
respectively.
</TABLE>
<PAGE>
33
<TABLE>
<CAPTION>
PORTFOLIO MANAGER AND BUSINESS EXPERIENCE (PAST
FUND FIVE YEARS)
---- -----------------------------------------------
<C> <S>
Low Duration Fund William H. Gross, Managing Director, PIMCO. A
Low Duration Fund II Fixed Income Portfolio Manager, Mr. Gross is
Total Return Fund one of the founders of PIMCO and has managed
Total Return Fund II the PIMCO Low Duration, Low Duration II, Total
Total Return Fund III Return, Total Return II and Total Return III
Funds since their inception, May 11, 1987,
November 1, 1991, May 11, 1987, December 30,
1991, and May 1, 1991, respectively.
High Yield Fund Benjamin Trosky, Managing Director, PIMCO. A
Fixed Income Portfolio Manager, Mr. Trosky
joined PIMCO in 1990 and has managed the PIMCO
High Yield Fund since its inception, December
16, 1992.
Long-Term U.S. Government Fund Frank B. Rabinovitch, Managing Director, PIMCO.
A Fixed Income Portfolio Manager, Mr.
Rabinovitch joined PIMCO in 1984 and has
managed the PIMCO Long-Term U.S. Government
Fund since its inception, July 1, 1991.
Foreign Fund Lee R. Thomas, III, Executive Vice President
Global Fund and Senior International Portfolio Manager,
International Fund PIMCO. A Fixed Income Portfolio Manager, Mr.
Thomas has managed the PIMCO Foreign, Global
and International Funds since July 13, 1995.
Prior to joining PIMCO in 1995, 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.
VersaSTYLE Equity Fund II Robert S. Venable, Portfolio Manager, PIMCO. An
Equity Portfolio Manager, Mr. Venable has
managed the PIMCO VersaSTYLE Equity Fund II
since its inception, January 17, 1995. Prior to
joining PIMCO in 1992, Mr. Venable was
associated with the Hewlett Packard Company as
an engineer and the Franklin Mint as a
financial analyst.
</TABLE>
FUND ADMINISTRATOR
PIMCO also serves as administrator to the Funds pursuant to an administration
agreement. PIMCO provides administrative services to the Funds, which include
clerical help and accounting, bookkeeping, internal audit services, and certain
other services required by the Funds, preparation of reports to the Funds'
shareholders and regulatory filings. In addition, PIMCO, at its own expense,
arranges for the provision of legal, audit, custody, transfer agency and other
services for the Funds, and is responsible for the costs of registration of the
Trust's shares and the printing of prospectuses and shareholder reports for
current shareholders.
The Trust 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; (vii) expenses,
such as organizational expenses, which are capitalized in accordance with
generally accepted accounting principles; and (viii) any expenses allocated or
allocable to a specific class of shares, which include service fees payable
with respect to the Administrative Class shares and may include certain other
expenses as permitted by the Trust's Dual Class Plan adopted pursuant to Rule
18f-3 under the 1940 Act and subject to review and approval by the Trustees.
PIMCO FUNDS
<PAGE>
34
ADVISORY AND ADMINISTRATIVE FEES
The PIMCO Funds feature fixed advisory and administrative fee rates. For
providing investment advisory and administrative services to the Funds as
described above, PIMCO receives monthly fees from each Fund at an annual rate
based on the average daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE RATE
---- --------
<S> <C>
Money Market Fund............................................ 0.15%
Commercial Mortgage Securities, StocksPLUS, StocksPLUS Short
Strategy, VersaSTYLE Equity, VersaSTYLE Equity II and Stra-
tegic Balanced Funds........................................ 0.40%
All other Funds.............................................. 0.25%
<CAPTION>
ADMINISTRATIVE
FUND FEE RATE
---- --------------
<S> <C>
Money Market Fund and Short-Term Fund........................ 0.20%
Low Duration Fund and Total Return Fund...................... 0.18%
Global Fund.................................................. 0.30%
All other Funds.............................................. 0.25%
</TABLE>
Both the investment advisory contract and administration agreement for the
Funds may be terminated by the Trustees at any time on 60 days' written
notice. The investment advisory contract may be terminated by PIMCO on 60
days' written notice. Following the expiration of the two-year period
commencing with the effectiveness of the administration agreement, it may be
terminated by PIMCO on 60 days' written notice. Following their initial two-
year terms, the investment advisory contract and administration agreement will
continue from year to year if approved by the Trustees.
SERVICE FEES
The Trust has adopted an Administrative Services Plan and a Distribution
Plan (the "Plans") with respect to the Administrative Class shares of each
Fund. Under the terms of each Plan, the Trust is permitted to reimburse, out
of the Administrative Class assets of each Fund, in an amount up to 0.25% on
an annual basis of the average daily net assets of that class, financial
intermediaries that provide services in connection with the distribution of
shares or administration of plans or programs that use Fund shares as their
funding medium, and to reimburse certain other distribution-related expenses.
The same entity may not receive both distribution and administrative services
fees with respect to the same assets but may with respect to separate assets
receive fees under both a Distribution Plan and Administrative Services Plan.
Fees paid pursuant to either type of Plan may be paid for shareholder service
and the maintenance of accounts and therefore may constitute "service fees"
for purposes of applicable rules of the National Association of Securities
Dealers, Inc. Each Plan has been adopted in accordance with the requirements
of Rule 12b-1 under the 1940 Act and will be administered in accordance with
the provisions of that rule, except that shareholders will not have the voting
rights set forth in Rule 12b-1 with respect to the Administrative Services
Plan that they will have with respect to the Distribution Plan. For more
complete disclosure regarding the Plans and their terms, see the Statement of
Additional Information.
Institutional Class shares of the Trust may also be offered through certain
brokers and financial intermediaries ("service agents") that have established
a shareholder servicing relationship with the Trust on behalf of their
customers. The Trust pays no compensation to such entities. Service agents may
impose additional or different conditions on the purchase or redemption of
Trust shares by their customers and may charge their customers transaction or
other account fees on the purchase and redemption of Trust shares. Each
service agent is responsible for transmitting to its customers a schedule of
any such fees and information regarding any additional or different conditions
regarding purchases and redemptions. Shareholders who are customers of service
agents should consult their service agent for information regarding these fees
and conditions.
DISTRIBUTOR
Shares of the Trust are distributed through PIMCO Advisors Distribution
Company (the "Distributor"), an indirect wholly owned subsidiary of PIMCO
Advisors. The Distributor, located at 2187 Atlantic Street, Stamford,
Connecticut 06902, is a broker-dealer registered with the SEC.
<PAGE>
35
PURCHASE OF SHARES
Each Fund offers its shares in two classes: the "Institutional Class" and the
"Administrative Class." Shares of the Institutional Class are offered primarily
for direct investment by institutional investors and high net worth
individuals. They also are offered through certain financial intermediaries
that charge their customers transaction or other fees with respect to their
customers' investment in the Funds. Shares of the Administrative Class are
offered primarily through broker-dealers, retirement plan administrators and
other financial intermediaries. Administrative Class shares pay service fees to
such entities for services they provide to shareholders of that class.
Shares of either class of the Funds may be purchased at the relevant net
asset value of that class without a sales charge. The minimum initial
investment for shares of either class is $1,000,000. Shares of the PIMCO
International Fund and PIMCO VersaSTYLE Equity Fund II are offered only to
clients of PIMCO who maintain separately managed private accounts.
INITIAL INVESTMENT
An account may be opened by completing and signing a Client Registration
Application and mailing it to PIMCO Funds at the following address: 840 Newport
Center Drive, Suite 360, Newport Beach, California 92660. A Client Registration
Application may be obtained by calling (800) 800-0952.
Except as provided below, purchases of shares can only be made by wiring
federal funds to Investors Fiduciary Trust Company (the "Transfer Agent").
Before wiring federal funds, the investor must first telephone the Trust at
(800) 927-4648 to receive instructions for wire transfer, and the following
information will be requested: name of authorized person; shareholder name;
shareholder account number; name of Fund and share class; amount being wired;
and wiring bank name.
Shares may be purchased without first wiring federal funds if the proceeds of
the investment are derived from an advisory account maintained by the investor
with PIMCO, PIMCO Advisors or one of their affiliates; from surrender or other
payment from an annuity, insurance, or other contract held by Pacific Mutual;
or from an investment by broker-dealers, institutional clients or other
financial intermediaries which have established a shareholder servicing
relationship with the Trust on behalf of their customers.
All purchase orders are effected at the relevant net asset value for that
class next determined after receipt of the purchase order. A purchase order,
together with payment in proper form, received by the Transfer Agent prior to
the close of business (4:00 p.m., Eastern time; 3:00 p.m., Eastern time for the
PIMCO StocksPLUS, StocksPLUS Short Strategy and Strategic Balanced Funds) on a
day the Trust is open for business will be effected at that day's net asset
value. An order received after the close of business will be effected at the
net asset value determined on the next business day. The Trust is "open for
business" on each day the New York Stock Exchange is open for trading, which
excludes the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Purchase orders will be accepted only on days on which the Trust is open for
business.
With respect to the Funds whose policy is to declare dividends daily (i.e.,
each of the Fixed Income Funds except the PIMCO International Fund), if a
purchase order for shares is received prior to 12:00 noon, Eastern time, and
payment in federal funds is received by the Transfer Agent by the close of the
federal funds wire on the day the purchase order is received, dividends will
accrue starting that day. If a purchase order is received after 12:00 noon,
Eastern time, and payment in federal funds is received by the Transfer Agent by
the close of the federal funds wire on the day the purchase order is received,
or as otherwise agreed to by the Trust, the order will be effected at that
day's net asset value, but dividends will not begin to accrue until the
following business day.
ADDITIONAL INVESTMENTS
Additional investments may be made at any time at the relevant net asset
value for that class by calling the Trust and wiring federal funds to the
Transfer Agent as outlined above.
PIMCO FUNDS
<PAGE>
36
OTHER PURCHASE INFORMATION
Purchases of a Fund's shares will be made in full and fractional shares. In
the interest of economy and convenience, certificates for shares will not be
issued.
The Trust and the Distributor each reserves the right, in its sole
discretion, to suspend the offering of shares of the Funds or to reject any
purchase order, in whole or in part, when, in the judgment of management, such
suspension or rejection is in the best interests of the Trust; to waive the
minimum initial investment for certain investors; and to redeem shares if
information provided in the Client Registration Application should prove to be
incorrect in any manner judged by the Trust to be material (e.g., in a manner
such as to render the shareholder ineligible to purchase shares of the Trust).
Purchases and sales of Fund shares should be made for long-term investment
purposes only. The Trust and Adviser each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.
Shares of the Trust are not qualified or registered for sale in all states.
Prospective investors should inquire as to whether shares of a particular Fund
are available for offer and sale in their state of residence. Shares of the
Trust may not be offered or sold in any state unless registered or qualified
in that jurisdiction or unless an exemption from registration or qualification
is available.
Investors may, subject to the approval of the Trust, purchase shares of a
Fund with liquid securities that are eligible for purchase by the Fund
(consistent with such Fund's investment policies and restrictions) and that
have a value that is readily ascertainable in accordance with the Trust's
valuation policies. These transactions will be effected only if the Adviser
intends to retain the security in the Fund as an investment. Assets so
purchased by a Fund will be valued in generally the same manner as they would
be valued for purposes of pricing the Fund's shares, if such assets were
included in the Fund's assets at the time of purchase. The Trust reserves the
right to amend or terminate this practice at any time.
RETIREMENT PLANS
Shares of the Funds are available for purchase by retirement plans,
including Keogh plans, 401(k) plans, 403(b) plans and Individual Retirement
Accounts. Investors who purchase shares through retirement plans should be
aware that plan administrators may aggregate purchase and redemption orders
for participants in the plan. Therefore, there may be a delay between the time
the investor places his order with the plan administrator, and the time the
order is forwarded to the Transfer Agent for execution.
REDEMPTION OF SHARES
REDEMPTIONS BY MAIL
Shares may be redeemed by submitting a written request to PIMCO Funds, 840
Newport Center Drive, Suite 360, Newport Beach, California 92660, stating the
Fund from which the shares are to be redeemed, the class of shares, the number
or dollar amount of the shares to be redeemed and the account number. The
request must be signed exactly as the names of the registered owners appear on
the Trust's account records, and the request must be signed by the minimum
number of persons designated on the Client Registration Application that are
required to effect a redemption. In order to discourage short-term trading,
the PIMCO StocksPLUS Short Strategy Fund imposes a redemption fee, payable to
the Fund, of 1% on all shares of the Fund held for less than three months.
REDEMPTIONS BY TELEPHONE OR OTHER WIRE COMMUNICATION
If an election is made on the Client Registration Application (or
subsequently in writing), redemptions of shares may be requested by calling
the Trust at (800) 927-4648, by sending a facsimile to (714) 760-4456, or by
other means of wire communication. Investors should state the Fund and class
from which the shares are to be redeemed, the number or dollar amount of the
shares to be redeemed and the account number. Redemption requests of an amount
of $10,000,000 or more may be initiated by telephone, but must be confirmed in
writing by an authorized party prior to processing.
<PAGE>
37
In electing a telephone redemption, the investor authorizes PIMCO and the
Transfer Agent to act on telephone instructions from any person representing
himself to be the investor, and reasonably believed by PIMCO and the Transfer
Agent to be genuine. Neither the Trust nor its Transfer Agent will be liable
for any loss, cost or expense for acting on instructions (whether in writing or
by telephone) believed by the party receiving such instructions to be genuine
and in accordance with the procedures described in this Prospectus.
Shareholders should realize that by electing the telephone or wire redemption
option, they may be giving up a measure of security that they might have if
they were to redeem their shares in writing. Furthermore, interruptions in
telephone service may mean that a shareholder will be unable to effect a
redemption by telephone when desired. The Transfer Agent provides written
confirmation of transactions initiated by telephone as a procedure designed to
confirm that telephone instructions are genuine (written confirmation is also
provided for redemption requests received in writing). All telephone
transactions are recorded, and PIMCO or the Transfer Agent may request certain
information in order to verify that the person giving instructions is
authorized to do so. All redemptions, whether initiated by letter or telephone,
will be processed in a timely manner and proceeds will be forwarded by wire in
accordance with the redemption policies of the Trust detailed below. See
"Redemption of Shares--Other Redemption Information."
Shareholders may decline telephone exchange or redemption privileges after an
account is opened by instructing the Transfer Agent in writing at least seven
business days prior to the date the instruction is to be effective.
Shareholders may experience delays in exercising telephone redemption
privileges during periods of abnormal market activity. During periods of
volatile economic or market conditions, shareholders may wish to consider
transmitting redemption orders by telegram, facsimile or overnight courier.
OTHER REDEMPTION INFORMATION
Payment of the redemption price will ordinarily be wired to the investor's
bank one business day after the tender request in the case of the Fixed Income
Funds and the PIMCO Strategic Balanced Fund, and three business days after the
tender request in the case of the Equity Funds, but may take up to seven
business days. Redemption proceeds will be sent by wire only to the bank name
designated on the Client Registration Application. The Trust may suspend the
right of redemption or postpone the payment date at times when the New York
Stock Exchange is closed, or during certain other periods as permitted under
the federal securities laws.
For shareholder protection, a request to change information contained in an
account registration (for example, a request to change the bank designated to
receive wire redemption proceeds) must be received in writing, signed by the
minimum number of persons designated on the Client Registration Application
that are required to effect a redemption, and accompanied by a signature
guarantee from any eligible guarantor institution, as determined in accordance
with the Trust's procedures. Shareholders should inquire as to whether a
particular institution is an eligible guarantor institution. A signature
guarantee cannot be provided by a notary public. In addition, corporations,
trusts and other institutional organizations are required to furnish evidence
of the authority of the persons designated on the Client Registration
Application to effect transactions for the organization.
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the investor) if at any time, due to redemption
by the investor, the shares in the account do not have a value of at least
$100,000 ($10,000 with respect to accounts opened before January 1, 1995). A
shareholder will receive advance notice of a mandatory redemption and will be
given at least 30 days to bring the value of its account up to at least
$100,000, or $10,000, as the case may be.
The Trust agrees to redeem shares of each Fund solely in cash up to the
lesser of $250,000 or 1% of the net assets during any 90-day period for any one
shareholder. In consideration of the best interests of the remaining
shareholders, the Trust reserves the right to pay any redemption proceeds
exceeding this amount in whole or in part by a distribution in kind of
securities held by a Fund in lieu of cash. It is highly unlikely that shares
would ever be redeemed in kind. If shares are redeemed in kind, however, the
redeeming shareholder should expect to incur transaction costs upon the
disposition of the securities received in the distribution.
PIMCO FUNDS
<PAGE>
38
EXCHANGE PRIVILEGE
Shares of a Fund may be exchanged for shares of the same class of any other
Fund based on the respective net asset values of the shares involved, except
that shares of the PIMCO International Fund and PIMCO VersaSTYLE Equity Fund
II are available only to private account clients of PIMCO. An exchange may be
made by following the redemption procedure described above under "Redemptions
by Mail" or, if the telephone redemption option has been elected, by calling
the Trust at (800) 927-4648. Shares of a Fund may also be exchanged for shares
of the same class of a series of the PIMCO Funds: Equity Advisors Series, an
affiliated no-load mutual fund family comprised primarily of equity portfolios
managed by the subsidiary partnerships of PIMCO Advisors. Shareholders
interested in such an exchange may request a prospectus for these funds by
contacting the PIMCO Funds at the same address and telephone number as the
Trust.
Exchanges may be made only with respect to Funds, or PIMCO Funds: Equity
Advisors Series, registered in the state of residence of the investor or where
an exemption from registration is available. An exchange order is treated the
same as a redemption followed by a purchase and may result in a capital gain
or loss for tax purposes, and special rules may apply in computing tax basis
when determining gain or loss. See "Taxation" in the Statement of Additional
Information.
The Trust reserves the right to modify or revoke the exchange privilege of
any shareholder or to limit or reject any exchange. Although each Fund will
attempt to give shareholders prior notice whenever it is reasonably able to do
so, it may impose these restrictions at any time.
PORTFOLIO TRANSACTIONS
Pursuant to the advisory contract, the Adviser places orders for the
purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers selected by it in its discretion. In effecting purchases
and sales of portfolio securities for the account of the Funds, the Adviser
will seek the best price and execution of the Funds' orders. In doing so, a
Fund may pay higher commission rates than the lowest available when the
Adviser believes it is reasonable to do so in light of the value of the
brokerage and research services provided by the broker effecting the
transaction. The Adviser also may consider sales of shares of the Trust as a
factor in the selection of broker-dealers to execute portfolio transactions
for the Trust.
The Adviser manages the Funds without regard generally to restrictions on
portfolio turnover, except those imposed on its ability to engage in short-
term trading by provisions of the federal tax laws. The use of futures
contracts and other derivative instruments with relatively short maturities
may tend to exaggerate the portfolio turnover rate for some of the Funds.
Trading in fixed income securities does not generally involve the payment of
brokerage commissions, but does involve indirect transaction costs. The use of
futures contracts may involve the payment of commissions to futures commission
merchants. The higher the rate of portfolio turnover of a Fund, the higher all
these transaction costs borne by the Fund generally will be.
Some securities considered for investment by the Funds may also be
appropriate for other clients served by the Adviser. If a purchase or sale of
securities consistent with the investment policies of a Fund and one or more
of these clients served by the Adviser is considered at or about the same
time, transactions in such securities will be allocated among the Fund and
clients in a manner deemed fair and reasonable by the Adviser.
NET ASSET VALUE
The net asset value per share of each class of each Fund is determined as of
the close of trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time) by dividing the total market value of a Fund's portfolio
investments and other assets attributable to that class, less any liabilities,
by the number of total outstanding shares of that class. Net asset value will
not be determined on days on which the New York Stock Exchange is closed.
<PAGE>
39
The PIMCO Money Market Fund's securities are normally valued using the
amortized cost method of valuation. This involves valuing a security at cost on
the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity. See the Statement of
Additional Information for a description of certain conditions and procedures
followed by the PIMCO Money Market Fund in connection with amortized cost
valuation. For all other Funds, 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, at
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
(other than obligations having a maturity of 60 days or less), are normally
valued on the basis of quotations obtained from brokers and dealers or pricing
services, which take into account appropriate factors such as institutional-
sized trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data.
Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using foreign exchange quotations received from independent
dealers. Short-term investments having a maturity of 60 days or less are valued
at amortized cost, when the Board of Trustees determines that amortized cost is
their fair value. Certain fixed income securities for which daily market
quotations are not readily 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 and whose durations are comparable to
the securities being valued. Subject to the foregoing, other securities for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Shares begin earning dividends on the effective date of purchase, provided
notification deadlines are met. See "Purchase of Shares." For the Fixed Income
Funds (other than the PIMCO International Fund), dividends are declared daily
from net investment income to shareholders of record at the close of the
previous business day, and distributed to shareholders monthly. The PIMCO
International, Strategic Balanced and Equity Funds intend to declare and pay as
a dividend substantially all of their net investment income on a quarterly
basis. Any net realized capital gains from the sale of portfolio securities
will be distributed no less frequently than once yearly. Dividend and capital
gain distributions of a Fund will be reinvested in additional shares of that
Fund unless the shareholder elects to have them paid in cash. Dividends from
net investment income with respect to Administrative Class shares will be lower
than those paid with respect to Institutional Class shares, reflecting the
payment of service fees by that class.
Each Fund intends to qualify as a regulated investment company annually and
to elect to be treated as a regulated investment company under the Internal
Revenue Code of 1986, as amended. As such, a Fund generally will not pay
federal income tax on the income and gains it pays as dividends to its
shareholders. In order to avoid a 4% federal excise tax, each Fund intends to
distribute each year substantially all of its net income and gains.
Distributions received by tax-exempt shareholders will not be subject to
federal income tax to the extent permitted under applicable tax law. To the
extent that a shareholder is not exempt from tax on Fund distributions, such
shareholder will be subject to tax on dividends received from a Fund,
regardless of whether received in cash or reinvested in additional shares. All
shareholders must treat dividends, other than capital gain dividends or
dividends that represent a return of capital to shareholders, as ordinary
income. Dividends designated by a Fund as capital gain dividends are taxable to
shareholders as long-term capital gain except as provided by an applicable tax
exemption. Any distributions that are not from a Fund's net investment income
or net capital gain may be characterized as a return of capital to shareholders
or, in some cases, as capital gain. Certain dividends declared in October,
November or December of a calendar year are taxable to shareholders (who
otherwise are subject to tax on dividends) as though received on December 31 of
that year if paid to shareholders during January of the following calendar
year. For state income tax purposes, interest on some Federal obligations
generally is not exempt from taxation, whether received directly by a
shareholder or through distributions of investment company taxable income (for
example, interest on FNMA and GNMA Certificates). Each Fund will advise
shareholders annually of the amount and nature of the dividends paid to them.
PIMCO FUNDS
<PAGE>
40
Taxable shareholders should note that the timing of their investment could
have undesirable tax consequences. If shares are purchased on or just before
the day the Fund declares a dividend, taxable shareholders will pay full price
for the shares and may receive a portion of their investment back as a taxable
distribution.
The preceding discussion relates only to federal income tax; the
consequences under other tax laws may differ. For additional information
relating to the tax aspects of investing in a Fund, see the Statement of
Additional Information.
OTHER INFORMATION
CAPITALIZATION
The Trust was organized as a Massachusetts business trust on February 19,
1987. The Board of Trustees may establish additional portfolios in the future.
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.0001 each. When issued,
shares of the Trust are fully paid, non-assessable and freely transferable.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust, and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust provides for
indemnification out of Trust property for all loss and expense of any
shareholder held personally liable for the obligations of the Trust. The risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would be unable to meet
its obligations, and thus should be considered remote.
VOTING
Shareholders have the right to vote on the election of Trustees and on any
and all matters on which the law or the Declaration of Trust states they may
be entitled to vote. The Trust is not required to hold regular annual meetings
of Trust shareholders and does not intend to do so. Shareholders of a class of
shares have separate voting rights with respect to matters that only affect
that class. See "Other Information--Voting Rights" in the Statement of
Additional Information.
The Declaration of Trust provides that the holders of not less than two-
thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As of May 21, 1996, St. Johns Hospital (Santa
Monica, California) owned a controlling interest (as that term is defined in
the 1940 Act) of the PIMCO Money Market Fund; Pacific Mutual Life Insurance
Company (Newport Beach, California), owned a controlling interest of the PIMCO
Total Return Fund II; Archdiocese of Los Angeles (Los Angeles, California)
owned a controlling interest of the PIMCO Total Return Fund III; Firemans Fund
Insurance (New York, New York) owned a controlling interest of the PIMCO Long-
Term U.S. Government Fund; Southern California Edison (Rosemead, California)
and Charles Schwab & Co., Inc. (San Francisco, California) owned controlling
interests of the PIMCO Foreign Fund; and Pacific Mutual Life Insurance Company
(Newport Beach, California) owned a controlling interest of the PIMCO
VersaSTYLE Equity Fund II. As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Trust) means the vote of
the lesser of: (1) 67% of the shares of the Fund (or the Trust) present at a
meeting, if the holders of more than 50% of the outstanding shares are present
in person or by proxy; or (2) more than 50% of the outstanding shares of the
Fund (or the Trust).
<PAGE>
41
PERFORMANCE INFORMATION
The Trust may, from time to time, include the yield and total return for each
class of shares of its Funds in advertisements or reports to shareholders or
prospective investors. Yield quotations for the PIMCO Money Market Fund may
include current yield and effective yield. Current yield will be based on
income received by a hypothetical investment over a given seven-day period
(less expenses accrued during the period) and "annualized" (i.e., assuming that
the seven-day yield would be received for 52 weeks, stated in terms of an
annual percentage return on the investment). Effective yield for the Fund is
calculated in the manner similar to that used to calculate current yield, but
reflects the compounding effect on earnings of reinvested dividends. For the
remaining Funds, quotations of yield for a Fund or class will be based on the
investment income per share (as defined by the SEC) during a particular 30-day
(or one-month) period (including dividends and interest), less expenses accrued
during the period ("net investment income"), and will be computed by dividing
net investment income by the maximum public offering price per share on the
last day of the period. Quotations of average annual total return for a Fund or
class will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the Fund or class over periods of one,
five and ten years (up to the life of the Fund), reflect the deduction of a
proportional share of Fund or class expenses (on an annual basis), and assume
that all dividends and distributions are reinvested when paid.
The Trust also may provide current distribution information to its
shareholders in shareholder reports or other shareholder communications, or in
certain types of sales literature provided to prospective investors. Current
distribution information for a particular class of a Fund will be based on
distributions for a specified period (i.e., total dividends from net investment
income), divided by the relevant class net asset value per share on the last
day of the period and annualized. The rate of current distributions does not
reflect deductions for unrealized losses from transactions in derivative
instruments such as options and futures, which may reduce total return. Current
distribution rates differ from standardized yield rates in that they represent
what a class of a Fund has declared and paid to shareholders as of the end of a
specified period rather than the Fund's actual net investment income for that
period.
Performance information for the Trust may also be compared to various
unmanaged indices, such as the Standard & Poor's 500 Composite Stock Price
Index, the Lehman Brothers Aggregate Bond Index, the Merrill Lynch 1 to 3 Year
Treasury Index, the Lehman Intermediate and 20+ Year Treasury Blend Index, the
Lehman BB Intermediate Corporate Index, indexes prepared by Lipper Analytical
Services, the J.P. Morgan Global Index, the Salomon Brothers World Government
Bond Index-10 Non U.S.-Dollar Hedged and the J.P. Morgan Government Bond Index
Non U.S.-Dollar Hedged, and other entities or organizations which track the
performance of investment companies or investment advisers. Unmanaged indexes
(i.e., other than Lipper) generally do not reflect deductions for
administrative and management costs and expenses. PIMCO may also report to
shareholders or to the public in advertisements concerning the performance of
PIMCO as adviser to clients other than the Trust, and on the comparative
performance or standing of PIMCO in relation to other money managers. Such
comparative information may be compiled or provided by independent ratings
services or by news organizations. Any performance information, whether related
to the Funds or to the Adviser, should be considered in light of a Fund's
investment objectives and policies, characteristics and quality of the
portfolio, and the market conditions during the time period indicated, and
should not be considered to be representative of what may be achieved in the
future. For a description of the methods used to determine yield and total
return for the Funds, see the Statement of Additional Information.
Investment results of the Funds will fluctuate over time, and any
presentation of the Funds' total return or yield for any prior period should
not be considered as a representation of what an investor's total return or
yield may be in any future period. The Trust's Annual Report contains
additional performance information for the Funds and is available upon request,
without charge, by calling (800) 927-4648 (Current Shareholders), or (800) 800-
0952 (New Accounts).
PIMCO FUNDS
<PAGE>
A-1
APPENDIX A
DESCRIPTION OF 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." Traditionally, a fixed income 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 fixed
income security provides its final payment, taking no account of the pattern of
the security's payments prior to maturity. In contrast, duration incorporates a
bond's yield, coupon interest payments, final maturity and call features into
one measure. Duration management is one of the fundamental tools used by the
Adviser.
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.
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 or call option positions (backed by a segregated account of cash
and cash equivalents) 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.
There are some situations where even 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. Another example where the interest rate exposure is not
properly captured by duration is the case of mortgage pass-through securities.
The stated final maturity of such securities is generally 30 years, but current
prepayment rates are more critical in determining the securities' interest rate
exposure. Finally, the duration of a fixed income security may vary over time
in response to changes in interest rates and other market factors. In these and
other similar situations, the Adviser will use more sophisticated analytical
techniques that incorporate the anticipated economic life of a security into
the determination of its interest rate exposure.
PIMCO FUNDS
<PAGE>
B-1
APPENDIX B
DESCRIPTION OF SECURITIES RATINGS
Certain of the Funds make use of average portfolio credit quality standards
to assist institutional investors whose own investment guidelines limit their
investments accordingly. In determining a Fund's overall dollar-weighted
average quality, unrated securities are treated as if rated, based on the
Adviser's view of their comparability to rated securities. A Fund's use of
average quality criteria is intended to be a guide for those institutional
investors whose investment guidelines require that assets be invested according
to comparable criteria. Reference to an overall average quality rating for a
Fund does not mean that all securities held by the Fund will be rated in that
category or higher. A Fund's investments may range in quality from securities
rated in the lowest category in which the Fund is permitted to invest to
securities rated in the highest category (as rated by Moody's or S&P or, if
unrated, determined by the Adviser to be of comparable quality). The percentage
of a Fund's assets invested in securities in a particular rating category will
vary. Following is a description of Moody's and S&P's ratings applicable to
fixed income securities.
MOODY'S INVESTORS SERVICE, INC.
CORPORATE AND MUNICIPAL BOND RATINGS
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 that make the long-term risks appear somewhat larger than with 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
that 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 a 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.
PIMCO FUNDS
<PAGE>
B-2
Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classified from Aa through B in its corporate bond rating system. The modifier
1 indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating
category.
CORPORATE SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters of credit and bonds of indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime 1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return
on funds employed; conservative capitalization structure with moderate
reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
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
ability 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.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S
CORPORATE AND MUNICIPAL BOND RATINGS
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is 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 to pay interest and repay principal for
debt in this category than in higher-rated categories.
<PAGE>
B-3
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the lease degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default and
is 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, it is 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 is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior debt that
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.
C1: The rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating will also be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional ratings: The letter "p" indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
r: The "r" is attached to highlight derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high
variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities.
The absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.
N.R.: Not rated.
PIMCO FUNDS
<PAGE>
B-4
Debt obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.
COMMERCIAL PAPER RATING DEFINITIONS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded into several categories, ranging from A for
the highest quality obligations to D for the lowest. These categories are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
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.
B: Issues rated B are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
A commercial paper rating is not a recommendation to purchase, sell or hold
a security inasmuch as it does not comment as to market price or suitability
for a particular investor. The ratings are based on current information
furnished to Standard & Poor's by the issuer or obtained from other sources it
considers reliable. Standard & Poor's does not perform an audit in connection
with any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended, or withdrawn as a result of changes in
or unavailability of such information.
<PAGE>
[LOGO of PIMCO]
PIMCO FUNDS
Pacific Investment Management Series
INVESTMENT ADVISER AND ADMINISTRATOR
Pacific Investment Management Company
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
ACCOUNTANTS
Price Waterhouse LLP
1055 Broadway
Kansas City, MO 64105
COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W., Suite 500
Washington, DC 20005
PROSPECTUS
- --------------------------------------------------------------------------------
June 15, 1996
<PAGE>
PIMCO FUNDS
PACIFIC INVESTMENT MANAGEMENT SERIES
STATEMENT OF ADDITIONAL INFORMATION
PIMCO Funds (the "Trust") is a no-load, open-end management investment
company ("mutual fund") currently consisting of twenty separate investment
portfolios (the "Funds"): the PIMCO MONEY MARKET FUND; the PIMCO SHORT-TERM
FUND; the PIMCO LOW DURATION FUND; the PIMCO LOW DURATION FUND II; the PIMCO LOW
DURATION FUND III; the PIMCO MODERATE DURATION FUND; the PIMCO HIGH YIELD FUND;
the PIMCO TOTAL RETURN FUND; the PIMCO TOTAL RETURN FUND II; the PIMCO TOTAL
RETURN FUND III; the PIMCO COMMERCIAL MORTGAGE SECURITIES FUND; the PIMCO LONG-
TERM U.S. GOVERNMENT FUND; the PIMCO FOREIGN FUND; the PIMCO GLOBAL FUND; the
PIMCO INTERNATIONAL FUND; the PIMCO STOCKSPLUS FUND; the PIMCO STOCKSPLUS SHORT
STRATEGY FUND; the PIMCO VERSASTYLE EQUITY FUND; the PIMCO VERSASTYLE EQUITY
FUND II; and the PIMCO STRATEGIC BALANCED FUND. Shares of the PIMCO
INTERNATIONAL FUND and PIMCO VERSASTYLE EQUITY FUND II are offered only to
clients of PIMCO who maintain separately managed private accounts.
The Trust's investment adviser is Pacific Investment Management Company
("PIMCO" or the "Adviser"), 840 Newport Center Drive, Suite 360, Newport Beach,
California 92660. PIMCO is a subsidiary partnership of PIMCO Advisors L.P.
("PIMCO Advisors").
This Statement of Additional Information is not a Prospectus, and should be
used in conjunction with the Prospectus for the Trust dated June 15, 1996. A
copy of the Prospectus may be obtained free of charge from the Trust at the
address and telephone number listed below.
PIMCO Funds
840 Newport Center Drive
Suite 360
Newport Beach, California 92660
Telephone: (800) 927-4648
June 15, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
INVESTMENT OBJECTIVES AND POLICIES............................ 1
Borrowing................................................... 1
Corporate Debt Securities................................... 2
Participation on Creditors Committees....................... 3
Mortgage-Related and Other Asset-Backed Securities.......... 3
Foreign Securities.......................................... 8
Foreign Currency Exchange-Related Securities................ 10
Bank Obligations............................................ 11
Loan Participations......................................... 12
Short Sales................................................. 14
Derivative Instruments...................................... 14
Warrants to Purchase Securities............................. 21
Illiquid Securities......................................... 21
Social Investment Policies.................................. 22
INVESTMENT RESTRICTIONS....................................... 22
MANAGEMENT OF THE TRUST....................................... 26
Trustees and Officers....................................... 26
Compensation Table.......................................... 29
Investment Adviser.......................................... 29
Fund Administrator.......................................... 32
Expense Limitations......................................... 34
Distribution of Trust Shares................................ 34
Service Fees................................................ 35
The Reorganization.......................................... 36
Purchases and Redemptions................................... 36
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................... 37
Investment Decisions........................................ 37
Brokerage and Research Services............................. 38
Portfolio Turnover.......................................... 39
NET ASSET VALUE............................................... 39
TAXATION...................................................... 40
Distributions............................................... 41
Sales of Shares............................................. 41
Backup Withholding.......................................... 41
Options, Futures and Forward Contracts, and Swap Agreements. 41
Short Sales................................................. 42
Passive Foreign Investment Companies........................ 42
Foreign Currency Transactions............................... 43
Foreign Taxation............................................ 43
Original Issue Discount..................................... 44
Other Taxation.............................................. 44
OTHER INFORMATION............................................. 45
Capitalization.............................................. 45
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Performance Information..................................... 45
Voting Rights............................................... 50
Code of Ethics.............................................. 52
Custodian, Transfer Agent and Dividend Disbursing Agent..... 52
Independent Accountants..................................... 52
Counsel..................................................... 52
Registration Statement...................................... 52
Financial Statements........................................ 53
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and general investment policies of each Fund is
described in the Prospectus. Additional information concerning the
characteristics of certain of the Funds' investments are set forth below.
BORROWING
A Fund may borrow for temporary administrative purposes. This borrowing may
be unsecured. Provisions of the Investment Company Act of 1940 ("1940 Act")
require a Fund to maintain continuous asset coverage (that is, total assets
including borrowings, less liabilities exclusive of borrowings) of 300% of the
amount borrowed, with an exception for borrowings not in excess of 5% of the
Funds total assets made for temporary administrative purposes. Any borrowings
for temporary administrative purposes in excess of 5% of the Funds total assets
must maintain continuous asset coverage. 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.
In addition to borrowing for temporary purposes, a Fund may enter into
reverse repurchase agreements and mortgage dollar rolls. 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.
The Fund will maintain a segregated account with its custodian consisting of
liquid assets, such as cash, U.S. Government securities or high quality debt
securities 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. Reverse
repurchase agreements will be subject to the Funds limitations on borrowings,
which will restrict the aggregate of such transactions (plus any other
borrowings) to 33 1/3% of a Funds total assets.
A "mortgage dollar roll," is similar to reverse repurchase agreements in
certain respects. In a "dollar roll" transaction a Fund sells a mortgage-related
security, such as a security issued by the Government National Mortgage
Association ("GNMA"), 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
liquid assets, such as cash or high quality debt securities equal in value to
the securities subject to repurchase by the Fund, maintained in a segregated
account. Dollar rolls will be subject to the Funds limitations on borrowings,
which will restrict the aggregate of such transactions (plus any other
borrowings) to 33 1/3% of a Fund's total assets.
1
<PAGE>
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.
CORPORATE DEBT SECURITIES
A Fund's investments in U.S. dollar or foreign currency-denominated
corporate debt securities of domestic or foreign issuers are limited to
corporate debt securities (corporate bonds, debentures, notes and other similar
corporate debt instruments, including convertible securities) which meet the
minimum ratings criteria set forth for the Fund, or, if unrated, are in the
Adviser's opinion comparable in quality to corporate debt securities in which
the Fund may invest. 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.
Among the corporate bonds in which the Funds may invest are convertible
securities. A convertible security is a bond, debenture, note, or other security
that entitles the holder to acquire common stock or other equity securities of
the same or a different issuer. A convertible security generally entitles the
holder to receive interest paid or accrued until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, convertible
securities have characteristics similar to nonconvertible debt securities.
Convertible securities rank senior to common stock in a corporation's capital
structure and, therefore, generally entail less risk than the corporation's
common stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed income security.
A convertible security may be subject to redemption at the option of the
issuer at a predetermined price. If a convertible security held by a Fund is
called for redemption, the Fund would be required to permit the issuer to redeem
the security and convert it to underlying common stock, or would sell the
convertible security to a third party. A Fund generally would invest in
convertible securities for their favorable price characteristics and total
return potential and would normally not exercise an option to convert.
Securities rated Baa and BBB are the lowest which are considered
"investment grade" obligations. Moody's Investor Services, Inc. ("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." Standard & Poor's ("S&P") describes securities rated
BBB as "regarded as having an adequate capacity to pay interest and repay
principal...[w]hereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal... than in higher rated
categories."
Investments in securities rated below investment grade that are eligible
for purchase by certain of the Funds (i.e., rated B or better by Moody's or
S&P), and in particular, by the PIMCO High Yield Fund, are described as
"speculative" by both Moody's and S&P. Investment in lower rated corporate debt
securities ("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 debt securities that are
high yield may be more complex than for issuers of higher quality debt
securities.
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High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of high yield securities have been found to be less sensitive to
interest-rate changes than higher-rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in high yield security prices because the advent of a recession
could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt 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 Adviser seeks to minimize the risks of investing in all securities through
diversification, in-depth credit analysis and attention to current developments
in interest rates and market conditions.
PARTICIPATION ON CREDITORS COMMITTEE
A Fund (in particular, the PIMCO High Yield 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 will participate on such
committees only when the Adviser believes 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 residential or
commercial mortgage loans, 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 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 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
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foreclosure, net of fees or costs which may be incurred. Some mortgage-related
securities (such as securities issued by GNMA) 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
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 mortgages insured by the Federal Housing
Administration (the "FHA"), or guaranteed by the Department of Veterans Affairs
(the "VA").
Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a government-
sponsored corporation formerly owned by the twelve Federal Home Loan Banks and
now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("Pcs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but Pcs are not backed by the full faith and
credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools. However, timely
payment of interest and principal of these pools may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance and letters of credit. The insurance and guarantees are issued
by governmental entities, private insurers and the mortgage poolers. Such
insurance and guarantees and the creditworthiness of the issuers thereof will be
considered in determining whether a mortgage-related security meets the Trust'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. The Funds may buy mortgage-related securities without
insurance or guarantees if, through an examination of the loan experience and
practices of the originator/servicers and poolers, the Adviser determines that
the securities meet the Trust's quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable. No Fund will purchase mortgage-
related securities or any other assets which in the Adviser's opinion are
illiquid if, as a result, more than 15% of the value of the Fund's net assets
will be illiquid (10% in the case of the PIMCO Money Market Fund.)
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Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Funds'
industry concentration restrictions, set forth below under "Investment
Restrictions," by virtue of the exclusion from that test available to all U.S.
Government securities. In the case of privately issued mortgage-related
securities, the Funds take the position that mortgage-related securities do not
represent interests in any particular "industry" or group of industries. The
assets underlying such securities may be represented by a portfolio of first
lien residential mortgages (including both whole mortgage loans and mortgage
participation interests) or portfolios of mortgage pass-through securities
issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a
mortgage-related security may in turn be insured or guaranteed by the FHA or the
VA. In the case of private issue mortgage-related securities whose underlying
assets are neither U.S. Government securities nor U.S. Government-insured
mortgages, to the extent that real properties securing such assets may be
located in the same geographical region, the security may be subject to a
greater risk of default than other comparable securities in the event of adverse
economic, political or business developments that may affect such region and,
ultimately, the ability of residential homeowners to make payments of principal
and interest on the underlying mortgages.
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, semi-annually. 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
semi-annually, 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 FHA
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
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payment date are paid to the holders of the CMOs as additional sinking fund
payments. Because of the "pass-through" nature of all principal payments
received on the collateral pool in excess of FHLMC's minimum sinking fund
requirement, the rate at which principal of the CMOs 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 semi-annual 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.
COMMERCIAL MORTGAGE-BACKED SECURITIES include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property. The
market for commercial mortgage-backed securities developed more recently and in
terms of total outstanding principal amount of issues is relatively small
compared to the market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial mortgage-backed securities reflect
the risks of investing in the real estate securing the underlying mortgage
loans. These risks reflect the effects of local and other economic conditions on
real estate markets, the ability of tenants to make loan payments, and the
ability of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility than other
types of mortgage- or asset-backed securities.
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 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 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.
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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 (the 1933 Act). CMO
residuals, whether or not registered under the 1933 Act, may be subject to
certain restrictions on transferability, and may be deemed "illiquid" and
subject to a Fund's limitations on investment in illiquid securities.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities
("SMBS") are derivative multi-class mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose entities
of the foregoing.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the interest
and most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the IO class), while
the other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on a Fund's yield to maturity from these securities. If the underlying
mortgage assets experience greater than anticipated prepayments of principal, a
Fund may fail to fully recoup its initial investment in these securities even if
the security is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and
subject to a Fund's limitations on investment in illiquid securities.
OTHER ASSET-BACKED SECURITIES. Similarly, the Adviser expects that other
asset-backed securities (unrelated to mortgage loans) will be offered to
investors in the future. Several types of asset-backed securities have already
been offered to investors, including Certificates for Automobile
Receivables(SM)) ("CARS(SM)"). CARS(SM) represent undivided fractional interests
in a trust whose assets consist of a pool of motor vehicle retail installment
sales contracts and security interests in the vehicles securing the contracts.
Payments of principal and interest on CARS(SM) are passed through monthly to
certificate holders, and are guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution unaffiliated
with the trustee or originator of the trust. An investor's return on CARS(SM)
may be affected by early prepayment of principal on the underlying vehicle sales
contracts. If the letter of credit is exhausted, the trust may be prevented from
realizing the full amount due on a sales contract because of state law
requirements and restrictions relating to foreclosure sales of vehicles and the
obtaining of deficiency judgments following such sales or because of
depreciation, damage or loss of a vehicle, the application of federal and state
bankruptcy and insolvency laws, or other factors. As a result, certificate
holders may experience delays in payments or losses if the letter of credit is
exhausted.
Consistent with a Fund's investment objectives and policies, the Adviser
also may invest in other types of asset-backed securities.
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FOREIGN SECURITIES
All Funds (except the PIMCO Low Duration II and Total Return II Funds) may
invest in U.S. dollar- or foreign currency-denominated corporate debt securities
of foreign issuers (including preferred or preference stock), certain foreign
bank obligations (see "Bank Obligations") and U.S. dollar-or foreign currency-
denominated obligations of foreign governments or their subdivisions, agencies
and instrumentalities, international agencies and supranational entities. The
PIMCO Money Market, High Yield, Commercial Mortgage Securities and Long-Term
U.S. Government Funds may invest in securities of foreign issuers only if they
are U.S. dollar-denominated. The PIMCO VersaSTYLE Equity Fund and the PIMCO
VersaSTYLE Equity Fund II may invest up to 25% of its total assets directly in
common stocks issued by foreign companies or in securities represented by
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or
Global Depositary Receipts ("GDRs"). The PIMCO Short-Term Fund will
limit its investment in securities denominated in foreign currencies to no more
than 5% of the Fund's total assets. Each of the remaining Fixed Income Funds
permitted to invest in foreign securities, except the PIMCO Foreign, Global and
International Funds, will limit its investment in securities denominated in
foreign currencies to no more than 20% of the Fund's total assets. Each of the
Funds, except the PIMCO VersaSTYLE Equity Fund and VersaSTYLE Equity Fund II,
will limit its foreign investments to securities of issuers based in developed
countries (which include Newly Industrialized Countries ("NICs") such as Mexico,
Taiwan and South Korea). The PIMCO Short-Term, Low Duration and Low Duration III
Funds limit their investments in securities of issuers based in NICs to 5% of
their assets, and the remaining Fixed Income Funds limit their investments in
securities of issuers based in NICs to 10% of their assets.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. These
include: differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which can
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. In addition, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and therefore may
exhibit greater price volatility. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.
The PIMCO VersaSTYLE Equity Fund and PIMCO VersaSTYLE Equity Fund II may
invest in the securities of issuers based in developing countries. Investing in
developing countries involves certain risks not typically associated with
investing in U.S. securities, and imposes risks greater than, or in addition to,
risks of investing in foreign, developed countries. These risks include: greater
risks of nationalization or expropriation of assets or confiscatory taxation;
currency devaluations and other currency exchange rate fluctuations; greater
social, economic and political uncertainty and instability (including the risk
of war); more substantial government involvement in the economy; higher rates of
inflation; less government supervision and regulation of the securities markets
and participants in those markets; controls on foreign investment and
limitations on repatriation of invested capital and on a Fund's ability to
exchange local currencies for U.S. dollars; unavailability of currency hedging
techniques in certain developing countries; the fact that companies in
developing countries may be smaller, less seasoned and newly organized
companies; the difference in, or lack of, auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; the risk that it may be more difficult to obtain and/or enforce a
judgment in a court outside the United States; and greater price volatility,
substantially less liquidity and significantly smaller market capitalization of
securities markets.
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The PIMCO VersaSTYLE Equity Fund and the PIMCO VersaSTYLE Equity Fund II
may invest in securities represented by ADRs, EDRs or GDRs. ADRs are dollar-
denominated receipts issued generally by domestic banks and representing the
deposit with the bank of a security of a foreign issuer, and are publicly traded
on exchanges or over-the-counter in the United States. EDRs are receipts similar
to ADRs and are issued and traded in Europe. GDRs may be offered privately in
the United States and also trade in public or private markets in other
countries. ADRs, EDRs and GDRs may be issued as sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities trade in the form of ADRs, EDRs or GDRs. In unsponsored programs, the
issuer may not be directly involved in the creation of the program. Although
regulatory requirements with respect to sponsored and unsponsored programs are
generally similar, in some cases it may be easier to obtain financial
information from an issuer that has participated in the creation of a sponsored
program.
All Funds that may invest in foreign currency-denominated securities also
may purchase and sell foreign currency options and foreign currency futures
contracts and related options, see "Derivative Instruments," and enter into
forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates in the purchase and
sale of securities. The Funds may also use foreign currency options and foreign
currency forward contracts to increase exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another.
A forward foreign currency 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. These contracts may be bought or sold to protect a Fund
against a possible loss resulting from an adverse change in the relationship
between foreign currencies and the U.S. dollar or to increase exposure to a
particular foreign currency. Open positions in forward contracts used for non-
hedging purposes will be covered by the segregation with the Trust's custodian
of liquid assets, such as cash, U.S. Government securities and high quality
short-term investments and are marked to market daily. Although forward
contracts are intended to minimize the risk of loss due to a decline in the
value of the hedged currencies, at the same time, they tend to limit any
potential gain which might result should the value of such currencies increase.
Each of the Fixed Income Funds (except the PIMCO Low Duration II and Total
Return II Funds) may invest in Brady Bonds. Brady Bonds are securities created
through the exchange of existing commercial bank loans to sovereign entities for
new obligations in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas
F. Brady (the "Brady Plan"). Brady Plan debt restructurings have been
implemented in a number of countries, including in Argentina, Bolivia, Bulgaria,
Costa Rica, the Dominican Republic, Ecuador, Jordan, Mexico, Niger, Nigeria, the
Philippines, Poland, Uruguay, and Venezuela. In addition, Brazil has concluded a
Brady-like plan. It is expected that other countries will undertake a Brady
Plan in the future, including Panama and Peru.
Brady Bonds have been issued only recently, and accordingly do not have a
long payment history. Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (primarily the U.S. dollar) and are actively traded
in the over-the-counter secondary market. U.S. dollar-denominated,
collateralized Brady Bonds, which may be fixed rate par bonds or floating rate
discount bonds, are generally collateralized in full as to principal by U.S.
Treasury zero coupon bonds having the same maturity as the Brady Bonds. Interest
payments on these Brady Bonds generally are collateralized on a one-year or
longer rolling-forward basis by cash or securities in an amount that, in the
case of fixed rate bonds, is equal to at least one year of interest payments or,
in the case of floating rate bonds, initially is equal to at least one year's
interest payments based on the applicable interest rate at that time and is
adjusted at regular intervals thereafter. Certain Brady Bonds are entitled to
"value recovery payments" in certain circumstances, which in effect constitute
supplemental interest payments but generally
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are not collateralized. Brady Bonds are often viewed as having three or four
valuation components: (i) the collateralized repayment of principal at final
maturity; (ii) the collateralized interest payments; (iii) the uncollateralized
interest payments; and (iv) any uncollateralized repayment of principal at
maturity (these uncollateralized amounts constitute the "residual risk").
Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and interest coupon payments
collateralized on an 18-month rolling-forward basis by funds held in escrow by
an agent for the bondholders. A significant portion of the Venezuelan Brady
Bonds and the Argentine Brady Bonds issued to date have principal repayments at
final maturity collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and/or interest coupon payments
collateralized on a 14-month (for Venezuela) or 12-month (for Argentina)
rolling-forward basis by securities held by the Federal Reserve Bank of New York
as collateral agent.
Brady Bonds involve various risk factors including residual risk and the
history of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds. There can be no assurance that Brady
Bonds in which the Funds may invest will not be subject to restructuring
arrangements or to requests for new credit, which may cause the Funds to suffer
a loss of interest or principal on any of its holdings.
FOREIGN CURRENCY EXCHANGE-RELATED SECURITIES
FOREIGN CURRENCY WARRANTS. Foreign currency warrants such as Currency
Exchange Warrants(SM) ("CEWS(SM)") are warrants which entitle the holder to
receive from their issuer an amount of cash (generally, for warrants issued in
the United States, in U.S. dollars) which is calculated pursuant to a
predetermined formula and based on the exchange rate between a specified foreign
currency and the U.S. dollar as of the exercise date of the warrant. Foreign
currency warrants generally are exercisable upon their issuance and expire as of
a specified date and time. Foreign currency warrants have been issued in
connection with U.S. dollar-denominated debt offerings by major corporate
issuers in an attempt to reduce the foreign currency exchange risk which, from
the point of view of prospective purchasers of the securities, is inherent in
the international fixed-income marketplace. Foreign currency warrants may
attempt to reduce the foreign exchange risk assumed by purchasers of a security
by, for example, providing for a supplemental payment in the event that the U.S.
dollar depreciates against the value of a major foreign currency such as the
Japanese Yen or German Deutschmark. The formula used to determine the amount
payable upon exercise of a foreign currency warrant may make the warrant
worthless unless the applicable foreign currency exchange rate moves in a
particular direction (e.g., unless the U.S. dollar appreciates or depreciates
against the particular foreign currency to which the warrant is linked or
indexed). Foreign currency warrants are severable from the debt obligations with
which they may be offered, and may be listed on exchanges. Foreign currency
warrants may be exercisable only in certain minimum amounts, and an investor
wishing to exercise warrants who possesses less than the minimum number required
for exercise may be required either to sell the warrants or to purchase
additional warrants, thereby incurring additional transaction costs. In the case
of any exercise of warrants, there may be a time delay between the time a holder
of warrants gives instructions to exercise and the time the exchange rate
relating to exercise is determined, during which time the exchange rate could
change significantly, thereby affecting both the market and cash settlement
values of the warrants being exercised. The expiration date of the warrants may
be accelerated if the warrants should be delisted from an exchange or if their
trading should be suspended permanently, which would result in the loss of any
remaining "time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case the
warrants were "out-of-the-money," in a total loss of the purchase price of the
warrants. Warrants are generally unsecured obligations of their issuers and are
not standardized foreign currency options issued by the Options Clearing
Corporation ("OCC"). Unlike foreign currency options issued by OCC, the terms of
foreign exchange warrants generally will not be amended in the event of
governmental or regulatory actions affecting exchange rates or in the event of
the imposition of
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other regulatory controls affecting the international currency markets. The
initial public offering price of foreign currency warrants is generally
considerably in excess of the price that a commercial user of foreign currencies
might pay in the interbank market for a comparable option involving
significantly larger amounts of foreign currencies. Foreign currency warrants
are subject to significant foreign exchange risk, including risks arising from
complex political or economic factors.
PRINCIPAL EXCHANGE RATE LINKED SECURITIES. Principal exchange rate linked
securities ("PERLS(SM)") are debt obligations the principal on which is payable
at maturity in an amount that may vary based on the exchange rate between the
U.S. dollar and a particular foreign currency at or about that time. The return
on "standard" principal exchange rate linked securities is enhanced if the
foreign currency to which the security is linked appreciates against the U.S.
dollar, and is adversely affected by increases in the foreign exchange value of
the U.S. dollar; "reverse" principal exchange rate linked securities are like
the "standard" securities, except that their return is enhanced by increases in
the value of the U.S. dollar and adversely impacted by increases in the value of
foreign currency. Interest payments on the securities are generally made in U.S.
dollars at rates that reflect the degree of foreign currency risk assumed or
given up by the purchaser of the notes (i.e., at relatively higher interest
rates if the purchaser has assumed some of the foreign exchange risk, or
relatively lower interest rates if the issuer has assumed some of the foreign
exchange risk, based on the expectations of the current market). Principal
exchange rate linked securities may in limited cases be subject to acceleration
of maturity (generally, not without the consent of the holders of the
securities), which may have an adverse impact on the value of the principal
payment to be made at maturity.
PERFORMANCE INDEXED PAPER. Performance indexed paper ("PIPS(SM)") is U.S.
dollar-denominated commercial paper the yield of which is linked to certain
foreign exchange rate movements. The yield to the investor on performance
indexed paper is established at maturity as a function of spot exchange rates
between the U.S. dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is below,
and a potential maximum rate of return that is above, market yields on U.S.
dollar-denominated commercial paper, with both the minimum and maximum rates of
return on the investment corresponding to the minimum and maximum values of the
spot exchange rate two business days prior to maturity.
BANK OBLIGATIONS
Bank obligations in which the Funds invest include certificates of deposit,
bankers' acceptances, and fixed time deposits. Certificates of deposit are
negotiable certificates issued against funds deposited in a commercial bank for
a definite period of time and earning a specified return. Bankers' acceptances
are negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor, but may be subject to early
withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. A Fund will not invest in
fixed time deposits which (1) are not subject to prepayment or (2) provide for
withdrawal penalties upon prepayment (other than overnight deposits) if, in the
aggregate, more than 15% of its net assets (10% in the case of the PIMCO Money
Market Fund) would be invested in such deposits, repurchase agreements maturing
in more than seven days and other illiquid assets.
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Each Fund limits its investments in United States bank obligations to
obligations of United States banks (including foreign branches) which have more
than $1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the Federal Deposit Insurance Corporation. A Fund
also may invest in certificates of deposit of savings and loan associations
(federally or state chartered and federally insured) having total assets in
excess of $1 billion.
Each Fund (except the PIMCO Money Market, High Yield, Commercial Mortgage
Securities and Long-Term U.S. Government Funds) limits its investments in
foreign bank obligations to United States dollar-or foreign currency-denominated
obligations of foreign banks (including United States branches of foreign banks)
which at the time of investment (i) have more than $10 billion, or the
equivalent in other currencies, in total assets; (ii) in terms of assets are
among the 75 largest foreign banks in the world; (iii) have branches or agencies
(limited purpose offices which do not offer all banking services) in the United
States; and (iv) in the opinion of the Adviser, are of an investment quality
comparable to obligations of United States banks in which the Funds may invest.
The PIMCO Money Market, High Yield, Commercial Mortgage Securities and Long-Term
U.S. Government Funds may invest in the same types of bank obligations as the
other Funds, but they must be U.S. dollar-denominated. Subject to the Trust's
limitation on concentration of no more than 25% of its assets in the securities
of issuers in a particular industry, there is no limitation on the amount of a
Fund's assets which may be invested in obligations of foreign banks which meet
the conditions set forth herein.
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.
LOAN PARTICIPATIONS
Each Fund may purchase participations in commercial loans. Such
indebtedness may be secured or unsecured. Loan participations typically
represent direct participation in a loan to a corporate borrower, and generally
are offered by banks or other financial institutions or lending syndicates. When
purchasing loan participations, a Fund assumes the credit risk associated with
the corporate borrower and may assume the credit risk associated with an
interposed bank or other financial intermediary. The participation interests in
which a Fund intends to invest may not be rated by any nationally recognized
rating service.
A loan is often administered by an agent bank acting as agent for all
holders. The agent bank administers the terms of the loan, as specified in the
loan agreement. In addition, the agent bank is normally responsible for the
collection of principal and interest payments from the corporate borrower and
the apportionment of these payments to the credit of all institutions which are
parties to the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the corporate borrower, the
Fund may have to rely on the agent bank or other financial intermediary to apply
appropriate credit remedies against a corporate borrower.
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A financial institution's employment as agent bank might be terminated in
the event that it fails to observe a requisite standard of care or becomes
insolvent. A successor agent bank would generally be appointed to replace the
terminated agent bank, and assets held by the agent bank under the loan
agreement should remain available to holders of such indebtedness. However, if
assets held by the agent bank for the benefit of a Fund were determined to be
subject to the claims of the agent bank's general creditors, the Fund might
incur certain costs and delays in realizing payment on a loan or loan
participation and could suffer a loss of principal and/or interest. In
situations involving other interposed financial institutions (e.g., an insurance
company or governmental agency) similar risks may arise.
Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the corporate borrower for payment of principal and
interest. If a Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protection than an unsecured loan
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the corporate borrower's obligation, or that the collateral can be
liquidated.
The Funds may invest in loan participations with credit quality comparable
to that of issuers of its securities investments. Indebtedness of companies
whose creditworthiness is poor involves substantially greater risks, and may be
highly speculative. Some companies may never pay off their indebtedness, or may
pay only a small fraction of the amount owed. Consequently, when investing in
indebtedness of companies with poor credit, a Fund bears a substantial risk of
losing the entire amount invested.
Each Fund limits the amount of its total assets that it will invest in any
one issuer or in issuers within the same industry (see "Investment
Restrictions"). For purposes of these limits, a Fund generally will treat the
corporate borrower as the "issuer" of indebtedness held by the Fund. In the case
of loan participations where a bank or other lending institution serves as a
financial intermediary between a Fund and the corporate borrower, if the
participation does not shift to the Fund the direct debtor-creditor relationship
with the corporate borrower, Securities and Exchange Commission ("SEC")
interpretations require the Fund to treat both the lending bank or other lending
institution and the corporate borrower as "issuers" for the purposes of
determining whether the Fund has invested more than 5% of its total assets in a
single issuer. Treating a financial intermediary as an issuer of indebtedness
may restrict a Funds' ability to invest in indebtedness related to a single
financial intermediary, or a group of intermediaries engaged in the same
industry, even if the underlying borrowers represent many different companies
and industries.
Loans and other types of direct indebtedness may not be readily marketable
and may be subject to restrictions on resale. In some cases, negotiations
involved in disposing of indebtedness may require weeks to complete.
Consequently, some indebtedness may be difficult or impossible to dispose of
readily at what the Adviser believes to be a fair price. In addition, valuation
of illiquid indebtedness involves a greater degree of judgment in determining a
Fund's net asset value than if that value were based on available market
quotations, and could result in significant variations in the Fund's daily share
price. At the same time, some loan interests are traded among certain financial
institutions and accordingly may be deemed liquid. As the market for different
types of indebtedness develops, the liquidity of these instruments is expected
to improve. In addition, the Funds currently intend to treat indebtedness for
which there is no readily available market as illiquid for purposes of the
Funds' limitation on illiquid investments.
Investments in loans through a direct assignment of the financial
institution's interests with respect to the loan may involve additional risks to
the Funds. For example, if a loan is foreclosed, a Fund could become part owner
of any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, a Fund could be held liable
as co-lender. It is unclear whether loans and other forms of direct indebtedness
offer securities law protections against fraud and misrepresentation. In the
absence of definitive
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regulatory guidance, the Funds rely on the Adviser's research in an attempt to
avoid situations where fraud or misrepresentation could adversely affect the
Funds.
SHORT SALES
Certain of the Funds, particularly the PIMCO StocksPLUS Short Strategy
Fund, may make short sales of securities as part of their overall portfolio
management strategies involving the use of derivative instruments and to offset
potential declines in long positions in similar securities. A short sale is a
transaction in which a Fund sells a security it does not own in anticipation
that the market price of that security will decline.
When a Fund makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any accrued interest on such borrowed securities.
If the price of the security sold short increases between the time of the
short sale and the time and the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. The successful use of short selling may be
adversely affected by imperfect correlation between movements in the price of
the security sold short and the securities being hedged.
To the extent that a Fund engages in short sales, it will provide
collateral to the broker-dealer and (except in the case of short sales "against
the box") will maintain additional asset coverage in the form of liquid assets,
such as cash, U.S. Government securities or high grade debt obligations in a
segregated account. Each Fund, except the PIMCO StocksPLUS Short Strategy Fund,
does not intend to enter into short sales (other than those "against the box")
if immediately after such sale the aggregate of the value of all collateral plus
the amount in such segregated account exceeds one-third of the value of the
Fund's net assets. This percentage may be varied by action of the Trustees. A
short sale is "against the box" to the extent that the Fund contemporaneously
owns, or has the right to obtain at no added cost, securities identical to those
sold short. The Funds will engage in short selling to the extent permitted by
the 1940 Act and rules and interpretations thereunder.
With respect to each Fund, except the PIMCO StocksPLUS Short Strategy Fund,
the Trust has agreed with a state securities commission that as an operating
policy, the dollar amount of short sales (other than short sales against the
box) at any time shall not exceed 25% of the net equity of a Fund, and the value
of securities of any one issuer in which a Fund is short shall not exceed 2% of
the Fund's net assets or 2% of the securities of any class of any issuer.
DERIVATIVE INSTRUMENTS
In pursuing their individual objectives the Funds may, as described in the
Prospectus, purchase and sell (write) both put options and call options on
securities, securities indexes, and foreign currencies, and enter into interest
rate, foreign currency and index futures contracts and purchase and sell options
on such futures contracts ("futures options") for hedging purposes, except that
those Funds that may not invest in foreign currency-denominated securities may
not enter into transactions involving currency futures or options. The Funds
also may purchase and sell foreign currency options for purposes of increasing
exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another. The Funds also may enter into swap
agreements with respect to foreign currencies, interest rates and indexes of
securities. The Funds may invest in structured notes. If other types of
financial instruments, including other types of options, futures contracts, or
futures options are traded in the future, a Fund may also use those instruments,
provided that the Trustees determine that their use is consistent with the
Fund's investment
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objective, and provided that their use is consistent with restrictions
applicable to options and futures contracts currently eligible for use by the
Trust (i.e., that written call or put options will be "covered" or "secured,"
and that futures and futures options will be used only for hedging purposes).
OPTIONS ON SECURITIES AND INDEXES. A Fund may, as specified for the Fund in
the Prospectus, purchase and sell both put and call options on fixed income or
other securities or indexes in standardized contracts traded on foreign or
domestic securities exchanges, boards of trade, or similar entities, or quoted
on NASDAQ or on a regulated foreign over-the-counter market, and agreements,
sometimes called cash puts, which may accompany the purchase of a new issue of
bonds from a dealer.
An option on a security (or index) is a contract that gives the holder of
the option, in return for a premium, the right to buy from (in the case of a
call) or sell to (in the case of a put) the writer of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at any time during the term of the option. The writer of an option on a
security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security. Upon exercise, the writer of an
option on an index is obligated to pay the difference between the cash value of
the index and the exercise price multiplied by the specified multiplier for the
index option. (An index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial instruments or
securities, or certain economic indicators.)
A Fund will write call options and put options only if they are "covered."
In the case of a call option on a security, the option is "covered" if the Fund
owns the security underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or, if additional
cash consideration is required, cash or other liquid assets such as U.S.
Government securities or high grade debt obligations in such amount are placed
in a segregated account by its custodian) upon conversion or exchange of other
securities held by the Fund. For a call option on an index, the option is
covered if the Fund maintains with its custodian liquid assets such as cash,
U.S. Government securities or high grade debt obligations in an amount equal to
the contract value of the index. A call option is also covered if the Fund holds
a call on the same security or index as the call written where the exercise
price of the call held is (i) equal to or less than the exercise price of the
call written, or (ii) greater than the exercise price of the call written,
provided the difference is maintained by the Fund in liquid assets such as cash,
U.S. Government securities or high grade debt obligations in a segregated
account with its custodian. A put option on a security or an index is "covered"
if the Fund maintains liquid assets such as cash, U.S. Government securities or
high grade debt obligations equal to the exercise price in a segregated account
with its custodian. A put option is also covered if the Fund holds a put on the
same security or index as the put written where the exercise price of the put
held is (i) equal to or greater than the exercise price of the put written, or
(ii) less than the exercise price of the put written, provided the difference is
maintained by the Fund in cash or cash equivalents in a segregated account with
its custodian.
If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by a Fund expires unexercised, the Fund realizes a capital loss equal
to the premium paid. Prior to the earlier of exercise or expiration, an option
may be closed out by an offsetting purchase or sale of an option of the same
series (type, exchange, underlying security or index, exercise price, and
expiration). There can be no assurance, however, that a closing purchase or sale
transaction can be effected when the Fund desires.
A Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss.
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The principal factors affecting the market value of a put or a call option
include supply and demand, interest rates, the current market price of the
underlying security or index in relation to the exercise price of the option,
the volatility of the underlying security or index, and the time remaining until
the expiration date.
The premium paid for a put or call option purchased by a Fund is an asset
of the Fund. The premium received for an option written by a Fund is recorded as
a deferred credit. The value of an option purchased or written is marked to
market daily and is valued at the closing price on the exchange on which it is
traded or, if not traded on an exchange or no closing price is available, at the
mean between the last bid and asked prices.
The Funds may write covered straddles consisting of a combination of a call
and a put written on the same underlying security. A straddle will be covered
when sufficient assets are deposited to meet the Funds' immediate obligations.
The Funds may use the same liquid assets to cover both the call and put options
where the exercise price of the call and put are the same, or the exercise price
of the call is higher than that of the put. In such cases, the Funds will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."
RISKS ASSOCIATED WITH OPTIONS ON SECURITIES AND INDEXES. There are several
risks associated with transactions in options on securities and on indexes. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option may expire worthless. If a Fund were
unable to close out a covered call option that it had written on a security, it
would not be able to sell the underlying security unless the option expired
without exercise. As the writer of a covered call option, a Fund forgoes, during
the option's life, the opportunity to profit from increases in the market value
of the security covering the call option above the sum of the premium and the
exercise price of the call.
If trading were suspended in an option purchased by a Fund, the Fund would
not be able to close out the option. If restrictions on exercise were imposed,
the Fund might be unable to exercise an option it has purchased. Except to the
extent that a call option on an index written by the Fund is covered by an
option on the same index purchased by the Fund, movements in the index may
result in a loss to the Fund; however, such losses may be mitigated by changes
in the value of the Fund's securities during the period the option was
outstanding.
FOREIGN CURRENCY OPTIONS. A Fund may buy or sell put and call options on
foreign currencies either on exchanges or in the over-the-counter market. A put
option on a foreign currency gives the purchaser of the option the right to sell
a foreign currency at the exercise price until the option expires. A call option
on a foreign currency gives the purchaser of the option the right to purchase
the currency at the exercise price until the option expires. 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 exchange-traded options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Fund may use interest
rate, foreign currency or index futures contracts, as specified for that Fund in
the Prospectus. An interest rate, foreign currency or index futures contract
provides for the future sale by one party and purchase by another party of
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a specified quantity of a financial instrument, foreign currency or the cash
value of an index at a specified price and time. A futures contract on an index
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. Although the value of an index might be a
function of the value of certain specified securities, no physical delivery of
these securities is made. A public market exists in futures contracts covering a
number of indexes as well as financial instruments and foreign currencies,
including: the S&P 500; the S&P Midcap 400; the Nikkei 225; the NYSE composite;
U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates; three-month U.S.
Treasury bills; 90-day commercial paper; bank certificates of deposit;
Eurodollar certificates of deposit; the Australian dollar; the Canadian dollar;
the British pound; the German mark; the Japanese yen; the French franc; the
Swiss franc; the Mexican peso; and certain multinational currencies, such as the
European Currency Unit ("ECU"). It is expected that other futures contracts will
be developed and traded in the future.
A Fund may purchase and write call and put futures options. Futures options
possess many of the same characteristics as options on securities and indexes
(discussed above). A futures option gives the holder the right, in return for
the premium paid, to assume a long position (call) or short position (put) in a
futures contract at a specified exercise price at any time during the period of
the option. Upon exercise of a call option, the holder acquires a long position
in the futures contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true.
To comply with applicable rules of the Commodity Futures Trading Commission
("CFTC") under which the Trust and the Funds avoid being deemed a "commodity
pool" or a "commodity pool operator," each Fund intends generally to limit its
use of futures contracts and futures options to "bona fide hedging"
transactions, as such term is defined in applicable regulations, interpretations
and practice. For example, a Fund might use futures contracts to hedge against
anticipated changes in interest rates that might adversely affect either the
value of the Fund's securities or the price of the securities which the Fund
intends to purchase. A Fund's hedging activities may include sales of futures
contracts as an offset against the effect of expected increases in interest
rates, and purchases of futures contracts as an offset against the effect of
expected declines in interest rates. Although other techniques could be used to
reduce that Fund's exposure to interest rate fluctuations, the Fund may be able
to hedge its exposure more effectively and perhaps at a lower cost by using
futures contracts and futures options.
A Fund will only enter into futures contracts and futures options which are
standardized and traded on a U.S. or foreign exchange, board of trade, or
similar entity, or quoted on an automated quotation system.
When a purchase or sale of a futures contract is made by a Fund, the Fund
is required to deposit with its custodian (or broker, if legally permitted) a
specified amount of liquid assets, such as cash, U.S. Government securities or
high grade debt obligations ("initial margin"). The margin required for a
futures contract is set by the exchange on which the contract is traded and may
be modified during the term of the contract. Margin requirements on foreign
exchanges may be different than U.S. exchanges. The initial margin is in the
nature of a performance bond or good faith deposit on the futures contract which
is returned to the Fund upon termination of the contract, assuming all
contractual obligations have been satisfied. Each Fund expects to earn interest
income on its initial margin deposits. A futures contract held by a Fund is
valued daily at the official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called "variation margin,"
equal to the daily change in value of the futures contract. This process is
known as "marking to market." Variation margin does not represent a borrowing or
loan by a Fund but is instead a settlement between the Fund and the broker of
the amount one would owe the other if the futures contract expired. In computing
daily net asset value, each Fund will mark to market its open futures positions.
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A Fund is also required to deposit and maintain margin with respect to put
and call options on futures contracts written by it. Such margin deposits will
vary depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund realizes a capital
gain, or if it is more, the Fund realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, the Fund
realizes a capital gain, or if it is less, the Fund realizes a capital loss. The
transaction costs must also be included in these calculations.
The Funds may write covered straddles consisting of a call and a put
written on the same underlying futures contract. A straddle will be covered when
sufficient assets are deposited to meet the Funds' immediate obligations. A Fund
may use the same liquid assets to cover both the call and put options where the
exercise price of the call and put are the same, or the exercise price of the
call is higher than that of the put. In such cases, the Funds will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."
LIMITATIONS ON USE OF FUTURES AND FUTURES OPTIONS. In general, the Funds
intend to enter into positions in futures contracts and related options only for
"bona fide hedging" purposes. With respect to positions in futures and related
options that do not constitute bona fide hedging positions, a Fund will not
enter into a futures contract or futures option contract if, immediately
thereafter, the aggregate initial margin deposits relating to such positions
plus premiums paid by it for open futures option positions, less the amount by
which any such options are "in-the-money," would exceed 5% of the Fund's net
assets. A call option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures contract
that is the subject of the option.
When purchasing a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) liquid assets, such as cash, U.S.
Government securities, or other highly liquid debt securities that, when added
to the amounts deposited with a futures commission merchant as margin, are equal
to the market value of the futures contract. Alternatively, the Fund may "cover"
its position by purchasing a put option on the same futures contract with a
strike price as high or higher than the price of the contract held by the Fund.
When selling a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) liquid assets, such as cash, U.S.
Government securities or high grade debt obligations that are equal to the
market value of the instruments underlying the contract. Alternatively, the Fund
may "cover" its position by owning the instruments underlying the contract (or,
in the case of an index futures contract, a portfolio with a volatility
substantially similar to that of the index on which the futures contract is
based), or by holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the contract written by
the Fund (or at a higher price if the difference is maintained in liquid assets
with the Trust's custodian).
When selling a call option on a futures contract, a Fund will maintain with
its custodian (and mark-to-market on a daily basis) liquid assets, such as cash,
U.S. Government securities, or other highly liquid debt securities that, when
added to the amounts deposited with a futures commission merchant as margin,
equal the total market value of the futures contract underlying the call option.
Alternatively, the Fund may cover its position by entering into a long position
in the same futures contract at a price no higher than the strike price of the
call option, by owning the instruments underlying the futures contract, or by
holding a
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<PAGE>
separate call option permitting the Fund to purchase the same futures contract
at a price not higher than the strike price of the call option sold by the Fund.
When selling a put option on a futures contract, a Fund will maintain with
its custodian (and mark-to-market on a daily basis) cash, U.S. Government
securities, or other highly liquid debt securities that equal the purchase price
of the futures contract, less any margin on deposit. Alternatively, the Fund may
cover the position either by entering into a short position in the same futures
contract, or by owning a separate put option permitting it to sell the same
futures contract so long as the strike price of the purchased put option is the
same or higher than the strike price of the put option sold by the Fund.
As an operating policy, the Adviser will generally use cash and cash
equivalents in establishing and maintaining segregated accounts to cover each
Fund's obligations under futures contracts and related options. The Adviser
defines cash equivalents to include high grade liquid debt securities with
maturities of one year or less. To the extent that securities with maturities
greater than one year are used, such use will not eliminate the risk of a form
of leverage, which may tend to exaggerate the effect on net asset value of any
increase or decrease in the market value of a Fund's portfolio, and may require
liquidation of portfolio positions when it is not advantageous to do so.
However, any potential risk of leverage resulting from the use of securities
with maturities greater than one year may be mitigated by the overall duration
limit on a Fund's portfolio securities. Thus, the use of a longer-term security
may require a Fund to hold offsetting short-term securities to balance the
Fund's portfolio such that the Fund's duration does not exceed the maximum
permitted for the Fund in the prospectus.
The requirements for qualification as a regulated investment company also
may limit the extent to which a Fund may enter into futures, futures options or
forward contracts. See "Taxation."
RISKS ASSOCIATED WITH FUTURES AND FUTURES OPTIONS. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can be no guarantee
that there will be a correlation between price movements in the hedging vehicle
and in the Fund securities being hedged. In addition, there are significant
differences between the securities and futures markets that could result in an
imperfect correlation between the markets, causing a given hedge not to achieve
its objectives. The degree of imperfection of correlation depends on
circumstances such as variations in speculative market demand for futures and
futures options on securities, including technical influences in futures trading
and futures options, and differences between the financial instruments being
hedged and the instruments underlying the standard contracts available for
trading in such respects as interest rate levels, maturities, and
creditworthiness of issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures or a futures option position, and that Fund
would remain obligated to meet margin requirements until the position is closed.
In addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue to exist.
ADDITIONAL RISKS OF OPTIONS ON SECURITIES, FUTURES CONTRACTS, OPTIONS ON
FUTURES CONTRACTS, AND FORWARD CURRENCY EXCHANGE CONTRACTS AND OPTIONS THEREON.
Options on securities, futures contracts, options on futures contracts, and
options on currencies may be traded on foreign exchanges. Such transactions may
not be regulated as effectively as similar transactions in the United States;
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities. The value of such positions also could be adversely affected by (i)
other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Trust's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of
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<PAGE>
different exercise and settlement terms and procedures and margin requirements
than in the United States, and (v) lesser trading volume.
SWAP AGREEMENTS. The Funds may enter into interest rate, index and currency
exchange rate swap agreements. These transactions are entered into in a attempt
to obtain a particular return when it is considered desirable to do so, possibly
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, which
may be adjusted for an interest factor. The gross returns to be exchanged or
"swapped" between the parties are generally 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. Forms
of 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 rate, or "floor;" and
interest rate collars, under which a party sells a cap and purchases a floor or
vice versa in an attempt to protect itself against interest rate movements
exceeding given minimum or maximum levels.
Most swap agreements entered into by the Funds would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current 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 current 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 liquid assets such as cash,
U.S. Government securities, or high grade debt obligations, to avoid any
potential leveraging of the Fund's portfolio. Obligations under swap agreements
so covered will not be construed to be "senior securities" for purposes of the
Funds' investment restriction concerning senior securities. 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 would exceed 5% of the
Fund's assets.
Whether a Fund's use of swap agreements will be successful in furthering
its investment objective of total return will depend on the 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 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 Funds will enter into swap
agreements only with counterparties that meet certain standards of
creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Funds' repurchase agreement guidelines).
Certain restrictions imposed on the Funds by the Internal Revenue Code may limit
the Funds' ability to use swap agreements. The swaps market is a relatively new
market and is largely unregulated. It is possible that developments in the swaps
market, including potential government regulation, could adversely affect a
Fund's ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the CFTC
effective February 22, 1993. To qualify for this exemption, a swap agreement
must be entered into by "eligible participants," which includes the following,
provided the participants' total assets exceed established levels: a bank or
trust company, savings association or credit
20
<PAGE>
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.
STRUCTURED NOTES. Structured notes are derivative debt securities, the
interest rate or principal of which is determined by an unrelated indicator.
Indexed securities include structured notes as well as securities other than
debt securities, the interest rate or principal of which is determined by an
unrelated indicator. Indexed securities may include a multiplier that multiplies
the indexed element by a specified factor and, therefore, the value of such
securities may be very volatile. To the extent a Fund invests in these
securities, however, the Adviser analyzes these securities in its overall
assessment of the effective duration of the Fund's portfolio in an effort to
monitor the Fund's interest rate risk.
WARRANTS TO PURCHASE SECURITIES
The Funds may invest in or acquire warrants to purchase equity or fixed
income securities. Bonds with warrants attached to purchase equity securities
have many characteristics of convertible bonds and their prices may, to some
degree, reflect the performance of the underlying stock. Bonds also may be
issued with warrants attached to purchase additional fixed income securities at
the same coupon rate. A decline in interest rates would permit a Fund to buy
additional bonds at the favorable rate or to sell the warrants at a profit. If
interest rates rise, the warrants would generally expire with no value.
A Fund will not invest more than 5% of its net assets, valued at the lower
of cost or market, in warrants to purchase securities. Included within that
amount, but not to exceed 2% of the Fund's net assets, may be warrants that are
not listed on the New York or American Stock Exchanges. Warrants acquired in
units or attached to securities will be deemed to be without value for purposes
of this restriction.
ILLIQUID SECURITIES
The Funds may invest up to 15% of their net assets in illiquid securities
(10% in the case of the PIMCO Money Market Fund). The term "illiquid securities"
for this purpose means securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount at which a Fund
has valued the securities. Illiquid securities are considered to include, among
other things, written over-the-counter options, securities or other liquid
assets being used as cover for such options, repurchase agreements with
maturities in excess of seven days, certain loan participation interests, fixed
time deposits which are not subject to prepayment or provide for withdrawal
penalties upon prepayment (other than
21
<PAGE>
overnight deposits), and other securities whose disposition is restricted under
the federal securities laws (other than securities issued pursuant to Rule 144A
under the 1933 Act and certain commercial paper that the Adviser has determined
to be liquid under procedures approved by the Board of Trustees).
SOCIAL INVESTMENT POLICIES
The PIMCO Low Duration III and Total Return III Funds will not, as a matter
of non-fundamental operating policy, invest in the securities of any issuer
determined by the Adviser to be engaged principally in the provision of
healthcare services, the manufacture of alcoholic beverages, tobacco products,
pharmaceuticals, military equipment, or the operation of gambling casinos. The
Funds will also avoid, to the extent possible on the basis of information
available to the Adviser, the purchase of securities of issuers engaged in the
production or trade of pornographic materials. An issuer will be deemed to be
principally engaged in an activity if it derives more than 10% of its gross
revenues from such activities. Evaluation of any particular issuer with respect
to these criteria may involve the exercise of subjective judgment by the
Adviser. The Adviser's determination of issuers engaged in such activities at
any given time will, however, be based upon its good faith interpretation of
available information and its continuing and reasonable best efforts to obtain
and evaluate the most current information available, and to utilize such
information, as it becomes available, promptly and expeditiously in portfolio
management for the Funds. In making its analysis, the Adviser may rely, among
other things, upon information contained in such publications as those produced
by the Investor Responsibility Research Center, Inc.
INVESTMENT RESTRICTIONS
Each Fund's investment objective as set forth in the Prospectus under
"Investment Objectives and Policies," together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
with respect to a Fund without shareholder approval by vote of a majority of the
outstanding shares of that Fund. Under these restrictions, a Fund may not:
(1) invest in a security if, as a result of such investment, more than 25%
of its total assets (taken at market value at the time of such investment) would
be invested in the securities of issuers in any particular industry, except that
this restriction does not apply (a) to securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities (or repurchase agreements
with respect thereto) and (b) with respect to the Money Market Fund, to
securities or obligations issued by U.S. banks;
(2) with respect to 75% of its assets, invest in a security if, as a result
of such investment, more than 5% of its total assets (taken at market value at
the time of such investment) would be invested in the securities of any one
issuer, except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities (This
investment restriction is not applicable to the Commercial Mortgage Securities
Fund, the Foreign Fund, the Global Fund or the International Fund.);
(3) with respect to 75% of its assets, invest in a security if, as a result
of such investment, it would hold more than 10% (taken at the time of such
investment) of the outstanding voting securities of any one issuer (This
restriction is not applicable to the Commercial Mortgage Securities Fund, the
Foreign Fund, the Global Fund or the International Fund);
(4) purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by companies
which invest in real estate, or interests therein;
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<PAGE>
(5) purchase or sell commodities or commodities contracts or oil, gas or
mineral programs. This restriction shall not prohibit a Fund, subject to
restrictions described in the Prospectus and elsewhere in this Statement of
Additional Information, from purchasing, selling or entering into futures
contracts, options on futures contracts, foreign currency forward contracts,
foreign currency options, or any interest rate, securities-related or foreign
currency-related hedging instrument, including swap agreements and other
derivative instruments, subject to compliance with any applicable provisions of
the federal securities or commodities laws;
(6) for the High Yield, Total Return III, International and StocksPLUS
Funds: purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but it
may make margin deposits in connection with transactions in options, futures,
and options on futures;
(7) borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that a Fund may (i) borrow from banks or enter
into reverse repurchase agreements, or employ similar investment techniques, and
pledge its assets in connection therewith, but only if immediately after each
borrowing there is asset coverage of 300% and (ii) enter into transactions in
options, futures, options on futures, and other derivative instruments as
described in the Prospectus and in this Statement of Additional Information (the
deposit of assets in escrow in connection with the writing of covered put and
call options and the purchase of securities on a when-issued or delayed delivery
basis, collateral arrangements with respect to initial or variation margin
deposits for futures contracts and commitments entered into under swap
agreements or other derivative instruments, will not be deemed to be pledges of
a Fund's assets);
(8) lend any funds or other assets, except that a Fund may, consistent with
its investment objective and policies: (a) invest in debt obligations, including
bonds, debentures, or other debt securities, bankers' acceptances and commercial
paper, even though the purchase of such obligations may be deemed to be the
making of loans, (b) enter into repurchase agreements, and (c) lend its
portfolio securities in an amount not to exceed one-third of the value of its
total assets, provided such loans are made in accordance with applicable
guidelines established by the Securities and Exchange Commission and the
Trustees of the Trust;
(9) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under the federal securities laws; or
(10) (a) for the High Yield, Total Return III, and StocksPLUS Funds:
maintain a short position, or purchase, write or sell puts, calls, straddles,
spreads or combinations thereof, except as set forth in the Prospectus and in
this Statement of Additional Information for transactions in options, futures,
options on futures, and transactions arising under swap agreements or other
derivative instruments;
(b) for the Money Market, Short-Term, Low Duration, Low Duration II,
Low Duration III, Moderate Duration, Total Return, Total Return II, Commercial
Mortgage Securities, Long-Term U.S. Government, Foreign, Global, International,
StocksPLUS Short Strategy, VersaSTYLE Equity, VersaSTYLE Equity II and Strategic
Balanced Funds: maintain a short position, or purchase, write or sell puts,
calls, straddles, spreads or combinations thereof, except on such conditions as
may be set forth in the Prospectus and in this Statement of Additional
Information.
Each Fund is also subject to the following non-fundamental restrictions and
policies (which may be changed without shareholder approval) relating to the
investment of its assets and activities. Unless otherwise indicated, a Fund may
not:
(A) invest for the purpose of exercising control or management;
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<PAGE>
(B) purchase securities of other investment companies, except that a Fund
may, for temporary purposes, purchase shares of money market mutual funds,
subject to such restrictions as may be imposed by the Investment Company Act of
1940 and rules thereunder, or by any State in which shares of the Fund are
registered (collateral arrangements with respect to securities on loan from a
Fund are not considered to involve the purchase of securities by the Fund and
are not subject to this restriction);
(C) invest more than 15% of the net assets of a Fund (10% in the case of
the PIMCO Money Market Fund) (taken at market value at the time of the
investment) in "illiquid securities," illiquid securities being defined to
include securities subject to legal or contractual restrictions on resale (which
may include private placements), repurchase agreements maturing in more than
seven days, certain loan participation interests, fixed time deposits which are
not subject to prepayment or provide for withdrawal penalties upon prepayment
(other than overnight deposits), certain options traded over the counter that a
Fund has purchased, securities or other liquid assets being used to cover such
options a Fund has written, securities for which market quotations are not
readily available, or other securities which legally or in the Adviser's opinion
may be deemed illiquid (other than securities issued pursuant to Rule 144A under
the Securities Act of 1933 and certain commercial paper that PIMCO has
determined to be liquid under procedures approved by the Board of
Trustees);
(D) invest in a security if, as a result of such investment, more than 5%
of its total assets (taken at market value at the time of such investment) would
be invested in securities of issuers (other than issuers of Federal agency
obligations) having a record, together with predecessors or unconditional
guarantors, of less than three years of continuous operation;
(E) purchase or retain securities of any issuer if 5% of the securities of
such issuer are owned by those officers and directors or trustees of the Trust
or of the Adviser who each own beneficially more than one-half of 1% of its
securities;
(F) purchase securities for the Fund from, or sell portfolio securities to,
any of the officers and directors or trustees of the Trust or of the Adviser;
(G) for the PIMCO Money Market, Short-Term, Low Duration, Low Duration II,
Low Duration III, Moderate Duration, Total Return, Total Return II, Commercial
Mortgage Securities, Long-Term U.S. Government, Foreign, Global, StocksPLUS
Short Strategy, VersaSTYLE Equity, VersaSTYLE Equity II and Strategic Balanced
Funds: purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but it
may make margin deposits in connection with covered transactions in options,
futures, options on futures and short positions;
(H) invest more than 5% of the assets of a Fund (taken at market value at
the time of investment) in any combination of interest only, principal only, or
inverse floating rate securities;
(I) borrow money (excluding dollar rolls and reverse repurchase agreements,
which are subject to the Fund's fundamental borrowing restriction), except for
temporary administrative purposes; or
(J) (a) for the PIMCO Short-Term, Low Duration and Low Duration III Funds,
invest greater than 5% of its assets in the securities of issuers based in Newly
Industrialized Countries ("NICs"); and
(b) for the remaining Fixed Income Funds, invest greater than 10% of
its assets in the securities of issuers based in NICs.
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<PAGE>
In addition, the Trust has adopted a non-fundamental policy pursuant to
which each Fund that may invest in securities denominated in foreign currencies,
except the PIMCO Global Fund, will hedge at least 75% of its exposure to foreign
currency using the techniques described in the Prospectus. There can be no
assurance that currency hedging techniques will be successful.
Under the 1940 Act, a "senior security" does not include any promissory
note or evidence of indebtedness where such loan is for temporary purposes only
and in an amount not exceeding 5% of the value of the total assets of the issuer
at the time the loan is made. A loan is presumed to be for temporary purposes if
it is repaid within sixty days and is not extended or renewed. Notwithstanding
the provisions of fundamental investment restriction (7) above, a Fund may
borrow money for temporary administrative purposes. To the extent that
borrowings for temporary administrative purposes exceed 5% of the total assets
of a Fund, such excess shall be subject to the 300% asset coverage requirement
of that restriction.
The staff of the SEC has taken the position that purchased over-the-counter
("OTC") options and the assets used as cover for written OTC options are
illiquid securities. Therefore, the Funds have adopted an investment policy
pursuant to which a Fund will not purchase or sell OTC options if, as a result
of such transactions, the sum of the market value of OTC options currently
outstanding which are held by the Fund, the market value of the underlying
securities covered by OTC call options currently outstanding which were sold by
the Fund and margin deposits on the Fund's existing OTC options on futures
contracts exceeds 15% of the net assets of the Fund, taken at market value,
together with all other assets of the Fund which are illiquid or are otherwise
not readily marketable. However, if an OTC option is sold by the Fund to a
primary U.S. Government securities dealer recognized by the Federal Reserve Bank
of New York and if the Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat as illiquid such amount of the underlying securities equal to
the repurchase price less the amount by which the option is "in-the-money"
(i.e., current market value of the underlying securities minus the option's
strike price). The repurchase price with the primary dealers is typically a
formula price which is generally based on a multiple of the premium received for
the option, plus the amount by which the option is "in-the-money." This policy
is not a fundamental policy of the Funds and may be amended by the Trustees
without the approval of shareholders. However, the Funds will not change or
modify this policy prior to the change or modification by the SEC staff of its
position.
Unless otherwise indicated, all limitations applicable to Fund investments
(as stated above and elsewhere in this Statement of Additional Information)
apply only at the time a transaction is entered into. Any subsequent change in a
rating assigned by any rating service to a security (or, if unrated, deemed to
be of comparable quality), or change in the percentage of Fund assets invested
in certain securities or other instruments, or change in the average duration of
a Fund's investment portfolio, resulting from market fluctuations or other
changes in a Fund's total assets will not require a Fund to dispose of an
investment until the Adviser determines that it is practicable to sell or close
out the investment without undue market or tax consequences to the Fund. In the
event that rating services assign different ratings to the same security, the
Adviser will determine which rating it believes best reflects the security's
quality and risk at that time, which may be the higher of the several assigned
ratings.
The Trust has undertaken with a state securities commission that it will
interpret the provisions of investment restriction (5) to prohibit the Trust's
investment in oil, gas or other mineral leases and that it will interpret the
provisions of investment restriction (4) to prohibit the Trust's investment in
real estate limited partnerships.
With respect to each Fund, except the PIMCO StocksPLUS Short Strategy Fund,
the Trust has agreed with a state securities commission that as an operating
policy, the dollar amount of short sales (other than short sales against the
box) at any time shall not exceed 25% of the net equity of a Fund, and the value
of securities of any one issuer in which a Fund is short shall not exceed 2% of
the Fund's net assets or 2% of the securities of any class of any issuer.
The Trust has undertaken to a state securities commission that the
aggregate premiums paid on all options held at any time by the Trust will be
limited to 20% of the Trust's total net asset value, and that the Trust will
engage in writing options on securities only if such options are issued by the
Options Clearing
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Corporation or are written by the Trust with primary U.S. Government securities
dealers recognized by the Federal Reserve Bank of New York. Furthermore,
pursuant to a restriction imposed by a state securities commission, the Adviser
waives its fee on all Trust assets invested temporarily in shares of money
market mutual funds pursuant to restriction "B", above.
The Trust has undertaken to a state securities commission that the Funds
will limit their investment in restricted securities (defined as securities in
which the Trust is restricted from selling to the public without registration
under the 1933 Act) to no more than 10% of their total assets.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their business address
and principal occupations during the past five years are as follows (unless
otherwise indicated, the address of all persons below is 840 Newport Center
Drive, Suite 360, Newport Beach, California 92660):
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING THE PAST FIVE YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C>
Brent R. Harris* Chairman of the Board Managing Director, PIMCO;
Age 36 and Trustee Director, Harris Holdings;
Director, Harris Oil Company;
Chairman and Director, PIMCO
Commercial Mortgage Securities
Trust, Inc. Formerly Principal,
Senior Vice President and Vice
President, PIMCO.
Guilford C. Babcock Trustee Associate Professor of
School of Business Finance, University of
Administration, University Southern California;
of Southern California, Director, PIMCO Commercial
Los Angeles, California Mortgage Securities Trust,
90089-1421 Inc.; Director, AMCAP Fund
Age 65 and Fundamental Investors
Fund of the Capital Group;
Director, Good Hope Medical
Foundation.
Vern O. Curtis Trustee Private Investor;
15213 N.W. Francesca Drive Director of 16 Real Estate
Portland, Oregon 97229 Investment Trusts affiliated
Age 62 with Public Storage, Inc.;
Director, PIMCO Commercial
Mortgage Securities
Trust, Inc. Formerly
Charitable Work, The
Church of Jesus Christ of
Latter Day Saints.
Thomas P. Kemp Trustee Co-Chairman, U.S. Committee to
3501 Jamboree Road Assist Russian Reform;
Suite 300 Director, Union Financial Corp.;
Newport Beach, California Director, PIMCO Commercial
92660 Mortgage Securities Trust, Inc.
Age 65 Formerly Senior Consultant,
World Cup 1994 Organizing Committee;
Chairman and CEO of Coca Cola
Bottling Company of L.A.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING THE PAST FIVE YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C>
William J. Popejoy Trustee Chairman, Western Vinyl
10036 Freeman Avenue Manufacturing; Partner, Butler
Santa Fe Springs, Popejoy Group; Director, PIMCO
California 90670 Commercial Mortgage Securities
Age 58 Trust, Inc. Formerly Chief
Executive Officer, Orange
County, California; Principal,
Castine Partners.
R. Wesley Burns President Executive Vice President,
Age 36 PIMCO. Formerly Vice President,
PIMCO.
William H. Gross Senior Vice President Managing Director, PIMCO.
Age 52
Margaret Isberg Senior Vice President Executive Vice President,
Age 39 PIMCO.
Leland T. Scholey Senior Vice President Senior Vice President, PIMCO.
Age 43 Formerly Vice President,
PIMCO.
Andrew C. Ward Senior Vice President Vice President, PIMCO.
Age 36
Michael G. Dow Vice President Account Manager, PIMCO.
Age 32 Formerly Fixed Income Specialist,
Salomon Brothers, Inc.; Vice
President Operations, Citibank
NA Global Consumer Banking Group.
U. Teri Frisch Vice President Account Manager, PIMCO.
Age 42
Raymond C. Hayes Vice President Account Manager, PIMCO. Formerly
Age 51 Marketing Director, Pacific
Financial Asset Management
Corporation.
Dean S. Meiling Vice President Managing Director, PIMCO.
Age 47
James F. Muzzy Vice President Managing Director, PIMCO.
Age 57
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING THE PAST FIVE YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C>
Douglas J. Ongaro Vice President Account Manager, PIMCO.
Age 35 Formerly Regional Marketing
Manager, Charles Schwab &
Co., Inc.
Jeffrey M. Sargent Vice President Vice President and Manager of
Age 33 Client Services, PIMCO. Formerly
Project Specialist, PIMCO.
William S. Thompson Vice President Chief Executive Officer
Age 50 and Managing Director,
PIMCO. Formerly Managing
Director, Salomon Brothers, Inc.
Teresa A. Wagner Vice President Vice President and Manager of
Age 33 Fund Administration, PIMCO.
Formerly Vice President,
PIMCO Advisors Institutional
Services; Finance Director,
Pacific Financial Asset
Management Corporation.
Kristen M. Wilsey Vice President Vice President, PIMCO.
Age 36 Formerly Account Manager,
PIMCO; Vice President, Pacific
Financial Asset Management
Corporation.
John P. Hardaway Treasurer Vice President and Manager of
Age 39 Fund Operations, PIMCO.
Garlin G. Flynn Secretary Senior Fund Administrator,
Age 50 PIMCO. Formerly Senior Mutual
Fund Analyst, PIMCO Advisors
Institutional Services; Senior
Mutual Fund Analyst, Pacific
Financial Asset Management
Corporation.
Joseph D. Hattesohl Assistant Manager of Fund Taxation,
Age 32 Treasurer PIMCO. Formerly Director of
Financial Reporting, Carl I.
Brown & Co.; Tax Manager,
Price Waterhouse LLP.
Michael J. Willemsen Assistant Secretary Project Lead, PIMCO. Formerly
Age 36 Shareholder Services
Specialist, PIMCO.
</TABLE>
____________________
*Mr. Harris is an "interested person" of the Trust (as that term is defined in
the 1940 Act) because of his affiliations with PIMCO.
28
<PAGE>
COMPENSATION TABLE
The following table sets forth information regarding compensation received
by the Trustees for the year ended March 31, 1996.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM TRUST
AND FUND
AGGREGATE COMPLEX
COMPENSATION PAID TO
NAME AND POSITION FROM TRUST(1) TRUSTEES(2)
- ----------------- ------------- ------------
<S> <C> <C>
Guilford C. Babcock $22,500 $32,500
Trustee
Vern O. Curtis $22,500 $32,500
Trustee
Thomas P. Kemp $22,500 $32,500
Trustee
William J. Popejoy $18,167(3) $25,167(3)
Trustee
</TABLE>
(1)Effective as of October 1, 1995, Trustees, other than those affiliated
with the Adviser or its affiliates, receive an annual retainer of $20,000 plus
$2,500 for each Board of Trustees meeting attended, plus reimbursement of
related expenses. For the fiscal year ended March 31, 1996, the unaffiliated
Trustees as a group received reimbursement of such fees and expenses aggregating
$85,667.
(2)Each Trustee also serves as a Director of PIMCO Commercial Mortgage
Securities Trust, Inc., a registered closed-end management investment company.
For their services, the Directors who are unaffiliated with the Adviser or its
affiliates receive an annual retainer of $6,000 plus $1,000 for each Board of
Directors meeting attended, plus reimbursement of related expenses. For the
fiscal year ended December 31, 1995, the unaffiliated Trustees as a group
received reimbursement of such fees and expenses aggregating $32,000.
(3)Mr. Popejoy became a Trustee and Director in August, 1995, and thus
received a pro rata portion of his annual retainers.
INVESTMENT ADVISER
PIMCO serves as investment adviser to the Funds pursuant to an investment
advisory contract ("Advisory Contract") between PIMCO and the Trust. PIMCO is a
subsidiary partnership of PIMCO Advisors. A majority interest of PIMCO Advisors
is held by PIMCO Partners, G.P., a general partnership
29
<PAGE>
between Pacific Investment Management Company, a California corporation and
indirect wholly owned subsidiary of Pacific Mutual Life Insurance Company
("Pacific Mutual"), and PIMCO Partners, LLC ("PIMCO Partners"), a limited
liability company controlled by the PIMCO Managing Directors. William H. Gross,
a Managing Director of PIMCO, holds approximately 41.9% of the ownership
interests in PIMCO Partners (representing an indirect economic interest in
approximately 15.6% of the partnership units of PIMCO Advisors owned by PIMCO
Partners, G.P., or approximately 12.5% of the outstanding partnership units of
PIMCO Advisors).
PIMCO is responsible for making investment decisions and placing orders for
the purchase and sale of the Trust's investments directly with the issuers or
with brokers or dealers selected by it in its discretion. See "Portfolio
Transactions." PIMCO also furnishes to the Board of Trustees, which has overall
responsibility for the business and affairs of the Trust, periodic reports on
the investment performance of each Fund.
Under the terms of the Advisory Contract, PIMCO is obligated to manage the
Funds in accordance with applicable laws and regulations. The investment
advisory services of PIMCO to the Trust are not exclusive under the terms of the
Advisory Contract. PIMCO is free to, and does, render investment advisory
services to others. The current Advisory Contract was approved by the Board of
Trustees, including a majority of the Trustees who are not parties to the
Advisory Contract or interested persons of such parties ("Independent
Trustees"), at a meeting held on May 31, 1994, as supplemented at a meeting held
on May 23, 1995 and was last approved by shareholders of all then-operational
Funds on October 17, 1994.
The Advisory Contract will continue in effect on a yearly basis provided
such continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Trust or by the Board of Trustees and (ii)
by a majority of the Independent Trustees. The Advisory Contract may be
terminated without penalty by vote of the Trustees or the shareholders of the
Trust, or by the Adviser, on 60 days' written notice by either party to the
contract and will terminate automatically if assigned.
The current Advisory Contract was executed in connection with the
consolidation of PIMCO, Pacific Investment Administrative Services Company
("PIASCo"), Thomson Advisory Group L.P. and certain other affiliated entities
(the "Consolidation"). Prior to the Consolidation, and since the inception of
each of the Funds, PIMCO had served as investment adviser to the Funds, pursuant
to an advisory contract, last approved by the Trustees April 14, 1993, and by
shareholders of the then-operational Funds on August 21, 1992 (the "Prior
Advisory Contract"). The terms and conditions of the Advisory Contract are
identical in all material respects to the Prior Advisory Contract, with the
exception of the identity of the service provider, its effective date and
termination date, and the amendment recently effected in connection with the
adoption of a new service and fee arrangement for the Funds.
The Adviser currently receives a monthly investment advisory fee from each
Fund at an annual rate based on average daily net assets of the Funds as
follows:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE RATE
- ---- --------
<S> <C>
Money Market Fund.................................................. 0.15%
Commercial Mortgage Securities, StocksPLUS, StocksPLUS
Short Strategy, VersaSTYLE Equity, VersaSTYLE Equity II
and Strategic Balanced Funds...................................... 0.40%
All other Funds.................................................... 0.25%
</TABLE>
30
<PAGE>
For the fiscal years ended March 31, 1996, 1995, and 1994, the aggregate
amount of the advisory fees paid by each operational Fund was as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND 3/31/96 3/31/95 3/31/94
- ---- ---------- ----------- -----------
<S> <C> <C> <C>
Money Market Fund* $ 10,118 $ N/A $ N/A
Short-Term Fund 249,319 383,063 158,599
Low Duration Fund 6,267,607 5,756,981 4,844,060
Low Duration Fund II 575,730 461,261 379,106
High Yield Fund 1,186,819 830,832 320,749
Total Return Fund 22,775,075 15,223,950 10,647,574
Total Return Fund II* 486,935 N/A N/A
Total Return Fund III 327,029 258,080 229,699
Long-Term U.S. Government Fund 101,042 91,533 72,884
Foreign Fund 640,157 921,902 977,658
Global Fund 264,783 177,065 28,608
International Fund 4,937,820 1,142,716 6,831,045
StocksPLUS Fund 324,388 109,177 30,476
VersaSTYLE Equity Fund II 25,485 11,112 N/A
</TABLE>
*The PIMCO Money Market Fund, for the fiscal years ended October 31, 1995
and 1994, paid aggregate advisory fees in the amount of $14,500 and $9,903,
respectively. The PIMCO Total Return Fund II, for the fiscal years ended October
31, 1995 and 1994, paid aggregate advisory fees in the amount of $1,009,081 and
$907,044, respectively. See "The Reorganization" for additional
information.
In connection with the former expense limitation provision, which was
terminated October 1, 1995, the Advisor reimbursed advisory fees for the fiscal
years ended March 31, 1996, 1995, and 1994, in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND 3/31/96 3/31/95 3/31/94
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Short-Term Fund $ 10,244 $ 8,045 $ 24,770
Low Duration Fund 0 0 0
High Yield Fund 0 (42,986) 27,055
Low Duration Fund II 0 (16,480) (20,008)
Total Return Fund 0 0 0
Total Return Fund III 1,775 (633) 11,945
Long-Term U.S. Government Fund 13,554 23,964 29,521
Foreign Fund 0 0 0
Global Fund (17,114) (34,409) 40,281
International Fund 0 0 0
StocksPLUS Fund 26,176 53,148 43,574
VersaSTYLE Equity Fund II 25,487 12,600 N/A
</TABLE>
31
<PAGE>
FUND ADMINISTRATOR
PIMCO also serves as Administrator to the Funds pursuant to an
administration agreement (the "Administration Agreement"). PIMCO provides the
Funds with certain administrative and shareholder services necessary for Fund
operations and is responsible for the supervision of other Fund service
providers. The administrative services provided by PIMCO include but are not
limited to: (1) shareholder servicing functions, including preparation of
shareholder reports and communications, (2) regulatory compliance, such as
reports and filings with the SEC and state securities commissions, and (3)
general supervision of the operations of the Funds, including coordination of
the services performed by the Funds' transfer agent, custodian, legal counsel,
independent accountants, and others. PIMCO (or an affiliate of PIMCO) also
furnishes the Funds with office space facilities required for conducting the
business of the Funds, and pays the compensation of those officers, employees
and Trustees of the Trust affiliated with PIMCO. In addition, PIMCO, at its own
expense, arranges for the provision of legal, audit, custody, transfer agency
and other services for the Funds, and is responsible for the costs of
registration of the Trust's shares and the printing of prospectuses and
shareholder reports for current shareholders. PIMCO has contractually agreed to
provide these services, and to bear these expenses, at the following rates (each
expressed as a percentage of the Fund's average daily net assets on an annual
basis):
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEE RATE
- ---- --------
<S> <C>
Money Market Fund and Short Term Fund.............................. 0.20%
Low Duration Fund and Total Return Fund............................ 0.18%
Global Fund........................................................ 0.30%
All other Funds.................................................... 0.25%
</TABLE>
Except for the expenses paid by PIMCO, the Trust bears all costs of its
operations. The Funds are responsible for: (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) 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; (vii) expenses, such as organizational
expenses, which are capitalized in accordance with generally accepted accounting
principles; and (viii) any expenses allocated or allocable to a specific class
of shares ("Class-specific expenses").
Class-specific expenses include service fees payable with respect to the
Administrative Class shares and may include certain other expenses as permitted
by the Trust's Dual Class Plan adopted pursuant to Rule 18f-3 under the 1940 Act
and subject to review and approval by the Trustees. It is not presently
anticipated that any expenses other than service fees will be allocated on a
class-specific basis.
The Administration Agreement for the Funds may be terminated by the
Trustees at any time on 60 days' written notice. Following the expiration of the
two-year period commencing with the effectiveness of the agreement, it may be
terminated by PIMCO, also on 60 days' written notice. Following its initial two-
year term, the agreement would continue from year to year if approved by the
Trustees.
The Administration Agreement is subject to annual approval by the Board,
including a majority of the Trust's Independent Trustees (as that term is
defined in the 1940 Act). The current Administration Agreement was approved by
the Board of Trustees, including all of the Independent Trustees at a meeting
held on August 22, 1995. In approving the Administration Agreement, the Trustees
determined that: (1) the Administration Agreement is in the best interests of
the Funds and their shareholders; (2) the services to be performed under the
Agreement are services required for the operation of the Funds; (3) PIMCO is
able
32
<PAGE>
to provide, or to procure, services for the Funds which are at least equal in
nature and quality to services that could be provided by others; and (4) the
fees to be charged pursuant to the Agreement are fair and reasonable in light of
the usual and customary charges made by others for services of the same nature
and quality. The preceding Administrative Services Contract between the Trust
and PIMCO was approved by the Trustees at their meeting held on May 31, 1994,
and was approved by shareholders of all then-operational Funds on October 17,
1994.
A previous Administrative Services Contract ("Prior Contact") between the
Trust and PIASCo was initially approved by the Trustees at a meeting held on
April 29, 1987 (and by the then-sole shareholder of the Trust at a meeting held
on April 30, 1987). The Prior Contract was last approved by the Board of
Trustees on February 23, 1993. PIASCo was a wholly owned subsidiary of the
predecessor of PIMCO. In connection with the Consolidation, PIMCO assumed the
duties of PIASCo as Administrator to the Funds. The terms and conditions of the
Administrative Services Contract are substantially identical in all material
respects to those of the Prior Contract, with the primary exception of the
identity of the service provider, its effective date and termination date, and
the amendment recently effected in connection with the adoption of a new service
and fee arrangement for the Funds.
For the fiscal years ended March 31, 1996, 1995, and 1994, the aggregate
amount of the administration fees paid by each operational Fund was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND 3/31/96 3/31/95 3/31/94
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Money Market Fund* $ 13,462 $ N/A $ N/A
Short-Term Fund 137,477 129,554 52,866
Low Duration Fund 3,520,078 2,272,874 1,907,377
Low Duration Fund II 391,248 154,668 126,369
High Yield Fund 842,032 302,332 109,187
Total Return Fund 13,084,413 6,059,785 4,228,783
Total Return Fund II* 486,935 N/A N/A
Total Return Fund III 217,584 86,027 76,566
Long-Term U.S. Government Fund 65,155 30,511 24,295
Foreign Fund 428,175 324,043 361,063
Global Fund 208,234 57,732 9,536
International Fund 3,800,674 440,899 2,702,418
StocksPLUS Fund 149,888 24,261 6,772
VersaSTYLE Equity Fund II 10,889 2,569 N/A
</TABLE>
*The PIMCO Money Market Fund, for the fiscal years ended October 31, 1995
and 1994, paid aggregate administration fees in the amount of $24,166 and
$16,506, respectively. The PIMCO Total Return Fund II, for the fiscal years
ended October 31, 1995 and 1994, paid aggregate administration fees in the
amount of $1,009,081 and $907,044, respectively. See "The Reorganization" for
additional information.
33
<PAGE>
In connection with the former expense limitation provision, the
Administrator reimbursed administration fees for the fiscal years ended March
31, 1996, 1995, and 1994, in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND 3/31/96 3/31/95 3/31/94
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Short-Term Fund $ 2,923 $ 2,295 $ 7,068
Low Duration Fund 0 0 0
Low Duration Fund II 0 (4,703) (5,709)
High Yield Fund 0 (12,266) 7,720
Total Return Fund 0 0 0
Total Return Fund III 507 (181) 3,408
Long-Term U.S. Government Fund 3,867 6,838 8,424
Foreign Fund 0 0 0
Global Fund (4,884) (9,818) 11,494
International Fund 0 0 0
StocksPLUS Fund 7,469 15,165 12,574
VersaSTYLE Equity Fund II 7,273 3,595 N/A
</TABLE>
EXPENSE LIMITATIONS
Certain of the states in which the shares of the Trust are qualified for
sale impose limitations on the expenses of the Trust. If, in any fiscal year,
the total expenses of the Trust (excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
extraordinary expenses, but including the advisory and administrative fees)
exceed the expense limitations applicable to the Trust imposed by the securities
regulations of any state, PIMCO will reimburse the Trust for the excess.
Fees foregone or payments made by PIMCO with respect to a Fund pursuant to
the expense limitation are contingent liabilities of the Fund which are subject
to potential reimbursement by that Fund to PIMCO, provided the assets of the
Fund reach a sufficient size to permit such reimbursement to be made without
causing the covered expenses of the Fund to exceed the amount as may be imposed
by any state expense limit to which the Trust is subject, and provided such
reimbursement is made within four years of the recognition of the contingent
liability by the Fund. If a reimbursement appears probable, it will be accounted
for as an expense of the Fund regardless of the time period over which the
reimbursement may actually be paid by the Fund.
DISTRIBUTION OF TRUST SHARES
Each Fund offers two classes of shares: the "Institutional Class" and the
"Administrative Class." Shares of the Institutional Class are offered primarily
for direct investment by institutional investors and high net worth individuals.
They also are offered through certain financial intermediaries that charge their
customers transaction or other fees with respect to the customer's investment in
the Funds. Shares of the Administrative Class are offered primarily through
brokers, retirement plan administrators and other financial intermediaries.
Administrative Class shares pay service fees to such entities for services they
provide to shareholders of that class.
The Trust has adopted a Dual Class Plan pursuant to Rule 18f-3 under the
1940 Act. Under the Plan, shares of each class of a Fund represent an equal pro
rata interest in such Fund and, generally, have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (a) each class has a
different designation; (b) each class of shares bears
34
<PAGE>
any class-specific expenses allocated to it; and (c) each class has exclusive
voting rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements, and each class 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.
PIMCO Advisors Distribution Company ("PADCO" or the "Distributor") serves
as the Trust's Distributor pursuant to a distribution contract ("Distribution
Contract") dated November 22, 1994, which is subject to annual approval by the
Board. The Distributor is a wholly owned subsidiary of PIMCO Advisors. The
Distribution Contract is terminable with respect to a Fund without penalty, at
any time, by the Trust upon 60 days' written notice to the Distributor, or by
the Distributor upon 60 days' written notice to the Trust. The Distributor is
not obligated to sell any specific amount of Trust shares.
Prior to the Consolidation, Pacific Equities Network ("PEN"), an indirect
subsidiary of Pacific Mutual, served as the Trust's Distributor, pursuant to a
contract approved by the Board of Trustees, including a majority of the
Independent Trustees, at its meeting held on April 29, 1987 (and by the then-
sole shareholder of the Trust at a meeting held on April 30, 1987) (the "Prior
Distribution Contract"). The Prior Distribution Contract was last approved by
the Board of Trustees on February 23, 1993 and by shareholders of the Trust on
November 1, 1988.
SERVICE FEES
The Trust has adopted an Administrative Services Plan and a Distribution
Plan with respect to the Administrative Class shares of each Fund. Under the
terms of each Plan, the Trust is permitted to reimburse, out of the
Administrative Class assets of each Fund, in an amount up to 0.25% on an annual
basis of the average daily net assets of that class, financial intermediaries
that provide services in connection with the distribution of shares or
administration of plans or programs that use Fund shares as their funding
medium, and to reimburse certain other distribution related expenses. Under the
terms of the Distribution Plan, these services may include, but are not limited
to, the following functions: providing facilities to answer questions from
prospective investors about the Fund; receiving and answering correspondence,
including requests for prospectuses and statements of additional information;
preparing, printing and delivering prospectuses and shareholder reports to
prospective shareholders; complying with federal and state securities laws
pertaining to the sale of Administrative Class shares; and assisting investors
in completing application forms and selecting dividend and other account
options.
Under the terms of the Administrative Services Plan, the services may
include, but are not limited to, the following functions: receiving, aggregating
and processing shareholder orders; furnishing shareholder sub-accounting;
providing and maintaining elective shareholder services such as check writing
and wire transfer services; providing and maintaining pre-authorized investment
plans; communicating periodically with shareholders; acting as the sole
shareholder of record and nominee for shareholders; maintaining accounting
records for shareholders; answering questions and handling correspondence from
shareholders about their accounts; and performing similar account administrative
services.
The same entity may be the recipient of fees under both the Distribution
Plan and the Administrative Services Plan, but may not receive fees under both
plans with respect to the same assets.
35
<PAGE>
Each Plan provides that it may not be amended to materially increase the
costs which Administrative Class shareholders may bear under the Plan without
the approval of a majority of the outstanding voting securities of the class,
and by vote of a majority of both (i) the Trustees of the Trust and (ii) those
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 any agreements related to it (the "Plan Trustees"), cast in person
at a meeting called for the purpose of voting on the Plan and any related
amendments.
Each Plan provides that it may not take effect until approved by vote of a
majority of both (i) the Trustees of the Trust and (ii) the Plan Trustees. The
Distribution Plan further provides that it may not take effect unless approved
by the vote of a majority of the outstanding voting securities of the class. The
Plans were approved by the Trustees, including the Plan Trustees, at a meeting
held on May 31, 1994.
Each Plan provides that it shall continue in effect so long as such
continuance is specifically approved at least annually by the Trustees and the
Plan Trustees. Each Plan provides that any person authorized to direct the
disposition of monies paid or payable by a class pursuant to the Plan or any
related agreement shall provide to the Trustees, and the Board shall review at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
Each Plan provides that expenses payable under the Plan may be carried
forward for reimbursement for up to twelve months beyond the date in which the
expense is incurred, subject to the limit that not more that 0.25% of the
average daily net assets of each class may be used in any month to pay expenses
under the Plan. Each Plan requires that Administrative Class shares will incur
no interest or carrying charges.
Rules of the National Association of Securities Dealers, Inc. (NASD) limit
the amount of distribution fees that may be paid by mutual funds. "Service
fees," defined to mean fees paid for providing shareholder services or the
maintenance of accounts (but not transfer agency services) are not subject to
the limits. The Trust believes that most, if not all, of the fees paid pursuant
to the Plan will qualify as "service fees" and therefore will not be limited by
NASD rules.
For the fiscal year ended March 31, 1996, the Administrative Class shares
of the PIMCO Money Market, Short-Term, Low Duration, High Yield, Total Return
and Total Return II Funds paid aggregate fees under the Distribution Plan to
qualified service providers in the amount of $11, $1,003, $3,442, $701,
$141,529, and $3,408, respectively. All of these amounts constituted "service
fees" under applicable NASD rules.
THE REORGANIZATION
On November 1, 1995, the Money Market Fund and the PIMCO Managed Bond and
Income Fund, two series of PIMCO Advisors Institutional Funds, were reorganized
as series of PIMCO Funds, and were renamed PIMCO Money Market Fund and PIMCO
Total Return Fund II, respectively. All information presented for these Funds
prior to this date represents their operational history as series of PIMCO
Advisors Institutional Funds. In connection with the Reorganization, the Funds
changed their fiscal year end from October 31 to March 31.
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus under the
headings "Purchase of Shares," "Redemption of Shares," and "Net Asset Value,"
and that information is incorporated herein by reference.
Certain managed account clients of the Adviser may purchase shares of the
Trust. To avoid the imposition of duplicative fees, the Adviser may be required
to make adjustments in the management fees charged separately by the Adviser to
these clients to offset the generally higher level of management fees and
expenses resulting from a client's investment in the Trust.
36
<PAGE>
Certain clients of the Adviser whose assets would be eligible for purchase
by one or more of the Funds may purchase shares of the Trust with such assets.
Assets so purchased by a Fund will be valued in accordance with procedures
adopted by the Board of Trustees.
Shares of the Funds are not qualified or registered for sale in all states.
Prospective investors should inquire as to whether shares of a particular Fund
are available for offer and sale in their state of domicile or residence. Shares
of a Fund may not be offered or sold in any state unless registered or qualified
in that jurisdiction, unless an exemption from registration or qualification is
available.
Independent financial intermediaries unaffiliated with PIMCO may perform
shareholder servicing functions with respect to certain of their clients whose
assets may be invested in the Funds. These services, normally provided by PIMCO
directly to Trust shareholders, may include the provision of ongoing information
concerning the Funds and their investment performance, responding to shareholder
inquiries, assisting with purchases, redemptions and exchanges of Trust shares,
and other services. PIMCO may pay fees to such entities for the provision of
these services which PIMCO normally would perform, out of PIMCO's own resources.
The Trust reserves the right to suspend or postpone redemptions during any
period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the SEC, or that Exchange is closed for other than customary
weekend and holiday closings; (b) the SEC has by order permitted such
suspension; or (c) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the investor) if at any time, due to shareholder
redemption, the shares in the account do not have a value of at least $100,000
($10,000 with respect to accounts opened before January 1, 1995). An investor
will be notified that the value of his account is less than the minimum and
allowed at least 30 days to bring the value of the account up to at least
$100,000 (or $10,000, as applicable) before the redemption is processed. The
Declaration of Trust also authorizes the Trust to redeem shares under certain
other circumstances as may be specified by the Board of Trustees.
PORTFOLIO TRANSACTIONS AND BROKERAGE
INVESTMENT DECISIONS
Investment decisions for the Trust and for the other investment advisory
clients of the Adviser are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved (including the
Trust). Thus, a particular security may be bought or sold for certain clients
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 clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that two
or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a manner which in the
Adviser's opinion 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.
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<PAGE>
BROKERAGE AND RESEARCH SERVICES
There is generally no stated commission in the case of fixed income
securities, which are traded in the over-the-counter markets, but the price paid
by the Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. 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. Transactions in
foreign securities generally involve the payment of fixed brokerage commissions,
which are generally higher than those in the United States.
The Adviser places all orders for the purchase and sale of portfolio
securities, options and futures contracts for the Trust and buys and sells such
securities, options and futures for the Trust through a substantial number of
brokers and dealers. In so doing, the Adviser uses its best efforts to obtain
for the Trust the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions as described
below. In seeking the most favorable price and execution, the Adviser, having in
mind the Trust's best interests, 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 the 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. For the fiscal
years ended March 31, 1996 and 1995, the PIMCO VersaSTYLE Equity Fund II paid
brokerage commissions in the aggregate amount of $22,203 and $23,037,
respectively. None of these amounts were paid to an affiliate of the Trust, the
Adviser, PADCO or PEN.
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 services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
the Adviser receives research services from many broker-dealers with which the
Adviser places the Trust's portfolio transactions. These services, which in some
cases may 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 are of value to the Adviser in advising various of its clients
(including the Trust), although not all of these services are
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<PAGE>
necessarily useful and of value in managing the Trust. The management fee paid
by the Trust is not reduced because the Adviser and its affiliates receive such
services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Adviser may cause the Trust to pay a broker-dealer which provides "brokerage and
research services" (as defined in the Act) to the Adviser an amount of disclosed
commission for effecting a securities transaction for the Trust in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.
Consistent with the Rules of Fair Practice of the NASD and subject to
seeking the most favorable price and execution available and such other policies
as the Trustees may determine, the Adviser may also consider sales of shares of
the Trust as a factor in the selection of broker-dealers to execute portfolio
transactions for the Trust.
PORTFOLIO TURNOVER
The Adviser manages the Funds without regard generally to restrictions on
portfolio turnover, except those imposed on its ability to engage in short-term
trading by provisions of the federal tax laws, see "Taxation." The use of
futures contracts and other derivative instruments with relatively short
maturities may tend to exaggerate the portfolio turnover rate for some of the
Funds. Trading in fixed income securities does not generally involve the payment
of brokerage commissions, but does involve indirect transaction costs. The use
of futures contracts may involve the payment of commissions to futures
commission merchants. The higher the rate of portfolio turnover of a Fund, the
higher these transaction costs borne by the Fund generally will be.
The portfolio turnover rate of a Fund is calculated by dividing (a) the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by (b) the monthly average of the value of the portfolio securities owned
by the Fund during the particular fiscal year. In calculating the rate of
portfolio turnover, there is excluded from both (a) and (b) all securities,
including options, whose maturities or expiration dates at the time of
acquisition were one year or less. Proceeds from short sales and assets used to
cover short positions undertaken are included in the amounts of securities sold
and purchased, respectively, during the year.
NET ASSET VALUE
As indicated under "Net Asset Value" in the Prospectus, the Trust's net
asset value per share for the purpose of pricing purchase and redemption orders
is determined at 4:00 p.m. (Eastern time) on each day the New York Stock
Exchange is open for trading. Net asset value will not be determined on the
following holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The PIMCO Money Market Fund's securities are valued using the amortized
cost method of valuation. This involves valuing a security at cost on the date
of acquisition and thereafter assuming a constant accretion of a discount or
amortization of a premium to maturity, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold the instrument. During such periods the yield to investors in
the Fund may differ somewhat from that obtained in a similar investment company
which uses available market quotations to value all of its portfolio securities.
The SEC's regulations require the PIMCO Money Market Fund to adhere to
certain conditions. The Trustees, as part of their responsibility within the
overall duty of care owed to the shareholders, are required to establish
procedures reasonably designed, taking into account current market conditions
and the Fund's investment objective, to stabilize the net asset value per share
as computed for the purpose of distribution and redemption at $1.00 per share.
The Trustees' procedures include a requirement to periodically monitor, as
appropriate and at such intervals as are reasonable in light of current market
conditions, the relationship between the amortized cost value per share and the
net asset value per share based upon available indications of market value. The
Trustees will consider what steps should be taken, if any, in the event of a
difference of more than 1/2 of 1% between the two. The Trustees will take such
steps as they consider appropriate, (e.g., selling securities to shorten the
average portfolio maturity) to minimize any material dilution or other unfair
results which might arise from differences between the two. The Fund also is
required to maintain a dollar-weighted average portfolio maturity of 90 days or
less, to limit its investments to instruments having remaining maturities of 13
months or less (except securities held subject to repurchase agreements having
13 months or less maturity) and to invest only in securities determined by the
Adviser under procedures established by the Board of Trustees to be of high
quality with minimal credit risks.
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TAXATION
While the Adviser anticipates that many shareholders of the Trust will be
tax-exempt institutions, the following discussion may be of general interest to
these shareholders, as well as for those shareholders of the Trust who do not
have tax-exempt status. The following discussion is general in nature and should
not be regarded as an exhaustive presentation of all possible tax ramifications.
All shareholders should consult a qualified tax adviser regarding their
investment in a Fund.
Each Fund intends to qualify annually and elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). To qualify as a regulated investment company, each Fund generally
must, among other things, (a) derive in each taxable year at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of stock, securities or
foreign currencies, or other income derived with respect to its business of
investing in such stock, securities or currencies ("Qualifying Income Test");
(b) derive in each taxable year less than 30% of its gross income from the sale
or other disposition of certain assets held less than three months, namely (1)
stocks or securities, (2) options, futures, or forward contracts (other than
those on foreign currencies), and (3) foreign currencies (or options, futures,
and forward contracts on foreign currencies) not directly related to the Fund's
principal business of investing in stock or securities; (c) diversify its
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash, U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited for
the purposes of this calculation to an amount 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 total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies); and (d) distribute at
least 90% of its investment company taxable income (which includes dividends,
interest and net short-term capital gains in excess of any net long-term capital
losses) each taxable year. The Treasury Department is authorized to promulgate
regulations under which gains from foreign currencies (and options, futures, and
forward contracts on foreign currency) would constitute qualifying income for
purposes of the Qualifying Income Test only if such gains are directly relating
to investing in securities. To date, such regulations have not been issued.
As a regulated investment company, a Fund generally will not be subject to
U.S. federal income tax on its investment company taxable income and net capital
gains (any net long-term capital gains in excess of the sum of net short-term
capital losses and capital loss carryovers from prior years) designated by the
Fund as capital gain dividends, if any, that it distributes to shareholders on a
timely basis. Each Fund intends to distribute to its shareholders, at least
annually, substantially all of its investment company taxable income and any net
capital gains. In addition, amounts not distributed by a Fund on a timely basis
in accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To avoid the tax, a Fund must distribute during
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (and adjusted for certain ordinary losses) for the twelve month period
ending on October 31 of the calendar year, and (3) all ordinary income and
capital gains for previous years that were not distributed during such years. A
distribution will be treated as paid on December 31 of the calendar year if it
is declared by a Fund in October, November, or December of that year to
shareholders of record on a date in such a month and paid by the Fund during
January of the following year. Such distributions will be taxable to
shareholders (other than those not subject to federal income tax) in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received. To avoid application of the excise
tax, each Fund intends to make its distributions in accordance with the calendar
year distribution requirement.
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DISTRIBUTIONS
Dividends paid out of a Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. Distributions received by tax-
exempt shareholders will not be subject to federal income tax to the extent
permitted under the applicable tax exemption.
A portion of the dividends paid by the PIMCO StocksPLUS, VersaSTYLE Equity
and VersaSTYLE Equity II Funds may qualify for the deduction for dividends
received by corporations. Dividends paid by the other Funds generally are not
expected to qualify for the deduction for dividends received by corporations,
although certain distributions from the PIMCO High Yield Fund may qualify.
Distributions of net capital gains, if any, designated as capital gain
dividends, are taxable as long-term capital gains, regardless of how long the
shareholder has held a Fund's shares and are not eligible for the dividends
received deduction. Any distributions that are not from a Fund's investment
company taxable income or net realized capital gains may be characterized as a
return of capital to shareholders or, in some cases, as capital gain. The tax
treatment of dividends and distributions will be the same whether a shareholder
reinvests them in additional shares or elects to receive them in cash.
SALES OF SHARES
Upon the disposition of shares of a Fund (whether by redemption, sale or
exchange), a shareholder will realize a gain or loss. Such gain or loss will be
capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term or short-term generally depending upon the
shareholder's holding period for the shares. Any loss realized on a disposition
will be disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized by a shareholder on a
disposition of shares held by the shareholder for six months or less will be
treated as a long-term capital loss to the extent of any distributions of
capital gain dividends received by the shareholder with respect to such shares.
BACKUP WITHHOLDING
A Fund may be required to withhold 31% of all taxable distributions payable
to shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code generally are exempt from such backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal tax liability.
OPTIONS, FUTURES AND FORWARD CONTRACTS, AND SWAP AGREEMENTS
Some of the options, futures contracts, forward contracts, and swap
agreements used by the Funds may be "section 1256 contracts." Any gains or
losses on section 1256 contracts are generally considered 60% long-term and 40%
short-term capital gains or losses ("60/40") although certain foreign currency
gains and losses from such contracts may be treated as ordinary in character.
Also, section 1256 contracts held by a Fund at the end of each taxable year
(and, for purposes of the 4% excise tax, on certain other dates as prescribed
under the Code) are "marked to market" with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is treated as ordinary or 60/40 gain or loss.
Generally, the hedging transactions and certain other transactions in
options, futures and forward contracts undertaken by a Fund, may result in
"straddles" for U.S. federal income tax purposes. In some cases, the straddle
rules also could apply in connection with swap agreements. The straddle rules
may affect the character of gains (or losses) realized by a Fund. In addition,
losses realized by a Fund on positions that
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<PAGE>
are part of a straddle may be deferred under the straddle rules, rather than
being taken into account in calculating the taxable income for the taxable year
in which such losses are realized. Because only a few regulations implementing
the straddle rules have been promulgated, the tax consequences of transactions
in options, futures, forward contracts, and swap agreements to a Fund are not
entirely clear. The transactions may increase the amount of short-term capital
gain realized by a Fund which is taxed as ordinary income when distributed to
shareholders.
A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections operate to
accelerate the recognition of gains or losses from the affected straddle
positions.
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not engage in such hedging transactions.
Rules governing the tax aspects of swap agreements are in a developing
stage and are not entirely clear in certain respects. Accordingly, while the
Funds intend to account for such transactions in a manner they deem to be
appropriate, the Internal Revenue Service might not accept such treatment. If it
did not, the status of a Fund as a regulated investment company might be
affected. The Funds intend to monitor developments in this area. Certain
requirements that must be met under the Code in order for a Fund to qualify as a
regulated investment company may limit the extent to which a Fund will be able
to engage in swap agreements.
The 30% limit on gains from the disposition of certain options, futures,
forward contracts, and swap agreements held less than three months and the
qualifying income and diversification requirements applicable to a Fund's assets
may limit the extent to which a Fund will be able to engage in transactions in
options, futures contracts, forward contracts, and swap agreements.
SHORT SALES
Certain Funds may make short sales of securities. Short sales may increase
the amount of short-term capital gain realized by a Fund, which is taxed as
ordinary income when distributed to shareholders. Moreover, the 30% limit on
gains from the disposition of securities held less than three months may limit
the extent to which a Fund will be able to engage in short sales.
PASSIVE FOREIGN INVESTMENT COMPANIES
Certain Funds may invest in the stock of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC for a taxable year if at
least one-half of its assets constitute investment-type assets or 75% or more of
its gross income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself may be subject
to tax on a portion of the excess distribution, whether or not the corresponding
income is distributed by the Fund to stockholders. In general, under the PFIC
rules, an excess distribution is treated as having been realized ratably over
the period during which the Fund held the PFIC stock. A Fund itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior taxable years and an interest factor will be added to the
tax, as if the tax had been payable
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in such prior taxable years. Certain distributions from a PFIC as well as gain
from the sale of PFIC stock are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might have been
classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently is available in some circumstances,
a Fund generally would be required to include in its gross income its share of
the earnings of a PFIC on a current basis, regardless of whether distributions
are received from the PFIC in a given year. If this election were made, the
special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, another election may be available
that would involve marking to market a Fund's PFIC shares at the end of each
taxable year (and on certain other dates prescribed in the Code), with the
result that unrealized gains are treated as though they were realized. If this
election were made, tax at the Fund level under the PFIC rules would generally
be eliminated, but the Fund could, in limited circumstances, incur nondeductible
interest charges. A Fund's intention to qualify annually as a regulated
investment company may limit its elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject a Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC shares.
FOREIGN CURRENCY TRANSACTIONS
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues income or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or loss. Similarly, on disposition of
debt securities denominated in a foreign currency and on disposition of certain
other instruments, gains or losses attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security or contract
and the date of disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as "section 988" gains or losses,
may increase or decrease the amount of a Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
FOREIGN TAXATION
Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. In addition, the Adviser intends to manage the Funds with the intention
of minimizing foreign taxation in cases where it is deemed prudent to do so. If
more than 50% of the value of the PIMCO Foreign, Global or International Funds'
total assets at the close of their taxable year consists of securities of
foreign corporations, such Fund will be eligible to elect to "pass-through" to
the Fund's shareholders the amount of foreign income and similar taxes paid by
the Fund. If this election is made, a shareholder generally subject to tax will
be required to include in gross income (in addition to taxable dividends
actually received) his pro rata share of the foreign taxes paid by the Fund, and
may be entitled either to deduct (as an itemized deduction) his or her pro rata
share of foreign taxes in computing his taxable income or to use it (subject to
limitations) as a foreign tax credit against his or her U.S. federal income tax
liability. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Each shareholder will be notified within 60 days
after the close of the Fund's taxable year whether the foreign taxes paid by the
Fund will "pass-through" for that year.
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Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through election is
made, the source of the PIMCO Foreign, Global or International Funds' income
will flow through to shareholders of the Trust. With respect to such Funds,
gains from the sale of securities will be treated as derived from U.S. sources
and certain currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income, and to certain
other types of income. Shareholders may be unable to claim a credit for the full
amount of their proportionate share of the foreign taxes paid by the Fund. The
foreign tax credit can be used to offset only 90% of the revised alternative
minimum tax imposed on corporations and individuals and foreign taxes generally
are not deductible in computing alternative minimum taxable income.
ORIGINAL ISSUE DISCOUNT
Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by a Fund may be treated as
debt securities that are issued originally at a discount. Generally, the amount
of the original issue discount ("OID") is treated as interest income and is
included in income over the term of the debt security, even though payment of
that amount is not received until a later time, usually when the debt security
matures. A portion of the OID includable in income with respect to certain high-
yield corporate debt securities may be treated as a dividend for Federal income
tax purposes.
Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by a Fund in the secondary
market may be treated as having market discount. Generally, any gain recognized
on the disposition of, and any partial payment of principal on, a debt security
having market discount is treated as ordinary income to the extent the gain, or
principal payment, does not exceed the "accrued market discount" on such debt
security. Market discount generally accrues in equal daily installments. A Fund
may make one or more of the elections applicable to debt securities having
market discount, which could affect the character and timing of recognition of
income.
Some debt securities (with a fixed maturity date of one year or less from
the date of issuance) that may be acquired by a Fund may be treated as having
acquisition discount, or OID in the case of certain types of debt securities.
Generally, the Fund will be required to include the acquisition discount, or
OID, in income over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt security
matures. The Fund may make one or more of the elections applicable to debt
securities having acquisition discount, or OID, which could affect the character
and timing of recognition of income.
A Fund generally will be required to distribute dividends to shareholders
representing discount on debt securities that is currently includable in income,
even though cash representing such income may not have been received by the
Fund. Cash to pay such dividends may be obtained from sales proceeds of
securities held by the Fund.
OTHER TAXATION
Distributions also may be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Under the laws of
various states, distributions of investment company taxable income generally are
taxable to shareholders even though all or a substantial portion of such
distributions may be derived from interest on certain federal obligations which,
if the interest were received directly by a resident of such state, would be
exempt from such state's income tax ("qualifying federal obligations"). However,
some states may exempt all or a portion of such distributions from income tax to
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the extent the shareholder is able to establish that the distribution is derived
from qualifying federal obligations. Moreover, for state income tax purposes,
interest on some federal obligations generally is not exempt from taxation,
whether received directly by a shareholder or through distributions of
investment company taxable income (for example, interest on FNMA Certificates
and GNMA Certificates). Each Fund will provide information annually to
shareholders indicating the amount and percentage of a Fund's dividend
distribution which is attributable to interest on federal obligations, and will
indicate to the extent possible from what types of federal obligations such
dividends are derived. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in a Fund.
OTHER INFORMATION
CAPITALIZATION
The Trust is a Massachusetts business trust established under a Declaration
of Trust dated February 19, 1987. The capitalization of the Trust consists
solely of an unlimited number of shares of beneficial interest with a par value
of $0.0001 each. The Board of Trustees may establish additional series (with
different investment objectives and fundamental policies) at any time in the
future. Establishment and offering of additional series will not alter the
rights of the Trust's shareholders. When issued, shares are fully paid, non-
assessable, redeemable and freely transferable. Shares do not have preemptive
rights or subscription rights. In liquidation of a Fund, each shareholder is
entitled to receive his pro rata share of the net assets of that Fund.
Expenses incurred by the Trust in connection with its organization and the
public offering of its shares aggregated approximately $75,971. These costs have
been deferred and amortized on a straight line basis over a period not less than
five years. Expenses incurred in the organization of subsequently offered Funds
are charged to those Funds and are being amortized on a straight line basis over
a period not less than five years.
PERFORMANCE INFORMATION
The Trust may, from time to time, include the yield and effective yield of
the PIMCO Money Market Fund, and the yield and total return for each class of
shares of all of the Funds, computed in accordance with SEC-prescribed formulas,
in advertisements or reports to shareholders or prospective investors. The Funds
also may compute current distribution rates and use this information in their
prospectuses and statement of additional information, in reports to current
shareholders, or in certain types of sales literature provided to prospective
investors.
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Current yield for the PIMCO Money Market Fund will be based on the change
in the value of hypothetical investment (exclusive of capital changes) over a
particular 7-day period less a pro-rata share of Fund expenses accrued over that
period (the "base period"), and stated as a percentage of the investment at the
start of the base period (the "base period return"). The base period return is
then annualized by multiplying by 365/7, with the resulting yield figure carried
to at least the nearest hundredth of one percent. "Effective yield" for the
PIMCO Money Market Fund assumes that all dividends received during an annual
period have been reinvested. Calculation of "effective yield" begins with the
same "base period return" used in the calculation of yield, which is then
annualized to reflect weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return +1) 365/7 ] - 1
Quotations of yield for the remaining Funds will be based on all investment
income per share (as defined by the SEC) during a particular 30-day (or one
month) period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and are computed by dividing net
investment income by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2[(a - b + 1)/6/ - 1]
-----
cd
where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the
period that entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period.
For the one month period ended March 31, 1996, the yield of the Funds
was as follows (all numbers are annualized):
<TABLE>
<CAPTION>
YIELD FOR PERIOD
ENDED MARCH 31, 1996
------------------------------------------
FUND INSTITUTIONAL CLASS ADMINISTRATIVE CLASS
---- ------------------- --------------------
<S> <C> <C>
Money Market Fund 4.78% 4.62%
Short-Term Fund 6.21% 5.93%
Low Duration Fund 6.35% 6.09%
Low Duration Fund II 5.73% N/A
High Yield Fund 8.73% 8.48%
Total Return Fund 6.56% 6.30%
Total Return Fund II 6.03% 5.79%
Total Return Fund III 6.43% N/A
Long-Term U.S. Government Fund 7.00% N/A
Foreign Fund 6.75% N/A
Global Fund 6.26% N/A
International Fund 5.81% N/A
StocksPLUS Fund 6.01% N/A
VersaStyle Equity Fund II N/A N/A
</TABLE>
Quotations of average annual total return for a Fund or class will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund or class over periods of one, five and ten
years (up to the life of the Fund), calculated pursuant to the following
formula: P (1 + T)n = ERV (where P = a hypothetical initial payment of $1,000, T
= the average annual total return, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures reflect the deduction of a proportional share
of Fund or class expenses on an annual basis, and assume that all dividends and
distributions are reinvested when paid. The Funds also may, with respect to
certain periods of less than one year, provide total return information for that
period that is unannualized. Any such information would be accomplished by
standardized total return information.
46
<PAGE>
For the fiscal year ended March 31, 1996, the total return of the Funds
(Institutional Class, unless otherwise noted) was as follows:
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIOD
ENDED MARCH 31, 1996
---------------------------------
1 YEAR 5 YEARS SINCE
ENDED ENDED INCEPTION INCEPTION
FUND 3/31/96 3/31/96 (ANNUALIZED) DATE
- ---- ------- ------- ------------ ---------
<S> <C> <C> <C> <C>
Money Market Fund* 5.97% 4.35% 4.38% 3/1/91
Money Market Fund (Administrative Class)* 5.71% N/A 5.71% 1/24/95
Short-Term Fund 8.49% 5.23% 6.49% 10/7/87
Short-Term Fund (Administrative Class) N/A N/A 2.57% 2/1/96
Low Duration Fund 9.13% 7.66% 8.36% 5/11/87
Low Duration Fund (Administrative Class) 8.83% N/A 9.23% 1/3/95
Low Duration Fund II 7.30% N/A 6.18% 11/1/91
High Yield Fund 15.70% N/A 12.74% 12/16/92
High Yield Fund (Administrative Class) 15.54% N/A 17.07% 1/16/95
Total Return Fund 11.14% 9.92% 9.88% 5/11/87
Total Return Fund (Administrative Class) 10.99% N/A 9.46% 9/7/94
Total Return Fund II* 10.59% N/A 7.83% 12/30/91
Total Return Fund II (Administrative Class)* 10.31% N/A 12.12% 11/30/94
Total Return Fund III 10.06% N/A 9.60% 5/1/91
Long-Term U.S. Government Fund 14.83% N/A 13.05% 7/1/91
Foreign Fund 21.80% N/A 9.52% 12/3/92
Global Fund 12.04% N/A 9.47% 11/23/93
International Fund 15.08% 8.24% 8.13% 12/13/89
StocksPLUS Fund 34.07% N/A 19.14% 5/14/93
VersaSTYLE Equity II Fund 30.53% N/A 22.14% 9/30/94
</TABLE>
47
<PAGE>
*The total return of the PIMCO Money Market Fund for the period November 1,
1995 through March 31, 1996 was 2.58% and 2.47%, for the Institutional Class and
Administrative Class, respectively. The total return of the PIMCO Total Return
Fund II for the period November 1, 1995 through March 31, 1996 was 0.78% and
0.57%, for the Institutional Class and Administrative Class, respectively. See
"The Reorganization" for additional information.
Current distribution information for a Fund will be based on distributions
for a specified period (i.e., total dividends from net investment income),
divided by Fund net asset value per share on the last day of the period and
annualized according to the following formula:
DIVIDEND YIELD = (((a/b)*365)/c)
where a = actual dividends distributed for the calendar month in question,
b = number of days of dividend declaration in the month in
question, and
c = net asset value (NAV) calculated on the last business day of
the month in question.
The rate of current distributions does not reflect deductions for
unrealized losses from transactions in derivative instruments such as options
and futures, which may reduce total return. Current distribution rates differ
from standardized yield rates in that they represent what a Fund has declared
and paid to shareholders as of the end of a specified period rather than the
Fund's actual net investment income for that same period. Distribution rates
will exclude net realized short-term capital gains. The rate of current
distributions for a Fund should be evaluated in light of these differences and
in light of the Fund's total return figures, which will always accompany any
calculation of the rate of current distributions.
48
<PAGE>
For the month ended March 31, 1996, the current distribution rates
(annualized) for the Funds (Institutional Class unless otherwise noted) were as
follows:
<TABLE>
<CAPTION>
DISTRIBUTION RATE
------------------------------
INSTITUTIONAL ADMINISTRATIVE
FUND CLASS CLASS
---- ------------- --------------
<S> <C> <C>
Money Market Fund 4.98% 4.75%
Short-Term Fund 6.48% 6.24%
Low Duration Fund 6.63% 6.38%
Low Duration Fund II 6.35% N/A
High Yield Fund 8.85% 8.60%
Total Return Fund 6.77% 6.52%
Total Return Fund II 6.41% 6.16%
Total Return Fund III 6.50% N/A
Long-Term U.S. Government Fund 7.42% N/A
Foreign Fund 5.49% N/A
Global Fund 6.02% N/A
International Fund N/A N/A
StocksPLUS Fund N/A N/A
VersaSTYLE Equity Fund II N/A N/A
</TABLE>
Performance information for a Fund may also be compared to various
unmanaged indexes, such as the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, the Lehman Brothers Aggregate Bond
Index, the Merrill Lynch 1 to 3 Year Treasury Index, the Lehman Intermediate and
20+ Year Treasury Blend Index, the Lehman BB Intermediate Corporate Index,
indexes prepared by Lipper Analytical Services, the J.P. Morgan Global Index,
the Salomon Brothers World Government Bond Index-10 Non U.S.-Dollar Hedged and
the J.P. Morgan Government Bond Index Non U.S.-Dollar Hedged. Unmanaged indexes
(i.e., other than Lipper) generally do not reflect deductions for administrative
and management costs and expenses. PIMCO may report to shareholders or to the
public in advertisements concerning the performance of PIMCO as adviser to
clients other than the Trust, or on the comparative performance or standing of
PIMCO in relation to other money managers. PIMCO also may provide current or
prospective private account clients, in connection with standardized performance
information for the Funds, performance information for the Funds gross of fees
and expenses for the purpose of assisting such clients in evaluating similar
performance information provided by other investment managers or institutions.
Comparative information may be compiled or provided by independent ratings
services or by news organizations. Any performance information, whether related
to the Funds or to the Adviser, should be considered in light of the Funds
investment objectives and policies, characteristics and quality of the Funds,
and the market conditions during the time period indicated, and should not be
considered to be representative of what may be achieved in the future.
49
<PAGE>
VOTING RIGHTS
Under the Declaration of Trust, the Trust is not required to hold annual
meetings of Trust shareholders to elect Trustees or for other purposes. It is
not anticipated that the Trust will hold shareholders' meetings unless required
by law or the Declaration of Trust. In this regard, the Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on the Board
if, at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. In addition, the Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares of the Trust
may remove a person serving as Trustee either by declaration in writing or at a
meeting called for such purpose. The Trustees are required to call a meeting for
the purpose of considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than ten percent of the
outstanding shares of the Trust. In the event that such a request was made, the
Trust has represented that it would assist with any necessary shareholder
communications. Shareholders of a class of shares have different voting rights
with respect to matters that affect only that class.
The Trust's shares do not have cumulative voting rights, so that the holder
of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees. As of May 31, 1996, the following persons owned of record or
beneficially 5% or more of the shares of the following Funds:
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
------------- -------------
<S> <C> <C>
MONEY MARKET FUND
St. Johns Hospital 14,421,447.92 53.71*
1328 22nd Street
Santa Monica, CA 90404
California Community Foundation 4,501,565.71 16.76
606 South Olive Street, Suite 2400
Los Angeles, CA 90014
PIMCO Advisors L.P. 4,338,133.45 16.16
800 Newport Center Drive
Newport Beach, CA 92660
SHORT-TERM FUND
TelePad Corporation 1,131,139.30 10.58
380 Herndon Parkway, Suite 1900
Herndon, VA 22070
Charles Schwab & Co., Inc.** 1,093,944.79 10.23
101 Montgomery Street
San Francisco, CA 94104
NBD, FBO 712,411.73 6.66
Indianapolis Symphony Orchestra
Post Office Box 771072
Detroit, MI 48277-1072
Denison University 668,161.37 6.25
P.O. Box F
Granville, OH 43023
Hawaii Carpenters Health & Welfare 650,684.10 6.09
615 Pilkoi Street
Honolulu, HI 96814
Sandra Smith Dompier 596,160.01 5.58
1900 West Loop South, Suite 1050
Houston, TX 77027
LOW DURATION FUND
Charles Schwab & Co., Inc.** 25,505,146.44 9.65
101 Montgomery Street
San Francisco, CA 94104
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
------------- -------------
<S> <C> <C>
LOW DURATION FUND II
Sprint 4,934,855.39 18.63
c/o FMTC
82 Devonshire Street
Boston, MA 02109
Health Cleveland 2,389,316.63 9.02
18101 Lorain Avenue
Cleveland, OH 44111
Salt River Project 2,024,149.13 7.64
P.O. Box 52025
Phoenix, AZ 85072
A.M. Castle 2,022,597.54 7.64
3400 North Wolf Road
Franklin Park, IL 60131
Moses H. Cone Memorial Hospital 1,774,659.92 6.70
1200 North Elm Street
Greensboro, NC 27401
University of Illinois 1,737,147.85 6.56
1305 West Green Street
Urbana, IL 61801
Houston Carpenters 1,546,492.76 5.84
4600 Gulf Freeway
Houston, TX 77023
HIGH YIELD FUND
Charles Schwab & Co., Inc. ** 7,430,287.58 13.45
101 Montgomery Street
San Francisco, CA 94104
Hewlett Packard Company 2,952,853.63 5.34
3000 Hanover Street
Palo Alto, CA 94304
Northern California Retail Clerks 2,940,017.13 5.32
190 North Wiget Lane
Post Office Box 9000
Walnut Creek, CA 94598-0990
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
------------- -------------
<S> <C> <C>
3M Company 2,885,074.82 5.22
3M Center, Building 224-5S-21
St. Paul, MN 55144
TOTAL RETURN FUND
Charles Schwab & Co., Inc.** 61,917,877.38 5.98
101 Montgomery Street
San Francisco, CA 94104
TOTAL RETURN FUND II
Pacific Mutual Life Insurance Company 29,975,186.94 61.41*
700 Newport Center Drive
Newport Beach, CA 92660
Arco 2,713,524.78 5.56
c/o State Street Bank
One Enterprise Drive
North Quincy, MA 02171
TOTAL RETURN FUND III
Archdiocese of Los Angeles 7,133,189.50 44.40*
1531 West 9th Street
Los Angeles, CA 90015
Holy Cross 2,640,045.86 16.43
St. Mary's Lourdes Hall
Notre Dame, IN 46556
Catholic Diocese of Wilmington 1,512,365.42 9.41
P.O. Box 2030
Wilmington, DE 19899
Society of Mount Carmel 1,289,591.40 8.03
1317 Frontage Road
Darien, IL 60561
LONG-TERM U.S. GOVERNMENT FUND
Firemans Fund Insurance 905,544.87 27.34*
One Wall Street, 8th Floor
New York, NY 10286
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
------------- -------------
<S> <C> <C>
Orchestral Association 728,189.18 21.99
220 South Michigan Avenue
Chicago, IL 60604
Charles Schwab & Co. Inc. ** 445,236.65 13.44
101 Montgomery Street
San Francisco, CA 94104
The J. Paul Getty Trust 219,672.76 6.63
401 Wilshire Blvd., Suite 900
Santa Monica, CA 90401
FOREIGN FUND
Southern California Edison 6,393,620.66 32.56*
2244 Walnut Grove Avenue
Rosemead, CA 91770
Charles Schwab & Co., Inc.** 6,320,284.07 32.19*
101 Montgomery Street
San Francisco, CA 94104
Donaldson, Lufkin & Jennrette** 3,196,793.85 16.28
1 Pershing Plaza
Post Office Box 2052
Jersey City, NJ 07399
Wachovia Bank & Trust Co., FBO 1,038,715.77 5.29
Mead Corporation
Post Office Box 3075
Winston-Salem, NC 27150
GLOBAL FUND
Walker Art Center 2,689,368.69 18.91
Vineland Place
Minneapolis, MN 55403
Georgetown University 2,462,329.26 17.31
3600 M Street, N.W.
Washington, DC 20007
Charles Schwab & Co., Inc. ** 1,575,406.18 11.08
101 Montgomery Street
San Francisco, CA 94104
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
------------- -------------
<S> <C> <C>
Pittsburgh Theological Seminary 943,379.69 6.63
616 North Highland Avenue
Pittsburgh, PA 15206-2596
Sisters of Mercy 810,424.95 5.70
2039 North Greyer Road
St. Louis, MO 63131
Worchester Polytechnic 803,665.66 5.65
100 Institute Road
Worchester, MA 01609
STOCKSPLUS FUND
Sisters of St. Benedict 1,881,022.46 13.21
c/o Norwest Bank
Sixth & Marquette Avenue
Minneapolis, MN 55479
Iowa Methodist 1,645,209.73 11.56
1200 Pleasant Street
Des Moines, IA 50309
Ziff Communications 1,008,472.34 7.08
c/o Bank of New York
One Wall Street, 7th Floor
New York, NY 10286
Northern Trust Company, FBO 829,813.76 5.83
Sprint Foundation
Post Office Box 92956
Chicago, IL 60675-2956
Boatmens Trust Company, FBO 791,914.72 5.56
Lutheran Charitable Foundation
Post Office Box 14737
St. Louis, MO 63178
First Trust N.A., FBO 743,392.45 5.22
Robinson Companies
Post Office Box 64010
St. Paul, MN 55164-0100
Northern Trust Company, FBO 739,092.28 5.19
Sprint-Carolina Telephone &
Telegraph Company
Post Office Box 92956
Chicago, IL 60675
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
------------- -------------
<S> <C> <C>
Ziff Davis Publishing 733,092.56 5.15
c/o Bank of New York
One Wall Street
New York, NY 10286
VERSASTYLE EQUITY FUND II
Pacific Mutual Life Insurance Company 554,713.58 100.00*
700 Newport Center Drive
Newport Beach, CA 92660
</TABLE>
50
<PAGE>
*Entity owned 25% or more of the outstanding shares of beneficial interest
of the Fund, and therefore may be presumed to "control" the Fund, as that term
is defined in the 1940 Act.
**Shares are held only as nominee.
As of May 31, 1996, the Trustees and Officers of the Trust, as a group,
owned .005%, .017%, .111%, .089%, .071% and 1.298% of the outstanding shares of
the PIMCO Low Duration, High Yield, StocksPLUS, Total Return, Foreign, and
Global Funds, respectively.
51
<PAGE>
CODE OF ETHICS
The Trust and PIMCO have each adopted a Code of Ethics governing personal
trading activities of all Trustees and officers of the Trust, and Directors,
officers and employees of PIMCO who, in connection with their regular functions,
play a role in the recommendation of any purchase or sale of a security by the
Trust or obtain information pertaining to such purchase or sale or who have the
power to influence the management or policies of the Trust or PIMCO. Such
persons are required to preclear certain security transactions with PIMCO's
Compliance Officer or his designee and to report certain transactions on a
regular basis. PIMCO has developed procedures for administration of the Codes.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company ("IFTC") serves as custodian, transfer
agent and dividend disbursing agent for assets of all Funds.
Pursuant to rules adopted under the 1940 Act, the Trust may maintain
foreign securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Board of Trustees following a consideration of a number of factors,
including (but not limited to) the reliability and financial stability of the
institution; the ability of the institution to perform capably custodial
services for the Trust; the reputation of the institution in its national
market; the political and economic stability of the country in which the
institution is located; and further risks of potential nationalization or
expropriation of Trust assets. The Board of Trustees reviews annually the
continuance of foreign custodial arrangements for the Trust. No assurance can
be given that the Trustees' appraisal of the risks in connection with foreign
custodial arrangements will always be correct or that expropriation,
nationalization, freezes, or confiscation of assets that would impact assets of
the Funds will not occur, and shareholders bear the risk of losses arising from
these or other events.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1055 Broadway, Kansas City, MO 64105, serves as
independent public accountants for all Funds. Price Waterhouse LLP provides
audit services, tax return preparation and assistance and consultation in
connection with review of Securities and Exchange Commission filings. Prior to
November 1, 1995, Deloitte & Touche LLP served as independent accountants for
the PIMCO Money Market Fund and PIMCO Total Return Fund II. See "The
Reorganization" for additional information.
COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C. 20005, passes
upon certain legal matters in connection with the shares offered by the Trust,
and also act as counsel to the Trust.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not contain
all of the information included in the Trust's registration statement filed with
the SEC under the 1933 Act with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statement, including the exhibits
filed therewith, may be examined at the offices of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
52
<PAGE>
FINANCIAL STATEMENTS
Financial statements for the Trust as of March 31, 1996 for its fiscal
year then ended, including notes thereto, and the reports of Price Waterhouse
LLP thereon dated May 10, 1996, are incorporated by reference from the Trust's
1996 Annual Report. A copy of the Annual Report delivered with this Statement of
Additional Information should be retained for future reference.
53
<PAGE>
P I M C O
[ARTWORKS APPEARS HERE]
PIMCO FUNDS ANNUAL REPORT MARCH 31, 1996
<PAGE>
CONTENTS
Chairman's Message 1
About the PIMCO Funds 2
Portfolio Managers Interviews 3
Investment Performance 10
Statement of Assets and Liabilities 16
Statement of Operations 18
Statement of Changes in Net Assets 20
Financial Highlights 24
Schedules of Investments
Total Return Fund 28
Total Return Fund II 39
Total Return Fund III 41
Low Duration Fund 43
Low Duration Fund II 50
Short-Term Fund 52
Long-Term U.S.
Government Fund 54
Foreign Fund 56
Global Fund 60
High Yield Fund 63
Money Market Fund 66
Growth Stock Fund 67
StocksPLUS Fund 69
Notes to Financial Statements 72
Report of Independent Accountants 80
International Hedged Portfolio
Combinations
(December 1985 - August 1993)
[GRAPH APPEARS HERE]
U.S. INT'L
Portfolio Risk Total Return Bonds Bonds
(%) (%) (%) (%)
3.95 8.16 0 100
3.83 8.26 5 95
3.72 8.37 10 90
3.63 8.47 15 85
3.56 8.58 20 80
3.51 8.69 25 75
3.47 8.79 30 70
3.46 8.90 35 65
3.48 9.00 40 60
3.51 9.11 45 55
3.56 9.21 50 50
3.63 9.32 55 45
3.72 9.42 60 40
3.83 9.53 65 35
3.96 9.63 70 30
4.10 9.74 75 25
4.25 9.85 80 20
4.41 9.95 85 15
4.58 10.06 90 10
4.77 10.16 95 5
5.01 10.27 100 0
SOURCE: Morgan International Research
ON THE COVER:
Depicted on the front cover and in greater
detail above, is an efficient frontier
graph showing different combinations of
foreign and domestic bonds. The historical
relationships shown support PIMCO's belief
that the use of foreign bonds tends to
reduce portfolio volatility without
sacrificing return. This risk reduction is
achieved because the U.S. and foreign bond
markets do not always move together. A
portfolio manager's ability to recognize
and take advantage of these differences is
an important tool for adding value and
reducing risk in both domestic (where
permitted) and international bond funds.
<PAGE>
CHAIRMAN'S MESSAGE
Dear PIMCO Funds Shareholder:
The bond rally of 1995 rewarded investors with some of the highest returns in
recent memory, but a sharp correction which began during the first quarter of
1996 offset a portion of those gains. After rallying strongly through December,
the bond market changed course on the announcement of an unusually strong
employment indicator. While this number was later shown to be exaggerated, many
bond investors interpreted it as a signal that renewed inflation was imminent,
and this sent bond prices lower through the Trust's fiscal year end.
Despite this unexpected level of market volatility, nine of the thirteen
operational PIMCO Funds, representing 94% of shareholder assets, outperformed
their respective benchmark indexes during the fiscal year ended March 31, 1996.
Please refer to the section on Investment Performance for graphs and tables
displaying the performance of each Fund and its comparative index. Accompanying
each Fund's performance graph is a summary of the primary factors contributing
to investment results.
We hope that you will take time to read the two portfolio manager interviews
appearing on the next few pages. The first interview features David H. Edington,
who manages the Short-Term and StocksPLUS Funds. Mr. Edington's comments on the
domestic markets are followed by a discussion of foreign fixed income investing
with Lee R. Thomas, III, portfolio manager of the Foreign and Global Funds. We
think you will find their observations on the past year as well as their
investment strategies and market outlooks to be useful and interesting.
The recent introduction of exchange privileges among the 26 institutional funds
offered by the PIMCO Funds and our affiliated equity fund family, the PIMCO
Funds: Equity Advisors Series, has been well received by shareholders. Should
you desire further information about these Funds or have any questions, please
call us at (800) 927-4648.
Thank you for your continued investment in the PIMCO Funds. We very much value
the confidence you and other investors have placed in us. That confidence has
helped us achieve a twelve-month growth rate of more than 45% and net assets of
$15.1 billion at the end of the fiscal year.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman of the Board
May 15, 1996
1
<PAGE>
ABOUT THE PIMCO FUNDS
Launched in 1987, the PIMCO Funds are no-load, open-end institutional mutual
funds designed to provide access to the investment advisory services offered by
Pacific Investment Management Company. With a minimum initial investment
requirement of $1,000,000, the PIMCO Funds are offered primarily to institutions
and high net-worth individuals, although shares of the Funds may also be
purchased at lesser minimum initial investments through certain discount
brokers.
The investment objective of the PIMCO Short-Term and PIMCO Money Market
Funds is to seek to obtain maximum current income, consistent with preservation
of capital and daily liquidity. The investment objective of the remaining PIMCO
Fixed Income Funds is to seek to realize maximum total return, consistent with
preservation of capital and prudent investment management. The investment
objective of the PIMCO Growth Stock Fund is to seek long-term growth of capital,
while that of the PIMCO StocksPLUS Fund is to seek to achieve a total return
which exceeds the total return performance of the S&P 500 Index.
The following table summarizes the primary characteristics of each of the
PIMCO Funds. To receive additional information about the Funds, including a
prospectus, please call (800) 927-4648.
<TABLE>
<CAPTION>
% Foreign
Fund Duration Credit Quality Exposure Primary Investments
====================================================================================================================================
<S> <C> <C> <C> <C>
Total Return 3-6 years B to AAA; max 10% 0-20% Intermediate maturity
below BBB fixed income securities
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return II 3-6 years BBB to AAA 0% Same as Total Return Fund, except
quality and foreign issuer restrictions
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return III 3-6 years B to AAA; max 10% 0-20% Same as Total Return Fund, except
below BBB prohibitions on firms engaged in
socially sensitive practices
- ------------------------------------------------------------------------------------------------------------------------------------
Low Duration 1-3 years B to AAA; max 10% 0-20% Short and intermediate
below BBB maturity fixed income securities
- ------------------------------------------------------------------------------------------------------------------------------------
Low Duration II 1-3 years A to AAA 0% Same as Low Duration Fund, except
quality and foreign issuer restrictions
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term 0-1 year B to AAA; max 10% 0-5% Money market instruments and short
below BBB maturity fixed income securities
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market (less than)90 days Min 95% AAA or 0% Money market instruments
dollar-weighted Prime 1; (less than) 5% AA
avg. maturity or Prime 2
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term U.S. Min 8 years A to AAA 0% Long-term maturity fixed income
Government securities
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign 3-6 years B to AAA; max 10% (greater Intermediate maturity foreign
below BBB than) fixed income securities
85%
- ------------------------------------------------------------------------------------------------------------------------------------
Global 3-8 years B to AAA; max 10% 25-75% Intermediate maturity U.S. and
below BBB foreign fixed income securities
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield 2-6 years B to AAA; min 65% 0% High yield fixed income securities
below BBB ("junk bonds")
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Stock n/a n/a 0-25% Common stocks believed to have
above-market appreciation
potential over full market cycle
- ------------------------------------------------------------------------------------------------------------------------------------
StocksPLUS 0-1 year B to AAA; max 10% 0-20% S&P 500 stock index derivatives
below BBB backed by a portfolio of short-term
fixed income securities
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
INTERVIEW WITH DAVID H. EDINGTON
[PHOTO APPEARS HERE]
Managing the PIMCO Funds' investment portfolios requires a diverse group of
talented investment professionals. PIMCO 's fixed income management team is
comprised of 8 portfolio managers and 9 analysts. Its equity team is comprised
of 2 portfolio managers and 1 analyst.
David H. Edington is a Managing Director of PIMCO and a senior member of our
fixed income portfolio management group. Dave is responsible for the management
of the PIMCO Short-Term and StocksPLUS Funds.
Q. The past year certainly tested fixed income managers, with interest rates
falling through 1995, followed by a quick rebound in early 1996. What
forces caused these changes, and why were market movements so volatile?
A. Market direction and volatility were driven by a reversal of economic
growth and inflation expectations, and especially how the Fed was likely to
behave. Throughout 1995, the consensus was that the economy was quite weak
and vulnerable to recession and that inflation was dead. But in the last
few months we have seen signs of modest economic growth, a slight up-tick
in inflation, and a couple of speculative price jumps in key commodities.
In response, the bond market has overreacted by making a big u-turn, from
an expectation of economic decline and muted inflation to the current fear
of accelerating growth and inflation. Markets tend to do that, to take the
last month or two of data and believe it represents a trend that will be
sustained for a long time. In reality, there has been very little change:
the economy continues to move along at a very manageable, non-recessionary
pace, and inflation is stable at historically low levels.
[The following table was represented as a line chart in the printed matter]
Yield Curve Data Points
3/31/95 12/31/95 3/31/96
3 Mos. 5.849 5.072 5.135
6 Mos. 6.114 5.147 5.177
1 Yr. 6.482 5.132 5.376
2 Yr. 6.778 5.15 5.752
3 Yr. 6.886 5.208 5.884
5 Yr. 7.067 5.374 6.078
10 Yr. 7.192 5.57 6.323
30 Yr. 7.43 5.949 6.669
Q. You have been calling for generally lower interest rates moving within a
narrow range over the next few years. What long-term forces influence this
outlook?
A. Our outlook is driven by four important fundamental forces, which are
long-term and more social and political, rather than financial, in nature.
The most important of these forces is the globalization of production and
labor costs and the effect that this trend has on dampening inflation. In
the last five years, just about every developing country, including the
former
3
<PAGE>
INTERVIEW WITH DAVID EDINGTON (Cont.)
communist bloc, has shifted from a closed, centrally-planned economy, to
free-market, export-oriented policies. This has resulted in a massive,
simultaneous program of building productive capacity in these areas, and it
has also introduced a huge pool of low-priced labor to the global
marketplace. Now companies can locate nearly anywhere in the developed or
developing world, taking advantage of the most favorable labor and
production costs.
The next important trend is demographics. In developed countries,
representing the lion's share of the world economy, populations are aging,
which means that more people will be forced to save for retirement and
consume less. The population group that really fuels the U.S. economy, 20-
to 40-year olds who are buying and furnishing houses, buying cars and
having children, is growing very slowly or even shrinking. The same is true
in Europe and Japan. This pattern of higher savings and lower consumption
should result in slow growth and low inflation.
Third is technology. The current investment boom in high tech equipment is
unprecedented. This should mean that the average worker can become much
more productive, so wages can go up without driving up the final cost of
goods or services. Or alternatively, if wages are stable, greater
productivity could drive down the final cost of goods and services,
resulting in lower inflation or even disinflation.
The final key force is the trend toward freer flows of capital.
Increasingly, portfolio managers, investment bankers and others are able to
influence monetary policy by moving capital into and out of the world's
markets. These "vigilantes", as they have come to be known, can bring swift
punishment upon countries which pursue inflationary policies by quickly
withdrawing capital (witness Mexico in late 1994/early 1995). When capital
is withdrawn, interest rates soar, currency values plummet and economic
growth is stifled. Because of this threat, most central banks now pursue
more or less sound monetary and inflation policies or risk losing the
capital essential for economic growth. Central banking authorities have
also recently become more independent from political interference. Couple
this with greater fiscal conservatism in Europe and the U.S., and you have
a global environment that should support lower inflation.
Q. Which investment strategies were most successful in your fixed income
portfolios this year? Which did not work as well as expected?
A. In hindsight, our duration decision, or our interest rate exposure relative
to comparative market indexes, worked against us in the second quarter of
1995 and the first quarter of 1996. In the second quarter, we defensively
held durations shorter than the market and rates declined. In the first
quarter, we thought rates would continue to fall, so we were longer than
our comparative indexes.
4
<PAGE>
Fortunately, we employed several other strategies this past year which
proved to be successful in adding value. For example, our holdings of
adjustable-rate mortgages (ARMs) performed extremely well. When interest
rates decline rapidly like they did in 1995, ARMs offer above-market yields
because their periodic coupon rate adjustments generally lag the market. In
addition, since they are 100% full faith and credit guaranteed by the U.S.
government, they carry no principal risk. Our hedged foreign bond holdings
have also appreciated significantly. In our longer-term, full-discretion
funds (such as the PIMCO Total Return Fund) we concentrated positions in
Germany to take advantage of its low inflation policies and attractive
interest rate spreads to similar maturity U.S. Treasury bonds. In certain
of our shorter-term funds we have favored higher yielding European
countries and Canada. Here we were looking for yields that exceed those in
the U.S. after hedging costs. Finally, holdings of corporate bonds have
also done very well. We have had success targeting companies; for example,
airlines like American, United and Delta, whose balance sheets have
improved substantially due to strong earnings. This means that in spite of
the recent weakening in the bond market, we have made some nice capital
gains as spreads have narrowed on some of these key holdings. Here at
PIMCO, I have the good fortune of working with portfolio managers and
analysts who possess expertise in the various sectors of the fixed income
markets.
Tools Used by PIMCO in Seeking Superior Portfolio Returns
INTEREST RATE
COST-EFFECTIVE FORECASTS
TRADING (Portfolio Duration)
PROPRIETARY SECTOR
QUANTITATIVE VALUE ROTATION
ANALYSIS ADDED (Govts, Mfg, Corps, Intl)
CREDIT YIELD CURVE
ANALYSIS POSITIONING
(Maturity Structure)
ISSUE
SELECTION
Q. You have spoken generally of how PIMCO manages fixed income assets.
Specifically, how were these strategies applied in your management of the
Short-Term Fund? What were the results?
A. The same basic philosophy is applied, but with a few adjustments. First,
the dynamics of the short end of the yield curve are unique, and we are
sensitive to that. Second, most all of the return will come from income, as
opposed to capital gains from price changes, so the key is to create a
portfolio with substantial yield while carefully controlling risk. The
yield part is easy. You can always buy corporate, mortgage or foreign bonds
with a lot of yield; the trick is the risk control.
5
<PAGE>
INTERVIEW WITH DAVID EDINGTON (Cont.)
All in all, the strategy has been successful. For the one and two year
periods ended March 31, 1996, the Short-Term Fund was ranked #1 (of 26 and
16 funds respectively) among Ultra Short Obligations funds in the Lipper
universe, and it also carries a four-star rating from Morningstar.* We
think of the Fund as an option for clients looking for long-term returns
that consistently outpace money market funds in exchange for some risk that
the Fund will underperform money market funds over shorter periods. For the
recent five-year period, the Fund outperformed the Lipper Money Market
Index comprised of the 30 largest money market mutual funds by 1.1% on an
annual basis.
Q. StocksPLUS is an enhanced index strategy which you have managed since its
inception (May 14, 1993). How does an investment manager like PIMCO, which
is well-known for its active fixed income performance, adapt its strategies
in managing a fund based on the S&P 500 Stock Index?
A. We invest primarily in S&P 500 derivatives such as futures or swaps, which
will give us 100% of the price movement of the stock market. This means we
will normally be fully exposed to the market. What makes the strategy work
is that by using derivatives, we only have to dedicate about 4% of our
portfolio as margin deposit. We can then invest the rest in high-quality,
liquid, short-term debt instruments in an attempt to add significant
additional yield over and above the return of the stock market. So we get
the stock market returns through derivative exposure, plus incremental
gains from an actively managed bond portfolio (hence the Fund's name,
"StocksPLUS").
Q. What have been the results of the StocksPLUS Fund so far?
A. The Fund had a great twelve months, outpacing the S&P 500 Index by nearly
2%. In fact, it has outpaced the S&P 500 by nearly 3% annually since its
inception. As a portfolio manager, I am pleased that so far the Fund has
achieved its objective of outperforming the Index, and it has done so
consistently, beating the Index in eight of its first eleven quarters of
operation.
* The top 10% of all funds in a broad investment catagory
(e.g. taxable bond) receive 5-star ratings. The next 22.5%
receive 4-star ratings. The Morningstar rating combines both
performance and risk into one evaluation.
6
<PAGE>
INTERVIEW WITH LEE R. THOMAS, III
[PHOTO APPEARS HERE]
Lee R. Thomas, III recently joined PIMCO as an Executive Vice President and
Senior International Portfolio Manager. Lee manages the Foreign and Global Funds
for the Trust.
Q. Mr. Edington has described some of PIMCO's fixed income management
techniques, including the selective use of foreign securities. How do your
strategies for investing in foreign markets compare with those utilized in
the PIMCO Fund's domestic portfolios?
A. We use the same basic approach as we use for domestic funds, with two key
differences. First, we employ many of the strategies Dave described, but in
more than 25 different countries simultaneously. On the surface, that makes
the job seem Herculean, but in practice the task is made easier because
many of the sector rotation strategies (e.g., to hold corporates or
mortgages) that we employ domestically are not available in foreign
markets. On the other hand, we make the same yield curve decisions, and of
course we have to make the same duration decision regarding our overall
exposure to interest rate risk. The second primary difference is that we
must also make country allocation and currency risk management decisions.
Additional Tools Used by PIMCO in Managing International Portfolios
CURRENCY
MANAGEMENT
RELATIVE CASH
VALUE STRATEGIES VALUE MANAGEMENT
ADDED
COUNTRY DURATION
ALLOCATION MANAGEMENT
Q. What unique risks and rewards should investors be aware of in evaluating
international investing compared with domestic investing?
A. Currency risk management is absolutely critical to international bond
investing. Inevitably you have foreign currency risk as a consequence of
owning foreign bonds, and the risk-reduction benefits of global
diversification cannot be secured unless you manage this risk adequately.
In addition, sovereign risks may affect repayment of bonds, and political
risks, such as exchange controls, may impact your ability to get your money
out of a country. While these latter two risks are rare, the potential loss
is enormous. Consequently, we include them in our analysis, particularly
for developing markets where we may take small positions.
As for the rewards of international investing, they may be realized through
both strategic and tactical means. The most important strategic reward
comes from diversifying interest rate risk and reducing volatility in a
7
<PAGE>
INTERVIEW WITH LEE THOMAS (Cont.)
portfolio. This concept is illustrated by the efficient frontier graph
described on the inside front cover of this report. Studies show that you
can potentially diversify away roughly half of your total portfolio risk
with no reduction in long-term return. Tactically, because markets are not
perfectly correlated, when you diversify beyond domestic borders, you can
find opportunities elsewhere, even when the U.S. market is going down.
Sometimes we find entire countries that offer unusual value, or it may be a
segment of a yield curve, or perhaps even specific sectors or securities.
Global investors simply have more choices available to them, and thus, more
opportunities to invest profitably.
Q. How are the Foreign and Global Funds similar? What are their primary
differences?
A. As noted, our fundamental investment strategies and techniques are similar
for both Funds. As for differences, the Foreign Fund invests almost
exclusively outside the U.S. It appeals to investors who want to determine
the foreign and domestic allocations of their investment portfolio
themselves. The Global Fund invests as its name implies: globally. This
means that the U.S. is included among the 25 to 30 countries where we can
invest. Investors in the Global Fund essentially turn the foreign/domestic
allocation decision over to us, and we allocate funds away from or toward
the U.S. as opportunities arise. Because the allocation decision is ours to
make, we can use it as another potential source of return. Another
important difference in the way the two Funds are managed is our approach
to foreign currency exposure. On average, the Foreign Fund will carry
considerably less exchange rate risk than the Global Fund. Primarily this
is because the Foreign Fund is managed against a hedged market index, while
the Global Fund is managed against an unhedged market index.
Q. What are some of the key strategies you have used during the past year to
capitalize on opportunities in international fixed income investing?
A. While correlations are increasing, economic and business cycles do not
change at exactly the same rate and time in all countries, creating pockets
of opportunities for investors. For example, when Japan began an aggressive
program of fiscal and monetary stimulation last summer to jump start their
economy, we shifted from long- to short-maturity Japanese bonds to take
advantage of likely reductions in short-term rates. We took profits on
these positions several months ago following interest rate cuts which
pushed bond prices higher. Another component of this strategy involved
overweighting the U.S. dollar relative to the Japanese yen. This also
benefited returns as the dollar strengthened significantly.
A second important strategic theme was a shift out of the U.S. and later
Japan into the core European economies, chiefly Germany. This shift began
about one year ago and later accelerated as we sold profitable Japanese
positions. In comparing different markets, we were surprised that German
10-year bond yields were as much as 0.7% higher than comparable U.S. yields
at a time when German inflation was very subdued
8
<PAGE>
and their economy was weaker than the U.S. Based on our economic analysis,
we believed that German rates would decline relative to U.S. rates, and in
fact they did early this year. The differential fell from 0.7% above to
0.5% below U.S. rates, giving the Funds a very nice capital gain.
[The following table was represented as a line graph in the printed matter.]
================================================================================
GERMAN 10-YEAR GOVERNMENT SPREAD TO U.S.
================================================================================
German 10-Year Gov't.
Spread to U.S.-Rates (BPS)
Jan-95 -17
Feb-95 -9
Mar-95 6
Apr-95 -3
May-95 26
Jun-95 44
Jul-95 68
Aug-95 18
Sep-95 45
Oct-95 51
Nov-95 50
Dec-95 40
Jan-96 31
Feb-96 29
Mar-96 36
Apr-96 -16
Q. What does the record show on performance and volatility of returns for the
Foreign and Global Funds?
A. The Foreign Fund, which opened in 1992, has now qualified for a 5-star
rating from Morningstar* based on its three-year performance. The Global
Fund, which began in 1993, will qualify for a three-year rating later this
year. Both Funds have outperformed their unmanaged comparative market
indexes, and importantly, have done so without adding significant
volatility relative to these market measures. Certainly as an institutional
manager we find this encouraging. The one-year and historical performance
of both Funds relative to their peers in the Lipper General World Income
universe has also been strong, particularly since many of the higher ranked
funds are more volatile emerging markets offerings. (The Foreign Fund
ranked 17, 25 and 14 of 146, 107 and 71 funds, respectively, for the one,
two and three year periods ended March 31, 1996. The Global Fund ranked 54
and 11 for the same one- and two-year periods.)
Q. What is your outlook for the major global economies, and what changes in
the Funds are you considering as a result?
A. The biggest change we foresee is the re-emergence of the Japanese economy,
which has been very weak the past few years. Japanese bond yields should
rise sharply as modest inflation appears, so we have significantly
underweighted Japan in the Funds. We have targeted core Europe for roughly
half of this reallocation to take advantage of low inflation and continued
economic weakness, which should lead to lower interest rates. The remainder
has been directed to the dollar markets of Canada, New Zealand and
Australia. As exporters of commodities, these countries stand to benefit
from the recent surge in commodity prices. By emphasizing these markets, we
are defensively positioned in the event that price increases ignite
inflation among commodity consuming nations, without reducing portfolio
duration. This duration strategy is consistent with our outlook for lower
interest rates in Europe and the U.S.
* The top 10% of all funds in a broad investment catagory (e.g. world bond)
receive 5-star ratings. The Morningstar rating combines both performance
and risk into one evaluation.
9
<PAGE>
INVESTMENT PERFORMANCE
[The following table was represented as a line graph in the printed matter.]
================================================================================
Total Return Fund Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
MONTH TOTAL RETURN LBAG
========== ============== =============
<S> <C> <C>
05/31/87 1,000,000.00 1,000,000.00
12/31/87 1,030,745.18 1,043,430.28
12/31/88 1,127,426.29 1,125,714.10
12/31/89 1,288,016.57 1,289,275.51
12/31/90 1,391,670.78 1,404,797.46
12/31/91 1,663,829.39 1,629,609.19
12/31/92 1,825,855.68 1,750,227.21
12/31/93 2,054,300.21 1,920,864.71
12/31/94 1,980,883.43 1,864,840.30
12/31/95 2,372,627.60 2,209,361.20
03/31/96 2,315,678.28 2,170,163.07
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in May 1987 and held through March 1996, compared to
the Lehman Brothers Aggregate Bond Index, an unmanaged market index. The
performance of the Administrative Class from inception in September 1994 (shown
at right), reflects the payment of a service fee in an amount not to exceed
0.25% on an annualized basis.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Total Return Fund
Int'l Class (%) 11.14 6.59 9.92 9.96
Lehman Aggregate
Index (%) 10.79 5.99 8.49 9.16
- -----------------------------------------------------
Admin. Class (%) 10.99 n/a n/a 10.67
Lehman Aggregate
Index (%) 10.79 n/a n/a 10.91
- -----------------------------------------------------
</TABLE>
. An above-index duration for most of the year led to strong relative and
absolute performance through the final three quarters of 1995, but detracted
from returns in the first quarter of 1996.
. Foreign bond holdings averaging 15% to 20% were strong contributors to
performance as hedged German and Finnish bonds posted strong returns amid low
inflation and stagnant growth in core Europe.
. Small dollar-denominated Mexican and Argentine bond positions boosted returns
when prices rallied in response to credible growth and inflation policies.
. Corporate holdings, particularly below investment grade, outperformed other
sectors and benefited returns with higher yields and stable spreads. These
benefits were limited in the latter half of the year as longer maturity
corporates were pared in anticipation of widening spreads.
. Fixed-rate mortgage positions lagged as rising prepayments offset their
higher yields through the first nine months, followed by duration extension
and lower prices in early 1996.
[The following table was represented as a line graph in the printed matter.]
================================================================================
Total Return Fund II Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
MONTH TOTAL RET II LBAG
========= ============== ============
<S> <C> <C>
12/31/91 1,000,000.00 1,000,000.00
12/31/92 1,094,320.03 1,074,016.53
12/31/93 1,213,560.32 1,178,727.22
12/31/94 1,186,684.24 1,144,348.17
12/31/95 1,411,856.80 1,355,761.38
03/31/96 1,376,575.39 1,331,719.95
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in December 1991 and held through March 1996,
compared to the Lehman Brothers Aggregate Bond Index, an unmanaged market index.
The performance of the Administrative Class from inception in November 1994
(shown at right), reflects the payment of a service fee in an amount not to
exceed 0.25% on an annualized basis.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Total Return
Fund II
Int'l Class (%) 10.59 6.36 n/a 7.81
Lehman Aggregate
Index (%) 10.79 5.99 n/a 6.97
- -----------------------------------------------------
Admin. Class (%) 10.31 n/a n/a 12.12
Lehman Aggregate
Index (%) 10.79 n/a n/a 12.62
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Returns Ended 3/31/96
- -----------------------------------------------------
5 Mo(a)
<S> <C>
Total Return
Fund II
Int'l Class (%) 0.78
Lehman Aggregate
Index (%) 1.10
- -----------------------------------------------------
Admin. Class (%) 0.57
Lehman Aggregate
Index (%) 1.10
- -----------------------------------------------------
</TABLE>
(a) Cumulative returns presented to reflect reorganization of the Fund,
effective November 1, 1995.
. An above-index duration aided strong performance in the final three quarters
of 1995, but detracted from returns in the first quarter of 1996.
. Corporate bonds were the strongest performing asset class, particularly
BBB-rated issues where spreads tightened as prospects for sustained economic
growth improved. The benefits of this strategy were limited in the latter
half of the year as longer maturity positions were trimmed.
. Adjustable-rate mortgages were used throughout the year to enhance portfolio
yield with limited price risk, boosting returns modestly.
. Fixed-rate mortgage positions lagged as rising prepayments offset their
higher yields through the first nine months, followed by duration extension
and lower prices in early 1996.
10
<PAGE>
[The following table was represented as a line graph in the printed matter.]
================================================================================
Total Return Fund III Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
MONTH TOTAL RET III LBAG
========= ============= ============
<S> <C> <C>
04/30/91 1,000,000.00 1,000,000.00
12/31/91 1,137,502.41 1,116,311.65
12/31/92 1,240,189.38 1,198,937.16
12/31/93 1,396,936.94 1,315,826.92
12/31/94 1,349,037.54 1,277,449.19
12/31/95 1,608,546.95 1,513,452.22
03/31/96 1,569,798.25 1,486,614.49
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in May 1991 and held through March 1996, compared to
the Lehman Brothers Aggregate Bond Index, an unmanaged market index.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Total Return
Fund III (%) 10.06 6.85 n/a 9.59
- -----------------------------------------------------
Lehman Aggregate
Index (%) 10.79 5.99 n/a 8.39
- -----------------------------------------------------
</TABLE>
. An above-index duration for most of the year led to strong relative and
absolute performance through the final three quarters of 1995, but detracted
in the first quarter of 1996.
. Foreign bond holdings averaging 15% to 20% benefited performance as hedged
German and Finnish bonds posted strong returns amid low inflation and
stagnant growth in core Europe.
. Small dollar-denominated Mexican and Argentine bond positions boosted returns
when prices rallied in response to credible growth and inflation policies.
. A sector strategy which underweighted corporates in favor of mortgages
limited returns, as corporates were the strongest performing domestic sector
due to higher yields and spread tightening.
[The following table was represented as a line graph in the printed matter.]
================================================================================
Low Duration Fund Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
MONTH LOW DURATION MERRILL 1-3
========= ============ ============
<S> <C> <C>
05/31/87 1,000,000.00 1,000,000.00
12/31/87 1,044,478.09 1,047,984.76
12/31/88 1,130,408.56 1,113,174.49
12/31/89 1,261,510.71 1,234,771.63
12/31/90 1,375,736.40 1,354,820.12
12/31/91 1,560,925.88 1,513,055.27
12/31/92 1,680,926.86 1,608,398.67
12/31/93 1,811,369.22 1,695,419.33
12/31/94 1,822,760.28 1,705,049.92
12/31/95 2,040,217.87 1,892,602.79
03/31/96 2,041,263.49 1,898,924.61
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in May 1987 and held through March 1996, compared to
the Merrill Lynch 1-3 Year Treasury Index, an unmanaged market index. The
performance of the Administrative Class from inception in January 1995 (shown at
right), reflects the payment of a service fee in an amount not to exceed 0.25%
on an annualized basis.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Low Duration Fund
Inst'l Class (%) 9.13 5.76 7.66 8.41
Merrill Lynch 1-3
Yr Tsy Index (%) 7.75 4.92 6.52 7.52
- -----------------------------------------------------
Admin. Class (%) 8.83 n/a n/a 9.16
Merrill Lynch 1-3
Yr Tsy Index (%) 7.75 n/a n/a 9.00
- -----------------------------------------------------
</TABLE>
. An above-index duration led to strong relative performance through the final
three quarters of 1995, but detracted slightly in the first quarter of 1996.
. A broad maturity mix had a small positive impact on returns as
intermediate-term rates fell dramatically.
. Corporate holdings particularly below investment grade, outperformed other
sectors and benefited returns with higher yields and stable spreads.
. Small dollar-denominated Mexican bond positions boosted performance when
prices rallied in response to credible growth and inflation policies.
. Fixed-rate mortgage positions lagged as rising prepayments offset their
higher yields.
[The following table was represented as a line graph in the printed matter.]
================================================================================
Low Duration Fund II Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
MONTH LOW DURATION MERRILL 1-3
========= ============ ============
<S> <C> <C>
10/31/91 1,000,000.00 1,000,000.00
12/31/91 1,030,157.63 1,025,788.25
12/31/92 1,094,356.61 1,090,427.09
12/31/93 1,166,344.05 1,149,423.47
12/31/94 1,170,070.79 1,155,952.61
12/31/95 1,307,960.85 1,283,105.62
03/31/96 1,303,600.04 1,287,391.54
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in November 1991 and held through March 1996,
compared to the Merrill Lynch 1-3 Year Treasury Index, an unmanaged market
index.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -------------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Low Duration
Fund II (%) 7.30 5.07 n/a 6.18
- -------------------------------------------------------
Merrill Lynch
1-3 Yr Tsy Index (%) 7.75 4.92 n/a 5.88
- -------------------------------------------------------
</TABLE>
. An above-index duration aided performance in the final three quarters of
1995, but detracted from returns in the first quarter of 1996.
. A broad maturity mix had a small positive impact on returns as
intermediate-term rates fell dramatically.
. Lack of exposure to lower rated corporate bonds (in keeping with the Fund's
investment guidelines) impeded performance when compared to the Low Duration
Fund, as these securities comprised the strongest domestic sector for the
year.
. Fixed-rate mortgages also limited returns when prepayments increased rapidly
in 1995, followed by dramatic slowing that caused durations to lengthen and
prices to fall through the bear market of early 1996.
11
<PAGE>
INVESTMENT PERFORMANCE (Cont.)
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATTER]
================================================================================
High Yield Fund Through March 31, 1996
================================================================================
<TABLE>
LEHMAN BB
MONTH HIGH YIELD INT CORP
========= ============ ============
<S> <C> <C>
12/31/92 1,000,000.00 1,000,000.00
12/31/93 1,187,025.82 1,146,545.45
12/31/94 1,215,478.79 1,156,314.50
12/31/95 1,466,840.41 1,376,719.76
03/31/96 1,480,400.02 1,386,737.39
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in December 1992 and held through March 1996,
compared to the Lehman Brothers BB Intermediate Corporate Index, an unmanaged
market index. The performance of the Administrative Class from inception in
January 1995 (shown at right), reflects the payment of a service fee in an
amount not to exceed 0.25% on an annualized basis.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
High Yield Fund
Inst'l Class (%) 15.70 11.68 n/a 12.89
Lehman BB Int.
Corp. Index (%) 13.48 9.79 n/a 10.59
- -----------------------------------------------------
Admin. Class (%) 15.54 n/a n/a 17.27
Lehman BB Int.
Corp. Index (%) 13.48 n/a n/a 15.30
- -----------------------------------------------------
</TABLE>
. A focus on BBB- and BB-rated non-cyclical credits benefited performance in
mid-1995 when investors became concerned about an economic slowdown.
. Maintaining this defensive strategy into 1996 detracted from returns as
lower-quality cyclical bonds outperformed on renewed optimism of economic
strength.
. Duration and maturity mix were held neutral to the index and had little
impact on relative return.
. Small holdings of dollar-denominated Mexican bonds aided performance as they
outperformed most high yield sectors during the period.
. Emphasizing the media/telecommunications and healthcare industries boosted
overall return due to improved cash flow ratios.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATTER]
================================================================================
Long Term U.S. Government Fund Through March 31, 1996
================================================================================
<TABLE>
LEHMAN INT
&
MONTH LONG-TERM GOV 20+ YR TREAS LBAG
========== ============ ============ ============
<S> <C> <C> <C>
06/30/91 1,000,000.00 1,000,000.00 1,000,000.00
12/31/91 1,181,839.72 1,154,987.78 1,110,386.16
12/31/92 1,322,838.26 1,244,270.52 1,192,573.10
12/31/93 1,568,556.86 1,450,540.54 1,308,842.39
12/31/94 1,452,653.13 1,341,134.05 1,270,668.38
12/31/95 1,911,315.03 1,736,411.78 1,505,418.68
03/31/96 1,791,701.29 1,627,082.08 1,478,723.40
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in July 1991 and held through March 1996, compared to
a 10 year duration blend of the Lehman Brothers Intermediate and 20+Yr. Treasury
Indices and the Lehman Brothers Aggregate Bond Index, each unmanaged market
indices.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Long-Term U.S.
Gov't. Fund (%) 14.83 8.05 n/a 13.04
- -----------------------------------------------------
LB Int. & 20+ Yr
Tresury Index (%) 14.03 7.17 n/a 10.78
- -----------------------------------------------------
Lehman Aggregate
Index (%) 10.79 5.99 n/a 8.57
- -----------------------------------------------------
</TABLE>
. Diversified sector, duration and maturity mix strategies led to strong
absolute and relative performance despite the backup in rates in early 1996.
. Duration strategy was mixed with a below-index duration limiting returns in
the second quarter, followed by two favorable above-index quarters which were
partially offset by surging rates in early 1996.
. A broad maturity mix had a small positive impact on returns as
intermediate-term rates fell dramatically.
. Mortgage exposure, which focused on a mix of short-term adjustable-rate and
long-term fixed rate issues, was positive overall, adding yield to the
portfolio that more than offset price and duration volatility on the
longer-term bonds.
12
<PAGE>
[THE FOLLOWING TALBE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATTER]
================================================================================
Foreign Fund Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
JP MORGAN
MONTH FOREIGN NON-US
========= ============ ============
<S> <C> <C>
12/31/92 1,000,000.00 1,000,000.00
12/31/93 1,164,013.44 1,139,019.60
12/31/94 1,079,026.38 1,081,273.43
12/31/95 1,308,003.45 1,278,457.48
03/31/96 1,332,867.26 1,289,271.47
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in December 1992 and held through March 1996,
compared to the J.P. Morgan Non-U.S. Government Bond Index (Hedged), an
unmanaged market index.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Foreign Fund (%) 21.80 8.82 n/a 9.25
- -----------------------------------------------------
J.P. Morgan
Non-U.S. Index (%) 14.12 7.84 n/a 8.13
- -----------------------------------------------------
</TABLE>
. Country selection benefited relative performance as the Fund moved to an
overweighted position in Europe relative to Japan.
. Currency strategy added value when the Japanese yen and German mark were
underweighted in an environment where they both fell against most major
currencies.
. An above-index duration added to absolute and relative returns.
. Small exposures to developing market bonds aided performance as both
Argentina and Mexico posted over 40% returns during the period.
. The core European countries of Germany, France, Belgium, Denmark and Finland
were favored, and they outperformed the index but lagged the higher-yielding
peripheral European markets during the past nine months.
[THE FOLLOWING TALBE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATTER]
================================================================================
Global Fund Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
JP MORGAN
MONTH GLOBAL GLOBAL
========= ============ ============
<S> <C> <C>
11/30/93 1,000,000.00 1,000,000.00
12/31/93 1,031,870.81 1,010,200.00
12/31/94 1,014,310.85 1,022,933.14
12/31/95 1,247,201.85 1,220,457.41
03/31/96 1,231,820.01 1,199,079.87
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in November 1993 and held through March 1996,
compared to the J.P. Morgan Global Index, an unmanaged market index.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 2 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Global Fund (%) 12.04 11.19 n/a 9.34
- -----------------------------------------------------
J.P. Morgan
Global Index (%) 6.58 9.29 n/a 8.09
- -----------------------------------------------------
</TABLE>
. Country selection benefited relative performance as the Fund moved to an
overweighted position in Canada and Europe relative to the U.S. and Japan.
. Currency strategy added value when the Japanese yen and German mark were
underweighted in an environment where they both fell against most major
currencies.
. An above-index duration added to absolute and relative returns.
. Small exposures to developing market bonds aided performance as both
Argentina and Mexico posted over 40% returns during the period.
. The core European countries of Germany, France, Belgium, Denmark and Finland
were favored, and they outperformed the index but lagged the higher-yielding
peripheral European markets during the past nine months.
13
<PAGE>
INVESTMENT PERFORMANCE (Cont.)
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATTER]
================================================================================
Short-Term Fund Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
LIPPER
MONTH MONEY MARKET MONEY MARKET
========= ============ ============
<S> <C> <C>
10/31/87 1,000,000.00 1,000,000.00
12/31/87 1,012,023.74 1,011,433.29
12/31/88 1,088,755.81 1,084,223.92
12/31/89 1,191,539.60 1,181,464.97
12/31/90 1,292,428.29 1,275,590.70
12/31/91 1,378,445.50 1,350,092.71
12/31/92 1,428,417.71 1,396,855.75
12/31/93 1,494,453.55 1,434,611.69
12/31/94 1,537,715.13 1,488,152.66
12/31/95 1,679,255.85 1,568,208.56
03/31/96 1,696,995.09 1,587,396.35
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in October 1987 and held through March 1996, compared
to the Lipper Money Market Index, an index consisting of the 30 largest equal
weighted Money Market Funds. Whereas money market funds attempt to maintain a
stable share price, the Short-Term Fund's share price will fluctuate in response
to market conditions. The performance of the Administrative class from inception
in February 1996 (shown at right), reflects the payment of a service fee in an
amount not to exceed 0.25% on an annualized basis. Effective September 1, 1995,
the Fund changed its index from the Wiesenberger Money Market Index to the
Lipper Money Market Index. Management of the Fund believes the Lipper Money
Market Index is a more widely recognized and distributed money market index.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Short-Term Fund
Inst'l Class (%) 8.49 5.52 5.23 6.48
- -----------------------------------------------------
Lipper Money
Market Index (%) 5.25 4.12 4.13 5.64
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Admin. Class (%) n/a n/a n/a 0.41
- -----------------------------------------------------
Lipper Money
Market Index (%) n/a n/a n/a 0.79
- -----------------------------------------------------
</TABLE>
. An above-index duration for most of the period led to strong relative
performance through the final three quarters of 1995, and detracted only
slightly in the first quarter of 1996.
. Short-term corporate and mortgage securities outperformed similar maturity
Treasuries due to higher yields and stable spreads.
. Opportunistic use of hedged Canadian and European bonds was a plus due to
their higher short-term interest rates and favorable hedging terms.
. Small dollar-denominated Mexican and Argentine bond positions boosted
performance when prices rallied in response to credible growth and inflation
policies.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATTER]
================================================================================
Money Market Fund Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
LIPPER
MONTH MONEY MARKET MONEY MARKET
========= ============ ============
<S> <C> <C>
02/28/91 1,000,000.00 1,000,000.00
12/31/91 1,047,059.10 1,046,651.18
12/31/92 1,083,083.32 1,082,903.94
12/31/93 1,113,416.25 1,112,174.01
12/31/94 1,157,083.08 1,153,681.32
12/31/95 1,227,235.03 1,215,744.16
03/31/96 1,243,447.46 1,230,619.38
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in March 1991 and held through March 1996, compared
to the Lipper Money Market Index, an index consisting of the 30 largest equal
weighted Money Market Funds. The performance of the Administrative Class, from
inception in January 1995 (shown at right), reflects the payment of a service
fee in an amount not to exceed 0.25% on an annualized basis. Effective November
1, 1995, the Fund changed its index from the Salomon Three Month T-Bill to the
Lipper Money Market Index. Management of the Fund believes the Lipper Money
Market Index is more consistent with the Fund's investment objectives.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Money Market
Fund
Inst'l Class (%) 5.97 4.47 4.35 4.37
Lipper Money
Market Index (%) 5.25 4.12 4.13 4.16
- -----------------------------------------------------
Admin Class (%) 5.71 n/a n/a 5.66
Lipper Money
Market Index (%) 5.25 n/a n/a 5.28
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Cumulative Returns Ended 3/31/96
- -----------------------------------------------------
5 Mo. (a)
<S> <C>
Money Market
Fund
Inst'l Class (%) 2.58
Lipper Money
Market Index (%) 1.96
- -----------------------------------------------------
Admin Class (%) 2.47
Lipper Money
Market Index (%) 1.96
- -----------------------------------------------------
</TABLE>
(a) Cumulative returns presented to reflect reorganization of the Fund,
effective November 1, 1995.
. High-grade, short-term corporate bonds offered higher yields than three-month
treasury bills, benefiting relative performance.
. Commercial paper offered by finance and utility companies boosted returns as
yields were consistently higher throughout the year.
. Maturity was held between two and three months for most of the year. This was
neutral for performance early in the period but added value when the yield
curve steepened in late 1995 and early 1996.
. Three Fed Funds reductions totaling 0.75% pushed money market yields lower
during the period.
14
<PAGE>
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATTER]
================================================================================
Growth Stock Fund Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
S&P/BARRA
MONTH GROWTH STOCK GROWTH
========= ================ =============
<S> <C> <C>
06/30/87 1,000,000.00 1,000,000.00
12/31/87 821,597.69 825,887.15
12/31/88 930,476.25 963,063.44
12/31/89 1,169,864.77 1,268,204.52
12/31/90 1,166,776.31 1,228,676.59
12/31/91 1,597,738.06 1,603,221.84
12/31/92 1,660,262.82 1,725,482.83
12/31/93 1,759,283.20 1,899,379.61
12/31/94 1,786,067.30 1,924,470.07
12/31/95 2,277,312.96 2,647,645.46
03/31/96 2,417,164.48 2,789,759.56
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in June 1987 and held through March 1996, compared to
the Standard & Poor's/BARRA Growth Index, an unmanaged market index.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 3 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
Growth Stock
Fund (%) 27.19 12.24 12.22 10.60
- -----------------------------------------------------
S&P/BARRA
Growth Index (%) 31.22 14.94 13.52 12.43
- -----------------------------------------------------
</TABLE>
. In a very strong market, growth stocks narrowly underperformed the broad S&P
500 Index during the period and mid cap stocks were the poorest performers.
. Returns lagged the Index for the first nine months of the period but pared
the relative performance deficit considerably in the recent quarter.
. A smaller-than-market capitalization bias was a drag on relative performance
in 1995 as smaller-cap growth stocks significantly underperformed.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATTER]
================================================================================
StockPLUS Fund Through March 31, 1996
================================================================================
<TABLE>
<CAPTION>
MONTH STOCKPLUS S&P 500
========= ================ =============
<S> <C> <C>
05/31/93 1,000,000.00 1,000,000.00
12/31/93 1,061,284.22 1,052,698.39
12/31/94 1,092,245.04 1,066,604.35
12/31/95 1,534,744.62 1,467,411.83
03/31/96 1,615,223.41 1,546,176.12
</TABLE>
The line graph depicts the value of $1,000,000 invested at the inception of the
Fund's Institutional Class in May 1993 and held through March 1996, compared to
the Standard & Poor's 500 Index, an unmanaged market index.
<TABLE>
<CAPTION>
Annualized Returns Ended 3/31/96
- -----------------------------------------------------
Since
1 Yr 2 Yr 5 Yr Inception
<S> <C> <C> <C> <C>
StockPLUS
Fund (%) 34.07 26.12 n/a 18.42
- -----------------------------------------------------
S&P 500
Index (%) 32.10 23.56 n/a 16.61
- -----------------------------------------------------
</TABLE>
. A fully invested equity position led to strong absolute returns as the S&P
500 Index rallied throughout the period.
. An extended duration for most of the period led to strong relative
performance on the cash portfolio through the final three quarters of 1995,
and detracted only slightly in the first quarter of 1996.
. Short-term corporate and mortgage securities outperformed similar maturity
Treasuries due to higher yields and stable spreads.
. Opportunistic use of hedged Canadian and European bonds in the third and
fourth quarters was a plus due to their higher short-term interest rates and
favorable hedging terms.
. Small dollar-denominated Mexican bond positions boosted performance when
prices rallied in response to credible growth and inflation policies.
15
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
March 31, 1996
<TABLE>
<CAPTION>
=========== =========== =========== =========== ===========
Total Total Total Low Low
Amounts in thousands, except per share amounts Return Return II Return III Duration Duration II
=========== =========== =========== =========== ===========
Assets:
<S> <C> <C> <C> <C> <C>
Investments, at value $13,039,888 $ 586,412 $ 163,563 $ 3,478,981 $ 350,232
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Cash and foreign currency 22,824 1 178 1 1
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Receivable for investments and foreign currency sold 2,168,927 27,043 19,575 208,930 31,380
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Receivable for Fund shares sold 20,414 16 21 1,719 0
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Variation margin receivable 12,137 876 250 214 153
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Interest and dividends receivable 130,564 4,706 1,959 32,601 1,548
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Other assets 0 0 0 0 1
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
15,394,754 619,054 185,546 3,722,446 383,315
======================================================== =========== =========== =========== =========== ===========
Liabilities:
Payable for investments and foreign currency purchased $ 4,982,267 $ 158,959 $ 42,981 $ 999,452 $ 129,842
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Written options outstanding 28,856 397 198 0 0
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Payable for Fund shares redeemed 13,745 503 12 39,459 0
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Dividends payable 11,729 87 44 2,384 57
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Accrued investment advisor's fee 2,247 102 31 587 55
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Accrued administrator's fee 1,618 102 31 423 55
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Accrued distribution fee 20 1 0 1 0
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Variation margin payable 2,026 0 16 0 0
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Other accrued expenses and liabilities 23 0 10 30 7
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
5,042,531 160,151 43,323 1,042,336 130,016
======================================================== =========== =========== =========== =========== ===========
Net Assets $10,352,223 $ 458,903 $ 142,223 $ 2,680,110 $ 253,299
======================================================== =========== =========== =========== =========== ===========
Net Assets Consist of:
Paid in capital $10,447,698 $ 462,937 $ 145,453 $ 2,711,410 $ 257,534
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Undistributed (overdistributed) net investment income (18,792) (329) (380) (5,120) (1,362)
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Accumulated undistributed net realized gain (loss) 15,021 (1,980) (217) (7,496) (899)
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation (depreciation) (91,704) (1,725) (2,633) (18,684) (1,974)
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
$10,352,223 $ 458,903 $ 142,223 $ 2,680,110 $ 253,299
======================================================== =========== =========== =========== =========== ===========
Shares Issued and Outstanding
Institutional Class 996,162 46,054 15,583 269,130 25,805
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Administrative Class 10,170 336 0 255 0
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, Offering and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 10.29 $ 9.89 $ 9.13 $ 9.95 $ 9.82
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Administrative Class 10.29 9.89 0 9.95 0
- -------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Cost of Investments Owned 13,069,858 586,100 164,891 3,497,696 351,999
======================================================== =========== =========== =========== =========== ===========
Cost of Foreign Currency Held 22,231 0 177 0 0
======================================================== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
16
<PAGE>
<TABLE>
<CAPTION>
========== ========== ========= ========= ==========
Long-Term
Amounts in thousands, except per share amounts Short-Term U.S. Gov't Foreign Global High Yield
========== ========== ========= ========= ==========
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at value $ 117,239 $ 42,402 $ 562,016 $ 221,093 $ 522,453
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Cash and foreign currency 42 0 405 469 0
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Receivable for investments and foreign currency sold 7,648 96 39,058 16,546 7,897
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Receivable for Fund shares sold 748 4 242 1 197
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Variation margin receivable 0 40 0 47 0
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Interest and dividends receivable 1,179 423 12,847 3,753 11,549
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Other assets 0 1 0 0 3
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
126,856 42,966 614,568 241,909 542,099
=========================================================== ========= ========= ========= ========= =========
Liabilities:
Payable for investments and foreign currency purchased $ 20,785 $ 10,376 $ 355,383 $ 107,810 $ 3,402
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Written options outstanding 0 0 22 11 0
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Payable for Fund shares redeemed 120 7 135 79 237
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Dividends payable 98 53 174 110 118
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Accrued investment advisor's fee 22 7 56 27 116
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Accrued administrator's fee 18 7 56 33 116
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Accrued distribution fee 1 0 0 0 0
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Variation margin payable 0 0 242 0 0
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Other accrued expenses and liabilities 16 5 7 6 120
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
21,060 10,455 356,075 108,076 4,109
=========================================================== ========= ========= ========= ========= =========
Net Assets $ 105,796 $ 32,511 $ 258,493 $ 133,833 $ 537,990
=========================================================== ========= ========= ========= ========= =========
Net Assets Consist of:
Paid in capital $ 106,593 $ 32,957 $ 251,507 $ 133,022 $ 525,389
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Undistributed (overdistributed) net investment income (161) 236 3,281 (16) 3,604
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Accumulated undistributed net realized gain (loss) (123) (876) (2,810) (445) 682
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Net unrealized appreciation (depreciation) (513) 194 6,515 1,272 8,315
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
$ 105,796 $ 32,511 $ 258,493 $ 133,833 $ 537,990
=========================================================== ========= ========= ========= ========= =========
Shares Issued and Outstanding
Institutional Class 10,257 3,264 24,612 13,313 49,062
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Administrative Class 403 0 0 0 92
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Net Asset Value, Offering and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 9.92 $ 9.96 $ 10.50 $ 10.05 $ 10.94
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Administrative Class 9.92 0 0 0 10.94
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
Cost of Investments Owned 117,935 42,042 561,706 221,192 514,138
=========================================================== ========= ========= ========= ========= =========
Cost of Foreign Currency Held 42 0 405 468 0
=========================================================== ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
======== ======== ==========
Money Growth
Amounts in thousands, except per share amounts Market Stock StocksPLUS
======== ======== ==========
<S> <C> <C> <C>
Assets:
Investments, at value $ 25,295 $ 7,893 $160,646
- -------------------------------------------------------------- -------- -------- --------
Cash and foreign currency 1 2 0
- -------------------------------------------------------------- -------- -------- --------
Receivable for investments and foreign currency sold 0 95 463
- -------------------------------------------------------------- -------- -------- --------
Receivable for Fund shares sold 620 0 32
- -------------------------------------------------------------- -------- -------- --------
Variation margin receivable 0 0 0
- -------------------------------------------------------------- -------- -------- --------
Interest and dividends receivable 35 9 1,406
- -------------------------------------------------------------- -------- -------- --------
Other assets 0 0 5
- -------------------------------------------------------------- -------- -------- --------
25,951 7,999 162,552
============================================================== ======== ======== ========
Liabilities:
Payable for investments and foreign currency purchased $ 0 $ 101 $ 9,562
- -------------------------------------------------------------- -------- -------- --------
Written options outstanding 0 0 0
- -------------------------------------------------------------- -------- -------- --------
Payable for Fund shares redeemed 0 0 5
- -------------------------------------------------------------- -------- -------- --------
Dividends payable 0 0 435
- -------------------------------------------------------------- -------- -------- --------
Accrued investment advisor's fee 3 2 50
- -------------------------------------------------------------- -------- -------- --------
Accrued administrator's fee 3 2 32
- -------------------------------------------------------------- -------- -------- --------
Accrued distribution fee 0 0 0
- -------------------------------------------------------------- -------- -------- --------
Variation margin payable 0 0 593
- -------------------------------------------------------------- -------- -------- --------
Other accrued expenses and liabilities 0 5 6
- -------------------------------------------------------------- -------- -------- --------
6 110 10,683
============================================================== ======== ======== ========
Net Assets $ 25,945 $ 7,889 $151,869
============================================================== ======== ======== ========
Net Assets Consist of:
Paid in capital $ 25,945 $ 6,058 $147,791
- -------------------------------------------------------------- -------- -------- --------
Undistributed (overdistributed) net investment income 0 255 1,762
- -------------------------------------------------------------- -------- -------- --------
Accumulated undistributed net realized gain (loss) 0 475 2,114
- -------------------------------------------------------------- -------- -------- --------
Net unrealized appreciation (depreciation) 0 1,101 202
- -------------------------------------------------------------- -------- -------- --------
$ 25,945 $ 7,889 $151,869
============================================================== ======== ======== ========
Shares Issued and Outstanding
Institutional Class 25,935 668 13,607
- -------------------------------------------------------------- -------- -------- --------
Administrative Class 10 0 0
- -------------------------------------------------------------- -------- -------- --------
Net Asset Value, Offering and Redemption Price Per Share
(Net Assets Per Share Outstanding)
Institutional Class $ 1.00 $ 11.81 $ 11.16
- -------------------------------------------------------------- -------- -------- --------
Administrative Class 1.00 0 0
- -------------------------------------------------------------- -------- -------- --------
Cost of Investments Owned 25,295 6,792 160,654
============================================================== ======== ======== ========
Cost of Foreign Currency Held 0 0 0
============================================================== ======== ======== ========
</TABLE>
17
<PAGE>
STATEMENT OF OPERATIONS
For the year or period ended March 31, 1996
<TABLE>
<CAPTION>
========= ========= ========== ========= ===========
Total Total Total Low Low
$ in thousands Return Return II Return III Duration Duration II
========= ========= ========== ========= ===========
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $ 658,723 $ 13,210 $ 8,760 $ 180,952 $ 15,155
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Dividends 1,025 0 0 500 0
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Total income 659,748 13,210 8,760 181,452 15,155
============================================================ ========= ========= ========= ========= =========
Expenses:
Investment advisory fees 22,775 487 326 6,268 576
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Administration fees 13,085 487 217 3,520 391
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Custodian and transfer agent fees 1,326 0 25 343 29
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Registration fees 480 0 16 44 13
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Distribution fees - Administrative Class 142 3 0 3 0
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Audit fees 61 0 9 38 13
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Legal fees 83 0 2 32 3
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Trustees' fees 48 2 1 16 1
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Amortization of organization costs 0 0 1 0 2
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Miscellaneous 243 0 8 94 6
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Reimbursement to (from) advisor and administrator 0 0 (2) 0 0
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Total expenses 38,243 979 603 10,358 1,034
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Fees paid indirectly (77) 0 (1) (23) (2)
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net expenses 38,166 979 602 10,335 1,032
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net Investment Income 621,582 12,231 8,158 171,117 14,123
============================================================ ========= ========= ========= ========= =========
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on investments (28,272) (1,100) (337) 4 (487)
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net realized gain on futures contracts and
written options 292,569 3,475 3,130 10,789 1,479
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net realized gain (loss) on foreign currency transactions (9,604) 0 192 (1,478) 0
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net change in unrealized appreciation
(depreciation) on investments 113,338 (4,612) 875 36,405 (369)
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net change in unrealized depreciation on
futures contracts and written options (107,079) (6,715) (1,851) (1,934) (414)
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net change in unrealized appreciation (depreciation)
on translation of assets and liabilities denominated
in foreign currencies 5,084 0 52 302 0
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net gain (loss) 266,036 (8,952) 2,061 44,088 209
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net Increase in Assets Resulting from Operations $ 887,618 $ 3,279 $ 10,219 $ 215,205 $ 14,332
============================================================ ========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
18
<PAGE>
<TABLE>
<CAPTION>
========== ========== ========= ========= ==========
Long-Term
$ in thousands Short-Term U.S. Gov't Foreign Global High Yield
========== ========== ========= ========= ==========
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest $ 6,738 $ 2,680 $ 15,276 $ 6,368 $ 44,302
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Dividends 0 0 0 0 643
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Total income 6,738 2,680 15,276 6,368 44,945
============================================================ ========= ========= ========= ========= =========
Expenses:
Investment advisory fees 249 101 640 265 1,187
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Administration fees 137 65 428 208 842
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Custodian and transfer agent fees 25 12 109 41 62
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Registration fees 19 12 25 27 48
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Distribution fees - Administrative Class 1 0 0 0 1
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Audit fees 10 7 30 23 19
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Legal fees 2 1 1 1 4
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Trustees' fees 1 0 2 1 3
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Amortization of organization costs 0 2 0 0 2
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Miscellaneous 81 3 17 4 14
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Reimbursement to (from) advisor and administrator (13) (17) 0 22 0
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Total expenses 512 186 1,252 592 2,182
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Fees paid indirectly (2) 0 (2) 0 (10)
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net expenses 510 186 1,250 592 2,172
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net Investment Income 6,228 2,494 14,026 5,776 42,773
============================================================ ========= ========= ========= ========= =========
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on investments 305 (371) 15,628 925 9,152
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net realized gain on futures contracts and
written options 306 3,910 4,874 1,964 164
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net realized gain (loss) on foreign currency transactions (19) 0 5,686 1,811 0
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net change in unrealized appreciation
(depreciation) on investments 701 143 1,524 (531) 11,935
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net change in unrealized depreciation on
futures contracts and written options (93) (585) (1,652) (620) (22)
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net change in unrealized appreciation (depreciation)
on translation of assets and liabilities denominated
in foreign currencies (24) 0 6,933 946 0
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net gain (loss) 1,176 3,097 32,993 4,495 21,229
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Net Increase in Assets Resulting from Operations $ 7,404 $ 5,591 $ 47,019 $ 10,271 $ 64,002
============================================================ ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
========= ========= ==========
Money Growth
$ in thousands Market Stock StocksPLUS
========= ========= ==========
<S> <C> <C> <C>
Investment Income:
Interest $ 415 $ 13 $ 12,432
- ------------------------------------------------------------ --------- --------- ---------
Dividends 0 151 13
- ------------------------------------------------------------ --------- --------- ---------
Total income 415 164 12,445
============================================================ ========= ========= =========
Expenses:
Investment advisory fees 10 30 325
- ------------------------------------------------------------ --------- --------- ---------
Administration fees 14 17 150
- ------------------------------------------------------------ --------- --------- ---------
Custodian and transfer agent fees 0 9 24
- ------------------------------------------------------------ --------- --------- ---------
Registration fees 0 3 26
- ------------------------------------------------------------ --------- --------- ---------
Distribution fees - Administrative Class 0 0 0
- ------------------------------------------------------------ --------- --------- ---------
Audit fees 0 8 15
- ------------------------------------------------------------ --------- --------- ---------
Legal fees 0 0 1
- ------------------------------------------------------------ --------- --------- ---------
Trustees' fees 0 0 0
- ------------------------------------------------------------ --------- --------- ---------
Amortization of organization costs 0 0 2
- ------------------------------------------------------------ --------- --------- ---------
Miscellaneous 0 1 3
- ------------------------------------------------------------ --------- --------- ---------
Reimbursement to (from) advisor and administrator 0 (14) (34)
- ------------------------------------------------------------ --------- --------- ---------
Total expenses 24 54 512
- ------------------------------------------------------------ --------- --------- ---------
Fees paid indirectly 0 0 0
- ------------------------------------------------------------ --------- --------- ---------
Net expenses 24 54 512
- ------------------------------------------------------------ --------- --------- ---------
Net Investment Income 391 110 11,933
============================================================ ========= ========= =========
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on investments 0 3,158 243
- ------------------------------------------------------------ --------- --------- ---------
Net realized gain on futures contracts and
written options 0 2 8,928
- ------------------------------------------------------------ --------- --------- ---------
Net realized gain (loss) on foreign currency transactions 0 0 31
- ------------------------------------------------------------ --------- --------- ---------
Net change in unrealized appreciation
(depreciation) on investments 0 (458) 28
- ------------------------------------------------------------ --------- --------- ---------
Net change in unrealized depreciation on
futures contracts and written options 0 0 (766)
- ------------------------------------------------------------ --------- --------- ---------
Net change in unrealized appreciation (depreciation)
on translation of assets and liabilities denominated
in foreign currencies 0 0 0
- ------------------------------------------------------------ --------- --------- ---------
Net gain (loss) 0 2,702 8,464
- ------------------------------------------------------------ --------- --------- ---------
Net Increase in Assets Resulting from Operations $ 391 $ 2,812 $ 20,397
============================================================ ========= ========= =========
</TABLE>
19
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
================================ ====================================
$ in thousands Total Return Total Return II(a)
================================ ====================================
Five
Increase (Decrease) in Net Assets from: Year Ended Year Ended Months Ended Year Ended
March 31, 1996 March 31, 1995 March 31, 1996 October 31, 1995(b)
<S> <C> <C> <C> <C>
Operations
Net investment income $ 621,582 $ 407,312 $ 12,231 $ 26,111
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net realized gain (loss) 254,693 (110,620) 2,375 14,545
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on investments 113,338 (77,343) (4,612) 11,126
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on futures contracts and written options (107,079) 82,421 (6,715) 8,255
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on translation of assets and liabilities
denominated in foreign currencies 5,084 1,525 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net increase resulting from operations 887,618 303,295 3,279 60,037
============================================================ ============================== ==============================
Distributions to Shareholders
From net investment income
Institutional Class (533,126) (347,782) (12,145) (25,586)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class (3,203) (126) (82) (106)
- ------------------------------------------------------------ ------------------------------ ------------------------------
In excess of net investment income
Institutional Class (84,779) (30,707) (11) 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class (510) (11) 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
From net realized capital gains
Institutional Class (110,361) 0 (4,011) (422)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class (772) 0 (28) (2)
- ------------------------------------------------------------ ------------------------------ ------------------------------
In excess of net realized capital gains
Institutional Class 0 0 (2,282) 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 (15) 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Tax basis return of capital
Institutional Class 0 (13,786) 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 (5) 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Total Distributions (732,751) (392,417) (18,574) (26,116)
============================================================ ============================== ==============================
Fund Share Transactions
Receipts for shares sold
Institutional Class 3,567,811 3,081,221 36,981 100,602
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 117,173 9,138 218 2,972
- ------------------------------------------------------------ ------------------------------ ------------------------------
Issued as reinvestment of distributions
Institutional Class 592,359 308,654 17,509 24,511
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 3,923 142 126 108
- ------------------------------------------------------------ ------------------------------ ------------------------------
Cost of shares redeemed
Institutional Class (1,308,591) (1,069,020) (25,812) (74,687)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class (24,091) (401) (78) (73)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net increase resulting from Fund
share transactions 2,948,584 2,329,734 28,944 53,433
- ------------------------------------------------------------ ------------------------------ ------------------------------
Total Increase in Net Assets 3,103,451 2,240,612 13,649 87,354
============================================================ ============================== ==============================
Net Assets
Beginning of period 7,248,772 5,008,160 445,254 357,900
- ------------------------------------------------------------ ------------------------------ ------------------------------
End of period * $ 10,352,223 $ 7,248,772 $ 458,903 $ 445,254
- ------------------------------------------------------------ ------------------------------ ------------------------------
* Including net undistributed (overdistributed)
investment income of: $ (18,792) $ (85,253) $ (329) $ (5)
- ------------------------------------------------------------ ------------------------------ ------------------------------
</TABLE>
(a) Formerly the PIMCO Managed Bond and Income Fund of the PIMCO Funds: Equity
Advisors Series.
(b) Audited by other independent accountants.
See Notes to Financial Statements
20
<PAGE>
<TABLE>
<CAPTION>
================================ ================================
$ in thousands Total Return III Low Duration
================================ ================================
Increase (Decrease) in Net Assets from: Year Ended Year Ended Year Ended Year Ended
March 31, 1996 March 31, 1995 March 31, 1996 March 31, 1995
<S> <C> <C> <C> <C>
Operations
Net investment income $ 8,158 $ 5,934 $ 171,117 $ 146,094
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net realized gain (loss) 2,985 (1,737) 9,315 (36,670)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on investments 875 (850) 36,405 (30,178)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on futures contracts and written options (1,851) 1,250 (1,934) 2,234
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on translation of assets and liabilities
denominated in foreign currencies 52 (73) 302 (386)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net increase resulting from operations 10,219 4,524 215,205 81,094
============================================================ ============================== ==============================
Distributions to Shareholders
From net investment income
Institutional Class (6,946) (5,003) (171,057) (125,715)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 (91) (10)
- ------------------------------------------------------------ ------------------------------ ------------------------------
In excess of net investment income
Institutional Class (1,214) (147) 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
From net realized capital gains
Institutional Class (1,687) 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
In excess of net realized capital gains
Institutional Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Tax basis return of capital
Institutional Class 0 (784) 0 (20,045)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 0 (2)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Total Distributions (9,847) (5,934) (171,148) (145,772)
============================================================ ============================== ==============================
Fund Share Transactions
Receipts for shares sold
Institutional Class 42,689 38,113 1,416,204 1,378,441
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 2,678 768
- ------------------------------------------------------------ ------------------------------ ------------------------------
Issued as reinvestment of distributions
Institutional Class 9,384 5,316 143,328 115,466
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 83 12
- ------------------------------------------------------------ ------------------------------ ------------------------------
Cost of shares redeemed
Institutional Class (9,719) (40,044) (1,258,060) (1,395,445)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 (983) (16)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net increase resulting from Fund
share transactions 42,354 3,385 303,250 99,226
- ------------------------------------------------------------ ------------------------------ ------------------------------
Total Increase in Net Assets 42,726 1,975 347,307 34,548
============================================================ ============================== ==============================
Net Assets
Beginning of period 99,497 97,522 2,332,803 2,298,255
- ------------------------------------------------------------ ------------------------------ ------------------------------
End of period * $ 142,223 $ 99,497 $ 2,680,110 $ 2,332,803
- ------------------------------------------------------------ ------------------------------ ------------------------------
* Including net undistributed (overdistributed)
investment income of: $ (380) $ (1,212) $ (5,120) $ 71
- ------------------------------------------------------------ ------------------------------ ------------------------------
</TABLE>
<TABLE>
<CAPTION>
================================ ================================
$ in thousands Low Duration II Short-Term
================================ ================================
Increase (Decrease) in Net Assets from: Year Ended Year Ended Year Ended Year Ended
March 31, 1996 March 31, 1995 March 31, 1996 March 31, 1995
<S> <C> <C> <C> <C>
Operations
Net investment income $ 14,123 $ 9,951 $ 6,228 $ 7,250
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net realized gain (loss) 992 (2,550) 592 (743)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on investments (369) (157) 701 (800)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on futures contracts and written options (414) 320 (93) 93
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net change in unrealized appreciation
(depreciation) on translation of assets and liabilities
denominated in foreign currencies 0 0 (24) 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net increase resulting from operations 14,332 7,564 7,404 5,800
============================================================ ============================== ==============================
Distributions to Shareholders
From net investment income
Institutional Class (13,042) (9,191) (5,943) (7,075)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 (24) 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
In excess of net investment income
Institutional Class (603) (491) (261) (165)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 (1) 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
From net realized capital gains
Institutional Class 0 (4) 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
In excess of net realized capital gains
Institutional Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Tax basis return of capital
Institutional Class (479) (276) 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Total Distributions (14,124) (9,962) (6,229) (7,240)
============================================================ ============================== ==============================
Fund Share Transactions
Receipts for shares sold
Institutional Class 166,259 77,909 133,513 265,206
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 4,324 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Issued as reinvestment of distributions
Institutional Class 13,248 8,742 4,930 5,671
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 0 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Cost of shares redeemed
Institutional Class (97,282) (54,798) (127,940) (252,499)
- ------------------------------------------------------------ ------------------------------ ------------------------------
Administrative Class 0 0 (320) 0
- ------------------------------------------------------------ ------------------------------ ------------------------------
Net increase resulting from Fund
share transactions 82,225 31,853 14,507 18,378
- ------------------------------------------------------------ ------------------------------ ------------------------------
Total Increase in Net Assets 82,433 29,455 15,682 16,938
============================================================ ============================== ==============================
Net Assets
Beginning of period 170,866 141,411 90,114 73,176
- ------------------------------------------------------------ ------------------------------ ------------------------------
End of period * $ 253,299 $ 170,866 $ 105,796 $ 90,114
- ------------------------------------------------------------ ------------------------------ ------------------------------
* Including net undistributed (overdistributed)
investment income of: $ (1,362) $ (1,081) $ (161) $ (261)
- ------------------------------------------------------------ ------------------------------ ------------------------------
</TABLE>
21
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (Cont.)
<TABLE>
<CAPTION>
=============================== ===============================
$ in thousands Long-Term
U.S. Government Foreign
=============================== ===============================
Increase (Decrease) in Net Assets from: Year Ended Year Ended Year Ended Year Ended
March 31, 1996 March 31, 1995 March 31, 1996 March 31, 1995
<S> <C> <C> <C> <C>
Operations
Net investment income $ 2,494 $ 1,998 $ 14,026 $ 21,377
- ----------------------------------------------------------- -------------------------- --------------------------
Net realized gain (loss) 3,539 (1,604) 26,188 (40,238)
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on investments 143 244 1,524 (184)
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on futures contracts and written options (585) 1,086 (1,652) 3,854
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on translation of assets and liabilities
denominated in foreign currencies 0 0 6,933 1,398
- ----------------------------------------------------------- -------------------------- --------------------------
Net increase (decrease) resulting from operations 5,591 1,724 47,019 (13,793)
=========================================================== ========================== ==========================
Distributions to Shareholders
From net investment income
Institutional Class (2,372) (1,941) (8,030) 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
In excess of net investment income
Institutional Class (122) (57) (5,997) 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
From net realized capital gains
Institutional Class (1,698) 0 (5,828) 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
In excess of net realized capital gains
Institutional Class (518) 0 (685) 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Tax basis return of capital
Institutional Class 0 0 0 (20,915)
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Total Distributions (4,710) (1,998) (20,540) (20,915)
=========================================================== ========================== ==========================
Fund Share Transactions
Receipts for shares sold
Institutional Class 21,443 21,532 79,674 60,501
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Issued as reinvestment of distributions
Institutional Class 3,954 1,200 17,861 17,186
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Cost of shares redeemed
Institutional Class (26,116) (16,087) (98,221) (308,800)
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Net increase (decrease) resulting from Fund
share transactions (719) 6,645 (686) (231,113)
- ----------------------------------------------------------- -------------------------- --------------------------
Total Increase (Decrease) in Net Assets 162 6,371 25,793 (265,821)
=========================================================== ========================== ==========================
Net Assets
Beginning of period 32,349 25,978 232,700 498,521
- ----------------------------------------------------------- -------------------------- --------------------------
End of period * $ 32,511 $ 32,349 $ 258,493 $ 232,700
- ----------------------------------------------------------- -------------------------- --------------------------
* Including net undistributed (overdistributed)
investment income of: $ 236 $ (122) $ 3,281 $ (5,995)
- ----------------------------------------------------------- -------------------------- --------------------------
</TABLE>
<TABLE>
<CAPTION>
===============================
$ in thousands Global
===============================
Increase (Decrease) in Net Assets from: Year Ended Year Ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Operations
Net investment income $ 5,776 $ 3,239
- ----------------------------------------------------------- --------------------------
Net realized gain (loss) 4,700 1,494
- ----------------------------------------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on investments (531) 525
- ----------------------------------------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on futures contracts and written options (620) 692
- ----------------------------------------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on translation of assets and liabilities
denominated in foreign currencies 946 603
- ----------------------------------------------------------- --------------------------
Net increase (decrease) resulting from operations 10,271 6,553
=========================================================== ==========================
Distributions to Shareholders
From net investment income
Institutional Class (5,778) (3,206)
- ----------------------------------------------------------- --------------------------
Administrative Class 0 0
- ----------------------------------------------------------- --------------------------
In excess of net investment income
Institutional Class 0 (2,548)
- ----------------------------------------------------------- --------------------------
Administrative Class 0 0
- ----------------------------------------------------------- --------------------------
From net realized capital gains
Institutional Class (2,136) 0
- ----------------------------------------------------------- --------------------------
Administrative Class 0 0
- ----------------------------------------------------------- --------------------------
In excess of net realized capital gains
Institutional Class (1,658) 0
- ----------------------------------------------------------- --------------------------
Administrative Class 0 0
- ----------------------------------------------------------- --------------------------
Tax basis return of capital
Institutional Class 0 0
- ----------------------------------------------------------- --------------------------
Administrative Class 0 0
- ----------------------------------------------------------- --------------------------
Total Distributions (9,572) (5,754)
=========================================================== ==========================
Fund Share Transactions
Receipts for shares sold
Institutional Class 54,351 43,231
- ----------------------------------------------------------- --------------------------
Administrative Class 0 0
- ----------------------------------------------------------- --------------------------
Issued as reinvestment of distributions
Institutional Class 8,928 5,606
- ----------------------------------------------------------- --------------------------
Administrative Class 0 0
- ----------------------------------------------------------- --------------------------
Cost of shares redeemed
Institutional Class (6,621) (13,645)
- ----------------------------------------------------------- --------------------------
Administrative Class 0 0
- ----------------------------------------------------------- --------------------------
Net increase (decrease) resulting from Fund
share transactions 56,658 35,192
- ----------------------------------------------------------- --------------------------
Total Increase (Decrease) in Net Assets 57,357 35,991
=========================================================== ==========================
Net Assets
Beginning of period 76,476 40,485
- ----------------------------------------------------------- --------------------------
End of period * $ 133,833 $ 76,476
- ----------------------------------------------------------- --------------------------
* Including net undistributed (overdistributed)
investment income of: $ (16) $ 1,199
- ----------------------------------------------------------- --------------------------
</TABLE>
(a) Formerly the Money Market Fund of the PIMCO Funds: Equity Advisors Series.
(b) Audited by other independent accountants.
See Notes to Financial Statements
22
<PAGE>
<TABLE>
<CAPTION>
=============================== ===============================
$ in thousands High Yield Money Market (a)
=============================== ===============================
Five Months Year Ended
Increase (Decrease) in Net Assets from: Year Ended Year Ended Ended October 31,
March 31, 1996 March 31, 1995 March 31, 1996 1995(b)
<S> <C> <C> <C> <C>
Operations
Net investment income $ 42,773 $ 28,015 $ 391 $ 536
- ----------------------------------------------------------- -------------------------- --------------------------
Net realized gain (loss) 9,316 (4,049) 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on investments 11,935 2,745 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on futures contracts and written options (22) 22 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on translation of assets and liabilities
denominated in foreign currencies 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Net increase (decrease) resulting from operations 64,002 26,733 391 536
=========================================================== ========================== ==========================
Distributions to Shareholders
From net investment income
Institutional Class (42,753) (28,199) (365) (517)
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class (25) (1) (26) (19)
- ----------------------------------------------------------- -------------------------- --------------------------
In excess of net investment income
Institutional Class 0 (530) 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
From net realized capital gains
Institutional Class (2,427) 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
In excess of net realized capital gains
Institutional Class 0 (49) 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Tax basis return of capital
Institutional Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Total Distributions (45,205) (28,779) (391) (536)
=========================================================== ========================== ==========================
Fund Share Transactions
Receipts for shares sold
Institutional Class 294,885 220,497 23,183 22,820
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 998 39 4 1,799
- ----------------------------------------------------------- -------------------------- --------------------------
Issued as reinvestment of distributions
Institutional Class 43,030 27,208 388 493
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 25 1 0 19
- ----------------------------------------------------------- -------------------------- --------------------------
Cost of shares redeemed
Institutional Class (156,050) (129,324) (5,377) (23,025)
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class (46) 0 (4) (1,809)
- ----------------------------------------------------------- -------------------------- --------------------------
Net increase (decrease) resulting from Fund
share transactions 182,842 118,421 18,194 297
- ----------------------------------------------------------- -------------------------- --------------------------
Total Increase (Decrease) in Net Assets 201,639 116,375 18,194 297
=========================================================== ========================== ==========================
Net Assets
Beginning of period 336,351 219,976 7,751 7,454
- ----------------------------------------------------------- -------------------------- --------------------------
End of period * $ 537,990 $ 336,351 $ 25,945 $ 7,751
- ----------------------------------------------------------- -------------------------- --------------------------
* Including net undistributed (overdistributed)
investment income of: $ 3,604 $ 1,534 $ 0 $ 0
- ----------------------------------------------------------- -------------------------- --------------------------
</TABLE>
<TABLE>
<CAPTION>
=============================== ================================
$ in thousands Growth Stock StocksPLUS
=============================== ================================
Increase (Decrease) in Net Assets from: Year Ended Year Ended Year Ended Year Ended
March 31, 1996 March 31, 1995 March 31, 1996 March 31, 1995
<S> <C> <C> <C> <C>
Operations
Net investment income $ 110 $ 270 $ 11,933 $ 2,841
- ----------------------------------------------------------- -------------------------- --------------------------
Net realized gain (loss) 3,160 938 9,202 858
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on investments (458) 600 28 66
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on futures contracts and written options 0 27 (766) 1,397
- ----------------------------------------------------------- -------------------------- --------------------------
Net change in unrealized appreciation
(depreciation) on translation of assets and liabilities
denominated in foreign currencies 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Net increase (decrease) resulting from operations 2,812 1,835 20,397 5,162
=========================================================== ========================== ==========================
Distributions to Shareholders
From net investment income
Institutional Class (109) (270) (8,982) (2,257)
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
In excess of net investment income
Institutional Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
From net realized capital gains
Institutional Class (2,750) (1,056) (9,224) 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
In excess of net realized capital gains
Institutional Class 0 0 (251) 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Tax basis return of capital
Institutional Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Total Distributions (2,859) (1,326) (18,457) (2,257)
=========================================================== ========================== ==========================
Fund Share Transactions
Receipts for shares sold
Institutional Class 1,627 954 114,561 28,147
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Issued as reinvestment of distributions
Institutional Class 2,408 1,314 17,428 2,257
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Cost of shares redeemed
Institutional Class (11,528) (9,861) (28,558) (1,136)
- ----------------------------------------------------------- -------------------------- --------------------------
Administrative Class 0 0 0 0
- ----------------------------------------------------------- -------------------------- --------------------------
Net increase (decrease) resulting from Fund
share transactions (7,493) (7,593) 103,431 29,268
- ----------------------------------------------------------- -------------------------- --------------------------
Total Increase (Decrease) in Net Assets (7,540) (7,084) 105,371 32,173
=========================================================== ========================== ==========================
Net Assets
Beginning of period 15,429 22,513 46,498 14,325
- ----------------------------------------------------------- -------------------------- --------------------------
End of period * $ 7,889 $ 15,429 $ 151,869 $ 46,498
- ----------------------------------------------------------- -------------------------- --------------------------
* Including net undistributed (overdistributed)
investment income of: $ 255 $ 0 $ 1,762 $ 1,176
- ----------------------------------------------------------- -------------------------- --------------------------
</TABLE>
23
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected Per Share Data for ------------- ---------- --------------- ------------ ---------- ------------- --------------
the Year or Period Ended: Net Asset Net Net Realized Total Income Dividends Dividends in Distributions
Value Investment and Unrealized from from Net Excess of Net from Net
Beginning of Income Gain (Loss) on Investment Investment Investment Realized
Period Investments Operations Income Income Capital Gains
------------- ---------- --------------- ------------ ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Return Fund
Institutional Class
03/31/96 $ 10.02 $ 0.81 $ 0.29 $ 1.10 $ (0.61) $ (0.10) $ (0.12)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/95 10.25 0.64 (0.24) 0.40 (0.56) (0.05) 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/94 10.91 0.68 (0.16) 0.52 (0.71) (0.15) (0.30)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/93 10.46 0.76 0.76 1.52 (0.76) 0.00 (0.31)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/92 10.15 0.86 0.60 1.46 (0.86) 0.00 (0.29)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
Administrative Class
03/31/96 10.01 0.80 0.29 1.09 (0.60) (0.09) (0.12)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
09/07/94 - 03/31/95 10.00 0.31 0.06 0.37 (0.32) (0.03) 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
Total Return Fund II (a)
Institutional Class
11/01/95 - 03/31/96 $ 10.21 $ 0.25 $ (0.17) $ 0.08 $ (0.26) $ 0.00 $ (0.09)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
10/31/95 (b) 9.39 0.69 0.76 1.45 (0.62) 0.00 (0.01)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
10/31/94 (b) 10.38 0.51 (0.88) (0.37) (0.51) 0.00 (0.05)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
10/31/93 (b) 9.99 0.61 0.74 1.35 (0.61) 0.00 (0.35)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
12/30/91 - 10/31/92 (b) 10.00 0.49 0.23 0.72 (0.49) 0.00 (0.24)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
Administrative Class
11/01/95 - 03/31/96 10.22 0.24 (0.17) 0.07 (0.26) 0.00 (0.09)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
11/30/94 - 10/31/95 (b) 9.34 0.56 0.88 1.44 (0.55) 0.00 (0.01)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
Total Return Fund III
03/31/96 $ 8.99 $ 0.72 $ 0.17 $ 0.89 $ (0.54) $ (0.09) $ (0.12)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/95 9.18 0.59 (0.16) 0.43 (0.52) (0.02) 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/94 9.81 0.59 (0.03) 0.56 (0.66) (0.12) (0.20)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/93 10.31 0.64 0.75 1.39 (0.64) 0.00 (1.25)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
05/01/91 - 03/31/92 10.00 0.63 0.58 1.21 (0.63) 0.00 (0.27)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
Low Duration Fund
Institutional Class
03/31/96 $ 9.76 $ 0.66 $ 0.21 $ 0.87 $ (0.68) $ 0.00 $ 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/95 10.04 0.65 (0.30) 0.35 (0.54) 0.00 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/94 10.30 0.62 (0.16) 0.46 (0.64) (0.03) (0.05)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/93 10.20 0.75 0.22 0.97 (0.74) 0.00 (0.13)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/92 10.02 0.83 0.25 1.08 (0.82) 0.00 (0.08)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
Administrative Class
03/31/96 9.76 0.63 0.21 0.84 (0.65) 0.00 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
12/31/94 - 03/31/95 9.67 0.18 0.07 0.25 (0.14) 0.00 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
Low Duration Fund II
03/31/96 $ 9.77 $ 0.66 $ 0.04 $ 0.70 $ (0.60) $ (0.03) $ 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/95 9.94 0.62 (0.16) 0.46 (0.58) (0.03) 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/94 10.25 0.60 (0.28) 0.32 (0.58) 0.00 (0.05)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/93 10.04 0.63 0.25 0.88 (0.64) 0.00 (0.03)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
11/01/91 - 03/31/92 10.00 0.28 0.03 0.31 (0.27) 0.00 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
Short-Term Fund
Institutional Class
03/31/96 $ 9.79 $ 0.69 $ 0.12 $ 0.81 $ (0.65) $ (0.03) $ 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/95 9.92 0.56 (0.13) 0.43 (0.55) (0.01) 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/94 10.03 0.48 (0.12) 0.36 (0.47) 0.00 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/93 10.01 0.37 0.02 0.39 (0.37) 0.00 0.00
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
03/31/92 10.02 0.55 0.00 0.55 (0.55) 0.00 (0.01)
- ---------------------------- ------- ------ ------- ------- -------- -------- --------
</TABLE>
+ Annualized
(a) Formerly the PIMCO Managed Bond and Income Fund of the PIMCO Funds:
Equity Advisors Series.
(b) Audited by other independent accountants.
See Notes to Financial Statements
24
<PAGE>
<TABLE>
<CAPTION>
------------- --------- -------------- ------------ ------------
Distributions
in Excess of Tax Basis Total Net Asset
Net Realized Return of Distributions Value End of Total Return
Capital Gains Capital Period
------------- --------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total Return Fund
Institutional Class
03/31/96 $ 0.00 $ 0.00 $ (0.83) $ 10.29 11.14%
- ---------------------------- -------- -------- -------- --------- -----
03/31/95 0.00 (0.02) (0.63) 10.02 4.22
- ---------------------------- -------- -------- -------- --------- -----
03/31/94 (0.02) 0.00 (1.18) 10.25 4.55
- ---------------------------- -------- -------- -------- --------- -----
03/31/93 0.00 0.00 (1.07) 10.91 15.29
- ---------------------------- -------- -------- -------- --------- -----
03/31/92 0.00 0.00 (1.15) 10.46 14.90
- ---------------------------- -------- -------- -------- --------- -----
Administrative Class
03/31/96 0.00 0.00 (0.81) 10.29 10.99
- ---------------------------- -------- -------- -------- --------- -----
09/07/94 - 03/31/95 0.00 (0.01) (0.36) 10.01 3.76
- ---------------------------- -------- -------- -------- --------- -----
Total Return Fund II (a)
Institutional Class
11/01/95 - 03/31/96 $ (0.05) $ 0.00 $ (0.40) $ 9.89 0.78%
- ---------------------------- -------- -------- -------- --------- -----
10/31/95 (b) 0.00 0.00 (0.63) 10.21 15.96
- ---------------------------- -------- -------- -------- --------- -----
10/31/94 (b) 0.00 (0.06) (0.62) 9.39 (3.58)
- ---------------------------- -------- -------- -------- --------- -----
10/31/93 (b) 0.00 0.00 (0.96) 10.38 13.79
- ---------------------------- -------- -------- -------- --------- -----
12/30/91 - 10/31/92 (b) 0.00 0.00 (0.73) 9.99 7.52
- ---------------------------- -------- -------- -------- --------- -----
Administrative Class
11/01/95 - 03/31/96 (0.05) 0.00 (0.40) 9.89 0.57
- ---------------------------- -------- -------- -------- --------- -----
11/30/94 - 10/31/95 (b) 0.00 0.00 (0.56) 10.22 15.92
- ---------------------------- -------- -------- -------- --------- -----
Total Return Fund III
03/31/96 $ 0.00 $ 0.00 $ (0.75) $ 9.13 10.06%
- ---------------------------- -------- -------- -------- --------- -----
03/31/95 0.00 (0.08) (0.62) 8.99 4.92
- ---------------------------- -------- -------- -------- --------- -----
03/31/94 (0.21) 0.00 (1.19) 9.18 5.64
- ---------------------------- -------- -------- -------- --------- -----
03/31/93 0.00 0.00 (1.89) 9.81 14.47
- ---------------------------- -------- -------- -------- --------- -----
05/01/91 - 03/31/92 0.00 0.00 (0.90) 10.31 13.61+
- ---------------------------- -------- -------- -------- --------- -----
Low Duration Fund
Institutional Class
03/31/96 $ 0.00 $ 0.00 $ (0.68) $ 9.95 9.13%
- ---------------------------- -------- -------- -------- --------- -----
03/31/95 0.00 (0.09) (0.63) 9.76 3.60
- ---------------------------- -------- -------- -------- --------- -----
03/31/94 0.00 0.00 (0.72) 10.04 4.56
- ---------------------------- -------- -------- -------- --------- -----
03/31/93 0.00 0.00 (0.87) 10.30 9.91
- ---------------------------- -------- -------- -------- --------- -----
03/31/92 0.00 0.00 (0.90) 10.20 11.30
- ---------------------------- -------- -------- -------- --------- -----
Administrative Class
03/31/96 0.00 0.00 (0.65) 9.95 8.83
- ---------------------------- -------- -------- -------- --------- -----
12/31/94 - 03/31/95 0.00 (0.02) (0.16) 9.76 2.53
- ---------------------------- -------- -------- -------- --------- -----
Low Duration Fund II
03/31/96 $ 0.00 $ (0.02) $ (0.65) $ 9.82 7.30%
- ---------------------------- -------- -------- -------- --------- -----
03/31/95 0.00 (0.02) (0.63) 9.77 4.80
- ---------------------------- -------- -------- -------- --------- -----
03/31/94 0.00 0.00 (0.63) 9.94 3.15
- ---------------------------- -------- -------- -------- --------- -----
03/31/93 0.00 0.00 (0.67) 10.25 8.95
- ---------------------------- -------- -------- -------- --------- -----
11/01/91 - 03/31/92 0.00 0.00 (0.27) 10.04 7.72+
- ---------------------------- -------- -------- -------- --------- -----
Short-Term Fund
Institutional Class
03/31/96 $ 0.00 $ 0.00 $ (0.68) $ 9.92 8.49%
- ---------------------------- -------- -------- -------- --------- -----
03/31/95 0.00 0.00 (0.56) 9.79 4.46
- ---------------------------- -------- -------- -------- --------- -----
03/31/94 0.00 0.00 (0.47) 9.92 3.66
- ---------------------------- -------- -------- -------- --------- -----
03/31/93 0.00 0.00 (0.37) 10.03 3.94
- ---------------------------- -------- -------- -------- --------- -----
03/31/92 0.00 0.00 (0.56) 10.01 5.66
- ---------------------------- -------- -------- -------- --------- -----
</TABLE>
<TABLE>
<CAPTION>
------------- ----------- ------------ ----------
Net Assets Ratio of Ratio of Net
End of Period Expenses to Investment Portfolio
(000's) Average Net Income to Turnover
Assets Average Net Rate
Assets
------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Total Return Fund
Institutional Class
03/31/96 $10,247,605 0.42% 6.85% 221.13%
- ---------------------------- ----------- ---- ---- ------
03/31/95 7,239,735 0.41 6.72 98.48
- ---------------------------- ----------- ---- ---- ------
03/31/94 5,008,160 0.41 6.27 176.74
- ---------------------------- ----------- ---- ---- ------
03/31/93 3,155,441 0.43 7.07 89.95
- ---------------------------- ----------- ---- ---- ------
03/31/92 1,813,935 0.46 8.18 110.46
- ---------------------------- ----------- ---- ---- ------
Administrative Class
03/31/96 104,618 0.68 6.64 221.13
- ---------------------------- ----------- ---- ---- ------
09/07/94 - 03/31/95 9,037 0.66+ 6.54+ 98.48
- ---------------------------- ----------- ---- ---- ------
Total Return Fund II (a)
Institutional Class
11/01/95 - 03/31/96 $ 455,583 0.51%+ 6.36%+ 73.18%
- ---------------------------- ----------- ---- ---- ------
10/31/95 (b) 442,091 0.50 6.47 41.05
- ---------------------------- ----------- ---- ---- ------
10/31/94 (b) 357,900 0.50 5.22 99.46
- ---------------------------- ----------- ---- ---- ------
10/31/93 (b) 371,260 0.50 5.38 49.71
- ---------------------------- ----------- ---- ---- ------
12/30/91 - 10/31/92 (b) 287,113 0.50+ 5.83+ 133.61
- ---------------------------- ----------- ---- ---- ------
Administrative Class
11/01/95 - 03/31/96 3,320 0.76+ 6.06+ 73.18
- ---------------------------- ----------- ---- ---- ------
11/30/94 - 10/31/95 (b) 3,163 0.76+ 6.22+ 40.91
- ---------------------------- ----------- ---- ---- ------
Total Return Fund III
03/31/96 $ 142,223 0.50% 6.82% 176.97%
- ---------------------------- ----------- ---- ---- ------
03/31/95 99,497 0.50 6.95 145.98
- ---------------------------- ----------- ---- ---- ------
03/31/94 97,522 0.50 6.00 95.21
- ---------------------------- ----------- ---- ---- ------
03/31/93 65,349 0.51 6.06 161.38
- ---------------------------- ----------- ---- ---- ------
05/01/91 - 03/31/92 47,908 0.60+ 6.75+ 521.14
- ---------------------------- ----------- ---- ---- ------
Low Duration Fund
Institutional Class
03/31/96 $ 2,677,574 0.42% 6.88% 208.79%
- ---------------------------- ----------- ---- ---- ------
03/31/95 2,332,032 0.41 6.46 77.14
- ---------------------------- ----------- ---- ---- ------
03/31/94 2,298,255 0.43 6.05 42.69
- ---------------------------- ----------- ---- ---- ------
03/31/93 1,403,594 0.45 7.21 67.51
- ---------------------------- ----------- ---- ---- ------
03/31/92 906,650 0.50 8.08 37.21
- ---------------------------- ----------- ---- ---- ------
Administrative Class
03/31/96 2,536 0.69 6.73 208.79
- ---------------------------- ----------- ---- ---- ------
12/31/94 - 03/31/95 771 0.66+ 6.93+ 77.14
- ---------------------------- ----------- ---- ---- ------
Low Duration Fund II
03/31/96 $ 253,299 0.48% 6.61% 225.02%
- ---------------------------- ----------- ---- ---- ------
03/31/95 170,866 0.47 6.35 102.43
- ---------------------------- ----------- ---- ---- ------
03/31/94 141,411 0.50 5.73 53.78
- ---------------------------- ----------- ---- ---- ------
03/31/93 101,025 0.50 6.16 95.33
- ---------------------------- ----------- ---- ---- ------
11/01/91 - 03/31/92 31,027 0.51+ 6.80+ 12.57
- ---------------------------- ----------- ---- ---- ------
Short-Term Fund
Institutional Class
03/31/96 $ 101,797 0.58% 6.86% 214.78%
- ---------------------------- ----------- ---- ---- ------
03/31/95 90,114 0.50 5.67 79.30
- ---------------------------- ----------- ---- ---- ------
03/31/94 73,176 0.50 4.87 45.81
- ---------------------------- ----------- ---- ---- ------
03/31/93 46,905 0.50 3.67 54.50
- ---------------------------- ----------- ---- ---- ------
03/31/92 44,172 0.50 5.52 94.62
- ---------------------------- ----------- ---- ---- ------
</TABLE>
25
<PAGE>
FINANCIAL HIGHLIGHTS (Cont.)
<TABLE>
<CAPTION>
Selected Per Share Data for
the Year or Period Ended:
============ ========== ============== ============
Net Asset Net Net Realized Total Income
Value Investment and Unrealized from
Beginning of Income Gain (Loss) on Investment
Period Investments Operations
============ ========== ============== ============
<S> <C> <C> <C> <C>
Short-Term Fund
Administrative Class
02/01/96 - 03/31/96 $ 9.98 $ 0.11 $ (0.07) $ 0.04
- --------------------------------- -------- -------- -------- --------
Long-Term U.S. Gov't Fund
03/31/96 $ 9.85 $ 0.83 $ 0.66 $ 1.49
- --------------------------------- -------- -------- -------- --------
03/31/95 9.96 0.60 (0.09) 0.51
- --------------------------------- -------- -------- -------- --------
03/31/94 11.36 0.62 (0.06) 0.56
- --------------------------------- -------- -------- -------- --------
03/31/93 10.82 0.70 1.66 2.36
- --------------------------------- -------- -------- -------- --------
07/01/91 - 03/31/92 10.00 0.64 0.85 1.49
- --------------------------------- -------- -------- -------- --------
Foreign Fund
03/31/96 $ 9.38 $ 0.96 $ 1.03 $ 1.99
- --------------------------------- -------- -------- -------- --------
03/31/95 10.18 0.38 (0.57) (0.19)
- --------------------------------- -------- -------- -------- --------
03/31/94 10.34 0.55 0.27 0.82
- --------------------------------- -------- -------- -------- --------
12/03/92 - 03/31/93 10.00 0.16 0.34 0.50
- --------------------------------- -------- -------- -------- --------
Global Fund
03/31/96 $ 9.87 $ 0.45 $ 0.72 $ 1.17
- --------------------------------- -------- -------- -------- --------
03/31/95 9.85 0.69 (0.14) 0.55
- --------------------------------- -------- -------- -------- --------
11/23/93 - 03/31/94 10.00 0.16 (0.15) 0.01
- --------------------------------- -------- -------- -------- --------
High Yield Fund
Institutional Class
03/31/96 $ 10.42 $ 1.04 $ 0.54 $ 1.58
- --------------------------------- -------- -------- -------- --------
03/31/95 10.52 0.99 (0.12) 0.87
- --------------------------------- -------- -------- -------- --------
03/31/94 10.41 0.90 0.18 1.08
- --------------------------------- -------- -------- -------- --------
12/16/92 - 03/31/93 10.00 0.24 0.41 0.65
- --------------------------------- -------- -------- -------- --------
Administrative Class
03/31/96 10.41 1.02(a) 0.54(a) 1.56
- --------------------------------- -------- -------- -------- --------
01/16/95 - 03/31/95 10.14 0.23 0.25 0.48
- --------------------------------- -------- -------- -------- --------
Money Market Fund (b)
Institutional Class
11/01/95 - 03/31/96 $ 1.00 $ 0.02 $ 0.00 $ 0.02
- --------------------------------- -------- -------- -------- --------
10/31/95 (c) 1.00 0.06 0.00 0.06
- --------------------------------- -------- -------- -------- --------
10/31/94 (c) 1.00 0.03 0.00 0.03
- --------------------------------- -------- -------- -------- --------
10/31/93 (c) 1.00 0.03 0.00 0.03
- --------------------------------- -------- -------- -------- --------
10/31/92 (c) 1.00 0.04 0.00 0.04
- --------------------------------- -------- -------- -------- --------
03/01/91 - 10/31/91 (c) 1.00 0.04 0.00 0.04
- --------------------------------- -------- -------- -------- --------
Administrative Class
11/01/95 - 03/31/96 1.00 0.02 0.00 0.02
- --------------------------------- -------- -------- -------- --------
01/24/95 - 10/31/95 (c) 1.00 0.05 0.00 0.05
- --------------------------------- -------- -------- -------- --------
Growth Stock Fund
03/31/96 (d) $ 13.71 $ 0.52 $ 2.84 $ 3.36
- --------------------------------- -------- -------- -------- --------
03/31/95 13.51 0.20 1.15 1.35
- --------------------------------- -------- -------- -------- --------
03/31/94 14.35 0.19 (0.11) 0.08
- --------------------------------- -------- -------- -------- --------
03/31/93 13.21 0.20 1.31 1.51
- --------------------------------- -------- -------- -------- --------
03/31/92 11.93 0.23 1.28 1.51
- --------------------------------- -------- -------- -------- --------
StocksPLUS Fund
03/31/96 $ 10.48 $ 0.91 $ 2.48 $ 3.39
- --------------------------------- -------- -------- -------- --------
03/31/95 9.52 1.03 0.69 1.72
- --------------------------------- -------- -------- -------- --------
05/14/93 - 03/31/94 10.00 0.34 0.10 0.44
- --------------------------------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Selected Per Share Data for
the Year or Period Ended:
========== ============= =============
Dividends Dividends in Distributions
from Net Excess of Net from Net
Investment Investment Realized
Income Income Capital Gains
========== ============ =============
<S> <C> <C> <C>
Short-Term Fund
Administrative Class
02/01/96 - 03/31/96 $ (0.10) $ 0.00 $ 0.00
- --------------------------------- -------- -------- --------
Long-Term U.S. Gov't Fund
03/31/96 $ (0.68) $ (0.04) $ (0.50)
- --------------------------------- -------- -------- --------
03/31/95 (0.60) (0.02) 0.00
- --------------------------------- -------- -------- --------
03/31/94 (1.05) (0.04) (0.70)
- --------------------------------- -------- -------- --------
03/31/93 (0.70) 0.00 (1.12)
- --------------------------------- -------- -------- --------
07/01/91 - 03/31/92 (0.64) 0.00 (0.03)
- --------------------------------- -------- -------- --------
Foreign Fund
03/31/96 $ (0.34) $ (0.25) $ (0.25)
- --------------------------------- -------- -------- --------
03/31/95 0.00 0.00 0.00
- --------------------------------- -------- -------- --------
03/31/94 (0.55) 0.00 (0.06)
- --------------------------------- -------- -------- --------
12/03/92 - 03/31/93 (0.16) 0.00 0.00
- --------------------------------- -------- -------- --------
Global Fund
03/31/96 $ (0.61) $ 0.00 $ (0.21)
- --------------------------------- -------- -------- --------
03/31/95 (0.29) (0.24) 0.00
- --------------------------------- -------- -------- --------
11/23/93 - 03/31/94 (0.16) 0.00 0.00
- --------------------------------- -------- -------- --------
High Yield Fund
Institutional Class
03/31/96 $ (1.01) $ 0.00 $ (0.05)
- --------------------------------- -------- -------- --------
03/31/95 (0.93) (0.02) 0.00
- --------------------------------- -------- -------- --------
03/31/94 (0.90) 0.00 (0.07)
- --------------------------------- -------- -------- --------
12/16/92 - 03/31/93 (0.24) 0.00 0.00
- --------------------------------- -------- -------- --------
Administrative Class
03/31/96 (0.98) 0.00 (0.05)
- --------------------------------- -------- -------- --------
01/16/95 - 03/31/95 (0.21) 0.00 0.00
- --------------------------------- -------- -------- --------
Money Market Fund (b)
Institutional Class
11/01/95 - 03/31/96 $ (0.02) $ 0.00 $ 0.00
- --------------------------------- -------- -------- --------
10/31/95 (c) (0.06) 0.00 0.00
- --------------------------------- -------- -------- --------
10/31/94 (c) (0.03) 0.00 0.00
- --------------------------------- -------- -------- --------
10/31/93 (c) (0.03) 0.00 0.00
- --------------------------------- -------- -------- --------
10/31/92 (c) (0.04) 0.00 0.00
- --------------------------------- -------- -------- --------
03/01/91 - 10/31/91 (c) (0.04) 0.00 0.00
- --------------------------------- -------- -------- --------
Administrative Class
11/01/95 - 03/31/96 (0.02) 0.00 0.00
- --------------------------------- -------- -------- --------
01/24/95 - 10/31/95 (c) (0.05) 0.00 0.00
- --------------------------------- -------- -------- --------
Growth Stock Fund
03/31/96 (d) $ (0.14) $ 0.00 $ (5.12)
- --------------------------------- -------- -------- --------
03/31/95 (0.20) 0.00 (0.95)
- --------------------------------- -------- -------- --------
03/31/94 (0.19) 0.00 (0.73)
- --------------------------------- -------- -------- --------
03/31/93 (0.20) 0.00 (0.17)
- --------------------------------- -------- -------- --------
03/31/92 (0.23) 0.00 0.00
- --------------------------------- -------- -------- --------
StocksPLUS Fund
03/31/96 $ (1.05) $ 0.00 $ (1.62)
- --------------------------------- -------- -------- --------
03/31/95 (0.76) 0.00 0.00
- --------------------------------- -------- -------- --------
05/14/93 - 03/31/94 (0.34) (0.01) (0.10)
- --------------------------------- -------- -------- --------
</TABLE>
+ Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Formerly the Money Market Fund of the PIMCO Funds: Equity Advisors Series.
(c) Audited by other independent accountants.
(d) For the year ended March 31, 1996, the average commission paid per share
traded was $0.04.
See Notes to Financial Statements
26
<PAGE>
<TABLE>
<CAPTION>
============= ========= ============= ============ ============
Distributions Tax Basis Total Net Asset
in Excess of Return of Distributions Value End of Total Return
Selected Per Share Date for Net Realized Capital Period
the Year or Period Ended: Capital Gains
============= ========= ============= ============ ============
<S> <C> <C> <C> <C> <C>
Short-Term Fund
Administrative Class
02/01/96 - 03/31/96 $ 0.00 $ 0.00 $ (0.10) $ 9.92 0.41%
- --------------------------------- -------- -------- -------- -------- --------
Long-Term U.S. Gov't Fund
03/31/96 $ (0.16) $ 0.00 $ (1.38) $ 9.96 14.83%
- --------------------------------- -------- -------- -------- -------- --------
03/31/95 0.00 0.00 (0.62) 9.85 5.50
- --------------------------------- -------- -------- -------- -------- --------
03/31/94 (0.17) 0.00 (1.96) 9.96 4.13
- --------------------------------- -------- -------- -------- -------- --------
03/31/93 0.00 0.00 (1.82) 11.36 23.42
- --------------------------------- -------- -------- -------- -------- --------
07/01/91 - 03/31/92 0.00 0.00 (0.67) 10.82 20.57+
- --------------------------------- -------- -------- -------- -------- --------
Foreign Fund
03/31/96 $ (0.03) $ 0.00 $ (0.87) $ 10.50 21.80%
- --------------------------------- -------- -------- -------- -------- --------
03/31/95 0.00 (0.61) (0.61) 9.38 (1.85)
- --------------------------------- -------- -------- -------- -------- --------
03/31/94 (0.37) 0.00 (0.98) 10.18 7.79
- --------------------------------- -------- -------- -------- -------- --------
12/03/92 - 03/31/93 0.00 0.00 (0.16) 10.34 16.23+
- --------------------------------- -------- -------- -------- -------- --------
Global Fund
03/31/96 $ (0.17) $ 0.00 $ (0.99) $ 10.05 12.04%
- --------------------------------- -------- -------- -------- -------- --------
03/31/95 0.00 0.00 (0.53) 9.87 10.35
- --------------------------------- -------- -------- -------- -------- --------
11/23/93 - 03/31/94 0.00 0.00 (0.16) 9.85 0.08
- --------------------------------- -------- -------- -------- -------- --------
High Yield Fund
Institutional Class
03/31/96 $ 0.00 $ 0.00 $ (1.06) $ 10.94 15.70%
- --------------------------------- -------- -------- -------- -------- --------
03/31/95 (0.02) 0.00 (0.97) 10.42 8.81
- --------------------------------- -------- -------- -------- -------- --------
03/31/94 0.00 0.00 (0.97) 10.52 10.65
- --------------------------------- -------- -------- -------- -------- --------
12/16/92 - 03/31/93 0.00 0.00 (0.24) 10.41 24.43+
- --------------------------------- -------- -------- -------- -------- --------
Administrative Class
03/31/96 0.00 0.00 (1.03) 10.94 15.54
- --------------------------------- -------- -------- -------- -------- --------
01/16/95 - 03/31/95 0.00 0.00 (0.21) 10.41 4.66
- --------------------------------- -------- -------- -------- -------- --------
Money Market Fund (b)
Institutional Class
11/01/95 - 03/31/96 $ 0.00 $ 0.00 $ (0.02) $ 1.00 2.58%
- --------------------------------- -------- -------- -------- -------- --------
10/31/95 (c) 0.00 0.00 (0.06) 1.00 5.67
- --------------------------------- -------- -------- -------- -------- --------
10/31/94 (c) 0.00 0.00 (0.03) 1.00 3.53
- --------------------------------- -------- -------- -------- -------- --------
10/31/93 (c) 0.00 0.00 (0.03) 1.00 2.83
- --------------------------------- -------- -------- -------- -------- --------
10/31/92 (c) 0.00 0.00 (0.04) 1.00 3.85
- --------------------------------- -------- -------- -------- -------- --------
03/01/91 - 10/31/91 (c) 0.00 0.00 (0.04) 1.00 3.78
- --------------------------------- -------- -------- -------- -------- --------
Administrative Class
11/01/95 - 03/31/96 0.00 0.00 (0.02) 1.00 2.47
- --------------------------------- -------- -------- -------- -------- --------
01/24/95 - 10/31/95 (c) 0.00 0.00 (0.05) 1.00 4.21
- --------------------------------- -------- -------- -------- -------- --------
Growth Stock Fund
03/31/96 (d) $ 0.00 $ 0.00 $ (5.26) $ 11.81 27.19%
- --------------------------------- -------- -------- -------- -------- --------
03/31/95 0.00 0.00 (1.15) 13.71 10.65
- --------------------------------- -------- -------- -------- -------- --------
03/31/94 0.00 0.00 (0.92) 13.51 (0.48)
- --------------------------------- -------- -------- -------- -------- --------
03/31/93 0.00 0.00 (0.37) 14.35 11.51
- --------------------------------- -------- -------- -------- -------- --------
03/31/92 0.00 0.00 (0.23) 13.21 12.87
- --------------------------------- -------- -------- -------- -------- --------
StocksPLUS Fund
03/31/96 $ (0.04) $ 0.00 $ (2.71) $ 11.16 34.07%
- --------------------------------- -------- -------- -------- -------- --------
03/31/95 0.00 0.00 (0.76) 10.48 18.64
- --------------------------------- -------- -------- -------- -------- --------
05/14/93 - 03/31/94 (0.47) 0.00 (0.92) 9.52 1.55
- --------------------------------- -------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
============= =========== ============ =========
Net Assets Ratio of Ratio of Net Portfolio
Selected Per Share Date for End of Period Expenses to Investment Turnover
the Year or Period Ended: (000's) Average Net Income to Rate
Assets Average Net
Assets
============= =========== ============ =========
<S> <C> <C> <C> <C>
Short-Term Fund
Administrative Class
02/01/96 - 03/31/96 $ 3,999 0.52%+ 4.44%+ 214.78%
- --------------------------------- -------- ----- ----- --------
Long-Term U.S. Gov't Fund
03/31/96 $ 32,511 0.56% 6.80% 238.32%
- --------------------------------- -------- ----- ----- --------
03/31/95 32,349 0.50 6.62 88.92
- --------------------------------- -------- ----- ----- --------
03/31/94 25,978 0.50 5.37 97.67
- --------------------------------- -------- ----- ----- --------
03/31/93 22,946 0.50 6.16 320.08
- --------------------------------- -------- ----- ----- --------
07/01/91 - 03/31/92 15,900 0.50+ 7.91+ 427.81
- --------------------------------- -------- ----- ----- --------
Foreign Fund
03/31/96 $258,493 0.52% 5.83% 1,233.71%
- --------------------------------- -------- ----- ----- --------
03/31/95 232,700 0.47 6.44 299.45
- --------------------------------- -------- ----- ----- --------
03/31/94 498,521 0.54 5.12 260.34
- --------------------------------- -------- ----- ----- --------
12/03/92 - 03/31/93 178,895 0.65+ 4.97+ 122.55
- --------------------------------- -------- ----- ----- --------
Global Fund
03/31/96 $133,833 0.58% 5.88% 1,082.91%
- --------------------------------- -------- ----- ----- --------
03/31/95 76,476 0.64 5.59 461.48
- --------------------------------- -------- ----- ----- --------
11/23/93 - 03/31/94 40,485 0.50+ 4.55+ 132.41
- --------------------------------- -------- ----- ----- --------
High Yield Fund
Institutional Class
03/31/96 $536,983 0.47% 9.28% 65.79%
- --------------------------------- -------- ----- ----- --------
03/31/95 336,310 0.48 9.37 77.60
- --------------------------------- -------- ----- ----- --------
03/31/94 219,976 0.50 8.40 112.40
- --------------------------------- -------- ----- ----- --------
12/16/92 - 03/31/93 24,069 0.50+ 8.24+ 29.74
- --------------------------------- -------- ----- ----- --------
Administrative Class
03/31/96 1,007 0.80 9.16 65.79%
- --------------------------------- -------- ----- ----- --------
01/16/95 - 03/31/95 41 0.73+ 10.12+ 77.60
- --------------------------------- -------- ----- ----- --------
Money Market Fund (b)
Institutional Class
11/01/95 - 03/31/96 $ 25,935 0.33%+ 5.44%+ N/A
- --------------------------------- -------- ----- ----- --------
10/31/95 (c) 7,741 0.40 5.53 N/A
- --------------------------------- -------- ----- ----- --------
10/31/94 (c) 7,454 0.40 3.52 N/A
- --------------------------------- -------- ----- ----- --------
10/31/93 (c) 5,836 0.40 2.78 N/A
- --------------------------------- -------- ----- ----- --------
10/31/92 (c) 7,817 0.40 4.02 N/A
- --------------------------------- -------- ----- ----- --------
03/01/91 - 10/31/91 (c) 45,406 0.53+ 5.20 N/A
- --------------------------------- -------- ----- ----- --------
Administrative Class
11/01/95 - 03/31/96 10 0.61+ 5.95+ N/A
- --------------------------------- -------- ----- ----- --------
01/24/95 - 10/31/95 (c) 10 0.68+ 5.94+ N/A
- --------------------------------- -------- ----- ----- --------
Growth Stock Fund
03/31/96 (d) $ 7,889 0.62% 0.86% 90.62%
- --------------------------------- -------- ----- ----- --------
03/31/95 15,429 0.50 1.43 89.98
- --------------------------------- -------- ----- ----- --------
03/31/94 22,513 0.50 1.39 81.36
- --------------------------------- -------- ----- ----- --------
03/31/93 22,907 0.53 1.53 63.91
- --------------------------------- -------- ----- ----- --------
03/31/92 15,590 0.60 2.02 64.63
- --------------------------------- -------- ----- ----- --------
StocksPLUS Fund
03/31/96 $151,869 0.70% 15.23% 101.67%
- --------------------------------- -------- ----- ----- --------
03/31/95 46,498 0.50 11.89 176.98
- --------------------------------- -------- ----- ----- --------
05/14/93 - 03/31/94 14,330 0.50+ 4.00+ 33.29
- --------------------------------- -------- ----- ----- --------
</TABLE>
27
<PAGE>
SCHEDULE OF INVESTMENTS
Total Return Fund
March 31, 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Mortgage-Backed Securities .............................................. 69.5%
Corporate Bonds and Notes ............................................... 24.2%
Short-Term Instruments .................................................. 16.2%
Foreign Currency-Denominated ............................................ 9.9%
Sovereign Issues ........................................................ 3.9%
Other ................................................................... 2.3%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
Corporate Bonds and Notes - 24.2%
================================================================================
<S> <C> <C>
Banking and Finance - 10.8%
ABN-AMRO Bank
7.750% due 05/15/23 $ 200 $ 204
Associates Corp. of North America
6.875% due 01/15/97 1,000 1,007
9.700% due 05/01/97 450 468
6.125% due 02/01/98 300 301
8.800% due 08/01/98 400 422
6.750% due 10/15/99 90 91
AT&T Capital Corp.
6.300% due 07/30/96 17,500 17,547
6.990% due 10/04/96 5,000 5,036
5.940% due 04/18/97 50,000 50,090
6.690% due 05/09/97 25,000 25,242
Bancomer
8.000% due 07/07/98 7,000 6,694
Banesto
8.250% due 07/28/02 28,900 30,538
Bankers Trust
7.250% due 11/01/96 300 302
8.000% due 03/15/97 250 254
8.625% due 04/01/18 247 255
Banponce Corp.
8.170% due 12/09/96 25,000 25,359
6.188% due 03/19/97 (d) 25,000 25,013
8.040% due 11/24/97 9,000 9,259
Barclays American Corp.
9.125% due 12/01/97 350 366
Beneficial Corp.
9.600% due 10/16/98 250 269
Canadian Pacific Securities Ltd.
9.450% due 08/01/21 2,750 3,213
Capital One Bank
5.977% due 07/11/96 (d) 22,000 22,000
Chemical Banking Corp.
6.125% due 11/01/08 400 368
Chrysler Financial Corp.
8.125% due 12/15/96 13,000 13,221
5.080% due 01/24/97 5,000 4,976
8.070% due 01/30/97 4,000 4,075
8.100% due 02/03/97 31,900 32,511
7.110% due 03/21/97 2,500 2,531
8.420% due 02/01/99 695 732
10.340% due 05/15/08 1,000 1,005
CIT Group Holdings
5.330% due 05/11/98 (d) 18,000 17,956
Citicorp
8.750% due 11/01/96 5,000 5,087
5.500% due 07/10/97 (d) 6,000 5,990
5.388% due 01/30/98 (d) 7,000 6,979
8.750% due 02/15/98 9,000 9,419
5.438% due 05/29/98 (d) 21,600 21,531
6.500% due 05/01/04 (d) 2,964 2,968
Coleman Holdings
0.000% due 05/27/98 (h) 6,099 5,062
Continental Bank Corp.
9.875% due 06/15/96 6,000 6,045
Den Danske Bank
7.038% due 06/23/00 (d) 4,500 4,541
Discover Credit Corp.
8.940% due 06/27/96 4,500 4,529
8.730% due 08/15/96 22,110 22,318
European Investment Bank
13.000% due 08/31/96 82 84
Farmers Group, Inc.
8.250% due 07/15/96 500 503
First Chicago Corp.
8.200% due 11/15/96 5,000 5,077
First Interstate Bancorp
12.750% due 05/01/97 1,250 1,338
6.000% due 06/25/97 (d) 5,000 5,014
8.875% due 01/01/09 405 420
9.125% due 01/01/09 28 29
First Security Bank
7.450% due 11/15/96 34,000 34,521
Ford Capital
9.125% due 04/08/96 3,250 3,252
Ford Motor Credit Corp.
6.300% due 06/17/96 (d) 200 200
8.875% due 08/01/96 21,600 21,837
4.850% due 08/30/96 85 85
7.875% due 01/15/97 1,000 1,016
9.350% due 05/14/97 1,000 1,038
4.980% due 11/09/98 (d) 17,080 17,171
7.020% due 10/10/00 70,000 71,057
General Electric Capital Corp.
8.300% due 09/20/09 150 167
General Motors Acceptance Corp.
8.650% due 04/12/96 3,000 3,003
6.050% due 04/19/96 60,000 60,020
6.700% due 05/20/96 5,000 5,009
6.750% due 05/20/96 30,000 30,056
7.750% due 07/18/96 5,000 5,035
5.590% due 07/19/96 (d) 5,000 5,007
8.250% due 08/01/96 2,000 2,017
5.645% due 08/30/96 (d) 19,500 19,506
6.147% due 10/15/96 (d) 36,000 36,090
7.875% due 11/05/96 250 253
8.000% due 12/05/96 15,000 15,235
7.750% due 12/10/96 1,000 1,014
7.700% due 01/24/97 14,225 14,451
7.750% due 01/24/97 5,400 5,488
7.750% due 01/28/97 4,250 4,320
7.375% due 02/27/97 2,000 2,028
7.875% due 02/27/97 2,000 2,037
7.625% due 02/28/97 5,000 5,081
7.875% due 03/04/97 250 256
7.250% due 03/14/97 15,000 15,200
6.700% due 04/15/97 26,100 26,333
7.750% due 04/15/97 8,150 8,305
8.375% due 05/01/97 1,350 1,384
7.750% due 05/12/97 2,000 2,042
7.250% due 05/19/97 7,500 7,615
7.125% due 05/23/97 1,000 1,015
6.125% due 06/09/97 8,000 8,024
6.000% due 06/16/97 1,000 1,002
7.100% due 07/01/97 1,700 1,726
6.400% due 07/30/97 1,000 1,007
6.300% due 09/10/97 1,000 1,005
6.000% due 10/10/97 23,000 23,004
7.850% due 11/17/97 13,000 13,362
8.625% due 06/15/99 650 691
9.625% due 12/15/01 300 340
Georgia Pacific Credit Corp.
9.850% due 06/15/97 3,000 3,122
Goldman Sachs
5.000% due 08/23/96 2,000 1,994
5.645% due 02/23/98 340 341
6.000% due 12/31/07 12,250 10,993
Great Western Bank
8.625% due 12/01/98 3,000 3,145
10.500% due 05/30/00 500 548
10.250% due 06/15/00 5,500 6,007
Heller Financial
6.450% due 02/15/97 975 978
Huntington Bank
7.750% due 07/19/96 50,000 50,350
Inter-American Development Bank
8.875% due 06/01/09 200 236
</TABLE>
28
<PAGE>
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
AAA .................................................................... 53%
A1/P1 .................................................................... 13%
BB .................................................................... 8%
BBB .................................................................... 10%
A .................................................................... 9%
AA .................................................................... 7%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
ITT Hartford
7.250% due 12/01/96 $ 500 $ 504
Lehman Brothers
6.088% due 06/22/98 (d) 25,000 25,206
Manufacturers Hanover Corp.
8.125% due 01/15/97 417 425
Maritrans Capital Corp.
9.250% due 04/01/07 1,000 907
Merrill Lynch & Co.
4.750% due 06/24/96 450 449
5.410% due 06/23/97 (d) 19,000 18,953
Morgan Stanley Group
7.790% due 02/03/97 21,000 21,346
Navistar Financial
9.500% due 06/01/96 3,000 3,015
NCNB Corp.
8.500% due 11/01/96 1,000 1,014
Northern Trust
9.000% due 05/15/98 100 106
Norwest Financial, Inc.
4.970% due 10/29/96 300 298
6.500% due 11/15/97 1,500 1,512
Reliance Group Holdings
9.000% due 11/15/00 6,000 6,090
Saferco
9.420% due 05/31/96 600 604
9.460% due 05/31/99 1,000 1,087
9.590% due 05/31/01 3,000 3,382
Salomon, Inc.
9.200% due 07/18/96 4,000 4,033
9.140% due 07/19/96 6,000 6,049
6.440% due 08/06/96 (d) 9,000 9,023
6.136% due 10/23/96 (d) 5,560 5,562
5.870% due 11/21/96 (d) 19,000 19,004
Security Pacific Corp.
6.552% due 03/01/18 (d) 201 199
Shearson Lehman
4.601% due 07/22/96 (d) 8,000 8,005
9.875% due 10/25/17 971 986
Signet Banking Corp.
5.375% due 05/15/97 (d) 1,000 995
5.813% due 04/15/98 (d) 1,000 991
9.625% due 06/01/99 6,500 7,019
Tenneco Credit Corp.
9.250% due 11/01/96 4,500 4,580
9.625% due 08/15/01 300 336
Transamerica Financial
5.155% due 04/20/99 (d) 500 489
Trizec Finance
10.875% due 10/15/05 3,715 3,789
USLife Corp.
6.750% due 01/15/98 100 101
Xerox Credit Corp.
10.125% due 04/15/99 1,500 1,502
-----------
1,121,819
===========
Industrials - 9.0%
American Home Products
6.875% due 04/15/97 900 909
AMR Corp.
7.600% due 01/27/97 6,000 6,075
7.470% due 01/28/97 6,500 6,555
7.750% due 12/01/97 10,000 10,215
9.500% due 07/15/98 5,500 5,831
8.050% due 03/05/99 4,000 4,105
9.750% due 03/15/00 7,760 8,517
10.610% due 01/11/01 4,000 4,570
10.570% due 01/15/01 3,000 3,387
10.590% due 01/31/01 3,000 3,392
10.000% due 02/01/01 2,000 2,228
10.000% due 03/07/01 1,500 1,663
9.400% due 05/08/01 3,000 3,294
9.500% due 05/15/01 2,250 2,493
9.130% due 10/25/01 2,000 2,155
8.470% due 02/20/02 2,000 2,116
8.500% due 02/26/02 1,000 1,060
10.400% due 03/10/11 3,000 3,597
10.450% due 03/10/11 1,000 1,186
10.420% due 03/15/11 12,500 15,012
10.150% due 05/15/20 1,400 1,629
10.500% due 03/01/21 3,500 4,194
10.375% due 03/15/21 11,000 13,610
10.125% due 06/01/21 9,200 10,687
Apollo Computer, Inc.
7.250% due 02/01/11 200 200
Arkla, Inc.
8.740% due 07/19/96 15,100 15,211
8.780% due 07/19/96 5,000 5,037
9.875% due 04/15/97 55,050 56,915
9.320% due 12/15/97 1,000 1,041
8.740% due 05/14/98 3,000 3,117
9.875% due 02/15/18 5,000 5,051
Baxter International
9.500% due 06/15/08 200 235
CF Cable TV, Inc.
9.125% due 07/15/07 1,600 1,604
Coastal Corp.
8.750% due 05/15/99 4,300 4,538
9.750% due 08/01/03 1,000 1,149
11.750% due 06/15/06 42,050 44,176
Columbia Healthcare
5.535% due 07/28/97 (d) 2,000 2,002
Continental Cablevision
11.000% due 06/01/07 2,000 2,285
Delta Air Lines
8.250% due 05/15/96 8,361 8,375
7.730% due 05/14/97 8,800 8,921
9.875% due 05/15/00 3,250 3,534
8.250% due 12/27/07 500 531
9.750% due 05/15/21 500 580
Eastman Kodak
8.550% due 05/01/97 400 411
Exide Corp.
0.000% due 12/15/04 (h) 9,775 8,309
General Motors Corp.
8.170% due 01/02/00 3,161 3,267
8.950% due 07/02/09 21,500 23,318
G-I Holdings, Inc.
0.000% due 10/01/98 (h) 10,000 8,000
Gulf Canada Resources
9.250% due 01/15/04 1,250 1,277
9.625% due 07/01/05 2,000 2,060
Healthsouth Rehabilitation
9.500% due 04/01/01 7,300 7,683
Hollinger International Publishing
9.250% due 02/01/06 3,000 2,955
K-III Communications Co.
8.500% due 02/01/06 4,000 3,880
Kaiser Aluminum & Chemical
9.875% due 02/15/02 250 250
Keystone Group
9.750% due 09/01/03 250 246
Lenfest Communications
8.375% due 11/01/05 5,000 4,825
Maxus Energy Corp.
9.875% due 10/15/02 300 302
Mazda Manufacturing Corp.
10.500% due 07/01/08 1,980 2,423
McDermott, Inc.
9.375% due 03/15/02 1,000 1,096
</TABLE>
29
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Total Return Fund
March 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
McGaw, Inc.
10.375% due 04/01/99 $ 2,330 $ 2,388
Merck & Co.
7.750% due 05/01/96 1,000 1,002
News America Holdings Corp.
12.000% due 12/15/01 2,000 2,195
8.625% due 02/01/03 750 812
Owens-Illinois, Inc.
10.000% due 08/01/02 300 311
11.000% due 12/01/03 8,000 8,780
Pepsico, Inc.
7.875% due 08/15/96 250 252
5.463% due 07/01/98 400 394
7.750% due 10/01/98 500 519
Philip Morris Co.
8.100% due 08/21/96 1,000 1,010
8.750% due 12/01/96 5,000 5,095
8.750% due 06/15/97 100 103
Purity Supreme
11.750% due 08/01/99 9,000 9,855
Ralston Purina
9.000% due 06/15/96 200 201
Repap Wisconsin, Inc.
9.250% due 02/01/02 5,000 4,800
Revlon Consumer Products Corp.
9.375% due 04/01/01 5,255 5,281
RJR Nabisco
8.000% due 01/15/00 6,500 6,782
7.625% due 09/01/00 6,000 5,858
8.000% due 07/15/01 30,000 29,475
Rogers Cablesystem Ltd.
10.000% due 12/01/07 5,000 5,225
Rogers Cantel Mobile
10.750% due 11/01/01 7,250 7,594
11.125% due 07/15/02 5,000 5,344
Schering-Plough
0.000% due 12/02/96 600 580
Sears Roebuck & Co.
6.580% due 07/23/97 150 151
0.000% due 07/12/98 610 475
Showboat, Inc.
9.250% due 05/01/08 2,000 2,045
Stone Consolidated
10.250% due 12/15/00 5,000 5,275
Sweetheart Cup Co.
9.625% due 09/01/00 1,200 1,230
System Energy Resources
7.430% due 01/15/11 5,419 5,116
Telewest Communications
9.625% due 10/01/06 5,000 5,000
Tenet Healthcare
9.625% due 09/01/02 5,000 5,400
10.125% due 03/01/05 1,000 1,078
Texas Instruments
9.000% due 07/15/99 14,500 14,635
Time Warner, Inc.
7.450% due 02/01/98 1,000 1,018
6.210% due 08/15/00 (d) 52,669 53,019
7.975% due 08/15/04 31,053 31,615
8.110% due 08/15/06 77,379 79,625
8.180% due 08/15/07 116,779 119,911
9.150% due 02/01/23 7,500 8,095
8.375% due 07/15/33 62,300 62,664
Union Oil of California
9.750% due 12/01/00 400 449
United Air Lines
6.750% due 12/01/97 11,400 11,382
10.670% due 05/01/04 7,050 8,326
USX Corp.
6.563% due 09/18/96 (d) 8,000 8,015
6.375% due 07/15/98 16,200 16,169
9.800% due 07/01/01 300 336
Varity Corp.
11.375% due 11/15/98 10,500 10,812
Vons
6.625% due 05/15/98 12,500 12,188
Wal-Mart Stores
8.000% due 05/01/96 100 100
World Color Press, Inc.
9.125% due 03/15/03 5,000 5,069
-----------
926,338
===========
Utilities - 4.4%
Arkansas Power & Light
10.370% due 12/22/97 3,000 3,174
Bell Atlantic Financial
6.625% due 11/30/97 400 403
Cablevision Industries
10.750% due 01/30/02 44,032 47,775
California Energy
0.000% due 01/15/04 (h) 9,235 8,843
Carolina Power & Light
7.900% due 12/27/96 11,000 11,178
5.375% due 07/01/98 100 98
Central Maine Power Co.
4.920% due 07/22/96 8,000 7,971
5.750% due 07/22/96 9,000 8,990
6.250% due 11/01/98 1,000 987
Chesapeake & Potomac Telephone
8.000% due 10/15/29 1,125 1,222
Cinncinnati Bell, Inc.
6.700% due 12/15/97 1,000 1,008
Cleveland Electric Illuminating Co.
9.375% due 03/01/17 3,000 2,771
CMS Energy
9.500% due 10/01/97 (d) 31,100 32,141
9.875% due 10/01/99 (d) 3,100 3,240
Commonwealth Edison
7.000% due 02/15/97 5,175 5,205
Consumers Power Co.
8.750% due 02/15/98 5,550 5,741
CTC Mansfield Funding
10.250% due 03/30/03 16,300 16,632
11.125% due 09/30/16 90,315 94,301
El Paso Electric Co.
7.250% due 02/01/99 10,956 10,901
First PV Funding
8.950% due 01/15/97 195 197
10.150% due 01/15/16 14,360 15,078
GTE Corp.
10.750% due 09/15/17 300 333
Hydro Quebec
5.598% due 04/15/99 (d) 10,000 9,945
9.400% due 02/01/21 500 588
9.500% due 11/15/30 2,370 2,827
Long Island Lighting Co.
8.750% due 05/01/96 3,000 3,006
8.750% due 02/15/97 2,000 2,033
6.250% due 07/15/01 7,000 6,577
New England Power
6.140% due 02/02/98 500 499
North Atlantic Energy
9.050% due 06/01/02 5,502 5,478
Northern Indiana Public Service
6.375% due 09/01/97 5,950 5,971
Pacific Gas & Electric
6.750% due 12/01/00 9 9
Public Service of New Hampshire
8.875% due 05/15/96 7,770 7,789
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
Questar Pipeline
9.375% due 06/01/21 $ 200 $ 229
Southern California Edison
6.125% due 07/15/97 500 501
5.450% due 06/15/98 400 394
Southwestern Bell
5.550% due 03/10/98 1,000 991
System Energy Resources
10.500% due 09/01/96 50,950 51,726
Tennessee Gas Pipeline
9.250% due 05/15/96 9,000 9,038
Texas-New Mexico Power
11.250% due 01/15/97 4,265 4,441
Texas Gas Transmission Corp.
9.625% due 07/15/97 5,400 5,677
Texas Utilities
6.383% due 05/01/99 (d) 32,125 32,195
Toledo Edison Co.
6.125% due 08/01/97 200 198
8.180% due 07/30/02 1,400 1,339
8.700% due 09/01/02 10,000 9,086
7.850% due 03/31/03 7,000 6,428
7.875% due 08/01/04 500 466
Transcontinental Gas Pipeline
6.210% due 05/15/00 1,000 1,000
Triton Energy
0.000% due 11/01/97 5,800 5,133
Tucson Electric Power
8.500% due 10/01/09 1,000 1,002
Virginia Electric & Power Co.
9.375% due 06/01/98 500 530
Wilmington Trust Co. - Tucson Electric
10.732% due 01/01/13 991 948
-----------
454,233
-----------
Total Corporate Bonds and Notes 2,502,390
===========
(Cost $2,485,037)
================================================================================
U.S. Treasury Obligations - 0.0%
================================================================================
U.S. Treasury Notes
8.000% due 10/15/96 2,315 2,348
U.S. Treasury Strips
0.000% due 11/15/11 383 111
0.000% due 11/15/12 2,000 912
-----------
Total U.S. Treasury Obligations 3,371
===========
(Cost $3,422)
================================================================================
U.S. Government Agencies - 0.6%
================================================================================
A.I.D. Housing Guarantee - Peru
9.980% due 08/01/08 1,375 1,448
Federal Home Loan Bank
4.410% due 07/08/96 400 399
8.250% due 11/25/96 800 814
6.320% due 12/04/97 1,500 1,513
Federal Home Loan Mortgage Corp.
4.150% due 10/04/96 (d) 500 500
Federal National Mortgage Assn.
8.000% due 07/10/96 50 50
8.625% due 04/10/01 1,250 1,251
Government Trust Certificate - Greece
8.000% due 05/15/98 124 125
Government Trust Certificate - Israel
9.250% due 11/15/96 17 17
0.000% due 05/15/10 7,300 2,714
Student Loan Marketing Assn.
5.595% due 04/25/04 (d) 50,759 50,759
-----------
Total U.S. Government Agencies 59,590
===========
(Cost $59,804)
================================================================================
Mortgage-Backed Securities - 69.5%
================================================================================
Federal Home Loan Mortgage Corporation - 9.0%
5.250% due 12/01/98 51 50
5.500% due 07/01/00-03/01/10 (g) 143 141
6.000% due 12/01/98-01/01/01 (g) 941 929
6.500% due 04/01/08-01/01/09 (g) 300 295
6.500% due 06/13/26 250,000 237,033
7.000% due 12/01/03-06/01/10 (g) 662 662
7.000% due 04/11/26-05/13/26 (g) 322,000 314,035
7.375% due 04/01/17 (d) 82 84
7.410% due 09/01/23 (d) 5,692 5,794
7.450% due 10/01/23 (d) 2,528 2,586
7.452% due 11/01/23 (d) 2,999 3,061
7.460% due 10/01/23 (d) 3,243 3,326
7.500% due 01/01/17-05/13/26 (g) 86,849 86,653
7.500% due 05/01/99-05/01/08 (g) 859 870
7.512% due 11/01/23 (d) 1,677 1,694
7.523% due 10/01/23-11/01/23(d)(g) 8,482 8,732
7.532% due 01/01/24-08/01/24(d)(g) 7,943 8,139
7.534% due 06/01/24 (d) 8,708 8,960
7.539% due 10/01/23 (d) 9,757 10,035
7.582% due 07/01/23 (d) 5,361 5,434
7.625% due 01/01/19 (d) 29 30
7.657% due 06/01/28 (d) 13,113 13,490
7.724% due 10/01/23 (d) 9,547 9,832
7.730% due 09/01/23 (d) 12,602 12,980
7.748% due 08/01/23 (d) 5,297 5,420
7.750% due 04/01/07 76 77
7.750% due 06/01/17 (d) 52 54
7.753% due 09/01/23 (d) 13,972 14,289
7.857% due 08/01/23 (d) 2,795 2,865
7.863% due 05/01/23 (d) 4,601 4,747
7.868% due 11/01/23 (d) 7,687 7,915
7.870% due 09/01/23-08/01/24(d)(g) 72,388 74,821
7.927% due 07/01/23 (d) 2,463 2,518
8.000% due 11/01/13-03/01/25 (g) 54,818 55,849
8.000% due 10/01/07-01/01/10 (g) 2,621 2,685
8.172% due 07/01/22 (d) 5,325 5,499
8.250% due 08/01/07-02/01/08 (g) 187 193
8.500% due 09/01/01-06/01/09 (g) 1,513 1,580
8.500% due 12/01/16-06/01/17 (g) 289 302
8.750% due 02/01/01-09/01/10 (g) 1,015 1,054
9.000% due 01/01/02-06/01/12 (g) 1,790 1,890
9.000% due 07/01/14-05/01/17 (g) 391 414
9.250% due 06/01/09-08/01/09 (g) 232 246
9.500% due 06/01/02-08/01/07 (g) 2,831 2,991
9.500% due 03/01/16-06/01/21 (g) 2,780 2,966
10.000% due 06/01/04-12/01/05 (g) 1,779 1,897
10.250% due 04/01/09-05/01/09 (g) 3,418 3,747
11.000% due 12/01/99-08/01/10 (g) 165 185
11.000% due 03/01/11-07/01/19 (g) 1,951 2,184
11.250% due 10/01/09-09/01/15 (g) 227 253
11.500% due 03/01/00 20 21
12.500% due 07/01/99 17 18
13.250% due 10/01/13 87 100
14.000% due 04/01/16 56 65
15.500% due 08/01/11-11/01/11 (g) 33 39
16.250% due 05/01/11-11/01/11 (g) 34 40
-----------
931,769
===========
Federal Housing Administration - 0.7%
5.250% due 02/01/03 354 326
7.211% due 12/01/21 3,995 4,014
7.375% due 03/01/19-07/01/21 (g) 5,487 5,499
7.399% due 02/01/21 2,847 2,853
7.430% due 12/01/16-05/01/23 (g) 55,973 56,310
7.650% due 11/01/18 375 371
-----------
69,373
===========
</TABLE>
31
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Total Return Fund
March 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
Federal National Mortgage Association - 8.0%
5.625% due 02/01/26 (d) $ 4,912 $ 4,986
6.000% due 03/01/24 2,619 2,425
6.030% due 06/01/24 (d) 23,383 24,009
6.250% due 03/01/18 (d) 83 84
6.283% due 04/23/26 10,000 10,078
6.347% due 08/01/29 (d) 119,940 121,043
6.368% due 10/01/27-07/01/28(d)(g) 8,301 8,382
6.369% due 09/01/27-10/01/28(d)(g) 144,895 146,302
6.370% due 10/01/28 (d) 87,157 88,031
6.377% due 09/01/24 (d) 6,231 6,296
6.496% due 09/01/24 (d) 7,266 7,433
6.500% due 10/01/05-04/01/08 (g) 517 514
6.636% due 05/01/24 (d) 11,403 11,817
6.750% due 08/01/03 1,040 1,033
6.933% due 07/01/24 (d) 42,437 43,514
7.000% due 04/01/04-03/01/08 (g) 1,035 1,035
7.000% due 01/01/24-10/01/24 (g) 23,811 23,290
7.157% due 09/01/22 (d) 5,119 5,170
7.250% due 05/01/02 50 50
7.250% due 01/01/08-05/01/09 (g) 234 233
7.250% due 01/01/23 12,041 11,821
7.451% due 12/01/23 (d) 12,516 12,970
7.499% due 12/01/23 (d) 5,282 5,409
7.500% due 04/01/24-06/01/25 (g) 112,536 112,646
7.515% due 01/01/25 (d) 8,688 9,003
7.546% due 06/01/25 (d) 14,335 14,807
7.568% due 01/01/24 (d) 3,067 3,167
7.582% due 12/01/24 (d) 7,689 7,918
7.599% due 01/01/24 (d) 11,925 12,313
7.607% due 12/01/23 (d) 8,679 8,958
7.646% due 11/01/23 (d) 2,797 2,887
7.653% due 03/01/33 (d) 46,563 47,904
7.654% due 11/01/23 (d) 4,550 4,696
7.677% due 01/01/24 (d) 1,864 1,925
7.693% due 04/01/25 (d) 11,676 12,055
7.714% due 09/01/23 (d) 10,336 10,606
7.750% due 06/01/09 268 271
7.805% due 06/01/24 (d) 4,316 4,472
7.939% due 10/01/23 (d) 13,429 13,862
8.000% due 09/01/01-10/01/08 (g) 2,726 2,779
8.000% due 04/01/18 35 36
8.156% due 08/01/23 (d) 4,002 4,127
8.250% due 11/01/04-06/01/13 (g) 1,356 1,386
8.250% due 02/01/17 260 265
8.500% due 07/01/99-02/01/10 (g) 7,464 7,718
8.500% due 06/01/10-09/01/18 (g) 2,182 2,265
9.000% due 01/01/99-11/01/06 (g) 3,421 3,614
9.000% due 05/01/15-04/01/17 (g) 556 585
9.500% due 12/01/06-03/01/16 (g) 142 151
9.750% due 11/01/08 154 166
10.500% due 12/01/16-04/01/22 (g) 1,652 1,835
13.000% due 09/01/13 90 105
13.250% due 09/01/11 30 35
14.500% due 11/01/11-01/01/13 (g) 114 135
14.750% due 08/01/12-11/01/14 (g) 570 665
15.500% due 10/01/12-12/01/12 (g) 53 63
15.750% due 12/01/11-08/01/12 (g) 291 340
16.000% due 09/01/12 342 408
-----------
830,093
===========
Government National Mortgage Association - 27.4%
5.650% due 10/15/12 14 13
6.000% due 10/15/08 337 327
6.000% due 12/15/23-04/18/26 (g) 283,035 261,340
6.500% due 10/15/08 320 316
6.500% due 01/20/23-01/20/25(d)(g) 73,526 74,209
6.500% due 11/15/23-05/20/26 (g) 1,175,976 1,112,647
6.875% due 09/20/22 (d) 3,788 3,840
7.000% due 10/15/08 315 317
7.000% due 06/20/23-03/20/25(d)(g) 286,787 290,595
7.000% due 12/15/22-04/18/26 (g) 299,704 291,951
7.250% due 07/20/22-09/20/24(d)(g) 412,993 418,538
7.375% due 04/20/23-06/20/24(d)(g) 117,016 118,645
7.500% due 08/15/05-12/15/09 (g) 4,524 4,628
7.500% due 04/18/22-05/20/26 (g) 187,518 187,336
8.000% due 08/15/05-04/15/08 (g) 1,629 1,681
8.000% due 06/15/16-04/18/26 (g) 47,740 49,076
8.250% due 08/15/04-07/15/08 (g) 908 938
8.500% due 06/15/01-07/18/08 (g) 404 423
8.500% due 08/15/16-11/15/22 (g) 739 775
8.750% due 03/15/07-07/15/07 (g) 230 239
9.000% due 09/15/01-05/15/09 (g) 1,293 1,368
9.000% due 05/15/16-08/15/21 (g) 3,692 3,945
9.250% due 10/15/01-03/15/06 (g) 731 770
9.500% due 04/15/01-11/15/09 (g) 787 839
9.500% due 12/15/16-08/15/23 (g) 2,628 2,836
9.750% due 08/15/97-07/15/04 (g) 431 458
9.750% due 09/15/17-01/15/21 (g) 475 515
10.000% due 06/20/01-08/20/04 (g) 140 147
10.000% due 01/15/15-03/20/20 (g) 1,959 2,151
10.250% due 05/15/01 24 26
10.500% due 06/15/04 200 216
10.500% due 10/15/15 5 6
10.750% due 08/15/98-09/15/98 (g) 54 57
11.000% due 05/15/04 135 146
11.250% due 03/15/01 13 14
11.500% due 04/15/13-05/15/13 (g) 19 22
12.000% due 03/20/99-02/15/00 (g) 26 27
12.000% due 01/15/13-03/15/15 (g) 119 134
12.500% due 01/15/11 7 8
13.000% due 12/15/12-10/15/14 (g) 81 94
13.250% due 10/20/14 49 56
13.500% due 11/15/12-12/15/12 (g) 16 19
14.500% due 09/15/12 47 55
15.000% due 09/15/12-10/15/12 (g) 21 25
16.000% due 01/15/12-04/15/12 (g) 17 20
17.000% due 11/15/11-12/15/11 (g) 184 217
-----------
2,832,005
===========
Collateralized Mortgage Obligations - 20.8%
AFC Home Equity Loan Trust
7.517% due 10/25/26 (d) 28,629 28,871
American Southwest Financial
12.250% due 11/01/14 106 120
9.450% due 03/01/15 770 772
12.500% due 04/01/15 1,163 1,293
12.000% due 05/01/15 2,056 2,313
11.400% due 09/01/15 1,606 1,677
Bear Stearns
9.200% due 11/01/18 72 73
9.500% due 06/25/23 1,968 2,017
6.094% due 10/25/23 (d) 11,834 11,841
10.000% due 08/25/24 15,018 15,450
7.000% due 03/25/27 7,000 6,338
Capstead
8.400% due 01/25/21 11,035 11,121
8.750% due 07/25/21 10,000 10,312
Centex Acceptance Corp.
11.000% due 11/01/15 423 425
Chase Mortgage Financial Corp.
9.500% due 04/25/24 2,280 2,287
8.000% due 06/25/24 920 930
7.000% due 07/25/24 6 6
7.500% due 10/25/24 100 101
Citicorp Mortgage
9.500% due 07/01/04 188 193
9.500% due 08/25/05 5,573 4,342
8.500% due 05/25/06 50 50
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
9.000% due 12/01/16 $ 751 $ 762
8.500% due 02/01/17 436 439
8.500% due 04/01/17 438 442
9.000% due 04/01/17 2,213 2,285
9.000% due 05/01/17 4,944 5,104
8.000% due 07/25/18 139 139
9.500% due 01/01/19 3,971 4,044
9.500% due 09/25/19 250 256
9.500% due 10/25/19 256 255
9.500% due 09/25/20 2,012 2,059
7.750% due 04/25/21 1,059 1,060
6.000% due 08/25/21 847 839
7.715% due 10/25/22 (d) 35,126 35,818
CMC Securities Corp.
7.172% due 09/25/23 (d) 25,681 25,961
CMO Trust
10.200% due 02/01/16 1,015 1,074
8.800% due 05/25/16 9,469 9,434
8.000% due 01/01/17 397 406
Collateralized Mortgage Securities Corp.
11.875% due 04/01/15 2,833 3,058
11.450% due 09/01/15 86 94
11.450% due 11/01/15 526 574
10.200% due 04/20/17 527 563
8.000% due 08/20/18 0 0
8.750% due 04/20/19 1,562 1,616
Countrywide
6.575% due 07/25/24 (d) 25,031 25,406
Donaldson, Lufkin & Jenrette
7.632% due 08/01/21 (d) 10,078 10,156
8.037% due 12/25/22 (d) 3,877 3,953
8.065% due 03/25/24 (d) 3,791 3,871
Drexel Mortgage Funding
9.500% due 11/20/17 2,383 2,497
8.600% due 03/01/18 1,267 1,292
9.500% due 08/01/19 41 42
Federal Home Loan Mortgage Corp.
8.125% due 09/30/96 1,000 1,014
8.500% due 03/15/97 68 68
7.000% due 06/15/97 209 209
8.750% due 10/15/05 73 75
10.750% due 11/30/05 1,875 1,965
6.500% due 08/15/06 710 706
9.000% due 09/15/08 53 55
10.250% due 03/15/09 35 36
4.750% due 09/15/09 368 366
4.750% due 07/15/10 229 228
4.750% due 03/15/12 500 494
8.500% due 08/15/13 2,000 2,089
8.500% due 09/15/13 5,941 6,206
11.000% due 11/30/15 9,337 9,985
6.210% due 08/15/17 345 340
7.250% due 10/25/17 (d) 15,938 16,291
9.500% due 01/15/19 1,545 1,590
6.500% due 05/15/19 615 598
8.250% due 05/15/19 4,163 4,184
8.500% due 10/15/19 2,069 2,108
9.000% due 11/15/19 7,733 7,879
10.000% due 11/15/19 250 270
8.500% due 01/15/20 4,560 4,642
8.500% due 03/15/20 3,000 3,070
9.300% due 03/15/20 127 129
9.000% due 05/15/20 259 261
9.125% due 06/15/20 5,415 5,599
5.750% due 08/15/20 300 284
8.500% due 09/15/20 29,577 30,289
9.000% due 09/15/20 204 213
5.500% due 10/15/20 200 177
8.750% due 10/15/20 500 515
8.900% due 11/15/20 26,415 27,364
9.500% due 11/15/20 16,217 16,904
6.000% due 12/15/20 400 368
8.750% due 12/15/20 1,265 1,335
9.000% due 12/15/20 8,351 8,693
8.000% due 03/15/21 16,398 16,825
8.500% due 05/15/21 6 6
8.500% due 06/15/21 45,553 47,182
6.950% due 07/15/21 700 672
7.000% due 07/15/21 4,000 3,889
8.000% due 07/15/21 8,168 8,280
9.000% due 07/15/21 4,407 4,582
9.500% due 07/15/21 6,078 6,573
6.200% due 08/15/21 1,500 1,467
6.950% due 08/15/21 185 178
8.000% due 08/15/21 23,472 24,092
6.500% due 09/15/21 2,500 2,373
7.500% due 11/15/21 3,500 3,507
9.000% due 11/15/21 2,904 2,960
6.850% due 01/15/22 700 675
8.000% due 05/15/22 7,000 7,207
7.000% due 07/15/22 387 337
8.500% due 10/15/22 16,653 17,251
7.500% due 07/15/23 5,924 5,589
7.190% due 10/25/23 (d) 42,307 43,180
6.500% due 02/15/24 68 65
Federal National Mortgage Assn.
9.100% due 02/25/02 9,537 9,753
5.750% due 12/25/03 175 173
6.000% due 07/25/07 300 289
7.009% due 08/25/07 (d) 126 100
7.000% due 02/25/08 1,189 1,150
10.500% due 08/25/08 7,146 7,873
6.400% due 09/25/14 1,023 1,019
8.500% due 10/25/14 204 207
10.000% due 12/25/14 2,343 2,430
7.000% due 04/25/15 3,921 3,955
6.000% due 11/25/15 34,549 34,378
7.500% due 08/25/16 8,547 8,581
9.670% due 01/25/17 981 1,016
9.200% due 12/25/17 2,485 2,569
9.300% due 05/25/18 2,970 3,141
9.500% due 06/25/18 1,420 1,511
5.500% due 07/25/18 220 213
8.500% due 07/25/18 532 539
7.750% due 10/25/18 300 305
9.500% due 11/25/18 11,679 12,857
7.500% due 01/25/19 2,273 2,275
6.625% due 06/25/19 97 97
9.500% due 06/25/19 5,942 6,296
8.000% due 10/25/19 16,840 17,160
7.500% due 12/25/19 200 202
9.000% due 12/25/19 19,265 20,256
8.500% due 01/25/20 13 13
7.500% due 05/25/20 8,000 7,973
8.000% due 07/25/20 290 296
9.000% due 09/25/20 6,550 6,897
8.000% due 12/25/20 18,692 18,874
7.500% due 01/25/21 22,667 21,909
8.750% due 01/25/21 9,963 10,278
7.500% due 02/25/21 25,811 25,867
7.500% due 03/25/21 20,919 21,018
7.250% due 04/25/21 8,960 8,762
7.500% due 06/25/21 320 323
8.000% due 07/25/21 24,228 24,410
8.500% due 09/25/21 14,640 15,138
8.000% due 10/25/21 22,430 23,058
6.000% due 12/25/21 200 185
8.000% due 01/25/22 21,700 22,224
8.000% due 03/25/22 722 727
7.000% due 04/25/22 17,091 16,065
7.000% due 07/25/22 8,596 8,098
</TABLE>
33
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Total Return Fund
March 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
8.000% due 07/25/22 $ 2,679 $ 2,691
6.500% due 08/25/23 270 260
6.750% due 10/25/23 441 369
6.500% due 11/25/23 170 157
7.000% due 11/17/24 63,477 55,869
8.400% due 04/25/25 8,644 8,712
First Boston Corp.
8.000% due 12/01/00 150 150
9.450% due 08/20/17 62 62
7.500% due 04/25/21 1,922 1,923
First Commonwealth Savings & Loan
10.375% due 04/01/05 24 25
General Electric Capital Mortgage
8.000% due 07/25/23 12,979 13,002
6.500% due 12/25/23 5,371 5,353
6.500% due 03/25/24 11,275 9,216
8.000% due 06/25/25 14,336 14,571
Glendale Federal Savings & Loan
7.483% due 03/01/28 (d) 14,461 14,537
Greenwich
7.157% due 04/25/22 (d) 4,193 4,216
7.264% due 07/25/22 (d) 16,930 17,087
7.158% due 10/25/22 (d) 563 567
7.250% due 04/25/23 (d) 6,824 6,873
7.646% due 04/25/24 (d) 14,956 15,111
7.648% due 06/25/24 (d) 24,275 24,625
8.238% due 08/25/24 (d) 29,608 30,496
7.834% due 11/25/24 (d) 19,382 19,836
Home Savings of America
10.000% due 07/01/09 49 52
Independent National Mortgage Corp.
9.000% due 12/25/19 26,105 26,464
6.650% due 10/25/24 2,723 2,538
7.920% due 11/25/24 (d) 21,253 21,804
7.069% due 07/25/25 (d) 55,720 56,555
7.803% due 07/25/25 (d) 67,943 69,684
International Mortgage Acceptance Corp.
12.250% due 03/01/14 980 1,065
J.P. Morgan & Co.
9.000% due 10/20/20 11,865 12,622
Kidder Peabody
8.390% due 05/20/18 621 630
7.900% due 03/25/24 (d) 44,089 44,750
7.901% due 03/25/24 (d) 20,000 19,663
Lomas Mortgage Funding Corp.
9.700% due 11/20/18 2,817 2,834
Marine Midland
8.000% due 04/25/23 142 143
8.000% due 10/25/23 350 333
Merrill Lynch Mortgage
9.470% due 04/27/18 67 69
6.965% due 06/15/21 (d) 11,764 11,804
7.225% due 06/15/21 (d) 11,028 11,028
7.585% due 06/15/21 (d) 2,450 2,439
8.051% due 06/25/22 (d) 22,114 22,556
Morgan Stanley Mortgage
8.971% due 10/22/15 3,722 3,751
8.150% due 07/20/21 20 20
Nomura Asset Securitization Corp.
7.247% due 05/25/24 (d) 22,221 22,589
Norwest Mortgage
12.500% due 02/01/14 1,663 1,775
12.250% due 04/01/14 167 182
PaineWebber Mortgage
6.000% due 04/25/09 11,951 10,742
Prudential Bache
6.309% due 09/01/18 (d) 792 796
9.000% due 01/01/19 540 560
8.400% due 03/20/21 4,559 4,680
Prudential Home
9.500% due 11/25/97 186 186
7.000% due 04/25/99 438 438
7.500% due 05/25/08 1,773 1,772
8.000% due 06/25/22 17,921 17,792
6.900% due 03/25/23 1,946 1,941
7.000% due 04/25/23 8,871 8,877
7.500% due 06/25/25 17,062 17,126
PSB Financial Corp.
11.050% due 12/01/15 1,715 1,824
Residential Asset Securities Corp.
8.000% due 10/25/24 25,404 25,597
Residential Funding
8.082% due 02/25/07 180 182
7.000% due 08/25/08 25,264 25,374
6.500% due 09/25/08 7,000 6,328
8.500% due 05/25/17 252 253
9.000% due 01/01/20 2,624 2,678
8.500% due 02/25/21 3,066 3,070
8.000% due 01/25/23 10,000 10,005
10.000% due 09/25/23 2,510 2,628
6.750% due 11/25/23 39,235 31,049
7.500% due 09/25/25 18,183 17,648
Resolution Trust Corp.
7.500% due 12/15/04 3,000 3,013
6.269% due 01/25/21 (d) 1,632 1,564
8.723% due 08/25/21 8,231 8,384
8.723% due 08/25/21 (d) 13,329 13,691
6.009% due 10/25/21 (d) 855 846
8.145% due 10/25/21 (d) 423 422
8.625% due 10/25/21 300 304
7.679% due 01/25/22 (d) 4,471 4,543
7.836% due 03/25/22 (d) 6,690 6,743
8.477% due 05/25/22 (d) 4,656 4,798
6.575% due 06/25/23 (d) 12,086 12,190
7.900% due 06/25/23 76 76
7.500% due 08/25/23 621 626
9.450% due 05/25/24 19,693 20,032
10.646% due 05/25/24 (d) 7,325 7,569
8.150% due 06/25/24 133 135
6.500% due 07/25/24 (d) 8,578 8,621
7.000% due 10/25/24 328 328
7.100% due 12/25/24 1,500 1,465
7.050% due 03/25/25 765 762
7.750% due 03/25/25 5,000 4,991
8.750% due 05/25/26 2,775 2,768
7.611% due 07/25/28 (d) 14,001 14,187
Ryland Acceptance Corp.
8.650% due 05/15/00 8,094 8,005
9.450% due 10/01/16 275 291
8.011% due 07/25/22 (d) 42,000 42,630
8.057% due 08/25/22 (d) 5,396 5,464
8.000% due 09/25/22 8,753 8,790
8.200% due 09/25/22 100 103
7.529% due 08/25/29 (d) 13,676 13,877
14.000% due 11/25/31 2,945 3,267
Ryland Mortgage Securities Corp.
7.211% due 10/25/31 (d) 22,287 22,553
Salomon Mortgage
7.574% due 11/25/22 (d) 2,748 2,767
7.778% due 07/01/24 (d) 36,334 37,322
Santa Barbara Savings
9.500% due 11/20/18 7,696 7,798
Saxon Mortgage
7.874% due 09/25/22 (d) 5,770 5,840
8.011% due 08/25/23 (d) 62,964 63,909
Sears Mortgage
9.250% due 12/01/16 3,899 4,046
6.790% due 06/25/22 (d) 1,530 1,528
7.717% due 09/25/22 (d) 6,498 6,559
8.697% due 05/25/32 (d) 23,331 23,572
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
Structured Asset Securities Corp.
5.944% due 02/25/28 $ 24,500 $ 24,420
UBS Mortgage
9.000% due 11/27/19 7,526 7,592
Vendee Mortgage Trust
7.750% due 03/15/16 600 605
-----------
2,149,580
===========
Other Mortgage-Backed Securities - 3.3%
Bank of America
8.375% due 05/01/07 5 5
9.000% due 03/01/08 138 143
9.000% due 04/05/08 39 40
9.000% due 05/01/08 11 12
9.500% due 07/01/08 61 62
11.875% due 04/01/10 15 16
Daiwa Mortgage
7.250% due 09/25/06 (d) 3,795 3,835
General American Capital Corp.
6.805% due 07/01/18 (d) 10,275 10,189
General Electric Credit Corp.
8.000% due 03/01/02 248 252
Georgia Federal Mortgage
10.500% due 11/01/14 2,996 3,111
Great Western Savings & Loan
6.150% due 09/25/17 (d) 285 277
Guardian
7.144% due 12/25/18 (d) 875 752
7.494% due 02/01/19 (d) 1,008 867
7.749% due 05/25/19 (d) 115 96
Home Savings of America
6.026% due 05/25/27 (d) 5,234 5,116
Imperial Savings & Loan
10.000% due 09/01/16 356 375
8.800% due 01/25/17 187 190
9.800% due 07/25/17 714 718
LTC Commercial Corp.
7.100% due 11/28/12 5,896 5,824
MDC Mortgage Funding
7.739% due 01/25/25 (d) 17,576 17,949
Merrill Lynch Mortgage
9.250% due 12/15/09 88 93
Mellon Financial Co.
13.250% due 01/15/99 498 530
Mid-State Trust
8.330% due 04/01/30 38,203 40,638
OSCC Home Equity
6.950% due 05/15/07 198 192
PaineWebber Mortgage
8.297% due 11/25/23 (d) 2,579 2,649
Resolution Trust Corp.
7.844% due 02/25/20 (d) 624 430
7.260% due 09/25/20 (d) 20,000 950
6.050% due 04/25/21 (d) 1,389 1,396
8.017% due 06/25/21 (d) 15,342 15,390
8.230% due 09/25/21 (d) 8,022 8,140
6.500% due 10/25/21 (d) 1,724 1,741
7.433% due 10/25/28 (d) 20,906 21,062
7.499% due 10/25/28 (d) 40,425 41,145
7.500% due 10/25/28 11,539 11,571
7.212% due 05/25/29 (d) 7,682 7,761
7.594% due 05/25/29 (d) 9,327 9,242
7.707% due 05/25/29 (d) 9,175 9,241
Rural Housing
3.330% due 04/01/26 827 754
Ryland Acceptance Corp.
9.000% due 12/01/16 1,249 1,297
11.500% due 12/25/16 382 384
7.691% due 11/28/22 (d) 7,000 7,103
7.909% due 09/25/23 (d) 23,047 23,399
Salomon Mortgage
11.500% due 09/01/15 2,698 2,946
Saxon Mortgage
7.922% due 12/25/22 (d) 25,592 25,848
Sears Mortgage
12.000% due 02/25/14 2,078 2,280
8.000% due 03/25/22 4,756 4,776
7.588% due 10/25/22 (d) 9,181 9,307
Securitized Asset Sales, Inc.
7.720% due 10/25/23 (d) 13,460 13,662
7.935% due 12/26/23 (d) 12,756 13,110
Structured Asset Securities Corp.
9.250% due 07/01/19 200 198
USGI Capital
8.500% due 11/25/07 12,752 12,934
Western Federal Savings & Loan
6.929% due 11/25/18 (d) 523 520
6.979% due 03/25/19 (d) 4,342 4,330
-----------
344,848
===========
Stripped Mortgage-Backed Securities - 0.3%
Federal Home Loan Mortgage Corp. (IO)
6.500% due 12/15/02 153 8
10.038% due 09/15/05 (d) 108 11
6.500% due 11/15/06 6,007 630
6.500% due 03/15/07 14,368 1,333
5.750% due 09/15/07 (d) 21,816 1,570
5.428% due 02/15/08 (d) 1,418 124
11.651% due 01/15/16 (d) 118 16
6.500% due 08/15/16 13,257 1,096
7.000% due 04/15/18 10,576 967
9.993% due 11/15/18 300 64
8.845% due 01/15/21 781 204
9.000% due 05/15/22 367 112
Federal National Mortgage Assn. (IO)
33.862% due 04/25/02 105 8
6.750% due 09/25/04 458 30
7.000% due 06/25/05 173 9
10.458% due 07/25/05 (d) 5,872 555
6.500% due 07/25/06 17,849 1,659
6.500% due 02/25/07 12,514 1,297
6.500% due 07/25/07 3,665 361
6.500% due 09/25/07 20,716 1,989
6.500% due 10/25/07 5,429 614
0.100% due 03/25/09 (d) 79,724 1,762
7.000% due 08/25/15 10,729 1,037
6.500% due 08/25/20 2,666 683
10.070% due 01/25/21 241 56
9.032% due 08/25/21 4,021 794
0.950% due 11/25/21 (d) 82,940 1,596
6.500% due 01/25/23 12,983 1,659
Federal Home Loan Mortgage Corp. (PO)
0.000% due 02/15/24 1,413 1,377
Federal National Mortgage Assn. (PO)
0.000% due 09/01/07 1,801 1,309
0.000% due 02/25/21 10,670 9,053
0.000% due 07/25/23 1,969 1,941
0.000% due 08/25/23 525 312
PaineWebber (IO)
13.595% due 08/01/19 470 165
-----------
34,401
-----------
Total Mortgage-Backed Securities 7,192,069
===========
(Cost $7,223,926)
================================================================================
Asset-Backed Securities - 1.6%
================================================================================
American Airlines Equipment Trust
10.210% due 01/01/10 6,500 7,709
Delta Air Lines Equipment Trust
9.230% due 07/02/02 17,127 18,155
</TABLE>
35
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Total Return Fund
March 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
10.500% due 01/02/07 $ 7,980 $ 9,207
10.570% due 01/02/07 15,881 19,504
9.550% due 01/02/08 7,773 8,732
10.000% due 06/05/13 10,828 12,384
Discover Card Trust
7.300% due 05/21/99 200 201
National Credit Card Trust
9.450% due 12/31/97 300 304
Standard Credit Card Master Trust
7.250% due 04/07/08 300 308
UAL Equipment Trust
9.200% due 03/22/08 4,610 4,929
10.360% due 11/13/12 7,000 8,066
10.020% due 03/22/14 4,500 5,160
10.850% due 07/05/14 34,111 41,583
10.125% due 03/22/15 14,300 16,909
9.060% due 06/17/15 5,000 5,327
9.210% due 01/21/17 2,000 2,150
-----------
Total Asset-Backed Securities 160,628
===========
(Cost $154,075)
================================================================================
Sovereign Issues - 3.9%
================================================================================
Banco Nacional de Obra y Servicios
10.750% due 08/16/96 1,500 1,512
6.875% due 10/01/98 19,500 18,159
Cemex
8.875% due 06/10/98 5,000 4,881
Kingdom of Sweden
10.250% due 11/01/15 500 639
Petroleos Mexicanos
8.750% due 03/05/97 3,500 3,509
Province of Newfoundland
9.000% due 06/01/19 500 577
Province of Nova Scotia
9.375% due 07/15/02 1,000 1,115
Province of Ontario
7.750% due 06/04/02 200 212
Province of Quebec
7.500% due 07/15/02 6,000 6,187
Province of Saskatchewan
9.125% due 02/15/21 3,000 3,541
Republic of Argentina
7.458% due 04/26/96 40,500 40,318
5.297% due 09/01/97 (d) 1,700 1,416
6.313% due 03/31/05 (d) 184,090 132,545
6.813% due 03/31/05 5,000 3,600
5.000% due 03/31/23 (d) 90,000 46,575
United Mexican States
6.250% due 12/31/19 89,000 56,404
6.547% due 12/31/19 (d) 59,000 44,471
6.609% due 12/31/19 (d) 2,000 1,508
6.766% due 12/31/19 (d) 50,000 37,688
-----------
Total Sovereign Issues 404,857
===========
(Cost $410,212)
================================================================================
Foreign Currency-Denominated Issues (c)(f) - 9.9%
================================================================================
City of Montreal
11.500% due 09/20/00 C$ 7,000 5,926
Commonwealth of Canada
9.000% due 12/01/04 117,500 93,986
8.750% due 12/01/05 488,600 385,798
Petroleos Mexicanos
7.750% due 09/30/98 FF 5,000 972
Republic of Germany
8.250% due 09/20/01 DM 6,130 4,657
7.250% due 10/21/02 16,465 11,924
6.250% due 01/04/24 855,900 513,897
RJR Nabisco
6.875% due 11/22/00 DM 9,500 6,549
-----------
Total Foreign Currency-
Denominated Issues 1,023,709
===========
(Cost $1,040,023)
================================================================================
Purchased CME Put Options - 0.0%
================================================================================
Eurodollar June Futures
Strike @ 91 Exp. 6/18/96 $1,800,000 45
Eurodollar June Futures
Strike @ 91.25 Exp. 6/18/96 2,100,000 53
Eurodollar September Futures
Strike @ 90.50 Exp. 9/16/96 1,300,000 0
-----------
Total Purchased CME Put Options 98
===========
(Cost $93)
================================================================================
Preferred Stock - 0.1%
================================================================================
<CAPTION>
Shares
<S> <C> <C>
Banco Bilbao Vizcaya International 266,217 7,388
Cleveland Electric Illuminating Co. 2,808 278
Santander Overseas 275,000 7,322
-----------
Total Preferred Stock 14,988
===========
(Cost $14,834)
================================================================================
Short-Term Instruments - 16.2%
================================================================================
<CAPTION>
Principal
Amount
(000's)
<S> <C> <C>
Discount Notes - 14.7%
Abbott Laboratories
5.340% due 04/23/96 $ 35,100 34,985
AT&T Corp.
5.370% due 04/01/96 2,100 2,100
5.200% due 04/02/96 27,800 27,796
5.160% due 04/03/96 16,000 15,995
5.200% due 04/03/96 87,000 86,975
Ameritech Co.
5.200% due 04/03/96 600 600
5.250% due 06/24/96 34,700 34,249
Amoco Credit Corp.
5.190% due 04/19/96 4,400 4,389
BellSouth Telecommunications
5.180% due 04/11/96 7,000 6,990
5.190% due 04/12/96 15,000 14,976
5.180% due 04/26/96 100 100
Campbell Soup Co.
5.310% due 05/07/96 25,000 24,867
Canadian Wheat Board
5.180% due 04/01/96 30,000 30,000
Coca-Cola Co.
5.180% due 04/09/96 10,000 9,988
5.300% due 04/11/96 400 399
5.320% due 04/11/96 20,700 20,669
5.200% due 06/14/96 2,500 2,471
Commonwealth Bank of Australia
5.200% due 04/02/96 13,600 13,598
5.150% due 04/22/96 4,000 3,988
5.250% due 04/25/96 5,200 5,182
5.240% due 04/29/96 3,200 3,187
5.190% due 05/20/96 1,900 1,887
Commonwealth of Canada
5.240% due 04/15/96 500 499
5.210% due 05/22/96 15,500 15,386
5.210% due 05/28/96 10,500 10,413
5.250% due 06/26/96 83,200 82,093
Duke Power Co.
5.230% due 04/12/96 2,500 2,496
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
E.I. Du Pont de Nemours
5.300% due 04/18/96 $ 4,000 $ 3,990
5.210% due 04/26/96 23,500 23,415
5.220% due 04/26/96 400 399
Eli Lilly & Co.
5.240% due 06/17/96 1,800 1,778
Emerson Electric Co.
5.220% due 04/02/96 20,000 19,997
Federal Home Loan Bank
5.025% due 04/25/96 800 797
5.190% due 04/25/96 89,120 88,812
Federal Home Loan Mortgage Corp.
5.270% due 04/18/96 1,700 1,696
5.260% due 04/22/96 3,000 2,991
5.270% due 04/22/96 28,300 28,213
Federal National Mortgage Assn.
5.120% due 04/15/96 5,300 5,289
5.170% due 04/16/96 14,000 13,970
5.300% due 04/16/96 29,000 28,936
5.270% due 05/15/96 1,100 1,093
Ford Motor Credit Corp.
5.370% due 04/01/96 51,700 51,700
5.240% due 04/08/96 18,100 18,082
5.250% due 05/10/96 13,600 13,523
5.280% due 05/28/96 1,300 1,289
5.250% due 06/26/96 1,500 1,480
5.260% due 07/05/96 124,800 122,960
General Electric Capital Corp.
5.230% due 04/03/96 34,900 34,890
5.540% due 04/03/96 13,000 12,996
5.210% due 04/12/96 100,000 99,841
5.320% due 04/23/96 11,000 10,964
5.340% due 04/23/96 61,800 61,598
5.260% due 04/25/96 59,000 58,793
5.390% due 04/26/96 900 897
Hewlett Packard Co.
5.220% due 06/14/96 17,000 16,804
KFW International Financial
5.250% due 05/17/96 9,500 9,436
Kimberly Clark Corp.
5.280% due 05/06/96 6,880 6,845
Minnesota Mining and Manufacturing
5.220% due 04/19/96 20,395 20,342
5.250% due 05/23/96 2,900 2,878
Motorola, Inc.
5.170% due 04/19/96 6,000 5,984
National Rural Utilities Cooperative
5.180% due 04/09/96 10,000 9,988
5.300% due 05/20/96 19,400 19,260
5.250% due 06/07/96 8,800 8,707
Ontario Hydro
5.380% due 04/02/96 34,500 34,495
Pitney Bowes Credit, Inc.
5.130% due 04/02/96 12,000 11,998
5.110% due 04/29/96 50,800 50,598
Province of Alberta
5.250% due 04/25/96 10,000 9,965
Shell Oil Co.
5.290% due 04/11/96 9,200 9,186
5.330% due 04/11/96 8,100 8,088
5.180% due 04/12/96 1,000 998
United Parcel Service
5.430% due 04/04/96 21,100 21,090
5.170% due 04/12/96 16,200 16,174
U.S. West Communications
5.150% due 04/04/96 23,500 23,490
Wal-Mart Stores
5.370% due 04/01/96 62,800 62,800
Warner Lambert
5.450% due 04/09/96 2,200 2,198
Wisconsin Electric Power & Light
5.200% due 04/04/96 1,500 1,499
-----------
1,519,490
===========
Repurchase Agreements - 0.4%
Daiwa Securities
5.200% due 04/01/96 33,000 33,000
(Dated 03/29/96. Collateralized
by U.S. Treasury Bill due 09/19/96
valued at $33,784,548. Repurchase
proceeds are $33,014,300.)
State Street Bank
4.750% due 04/01/96 8,742 8,742
(Dated 03/29/96. Collateralized
by U.S. Treasury Bond 8.750%
due 05/15/17 valued at $8,917,531.
Repurchase proceeds are $8,745,460.)
-----------
41,742
===========
U.S. Treasury Bills - 1.1%
4.851% 04/04/96-08/29/96 (b)(g) 118,230 116,956
-----------
Total Short-Term Instruments 1,678,188
===========
(Cost $1,678,432)
Total Investments (a) - 126.0% $13,039,888
(Cost $13,069,858)
Written Options (e) - (0.3%) (28,856)
(Premiums $11,679)
Other Assets and Liabilities (Net) - (25.7%) (2,658,809)
-----------
Net Assets - 100.0% $10,352,223
===========
</TABLE>
Notes to Schedule of Investments ($ 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. $ 103,632
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (137,109)
-----------
Unrealized depreciation-net $ (33,477)
===========
(b) Securities with an aggregate market value of $116,956 have been segregated
with the custodian to cover margin requirements for the following open
future contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Type Contracts Depreciation
- --------------------------------------------------------------------------------
<S> <C> <C>
Republic of Germany 10 Year Bond (6/96) 3,726 $ (3,458)
U.S. Treasury 5 Year Note (6/96) 5,728 (4,963)
U.S. Treasury 10 Year Note (6/96) 7,852 (9,165)
U.S. Treasury 30 Year Bond (6/96) 8,199 (31,227)
-----------
$ (48,813)
===========
</TABLE>
37
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Total Return Fund
March 31, 1996
- --------------------------------------------------------------------------------
(c) Foreign forward currency contracts outstanding at March 31, 1996:
<TABLE>
<CAPTION>
Principal
Amount Unrealized
Covered by Expiration Appreciation/
Type Contract Month (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Buy BP 3,300 05/96 $ (2)
Sell C$ 290,322 05/96 (1,586)
Sell C$ 73,500 03/97 (92)
Sell FF 4,535 06/96 10
Buy DM 265,001 04/96 582
Buy DM 121,456 05/96 (1,449)
Sell DM 59,140 05/96 112
Sell DM 407,304 12/96 7,662
Sell DM 361,008 01/97 1,295
Sell DM 65,330 02/97 (522)
--------
$ 6,010
========
</TABLE>
(d) Variable rate security. The rate listed is as of
March 31, 1996.
(e) Premiums received on Written Put Options:
<TABLE>
<CAPTION>
Premium Market
Type Par Received Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
CBOT U.S. Treasury Bond June Futures
Strike @ 112.00 Exp. 05/18/96 $1,118,000 $ 10,056 $22,185
CBOT U.S. Treasury Bond June Futures
Strike @ 114.00 Exp. 05/18/96 200,000 1,067 6,469
CBOT U.S. Treasury Bond September Futures
Strike @ 110.00 Exp. 08/24/96 5,000 66 116
CME Eurodollar June Futures
Strike @ 94.00 Exp. 06/17/96 668,000 420 16
OTC General Motors Acceptance Corp.
Strike @ 99.90 Exp. 06/03/96 70,000 70 70
-------------------
$ 11,679 $28,856
===================
</TABLE>
(f) Principal amount denoted in indicated currency:
BP - British Pound
C$ - Canadian Dollar
DM - German Mark
FF - French Franc
(g) Securities are grouped by coupon and represent a range of maturities.
(h) Security becomes interest bearing at a future date.
See Notes to Financial Statements
38
<PAGE>
SCHEDULE OF INVESTMENTS
Total Return Fund II
March 31, 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Mortgage-Backed Securities .................................. 78.1%
Corporate Bond and Notes .................................... 25.1%
Other ....................................................... 1.6%
Short-Term Instruments ...................................... 22.9%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
Corporate Bonds and Notes - 25.1%
================================================================================
<S> <C> <C>
Banking and Finance-6.5%
Citicorp
5.388% due 01/30/98 (c) $ 5,000 $ 4,985
5.438% due 05/29/98 (c) 5,000 4,984
Discover Credit Corp.
9.000% due 04/15/96 5,250 5,267
First Interstate Bancorp
6.000% due 06/25/97 (c) 250 251
General Motors Acceptance Corp.
6.750% due 04/25/97 10,000 10,095
7.900% due 05/01/97 500 511
Great Western Financial
8.625% due 12/01/98 3,000 3,144
Lehman Brothers Holdings
8.875% due 11/01/98 500 528
-----------
29,765
===========
Industrials-12.2%
AMR Corp.
7.750% due 12/01/97 10,000 10,215
9.430% due 05/10/01 1,000 1,099
8.900% due 02/26/07 6,450 6,987
Columbia Health Care
5.535% due 07/28/97 (c) 15,000 15,012
Time Warner, Inc.
6.210% due 08/15/00 (c) 5,575 5,612
7.975% due 08/15/04 3,345 3,406
8.110% due 08/15/06 6,690 6,884
8.180% due 08/15/07 6,690 6,869
-----------
56,084
===========
Utilities-6.4%
Commonwealth Edison
8.000% due 10/15/03 7,550 7,637
CTC Mansfield Funding
11.125% due 09/30/16 2,500 2,610
Illinois Power Co.
5.850% due 10/01/96 1,000 1,001
Long Island Lighting Co.
8.750% due 05/01/96 8,000 8,016
9.000% due 11/01/22 7,250 6,916
Ohio Edison
8.500% due 05/01/96 3,000 3,006
-----------
29,186
-----------
Total Corporate Bonds and Notes 115,035
===========
(Cost $111,712)
================================================================================
Mortgage Backed Securities - 78.1%
================================================================================
Federal Home Loan Mortgage Corporation-14.1%
7.250% due 03/01/06 500 507
7.488% due 02/01/23 (c) 2,514 2,567
7.500% due 05/13/26 25,000 24,922
7.841% due 04/01/29 (c) 3,775 3,882
8.000% due 04/01/25-12/01/25 (e) 9,816 9,997
8.132% due 12/01/22 (c) 21,255 21,954
8.250% due 03/01/08-05/01/08 (e) 305 317
8.500% due 12/01/01 8 9
9.500% due 02/01/11 184 199
10.000% due 06/01/11 35 39
10.500% due 04/01/01 173 183
15.500% due 06/01/11 3 3
-----------
64,579
===========
Federal Housing Administration-0.2%
7.430% due 10/01/19 389 392
8.829% due 05/01/19 648 671
-----------
1,063
===========
Federal National Mortgage Association-12.1%
4.500% due 07/01/96 1 1
7.000% due 08/01/09 537 537
7.078% due 02/01/23 (c) 6,532 6,553
7.200% due 04/01/24 4,953 5,077
7.482% due 12/01/23 (c) 3,066 3,164
7.500% due 04/01/24 (c) 17,502 17,514
7.599% due 01/01/24 (c) 5,963 6,156
7.675% due 10/01/24 (c) 3,459 3,570
7.750% due 10/01/07 585 593
8.000% due 10/01/05 723 740
8.013% due 07/01/20 (c) 2,051 2,123
8.500% due 12/01/01-08/01/07 (e) 6,653 6,902
9.000% due 12/01/01 1,909 2,019
11.000% due 09/01/10 354 394
13.750% due 10/01/10-12/01/14 (e) 154 180
14.500% due 03/01/13 10 12
14.750% due 10/01/12-11/01/12 (e) 45 53
-----------
55,588
===========
Government National Mortgage Association-26.7%
6.500% due 04/18/26 30,000 28,275
7.000% due 01/20/25 (c) 4,163 4,235
7.000% due 04/18/26 80,000 77,925
7.250% due 09/20/24 (c) 4,156 4,213
7.375% due 06/20/23 (c) 7,417 7,497
7.500% due 03/15/24 440 440
12.000% due 10/15/12-10/15/15 (e) 82 94
-----------
122,679
===========
Collateralized Mortgage Obligations-22.8%
AFC Home Equity Loan Trust
7.517% due 10/25/26 (c) 7,157 7,218
American Southwest Financial
8.450% due 09/01/17 246 245
Capstead
8.900% due 12/25/21 900 927
Chase Mortgage Financial Corp.
8.000% due 06/25/24 733 741
Citicorp Mortgage
9.500% due 07/01/04 44 45
9.500% due 10/25/04 174 182
Collateralized Mortgage Securities Corp.
9.000% due 04/25/10 16,872 17,267
Countrywide
7.697% due 11/25/24 (c) 10,249 10,476
Donaldson, Lufkin & Jenrette
11.000% due 08/01/19 506 555
Federal Home Loan Mortgage Corp.
8.800% due 12/01/15 316 339
9.000% due 12/15/20 4,364 4,526
7.000% due 07/15/22 12,422 11,176
Federal National Mortgage Assn.
7.000% due 04/25/15 310 312
8.500% due 03/25/17 1,188 1,204
9.000% due 09/25/18 1,949 2,011
9.250% due 07/25/19 8,272 8,613
Guaranteed Mortgage Corp.
9.300% due 07/20/19 1,000 1,067
Independent National Mortgage Corp.
7.920% due 11/25/24 (c) 9,018 9,252
Norwest Mortgage
12.375% due 01/01/14 570 617
Residential Funding
10.000% due 10/01/19 48 48
Ryland Acceptance Corp.
8.000% due 09/25/22 8,447 8,483
Saxon Mortgage
7.874% due 09/25/22 (c) 5,657 5,725
</TABLE>
39
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Total Return Fund II
March 31, 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
..........................................................A .............. 6%
..........................................................BBB ............ 13%
..........................................................BB ............. 2%
..........................................................A1/P1........... 17%
..........................................................AAA ............ 62%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
<S> <C> <C>
8.123% due 01/25/23 (c) $ 8,290 $ 8,373
Sears Mortgage
8.250% due 09/25/31 267 266
8.697% due 05/25/32 (c) 4,734 4,783
U.S. Home Equity
8.500% due 04/15/21 53 54
-----------
104,505
===========
Other Mortgage-Backed Securities-2.2%
Bank of America
9.000% due 03/01/08 115 119
Dime Savings
7.135% due 11/25/18 (c) 210 188
Federal Home Loan Mortgage Corp.
11.875% due 06/15/13 365 401
Ryland Acceptance Corp.
7.909% due 09/25/23 (c) 8,381 8,522
Security Pacific National Bank
8.500% due 03/01/17 122 121
Western Federal Savings & Loan
6.979% due 03/25/19 (c) 939 936
-----------
10,287
-----------
Total Mortgage-Backed Securities 358,701
(Cost $361,316) ===========
</TABLE>
<TABLE>
<CAPTION>
=========================================================================
Asset-Backed Securities - 1.6%
=========================================================================
<S> <C> <C>
United Air Lines Equipment Trust
9.190% due 12/24/13 7,213 7,520
-----------
Total Asset-Backed Securities 7,520
(Cost $7,891) ===========
=========================================================================
Short-Term Instruments - 22.9%
=========================================================================
Discount Notes-21.7%
Abbot Laboratories
5.250% due 04/11/96 10,100 10,085
Ameritech Corp.
5.230% due 06/25/96 13,000 12,829
AT&T Corp.
5.180% due 04/09/96 1,200 1,199
Eli Lilly & Co.
5.240% due 06/17/96 10,500 10,374
Federal Home Loan Mortgage Corp.
5.150% due 04/11/96 3,400 3,395
Federal National Mortgage Assn.
5.120% due 04/03/96 7,000 6,998
5.120% due 04/15/96 8,000 7,984
5.140% due 05/03/96 4,000 3,982
Ford Motor Credit Co.
5.370% due 04/01/96 2,500 2,500
5.240% due 04/08/96 900 899
5.250% due 05/10/96 2,700 2,685
5.250% due 06/26/96 10,500 10,360
G.E. Capital Corp.
5.340% due 04/23/96 4,000 3,987
Hewlett Packard Co.
5.140% due 04/26/96 4,000 3,986
5.230% due 06/20/96 600 594
Minnesota Mining & Mfg. Co.
5.250% due 05/23/96 3,300 3,276
Motorola, Inc.
5.170% due 04/02/96 1,000 1,000
United Parcel Service
5.430% due 04/04/96 1,000 1,000
Wal-Mart Stores
5.280% due 04/11/96 12,400 12,381
-----------
99,514
===========
Repurchase Agreement-0.4%
State Street Bank
4.750% due 04/01/96 $ 1,851 $ 1,851
(Dated 3/29/96. Collateralized by -----------
U.S. Treasury Notes 8.75% 05/15/17
valued at $1,888,782 Repurchase
proceeds are $1,851,733.)
U.S. Treasury Bills-0.8%
4.788% due 04/04/96-08/29/96(b)(e) 3,835 3,791
-----------
Total Short-Term Instruments 105,156
(Cost $105,181) ===========
Total Investments (a)-127.7% $ 586,412
(Cost $586,100)
Written Options (d)-0.0% (397)
(Premiums $233)
Other Assets and Liabilities (Net)-(27.7)% (127,112)
-----------
Net Assets - 100.0% $ 458,903
===========
</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. $ 5,410
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (5,098)
-----------
Unrealized appreciation-net $ 312
===========
(b) Securities with an aggregate market value of $3,791 have been segregated
with the custodian to cover margin requirements for the following open
future contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Type Contracts Depreciation
- -------------------------------------------------------------------------
<S> <C> <C>
CBOT U.S. Treasury 5 Year Note (6/96) 267 $ (580)
CBOT U.S. Treasury 10 Year Note (6/96) 832 (1,248)
CBOT U.S. Treasury 30 Year Bond (6/96) 474 (45)
-------------
$ (1,873)
=============
</TABLE>
(c) Variable rate security. The rate listed is as of March 31, 1996.
(d) Premiums received on Written Put Options:
<TABLE>
<CAPTION>
Premium Market
Type Par Received Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
CBOT U.S. Treasury Bond Futures
Strike @ 112.00 Exp. 5/18/96 $20,000 $ 233 $ 397
</TABLE>
(e) Securities are grouped by coupon and represent a range of maturities.
See Notes to Financial Statements
40
<PAGE>
SCHEDULE OF INVESTMENTS
Total Return Fund III
March 31, 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Mortgage-Backed Securities .................................. 63.9%
Short-Term Instruments ...................................... 22.4%
Foreign Currency-Denominated ................................ 10.4%
Corporate Bonds and Notes ................................... 13.8%
Other ....................................................... 4.5%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
<S> <C> <C>
=========================================================================
Corporate Bonds and Notes - 13.8%
=========================================================================
Industrials-6.2%
Arkla, Inc.
9.875% due 02/15/18 $ 500 $ 505
Coastal Corp.
10.375% due 10/01/00 3,000 3,412
Spieker Properties
6.950% due 12/15/02 2,000 1,946
Time Warner, Inc.
8.375% due 07/15/33 3,000 3,018
-----------
8,881
===========
Utilities-7.6%
Cablevision Industries
10.750% due 01/30/02 3,000 3,255
Cleveland Electric Illuminating Co.
8.750% due 11/15/05 3,500 3,402
Niagara Mohawk Power
5.875% due 11/01/96 2,640 2,616
North Atlantic Energy
9.050% due 06/01/02 944 939
System Energy Resources
10.500% due 09/01/96 70 71
Texas Gas Transmission Corp.
9.625% due 07/15/97 500 526
-----------
10,809
-----------
Total Corporate Bonds and Notes 19,690
(Cost $19,953) ===========
=========================================================================
U.S. Treasury Notes - 0.1%
=========================================================================
5.500% due 04/30/96 40 40
-----------
Total U.S. Treasury Notes 40
(Cost $40) ===========
=========================================================================
U.S. Government Agencies - 0.4%
=========================================================================
Federal National Mortgage Assn.
9.150% due 04/10/98 300 317
5.870% due 10/15/03 50 47
Government Trust Certificate - Greece
8.000% due 05/15/98 225 227
-----------
Total U.S. Government Agencies 591
===========
(Cost $579)
=========================================================================
Mortgage-Backed Securities-63.9%
=========================================================================
Federal Home Loan Mortgage Corporation-9.2%
7.500% due 05/13/26 5,000 4,984
8.000% due 02/01/06 475 483
8.000% due 04/11/26 4,000 4,071
8.132% due 12/01/22 (d) 3,422 3,535
-----------
13,073
===========
Federal National Mortgage Association-8.3%
6.360% due 07/01/17 (d) 119 120
6.369% due 12/01/27-02/01/27(d)(g) 4,109 4,142
6.396% due 08/01/29 (d) 135 137
7.500% due 04/01/24 4,376 4,379
8.121% due 07/01/23 (d) 1,585 1,637
8.250% due 07/01/17 195 199
8.500% due 02/01/07 1,085 1,122
9.000% due 07/01/05 67 71
-----------
11,807
===========
Government National Mortgage Association-19.1%
6.500% due 05/20/26 15,000 14,184
7.000% due 06/20/22-11/20/24(d)(g) 12,831 12,999
-----------
27,183
===========
Collateralized Mortgage Obligations-20.6%
Chase Mortgage Financial Corp.
9.500% due 04/25/24 232 233
CMC Securities Corp.
7.430% due 04/25/25 (d) 4,543 4,611
CMO Trust
8.000% due 01/01/17 5,959 6,085
Federal Home Loan Mortgage Corp.
8.000% due 05/15/00-02/15/15 (g) 2,408 2,462
7.500% due 04/15/19 2,123 2,139
Federal National Mortgage Assn.
7.750% due 07/25/19 416 423
Greenwich
7.834% due 11/25/24 (d) 2,685 2,748
PNC Mortgage Securities Corp.
7.500% due 06/25/10 1,308 1,310
Residential Accredit Loans, Inc.
7.050% due 01/25/26 2,000 1,877
7.250% due 01/25/26 3,000 2,772
Residential Funding
9.000% due 07/01/21 618 625
Resolution Trust Corp.
8.835% due 12/25/23 2,500 2,547
Sears Mortgage
8.697% due 05/25/32 (d) 1,420 1,435
-----------
29,267
===========
Other Mortgage-Backed Securities-4.8%
Guardian
6.836% due 07/25/20 (d) 1,580 1,011
Resolution Trust Corp.
8.625% due 10/25/21 522 524
7.707% due 05/25/29 (d) 3,153 3,176
Ryland Acceptance Corp.
7.909% due 09/25/23 (d) 2,095 2,131
-----------
6,842
===========
Stripped Mortgage-Backed Securities-1.9%
Federal Home Loan Mortgage Corp. (IO)
6.500% due 04/15/22 9,961 1,290
Resolution Trust Corp. (PO)
0.000% due 09/25/00 1,575 1,429
-----------
2,719
-----------
Total Mortgage-Backed Securities 90,891
(Cost $91,968) ===========
=========================================================================
Sovereign Issues - 4.0%
=========================================================================
Republic of Argentina
6.313% due 03/31/05 (d) 3,960 2,851
Province of Quebec
8.800% due 04/15/03 1,000 1,105
Province of Saskatchewan
11.000% due 01/09/01 2,000 1,694
-----------
Total Sovereign Issues 5,650
(Cost $5,291) ===========
=========================================================================
Foreign Currency-Denominated Issues (c)(f) - 10.4%
=========================================================================
Republic of Germany
6.250% due 01/04/24 DM 5,000 3,002
Commonwealth of Canada
8.500% due 04/01/02 C$ 2,000 1,559
8.750% due 12/01/05 2,520 1,990
United Kingdom Gilt
9.500% due 04/18/05 BP 5,000 8,276
-----------
Total Foreign Currency-Denominated Issues 14,827
(Cost $15,184) ===========
</TABLE>
41
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Total Return Fund III
March 31, 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
A ...................................................................... 3%
BBB ...................................................................... 8%
BB ...................................................................... 7%
A1 ...................................................................... 21%
AAA ...................................................................... 61%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
<S> <C> <C>
=========================================================================
Purchased CME Put Option - 0.0%
=========================================================================
Eurodollar June Futures
Strike @ 90.75 Exp. 6/17/96 $ 110,000 $ 0
-----------
Total Purchased CME Put Option 0
(Cost $2) ===========
=========================================================================
Short-Term Instruments - 22.4%
=========================================================================
Discount Notes-21.1%
AT&T Corp.
5.290% due 05/02/96 4,000 3,982
Amoco Credit Corp.
5.190% due 04/19/96 3,000 2,992
Commonwealth Bank of Australia
5.150% due 04/22/96 3,500 3,490
5.190% due 05/20/96 1,000 993
E.I. Du Pont de Nemours
5.280% due 04/01/96 800 800
Federal Home Loan Mortgage Corp.
5.120% due 04/03/96 2,200 2,199
5.170% due 04/16/96 5,500 5,488
5.280% due 04/22/96 700 698
Ford Motor Credit Corp.
5.370% due 04/01/96 2,000 2,000
5.250% due 05/10/96 1,000 994
5.250% due 06/26/96 3,000 2,962
Kimberly Clark
5.120% due 04/19/96 800 798
Minnesota Mining & Mfg. Co.
5.250% due 05/23/96 1,400 1,389
Shell Oil Co.
5.290% due 04/11/96 300 300
United Parcel Service
5.430% due 04/04/96 1,000 1,000
-----------
30,085
===========
Repurchase Agreement-0.4%
State Street Bank
4.750% due 04/01/96 550 550
(Dated 03/29/96. Collateralized by -----------
U.S. Treasury Note 8.750% 05/15/17
valued at $563,538. Repurchase
proceeds are 550,218.)
U.S. Treasury Bills-0.9%
4.870% due 04/04/96-08/29/96(b)(g) 1,250 1,239
-----------
Total Short-Term Instruments 31,874
(Cost $31,874) ===========
Total Investments (a)-115.0% $ 163,563
(Cost $164,891)
Written Options (e)-(0.1%) (198)
(Premiums $79)
Other Assets and Liabilities (Net)-(14.9%) (21,142)
-----------
Net Assets-100.0% $ 142,223
===========
</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. $ 971
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (2,169)
-----------
Unrealized depreciation-net $ (1,198)
-----------
(b) Securities with an aggregate market value of $1,239 have been segregated
with the custodian to cover margin requirements for the following open
future contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Type Contracts Depreciation
- -------------------------------------------------------------------------
<S> <C> <C>
Republic of Germany 10 Year Bond (6/96) 30 $ (102)
U.S. Treasury 5 Year Note (6/96) 100 (217)
U.S. Treasury 10 Year Note (6/96) 198 (520)
U.S. Treasury 30 Year Bond (6/96) 150 (358)
-----------
$ (1,197)
-----------
</TABLE>
(c) Foreign forward currency contracts outstanding at March 31, 1996:
<TABLE>
<CAPTION>
Principal
Amount Unrealized
Covered Expiration Appreciation/
Type by Contract Month (Depreciation)
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell BP 5,353 5/96 $ 3
Sell C$ 4,325 5/96 (24)
Sell DM 4,495 1/97 39
-----------
$ 18
===========
</TABLE>
(d) Variable rate security. The rate listed is as of March 31, 1996.
(e) Premiums received on Written Put Options:
<TABLE>
<CAPTION>
Premiums Market
Type Par Received Value
- -------------------------------------------------------------------------
<S> <C> <C> <C>
CBOT U.S. T-Bond Futures
Strike @ 112.00 Exp. 05/18/96 $10,000 $ 79 $ 198
</TABLE>
(f) Principal amount denoted in indicated currency:
BP - British Pound
C$ - Canadian Dollar
DM - German Mark
(g) Securities are grouped by coupon and represent a range of maturities.
See Notes to Financial Statements
42
<PAGE>
SCHEDULE OF INVESTMENTS
Low Duration Fund
March 31, 1996
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<CAPTION>
<S> <C>
Corporate Bonds and Notes ............................................ 30.5%
Other ................................................................ 5.3%
Short-Term Instruments ............................................... 16.5%
Mortage-Backed Securities............................................. 77.5%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amounts Value
(000's) (000's)
=========================================================================
Corporate Bonds and Notes - 30.5%
=========================================================================
<S> <C> <C>
Banking and Finance - 11.4%
American Express Co.
8.750% due 06/15/96 $ 1,000 $ 1,007
American General Financial Corp.
7.750% due 01/15/97 600 609
6.000% due 02/23/98 1,000 996
Associates Corp. of North America
6.750% due 07/15/97 625 631
7.250% due 05/15/98 500 511
7.500% due 05/15/99 1,000 1,035
AT&T Capital Corp.
7.660% due 01/30/97 600 610
Banc One Corp.
7.250% due 08/01/02 500 513
Bancomer
8.000% due 07/07/98 4,000 3,825
BankAmerica Corp.
7.200% due 09/15/02 100 102
Bankers Trust
8.250% due 07/02/96 3,000 3,017
7.250% due 11/01/96 5,500 5,544
Banponce Corp.
5.813% due 01/27/97(d) 5,000 5,003
Capital One Bank
5.925% due 07/26/96(d) 15,000 15,001
Chrysler Financial Corp.
8.125% due 12/15/96 15,000 15,255
6.100% due 11/03/97 2,000 2,003
8.330% due 02/02/98 5,490 5,699
6.280% due 07/17/98 3,000 3,005
Citicorp
5.438% due 05/29/98(d) 8,000 7,974
Comercia Bank
6.750% due 05/12/98 500 506
Commercial Credit
5.500% due 05/15/98 1,000 984
Den Danske Bank
7.038% due 06/23/00(d) 1,000 1,009
Discover Credit Corp.
8.970% due 07/08/96 2,000 2,015
9.000% due 07/24/96 7,500 7,567
8.875% due 08/07/96 5,000 5,047
7.760% due 05/13/97 5,000 5,085
Ford Capital
9.000% due 06/01/96 4,800 4,827
Ford Motor Credit Corp.
7.875% due 01/15/97 700 711
6.800% due 08/15/97 1,200 1,213
6.520% due 02/03/98 1,000 1,008
General Motors Acceptance Corp.
8.600% due 05/10/96 1,050 1,053
6.700% due 05/20/96 3,000 3,005
8.800% due 07/03/96 1,500 1,513
8.800% due 07/08/96 1,850 1,865
5.590% due 07/19/96 (d) 7,500 7,510
5.907% due 07/26/96 (d) 7,750 7,752
6.625% due 08/01/96 5,000 5,019
8.100% due 09/19/96 250 253
8.000% due 10/01/96 500 506
6.147% due 10/15/96 (d) 16,000 16,040
7.650% due 12/17/96 425 431
8.250% due 01/13/97 9,000 9,176
8.000% due 01/23/97 17,000 17,310
7.750% due 01/24/97 2,500 2,541
7.625% due 02/28/97 10,000 10,162
7.750% due 04/15/97 13,834 14,098
7.000% due 08/19/97 175 178
Goldman Sachs Mortgage Corp.
5.000% due 08/23/96 17,455 17,400
Kansallis-Osake
7.530% due 09/30/43 (d) 13,500 13,905
Lehman Brothers, Inc.
7.000% due 05/15/97 500 505
7.375% due 08/15/97 500 508
Manufacturers Hanover Corp.
5.750% due 04/30/97 (d) 6,000 5,984
Marine Midland Bank
5.813% due 09/27/96 (d) 2,000 1,998
Navistar Financial
9.500% due 06/01/96 2,000 2,010
Norwest Financial, Inc.
6.400% due 11/15/96 15,000 15,084
Salomon, Inc.
5.720% due 06/11/96 3,000 2,999
5.200% due 01/20/97 750 743
8.850% due 02/10/97 2,000 2,040
8.670% due 02/13/97 1,500 1,530
5.930% due 03/17/97 12,590 12,536
7.125% due 08/01/99 1,000 1,002
Signet Banking Corp.
5.375% due 05/15/97 (d) 2,095 2,084
5.813% due 04/15/98 (d) 2,865 2,838
Society Bank
6.875% due 10/15/96 19,375 19,508
Transamerica Financial
6.940% due 04/27/98 700 709
Wachovia Bank
4.625% due 12/13/96 1,000 994
-------
305,101
=======
Industrials - 12.3%
AMR Corp.
8.730% due 08/19/96 1,000 1,011
7.600% due 01/27/97 2,000 2,025
6.500% due 03/15/97 3,690 3,707
9.500% due 07/15/98 1,000 1,060
9.270% due 08/13/98 2,000 2,116
8.100% due 11/01/98 2,000 2,053
8.730% due 11/02/98 3,000 3,147
9.910% due 03/01/01 2,500 2,762
10.000% due 03/07/01 4,000 4,434
9.440% due 05/15/01 5,000 5,437
9.125% due 10/24/01 1,000 1,077
Arkla, Inc.
8.780% due 07/19/96 9,500 9,571
8.740% due 07/19/96 5,000 5,037
9.875% due 04/15/97 11,500 11,890
9.200% due 12/18/97 1,000 1,040
Bausch & Lomb
6.480% due 12/17/97 275 277
Coastal Corp.
10.375% due 10/01/00 5,000 5,687
11.750% due 06/15/06 22,500 23,637
Consolidated Natural Gas Co.
8.750% due 06/01/99 400 428
Delta Air Lines
8.250% due 05/15/96 5,000 5,008
7.790% due 12/01/98 4,449 4,546
E. I. Du Pont de Nemours
8.500% due 02/10/98 100 104
First Brands Corp.
9.125% due 04/01/99 3,000 3,083
Ford Motor Co.
9.250% due 07/15/97 14,900 15,494
9.000% due 09/15/01 500 551
</TABLE>
43
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Low Duration Fund
March 31, 1996
<TABLE>
<CAPTION>
<S> <C>
AA ...................................................................... 2%
A ....................................................................... 8%
BBB ..................................................................... 12%
BB ...................................................................... 7%
A1 ...................................................................... 13%
AAA ..................................................................... 58%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
<S> <C> <C>
General Motors Corp.
9.750% due 05/15/99 $ 2,300 $ 2,310
McGaw Inc.
10.375% due 04/01/99 1,000 1,025
Minnesota Mining & Mfg. Co.
6.250% due 03/29/99 200 200
Nabisco, Inc.
8.300% due 04/15/99 2,900 3,036
8.000% due 01/15/00 16,675 17,398
News America Holdings Corp.
12.000% due 12/15/01 4,805 5,273
Pepsico, Inc.
7.000% due 10/14/99 600 604
Pfizer, Inc.
6.500% due 02/01/97 500 504
Philip Morris Co.
8.750% due 12/01/96 8,250 8,408
7.500% due 03/15/97 250 254
Sears Roebuck & Co.
9.360% due 06/12/96 500 503
9.000% due 09/15/96 1,500 1,521
9.250% due 04/15/98 5,750 6,083
Tenneco, Inc.
10.850% due 10/30/98 3,347 3,564
Time Warner, Inc.
7.450% due 02/01/98 810 824
6.210% due 08/15/00 (d) 35,412 35,647
7.975% due 08/15/04 21,247 21,632
8.110% due 08/15/06 42,495 43,728
8.180% due 08/15/07 42,495 43,635
United Air Lines
6.750% due 12/01/97 11,875 11,856
USX Corp.
7.750% due 01/21/98 2,000 2,035
Varity Corp.
11.375% due 11/15/98 4,650 4,788
Waste Management, Inc.
7.875% due 08/15/96 100 101
-------
330,111
=======
Utilities - 6.8%
Alabama Power
7.250% due 08/01/07 100 99
Bell Atlantic Financial
6.000% due 06/01/98 500 499
Cablevision Industries
10.750% due 01/30/02 2,000 2,170
Carolina Power & Light
7.900% due 12/27/96 16,300 16,564
Central Power & Light
6.625% due 01/01/98 100 101
Cleveland Electric Illuminating Co.
9.110% due 07/22/96 500 503
9.100% due 07/22/96 1,500 1,509
9.450% due 12/01/97 11,400 11,700
8.330% due 10/30/98 1,500 1,491
9.375% due 03/01/17 3,000 2,754
CMS Energy
9.500% due 10/01/97 (d) 23,175 23,951
Commonwealth Edison
8.130% due 08/15/96 5,000 5,038
5.750% due 12/01/96 2,000 1,994
8.875% due 05/15/97 7,000 7,186
Consumers Power Co.
8.750% due 02/15/98 5,000 5,172
CTC Mansfield Funding
11.125% due 09/30/16 7,985 8,337
Detroit Edison
6.000% due 12/01/96 4,040 4,040
Gulf States Utilities
6.670% due 11/01/96 2,500 2,512
Long Island Lighting Co.
8.750% due 05/01/96 2,000 2,004
7.625% due 04/15/98 3,000 3,044
7.300% due 07/15/99 3,000 2,984
6.250% due 07/15/01 2,275 2,137
Louisiana Power & Light Co.
7.740% due 07/01/02 10,500 10,642
10.300% due 01/02/05 2,940 3,076
Mississippi Power & Light
8.800% due 04/01/05 1,000 1,023
New Orleans Public Service
10.950% due 05/01/97 4,200 4,364
New York State Electric
6.500% due 09/01/98 2,350 2,346
North Atlantic Energy
9.050% due 06/01/02 4,718 4,698
Northern States Power Co.
5.875% due 10/01/97 100 100
Northern Telecom
8.250% due 06/13/96 1,000 1,006
Ohio Edison
8.500% due 05/01/96 4,200 4,208
Pennsylvania Power Co.
9.000% due 12/01/96 5,500 5,592
Public Service Electric & Gas
6.000% due 01/01/98 1,000 995
Texas Gas Transmission Corp.
9.625% due 07/15/97 9,000 9,462
Texas-New Mexico Power
11.250% due 01/15/97 1,938 2,018
Transcontinental Gas Pipeline
9.000% due 11/15/96 4,850 4,944
8.125% due 01/15/97 5,500 5,585
6.210% due 05/15/00 6,309 6,309
Triton Energy
0.000% due 11/01/97 8,500 7,523
Union Electric
5.500% due 03/01/97 500 498
United Illuminating
9.760% due 01/02/06 3,153 3,308
-------
183,486
-------
Total Corporate Bonds and Notes 818,698
(Cost $810,759) =======
=========================================================================
U.S. Government Agencies - 0.2%
=========================================================================
Federal Home Loan Mortgage Corp.
8.250% due 05/27/96 100 100
8.440% due 10/27/04 500 513
Federal National Mortgage Assn.
5.200% due 07/10/98 1,500 1,467
7.300% due 10/28/02 100 100
Small Business Administration
8.250% due 01/25/13 (d) 1,813 1,901
7.500% due 02/25/14 (d) 1,505 1,552
Student Loan Marketing Assn.
7.560% due 12/09/96 100 101
-----
Total U.S. Government Agencies 5,734
(Cost $5,577) =====
=========================================================================
Mortgage-Backed Securities - 77.5%
=========================================================================
Federal Home Loan Mortgage Corporation - 11.0%
5.000% due 05/01/98-08/01/98 (f) 37 36
5.500% due 05/01/98-04/01/07 (f) 480 470
6.300% due 01/01/17-06/01/17 (d) (f) 941 945
6.309% due 09/01/15-01/01/20 (d) (f) 5,197 5,221
6.309% due 11/01/26-06/01/30 (d) (f) 5,222 5,259
6.321% due 02/01/16(d) 210 211
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
<S> <C> <C>
6.366% due 01/01/30-12/01/30 (d)(f) $ 5,230 $ 5,272
6.369% due 11/01/14-08/01/19 (d)(f) 3,411 3,429
6.375% due 01/01/20 (d) 378 381
6.377% due 05/01/17 (d) 378 380
6.377% due 10/01/30 (d) 570 574
6.500% due 01/01/02-02/01/05 (f) 166 166
6.500% due 04/11/26 48,000 45,630
7.000% due 01/01/17 (d) 113 115
7.250% due 07/01/07 95 95
7.353% due 02/01/20 (d) 5,899 6,025
7.500% due 09/01/06 254 257
7.500% due 05/13/26 78,000 77,757
7.532% due 01/01/24-08/01/24(d)(f) 8,030 8,231
7.539% due 10/01/23 (d) 6,360 6,541
7.616% due 11/01/23 (d) 4,288 4,413
7.769% due 01/01/24 (d) 7,565 7,793
7.796% due 11/01/22 (d) 5,421 5,567
8.000% due 07/01/06-04/01/07 (f) 476 489
8.000% due 07/02/24-04/11/26 (f) 88,520 90,150
8.132% due 12/01/22 (d) 3,422 3,535
8.250% due 10/01/07-11/01/07 (f) 85 88
8.500% due 07/01/01-05/01/10 (f) 895 930
8.500% due 01/01/12 99 103
8.750% due 02/01/01-04/01/02 (f) 268 278
9.000% due 09/01/98-07/01/04 (f) 295 307
9.000% due 12/15/20 9,472 9,988
9.250% due 07/01/01 20 21
9.500% due 03/01/01-12/01/04 (f) 320 338
9.750% due 03/01/01-11/01/08 (f) 1,944 2,074
10.000% due 04/01/01 19 21
10.500% due 07/01/00-10/01/00 (f) 110 116
10.500% due 10/01/10-02/01/16 (f) 87 96
10.750% due 10/01/00-09/01/09 (f) 152 166
10.750% due 10/01/10-08/01/11 (f) 841 934
11.250% due 10/01/14 14 16
11.500% due 10/01/15 2 3
11.750% due 11/01/10-08/01/15 (f) 33 37
14.000% due 02/01/12-12/01/12 (f) 8 9
-------
294,467
=======
Federal Housing Administration - 0.8%
6.950% due 04/01/14 1,858 1,799
7.421% due 11/01/19 1,127 1,132
7.430% due 10/01/19-12/01/21 (f) 15,112 15,188
9.680% due 02/01/24 2,039 2,100
------
20,219
======
Federal National Mortgage Association - 4.2
6.309% due 03/01/18-01/01/19(d)(f) 425 430
6.314% due 01/01/26 (d) 12,676 12,778
6.347% due 08/01/29 (d) 3,750 3,784
6.355% due 02/01/31 (d) 5,494 5,544
6.366% due 02/01/19 (d) 607 614
6.367% due 01/01/26 (d) 2,234 2,257
6.369% due 04/01/19-03/01/28(d)(f) 2,122 2,143
6.383% due 01/01/26 (d) 6,265 6,332
6.435% due 04/01/18 (d) 9,981 10,042
6.500% due 06/01/08 54 51
7.000% due 12/01/06-09/01/07 (f) 121 118
7.116% due 10/01/24 (d) 20,299 20,994
7.151% due 04/01/24 (d) 10,074 10,363
7.334% due 01/01/24 (d) 11,552 11,902
7.939% due 10/01/23 (d) 8,919 9,207
8.000% due 03/01/04 322 331
8.142% due 07/01/23 (d) 5,750 5,922
8.466% due 05/01/97 (d) 415 427
8.500% due 03/01/08-02/01/17 (f) 770 806
9.000% due 05/01/97-08/01/98 (f) 1,235 1,271
10.000% due 02/01/04-06/01/13 (f) 3,052 3,282
10.000% due 09/01/14-06/01/19 (f) 1,493 1,633
10.500% due 06/01/05-11/01/05 (f) 618 659
11.000% due 10/01/98-09/01/00 (f) 63 67
11.250% due 12/01/10-10/01/15 (f) 398 446
12.000% due 01/01/15-10/01/15 (f) 18 21
12.750% due 02/01/14-11/01/14 (f) 135 156
13.000% due 07/01/15 10 11
13.250% due 09/01/11 33 38
13.500% due 04/01/14 10 11
15.500% due 10/01/12-12/01/12 (f) 98 117
15.750% due 12/01/11 76 89
16.000% due 09/01/12-12/01/12 (f) 39 47
-------
111,893
=======
Government National Mortgage Association - 35.0%
5.500% due 08/20/25 (d) 4,915 4,844
6.500% due 02/20/23-06/20/25 (f) 20,827 21,028
6.875% due 09/20/22 (d) 5,925 6,006
7.000% due 05/20/22-03/20/25 (f) 82,851 83,988
7.000% due 04/18/26 (d) 498,000 485,082
7.250% due 07/20/22-09/20/24 (f) 164,415 166,515
7.375% due 05/20/22-04/20/23 (f) 40,617 41,070
7.500% due 04/18/22-05/20/26 (f) 127,000 126,818
8.000% due 07/15/04-11/15/06 (f) 12 12
9.750% due 07/15/13-02/15/20 (f) 1,699 1,838
10.750% due 10/15/98 45 47
11.750% due 07/15/13-09/15/15 (f) 563 634
12.000% due 06/20/15 38 42
13.500% due 05/15/11-11/15/12 (f) 73 85
13.750% due 06/15/96-10/15/96 (f) 12 12
14.750% due 11/15/96 2 2
16.500% due 12/15/11 1 1
16.750% due 12/15/96-01/15/97 (f) 5 5
16.750% due 12/15/11 12 13
-------
938,042
=======
Collateralized Mortgage Obligations - 19.3%
American Southwest Financial
5.100% due 06/02/99 15,292 14,685
9.200% due 07/01/16 506 507
Bear Stearns
8.200% due 09/25/22 1,825 1,837
8.000% due 05/25/23 638 650
Capstead
7.400% due 04/25/18 10,989 11,028
7.800% due 02/25/22 1,474 1,478
8.300% due 03/25/22 10,710 10,695
7.500% due 02/25/23 3,105 3,114
Chase Mortgage Financial Corp.
10.000% due 11/25/09 1,864 1,957
8.000% due 06/25/24 113 115
7.500% due 10/25/24 100 101
Citicorp Mortgage
9.000% due 10/01/01 123 124
9.000% due 11/01/01 2,326 2,403
8.500% due 06/25/06 2,719 2,735
9.000% due 07/25/06 1,407 1,423
9.350% due 06/01/10 62 63
7.250% due 11/01/11 1,680 1,670
10.000% due 01/25/13 168 173
9.500% due 10/25/15 2,231 2,288
9.500% due 11/01/16 1,683 1,742
CMO Trust
6.188% due 01/20/03 (d) 44 44
9.500% due 06/25/20 948 1,003
Collateralized Mortgage Securities Corp.
7.985% due 05/01/17 16,159 16,319
</TABLE>
45
<PAGE>
SCHEDULE OF INVESTMENTS
Low Duration Fund
March 31, 1996
<TABLE>
<CAPTION>
Principal
Amounts Value
(000's) (000's)
=========================================================================
<S> <C> <C>
Columbia Federal
8.051% due 12/01/17 (d) $ 12 $ 12
Conseco Commercial Mortgage
9.700% due 07/15/04 4,257 4,344
Countrywide
7.697% due 11/25/24 (d) 13,665 13,968
6.375% due 01/25/35 (d) 24,172 23,922
Donaldson, Lufkin & Jenrette
11.000% due 08/01/19 2,738 3,002
4.566% due 03/25/24 (d) 23,345 22,481
7.614% due 05/25/24 (d) 7,135 7,282
Federal Home Loan Mortgage Corp.
9.000% due 01/15/04 500 516
9.000% due 04/15/04 440 449
9.000% due 12/15/05 1,000 1,028
10.000% due 09/15/09 27 27
12.500% due 09/30/13 2,157 2,408
11.000% due 11/30/15 5,836 6,240
8.000% due 04/15/19 3,026 3,059
8.500% due 06/15/19 5,226 5,244
10.000% due 07/15/19 525 577
8.500% due 09/15/19 1,691 1,705
8.500% due 09/15/19 4,002 4,084
9.000% due 11/15/19 4,221 4,379
7.950% due 02/15/20 5,025 5,111
9.000% due 02/15/20 1,822 1,858
8.250% due 03/15/20 563 574
7.500% due 04/15/20 2,900 2,909
8.000% due 04/15/20 2,500 2,575
10.000% due 05/15/20 350 386
8.950% due 11/15/20 3,695 3,743
7.500% due 12/15/20 2,000 1,995
9.500% due 01/15/21 4,144 4,411
8.000% due 04/15/21 2,960 2,997
9.000% due 05/15/21 400 421
9.000% due 05/15/21 250 264
7.000% due 08/15/21 16,247 16,264
Federal National Mortgage Assn.
8.950% due 05/25/03 187 193
9.000% due 07/25/03 1,347 1,395
9.400% due 07/25/03 295 307
8.500% due 09/25/06 728 741
6.875% due 06/25/09 5,695 5,688
7.000% due 04/25/15 4,128 4,163
7.250% due 07/25/15 5,000 5,036
7.500% due 01/25/16 767 770
5.750% due 04/25/16 6,107 5,939
9.000% due 06/25/17 73 74
8.000% due 01/25/19 313 316
7.500% due 02/25/19 419 420
8.000% due 05/25/19 3,126 3,171
8.750% due 05/25/19 250 259
9.000% due 05/25/19 3,716 3,781
9.300% due 05/25/19 138 142
9.000% due 07/25/19 1,152 1,190
9.000% due 08/25/19 4,862 4,921
9.500% due 03/25/20 5,345 5,311
9.500% due 05/25/20 1,450 1,626
8.000% due 07/25/20 12,577 12,832
8.500% due 01/25/21 308 314
9.000% due 03/25/21 9,551 9,965
9.000% due 04/25/21 300 317
8.000% due 03/25/22 289 291
First Boston Corp.
7.050% due 07/25/23 843 844
General Electric Capital Mortgage
6.350% due 03/25/17 36,701 36,446
Glendale Federal Savings & Loan
7.420% due 03/25/30 (d) 3,739 3,795
Greenwich
7.834% due 11/25/24 (d) 15,038 15,390
Home MAC Mortgage Securities Corp.
8.550% due 07/01/08 56 57
Homestead Mortgage Acceptance Corp.
11.450% due 09/01/15 2,333 2,509
Housing Securities, Inc.
6.750% due 02/25/21 28,161 28,144
Independent National Mortgage Corp.
8.250% due 03/25/25 17,020 17,267
Merrill Lynch Mortgage
10.000% due 11/15/08 154 155
9.400% due 12/27/18 5,000 4,998
9.650% due 05/20/19 14,359 14,440
Norwest Mortgage
12.375% due 01/01/14 380 411
12.500% due 02/01/14 918 979
12.250% due 04/01/14 667 726
Prudential Bache
6.309% due 09/01/18 (d) 79 80
Prudential Home
6.500% due 04/25/00 117 117
7.500% due 09/25/07 878 883
7.000% due 11/25/07 3,556 3,575
7.000% due 06/25/23 3,014 2,894
Prudential Securities
8.000% due 12/25/20 2,000 2,044
Residential Funding
9.250% due 11/01/02 838 859
6.040% due 07/01/19 (d) 1,821 1,710
7.131% due 09/25/19 (d) 470 461
8.250% due 07/25/21 1,455 1,453
9.000% due 12/25/21 407 418
Resolution Trust Corp.
7.037% due 09/25/19 (d) 4,109 4,142
6.269% due 01/25/21 (d) 326 313
6.916% due 07/25/21 (d) 79 81
7.195% due 10/25/21 (d) 1,993 2,001
7.850% due 05/25/22 164 164
10.000% due 05/25/22 396 404
7.250% due 10/25/23 1,115 1,111
9.500% due 05/25/24 682 669
7.000% due 10/25/24 66 66
8.750% due 05/25/26 78 78
6.269% due 09/25/27 (d) 3,520 3,371
9.000% due 09/25/28 432 439
Ryland Acceptance Corp.
8.000% due 03/01/18 2,842 2,778
9.500% due 07/01/18 1,706 1,725
Salomon Mortgage
7.200% due 12/25/17 (d) 3,575 3,582
6.975% due 01/25/18 (d) 163 163
9.558% due 10/25/18 8,077 8,292
5.939% due 03/25/24 (d) 9,498 9,504
Sears Mortgage
7.885% due 08/25/23 (d) 1,809 1,836
8.697% due 05/25/32 (d) 1,183 1,196
Shearson Lehman
9.600% due 03/25/21 1,984 2,033
Structured Asset Sales, Inc.
7.500% due 10/25/25 23,000 23,198
UBS Mortgage
9.000% due 10/18/20 8,457 8,552
Westam Mortgage Financial Corp.
6.500% due 10/02/17 8,986 8,730
-------
518,634
=======
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Principal
Amounts Value
(000's) (000's)
=========================================================================
<S> <C> <C>
Other Mortgage-Backed Securities - 4.5%
Dime Savings
7.135% due 11/25/18 (d) $ 4,159 $ 3,726
First Boston Mortgage Securities Corp.
8.300% due 08/20/09 578 589
Fleet Finance, Inc.
5.450% due 03/20/23 74 73
Glendale Federal Savings & Loan
11.000% due 03/01/10 49 52
Great Western Savings & Loan
6.380% due 02/25/18 (d) 669 657
Guardian
6.824% due 07/25/18 (d) 100 89
7.749% due 05/25/19 (d) 1,109 932
6.869% due 12/25/19 (d) 2,350 1,551
6.957% due 12/25/19 (d) 473 336
6.857% due 02/25/20 (d) 2,354 1,412
6.836% due 07/25/20 (d) 2,155 1,379
Home Savings of America
6.026% due 05/25/27 (d) 2,945 2,878
6.079% due 09/25/28 (d) 1,972 1,923
Imperial Savings & Loan
9.800% due 07/25/17 100 100
9.900% due 02/25/18 795 839
Kearny St. Real Estate Co.
6.600% due 10/15/02 3,752 3,749
7.300% due 10/15/03 2,000 2,000
9.400% due 10/15/05 1,000 999
MDC Mortgage Funding
7.739% due 01/25/25 (d) 18,419 18,810
Residential Asset Securitization Trust
7.050% due 05/01/26 16,365 16,355
Residential Funding
8.500% due 04/01/02 53 54
Resolution Trust Corp.
7.574% due 05/25/19 (d) 12,768 12,429
7.400% due 08/25/19 (d) 7,951 7,889
8.625% due 10/25/21 1,306 1,310
6.900% due 02/25/27 9,810 8,608
6.307% due 10/25/28 (d) 4,368 4,447
7.482% due 05/25/29 (d) 4,436 4,419
10.374% due 08/25/21 (d) 1,635 1,714
Ryland Acceptance Corp.
8.900% due 12/01/08 20 20
7.691% due 11/28/22 (d) 10,068 10,216
Salomon Mortgage
12.000% due 05/01/15 987 975
11.500% due 09/01/15 1,349 1,473
8.230% due 12/25/17 (d) 763 749
Sears Mortgage
12.000% due 02/25/14 219 240
7.588% due 10/25/22 (d) 7,345 7,446
Security Pacific
7.850% due 05/15/98 17 17
Western Federal Savings & Loan
6.749% due 06/25/18 (d) 99 98
6.929% due 11/25/18 (d) 419 417
10.069% due 02/01/20 (d) 114 119
-------
121,089
=======
Stripped Mortgage-Backed Securities - 2.7%
Federal Home Loan Mortgage Corp.(IO)
7.000% due 07/15/04 7,494 449
6.250% due 09/15/04 17,598 1,150
6.000% due 02/15/06 21,116 1,565
9.982% due 07/15/06 15,302 2,443
10.195% due 08/15/06 4,903 747
11.944% due 12/15/06 6,933 1,453
6.000% due 10/15/07 6,684 641
6.000% due 02/15/08 16,461 1,748
7.000% due 07/15/12 8,284 454
6.500% due 08/25/13 19,918 1,519
7.000% due 08/15/18 7,321 2,083
7.500% due 12/15/18 13,836 1,592
6.500% due 05/15/19 27,910 3,420
6.500% due 06/15/19 30,100 3,181
10.496% due 04/15/21 9,818 1,666
6.500% due 04/15/22 16,505 2,137
7.000% due 05/15/23 1,484 224
4.000% due 01/15/24 20,919 6,164
Federal National Mortgage Assn.(IO)
6.000% due 07/25/05 7,116 679
7.272% due 09/25/06 6,500 1,495
6.000% due 02/25/08 19,131 2,114
6.500% due 03/25/09 6,630 971
0.100% due 03/25/09 (d) 53,415 1,180
6.500% due 03/25/09 7,705 1,797
6.500% due 02/25/13 13,609 897
8.815% due 06/25/16 19,798 2,473
7.000% due 07/25/17 4,293 469
9.987% due 12/25/18 6,914 693
7.500% due 03/25/19 14,060 1,986
6.500% due 04/25/20 57,594 6,544
7.000% due 05/25/21 27,983 3,632
8.598% due 02/25/22 5,000 1,402
6.500% due 03/25/23 12,991 2,017
4.875% due 03/25/24 (d) 18,673 1,306
Federal National Mortgage Assn. (PO)
0.000% due 01/25/20 5,771 5,617
0.000% due 07/25/22 4,510 3,497
Resolution Trust Corp. (PO)
0.000% due 09/25/00 1,575 1,429
0.000% due 09/25/22 129 104
---------
72,938
---------
Total Mortgage-Backed Securities 2,077,282
(Cost $2,096,190) =========
=========================================================================
Asset-Backed Securities - 0.2%
=========================================================================
Premier Auto Trust
7.350% due 05/04/97 4,615 4,627
Prudential Home (IO)
0.300% due 04/25/09 (d) 116,052 1,040
SCFC Boat Loan Trust
7.050% due 04/15/07 106 106
-----
Total Asset-Backed Securities 5,773
(Cost $5,761) =====
=========================================================================
Sovereign Issues - 3.8%
=========================================================================
Banco Nacional de Obra y Servicios
10.750% due 08/16/96 1,500 1,512
6.875% due 10/01/98 10,000 9,313
Cemex
10.000% due 11/15/96 4,400 4,448
8.875% due 06/10/98 2,000 1,953
Nacional Financiera
6.000% due 12/19/96 13,500 13,230
7.969% due 12/15/97 (d) 535 519
5.875% due 02/17/98 2,000 1,899
6.250% due 12/03/98 (d) 1,500 1,380
Petroleos Mexicanos
8.750% due 03/05/97 1,000 1,003
8.250% due 02/04/98 5,000 4,975
Province of Quebec
5.875% due 10/26/01 (d) 250 245
Republic of Argentina
5.273% due 05/31/96 (d) 400 401
</TABLE>
47
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Low Duration Fund
March 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
<S> <C> <C>
United Mexican States
5.820% due 06/28/01 $ 10,000 $ 7,960
6.547% due 12/31/19 (d) 30,000 22,613
6.609% due 12/31/19 (d) 10,000 7,538
6.766% due 12/31/19 (d) 30,000 22,613
-------
Total Sovereign Issues 101,602
(Cost $110,354) =======
=========================================================================
Foreign Currency-Denominated Issues (c)(e) - 0.1%
=========================================================================
Banco National de Comercio Exterior
8.000% due 05/06/98 DM 3,500 2,402
-----
Total Foreign Currency-Denominated Issues 2,402
(Cost $2,072) =====
=========================================================================
Preferred Stock - 1.0%
=========================================================================
Shares
Gulf States Utility 1,000 24,938
Santander Overseas 75,000 1,997
------
Total Preferred Stock 26,935
(Cost $26,398) ======
=========================================================================
Short-Term Instruments - 16.5%
=========================================================================
Principal
Amount
(000's)
Discount Notes - 16.2%
AT&T Corp.
5.370% due 04/01/96 $ 9,500 9,500
5.200% due 04/02/96 14,300 14,298
5.180% due 04/09/96 10,400 10,388
Ameritech
5.200% due 04/03/96 3,405 3,404
BellSouth Telecommunications
5.250% due 05/10/96 6,500 6,463
Coca-Cola Co.
5.160% due 04/03/96 4,500 4,499
Commonwealth Bank
5.200% due 04/02/96 14,500 14,498
5.240% due 04/29/96 51,200 50,991
Commonwealth of Canada
5.210% due 05/22/96 1,800 1,787
E.I. Du Pont de Nemours
5.300% due 04/18/96 25,600 25,536
Emerson Electric Co.
5.220% due 04/02/96 3,000 3,000
Federal Home Loan Bank
5.200% due 06/19/96 1,500 1,482
Federal Home Loan Mortgage Corp.
5.150% due 04/11/96 25,000 24,964
5.270% due 04/22/96 6,500 6,480
Federal National Mortgage Assn.
5.120% due 04/15/96 32,700 32,635
5.280% due 04/19/96 49,000 48,871
Ford Motor Credit Co.
5.250% due 05/10/96 6,100 6,065
5.370% due 04/01/96 12,000 12,000
5.280% due 05/28/96 12,900 12,783
5.250% due 06/26/96 4,000 3,947
General Electric Capital Corp.
5.320% due 04/23/96 3,000 2,990
5.260% due 04/25/96 1,000 996
Hewlett-Packard Co.
5.220% due 06/14/96 19,000 18,781
5.220% due 06/14/96 1,100 1,087
Eli Lilly & Co.
5.240% due 06/17/96 1,000 988
Minnesota Mining & Mfg. Co.
5.220% due 04/19/96 29,800 29,722
5.220% due 04/24/96 6,200 6,179
5.250% due 05/23/96 2,000 1,985
Motorola
5.280% due 05/06/96 23,000 22,882
National Rural Utilities Cooperative
5.300% due 05/20/96 1,100 1,092
Shell Oil Co.
5.330% due 04/11/96 28,000 27,959
Toys `R' Us, Inc.
5.200% due 04/02/96 700 700
5.320% due 05/01/96 6,000 5,973
United Parcel Service
5.430% due 04/04/96 18,000 17,992
----------
432,917
==========
Repurchase Agreements - 0.3%
Daiwa Securities
5.200% due 04/01/96 4,000 4,000
(Dated 03/29/96. Collateralized by
U.S. Treasury Bill 09/19/96
valued at $4,098,645. Repurchase
proceeds are $4,001,733.)
State Street Bank
4.750% due 04/01/96 2,979 2,979
(Dated 03/29/96. Collateralized by
U.S. Treasury Bond 8.750% 05/15/17
valued at $3,040,630. Repurchase ----------
proceeds are $2,980,179.) 6,979
==========
U.S. Treasury Bills (b)-0.0%
4.813% due 05/09/96-08/29/96 665 659
----------
Total Short-Term Instruments 440,555
(Cost $440,585) ==========
Total Investments (a) - 129.8% $3,478,981
(Cost $3,497,696)
Other Assets and Liabilities (Net) - (29.8%) (798,871)
----------
Net Assets - 100.0% $2,680,110
==========
</TABLE>
Notes to Schedule of Investments ($ 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. $ 21,096
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
tax cost over value. (38,136)
----------
Unrealized depreciation-net $ (17,040)
==========
48
<PAGE>
=========================================================================
(b) Securities with an aggregate market value of $659 have been segregated with
the custodian to cover margin requirements for the following open future
contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Appreciation/
Type Contracts (Depreciation)
- ----------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury 10 Year Note (06/96) 358 $ (17)
U.S. Treasury 30 Year Bond (06/96) 47 38
-----
$ 21
=====
</TABLE>
(c) Foreign forward currency contracts outstanding at March 31, 1996:
<TABLE>
<CAPTION>
Principal
Amount Unrealized
Covered by Expiration Appreciation/
Type Contract Month (Depreciation)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Sell C$ 5,061 05/96 $(28)
Sell DM 3,544 05/96 43
-----
$ 15
=====
</TABLE>
(d) Variable rate security. The rate listed is as of March 31, 1996.
(e) Principal amount denoted in indicated currency:
C$ - Canadian Dollar
DM - German Mark
(f) Securities are grouped by coupon and represent a range of maturities.
See Notes to Financial Statements
49
<PAGE>
SCHEDULE OF INVESTMENTS
Low Duration Fund II
March 31, 1996
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<CAPTION>
<S> <C>
Corporate Bonds and Notes ........................................... 9.3%
U.S. Government Agency .............................................. 0.2%
Short-Term Instruments .............................................. 29.8%
Mortage-Backed Securities ........................................... 99.0%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amounts Value
(000's) (000's)
=========================================================================
Corporate Bonds and Notes - 9.3%
=========================================================================
<S> <C> <C>
Banking and Finance - 8.1%
AT&T Capital Corp.
6.990% due 10/04/96 $ 5,000 $ 5,036
Chrysler Financial Corp.
8.220% due 12/27/96 2,000 2,036
Ford Motor Credit Corp.
8.000% due 12/01/96 5,000 5,069
Golden West Financial Corp.
8.625% due 08/30/98 3,000 3,153
Household Financial Corp.
7.800% due 11/01/96 3,200 3,235
Salomon, Inc.
8.550% due 02/17/97 1,900 1,934
------------
20,463
============
Industrials - 1.2%
General Motors Corp.
9.750% due 05/15/99 3,000 3,013
------------
Total Corporate Bonds and Notes 23,476
(Cost $23,240) ============
================================================================================
U.S. Government Agency - 0.2%
================================================================================
Government Trust Certificate - Israel
9.250% due 11/15/96 513 518
------------
Total U.S. Government Agency 518
(Cost $521) ============
================================================================================
Mortgage-Backed Securities - 99.0%
================================================================================
Federal Home Loan Mortgage Corporation - 23.7%
7.500% due 05/13/26 20,000 19,938
8.000% due 07/01/24-04/11/26 (d) 35,000 35,638
8.013% due 07/01/23 (c) 3,830 3,953
10.500% due 09/01/15-12/01/18 (d) 362 395
------------
59,924
============
Federal National Mortgage Association - 9.7%
6.283% due 04/23/26 (c) 15,000 15,117
7.339% due 01/01/24 (c) 4,111 4,236
7.605% due 02/01/25 (c) 2,815 2,899
8.500% due 02/01/98-06/01/98 (d) 83 85
9.000% due 06/01/98 171 175
10.500% due 05/01/12 (d) 1,881 2,073
------------
24,585
============
Government National Mortgage Association - 29.6%
7.000% due 04/20/2022-04/18/26(c)(d) 37,117 36,431
7.250% due 07/20/23 (c) 17,961 18,195
7.375% due 06/20/22 (c) 6,822 6,927
7.500% due 04/18/22-03/15/24 (d) 11,471 11,462
9.000% due 07/20/16-12/20/17 (d) 1,720 1,825
------------
74,840
============
Collateralized Mortgage Obligations - 29.4%
American Housing
9.125% due 05/25/14 231 232
American Southwest Financial
7.500% due 10/01/18 1,000 995
Capstead
7.500% due 02/25/23 3,000 3,009
Citicorp Mortgage
9.500% due 09/25/02 1,992 2,047
9.500% due 10/25/15 1,674 1,716
CMC Securities Corp.
7.430% due 04/25/25 (c) 9,086 9,223
Collateralized Mortgage Securities Corp.
9.000% due 04/25/10 5,068 5,187
11.875% due 04/01/15 393 425
Donaldson, Lufkin & Jenrette
7.620% due 03/25/23 (c) 1,653 1,663
7.614% due 05/25/24 (c) 3,602 3,676
Federal Home Loan Mortgage Corp.
8.500% due 05/15/04 2,000 2,036
12.900% due 05/01/14 542 567
8.600% due 06/15/19 2,720 2,764
Federal National Mortgage Assn.
9.250% due 10/25/18 243 253
7.000% due 08/25/22 1,000 1,001
General Electric Capital Corp.
7.500% due 11/25/18 101 101
Kidder Peabody
7.150% due 04/25/25 2,694 2,625
Lomas & Nettleton
12.000% due 03/17/14 230 240
Merrill Lynch Mortgage
9.100% due 04/20/00 687 686
Prudential Home
7.000% due 07/25/23 1,829 1,823
7.500% due 06/25/25 10,000 10,038
Residential Asset Securitization Trust
9.000% due 05/01/26 10,169 10,369
Residential Funding
7.500% due 10/25/22 2,097 2,021
Resolution Trust Corp.
7.195% due 10/25/21 (c) 498 500
Ryland Acceptance Corp.
14.000% due 11/25/31 259 287
Salomon Mortgage
7.574% due 11/25/22 (c) 4,397 4,428
Saxon Mortgage
7.874% due 09/25/22 (c) 3,771 3,817
Sears Mortgage
8.697% due 05/25/32 (c) 1,657 1,674
UBS Mortgage
8.000% due 07/25/20 1,156 1,166
------------
74,569
============
Other Mortgage-Backed Securities - 6.6%
Guardian
8.052% due 07/25/19 (c) 236 194
7.229% due 10/25/19 (c) 782 555
6.836% due 07/25/20 (c) 1,437 920
Resolution Trust Corp.
7.574% due 05/25/19 (c) 2,776 2,702
8.625% due 10/25/21 784 786
7.902% due 10/25/28 (c) 7,162 7,283
Salomon Mortgage
12.125% due 04/01/16 149 153
Sears Mortgage
6.500% due 03/25/17 508 470
7.588% due 10/25/22 (c) 3,672 3,723
------------
16,786
------------
Total Mortgage-Backed Securities 250,704
(Cost $252,679) ============
=========================================================================
Short-Term Instruments - 29.8%
=========================================================================
Banker's Acceptance - 1.6%
Republic National Bank of New York
5.100% due 04/29/96 4,000 3,984
------------
Discount Notes - 27.3%
Ameritech Corp.
5.230% due 06/25/96 4,000 3,947
</TABLE>
50
<PAGE>
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<CAPTION>
<S> <C>
AA ...................................................................... 2%
A ....................................................................... 7%
BBB ..................................................................... 1%
A1 ...................................................................... 21%
AAA ..................................................................... 69%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
<S> <C> <C>
Amoco Credit Corp.
5.180% due 04/08/96 $ 1,900 $ 1,898
5.190% due 04/19/96 2,100 2,095
AT&T Corp.
5.180% due 04/09/96 1,200 1,199
5.450% due 04/19/96 100 100
5.290% due 05/02/96 1,000 995
Emerson Electric Co.
5.250% due 04/12/96 10,500 10,483
Federal Home Loan Bank
5.190% due 04/25/96 1,000 997
5.310% due 04/29/96 1,000 996
5.200% due 06/19/96 5,600 5,531
Ford Motor Credit Corp.
5.250% due 05/10/96 1,700 1,690
5.260% due 07/05/96 12,000 11,823
General Electric Capital Corp.
5.260% due 04/25/96 1,700 1,694
Hewlett-Packard Co.
5.230% due 06/20/96 5,500 5,432
Motorola, Inc.
5.170% due 04/02/96 4,300 4,299
National Rural Utilities Cooperative
5.330% due 05/24/96 1,000 992
5.300% due 06/07/96 1,000 989
Shell Oil Co.
5.330% due 04/11/96 2,500 2,496
U.S. West Communications
5.150% due 04/10/96 5,200 5,193
United Parcel Service
5.430% due 04/04/96 5,200 5,198
Warner Lambert
5.540% due 04/09/96 1,200 1,199
------------
69,246
============
Repurchase Agreement - 0.7%
State Street Bank
4.750% due 04/01/96 1,883 1,883
(Dated 03/29/96. Collateralized by ------------
U.S. Treasury Bond 8.750% 05/15/17
valued at $1,925,939. Repurchase
proceeds are $1,883,745.)
U.S. Treasury Bills - 0.2%
4.81% due 05/09/96-08/29/96(b)(d) 425 421
------------
Total Short-Term Instruments 75,534
(Cost $75,559) ============
Total Investments (a) - 138.3% $ 350,232
(Cost $351,999)
Other Assets and Liabilities (Net) - (38.3%) (96,933)
------------
Net Assets - 100% $ 253,299
============
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. $ 1,124
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
tax cost over value. (3,167)
------------
Unrealized depreciation-net $ (2,043)
============
</TABLE>
(b) Securities with an aggregate market value of $421 have been segregated with
the custodian to cover margin requirements for the following open future
contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Appreciation/
Type Contracts (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury 5 Year Note (6/96) 100 $(218)
U.S. Treasury 10 Year Note (6/96) 228 10
-----
$(208)
=====
</TABLE>
(c) Variable rate security. The rate listed is as of March 31, 1996.
(d) Securities are grouped by coupon and represent a range of maturities.
See Notes to Financial Statements
51
<PAGE>
SCHEDULE OF INVESTMENTS
Short-Term Fund
March 31, 1996
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<CAPTION>
<S> <C>
Short-Term Instruments............................................... 17.3%
Mortgage-Backed Securities .......................................... 52.5%
Corporate Bonds and Notes ........................................... 31.1%
Soveriegn Issues .................................................... 4.3%
Foreign Currency-Denominated ........................................ 5.6%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
Corporate Bonds and Notes - 31.1%
<S> <C> <C>
Banking and Finance - 19.5%
Capital One Bank
5.977% due 07/11/96 (c) $ $2,200 $ 2,200
5.905% due 07/30/96 (c) 1,000 1,001
Caterpillar Financial
5.200% due 04/01/99 (c) 2000 1,983
Ford Motor Credit Corp.
4.980% due 11/09/98 (c) 2,600 2,614
5.580% due 03/23/99 (c) 1,000 992
4.830% due 04/05/99 (c) 1,500 1,522
General Motors Acceptance Corp.
8.800% due 04/04/96 1,500 1,501
8.800% due 07/08/96 1,300 1,311
5.250% due 12/09/96 2,000 1,994
Kansallis-Osake
7.530% due 09/30/43 (c) 1,000 1,030
Lehman Brothers
4.800% due 09/01/99 (c) 3,000 2,972
Salomon, Inc.
6.175% due 10/21/96 (c) 500 500
5.870% due 11/21/96 (c) 1,000 1,000
------------
20,620
============
Industrials - 9.4%
Avencor Ltd.
9.220% due 06/30/96 1,000 1,026
COFIRI International, Inc.
5.800% due 10/27/00 (c) 2,000 1,983
Delta Air Lines
9.875% due 01/01/98 1,000 1,048
First Brands Corp.
9.125% due 04/01/99 1,000 1,027
G-I Holdings, Inc.
0.000% due 10/01/98 1,000 800
Nafin Finance Trust
7.919% due 03/31/99 (c) 401 385
Sears Roebuck & Co.
4.947% due 03/10/99 (c) 3,000 2,968
Time Warner, Inc.
6.210% due 08/15/00 (c) 697 702
------------
9,939
============
Utilities - 2.2%
CMS Energy
9.500% due 10/01/97 1,000 1,033
Triton Energy
0.000% due 11/01/97 (d) 1,500 1,328
------------
2,361
------------
Total Corporate Bonds and Notes 32,920
(Cost $32,656) ============
=========================================================================
Mortgage-Backed Securities - 52.5%
=========================================================================
Federal Home Loan Mortgage Corporation - 3.9%
8.000% due 04/11/26 4,000 4,071
------------
Federal National Mortgage Association - 5.5%
1.000% due 06/25/23 1,277 1,189
6.750% due 06/25/21 3,100 2,962
7.030% due 09/01/23 (c) 1,662 1,663
------------
5,814
============
Government National Mortgage Association - 18.9%
5.000% due 02/20/26 (c) 3,060 2,970
5.000% due 05/22/26 6,000 5,812
6.000% due 08/20/25 (c) 2,935 2,927
7.250% due 07/20/24 (c) 4,827 4,893
7.250% due 09/20/24 (c) 3,394 3,440
------------
20,042
============
Collateralized Mortgage Obligations - 14.9%
Donaldson, Lufkin & Jenrette
7.550% due 10/17/20 (c) 2,051 2,072
7.814% due 09/01/21 (c) 132 133
7.273% due 06/25/22 (c) 792 796
7.675% due 02/25/23 (c) 734 742
7.664% due 05/25/23 (c) 1,064 1,076
7.847% due 12/25/23 (c) 418 420
General Electric Capital Mortgage
6.500% due 12/25/23 854 851
Greenwich
7.720% due 04/25/22 (c) 361 364
7.158% due 10/25/22 (c) 322 324
Housing Securities, Inc.
6.750% due 05/25/20 445 444
JP Morgan Acceptance Corp.
9.000% due 10/20/07 291 292
Manufacturers Hanover Corp.
5.807% due 12/16/25 (c) 2,778 2,777
Prudential Bache
6.309% due 09/01/18 (c) 79 80
Prudential Home
7.625% due 08/25/22 31 31
6.750% due 01/25/24 2,740 2,719
Resolution Trust Corp.
8.832% due 12/25/20 (c) 972 987
6.916% due 07/25/21 (c) 40 40
7.113% due 06/25/24 (c) 889 896
Ryland Acceptance Corp.
7.102% due 08/25/21 (c) 699 701
------------
15,745
============
Other Mortgage-Backed Securities - 4.3%
Dime Savings
7.135% due 11/25/18 (c) 648 581
Guardian
6.869% due 12/25/19 (c) 439 290
6.850% due 02/25/20 (c) 705 374
6.857% due 02/25/20 (c) 651 391
Resolution Trust Corp.
6.050% due 04/25/21 (c) 35 35
8.625% due 10/25/21 1,000 1,009
6.998% due 05/25/29 (c) 1,434 1,450
Ryland Acceptance Corp.
7.034% due 10/25/18 (c) 92 92
7.285% due 12/25/21 (c) 359 361
------------
4,583
============
Stripped Mortgage-Backed Securities - 5.0%
Federal Home Loan Mortgage Corp. (IO)
7.000% due 01/15/08 2,344 20
Federal National Mortgage Assn. (IO)
6.000% due 10/25/03 7,000 417
7.000% due 07/25/06 7,561 860
6.500% due 12/25/06 9,045 1,201
7.000% due 05/25/13 5,033 349
6.500% due 06/25/17 8,984 1,020
6.500% due 10/25/23 4,308 786
L.F. Rothchild Mortgage (PO)
0.000% due 04/01/17 715 679
------------
5,332
------------
Total Mortgage-Backed Securities 55,587
(Cost $56,575) ============
</TABLE>
52
<PAGE>
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<CAPTION>
<S> <C>
AAA ..................................................................... 46%
AA ...................................................................... 3%
A ....................................................................... 19%
BBB ..................................................................... 10%
A1 ...................................................................... 14%
BB ...................................................................... 7%
B ....................................................................... 1%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
Sovereign Issues - 4.3%
=========================================================================
<S> <C> <C>
Cemex
10.000% due 11/15/96 $ 1,000 $ 1,011
Government of Malaysia
6.000% due 10/19/05 (c) 1,250 1,250
Republic of Argentina
6.313% due 03/31/05 (c) 1,980 1,426
United Mexican States
11.188% due 07/21/97 (c) 800 829
------------
Total Sovereign Issues 4,516
(Cost $4,531) ============
=========================================================================
Foreign Currency-Denominated Issues (b)(e) - 5.6%
=========================================================================
Irish Gilt
8.750% due 07/27/97 IP 750 1,226
Kingdom of Denmark
7.000% due 02/15/98 DK 12,000 2,187
Kingdom of Netherlands
6.250% due 07/15/98 DG 3,900 2,464
------------
Total Foreign Currency-Denominated Issues 5,877
============
(Cost $5,842)
=========================================================================
Short-Term Instruments - 17.3%
=========================================================================
Certificate of Deposit - 1.9%
Advanta National Bank
6.050% due 08/07/96 $ 2,000 2,007
------------
Discount Notes - 14.5%
AT&T Corp.
5.450% due 04/19/96 800 798
Coca-Cola Co.
5.280% due 04/09/96 4,500 4,495
Commonwealth Bank of Australia
5.150% due 04/22/96 2,300 2,293
5.240% due 04/29/96 500 498
General Electric Capital Corp.
5.340% due 04/23/96 700 698
5.260% due 04/25/96 1,500 1,495
Wal-Mart Stores
5.280% due 04/11/96 4,500 4,493
Warner Lambert
5.540% due 04/09/96 600 599
------------
15,369
============
Repurchase Agreement - 0.9%
State Street Bank
4.750% due 04/01/96 953 953
(Dated 3/29/96. Collateralized by ------------
U.S. Treasury Bond 8.750% 05/15/17
valued at $972,259. Repurchase
proceeds are $953,377.)
U. S. Treasury Bills - 0.0%
4.790% due 05/09/96 10 10
------------
Total Short-Term Instruments 18,339
(Cost $18,331) ============
Total Investments (a) - 110.8% $ 117,239
(Cost $117,935)
Other Assets and Liabilities (Net) - (10.8%) (11,443)
------------
Net Assets - 100.0% $ 105,796
============
</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. $ 777
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (1,222)
------------
Unrealized depreciation-net $ (445)
============
(b) Foreign forward currency contracts outstanding at March 31, 1996:
<TABLE>
<CAPTION>
Principal
Amount
Covered Expiration Unrealized
Type By Contract Month Depreciation
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell BP 27 04/96 $ 0
Sell DG 4,238 12/96 (4)
-----
$ (4)
=====
</TABLE>
(c) Variable rate security. The rate listed is as of March 31, 1996.
(d) Security becomes interest bearing at a future date.
(e) Principal amount denoted in indicated currency
BP - British Pound
DG - Dutch Guilder
DK - Danish Krone
IP - Irish Punt
See Notes to Financial Statements
53
<PAGE>
SCHEDULE OF INVESTMENTS
Long-Term U.S. Government Fund
March 31, 1996
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<CAPTION>
<S> <C>
U.S. Treasury Bond ......................................... 43.3%
Short-Term Instruments ..................................... 1.2%
Mortgage-Backed Securities ................................. 85.9%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
U.S. Treasury Bond - 43.3%
=========================================================================
<S> <C> <C>
6.250% due 08/15/23 $ 15,200 $ 14,065
------------
Total U.S. Treasury Bond 14,065
(Cost $14,118) ============
=========================================================================
Mortgage-Backed Securities - 85.9%
=========================================================================
Federal Home Loan Mortgage Corporation - 1.9%
7.771% due 05/01/22 (b) 335 345
8.213% due 06/01/22 (b) 263 270
------------
615
============
Federal Housing Administration - 5.4%
7.421% due 11/01/19 256 257
7.430% due 12/28/17 1,497 1,510
------------
1,767
============
Federal National Mortgage Association - 5.7%
6.749% due 05/01/25 (b) 1,137 1,166
7.242% due 10/01/24 (b) 653 673
------------
1,839
============
Government National Mortgage Association - 8.7%
5.500% due 02/20/24 (b) 449 442
7.000% due 06/20/23 (b) 786 795
7.000% due 11/20/24 (b) 843 857
7.250% due 07/20/23 (b) 718 728
------------
2,822
============
Collateralized Mortgage Obligations - 50.9%
Bear Stearns
7.100% due 06/25/24 385 363
California Federal Bank
6.829% due 08/25/30 (b) 1,855 1,847
Federal Home Loan Mortgage Corp.
9.500% due 01/15/05 184 191
8.000% due 03/15/05 148 149
6.500% due 07/15/21 161 148
Federal National Mortgage Assn.
8.000% due 01/25/19 313 316
7.000% due 02/25/20 635 592
8.750% due 08/25/20 498 514
7.000% due 09/25/21 1,702 1,566
8.000% due 11/25/21 1,394 1,402
8.000% due 03/25/22 72 73
7.000% due 06/25/22 309 258
7.500% due 07/25/22 1,315 1,270
7.800% due 10/25/22 652 649
7.000% due 05/25/23 196 164
6.000% due 08/25/23 856 759
General Electric Capital Mortgage
7.500% due 03/25/19 222 223
Independent National Mortgage Corp.
8.515% due 01/25/25 (b) 719 741
Prudential Home
6.500% due 01/25/24 1,000 843
Residential Funding
7.705% due 03/25/25 (b) 707 718
Resolution Trust Corp.
6.575% due 06/25/23 (b) 537 542
Student Loan Marketing Assn.
5.595% due 04/25/04 (b) 1,880 1,880
Vendee Mortgage
6.500% due 06/15/24 1,680 1,339
------------
16,547
============
Other Mortgage-Backed Securities - 9.2%
Residential Funding
8.500% due 04/01/02 $ 40 $ 40
Resolution Trust Corp.
6.998% due 05/25/29 (b) 1,912 1,933
Ryland Acceptance Corp.
7.691% due 11/28/22 (b) 1,000 1,015
------------
2,988
============
Stripped Mortgage-Backed Securities - 4.1%
Federal Home Loan Mortgage Corp. (IO)
7.000% due 07/15/04 2,248 135
6.500% due 08/15/06 604 64
6.500% due 10/15/06 991 107
6.500% due 11/15/06 1,201 126
6.000% due 10/15/07 1,250 118
2.675% due 12/15/08 (b) 3,645 202
7.000% due 02/15/26 1,427 109
Federal National Mortgage Assn. (IO)
6.500% due 02/25/07 720 74
6.500% due 08/25/20 1,000 171
6.500% due 09/25/21 1,557 237
------------
1,343
------------
Total Mortgage-Backed Securities 27,921
(Cost $27,509) ============
=========================================================================
Purchased CME Put Options - 0.0%
=========================================================================
Eurodollar June Futures
Strike @ 91.00 Exp. 6/18/96 5,000 0
------------
Total Purchased CME Put Options 0
(Cost $0) ============
=========================================================================
Short-Term Instruments - 1.2%
=========================================================================
Repurchase Agreement - 0.6%
State Street Bank
4.750% due 04/01/96 219 219
(Dated 3/29/96. Collateralized by ------------
U.S. Treasury Note 8.750% 5/15/17
valued at $229,131. Repurchase
proceeds are $219,087.)
U.S. Treasury Bills - 0.6%
4.863% due 05/23/96-08/29/96 (c)(e) 200 197
------------
Total Short-Term Instruments 416
(Cost $415) ============
Total Investments (a) - 130.4% $ 42,402
(Cost $42,042)
Written Options (d) - 0.0% 0
(Premiums $4)
Other Assets and Liabilities (Net) - (30.4%) (9,891)
------------
Net Assets - 100.0% $ 32,511
============
</TABLE>
54
<PAGE>
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<CAPTION>
<S> <C>
AA ...................................................................... 6%
AAA ..................................................................... 94%
</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. $ 565
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (1,309)
------------
Unrealized depreciation-net $ (744)
============
(b) Variable rate security. The rate listed is as of March 31, 1996.
(c) Securities with an aggregate market value of $197 have been segregated with
the custodian to cover margin requirements for the following open future
contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Type Contracts Depreciation
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury 30 Year Bond (6/96) 54 $ (218)
</TABLE>
(d) Premiums received on Written Put Options:
<TABLE>
<CAPTION>
Premiums Market
Type Par Received Value
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CME Eurodollar June Futures
Strike @ 94.00 Exp. 6/18/96 $6,000 $ 4 $ 0
</TABLE>
(e) Securities are grouped by coupon rate and represent a range of maturities
See Notes to Financial Statements
55
<PAGE>
SCHEDULE OF INVESTMENTS
Foreign Fund
March 31, 1996
[THE FOLLOWING TABLE WAS PRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT]
<TABLE>
<S> <C>
Canada ..................................................... 15.9%
Denmark .................................................... 6.9%
Finland .................................................... 11.6%
Germany .................................................... 11.8%
Japan ...................................................... 23.6%
Mexico ..................................................... 11.2%
Netherlands ................................................ 14.4%
Spain ...................................................... 9.5%
Sweden ..................................................... 8.7%
United Kingdom ............................................. 16.7%
United States .............................................. 42.8%
Short-Term Instruments ..................................... 7.1%
Other ...................................................... 37.2%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
Argentina (c) (f) - 8.1%
=========================================================================
<S> <C> <C> <C>
Republic of Argentina
7.458% due 04/26/96 $ 10,000 $ 9,955
8.000% due 08/09/97 DG 1,300 804
6.313% due 03/31/05(d) AP 14,157 10,193
-----------
Total Argentina 20,952
===========
(Cost $20,140)
=========================================================================
Belgium (c) (f) - 5.3%
=========================================================================
Kingdom of Belgium
9.000% due 03/28/03 BF 244,700 9,285
5.100% due 11/21/04(d) 134,200 4,496
-----------
Total Belgium 13,781
(Cost $13,832) ===========
=========================================================================
Canada (c) (f) - 15.9%
=========================================================================
Commonwealth of Canada
7.500% due 03/01/01 C$ 10,200 7,642
9.000% due 12/01/04 36,610 29,284
Hydro-Quebec
6.000% due 09/30/49(d) $ 4,000 3,468
Sears Canada
11.700% due 07/10/00 C$ 1,000 829
-----------
Total Canada 41,223
(Cost $41,165) ===========
=========================================================================
Denmark (c) (f) - 6.9%
=========================================================================
Kingdom of Denmark
8.000% due 05/15/03 DK 63,110 11,684
8.000% due 03/15/06 34,800 6,302
-----------
Total Denmark 17,986
(Cost $18,001) ===========
=========================================================================
Finland (c) (f) - 11.6%
=========================================================================
Merita
6.175% due 09/11/03(d) $ 5,000 4,972
Republic of Finland
10.000% due 09/15/01 FM 51,000 12,613
9.500% due 03/15/04 52,000 12,405
-----------
Total Finland 29,990
(Cost $30,279) ===========
=========================================================================
France (c) (f) - 3.8%
=========================================================================
Republic of France
7.750% due 10/25/05 FF 46,080 9,894
-----------
Total France 9,894
(Cost $9,786) ===========
=========================================================================
Germany (c) (f) - 11.8%
=========================================================================
German Unity Fund
8.750% due 07/20/00 DM 4,500 3,448
Republic of Germany
6.875% due 06/11/03 15,700 11,058
6.250% due 01/04/24 26,560 15,947
-----------
Total Germany 30,453
(Cost $30,210) ===========
=========================================================================
Ireland (c) (f) - 1.8%
=========================================================================
Irish Gilt
6.250% due 04/01/99 IP 3,000 4,649
-----------
Total Ireland 4,649
(Cost $4,690) ===========
=========================================================================
Italy (c) (f) - 4.6%
=========================================================================
Republic of Italy
9.188% due 09/01/05 IL 18,685,000 11,832
-----------
Total Italy 11,832
(Cost $11,945) ===========
=========================================================================
Japan (c) (f) - 23.6%
=========================================================================
Government of Japan
4.600% due 06/22/98 JY 6,071,000 60,962
-----------
Total Japan 60,962
(Cost $61,400) ===========
=========================================================================
Mexico (f) - 11.2%
=========================================================================
Bancomer
8.000% due 07/07/98 $ 2,000 1,913
Banco Nacional de Comercio Exterior
8.000% due 05/06/98 DM 13,000 8,922
Banco Nacional de Obra y Servicios
10.750% due 08/16/96 $ 850 857
Nacional Financiera
6.000% due 12/19/96 1,000 980
7.969% due 12/15/97(d) 374 363
Petroleos Mexicanos
7.750% due 09/30/98 FF 44,000 8,552
Republic of Mexico
0.000% due 05/16/96 MP 23,000 2,895
Third Mexican Acceptance Corp.
7.370% due 03/15/98 $ 1,000 919
United Mexican States
5.820% due 06/28/01 4,500 3,582
-----------
Total Mexico 28,983
(Cost $27,223) ===========
=========================================================================
Netherlands (c) (f) - 14.4%
=========================================================================
Baden-Wuerttemberg L-Finance N.V.
6.625% due 08/20/03 DM 9,100 6,270
Kingdom of Netherlands
9.000% due 05/15/00 DG 30,700 21,200
8.250% due 02/15/07 8,800 6,010
Landesbank Reinland-Pfalz
7.250% due 04/20/05 DM 5,500 3,855
-----------
Total Netherlands 37,335
(Cost $37,848) ===========
=========================================================================
New Zealand (c) (f) - 6.4%
=========================================================================
Commonwealth of New Zealand
10.000% due 07/15/97 N$ 3,900 2,703
8.000% due 07/15/98 4,100 2,769
6.500% due 02/15/00 9,500 6,079
10.000% due 03/15/02 6,700 4,936
-----------
Total New Zealand 16,487
(Cost $16,655) ===========
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
Panama - 1.6%
=========================================================================
<S> <C> <C> <C>
Bladex
6.641% due 05/23/96(d) $ 4,000 $ 3,998
-----------
Total Panama 3,998
(Cost $4,000) ===========
=========================================================================
Spain (c) (f) - 9.5%
=========================================================================
Kingdom of Spain
10.300% due 06/15/02 SP 627,000 5,240
7.250% due 03/04/03 DM 9,100 6,495
10.900% due 08/30/03 SP 594,000 5,107
10.000% due 02/28/05 954,000 7,807
-----------
Total Spain 24,649
(Cost $24,700) ===========
=========================================================================
Sweden (c) (f) - 8.7%
=========================================================================
Kingdom of Sweden
11.000% due 01/21/99 SK 137,800 22,519
-----------
Total Sweden 22,519
(Cost $21,926) ===========
=========================================================================
United Kingdom (c) (f) - 16.7
=========================================================================
United Kingdom Gilt
6.000% due 08/10/99 BP 29,340 43,073
-----------
Total United Kingdom 43,073
(Cost $44,210) ===========
=========================================================================
United States- 42.8%
=========================================================================
Corporate Bonds and Notes- 16.7%
Dean Witter Discover
5.586% due 02/01/99(d) $ 3,000 2,992
5.586% due 02/05/99(d) 1,000 1,001
Ford Motor Credit Corp.
5.490% due 03/30/99(d) 4,000 3,963
5.560% due 04/13/99(d) 5,000 4,952
General Motors Acceptance Corp.
7.125% due 05/23/97 3,000 3,044
7.850% due 11/17/97 9,000 9,251
Hewlett Packard Co.
5.625% due 11/20/00 2,500 1,692
Resolution Trust Corp.
7.750% due 04/25/28 4,797 4,798
Student Loan Marketing Assn.
5.595% due 04/25/04(d) 1,598 1,598
TCI Communications, Inc.
6.144% due 04/01/02(d) 5,200 5,200
Time Warner, Inc.
6.210% due 08/15/00(d) 875 881
7.975% due 08/15/04 525 535
8.110% due 08/15/06 1,050 1,080
8.180% due 08/15/07 1,050 1,078
Transcontinental Gas Pipeline
6.210% due 05/15/00 1,000 1,000
-----------
43,065
===========
Mortgage Backed Securities - 26.1%
Chase Mortgage
7.500% due 11/25/23 261 261
Collateralized Mortgage Obligation Trust
9.000% due 05/01/14 103 107
Countrywide
7.697% due 11/25/24(d) 683 698
Federal Home Loan Mortgage Corp.
9.050% due 06/15/19 220 230
9.000% due 11/15/19 80 80
7.870% due 08/01/24(d) $ 3,528 $ 3,642
7.893% due 01/01/24(d) 623 643
Federal National Mortgage Assn.
9.050% due 12/25/18 2,378 2,483
6.719% due 04/01/24(d) 420 431
6.369% due 12/01/27(d) 1,030 1,039
6.347% due 08/01/29(d) 2,495 2,518
Government National Mortgage Assn.
7.000% due 11/20/21(d) 1,372 1,386
7.000% due 05/20/22(d) 140 142
6.875% due 09/20/22(d) 1,004 1,018
7.375% due 05/20/23(d) 1,530 1,551
7.000% due 07/20/23(d) 977 987
7.250% due 07/20/23(d) 5,300 5,369
7.250% due 07/20/23(d) 846 857
7.250% due 09/20/23(d) 1,061 1,075
7.000% due 09/20/23(d) 2,048 2,071
7.000% due 10/20/23(d) 881 893
7.000% due 10/20/23(d) 4,555 4,607
7.000% due 11/20/23(d) 4,214 4,263
7.000% due 12/20/23(d) 2,686 2,716
7.375% due 06/20/24(d) 1,265 1,289
7.250% due 09/20/24(d) 3,327 3,373
7.250% due 09/20/24(d) 954 967
7.000% due 10/20/24(d) 696 705
MBLAC - NY REO Associates L.P.
9.375% due 02/01/98(d) 3,467 3,468
Morgan Stanley Mortgage
8.150% due 07/20/21 6 6
Paine Webber Mortgage
7.000% due 10/25/23 2,437 2,429
Resolution Trust Corp.
7.500% due 12/15/04 2,000 2,009
10.646% due 05/25/24(d) 366 378
7.750% due 04/25/28 44 44
Ryland Acceptance Corp.
7.909% due 09/25/23(d) 12,571 12,783
Sears Mortgage
6.790% due 06/25/22(d) 306 306
8.250% due 09/25/31 728 726
-----------
67,550
-----------
Total United States 110,615
(Cost $110,489) ===========
=========================================================================
Purchased OTC Options (f) - 5.6%
=========================================================================
Call - Commonwealth of Canada
9.000% due 12/01/04(h) C$ 21,000 1,308
Strike @ 100.00 Exp. 04/11/96
Call - Republic of Finland
9.500% due 03/15/04(h) FM 140,000 3,896
Strike @ 98.00 Exp. 05/10/96
Call - Republic of Germany
6.250% due 01/24/24(h) DM 24,700 1,564
Strike @ 79.50 Exp. 04/09/96
Put - Italian Lira v. German Mark
Strike @ 1,200 Exp. 04/11/96 IL 3,700 0
Put - Italian Lira v. Swiss Franc
Strike @ 1,500 Exp. 04/17/96 4,500,000 0
Call - Government of Japan
4.600% due 06/22/98(h) JY 6,071,000 3,328
Strike @ 101.50 Exp. 04/02/96
Call - United Kingdom
6.000% due 08/10/99(h) BP 29,000 4,258
Strike @ 86.50 Exp. 06/24/96
-----------
Total Purchased OTC Options 14,354
(Cost $14,920) ===========
</TABLE>
57
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Foreign Fund
March 31, 1996
[THE FOLLOWING TABLE WAS PRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT]
<TABLE>
<S> <C>
AA ...................................................................... 33%
AAA ...................................................................... 46%
A ...................................................................... 6%
BBB ...................................................................... 4%
BB ...................................................................... 8%
A1 ...................................................................... 3%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
Short-Term Instruments - 7.1%
=========================================================================
<S> <C> <C> <C>
Discount Notes - 6.0%
Abbott Laboratories
5.340% due 04/23/96 $ 5,200 $ 5,183
Amoco Credit Corp.
5.190% due 04/19/96 200 199
E.I. Du Pont de Nemours
5.220% due 05/31/96 2,800 2,773
Federal Home Loan Bank
5.025% due 04/25/96 500 498
5.310% due 04/29/96 1,400 1,394
5.200% due 06/19/96 2,700 2,667
General Electric Capital Corp.
5.260% due 04/25/96 600 598
Hewlett Packard Co.
5.220% due 04/26/96 900 897
Kimberly-Clark Corp.
5.120% due 05/02/96 1,200 1,195
National Rural Utilities Cooperative
5.160% due 04/26/96 200 199
-----------
15,603
===========
Repurchase Agreement - 0.7%
State Street Bank
4.750% due 04/01/96 1,735 1,735
(Dated 03/29/96. Collateralized by
U.S. Treasury Bond 8.750% 05/15/17
valued at $1,771,121. Repurchase
proceeds are $1,735,687.)
U.S. Treasury Bills(b) - 0.4%
4.848% due 04/04/96-08/29/96(g) 950 943
-----------
Total Short-Term Instruments 18,281
(Cost $18,287) ===========
Total Investments (a)-217.4% $ 562,016
(cost $561,706)
Written Options (e)-0.0% (22)
(Premiums $80)
Other Assets and Liabilities (Net)-(117.4%) (303,501)
-----------
Net Assets-100.0% $ 258,493
===========
</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. $ 5,728
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (5,747)
-------
Unrealized depreciation-net $ 19
=======
(b) Securities with an aggregate market value of $474 have been segregated with
the custodian to cover margin requirements for the following open future
contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Appreciation/
Type Contracts (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C>
Commonwealth of Australia 10 Year Bond (6/96) 54 $ (28)
Republic of Germany 10 Year Bond (6/96) 31 44
U.S. Treasury 10 Year Note (6/96) 295 515
U.S. Treasury 30 Year Bond (6/96) 89 (49)
--------
$ 482
========
</TABLE>
(c) Foreign forward currency contracts outstanding at March 31, 1996:
<TABLE>
<CAPTION>
Principal
Amount Unrealized
Covered Expiration Appreciation/
Type by Contract Month (Depreciation)
================================================================================
<S> <C> <C> <C> <C>
Buy A$ 8,954 04/96 $ (92)
Buy AP 1,860 06/96 63
Buy 2,100 12/96 124
Sell BF 200 04/96 0
Sell 3,877 06/96 0
Sell BP 1,239 04/96 (2)
Sell 15,850 05/96 8
Buy C$ 6,060 05/96 33
Sell 7,200 05/96 (34)
Buy CK 267,519 08/96 113
Buy DG 211 04/96 (2)
Sell 1,393 04/96 4
Buy DK 11,258 04/96 (32)
Sell 11,608 04/96 31
Sell 38,473 05/96 1
Buy 40,157 09/96 84
Buy DM 9,695 04/96 11
Sell 12,874 04/96 18
Buy 32,519 05/96 (189)
Sell 3,783 05/96 16
Sell 56,122 12/96 1,101
Sell 6,563 01/97 57
Sell 15,763 03/97 (44)
Sell FF 66,651 04/96 (88)
Buy 23,591 09/96 75
Buy FM 55,957 04/96 (72)
Sell 49,562 04/96 42
Buy 24,050 09/96 (278)
Buy IL 8,117,303 05/96 19
Sell 25,296,420 05/96 (147)
Buy 19,422,829 09/96 649
Buy IP 7,027 04/96 (84)
Sell IP 8,332 04/96 (41)
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Unrealized
Covered Expiration Appreciation/
Type by Contract Month (Depreciation)
================================================================================
<S> <C> <C> <C> <C>
Sell JY 500,738 04/96 $ 39
Buy 207,270 05/96 (42)
Sell 950,724 05/96 79
Buy 7,180,000 10/96 (6,653)
Sell 7,180,000 10/96 7,452
Sell N$ 917 04/96 3
Sell SK 71,130 04/96 94
Sell 50,632 09/96 (180)
Buy 3,900 05/96 580
Buy SP 961,000 04/96 93
Sell 861,605 04/96 (65)
Sell 188,632 08/96 (17)
----------
$ 2,727
==========
</TABLE>
(d) Variable rate security. The rate listed is as of March 31, 1996.
(e) Premiums received on Written Put Options:
<TABLE>
<CAPTION>
Premiums Market
Type Par Received Value
- --------------------------------------------------------------------------------
Republic of Argentina
<S> <C> <C> <C> <C>
Strike @ 68.25 Exp. 4/12/1996 AP 2,800 $48 $ 9
Italian Lira v. Swiss Franc
Strike @ 1,345.91 Exp. 04/17/96 IL 4,037,730 15 8
Italian Lira v. German Mark
Strike @ 1,080.00 Exp.4/11/1996 DM 3,700 17 5
---------------
$80 $22
===============
</TABLE>
(f) Principal amount denoted in indicated currency:
<TABLE>
<S> <C>
A$ - Australian Dollar
AP - Argentine Peso
BF - Belgian Franc
BP - British Pound
C$ - Canadian Dollar
CK - Czech Koruna
DG - Dutch Gilder
DK - Danish Krone
DM - German Mark
FF - French Franc
FM - Finnish Markka
IL - Italian Lira
IP - Irish Punt
JY - Japanese Yen
MP - Mexican Peso
N$ - New Zealand Dollar
SK - Swedish Krona
SP - Spanish Peseta
</TABLE>
(g) Securities are grouped by coupon and represent a range of maturities.
(h) Security is subject to outstanding forward sale commitment. See Note 1.
See Notes to Financial Statements
59
<PAGE>
SCHEDULE OF INVESTMENTS
Global Fund
March 31, 1996
[THE FOLLOWING TABLE WAS PRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT]
<TABLE>
<S> <C>
Argentina .................................................. 9.3%
Canada ..................................................... 15.0%
Denmark .................................................... 6.0%
Germany .................................................... 6.9%
Netherlands ................................................ 8.0%
Spain ...................................................... 10.6%
Sweden ..................................................... 6.3%
United Kingdom ............................................. 8.7%
United States .............................................. 38.2%
Short-Term Instruments ..................................... 30.9%
Other ...................................................... 25.3%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
Argentina (f) - 9.3%
=========================================================================
<S> <C> <C> <C>
Republic of Argentina
7.458% due 04/26/96 $ 7,750 $ 7,715
8.000% due 08/09/97 DG 600 371
6.313% due 03/31/05 (d) $ 6,039 4,348
-----------
Total Argentina 12,434
(Cost $12,229) ===========
=========================================================================
Belgium (f) - 3.0%
=========================================================================
Kingdom of Belgium
9.000% due 03/28/03 BF 52,800 2,003
5.100% due 11/21/04 (d) 59,900 2,007
-----------
Total Belgium 4,010
(Cost $4,008) ===========
=========================================================================
Canada (f) - 15.0%
=========================================================================
Commonwealth of Canada
5.240% due 04/15/96 $ 500 499
7.500% due 03/01/01 C$ 10,200 7,642
9.000% due 12/01/04 14,870 11,894
-----------
Total Canada 20,035
(Cost $20,004) ===========
=========================================================================
Denmark (f) - 6.0%
=========================================================================
Kingdom of Denmark
8.000% due 05/15/03 DK 23,040 4,266
8.000% due 03/15/06 21,000 3,803
-----------
Total Denmark 8,069
(Cost $8,060) ===========
=========================================================================
Finland (f) - 3.1%
=========================================================================
Republic of Finland
10.000% due 09/15/01 FM 17,000 4,204
-----------
Total Finland 4,204
(Cost $4,226) ===========
=========================================================================
France (f) - 0.5%
=========================================================================
Republic of France
7.750% due 10/25/05 FF 3,050 655
-----------
Total France 655
(Cost $648) ===========
=========================================================================
Germany (f) - 6.9%
=========================================================================
German Unity Fund
8.750% due 07/20/00 DM 3,100 2,375
Republic of Germany
6.875% due 06/11/03 3,800 2,677
6.250% due 01/04/24 6,860 4,119
-----------
Total Germany 9,171
(Cost $9,269) ===========
=========================================================================
Ireland (f) - 1.6%
=========================================================================
Irish Gilt
6.250% due 04/01/99 IP 1,400 2,169
-----------
Total Ireland 2,169
(Cost $2,198) ===========
=========================================================================
Italy (f) - 2.3%
=========================================================================
Republic of Italy
9.188% due 09/01/05 IL 4,770,000 3,021
-----------
Total Italy 3,021
(Cost $3,050) ===========
=========================================================================
Mexico (f) - 4.7%
=========================================================================
Banco Nacional de Comercio Exterior
11.250% due 05/31/96 (d) $ 1,300 1,300
8.000% due 05/06/98 DM 500 343
Banco Nacional de Obra y Servicios
10.750% due 08/16/96 $ 500 504
Cemex
10.000% due 11/15/96 1,000 1,011
Republic of Mexico
0.000% due 05/16/96 MP 10,000 1,259
Third Mexican Acceptance Corp.
7.370% due 03/15/98 $ 2,000 1,837
-----------
Total Mexico 6,254
(Cost $6,276) ===========
=========================================================================
Netherlands (f) - 8.0%
=========================================================================
Baden-Wuerttemberg L-Finance N.V.
6.625% due 08/20/03 DM 2,600 1,791
Kingdom of Netherlands
9.000% due 05/15/00 DG 5,300 3,660
8.250% due 02/15/07 4,400 3,005
Landesbank Reinland-Pfalz
7.250% due 04/20/05 DM 3,200 2,243
-----------
Total Netherlands 10,699
(Cost $10,884) ===========
=========================================================================
New Zealand (f) - 5.2%
=========================================================================
Commonwealth of New Zealand
10.000% due 07/15/97 N$ 1,600 1,108
8.000% due 07/15/98 1,400 945
6.500% due 02/15/00 4,200 2,688
10.000% due 03/15/02 3,100 2,284
-----------
Total New Zealand 7,025
(Cost $7,105) ===========
=========================================================================
Panama - 1.5%
=========================================================================
Bladex
6.641% due 05/23/96 (d) $ 2,000 1,999
-----------
Total Panama 1,999
(Cost $2,000) ===========
==========================================================================
Spain (f) - 10.6%
==========================================================================
Kingdom of Spain
10.300% due 06/15/02 SP 306,000 2,557
7.250% due 03/04/03 DM 9,900 7,066
10.900% due 08/30/03 SP 290,000 2,493
10.000% due 02/28/05 252,000 2,062
-----------
Total Spain 14,178
(Cost $14,188) ===========
=========================================================================
Sweden (f) - 6.3%
=========================================================================
Kingdom of Sweden
11.000% due 01/21/99 SK 51,500 8,416
-----------
Total Sweden 8,416
(Cost $8,257) ===========
</TABLE>
60
<PAGE>
[THE FOLLOWING TABLE WAS PRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT]
<TABLE>
<S> <C>
.................................................... A................. 4%
.................................................... BBB................. 3%
.................................................... BB................. 8%
.................................................... AA................. 34%
....................................................A1/P1................. 18%
....................................................A2/P2................. 1%
.................................................... AAA................. 32%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
United Kingdom (f) - 8.7%
=========================================================================
<S> <C> <C> <C>
United Kingdom Gilt
6.000% due 08/10/99 BP 7,890 $ 11,583
-----------
Total United Kingdom 11,583
===========
(Cost $11,824)
================================================================================
United States - 38.2%
================================================================================
Corporate Bonds and Notes - 11.1%
CMS Energy
9.500% due 10/01/97 (d) $ 750 775
CTC Mansfield Funding
11.125% due 09/30/16 700 731
Dean Witter Discover
5.586% due 02/01/99 (d) 1,000 997
5.586% due 02/05/99 (d) 1,000 1,001
General Motors Acceptance Corp.
6.750% due 05/20/96 1,000 1,002
6.500% due 05/15/97 1,000 1,007
Hewlett Packard Co.
5.625% due 11/20/00 DM 1,300 880
Kansallis-Osake
7.530% due 09/30/43 (d) $ 5,000 5,150
TCI Communications, Inc.
6.144% due 04/01/02 (d) 2,700 2,700
United Air Lines
10.670% due 05/01/04 500 591
-----------
14,834
===========
Mortgage-Backed Securities - 25.9%
Countrywide
7.697% due 11/25/24 (d) 342 349
Federal Home Loan Mortgage Corp.
7.809% due 05/01/23 (d) 1,532 1,579
7.893% due 01/01/24 (d) 139 143
Federal Housing Administration
7.399% due 02/01/21 1,708 1,712
Federal National Mortgage Assn.
7.500% due 11/01/01-01/01/02 (g) 1,324 1,352
6.500% due 04/01/09 875 859
7.690% due 11/01/23 (d) 1,198 1,233
7.286% due 03/01/24 (d) 692 710
6.369% due 12/01/27 (d) 461 465
6.347% due 08/01/29 (d) 1,343 1,356
Government National Mortgage Assn.
6.875% due 09/20/22 (d) 492 499
7.375% due 05/20/23-06/20/24(d)(g) 2,152 2,182
7.250% due 07/20/22-09/20/24(d)(g) 12,011 12,171
7.000% due 07/20/23-10/20/24(d)(g) 5,446 5,509
Residential Funding
7.705% due 03/25/25 (d) 3,535 3,588
Resolution Trust Corp.
8.000% due 04/25/25 1,000 1,007
-----------
34,714
===========
Asset-Backed Securities - 1.2%
Student Loan Marketing Assn.
5.595% due 04/25/04 (d) 1,598 1,598
-----------
Total United States 51,146
===========
(Cost $50,731)
- --------------------------------------------------------------------------------
Purchased OTC Options (f) - 3.4%
- --------------------------------------------------------------------------------
Call - Commonwealth of Canada
9.000% due 12/01/04 (h) C$ 11,000 685
Strike @ 100.00 Exp. 04/11/96
Call - Kingdom of Denmark
8.000% due 03/15/06 (h) DK 21,000 486
Strike @ 90.00 Exp. 06/10/96
8.500% due 05/15/03 (h) DK 23,040 567
Strike @ 91 Exp. 06/10/96
Call - Republic of Finland
10.000% due 09/15/01 (h) FM 40,000 947
Strike @ 104.10 Exp. 04/09/96
Call - Kingdom of Spain
10.300% due 06/15/02 (h) SP 306,000 476
Strike @ 85 Exp. 06/10/96
10.900% due 08/30/03 (h) 290,000 445
Strike @ 87.85 Exp. 06/10/96
Call - United Kingdom
6.000% due 08/10/99 (h) BP 7,000 1,027
Strike @ 86.50 Exp. 06/24/96
Put - Italian Lira v. Swiss Franc
Strike @ 1,500 Exp. 04/17/96 IL 2,250,000 0
Put - Italian Lira v. German Mark
Strike @ 1,200 Exp. 04/11/96 DM 1,800 0
-----------
Total Purchased OTC Options 4,633
===========
(Cost $4,833)
================================================================================
Short-Term Instruments (f) - 30.9%
================================================================================
Discount Notes - 28.0%
Ameritech Corp.
5.230% due 06/25/96 $ 6,000 5,921
Amoco Credit Corp.
5.180% due 04/08/96 1,300 1,299
5.190% due 04/19/96 3,000 2,992
AT&T Corp.
5.370% due 04/01/96 2,500 2,500
E.I. Du Pont de Nemours
5.220% due 05/31/96 1,500 1,486
General Electric Capital Corp.
5.260% due 04/25/96 5,500 5,481
Hewlett Packard Co.
5.230% due 06/20/96 2,000 1,975
Kimberly Clark Corp.
5.120% due 05/02/96 4,700 4,679
Minnesota Mining & Mfg. Co.
5.220% due 04/24/96 2,000 1,993
National Rural Utilities Cooperative
5.250% due 06/07/96 3,500 3,463
Shell Oil Co.
5.290% due 04/11/96 5,000 4,993
Warner Lambert
5.540% due 04/09/96 800 799
-----------
37,581
===========
Repurchase Agreement - 2.5%
Daiwa Securities
5.300% due 04/01/96 2,500 2,500
(Dated 03/29/96. Collateralized by
U.S. Treasury Note 8.000% 08/15/99
valued at $2,550,426. Repurchase
proceeds are $2,501,104.)
State Street Bank
4.750% due 04/01/96 837 837
(Dated 03/29/96. Collateralized by
U.S. Treasury Bond 8.750% 05/15/17
valued at $854,597. Repurchase
proceeds are $837,331.)
-----------
3,337
===========
U.S. Treasury Bills - 0.4%
4.736% due 05/23/96-10/17/96(b)(g) 480 474
Total Short-Term Instruments 41,392
(Cost $41,402) ===========
</TABLE>
61
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Global Fund
March 31, 1996
<TABLE>
=========================================================================
<S> <C>
Total Investments (a) - 165.2% $ 221,093
(Cost $221,192)
Written Options (e) - 0.0% (11)
(Premiums $40)
Other Assets and Liabilities (Net) - (65.2%) (87,249)
-----------
Net Assets - 100.0% $ 133,833
===========
</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. $ 1,042
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (1,289)
-----------
Unrealized depreciation-net $ (247)
===========
(b) Securities with an aggregate market value of $474 have been segregated with
the custodian to cover margin requirements for the following open future
contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Appreciation/
Type Contracts (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C>
Commonwealth of Australia 10 Year Bond (6/96) 13 $ (14)
Republic of Germany 10 Year Bond (6/96) 62 10
U.S. Treasury 5 Year Note (6/96) 59 (17)
U.S. Treasury 10 Year Bond (6/96) 121 (103)
---------
$ (124)
=========
</TABLE>
<TABLE>
<CAPTION>
(c) Foreign forward currency contracts outstanding at March 31, 1996:
Principal
Amount Unrealized
Covered Expiration Appreciation/
Type by Contract Month (Depreciation)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Buy AP 800 06/96 $ 27
Buy 900 12/96 53
Buy A$ 1,739 04/96 67
Sell 3,401 04/96 (33)
Sell BF 89 04/96 0
Buy 121,300 06/96 (3)
Buy C$ 7,179 05/96 39
Sell 2,400 05/96 (11)
Sell 4,600 03/97 (12)
Buy CK 114,621 08/96 48
Buy DM 10,528 04/96 12
Sell 6,170 04/96 8
Buy 20,015 05/96 (134)
Sell 1,737 05/96 6
Sell 21,861 12/96 422
Buy 3,992 01/97 (35)
Sell 317 03/97 0
Sell 12,170 03/97 (26)
Buy DK 4,192 04/96 (12)
Sell 4,439 04/96 11
Sell 1,583 05/96 0
Buy 15,685 09/96 $ 34
Buy SP 672,546 04/96 61
Sell 53,576 08/96 (5)
Buy FM 9,634 04/96 (18)
Sell 4,316 04/96 7
Buy 9,100 09/96 (105)
Buy FF 39,959 04/96 53
Sell 6 04/96 0
Buy 9,355 09/96 30
Sell BP 528 04/96 (1)
Buy 3,698 05/96 (2)
Buy IP 2,694 04/96 (32)
Sell 3,832 04/96 (19)
Buy IL 5,040,270 05/96 5
Sell 4,510,262 05/96 (26)
Buy 9,837,643 09/96 327
Sell JY 213,258 04/96 17
Buy 1,543,008 05/96 (168)
Buy 2,930,000 10/96 (2,715)
Sell 2,930,000 10/96 3,041
Buy DG 6,039 04/96 (30)
Sell N$ 459 04/96 2
Sell SK 34,453 04/96 46
Sell 4,376 05/96 (15)
Buy 20,067 09/96 230
-------
$ 1,144
=======
</TABLE>
(d) Variable rate security. The rate listed is as of March 31, 1996.
(e) Premiums received on Written Put Options:
<TABLE>
<CAPTION>
Premium Market
Type Par Received Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Put - Republic of Argentina
Strike @ 68.25 Exp. 04/12/96 $ 1,400 $24 $ 5
Put - Italian Lira v. Swiss Franc
Strike @ 1,345.91 Exp. 04/17/96 IL 2,018,900 8 4
Put - Italian Lira v. German Mark
Strike @ 1,080.00 Exp. 04/11/96 DM 1,800 8 2
--------------
$40 $11
==============
</TABLE>
(f) Principal amount denoted in indicated currency:
A$ - Australian Dollar
AP - Argentine Peso
BF - Belgian Franc
BP - British Pound
C$ - Canadian Dollar
CK - Czech Koruna
DG - Dutch Gilder
DK - Danish Krone
DM - German Mark
FF - French Franc
FM - Finnish Markka
IL - Italian Lira
IP - Irish Punt
JY - Japanese Yen
MP - Mexican Peso
N$ - New Zealand Dollar
SK - Swedish Krona
SP - Spanish Peseta
(g) Securities are grouped by coupon and represent a range of maturities.
(h) Security subject to outstanding forward sale commitment. See Note 1.
See Notes to Financial Statements
62
<PAGE>
SCHEDULE OF INVESTMENTS
High Yield Fund
March 31, 1996
[THE FOLLOWING TABLE WAS PRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT]
<TABLE>
<S> <C>
Mortgage-Backed Securities .................................. 9.0%
Corporate Bonds and Notes ................................... 77.9%
Other ....................................................... 10.2%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
Corporate Bonds and Notes - 77.9%
=========================================================================
<S> <C> <C>
Banking and Finance - 6.5%
Coleman Holdings
0.000% due 05/27/98 (b) $ $10,000 $ 8,300
Navistar Financial
8.875% due 11/15/98 4,500 4,523
Phoenix RE Corp.
9.750% due 08/15/03 6,550 7,009
Reliance Financial Services
9.000% due 11/15/00 6,000 6,090
10.360% due 12/01/00 (c) 1,000 1,013
Trizec Finance
10.875% due 10/15/05 6,500 6,630
UCC Investors
10.500% due 05/01/02 1,500 1,575
-----------
35,140
===========
Industrials - 58.4%
Abbey Healthcare Group
9.500% due 11/01/02 7,470 7,900
Albritton Communications
9.750% due 11/30/07 4,000 3,810
American Airlines
10.610% due 03/04/10 650 779
Amerigas Partners L.P.
10.125% due 04/15/07 4,750 5,035
Ametek, Inc.
9.750% due 03/15/04 6,000 6,398
Atlas Air, Inc.
12.250% due 12/01/02 4,500 4,815
Bally's Grand
10.375% due 12/15/03 5,800 6,025
Benedek Broadcasting
11.875% due 03/01/05 5,500 5,855
Boyd Gaming Corp.
10.750% due 09/01/03 4,000 4,240
Buckeye Cellulose Corp.
8.500% due 12/15/05 2,500 2,475
Building Materials Corp.
0.000% due 07/01/04 (b) 15,570 11,600
Cablevision Systems
10.750% due 04/01/04 1,640 1,734
9.875% due 04/01/23 3,000 3,098
Century Communication
11.875% due 10/15/03 5,500 5,899
CF Cable TV, Inc.
9.125% due 07/15/07 7,000 7,018
Continental Cablevision
11.000% due 06/01/07 5,810 6,638
9.500% due 08/01/13 3,625 4,087
Cumberland Farms
10.500% due 10/01/03 3,500 3,338
Delta Air Lines
10.790% due 03/26/14 2,264 2,721
Doane Products Co.
10.625% due 03/01/06 1,000 1,025
Doskocil Companies, Inc.
9.750% due 07/15/00 3,250 3,396
Exide Corp.
0.000% due 12/15/04 (b) 6,250 5,313
Ferrell Gas
10.000% due 08/01/01 5,350 5,725
Figgie International, Inc.
9.875% due 10/01/99 4,740 4,835
G-I Holdings, Inc.
0.000% due 10/01/98 (b) 430 344
Genesis Health Ventures
9.750% due 06/15/05 5,000 5,225
Granite Broadcasting Corp.
10.375% due 05/15/05 3,750 3,811
Gulf Canada Resources
9.250% due 01/15/04 8,750 8,936
HMH Properties
9.500% due 05/15/05 5,000 4,888
J.Q. Hammons Hotels
8.875% due 02/15/04 7,000 6,808
Hollinger International Publishing
9.250% due 02/01/06 5,500 5,418
Infinity Broadcasting
10.375% due 03/15/02 4,500 4,838
Jorgensen, Earle M. Co.
10.750% due 03/01/00 6,050 5,974
K-III Communications Co.
8.500% due 02/01/06 8,500 8,245
Lenfest Communications
8.375% due 11/01/05 7,500 7,238
Mobilemedia Communications Corp.
9.375% due 11/01/07 4,000 3,930
Nuevo Energy Co.
12.500% due 06/15/02 5,454 5,877
Owens Illinois
10.500% due 06/15/02 2,000 2,095
11.000% due 12/01/03 6,000 6,585
Pacific Lumber
10.500% due 03/01/03 3,500 3,360
Paging Network
10.125% due 08/01/07 6,500 6,833
Pathmark Stores, Inc.
9.625% due 05/01/03 6,500 6,143
0.000% due 11/01/03 (b) 1,500 908
Repap Wisconsin, Inc.
9.250% due 02/01/02 6,750 6,480
Revlon Consumer Products Corp.
9.500% due 06/01/99 6,000 6,090
10.500% due 02/15/03 2,000 2,030
RJR Nabisco
8.000% due 07/15/01 2,000 1,965
8.625% due 12/01/02 5,500 5,472
Rogers Cablesystems, Inc.
10.000% due 03/15/05 5,500 5,734
Rogers Cantel Mobile
10.750% due 11/01/01 6,180 6,474
11.125% due 07/15/02 2,000 2,138
SCI Television
11.000% due 06/30/05 7,675 8,068
Sequa Corp.
10.000% due 05/14/01 1,500 1,507
10.150% due 05/15/01 3,500 3,536
Showboat, Inc.
9.250% due 05/01/08 5,900 6,033
Stone Consolidated
10.250% due 12/15/00 2,250 2,374
Sweetheart Cup Co.
9.625% due 09/01/00 6,000 6,150
Teekay Shipping Corp.
8.320% due 02/01/08 3,500 3,408
Telewest Communications
9.625% due 10/01/06 7,500 7,500
Tenet Healthcare
10.125% due 03/01/05 4,800 5,172
Unisys Corp.
12.000% due 04/15/03 4,000 3,949
West Point Stevens
8.750% due 12/15/01 5,000 4,994
World Color Press, Inc.
9.125% due 03/15/03 9,085 9,210
Young Broadcasting, Inc.
9.000% due 01/15/06 5,000 4,775
-----------
314,274
===========
</TABLE>
63
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
High Yield Fund
March 31, 1996
[THE FOLLOWING TABLE WAS PRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT]
<TABLE>
<S> <C>
...............................................AAA ....................... 1%
...............................................BBB ....................... 7%
............................................... A1 ....................... 3%
............................................... B ....................... 27%
............................................... BB ....................... 62%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
- -------------------------------------------------------------------------
<S> <C> <C>
Utilities - 13.0%
AES Corp.
9.750% due 06/15/00 $ 6,285 $ 6,458
Cablevision Systems
9.875% due 02/15/13 2,000 2,090
California Energy
9.875% due 06/30/03 3,000 3,120
0.000% due 01/15/04 (b) 10,240 9,805
CMS Energy
9.875% due 10/01/99 (c) 4,950 5,173
CTC Mansfield Funding
11.125% due 09/30/16 7,000 7,309
El Paso Electric Co.
8.900% due 02/01/06 3,500 3,561
Long Island Lighting Co.
7.050% due 03/15/03 2,500 2,354
8.200% due 03/15/23 4,500 4,134
Niagara Mohawk Power
9.500% due 03/01/21 2,000 1,893
7.875% due 04/01/24 5,500 4,704
North Atlantic Energy
9.050% due 06/01/02 5,750 5,725
Triton Energy
0.000% due 11/01/97 6,950 6,151
Wilmington Trust Co. - Tucson Electric
10.211% due 01/01/09 500 481
10.732% due 01/01/13 6,993 6,720
-----------
69,678
-----------
Total Corporate Bonds and Notes 419,092
(Cost $411,358) ===========
=========================================================================
Mortgage-Backed Securities - 9.0%
=========================================================================
Collateralized Mortgage Obligations - 3.4%
Federal National Mortgage Assn.
8.099% due 05/25/28 (c) 2,835 1,905
Lennar Central Partners L.P.
9.890% due 09/15/04 1,000 1,006
LTC
9.200% due 08/04/23 1,877 1,971
Manufacturers Hanover Corp.
5.807% due 12/16/25 (c) 980 979
9.400% due 12/16/25 (c) 4,361 4,208
Red Mountain Funding Corp.
9.150% due 11/28/27 4,227 3,805
Resolution Trust Corp.
7.260% due 09/25/20 (c) 1,092 720
9.250% due 06/25/23 3,562 3,613
9.500% due 05/25/24 171 166
8.500% due 03/25/25 272 268
-----------
18,641
===========
Other Mortgage-Backed Securities - 4.8%
Kearny St. Real Estate Co.
9.400% due 10/15/05 5,000 4,993
MBLAC - NY REO Associates L.P.
9.375% due 02/01/98 (c) 2,577 2,578
Resolution Trust Corp.
8.000% due 06/25/26 12,332 10,540
6.900% due 02/25/27 5,272 4,626
Structured Asset Securities Corp.
7.050% due 11/25/02 4,000 3,197
-----------
25,934
===========
Stripped Mortgage-Backed Securities - 0.8%
Federal National Mortgage Assn. (IO)
6.000% due 07/25/05 5,500 525
7.000% due 07/25/08 8,061 1,212
6.500% due 06/25/17 5,000 568
Fund America (IO)
9.590% due 10/20/21 $ 2,536 $ 684
Prudential Home (IO)
0.251% due 05/25/24 117,689 1,097
-----------
4,086
-----------
Total Mortgage-Backed Securities 48,661
(Cost $48,888) ===========
=========================================================================
Asset-Backed Securities - 0.5%
=========================================================================
Airplanes Pass Through Trust
10.875% due 03/15/19 2,500 2,495
-----------
Total Asset-Backed Securities 2,495
(Cost $2,500) ===========
=========================================================================
Sovereign Issues - 3.7%
=========================================================================
First Mexican Acceptance Corp.
8.750% due 09/15/96 1,000 995
Republic of Argentina
6.313% due 03/31/05 (c) 14,603 10,514
5.000% due 03/31/23 (c) 8,000 4,140
Third Mexican Acceptance Corp.
7.370% due 03/15/98 1,000 919
United Mexican States
6.250% due 12/31/19 5,000 3,169
-----------
Total Sovereign Issues 19,737
(Cost $19,236) ===========
=========================================================================
Preferred Stock - 3.0%
=========================================================================
Shares
Cablevision Systems 60,000 6,055
First Nationwide Bank 87,500 9,844
-----------
Total Preferred Stock 15,899
===========
(Cost $15,581)
=========================================================================
Short-Term Instruments - 3.0%
=========================================================================
Principal
Amount
(000's)
Discount Notes - 2.5%
Commonwealth Bank of Australia
5.190% due 05/20/96 $ 1,800 1,787
Commonwealth of Canada
5.250% due 06/26/96 4,000 3,947
Ford Motor Credit Corp.
5.250% due 06/26/96 3,500 3,453
General Electric Capital Corp.
5.340% due 04/23/96 4,500 4,485
-----------
13,672
===========
Repurchase Agreements - 0.5%
Daiwa Securities
5.200% due 04/01/96 2,000 2,000
(Dated 3/29/96. Collateralized by
U.S. Treasury Bill 09/19/96 valued
at $2,049,323. Repurchase proceeds
are $2,000,867.)
State Street Bank
4.750% due 04/01/96 897 897
(Dated 3/29/96. Collateralized by
U.S. Treasury Bond 8.750% 05/15/17
valued at $916,524. Repurchase
proceeds are $897,355.)
-----------
2,897
-----------
Total Short-Term Instruments 16,569
(Cost $16,575) ===========
</TABLE>
64
<PAGE>
<TABLE>
=========================================================================
<S> <C>
Total Investments (a) - 97.1% $ 522,453
(Cost $514,138)
Other Assets and Liabilities (Net) - 2.9% 15,537
-----------
Net Assets - 100.0% $ 537,990
===========
</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. $ 11,981
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (3,350)
-----------
Unrealized appreciation-net $ 8,631
===========
(b) Security becomes interest bearing at a future date.
(c) Variable rate security. The rate listed is as of March 31, 1996.
See Notes to Financial Statements
65
<PAGE>
SCHEDULE OF INVESTMENTS
Money Market Fund
March 31, 1996
[THE FOLLOWING TABLE WAS PRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT]
<TABLE>
<S> <C>
AAA ...................................................................... 21%
A ...................................................................... 1%
A1 ...................................................................... 78%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
=========================================================================
U.S. Treasury Notes - 3.9%
=========================================================================
<S> <C> <C>
7.875% due 07/15/96 $ 1,000 $ 1,006
-----------
Total U.S. Treasury Notes 1,006
(Cost $1,006) ===========
=========================================================================
U.S. Government Agencies - 5.4%
=========================================================================
Federal National Mortgage Assn.
6.366% due 12/01/18 (a) 457 460
Student Loan Marketing Assn.
5.776% due 04/25/04 (a) 940 940
-----------
Total U.S. Government Agencies 1,400
(Cost $1,400) ===========
=========================================================================
Short-Term Instruments - 88.2%
=========================================================================
Discount Notes - 76.7%
Air Products & Chemicals, Inc.
5.370% due 06/21/96 300 296
Aluminum Co. of America
5.400% due 04/22/96 1,050 1,047
American Greetings Co.
5.350% due 04/04/96 1,000 1,000
Ameritech Corp.
5.120% due 04/29/96 700 697
Aon Corp.
5.250% due 05/13/96 800 795
Bell Atlantic Financial Services, Inc.
5.330% due 04/05/96 1,000 999
E.I. Du Pont de Nemours
5.290% due 04/08/96 600 599
5.350% due 08/05/96 400 393
Dun & Bradstreet Corp.
5.520% due 04/09/96 400 400
Federal Home Loan Bank
5.230% due 04/10/96 1,000 999
5.220% due 06/26/96 500 494
Federal Home Loan Mortgage Corp.
5.210% due 04/08/96 1,900 1,898
5.300% due 04/22/96 1,000 997
General Electric Capital Corp.
5.220% due 08/08/96 1,000 981
Goldman Sachs & Co.
5.600% due 04/04/96 350 350
Hewlett Packard Co.
5.240% due 04/18/96 750 748
Home Depot, Inc.
5.350% due 04/08/96 1,000 999
IBM Credit Corp.
5.120% due 04/11/96 800 799
Knight Ridder, Inc.
5.125% due 04/22/96 300 299
5.130% due 06/10/96 500 495
Lehman Brothers Holdings, Inc.
5.500% due 06/15/96 350 350
National Australia Funding
5.430% due 05/28/96 700 694
Proctor & Gamble Co.
5.050% due 05/02/96 600 597
Southwestern Bell Capital Corp.
5.250% due 06/19/96 1,000 988
Wal-Mart Stores
5.400% due 04/11/96 1,000 999
Xerox Credit Corp.
5.250% due 06/14/96 1,000 989
-----------
19,902
===========
Repurchase Agreement - 0.4%
State Street Bank
4.750% due 04/01/96 $ 103 $ 103
(Dated 3/29/96. Collateralized by -----------
U.S. Treasury Bond 8.750% 05/15/17
valued at $105,276. Repurchase
proceeds are $103,041.)
U.S. Treasury Bills - 11.1%
5.022% due 08/22/96-03/06/97 (b) 3,000 2,884
-----------
Total Short-Term Instruments 22,889
(Cost $22,889) -----------
Total Investments - 97.5% $ 25,295
(Cost $25,295)
Other Assets and Liabilities (Net) - 2.5% 650
-----------
Net Assets - 100.0% $ 25,945
===========
</TABLE>
Notes to Schedule of Investments:
(a) Variable rate security. The rate listed is as of March 31, 1996.
(b) Securities are grouped by coupon and represent a range of maturities.
See Notes to Financial Statements
66
<PAGE>
SCHEDULE OF INVESTMENTS
Growth Stock Fund
March 31, 1996
[The following table was represented by a pie chart in the printed material]
<TABLE>
<S> <C>
Financial Services .......................................... 5.2%
Utilities/Telecommunications ................................ 10.7%
Capital Goods ............................................... 9.5%
Technology .................................................. 15.2%
Other ....................................................... 8.4%
Consumer Discretionary ...................................... 10.7%
Consumer Staples ............................................ 40.4%
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (000's)
================================================================================
Common Stock - 99.5%
================================================================================
<S> <C> <C>
Basic Materials - 4.5%
Bemis Co., Inc. (b) 1,900 $ 60
Bowater, Inc. 800 30
Cabot Corp. 2,000 61
Kimberly-Clark Corp. 900 67
Monsanto Co. 600 92
Morton International, Inc. 600 23
Sigma-Aldrich Corp. 400 23
--------
356
========
Capital Goods - 9.5%
Allied Products Corp. 900 20
Federal Signal Corp. 1,200 31
General Electric Co. 4,600 358
Johnson Controls, Inc. 1,400 104
Lennar Corp. (b) 1,200 30
Pulte Corp. 1,600 43
Raychem Corp. (b) 1,300 84
Thermo Electron Corp. 1,400 83
--------
753
========
Consumer Discretionary - 10.7%
Autozone, Inc. (b) 2,200 75
Claire's Stores, Inc. 5,250 95
Department 56, Inc. (b) 2,700 59
Disney (Walt) Co. 1,200 77
HBO & Co. 300 28
Hasbro, Inc. (b) 1,500 55
Hilton Hotels Corp. 1,000 94
Home Depot, Inc. 1,600 77
Magna International, Inc. A 1,200 55
Meredith Corp. (b) 1,900 78
Nike, Inc. Class B 1,100 89
Office Depot, Inc. (b) 1,000 20
Staples, Inc. (b) 2,100 43
--------
845
========
Consumer Staples - 40.4%
Abbott Laboratories 3,300 134
Albertsons, Inc. 2,600 97
Amgen, Inc. (b) 500 29
Becton, Dickinson & Co. (b) 900 74
Bergen Brunswig Corp. (b) 1,800 47
Campbell Soup Co. 3,800 231
Coca-Cola Co. 3,100 256
Columbia HCA Healthcare Corp. 1,100 64
ConAgra, Inc. 3,300 134
Health Management Associates, Inc. (b) 600 21
IBP, Inc. 3,300 85
Johnson & Johnson 3,000 277
Kroger Co. (b) 2,400 97
Medtronic, Inc. (b) 2,000 119
Merck & Co. 3,600 224
Pepsico, Inc. 4,800 304
Pfizer, Inc. 2,300 154
Proctor & Gamble Co. 1,000 85
Safeway, Inc. (b) 1,700 48
St. Jude Medical, Inc. (b) 1,700 63
Sara Lee Corp. 5,000 163
Schering Plough Corp. 2,200 128
Stryker Corp. (b) 1,200 59
United Healthcare Corp. (b) 600 37
U.S. Healthcare, Inc. 500 23
Vencor, Inc. (b) 1,100 38
Vons Cos.(b) 3,200 100
Wrigley, William Jr. Co. (b) 1,700 100
--------
3,191
========
Energy - 1.1%
Baker-Hughes, Inc. (b) 400 12
Halliburton Co. (b) 300 17
Mobil Corp. (b) 300 35
Smith International, Inc. (b) 800 20
--------
84
========
Financial Services - 5.2%
American Express Co. (b) 600 30
Charter One Financial, Inc. (b) 1,100 37
Equifax, Inc. 1,400 28
Federal National Mortgage Assn. 4,900 156
Fifth Third Bancorp 400 23
First USA, Inc. 400 23
Green Tree Financial Corp. 1,400 48
Household International, Inc. 200 13
SunAmerica, Inc. 600 30
Westcorp 1,300 24
--------
412
========
Services - 1.1%
CUC International, Inc. (b) 900 26
Federal Express Corp. (b) 200 14
Olsten Corp. 1,050 33
Tyco International, Ltd. 300 10
--------
83
========
Technology - 15.2%
Adaptec, Inc. (b) 1,100 53
ADC Telecommunications (b) 1,000 35
Analog Devices, Inc. (b) 1,400 39
Applied Materials, Inc. (b) 1,500 53
Avnet, Electronics Inc. 1,700 82
Bay Networks, Inc. (b) 1,400 43
Cabletron Systems, Inc. (b) 1,000 66
Cisco Systems, Inc. (b) 1,500 70
Compaq Computer Corp. (b) 700 27
Computer Associates International, Inc. (b) 800 57
CompUSA, Inc. (b) 2,000 111
EMC Corp. (b) 1,800 39
Hewlett Packard Co. 900 85
Intel Corp. 600 34
Komag, Inc. (b) 1,400 34
Linear Technology Corp. 1,800 75
Microsoft Corp. (b) 1,200 124
Novellus Systems, Inc. (b) 600 27
Oracle Corp. (b) 500 24
Shared Medical Systems Corp. 1,000 60
Tellabs, Inc. (b) 1,200 58
--------
1,196
========
Transportation - 1.1%
Delta Air Lines, Inc. (b) 700 54
Southwest Airlines Co. (b) 1,000 30
--------
84
========
Utilities/Telecommunications - 10.7%
AES Corp. (b) 1,700 42
AT&T Corp. 1,500 92
CalEnergy Co., Inc. (b) 5,600 149
Cincinnati Bell, Inc. 1,200 62
</TABLE>
67
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
Growth Stock Fund
March 31, 1996
<TABLE>
<CAPTION>
Value
Shares (000's)
<S> <C> <C>
Frontier Corp. 3,500 $ 110
GTE Corp. 3,000 132
Northern Telecom Ltd. 1,100 53
Sprint Corp. 2,400 91
360 Communications Co. (b) 800 19
Vodafone Group PLC 400 15
Williams Cos., Inc. 1,600 81
--------
846
--------
Total Common Stocks
(Cost $6,749) 7,850
========
</TABLE>
================================================================================
Short-Term Instruments - 0.6%
================================================================================
<TABLE>
<CAPTION>
Principal
Amount
(000's)
<S> <C> <C>
Repurchase Agreement - 0.6%
State Street Bank
4.750% due 04/01/96 $ 43 43
--------
(Dated 3/29/96. Collateralized by
U.S. Treasury Bond 8.750% 05/15/17
valued at $49,542. Repurchase
proceeds are $43,017.)
Total Short-Term Instruments 43
(Cost $43) ========
Total Investments (a) - 100.1% $ 7,893
(Cost $6,792)
Other Assets and Liabilities (Net)- (0.1%) (4)
--------
Net Assets - 100.0% $ 7,889
========
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. $ 1,268
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
tax cost over value. (169)
--------
Unrealized appreciation-net $ 1,099
========
(b) Non-income producing security.
</TABLE>
See Notes to Financial Statements
68
<PAGE>
SCHEDULE OF INVESTMENTS
StockPLUS Fund
March 31, 1996
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<S> <C>
Short-Term Instruments ...................................... 21.0%
Other ....................................................... 4.6%
Corporate Bonds and Notes ................................... 34.3%
Mortgage-Backed Securities .................................. 45.9%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
Corporate Bonds and Notes - 34.3%
================================================================================
<S> <C> <C>
Banking and Finance - 14.9%
Advanta Corp.
7.260% due 10/15/96 $ 1,500 $ 1,512
Banco Latino
5.919% due 03/27/97 5,000 5,000
Capital One Bank
5.977% due 07/11/96 (d) 600 600
5.905% due 07/30/96 (d) 500 500
6.313% due 03/21/97 (d) 1,000 1,002
Caterpillar Financial
5.200% due 04/01/99 (d) 2,000 1,983
Chrysler Financial Corp.
6.190% due 10/27/97 2,000 2,005
Den Danske Bank
5.625% due 06/30/00 (d) 450 454
Ford Motor Credit Corp.
4.980% due 11/09/98 (d) 500 503
5.490% due 03/30/99 (d) 250 248
4.830% due 04/05/99 (d) 340 345
General Motors Acceptance Corp.
5.600% due 03/16/99 (d) 2,000 1,995
Kansallis-Osake
7.530% due 09/30/43 (d) 1,500 1,545
Merrill Lynch & Co.
7.000% due 10/10/00 (d) 3,000 3,004
Navistar Financial
9.500% due 06/01/96 1,000 1,005
Salomon, Inc.
6.175% due 10/21/96 (d) 500 500
5.888% due 04/05/99 (d) 500 488
------------
22,689
============
Industrials - 12.4%
Avencor Ltd.
9.220% due 06/30/96 1,000 1,026
COFIRI International, Inc.
5.800% due 10/27/00 (d) 2,000 1,983
First Brands Corp.
9.125% due 04/01/99 1,000 1,028
G-I Holdings, Inc.
0.000% due 10/01/98 1,000 800
McGaw Inc.
10.375% due 04/01/99 1,500 1,538
Merita
6.225% due 12/01/05 (d) 1,000 994
Occidental Petroleum
9.200% due 08/15/97 1,000 1,041
RJR Nabisco
8.000% due 07/15/01 500 491
TCI Communications, Inc.
6.001% due 03/11/03 (d) 4,000 3,998
Time Warner, Inc.
6.210% due 08/15/00 (d) 3,750 3,775
United Illuminating
10.240% due 01/02/20 2,000 2,165
------------
18,839
============
Utilities - 7.0%
Cleveland Electric Illuminating Co.
8.170% due 11/30/98 1,000 1,003
CMS Energy
9.500% due 10/01/97 (d) 250 258
El Paso Electric Co.
7.250% due 02/01/99 1,000 995
North Atlantic Energy
9.050% due 06/01/02 1,486 1,479
Public Service of New Hampshire
8.875% due 05/15/96 4,120 4,130
Texas Utilities
6.383% due 05/01/99 (d) 2,500 2,505
Transcontinental Gas Pipeline
9.000% due 11/15/96 200 204
------------
10,574
------------
Total Corporate Bonds and Notes 52,102
(Cost $52,012) ============
================================================================================
U.S. Government Agencies - 1.3%
================================================================================
Student Loan Marketing Assn.
6.130% due 10/25/07 (d) 2,000 2,000
------------
Total U.S. Government Agencies 2,000
(Cost $2,000) ============
================================================================================
Mortgage-Backed Securities - 45.9%
================================================================================
Federal Home Loan Mortgage Corporation - 8.4%
6.920% due 07/01/19 (d) 3,102 3,167
7.835% due 12/01/22 (d) 1,921 1,978
8.000% due 04/11/26 5,000 5,089
8.214% due 06/01/22 (d) 1,480 1,528
8.500% due 04/01/25-06/1/25 (e) 974 1,008
------------
12,770
============
Federal National Mortgage Association - 2.1%
7.516% due 05/01/22 979 998
7.605% due 02/01/25 (d) 1,987 2,047
9.000% due 01/01/99 88 90
------------
3,135
============
Government National Mortgage Association - 10.1%
4.500% due 04/23/26 1,000 958
5.000% due 02/20/26-03/20/26(d)(e) 5,080 4,931
7.000% due 11/20/24 (d) 821 831
7.250% due 07/20/24-08/20/24(d)(e) 8,526 8,643
------------
15,363
============
Collateralized Mortgage Obligations - 15.6%
Bank Mart
7.592% due 03/01/19 (d) 2,765 2,757
Citicorp Mortgage
9.500% due 11/25/17 1,290 1,339
7.724% due 09/25/18 (d) 124 124
8.000% due 09/25/21 18 18
Collateralized Mortgage Securities Corp.
9.250% due 12/20/04 45 45
Countrywide
6.500% due 02/25/24 2,456 2,453
Donaldson, Lufkin & Jenrette
7.550% due 10/17/20 (d) 582 587
Federal Home Loan Mortgage Corp.
5.750% due 03/15/00 746 744
Federal National Mortgage Assn.
8.500% due 11/25/05 55 55
8.400% due 04/25/25 335 338
Greenwich
7.158% due 10/25/22 (d) 80 81
Manufacturers Hanover Corp.
5.807% due 12/16/25 (d) 2,695 2,694
PaineWebber Mortgage
6.531% due 02/25/01 (d) 2,615 2,571
Prudential Home
7.050% due 05/25/24 (d) 3,182 3,189
Residential Funding
6.431% due 03/25/18 (d) 1,059 1,048
Resolution Trust Corp.
7.400% due 01/25/20 (d) 1,000 1,019
</TABLE>
69
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
StockPLUS Fund
March 31, 1996
[The following table was represented by a pie chart in the printed material.]
<TABLE>
<S> <C>
A1/P1 .................................................................... 16%
AAA ...................................................................... 39%
BB ....................................................................... 11%
BBB ...................................................................... 20%
AA ....................................................................... 5%
A ........................................................................ 9%
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
================================================================================
<S> <C> <C>
7.372% due 05/25/21(d) $ 95 $ 95
5.589% due 09/25/21(d) 2,054 2,050
7.000% due 10/25/24 425 424
Salomon Mortgage
7.000% due 07/25/24 83 83
Sears Mortgage
8.697% due 05/25/32 (d) 57 57
Structured Asset Securities Corp.
7.750% due 02/25/28 1,881 1,913
------------
23,684
============
Other Mortgage-Backed Securities - 7.8%
California Federal Savings & Loan
6.986% due 01/01/19 (d) 111 110
Fund America
7.668% due 06/25/23 (d) 297 302
Great Western Savings & Loan
6.614% due 01/25/18 (d) 129 128
MBLAC - NY REO Associates L.P.
9.375% due 02/01/98 (d) 1,687 1,687
J.P. Morgan & Co.
7.177% due 01/25/18 (d) 1,254 1,260
Red Mountain Funding Corp.
6.450% due 11/28/27 1,973 1,974
REIG Commercial Mortgage Funding Trust
6.158% due 04/27/98 (d) 2,400 2,402
Resolution Trust Corp.
7.113% due 12/25/23 (d) 131 132
Structured Asset Securities Corp.
7.146% due 09/25/36 (d) 1,914 1,934
Western Federal Savings & Loan
6.729% due 10/25/18 (d) 868 867
6.918% due 06/25/19 (d) 992 990
7.118% due 03/25/19 (d) 105 104
------------
11,890
============
Stripped Mortgage-Backed Securities - 1.9%
Federal Home Loan Mortgage Corp. (IO)
7.000% due 01/15/08-08/15/13 (e) 1,656 40
Federal National Mortgage Assn. (IO)
6.000% due 11/25/00 1,600 177
7.000% due 07/25/06-03/25/07 (e) 1,800 172
7.000% due 07/25/21 2,294 367
7.500% due 08/25/10 1,177 23
Federal National Mortgage Assn. (PO)
0.000% due 01/25/20 2,037 1,983
Prudential Home (IO)
4.299% due 02/25/22 49 114
Residential Funding (IO)
6.750% due 01/25/24 1,591 6
------------
2,882
------------
Total Mortgage-Backed Securites 69,724
(Cost $69,836) ============
================================================================================
Sovereign Issues - 3.1%
================================================================================
Banco Latino
6.641% due 05/23/96 (d) 1,000 999
Republic of Argentina
6.313% due 03/31/05 (d) 2,475 1,782
United Mexican States
10.813% due 07/21/97 (d) 1,840 1,909
------------
Total Sovereign Issues 4,690
(Cost $4,669) ============
================================================================================
Purchased CME Put Options - 0.0%
================================================================================
Eurodollar June Futures 7,000 0
Strike @ 91.00 Exp. 06/18/96 ------------
Total Purchased CME Put Options 0
(Cost $0) ============
================================================================================
Preferred Stock - 0.2%
================================================================================
Shares
Santander Overseas 10,000 266
------------
Total Preferred Stock 266
(Cost $273) ============
================================================================================
Short-Term Instruments - 21.0%
================================================================================
Principal
Amount
(000's)
Discount Notes - 16.7%
Coca-Cola Corp.
5.250% due 05/24/96 $ 2,200 2,183
Commonwealth Bank of Australia
5.190% due 05/20/96 6,000 5,958
Commonwealth of Canada
5.240% due 04/15/96 1,500 1,498
Hewlett-Packard Co.
5.230% due 06/20/96 1,900 1,878
Motorola, Inc.
5.170% due 04/02/96 100 100
Pitney Bowes Credit, Inc.
5.210% due 05/14/96 2,000 1,988
Shell Oil Co.
5.180% due 04/12/96 6,000 5,991
United Parcel Service
5.170% due 04/12/96 1,800 1,797
Wal-Mart Stores
5.150% due 04/08/96 2,500 2,497
Wisconsin Gas
5.200% due 04/04/96 1,500 1,499
------------
25,389
============
Repurchase Agreement - 1.4%
State Street Bank
4.750% due 04/01/96 2,069 2,069
(Dated 03/29/96. Collateralized by ------------
U.S. Treasury Bond 8.750% 05/15/17
valued at $2,111,721. Repurchase
proceeds are $2,069,819.)
U.S. Treasury Bills - 2.9%
4.935% due 04/04/96-10/17/96 (b)(e) 4,435 4,406
------------
Total Short-Term Instruments 31,864
(Cost $31,864) ============
Total Investments (a) - 105.8% $ 160,646
(Cost $160,654)
Other Assets and Liabilities (Net) - (5.8%) (8,777)
------------
Net Assets - 100.0% $ 151,869
============
</TABLE>
70
<PAGE>
================================================================================
Notes to Schedule of Investments ($ in thousands):
<TABLE>
<CAPTION>
<S> <C>
(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. $ 498
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
tax cost over value. (286)
------------
Unrealized depreciation-net $ 212
============
(b) Securities with an aggregate market value of $4,406 have been segregated
with the custodian to cover margin requirements for the following open
future contracts at March 31, 1996:
Unrealized
Type Contracts Appreciation
- --------------------------------------------------------------------------------
S & P 500 Index (6/96) 272 $ 162
</TABLE>
(c) Foreign forward currency contracts outstanding at March 31, 1996:
<TABLE>
<CAPTION>
Principal
Amount
Covered Expiration Unrealized
Type by Contract Month Appreciation
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Buy JY 2,561 05/96 $ 0
</TABLE>
(d) Variable rate security. The rate listed is as of March 31, 1996.
(e) Securities are grouped by coupon and represent a range of maturities.
(f) Swap agreements outstanding at March 31, 1996:
<TABLE>
<CAPTION>
Notional Unrealized
Type Amount Appreciation
- --------------------------------------------------------------------------------
<S> <C> <C>
Receive total return on
S&P 500 Index and pay floating rate based
on 1 month LIBOR.
Broker: Deutsche Bank AG London
Exp. 06/28/96 $ 25,037 $ 244
Broker: Morgan Stanley Capital Service
Exp. 09/30/96 31,700 0
------------
$ 244
============
</TABLE>
(g) Principal amount denoted in indicated currency:
JY - Japanese Yen
See Notes to Financial Statements
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
1. Significant Accounting Policies
PIMCO Funds (the "Trust") was established as a Massachusetts business
trust on February 19, 1987. The Trust is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a no-load,
open-end investment management company. The Trust currently consists
of 18 separate investment funds (the "Funds"): the Total Return Fund;
the Total Return Fund II; the Total Return Fund III; the Low Duration
Fund; the Low Duration Fund II; the Low Duration Fund III; the
Short-Term Fund; the Long-Term U.S. Government Fund; the Foreign Fund;
the Global Fund; the High Yield Fund; the Money Market Fund; the
Growth Stock Fund; the StocksPLUS Fund; the VersaSTYLE Equity Fund;
the Moderate Duration Fund; the Commercial Mortgage Securities Fund;
and the International Fund (available only to private account clients
of PIMCO). The annual reports for the International and VersaSTYLE
Equity Funds are provided separately. The Moderate Duration,
Commercial Mortgage Securities and Low Duration III Funds had not
commenced operations as of March 31, 1996. The following is a summary
of significant accounting policies consistently followed by the Trust
in preparation of its financial statements. These policies are in
conformity with generally accepted accounting principles.
Reorganization. The Trust entered into an Agreement and Plan of
Reorganization with PIMCO Funds: Equity Advisors Series (formerly
PIMCO Advisors Institutional Funds), another registered open-end
investment company, pursuant to which two of its series, the Money
Market Fund and PIMCO Managed Bond and Income Fund, transferred all of
their respective assets, subject to any liabilities, to the Trust on
November 1, 1995. These funds were renamed PIMCO Money Market Fund and
PIMCO Total Return Fund II. A non-operational series of the Trust
formerly known as the PIMCO Total Return Fund II was liquidated prior
to November 1, 1995.
Security Valuation. Portfolio securities and other financial
instruments 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. dollars using foreign exchange quotations received
from independent dealers. Short-term investments which mature in 60
days or less are valued at amortized cost, which approximates market
value. Certain fixed income securities for which daily market
quotations are not readily 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.
Delayed Delivery Transactions. A Fund may purchase or sell securities
on a when-issued or delayed delivery basis. These transactions involve
a commitment by a Fund to purchase or sell securities for a
predetermined price or yield, with payment and delivery taking place
beyond the customary settlement period. When delayed delivery
purchases are outstanding, a Fund will set aside and maintain until
the settlement date in a segregated account, liquid assets or high
grade debt obligations in an amount sufficient to meet the purchase
price. When purchasing a security on a delayed delivery basis, a Fund
assumes the rights and risks of ownership of the security, including
the risk of price and yield fluctuations, and takes such fluctuations
into account when determining its net asset value. A Fund may dispose
of or renegotiate a delayed delivery transaction after it is entered
into, and may sell when-issued securities before they are delivered,
which may result in a capital gain or loss. When
72
<PAGE>
the Fund has sold a security on a delayed delivery basis, the Fund
does not participate in future gains and losses with respect to the
security. Forward sales commitments are accounted for by the Fund in
the same manner as forward currency contracts discussed below.
Credit Quality. The credit quality pie-charts included in the Schedule
of Investments represent the credit quality of all fixed income
securities. The rating assigned to each security is the higher of that
reported by Moody's or S&P. If the security is not rated by either
Moody's or S&P, the Advisor assigns a rating that is comparable in
quality.
Securities Transactions and Investment Income. Securities transactions
are recorded as of the trade date. Securities purchased or sold on a
when-issued or delayed-delivery basis may be settled a month or more
after 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. Dividends from net
investment income of each Fund except the Growth Stock and StocksPLUS
Funds are declared on each day the Trust is open for business and are
distributed to shareholders monthly. Dividends from net investment
income of the Growth Stock and StocksPLUS Funds are declared and
distributed to shareholders quarterly. Net long-term capital gains
earned by a Fund, if any, 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 investments relative
to the U.S. dollar, are reported to shareholders as income 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, net operating losses and capital loss
carryforwards.
Distributions reflected as a tax basis return of capital in the
accompanying Statements of Changes in Net Assets have been
reclassified to paid in capital. In addition, other amounts have been
reclassified between undistributed net investment income and
accumulated undistributed net realized gains in order to more
appropriately conform financial accounting and tax characterizations
of dividend distributions.
Commencement of Multiclass Operations. On August 23, 1994, each Fund
within the PIMCO Funds was authorized to offer investors a choice of
two classes of shares, the Institutional Class and the Administrative
Class. Each class has equal rights as to assets and voting privileges,
while each has exclusive voting rights with respect to its
distribution plan. The Total Return, Total Return II, Low Duration,
Short-Term, High Yield and Money Market Funds commenced multiclass
operations on September 7, 1994, November 30, 1994, December 31, 1994,
February 1, 1996, January 16, 1995 and January 24, 1995, respectively.
None of the other PIMCO Funds had commenced multiclass operations as
of March 31, 1996.
Income and non-class specific expenses are allocated daily to
each class of shares based on the relative value of settled shares as
of the beginning of each day, adjusted for purchase orders received in
Federal Funds prior to 12:00 pm, Eastern time. Realized and unrealized
capital gains and losses are allocated to each class of shares based
on relative net assets as of the beginning of each day adjusted for
the prior day's capital share activity.
73
<PAGE>
Notes to Financial Statements (Cont.)
March 31, 1996
Federal Income Taxes. Each Fund intends to qualify as a regulated
investment company and distribute all of its taxable income and net
realized gains, if applicable, to shareholders. Accordingly, no
provision for Federal income taxes has been made.
Futures and Options. Each Fund (except the Money Market 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 a 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
the value of such instruments are recorded as unrealized appreciation
(depreciation) until terminated, at which time realized gains and
losses are recognized.
Forward Currency Contracts. Each Fund (except the Total Return II, Low
Duration II, Long-Term U.S. Government, High Yield and Money Market
Funds) is authorized to enter into forward foreign exchange contracts
for the purpose of hedging against foreign exchange risk arising from
the Fund's investment or anticipated investment in securities
denominated in foreign currencies. The aggregate principal amounts of
the contracts for which delivery is anticipated are recorded in the
Fund's account, while such amounts are not recorded if the Fund
intends to settle the contracts prior to delivery. All commitments are
marked-to-market daily at the applicable translation rates and any
resulting unrealized gains or losses are recorded in the Fund's
financial statements. 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 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.
Swaps. Each Fund (except the Money Market Fund) is authorized to enter
into interest rate, index and currency exchange swap agreements. PIMCO
uses these agreements in order to obtain a desired return at a lower
cost to the Fund than if the Fund had invested directly in an
instrument that yielded the desired return. The agreements involve
elements of credit risk identified as the cost of replacing those
agreements for which PIMCO is in a net receivable position in the
event of counterparty default.
At March 31, 1996, the StocksPLUS Fund was a party to S & P 500
Index swap agreements. The agreements involve the contractual exchange
of payments whereby the Fund will receive proceeds based on the total
return of the S & P 500 Index and pay an amount based on LIBOR. The
differential to be paid or received is recognized daily over the life
of the agreement. For the year ended March 31, 1996, net income of
$6,712,682 was derived from the agreements and is included in interest
income of the Fund.
74
<PAGE>
Forward Sales. The following securities were subject to outstanding
forward sale commitments at March 31, 1996 (Amounts in thousands):
<TABLE>
<CAPTION>
Principal
Foreign Fund Amount Value Proceeds
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Commonwealth of Canada C$ 21,000 $ 16,798 $ 16,722
Government of Japan JY 6,071,000 60,962 61,607
Republic of Finland FM 140,000 33,399 33,462
Republic of Germany DM 24,700 14,830 15,662
United Kingdom Gilt BP 29,000 42,573 42,551
---------------------
$ 168,562 $170,004
=====================
</TABLE>
<TABLE>
<CAPTION>
Principal
Global Fund Amount Value Proceeds
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Commonwealth of Canada C$ 11,000 $ 8,799 $ 8,759
Kingdom of Denmark DK 44,040 8,069 8,047
Kingdom of Spain SP 596,000 5,051 5,066
United Kingdom Gilt BP 7,000 10,275 10,271
-----------------
$32,194 $32,143
=================
</TABLE>
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. PIMCO serves as investment adviser (the
"Adviser") to the Trust, pursuant to an investment advisory contract.
The Adviser receives a monthly fee from each Fund at an annual rate
based on average daily net assets of the Fund as follows: Money Market
Fund - 0.15%, StocksPLUS Fund - 0.40% and all other Funds - 0.25%.
Prior to October 1, 1995, the Adviser received a monthly fee based on
average daily net assets as follows: 0.30% of the first $150 million,
and 0.25% thereafter (0.45% and 0.40%, respectively, for the
StocksPLUS Fund).
Administration Fee. Effective October 1, 1995, the Trust, exclusive of
the Total Return II and Money Market Funds, adopted a "unified fee
structure" whereby PIMCO (the Administrator) provides services
necessary for the operation of the Funds for a single administrative
fee based on each Funds average daily net assets. The unified fee on
an annual basis is 0.18% for the Total Return and Low Duration Funds,
0.20% for the Short-Term Fund, 0.30% for the Global Fund and 0.25% for
all other Funds. Prior to adoption of the unified fee structure, the
Administrator received a monthly fee from each Fund at an annual rate
of 0.10% of each Funds average daily net assets. In conjunction with
the "Agreement and Plan of Reorganization", the Total Return II and
the Money Market Funds participate in the unified fee structure at
annual rates of 0.25% and 0.20%, respectively, of average daily net
assets.
Expenses. Effective October 1, 1995, under the unified fee structure,
the Trust 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 coun-
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONT.)
March 31, 1996
sel retained exclusively for their benefit; (vi) extraordinary
expenses, including costs of litigation and indemnification expenses;
(vii) expenses, such as organizational expenses, which were previously
capitalized in accordance with generally accepted accounting
principles; and (viii) any expenses allocated or allocable to a
specific class of shares, which include service fees payable with
respect to the Administrative Class shares and may include certain
other expenses as permitted by the Trust's Dual Class Plan adopted
pursuant to Rule 18f-3 under the Act and subject to review and
approval by the Trustees. 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 Offset Arrangement. Fees paid indirectly, in the accompanying
Statement of Operations, represent reductions in custody and transfer
agent expenses in lieu of interest income earned on incidental
uninvested cash balances. Such fees have been added to custody and
transfer agent fees to reflect total Fund expenses.
Expense Limitation. Prior to adoption of the unified fee structure,
the Adviser and the Administrator, in the interest of limiting
expenses of the Trust, limited the expenses of each Fund, including
the advisory and administrative fees, to 0.50% of its average net
assets on an annual basis (except the Foreign, Global and StocksPLUS
Funds which had an expense limit of 0.65%), excluding distribution
fees of 0.25% relating to the Administrative Class.
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 a Fund
reached a sufficient asset size; however, no such later payment would
have been made if that payment caused the annual expense ratio of a
Fund to exceed the amount of the relevant expense limitation. As of
September 30, 1995, all amounts previously foregone by the Adviser and
Administrator have been repaid by the Total Return, Low Duration,
Foreign and High Yield Funds. Cumulative unreimbursed amounts for
Total Return III, Low Duration II, Short-Term, Long-Term U.S.
Government, Global, Growth Stock, and the StocksPLUS Funds were
$60,284, $8,191, $129,529, $121,544, $29,546, $71,256, and $90,816
respectively, at September 30, 1995. These amounts have been waived as
a result of the adoption of the unified fee.
Related Party Transactions. PIMCO Advisors Distribution Company
("PADCO"), an indirect wholly-owned subsidiary of PIMCO Advisors L.P.,
serves as the distributor of the Trust's shares. Under the contract,
all expenses relating to the distribution of Trust shares will be paid
by the Adviser or PADCO out of past profits and resources which may
include fees received by the Adviser.
76
<PAGE>
3. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments)
for the year or period ended March 31, 1996 were as follows ($ in
thousands):
<TABLE>
<CAPTION>
U.S. Government/Agency All Other
--------------------------------------------------------
Purchases Sales Purchases Sales
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Return Fund $20,122,002 $16,494,716 $ 5,487,050 $ 3,768,645
Total Return Fund II 510,012 322,291 7,902 37,515
Total Return Fund III 219,011 175,740 59,215 24,109
Low Duration Fund 6,452,394 5,504,523 704,378 634,948
Low Duration Fund II 612,758 482,263 52,184 29,360
Short-Term Fund 43,733 33,012 173,708 152,506
Long-Term U.S. Gov't Fund 87,534 68,103 12,211 6,937
Foreign Fund 105,279 60,694 4,540,144 4,305,050
Global Fund 67,782 54,049 1,299,496 1,218,948
High Yield Fund 20,508 19,471 437,514 261,334
Growth Stock Fund 161 34 9,835 20,223
StocksPLUS Fund 43,782 18,430 136,482 56,237
</TABLE>
4. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows ($ in
thousands):
<TABLE>
<CAPTION>
Total Total Low Low Long-Term
Return Return III Duration Duration II Short-Term U.S. Gov't
------------------------------------------------------------------------------
-------------------------------- Premium -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at 3/31/95 $ 41,662 $ 402 $ 2,767 $ 129 $ 139 $ 130
Sales 29,417 237 1,320 0 168 94
Closing Buys (5,242) 0 0 0 (50) (160)
Expirations (42,455) (429) (3,993) (129) (257) (60)
Exercised (11,703) (131) (94) 0 0 0
------------------------------------------------------------------------------
Balance at 3/31/96 $ 11,679 $ 79 $ 0 $ 0 $ 0 $ 4
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
High
Foreign Global Yield Stock
----------------------------------
---------- Premium ---------------
<S> <C> <C> <C> <C>
Balance at 3/31/95 $ 373 $ 50 $ 102 $ 4
Sales 9,721 252 167 12
Closing Buys (9,230) (41) (52) (3)
Expirations (784) (209) (217) (6)
Exercised 0 (12) 0 (7)
----------------------------------
Balance at 3/31/96 $ 80 $ 40 $ 0 $ 0
==================================
</TABLE>
<TABLE>
<CAPTION>
Total
StocksPLUS Return II(a)
------------------------
-------- Premium -------
<S> <C> <C>
Balance at 10/31/95(b) $ 45 $ 169
Sales 121 233
Closing Buys (73) (27)
Expirations (93) (142)
Exercised 0 0
------------------------
Balance at 3/31/96 $ 0 $ 233
========================
</TABLE>
(a) Formerly the PIMCO Managed Bond and Income Fund of the PIMCO
Funds: Equity Advisors Series.
(b) Audited by other independent accountants.
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONT.)
March 31, 1996
5. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial
interest with a $.0001 par value. Changes in shares of beneficial
interest were as follows (shares in thousands):
<TABLE>
<CAPTION>
Total Total Total Total
Year or Period Ended Return Return Return II Return II Total
March 31, 1996 Inst'l Admin Inst'l Admin Return III
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares sold 342,019 11,183 3,595 23 4,560
Issued as reinvestment
of dividends 56,475 373 1,714 12 1,000
Shares redeemed (124,938) (2,289) (2,564) (8) (1,040)
----------------------------------------------------------------------
Net increase 273,556 9,267 2,745 27 4,520
======================================================================
</TABLE>
<TABLE>
Low Low Short- Short- Long-
Year or Period Ended Duration Duration Low Term Term Term
March 31, 1996 Inst'l Admin Duration II Inst'l Admin(a) U.S. Gov't
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 141,847 267 16,787 13,481 435 2,022
Issued as reinvestment
of dividends 14,360 8 1,339 498 0 372
Shares redeemed (126,025) (99) (9,818) (12,924) (32) (2,415)
---------------------------------------------------------------------------
Net increase (decrease) 30,182 176 8,308 1,055 403 (21)
===========================================================================
</TABLE>
(a) From commencement of operations, February 1, 1996.
<TABLE>
<CAPTION>
High High Money Money
Year or Period Ended Yield Yield Market Market
March 31, 1996 Foreign Global Inst'l Admin Inst'l Admin
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 7,828 5,338 27,025 90 23,183 4
Issued as reinvestment
of dividends 1,752 873 3,932 2 387 0
Shares redeemed (9,773) (649) (14,184) (4) (5,376) (4)
--------------------------------------------------------------------------
Net increase (decrease) (193) 5,562 16,773 88 18,194 0
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended Growth Stocks
March 31, 1996 Stock PLUS
------------------------------------------------------------
<S> <C> <C>
Shares sold 102 10,056
Issued as reinvestment
of dividends 215 1,556
Shares redeemed (774) (2,440)
----------------------
Net increase (decrease) (457) 9,172
======================
</TABLE>
<TABLE>
<CAPTION>
Total Total Low Low
Year or Period Return Return Total Duration Duration Low
Ended March 31, 1995 Inst'l Admin(a) Return IIII Inst'l Admin(b) Duration II
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 311,014 929 4,327 140,563 79 8,010
Issued as reinvestment
of dividends 31,143 15 599 11,769 1 900
Shares redeemed (108,135) (41) (4,489) (142,193) (1) (5,641)
-------------------------------------------------------------------------
Net increase 234,022 903 437 10,139 79 3,269
=========================================================================
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
High High
Year or Period Long-Term Yield Yield
Ended March 31, 1995 Short-Term U.S. Gov't Foreign Global Inst'l Admin(c)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 26,893 2,260 6,263 4,460 21,402 4
Issued as reinvestment
of dividends 576 125 1,796 590 2,648 0
Shares redeemed (25,641) (1,708) (32,201) (1,408) (12,668) 0
-------------------------------------------------------------------------
Net increase (decrease) 1,828 677 (24,142) 3,642 11,382 4
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
Year or Period Growth Stocks
Ended March 31, 1995 Stock PLUS
-----------------------------------------------------------
<S> <C> <C>
Shares sold 69 2,821
Issued as reinvestment
of dividends 102 222
Shares redeemed (713) (113)
-------------------
Net increase (decrease) (542) 2,930
===================
</TABLE>
(a) From commencement of operations, September 7, 1994.
(b) From commencement of operations, December 31, 1994.
(c) From commencement of operations, January 16, 1995.
<TABLE>
<CAPTION>
Total
Total Return II Money Money
Year or Period Ended Return II Admin Market Market
October 31, 1995 Inst'l(a)(d) (a)(b)(d) Inst'l(d) Admin(c)(d)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 10,242 306 22,820 1,799
Issued as reinvestment
of dividends 2,500 10 493 19
Shares redeemed (7,537) (7) (23,025) (1,808)
--------------------------------------------------------------
Net increase 5,205 309 288 10
==============================================================
</TABLE>
(a) Formerly the PIMCO Managed Bond and Income Fund of the PIMCO
Funds: Equity Advisors Series.
(b) From commencement of operations, November 30, 1994.
(c) From commencement of operations, January 24, 1995.
(d) Audited by other independent accountants.
6. Interest Expense
During the current year, the Short-Term Fund entered into certain
reverse repurchase agreements. Included in miscellaneous expenses is
$76,781 representing interest expense associated with these
instruments.
7. Federal Income Tax Matters
As of March 31, 1996, Low Duration Fund, Low Duration Fund II,
Short-Term Fund, and Foreign Fund have remaining capital loss
carryforwards that were realized in the prior year of $6,262,969,
$469,149, $122,770 and $1,519,059, respectively.
These capital losses are available to offset future realized
capital gains through March 31, 2003. Each Fund will resume capital
gains distributions in the future to the extent gains are realized in
excess of the available carryforwards.
79
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of the PIMCO Funds
In our opinion, the accompanying statements of assets and liabilities,
including the schedules 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 Total Return Fund, Total Return Fund III, Low Duration Fund, Low
Duration Fund II, Short-Term Fund, Long-Term U.S. Government Fund,
Foreign Fund, Global Fund, High Yield Fund, Growth Stock Fund, and
StocksPLUS Fund (series of the PIMCO Funds) at March 31, 1996, the
results of each of their operations, the changes in each of their net
assets and the financial highlights for each of the periods indicated
and the financial position of the Total Return Fund II and Money
Market Fund (series of the PIMCO Funds, previously known as PIMCO
Managed Bond and Income Fund and Money Market Fund, formerly series of
the PIMCO Advisors Institutional Funds) at March 31, 1996, the results
of each of their operations, the changes in each of their net assets,
and the financial highlights for the period from November 1, 1995
through March 31, 1996, in conformity with generally accepted
accounting principles. These financial statements and the financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' 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. The financial statements of the Total Return
Fund II and the Money Market Fund for periods prior to November 1,
1995 were audited by other independent accountants whose report dated
December 15, 1995 expressed an unqualified opinion on those
statements.
PRICE WATERHOUSE LLP
Kansas City, Missouri
May 10, 1996
80
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Funds. Founded in 1971, Pacific Investment
Management Company currently manages assets in excess of $76 billion on behalf
of mutual fund and institutional clients located around the world.
Pacific Investment Management Company is one of six investment advisory firms
which form PIMCO Advisors L.P., the nation's fourth largest publicly traded
investment management concern with combined assets under management in excess of
$97 billion. Widely recognized for providing consistent performance and
high-quality client service, the six affiliated firms are:
Pacific Investment Management Company/Newport Beach, California
Columbus Circle Investors/Stamford, Connecticut
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
Blairlogie Capital Management/Edinburgh, Scotland
Units of PIMCO Advisors L.P. trade on the New York Stock Exchange under the
ticker symbol "PA."
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
<PAGE>
P I M C O
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
(800) 927-4648
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.
<PAGE>
front cover
PIMCO
PIMCO International Fund
Annual Report March 31, 1996
<PAGE>
inside front cover
International Hedged Portfolio Combinations
(December 1985 - August 1993)
[Graph appears here]
<TABLE>
<CAPTION>
Portfolio Risk Total Return
(%) (%)
<S> <C>
3.95 8.16
3.83 8.26
3.72 8.37
3.63 8.47
3.56 8.58
3.51 8.69
3.47 8.79
3.46 8.90
3.48 9.00
3.51 9.11
3.56 9.21
3.63 9.32
3.72 9.42
3.83 9.53
3.96 9.63
4.10 9.74
4.25 9.85
4.41 9.95
4.58 10.06
4.77 10.16
5.01 10.27
</TABLE>
Source: Morgan International Research
On the Cover:
Depicted on the front cover and in greater detail above, is an
efficient frontier graph showing different combinations of foreign
and domestic bonds. The historical relationships shown support
PIMCO's belief that the use of foreign bonds tends to reduce
portfolio volatility without sacrificing return. This risk
reduction is achieved because the U.S. and foreign bond markets do
not always move together. A portfolio manager's ability to
recognize and take advantage of these differences is an important
tool for adding value and reducing risk in both domestic and
international bond funds.
<PAGE>
CHAIRMAN'S MESSAGE
Dear Client:
The global bond rally of 1995 rewarded investors with some of the highest
returns in recent memory, but a sharp correction in the U.S. bond market in
early 1996 offset a portion of those gains. This setback in U.S. bonds
highlights the diversification and performance benefits available through the
opportunistic use of foreign bonds in a domestic bond portfolio. While domestic
bond prices were falling, European (particularly German) bonds offered much
stronger returns, resulting in the International Fund significantly
outperforming the U.S. market. During the first quarter of 1996, the U.S. market
declined 2.34% as measured by the Lehman Government Corporate Bond Index,
compared to a modest 0.13% decline for the Fund.
The recent performance advantage of foreign bonds is also evident in the
International Fund's one-year return. For the fiscal year ended March 31, 1996,
the Fund returned 15.08%, while the domestic Lehman Index posted a 10.93%
increase. The Salomon World Government Bond Index, a currency-hedged composite
of major world bond markets, was up 13.32%. We are pleased to report that
International Fund clients benefited from much of this strong performance as
average client allocations to the Fund increased in the second quarter of 1995
from less than 1% to approximately 13% (individual allocations varied subject to
client guidelines).
Shown below is a summary of the International Fund's total return performance
compared to relevant market indexes over various time periods. Performance of
the Fund is net of fees and reflects the reinvestment of dividends.
Annualized Returns Ended 3/31/96
<TABLE>
<CAPTION>
Since
1yr. 3yrs. 5yrs. Inception
<S> <C> <C> <C> <C>
International Fund (%) 15.08 6.57 8.24 8.16
Salomon World Gov't
Bond Index (%) 13.32 8.19 8.56 7.94
Lehman Gov't/Corp.Index (%) 10.93 6.03 8.70 8.74
</TABLE>
Cumulative Returns from Inception through March 31, 1996
[Graph Appears Here]
<TABLE>
<CAPTION>
International Fund Salomon World Gov't Lehman Gov't/
Month Unit Value Bond Index Corp. Index
<S> <C> <C> <C>
12/31/89 1,000,000 1,000,000 1,000,000
12/31/91 1,223,513 1,148,200 1,257,457
12/31/92 1,309,150 1,238,152 1,352,790
12/31/93 1,496,037 1,400,508 1,502,023
12/31/94 1,353,748 1,348,529 1,449,322
12/31/95 1,634,563 1,599,803 1,728,206
03/31/96 1,632,491 1,612,208 1,687,775
</TABLE>
The line graph depicts the value of $1,000,000 invested at the Fund's inception
in December 1989 and held through March 1996, compared to the Salomon Brothers
World Government Bond Index (Currency Hedged) and the Lehman Brothers
Government/Corporate Bond Index, each an unmanaged market index.
We selected the theme for this year's cover, the efficient frontier, to
illustrate PIMCO's strong belief that a mix of domestic and foreign bonds
provides superior risk/return opportunities for fixed income investors. Thank
you for allowing us the opportunity to use this valuable investment management
tool on your behalf.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman of the Board
May 22, 1996
1
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
Amounts in thousands, except per share amounts
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments, at value $ 4,185,489
Cash and foreign currency 2,441
Receivable for investments and foreign currency sold 444,664
Variation margin receivable 89
Interest and dividends receivable 88,154
4,720,837
Liabilities:
Payable for investments and foreign currency purchased 2,447,641
Written options outstanding 120
Accrued investment advisor's fee 534
Accrued administrator's fee 534
Other accrued expenses and liabilities 68
2,448,897
Net Assets $ 2,271,940
Net Assets Consist of:
Paid in capital $ 2,254,524
Undistributed net investment income 27,949
Accumulated undistributed net realized loss (35,341)
Net unrealized appreciation 24,808
$ 2,271,940
Shares Issued and Outstanding 282,404
Net Asset Value, Offering and Redemption Price
Per Share (Net Assets Per Share Outstanding) $ 8.04
Cost of Investments Owned 4,205,697
Cost of Foreign Currency Held 2,436
</TABLE>
See Notes to Financial Statements
2
<PAGE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1996
$ in thousands
<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Interest $ 121,909
Expenses:
Investment advisory fees 4,938
Administration fees 3,801
Custodian and transfer agent fees 434
Audit fees 43
Legal fees 26
Trustees' fees 12
Miscellaneous 18
Total expenses 9,272
Fees paid indirectly (5)
Net expenses 9,267
Net Investment Income 112,642
Net Realized and Unrealized Gain (Loss)
Net realized gain on investments 89,590
Net realized gain on futures contracts and written options 6,577
Net realized gain on foreign currency transactions 18,053
Net change in unrealized depreciation on investments (12,127)
Net change in unrealized depreciation on futures contracts (297)
and written options
Net change in unrealized appreciation on translation of
assets and liabilities denominated in foreign currencies 36,595
Net Gain 138,391
Net Increase in Assets Resulting from Operations $ 251,033
</TABLE>
See Notes to Financial Statements
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
$ in thousands
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31,1996 March 31, 1995
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net investment income $ 112,642 $ 25,941
Net realized gain (loss) 114,220 (108,960)
Net change in unrealized appreciation 24,171 9,680
Net increase (decrease) resulting from 251,033 (73,339)
operations
Distributions to Shareholders
From net investment income (112,598) (35,032)
In excess of net investment income (36,556) 0
Total distributions (149,154) (35,032)
Fund Share Transactions
Receipts for shares sold 2,594,823 50,047
Issued as reinvestment of distributions 144,179 33,847
Cost of shares redeemed (614,891) (2,226,551)
Net increase (decrease) resulting from 2,124,111 (2,142,657)
Fund share transactions
Total Increase (Decrease) in Net Assets $ 2,225,990 $(2,251,028)
Net Assets
Beginning of period $ 45,950 $ 2,296,978
End of period * 2,271,940 45,950
* Including undistributed
(overdistributed) net investment
income of: $ 27,949 $ (44)
</TABLE>
See Notes to Financial Statements
4
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected Per Share Data
for the Year Ended: 3/31/96 3/31/95 3/31/94 3/31/93 3/31/92
<S> <C> <C> <C> <C> <C>
Net asset value beginning
of period $ 7.44 $ 9.93 $ 10.53 $ 10.02 $ 9.94
Net investment income 0.63 2.18 0.47 0.62 0.79
Net realized and unrealized 0.49 (2.41) 0.24 0.42 0.27
gain (loss)
Total income (loss) from 1.12 (0.23) 0.71 1.04 1.06
investment operations
Dividends from net (0.39) (2.26) (0.96) (0.48) (0.78)
investment income
Dividends in excess of (0.13) 0.00 0.00 0.00 0.00
net investment income
Distributions from net 0.00 0.00 (0.35) (0.05) (0.20)(a)
realized capital gains
Total distributions (0.52) (2.26) (1.31) (0.53) (0.98)
Net asset value end of
period $ 8.04 $ 7.44 $ 9.93 $ 10.53 $ 10.02
Total return (%) 15.08 (1.27) 6.54 10.61 10.97
Net assets end of $2,271,940 $45,950 $ 2,296,978 $ 2,589,677 $ 1,314,661
period (000's)
Ratio of expenses to 0.50 0.43 0.43 0.46 0.51
average net assets (%)
Ratio of net investment
income to 6.09 5.90 5.51 6.67 8.24
average net assets (%)
Portfolio turnover
rate (%) 1,046 674 370 301 201
</TABLE>
(a) Gain distribution includes $0.14 per share characterized for tax purposes
as distributions from ordinary income.
See Notes to Financial Statements
5
<PAGE>
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
March 31, 1996
Principal
Amount Value
(000's) (000's)
<S> <C> <C>
Argentina(b)(f) - 2.4%
Republic of Argentina
3.445% due 04/01/01 (d) AP 61,371 $ 42,250
0.000% due 09/01/02 (d) 18,598 10,442
0.000% due 04/01/07 (d) 4,001 2,023
Total Argentina 54,715
(Cost $56,989)
Belgium (b)(f) - 3.8%
Kingdom of Belgium
5.100% due 11/21/04 (d) BF 2,600,000 87,108
Total Belgium 87,108
(Cost $87,599)
Canada (b)(f) - 19.0%
Commonwealth of Canada
5.250% due 06/26/96 $ 7,400 7,302
7.500% due 03/01/01 C$ 32,900 24,649
9.000% due 12/01/04 499,020 399,157
Total Canada 431,108
(Cost $429,549)
Denmark (b)(f) - 4.6%
Kingdom of Denmark
8.000% due 03/15/06 DK 580,000 105,040
Total Denmark 105,040
(Cost $104,797)
Germany (b)(f) - 28.9%
Depfa Bank
5.625% due 02/07/03 DM 105,000 69,034
German Unity Fund
8.750% due 07/20/00 220,400 168,882
Republic of Germany
8.000% due 07/22/02 50,000 37,527
6.875% due 06/11/03 59,400 41,839
6.000% due 06/20/16 160,000 95,720
6.250% due 01/04/24 404,330 242,768
Total Germany 655,770
(Cost $659,377)
Finland (b)(f) - 20.1%
Merita Corp.
6.375% due 04/28/03 $ 6,000 $ 6,000
6.175% due 09/11/03 (d) 31,500 31,323
Republic of Finland
10.000% due 09/15/01 FM 394,000 97,444
9.500% due 03/15/04 1,351,000 322,297
Total Finland 457,064
(Cost $459,216)
Ireland (b)(f) - 2.7%
Irish Gilt
6.250% due 04/01/99 IP 38,900 60,280
Total Ireland 60,280
(Cost $61,246)
Mexico (f) - 1.2%
United Mexican States
0.000% due 05/16/96 MP 217,000 27,318
Total Mexico 27,318
(Cost $27,419)
Netherlands (b)(f) - 11.1%
Baden-Wuerttemberg L-Finance N.V.
6.625% due 08/20/03 DM 24,000 16,536
Kingdom of Netherlands
9.000% due 05/15/00 DG 54,400 37,566
7.000% due 06/15/05 25,000 15,766
8.250% due 02/15/07 265,540 181,360
Total Netherlands 251,228
(Cost $257,253)
New Zealand (b)(f) - 6.2%
Commonwealth of New Zealand
10.000% due 07/15/97 N$ 19,100 13,237
8.000% due 07/15/98 64,950 43,862
6.500% due 02/15/00 75,000 47,991
10.000% due 03/15/02 49,900 36,759
Total New Zealand 141,849
(Cost $142,376)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000's) (000's)
<S> <C> <C>
Panama - 0.1%
Bladex
6.641% due 05/23/96 (d) $ 2,000 $ 1,999
Total Panama 1,999
(Cost $2,000)
Spain (b)(f) - 4.5%
Kingdom of Spain
10.300% due 06/15/02 SP 6,232,000 52,078
10.900% due 08/30/03 5,908,000 50,798
Total Spain 102,876
(Cost $101,120)
Supranational (f) - 1.5%
International Bank of Reconstruction & Development
7.125% due 04/12/05 DM 50,000 35,160
Total Supranational 35,160
(Cost $35,600)
Sweden (b)(f) - 12.6%
Kingdom of Sweden
11.000% due 01/21/99 SK 1,121,700 183,307
10.250% due 05/05/00 628,000 102,316
Total Sweden 285,623
(Cost $282,883)
United Kingdom (b)(f) - 0.5%
United Kingdom Gilt
6.000% due 08/10/99 BP 8,100 11,891
Total United Kingdom 11,891
(Cost $12,130)
United States - 37.9%
Corporate Bonds and Notes - 6.0%
Champion Home Equity Loan Trust
6.630% due 02/25/28 (d) $ 12,459 12,736
Dean Witter Discover
5.586% due 02/05/99 (d) 34,000 34,032
Ford Motor Credit Corp.
5.580% due 03/23/99 (d) $ 12,500 $ 12,403
General Motors Acceptance Corp.
8.800% due 04/04/96 5,100 5,105
8.125% due 01/27/97 48,700 49,648
Hewlett Packard Co.
5.625% due 11/20/00 DM 15,000 10,153
Long Island Lighting Co.
8.750% due 05/01/96 $ 2,000 2,004
Marine Midland Bank
5.813% due 09/27/96 4,600 4,594
TCI Communications, Inc.
6.144% due 04/01/02 (d) 7,200 7,200
137,875
Mortgage-Backed Securities - 31.1%
Federal Home Loan Mortgage Corp.
6.309% due 01/01/20-06/01/30(d)(g) 40,272 40,495
8.277% due 06/01/22 (d) 6,083 6,218
7.944% due 08/01/22 (d) 3,934 4,061
7.893% due 01/01/24 (d) 5,403 5,576
7.828% due 02/01/24 (d) 6,166 6,352
7.870% due 08/01/24 (d) 7,057 7,284
Federal National Mortgage Assn.
8.305% due 07/01/21 (d) 3,094 3,203
7.850% due 05/01/22 (d) 11,948 12,346
7.847% due 11/01/22 (d) 3,477 3,592
7.585% due 01/01/23 (d) 5,033 5,195
7.628% due 01/01/23 (d) 5,188 5,355
7.934% due 02/01/23 (d) 8,755 9,065
7.948% due 08/01/23 (d) 4,888 5,063
6.719% due 04/01/24 (d) 4,456 4,565
7.564% due 09/01/24 (d) 6,226 6,429
7.402% due 04/01/25 (d) 8,566 8,838
6.369% due 12/01/27 (d) 10,162 10,244
6.362% due 03/01/29 (d) 92,612 93,507
6.355% due 02/01/31 (d) 48,758 49,203
Government National Mortgage Assn.
7.000% due 11/20/21-05/20/25(d)(g) 233,952 236,669
6.875% due 09/20/22 (d) 10,058 10,196
7.250% due 07/20/22-09/20/23(d)(g) 70,204 71,112
7.375% due 04/20/23-06/20/24(d)(g) 33,010 33,508
Kearny St. Real Estate Co.
6.600% due 10/15/02 1,876 1,874
</TABLE>
7
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
March 31, 1996
Principal
Amount Value
(000's) (000's)
<TABLE>
<CAPTION>
<S> <C> <C>
Prudential Home Mortgage
6.750% due 08/25/08 $ 10,000 $ 9,987
6.100% due 10/25/24 5,178 5,160
Resolution Trust Corp.
6.919% due 06/25/21 3,945 3,876
Ryland Acceptance Corp.
7.909% due 09/25/23 (d) 45,894 46,669
705,642
Asset-Backed Securities - 0.8%
Student Loan Marketing Assn.
5.595% due 04/25/04 (d) 15,134 15,134
6.130% due 10/25/07 (d) 3,500 3,500
18,634
Total United States 862,151
(Cost $861,670)
Purchased OTC Options - 2.5%
Call - Commonwealth of Canada
9.00% due 12/01/04 (h)
Strike @100.00
Exp. 04/11/06 C$ 100,000 6,229
Call - Kingdom of Denmark
8.000 % due 03/15/06 (h)
Strike @ 90.00
Exp. 06/10/96 DK 580,000 13,434
Call - Kingdom of Spain
10.300% due 06/15/02 (h)
Strike @ 85.00
Exp. 06/10/96 SP 6,232,000 9,688
10.900% due 08/30/03 (h)
Strike @ 87.00
Exp. 06/10/96 5,908,000 9,056
Call - Republic of Germany
6.25 % due 01/24/24 (h)
Strike @ 79.50
Exp. 04/09/96 DM 251,000 15,897
Call - United Kingdom Gilt
6.000 % due 08/10/99 (h)
Strike @ 86.50
Exp. 06/24/96 BP 8,000 1,175
Put - Italian Lira v. German Mark
Strike @ 1,200.00
Exp. 04/11/96 DM 35,600 0
Put - Italian Lira v. Swiss Franc
Strike @ 1,500.00
Exp. 04/17/96 IL 43,350,000 0
Total Purchased OTC Options 55,479
(Cost $65,559)
Short-Term Instruments - 24.6%
Discount Notes - 24.4%
Abbott Laboratories
5.250% due 04/11/96 $ 10,500 10,485
AT&T Corp.
5.180% due 04/09/96 $ 8,500 $ 8,490
5.290% due 05/02/96 2,300 2,289
Coca-Cola Co.
5.200% due 06/14/96 64,500 63,755
Commonwealth Bank
5.150% due 04/22/96 20,000 19,940
5.190% due 05/20/96 28,000 27,802
E.I. Du Pont de Nemours
5.300% due 04/18/96 10,000 9,975
5.190% due 05/10/96 8,300 8,253
Emerson Electric Co.
5.250% due 04/12/96 13,400 13,378
Federal Home Loan Mortgage Corp.
5.250% due 04/08/96 25,000 24,975
5.270% due 04/18/96 105,000 104,739
5.280% due 04/22/96 1,200 1,196
5.300% due 04/22/96 1,500 1,495
5.025% due 04/25/96 2,000 1,993
Federal National Mortgage Assn.
5.140% due 05/03/96 107,000 106,511
Ford Motor Credit Corp.
5.300% due 04/23/96 26,200 26,115
5.250% due 06/26/96 3,000 2,960
General Electric Capital Corp.
5.230% due 04/03/96 54,500 54,484
5.320% due 04/23/96 1,700 1,694
Hewlett Packard Co.
5.220% due 06/14/96 6,100 6,030
5.220% due 06/18/96 8,400 8,298
Minnesota Mining & Mfg. Co.
5.270% due 05/24/96 1,700 1,687
Motorola, Inc.
5.280% due 05/06/96 1,000 995
National Rural Utilities Cooperative
5.160% due 04/26/96 10,500 10,462
5.250% due 05/24/96 9,100 9,030
5.250% due 06/06/96 16,900 16,725
Pitney Bowes Credit, Inc.
5.210% due 05/14/96 9,500 9,441
Province of Alberta
5.250% due 04/25/96 1,500 1,495
554,692
Repurchase Agreement - 0.1%
State Street Bank
(Dated 03/29/96
Collateralized by U.S. 1,762 1,762
Treasury Bond 8.75% 05/15/17
valued at $1,802,084. Repurchase
proceeds are $1,762,697)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION> Principal
Amount Value
(000's) (000's)
<S> <C> <C>
U.S. Treasury Bills - 0.1%
4.861% due 04/04/96-08/29/96 (c)(g) 2,400 $ 2,376
Total Short-Term Instruments 558,830
(Cost $558,914)
Total Investments (a) - 184.2% $4,185,489
(Cost $4,205,697)
Written Options (e) - 0.0% (120)
(Premiums $313)
Other Assets and Liabilities (Net) - (84.2%) (1,913,429)
Net Assets - 100.0% $2,271,940
</TABLE>
Notes to Schedule of Investments ($ 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. $ 9,175
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value. (39,087)
Unrealized depreciation-net $(29,912)
(b) Foreign forward currency contracts outstanding at
March 31, 1996:
<TABLE>
<CAPTION>
Principal
Amount Unrealized
Covered Expiration Appreciation/
Type by Contract Month (Depreciation)
<S> <C> <C> <C> <C>
Sell A$ 69,458 04/96 $ (665)
Buy AP 2,500 06/96 85
Sell BF 7,755 06/96 0
Sell BP 9,897 04/96 (17)
Sell 1,217 05/96 1
Buy C$ 68,316 05/96 373
Sell 66,500 05/96 (309)
Sell 81,000 03/97 (91)
Buy CK 2,646,948 08/96 1,119
Buy DG 1,653 04/96 (19)
Sell 170,861 04/96 543
Sell 63,250 09/96 (286)
Buy DK 21,191 04/96 (61)
Buy 126,960 09/96 (176)
Sell 23,776 04/96 58
Sell 115,413 05/96 4
Buy DM 75,100 04/96 (12)
Buy 437,300 05/96 (1,354)
Sell 171,750 04/96 210
Sell 455,367 05/96 5,150
Sell 406,171 12/96 7,278
Sell 1,442 01/97 13
Sell 44,425 03/97 (84)
Buy FF 228,635 09/96 723
Sell 228,616 04/96 (303)
Buy FM 898,778 04/96 (1,551)
Buy 158,400 09/96 (1,829)
Sell 809,926 04/96 2,807
Buy IL 76,275,262 05/96 170
Buy 181,630,337 09/96 6,068
Sell 239,609,860 05/96 (1,392)
Buy IP 30,187 04/96 6
Buy 31,646 09/96 (110)
Sell 47,555 04/96 (176)
Sell 42,817 05/96 138
Sell JY 3,998,773 04/96 311
Sell 7,963,917 05/96 874
Sell N$ 8,908 04/96 30
Buy SK 743,956 04/96 (166)
Buy 488,907 09/96 5,599
Sell 1,485,261 04/96 1,370
Sell 491,150 05/96 (1,729)
Buy SP 9,598,466 04/96 929
$ 23,529
</TABLE>
(c) Securities with an aggregate market value of
$2,376 have been segregated with the custodian
to cover margin requirements for the following open
future contracts at March 31, 1996:
<TABLE>
<CAPTION>
Unrealized
Type Contracts Appreciation
<S> <C> <C>
U.S. Treasury 10 Year Note (06/96) 504 $242
</TABLE>
9
<PAGE>
SCHEDULE OF INVESTMENTS (Cont.)
March 31, 1996
(d) Variable rate security. The rate listed is as of
March 31, 1996.
(e) Premiums received on OTC Written Options:
<TABLE>
<CAPTION>
Premiums Market
Type Par Received Value
<S> <C> <C> <C>
Put - Italian Lira v. Swiss Franc $146 $ 74
Strike @ 1,340 Exp. 04/11/96 IL 38,896,800
Put - Italian Lira v. German Mark 167 46
Strike @ 1,080 Exp. 04/11/96 DM 35,600
$313 $120
</TABLE>
(f) Principal amount denoted in indicated currency:
<TABLE>
<CAPTION>
<S> <C> <C>
A$ - Australian Dollar FF - French Franc
AP - Argentine Peso FM - Finnish Markka
BF - Belgian Franc IL - Italian Lira
BP - British Pound IP - Irish Punt
C$ - Canadian Dollar JY - Japanese Yen
CK - Czech Koruna MP - Mexican Peso
DG - Dutch Guilder N$ - New Zealand Dollar
DK - Danish Krone SK - Swedish Krona
DM - German Mark SP - Spanish Peseta
</TABLE>
(g) Securities are grouped by coupon rate and represent a
range of maturities.
(h) Security is subject to outstanding forward sale commitment.
See Note 1 to Financial Statements, Significant Accounting
Policies.
See Notes to Financial Statements
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
1. Significant Accounting Policies
The International Fund (the "Fund"), which commenced operations on December 13,
1989, 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 management investment company. The investment objective of the Fund is
to seek to realize maximum total return, consistent with preservation of capital
and prudent investment management. The following is a summary of significant
accounting policies followed in the preparation of the Fund's financial
statements. The 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 (other than
obligations having a maturity of sixty days or less), are normally valued on the
basis of quotes obtained from brokers and dealers or pricing services. Foreign
currency amounts are converted to U.S. dollars using foreign exchange quotations
received 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.
Delayed Delivery Transactions. The Fund may purchase or sell securities on a
when-issued or delayed delivery basis. These transactions involve a commitment
by the Fund to purchase or sell securities for a predetermined price or yield,
with payment and delivery taking place beyond the customary settlement period.
When delayed delivery purchases are outstanding, the Fund will set aside and
maintain until the settlement date in a segregated account, liquid assets or
high grade debt obligations in an amount sufficient to meet the purchase price.
When purchasing a security on a delayed delivery basis, the Fund assumes the
rights and risks of ownership of the security, including the risk of price and
yield fluctuations, and takes such fluctuations into account when determining
its net asset value. The Fund may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss. When the Fund
has sold a security on a delayed delivery basis, the Fund does not participate
in future gains and losses with respect to the security. Forward sales
commitments are accounted for by the Fund in the same manner as forward currency
contracts discussed below.
Securities Transactions and Investment Income. Security transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Interest income is recorded on the accrual basis and includes the accretion of
discounts and amortization of premiums. Dividend income is recorded on the ex-
dividend date. Realized gain or loss from securities sold are recorded on the
identified cost basis.
Dividends and Distributions to Shareholders. The Fund declares and distributes
dividends representing substantially all net investment income on a quarterly
basis. Any net realized capital gains from the sale of portfolio securities will
be distributed no less frequently than once each year. The Fund records
distributions to shareholders on the ex-dividend date.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Cont.)
March 31, 1996
Distributions of 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, f oreign currency transactions and capital loss
carryforwards.
Federal Income 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
the value of such instruments are recorded as unrealized appreciation
(depreciation) 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 for the purpose of hedging against foreign exchange
risk arising from the Fund's investment or anticipated investment in securities
denominated in foreign currencies. 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 contracts
prior to delivery. All commitments are marked-to-market daily at the applicable
translation rates and any resulting unrealized gains or losses are recorded in
the Fund's financial statements. 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.
Forward Sales. The following securities were subject to outstanding
forward sale commitments at March 31, 1996 (amounts in thousands):
<TABLE>
<CAPTION>
Principal
Amount Value Proceeds
<S> <C> <C> <C> <C>
Commonwealth of
Canada C$ 100,000 $ 79,988 $ 79,628
Kingdom of Denmark DK 580,000 105,041 105,121
Kingdom of Spain SP 12,140,000 102,877 103,208
Republic of Germany DM 251,000 150,705 159,159
United Kingdom Gilt BP 8,000 11,744 11,738
$450,355 $458,854
</TABLE>
12
<PAGE>
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 0.25% 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:
0.30% of the first $150 million, and 0.25% thereafter.
Administration Fee. Effective October 1, 1995, the Trust adopted a "unified fee
structure" whereby PIMCO (the Administrator) provides services necessary for the
operation of the Fund for a single administrative fee based on the Fund's
average daily net assets. The unified fee on an annual basis is 0.25%. Prior to
adoption of the unified fee structure, 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 $2,000 for each
Board of Trustees meeting attended, plus reimbursement of related expenses.
Expense Offset Arrangement. Fees paid indirectly, in the accompanying Statement
of Operations, represent reductions in custody and transfer agent expenses in
lieu of interest income earned on incidental uninvested cash balances. Such fees
have been added to custody and transfer agent fees to reflect total Fund
expenses.
Expense Limitation. Prior to adoption of the unified fee structure, the Adviser
and the Administrator, in the interest of limiting expenses of the Fund, agreed
to limit the expenses of the Fund, including the advisory and administrative
fees, to not more than 0.65% of its average net assets on an annual basis.
Related Party Transactions. PIMCO Advisors Distribution Company ("PADCO"), an
indirect wholly-owned subsidiary of PIMCO Advisors L.P., serves as the
distributor of the Fund's shares. Under the contract, all expenses relating to
the distribution of Fund shares will be paid by the Adviser, the Administrator
or PADCO out of past profits and resources which may include fees received by
the Adviser.
3. Purchases and Sales of Securities
Purchases and sales of investment securities (excluding short-term instruments)
for the Fund for the year ended March 31, 1996 were as follows ($ in thousands):
Purchases Sales
U.S. Government Other U.S. Government Other
$1,405,632 $25,762,298 $689,817 $22,920,419
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Cont.)
March 31, 1996
4. Transactions in Written Call and Put Options were as follows
($ in thousands):
<TABLE>
<CAPTION>
Premiums
<S> <C>
Balance at March 31, 1995 $ 46
Sales 4,965
Closing buys (470)
Expirations (4,228)
Exercised -
Balance at March 31, 1996 $ 313
</TABLE>
5. 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 Year ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Shares sold 335,250 5,258
Shares redeemed (76,839) (234,125)
Shares issued as
reinvestment of dividends 17,814 3,820
Net increase/(decrease) 276,225 (225,047)
</TABLE>
6. Federal Income Tax Matters
For the year ended March 31, 1996, the Fund realized capital losses of
$19,435,112 for Federal income tax purposes, which included losses of
$85,055,599 deferred from the year ended March 31, 1995. Internal Revenue Code
regulations permit the Fund to defer into its next fiscal year net capital
losses incurred between each November 1 and the end of its fiscal year ("post-
October losses").
The capital losses realized by the Fund are available to offset future capital
gains through March 31, 2004. The Fund will resume capital gains distributions
in the future to the extent gains are realized in excess of the available
carryforwards.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of the
International 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 International 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
responsibilty of the Fund's management; our responsibility is to express an
opinion on these financial statements in accordancee 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
15
<PAGE>
[This page left blank intentionally]
16
<PAGE>
inside back cover
Pacific Investment Management Company is responsible for the
management and administration of the PIMCO Funds. Founded in 1971,
Pacific Investment Management Company currently manages assets in
excess of $76 billion on behalf of mutual fund and institutional
clients located around the world.
Pacific Investment Management Company is one of six investment
advisory firms which form PIMCO Advisors L.P., the nation's fourth
largest publicly traded investment management concern with combined
assets under management in excess of $97 billion. Widely recognized
for providing consistent performance and high quality client
service, the six affiliated firms are:
Pacific Investment Management Company/Newport Beach, California
Columbus Circle Investors/Stamford, Connecticut
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
Blairlogie Capital Management/Edinburgh, Scotland
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
<PAGE>
back cover
PIMCO
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
(800) 927-4648
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.
<PAGE>
March 31, 1996
ANNUAL REPORT
PIMCO
VERSASTYLE EQUITY FUND
<PAGE>
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
<TABLE>
<CAPTION>
VersaSTYLE
Equity S&P 500
Month Fund Index
<S> <C> <C>
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
</TABLE>
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
3/31/96 1 Yr. 3 Yrs. 5Yrs. Since
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>
1
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
Amounts in thousands, except per
share amounts
<TABLE>
<CAPTION>
<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
2
<PAGE>
STATEMENT OF OPERATIONS
For the year ended March 31, 1996
$ in thousands
<TABLE>
<CAPTION>
<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
Total expenses
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
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
$ in thousands
<TABLE>
<CAPTION>
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
4
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<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
5
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1996
<TABLE>
<CAPTION> 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
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>
6
<PAGE>
<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
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>
7
<PAGE>
<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
8
<PAGE>
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)
9
<PAGE>
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 $49,073. This amount has been
waived as a result of the adoption of the unified fee.
Related Party Transactions. PIMCO Advisors Distribution Company ("PADCO"), an
indirect wholly-owned
10
<PAGE>
subsidiary of PIMCO Advisors L.P., serves as the distributor of the Fund's
shares. Under the contract, all expenses relating to the distribution of Fund
shares will be paid by the Adviser, the Administrator or PADCO out of past
profits and resources which may include fees received by the Adviser.
3. Purchases and Sales of Securities
Purchases and sales of investment securities (excluding short-term instruments)
for the Fund for the year ended March 31, 1996 were as follows ($ 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>
11
<PAGE>
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
12
<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.
<PAGE>
Part C. OTHER INFORMATION
--------------------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial statements for the Trust as of March 31, 1996, and for
its fiscal year then ended, including notes thereto, and the
reports of Price Waterhouse LLP thereon, dated May 10, 1996
are incorporated by reference from the Annual Report.
(b) Exhibits
(1) (i) Declaration of Trust of Registrant/1/
-
(ii) Establishment and Designation of Global, Foreign, Low
Duration South Africa Free and Total Return South Africa
Free Portfolios as Series of Registrant/5/
-
(iii) Establishment and Designation of High Yield, Low Duration II
and Total Return II Portfolios as Series of Registrant/6/
-
(iv) Establishment and Designation of Income and Capital
Preservation Portfolio I and Income and Capital
Preservation Portfolio II as Series of Registrant/7/
-
(v) Amended and Restated Establishment and Designation of
Series of Shares of Registrant/8/
-
(vi) Amended Designation of Two Series of Registrant/8/
-
(vii) Second Amended and Restated Establishment and Designation of
Series of Shares of Registrant/9/
-
(viii) Establishment and Designation of Moderate Duration and
VersaSTYLE Equity Funds as Series of Registrant/10/
--
(ix) Amended Designation of Two Series of Registrant/14/
--
(x) Establishment and Designation of StocksPLUS Short Strategy
Fund as Series of Registrant/15/
--
(xi) Redesignation of One Existing Series and Establishment and
Designation of Two New Series of Registrant /16/
(xii) Form of Redesignation of One Series of Registrant
(2) By-laws of Registrant/1/
-
(3) Not applicable
(4) Not applicable
(5) (i) Investment Advisory Contract/2/
-
(ii) Supplements to Investment Advisory Contract Relating to
Global, Foreign, Low Duration South Africa Free and Total
Return South Africa Free Portfolios/5/
-
(iii) Supplements to Investment Advisory Contract Relating to
High Yield, Low Duration II and Total Return II
Portfolios/6/
-
C-1
<PAGE>
(iv) Supplements to Investment Advisory Contract Relating to
Income and Capital Preservation Portfolio I and Income and
Capital Preservation Portfolio II/7/
-
(v) Form of Supplements to Investment Advisory Contract Relating
to Moderate Duration Fund and VersaSTYLE Equity Fund/10/
--
(vi) Form of Amended Investment Advisory Contract/11/
--
(vii) Form of Supplement to Investment Advisory Contract/12/
--
(viii) Form of Supplement to Investment Advisory Contract Relating
to StocksPLUS Short Strategy Fund/15/
--
(ix) Supplements to Investment Advisory Contract/16/
(6) (i) Distribution Contract/2/
-
(ii) Supplement to Distribution Contract Relating to Global,
Foreign, Low Duration South Africa Free and Total Return
South Africa Free Portfolios/5/
-
(iii) Supplement to Distribution Contract Relating to High Yield,
Low Duration II and Total Return II Portfolios/6/
-
(iv) Supplements to Distribution Contract Relating to Income and
Capital Preservation Portfolio I and Income and Capital
Preservation Portfolio II/7/
-
(v) Form of Distribution Contract as Amended May 31, 1994/9/
-
(vi) Form of Supplements to Distribution Contract Relating to
Moderate Duration Fund and VersaSTYLE Equity Fund/10/
--
(vii) Form of Amended Distribution Contract/11/
--
(viii) Form of Supplement to Distribution Contract Relating to
StocksPLUS Short Strategy Fund/15/
--
(ix) Supplements to Distribution Contract/16/
(7) Not applicable
(8) Custodian Agreement/4/
-
(9) Transfer Agency Agreement/4/
-
(10) (i) Opinion of Counsel/13/
--
(ii) Consent of Counsel/3/
-
(11) Consent of Independent Accountants
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) (i) Form of Distribution Plan for Administrative Class Shares/9/
-
(ii) Administrative Services Contract/2/
-
(iii) Supplements to Administrative Services Contract relating to
Global, Foreign, Low Duration South Africa Free and Total
Return South Africa Free Portfolios/5/
-
(iv) Supplement to Administrative Services Contract Relating to
High Yield, Low Duration II and Total Return II
Portfolios/6/
-
(v) Supplements to Administrative Services Contract Relating to
Income and Capital Preservation Portfolio I and Income and
Capital Preservation Portfolio II/7/
-
(vi) Form of Administrative Services Plan for Administrative
Class Shares/9/
-
C-2
<PAGE>
(vii) Form of Supplements to Administrative Services Contract
Relating to Moderate Duration Fund and VersaSTYLE Equity
Fund/10/
--
(viii) Form of Amended Administrative Services Contract/11/
--
(ix) Form of Amended Administrative Services Contract/12/
--
(x) Form of Supplement to Administration Agreement Relating to
StocksPLUS Short Strategy Fund/15/
--
(xi) Supplements to Administration Agreement/16/
(16) Calculation of Performance/12/
--
(17) Financial Data Schedule
(18) (i) Dual-Class Plan/12/
--
(ii) Amended Dual-Class Plan/16/
____________________
/1/ Filed with initial Registration Statement on February 19, 1987
-
(File No. 33-12113).
/2/ Filed with Pre-Effective Amendment No. 2 on April 21, 1987.
-
/3/ Filed with Pre-Effective Amendment No. 4 on May 5, 1987.
-
/4/ Filed with Post-Effective Amendment No. 3 on August 1, 1988.
-
/5/ Filed with Post-Effective Amendment No. 8 on August 3, 1990.
-
/6/ Filed with Post-Effective Amendment No. 10 on May 31, 1991.
-
/7/ Filed with Post-Effective Amendment No. 12 on August 29, 1991.
-
/8/ Filed with Post-Effective Amendment No. 15 on June 1, 1992.
-
/9/ Filed with Post-Effective Amendment No. 20 on June 1, 1994.
-
/10/ Filed with Post-Effective Amendment No. 21 on August 1, 1994.
--
/11/ Filed with Post-Effective Amendment No. 22 on November 30, 1994.
--
/12/ Filed with Post-Effective Amendment No. 23 on June 1, 1995.
--
/13/ Filed with Registrant's Rule 24f-2 Notice.
--
/14/ Filed with Post-Effective Amendment No. 24 on July 31, 1995.
--
/15/ Filed with Post-Effective Amendment No. 27 on January 16, 1996.
--
/16/ Filed with Post-Effective Amendment No. 28 on April 1, 1996.
--
Item 25. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
C-3
<PAGE>
Item 26. Number of Holders of Securities
-------------------------------
As of May 3, 1996, the number of record holders of each Fund and
Class thereof of the Registrant were as follows:
<TABLE>
<CAPTION>
Institutional Administrative
Fund Class Class
---- ------------- --------------
<S> <C> <C>
Money Market 150 1
Short-Term 107 1
Low Duration 560 6
Low Duration II 51 0
Low Duration III 0 0
Moderate Duration 0 0
High Yield 103 1
Total Return 1201 33
Total Return II 159 6
Total Return III 22 0
Commercial Mortgage Securities 0 0
Long-Term U.S. Government 23 0
Foreign 49 0
Global 34 0
International 105 0
StocksPLUS 42 0
StocksPLUS Short Strategy 0 0
Growth Stock 9 0
VersaSTYLE Equity 1 0
</TABLE>
Item 27. Indemnification
---------------
Reference is made to Article IV of the Registrant's Declaration of
Trust, which was filed with the Registrant's initial Registration
Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to
the Declaration of Trust or otherwise, the Registrant is aware that in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and,
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the
successful defense of any act, suit or proceeding) is asserted by such
trustees, officers or controlling persons in connection with the
shares being registered, the Registrant will, unless in the opinion of
its counsel
C-4
<PAGE>
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
PIMCO, the investment adviser to the Trust, is a subsidiary
partnership of PIMCO Advisors L.P. ("PIMCO Advisors"). The general
partner of PIMCO Advisors is PIMCO Partners, G.P., a general
partnership between Pacific Investment Management Company, an indirect
wholly-owned subsidiary of Pacific Mutual Life Insurance Company
("Pacific Mutual"), and PIMCO Partners LLC, a limited liability
company controlled by the PIMCO Managing Directors.
The directors and officers of PIMCO and their business and other
connections are as follow:
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Allan, George C. Vice President, PIMCO and PIMCO Management, Inc.
Arnold, Tamara J. Vice President, PIMCO and PIMCO Management, Inc.
Barbi, Leslie A. Vice President, PIMCO and PIMCO Management, Inc.
Benz, William R. Executive Vice President, PIMCO and
PIMCO Management, Inc.
Brynjolfsson, John B. Vice President, PIMCO and PIMCO Management, Inc.
Burns, R. Wesley Executive Vice President, PIMCO and
PIMCO Management, Inc.; President of the Trust and
PIMCO Commerical Mortgage Securities Trust, Inc.;
Vice President, PIMCO Funds: Equity Advisors Series,
PIMCO Advisors Funds and Cash Accumulation Trust.
Cupps, Wendy W. Vice President, PIMCO and PIMCO Management, Inc.
Daniels, Charles M. III Executive Vice President, PIMCO and
PIMCO Management, Inc.
Dunn, Anita Vice President, PIMCO and PIMCO Management, Inc.
Edington, David H. Managing Director, PIMCO; Director and
Managing Director, PIMCO Management, Inc.
Ehlert, A. Benjamin Executive Vice President, PIMCO and
PIMCO Management, Inc.
Ettl, Robert A. Vice President, PIMCO and PIMCO Management, Inc.
Fitzgerald, Robert M. Treasurer, PIMCO; Chief Financial Officer,
Senior Vice President-Finance and Controller, PIMCO
Advisors and PIMCO Advisors Distribution Company.
Fraizer, Sherri A. Assistant Secretary, PIMCO
Gross, William H. Managing Director, PIMCO;
Director and Managing Director, PIMCO Management, Inc.;
Director and Vice President, StocksPLUS Management,
Inc.; Senior Vice President of the Trust; Member of
Equity and Operating Boards, PIMCO Advisors.
Hague, John L. Managing Director, PIMCO;
Director and Managing Director, PIMCO Management, Inc.
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Hally, Gordon C. Executive Vice President, PIMCO and
PIMCO Management, Inc.
Hamalainen, Pasi M. Vice President, PIMCO and PIMCO Management, Inc.
Hardaway, John P. Vice President, PIMCO and PIMCO Management, Inc.;
Treasurer of the Trust, PIMCO Commercial Mortgage
Securities Trust, Inc., PIMCO Advisors Funds and
Cash Accumulation Trust; Vice President, PIMCO Funds:
Equity Advisors Series.
Harris, Brent R. Managing Director, PIMCO; Director and
Managing Director, PIMCO Management, Inc.; Director
and Vice President, StocksPLUS Management, Inc.;
Trustee and Chairman of the Trust and PIMCO Commercial
Mortgage Securities Trust, Inc.; Member of Operating
Board, PIMCO Advisors.
Hodge, Douglas M. Senior Vice President, PIMCO and PIMCO Management, Inc.
Holden, Brent L. Executive Vice President, PIMCO and
PIMCO Management, Inc.
Holloway, Dwight F., Jr. Vice President, PIMCO and PIMCO Management, Inc.
Howe, Jane T. Vice President, PIMCO and PIMCO Management, Inc.
Isberg, Margaret E. Executive Vice President, PIMCO and
PIMCO Management, Inc.; Senior Vice President of
the Trust.
Loftus, John S. Executive Vice President, PIMCO and
PIMCO Management, Inc.
Meiling, Dean S. Managing Director, PIMCO; Director and Managing
Director, PIMCO Management, Inc.; Director, StocksPLUS
Management, Inc.; Vice President of the Trust
and PIMCO Commercial Mortgage Securities Trust,
Inc.; Member of Operating Board, PIMCO Advisors.
Muzzy, James F. Managing Director, PIMCO; Director and Managing
Director, PIMCO Management, Inc.; Director and
Vice President, StocksPLUS Management, Inc.;
Vice President of the Trust; Member of Operating
Board, PIMCO Advisors.
Otterbein, Thomas J. Vice President, PIMCO and PIMCO Management, Inc.
Podlich, William F. III Managing Director, PIMCO; Director and Managing
Director, PIMCO Management, Inc.; Vice President,
PIMCO Commercial Mortgage Securities Trust, Inc.,
Member of Equity and Operating Boards,
PIMCO Advisors.
Powers, William C. Managing Director, PIMCO; Director and Managing
Director, PIMCO Management, Inc.; Senior Vice
President, PIMCO Commercial Mortgage Securities
Trust, Inc.; Member of Operating Board,
PIMCO Advisors.
Rabinovitch, Frank B. Managing Director, PIMCO; Director and Managing
Director, PIMCO Management, Inc.
Rennie, Edward P. Senior Vice President, PIMCO and PIMCO Management, Inc.
Roney, Scott L. Vice President, PIMCO and PIMCO Management, Inc.
Rosborough, Michael J. Vice President, PIMCO and PIMCO Management, Inc.
Sargent, Jeffrey M. Vice President, PIMCO, PIMCO Management, Inc.,
the Trust, PIMCO Commercial Mortgage Securities
Trust, Inc. and PIMCO Funds: Equity Advisors Series.
Saye, Jeffrey M. Vice President, PIMCO and PIMCO Management, Inc.
Schmider, Ernest L. Senior Vice President, PIMCO and PIMCO
Management, Inc.; Secretary, Chief Administrative and
Legal Officer, PIMCO; Vice President-Legal and
Assistant Secretary, PIMCO Advisors.
Scholey, Leland T. Senior Vice President, PIMCO, PIMCO Management, Inc.
and the Trust.
Seliga, Denise C. Vice President, PIMCO and PIMCO Management, Inc.
Seymour, Rita J. Vice President, PIMCO and PIMCO Management, Inc.
Thomas, Lee R. Executive Vice President, PIMCO and
PIMCO Management, Inc.
Thompson, William S. Chief Executive Officer and Managing
Jr. Director, PIMCO; Director, Managing Director and
Chief Executive Officer, PIMCO Management, Inc.;
Director and President, StocksPLUS Management, Inc.;
Vice President of the Trust and PIMCO Commercial
Mortgage Securities Trust, Inc.; Member of Equity Board
and Operating Committee, and Chairman and Member of
Operating Board, PIMCO Advisors.
Trosky, Benjamin L. Managing Director, PIMCO; Director and Managing
Director, PIMCO Management, Inc.; Senior Vice
President, PIMCO Commercial Mortgage Securities
Trust, Inc.
Venable, Robert S. Vice President, PIMCO and PIMCO Management, Inc.
Wagner, Teresa A. Vice President, PIMCO, PIMCO Management, Inc., the
Trust, PIMCO Commercial Mortgage Securities Trust, Inc.
and PIMCO Funds: Equity Advisors Series; Vice President
and Assistant Clerk, PIMCO Advisors Funds and Cash
Accumulation Trust.
Ward, Andrew C. Vice President, PIMCO and PIMCO Management, Inc.;
Senior Vice President of the Trust.
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Willner, Ram Vice President, PIMCO and PIMCO Management, Inc.
Wilsey, Kristen M. Vice President, PIMCO, PIMCO Management, Inc.
and of the Trust.
Wood, George H. Vice President, PIMCO and PIMCO Management, Inc.
Yetter, Michael A. Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>
The address of PIMCO is 840 Newport Center Drive, Newport Beach, CA 92260.
The address of PIMCO Advisors L.P. is 800 Newport Center Drive, Newport Beach,
CA 92660.
The address of PIMCO Advisors Distribution Company is 2187 Atlantic Street,
Stamford, CT 06902.
Item 29. Principal Underwriters
----------------------
(a) PIMCO Advisors Distribution Company (the "Distributor") serves as
Distributor of Shares of the Trust. The Distributor also acts as
the principal underwriter for PIMCO Advisors Funds and PIMCO
Funds: Equity Advisors Series. The Distributor is a wholly-owned
subsidiary of PIMCO Advisors.
(b)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------------- -------------------------- ----------------------
<S> <C> <C>
Badgley, William D. Vice President None
Booth, Jeffrey L. Vice President None
Bosch, James D. Vice President None
Cvengros, William D. Director None
Fitzgerald, Robert M. Chief Financial Officer, None
Senior Vice President -
Finance and Controller
Gallagher, Michael J. Vice President None
Gray, Ronald H. Vice President None
Janeczek, Edward W., Jr. Vice President None
Jones, Johnathan C. Vice President None
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------------- -------------------------- ----------------------
<S> <C> <C>
Kemraj, Jaishree B. Assistant Vice President None
and Assistant Controller
Leasure, John O. President, Chief Executive None
Officer and Director
Lynch, William E. Vice President None
McCarthy, Jacqueline A. Vice President None
McLaughlin, Richard J. Vice President None
Meyers, Andrew J. Executive Vice President None
Moody, Paul R. Vice President None
Moyer, Fioja Vice President None
Pearlman, Goffrey H. Vice President None
Pisapia, Glynne Vice President None
Prindiville, Robert A. Chairman and Director None
Russell, Matthew M. Vice President None
Schott, Newton B., Jr. Senior Vice President, None
Secretary and Director
Stone, David P. Vice President None
Thomas, William H., Jr. Vice President None
Troyer, Paul H. Vice President None
Trumbore, Brian F. Senior Vice President None
</TABLE>
- -------------
*/ The business address of all directors and officers of the Distributor is
- -
either 2187 Atlantic Street, Stamford, CT 06902 or 800 Newport Center Drive,
Newport Beach, CA 92660.
Item 30. Location of Accounts and Records
--------------------------------
The account books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and the Rules thereunder will be maintained at the offices of
Pacific Investment Management Company, 840 Newport Center Drive,
Newport Beach, California 92660 and at the offices of the Trust's
Custodian, Investors Fiduciary Trust Company, 127 West 10th Street,
Kansas City, Missouri 64105.
C-8
<PAGE>
Item 31. Management Services
-------------------
Not applicable
Item 32. Undertakings
------------
(a) Not applicable.
(b) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to
six months from the effective date of Registrant's 1933 Act
registration statement, or post-effective amendment thereto which
provides for the addition of a new series of Registrant.
(c) Registrant undertakes to furnish to each person to whom a
prospectus is delivered with a copy of Registrant's latest
annual report to shareholders upon request and without charge.
(d) Registrant undertakes to call a meeting of shareholders for the
purpose of considering the removal of a person serving as Trustee
if requested in writing to do so by the holders of not less than
10% of the outstanding shares of Registrant.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment No. 29 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Washington
in the District of Columbia on the 14th day of June, 1996.
PIMCO FUNDS
(Registrant)
By:
-------------------------------------
R. Wesley Burns*++++
President
*By: /s/ Paul F. Roye
-------------------------------------
Paul F. Roye, as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
___________________________ Trustee June 14, 1996
Guilford C. Babcock*+
___________________________ Trustee June 14, 1996
Thomas P. Kemp*+
___________________________ Trustee June 14, 1996
Brent R. Harris*+++
___________________________ Trustee June 14, 1996
William J. Popejoy* +++++
___________________________ Trustee June 14, 1996
Vern O. Curtis*++++++
___________________________ President June 14, 1996
R. Wesley Burns*++++ (Principal
Executive
Officer)
___________________________ Treasurer June 14, 1996
John P. Hardaway++* (Principal
Financial
and Accounting
Officer)
*By: /s/ Paul F. Roye
-----------------------
Paul F. Roye
as attorney-in-fact
</TABLE>
<PAGE>
___________________
+ Pursuant to power of attorney filed with Post-Effective Amendment
No. 1 to Registration Statement No. 33-12113 on November 6, 1987.
++ Pursuant to power of attorney filed with Post-Effective Amendment
No. 10 to Registration Statement No. 33-12113 on May 31, 1991.
+++ Pursuant to power of attorney filed with Post-Effective Amendment
No. 14 to Registration Statement No. 33-12113 on April 28, 1992.
++++ Pursuant to power of attorney filed with Post-Effective Amendment
No. 20 to Registration Statement No. 33-12113 on June 1, 1995.
+++++ Pursuant to power of attorney filed with Post-Effective Amendment
No. 22 to Registration Statement No. 33-12113 on November 30, 1994.
++++++ Pursuant to power of attorney filed with Post-Effective Amendment
No. 23 to Registration Statement No. 33-12113 on June 1, 1995.
<PAGE>
PIMCO FUNDS
INDEX TO EXHIBITS
FILED WITH
POST-EFFECTIVE AMENDMENT NO. 29
<TABLE>
<C> <S>
EXHIBIT 1(12) Form of Redesignation of One Series Registrant (EDGAR
EXHIBIT 99.B1).
EXHIBIT 11 Consent of Independent Accountants (EDGAR EXHIBIT 99.B11).
EXHIBIT 17 Financial Data Schedule (EDGAR EXHIBIT 27).
</TABLE>
<PAGE>
EXHIBIT 1(12) - EDGAR EXHIBIT 99.B1
FORM OF REDESIGNATION OF ONE SERIES OF REGISTRANT
<PAGE>
[FORM OF]
REDESIGNATION
OF ONE SERIES OF SHARES OF BENEFICIAL INTEREST,
PAR VALUE $0.0001 PER SHARE, OF
PIMCO FUNDS
(FORMERLY PACIFIC INVESTMENT MANAGEMENT INSTITUTIONAL TRUST)
JUNE ___, 1996
The undersigned, being at least a majority of the Trustees of PIMCO Funds
(the "Trust") (formerly Pacific Investment Management Institutional Trust), a
Massachusetts business trust established by a Declaration of Trust dated
February 19, 1987, as amended from time to time (the "Declaration"), acting
pursuant to Section 5.11 and 5.12 of the Declaration, hereby amend the
Redesignation of One Existing Series of Shares of Beneficial Interest and
Establishment and Designation of Two Additional Series of Shares of Beneficial
Interest of PIMCO Funds dated February 27, 1996 as follows:
The series of shares of the Trust established and designated as the PIMCO
Balanced Fund shall be redesignated as the PIMCO Strategic Balanced Fund,
without in any way changing the rights or privileges of the Fund or its
shareholders.
This instrument may be executed in several parts, each of which shall be
deemed an original, and all of which shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, THE UNDERSIGNED HAVE EXECUTED THIS INSTRUMENT THE _____
DAY OF JUNE _____, 1996.
_________________________ ________________________________________
Brent R. Harris William J. Popejoy
_________________________ ________________________________________
Thomas P. Kemp Guilford C. Babcock
_________________________
Vern O. Curtis
<PAGE>
EXHIBIT 11 - EDGAR EXHIBIT 99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 29 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated May 10, 1996, relating to the financial
statements and financial highlights appearing in the March 31, 1996 Annual
Report to Shareholders of the Total Return Fund, Total Return Fund II, Total
Return Fund III, Low Duration Fund, Low Duration Fund II, Short-Term Fund, Long-
Term U.S. Government Fund, Foreign Fund, Global Fund, High Yield Fund, Growth
Stock Fund, Money Market Fund, StocksPLUS Fund, International Fund and the
VersaSTYLE Equity Fund (now known as the VersaSTYLE Equity Fund II) of the PIMCO
Funds, which are also incorporated by reference into the Registration Statement.
We also consent to the references to us under the heading "Financial Highlights"
in the Prospectus and under the headings "Independent Accountants" and
"Financial Statements" in the Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
---------------------------------
Price Waterhouse LLP
Kansas City, Missouri
June 14, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 011
<NAME> TOTAL RETURN FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 13,069,858
<INVESTMENTS-AT-VALUE> 13,039,888
<RECEIVABLES> 2,332,042
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 22,824
<TOTAL-ASSETS> 15,394,754
<PAYABLE-FOR-SECURITIES> 4,982,267
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,264
<TOTAL-LIABILITIES> 5,042,531
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,447,698
<SHARES-COMMON-STOCK> 996,162
<SHARES-COMMON-PRIOR> 722,606
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 18,792
<ACCUMULATED-NET-GAINS> 15,021
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (91,704)
<NET-ASSETS> 10,352,223
<DIVIDEND-INCOME> 1,025
<INTEREST-INCOME> 658,723
<OTHER-INCOME> 0
<EXPENSES-NET> 38,166
<NET-INVESTMENT-INCOME> 621,582
<REALIZED-GAINS-CURRENT> 254,693
<APPREC-INCREASE-CURRENT> 11,343
<NET-CHANGE-FROM-OPS> 887,618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 617,905
<DISTRIBUTIONS-OF-GAINS> 110,361
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 342,019
<NUMBER-OF-SHARES-REDEEMED> 124,938
<SHARES-REINVESTED> 56,475
<NET-CHANGE-IN-ASSETS> 3,103,451
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 85,253
<OVERDIST-NET-GAINS-PRIOR> 64,793
<GROSS-ADVISORY-FEES> 22,775
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38,243
<AVERAGE-NET-ASSETS> 9,025,378
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> 0.81
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> 0.71
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 0.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 012
<NAME> TOTAL RETURN FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 13,069,858
<INVESTMENTS-AT-VALUE> 13,039,888
<RECEIVABLES> 2,332,042
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 22,824
<TOTAL-ASSETS> 15,394,754
<PAYABLE-FOR-SECURITIES> 4,982,267
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,264
<TOTAL-LIABILITIES> 5,042,531
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,447,698
<SHARES-COMMON-STOCK> 10,170
<SHARES-COMMON-PRIOR> 903
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 18,792
<ACCUMULATED-NET-GAINS> 15,021
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (91,704)
<NET-ASSETS> 10,352,223
<DIVIDEND-INCOME> 1,025
<INTEREST-INCOME> 658,723
<OTHER-INCOME> 0
<EXPENSES-NET> 38,166
<NET-INVESTMENT-INCOME> 621,582
<REALIZED-GAINS-CURRENT> 254,693
<APPREC-INCREASE-CURRENT> 11,343
<NET-CHANGE-FROM-OPS> 887,618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,713
<DISTRIBUTIONS-OF-GAINS> 772
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,183
<NUMBER-OF-SHARES-REDEEMED> 2,289
<SHARES-REINVESTED> 373
<NET-CHANGE-IN-ASSETS> 3,103,451
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 85,253
<OVERDIST-NET-GAINS-PRIOR> 64,793
<GROSS-ADVISORY-FEES> 22,775
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38,243
<AVERAGE-NET-ASSETS> 55,840
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> 0.80
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> 0.69
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 021
<NAME> LONG-TERM U.S. GOVERNMENT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 42,042
<INVESTMENTS-AT-VALUE> 42,402
<RECEIVABLES> 563
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,966
<PAYABLE-FOR-SECURITIES> 10,376
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 79
<TOTAL-LIABILITIES> 10,455
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,957
<SHARES-COMMON-STOCK> 3,264
<SHARES-COMMON-PRIOR> 3,285
<ACCUMULATED-NII-CURRENT> 236
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 876
<ACCUM-APPREC-OR-DEPREC> 194
<NET-ASSETS> 32,511
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,680
<OTHER-INCOME> 0
<EXPENSES-NET> 186
<NET-INVESTMENT-INCOME> 2,494
<REALIZED-GAINS-CURRENT> 3,539
<APPREC-INCREASE-CURRENT> (442)
<NET-CHANGE-FROM-OPS> 5,591
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,494
<DISTRIBUTIONS-OF-GAINS> 2,216
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,024
<NUMBER-OF-SHARES-REDEEMED> 2,415
<SHARES-REINVESTED> 372
<NET-CHANGE-IN-ASSETS> 162
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 122
<OVERDIST-NET-GAINS-PRIOR> 1,841
<GROSS-ADVISORY-FEES> 101
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 186
<AVERAGE-NET-ASSETS> 36,398
<PER-SHARE-NAV-BEGIN> 9.85
<PER-SHARE-NII> 0.83
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> 0.72
<PER-SHARE-DISTRIBUTIONS> 0.66
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.96
<EXPENSE-RATIO> 0.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 031
<NAME> LOW DURATION FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 3,497,696
<INVESTMENTS-AT-VALUE> 3,478,982
<RECEIVABLES> 243,463
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 3,722,446
<PAYABLE-FOR-SECURITIES> 999,452
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42,884
<TOTAL-LIABILITIES> 1,042,336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,711,410
<SHARES-COMMON-STOCK> 269,130
<SHARES-COMMON-PRIOR> 238,948
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 5,120
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,496
<ACCUM-APPREC-OR-DEPREC> (18,684)
<NET-ASSETS> 2,680,110
<DIVIDEND-INCOME> 500
<INTEREST-INCOME> 180,952
<OTHER-INCOME> 0
<EXPENSES-NET> 10,335
<NET-INVESTMENT-INCOME> 171,117
<REALIZED-GAINS-CURRENT> 9,315
<APPREC-INCREASE-CURRENT> 34,773
<NET-CHANGE-FROM-OPS> 215,205
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 171,057
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 141,848
<NUMBER-OF-SHARES-REDEEMED> 126,025
<SHARES-REINVESTED> 14,360
<NET-CHANGE-IN-ASSETS> 347,307
<ACCUMULATED-NII-PRIOR> 71
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 21,592
<GROSS-ADVISORY-FEES> 6,268
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,358
<AVERAGE-NET-ASSETS> 2,486,545
<PER-SHARE-NAV-BEGIN> 9.76
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> 0.68
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 032
<NAME> LOW DURATION FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 3,497,696
<INVESTMENTS-AT-VALUE> 3,478,981
<RECEIVABLES> 243,464
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 3,722,446
<PAYABLE-FOR-SECURITIES> 999,452
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42,884
<TOTAL-LIABILITIES> 1,042,336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,711,410
<SHARES-COMMON-STOCK> 255
<SHARES-COMMON-PRIOR> 79
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 5,120
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,496
<ACCUM-APPREC-OR-DEPREC> (18,684)
<NET-ASSETS> 2,680,110
<DIVIDEND-INCOME> 500
<INTEREST-INCOME> 180,952
<OTHER-INCOME> 0
<EXPENSES-NET> 10,335
<NET-INVESTMENT-INCOME> 171,117
<REALIZED-GAINS-CURRENT> 9,315
<APPREC-INCREASE-CURRENT> 34,773
<NET-CHANGE-FROM-OPS> 215,205
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 91
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 267
<NUMBER-OF-SHARES-REDEEMED> 99
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 347,307
<ACCUMULATED-NII-PRIOR> 71
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 21,592
<GROSS-ADVISORY-FEES> 6,268
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,358
<AVERAGE-NET-ASSETS> 1,345
<PER-SHARE-NAV-BEGIN> 9.76
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> 0.65
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 051
<NAME> SHORT-TERM FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 117,935
<INVESTMENTS-AT-VALUE> 117,239
<RECEIVABLES> 9,575
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 42
<TOTAL-ASSETS> 126,856
<PAYABLE-FOR-SECURITIES> 20,785
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275
<TOTAL-LIABILITIES> 21,060
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106,593
<SHARES-COMMON-STOCK> 10,257
<SHARES-COMMON-PRIOR> 9,202
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 161
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 123
<ACCUM-APPREC-OR-DEPREC> (513)
<NET-ASSETS> 105,796
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,738
<OTHER-INCOME> 0
<EXPENSES-NET> 510
<NET-INVESTMENT-INCOME> 6,228
<REALIZED-GAINS-CURRENT> 592
<APPREC-INCREASE-CURRENT> 584
<NET-CHANGE-FROM-OPS> 7,404
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,204
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,481
<NUMBER-OF-SHARES-REDEEMED> 12,924
<SHARES-REINVESTED> 498
<NET-CHANGE-IN-ASSETS> 15,682
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 261
<OVERDIST-NET-GAINS-PRIOR> 615
<GROSS-ADVISORY-FEES> 249
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 512
<AVERAGE-NET-ASSETS> 90,219
<PER-SHARE-NAV-BEGIN> 9.79
<PER-SHARE-NII> 0.69
<PER-SHARE-GAIN-APPREC> 0.12
<PER-SHARE-DIVIDEND> 0.68
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 052
<NAME> SHORT-TERM FUND - ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 117,935
<INVESTMENTS-AT-VALUE> 117,239
<RECEIVABLES> 9,575
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 42
<TOTAL-ASSETS> 126,856
<PAYABLE-FOR-SECURITIES> 20,785
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275
<TOTAL-LIABILITIES> 21,060
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106,593
<SHARES-COMMON-STOCK> 403
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 161
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 123
<ACCUM-APPREC-OR-DEPREC> (513)
<NET-ASSETS> 105,796
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,738
<OTHER-INCOME> 0
<EXPENSES-NET> 510
<NET-INVESTMENT-INCOME> 6,228
<REALIZED-GAINS-CURRENT> 592
<APPREC-INCREASE-CURRENT> 584
<NET-CHANGE-FROM-OPS> 7,404
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 435
<NUMBER-OF-SHARES-REDEEMED> 32
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 15,682
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 261
<OVERDIST-NET-GAINS-PRIOR> 615
<GROSS-ADVISORY-FEES> 249
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 512
<AVERAGE-NET-ASSETS> 3,353
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 0.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 061
<NAME> STOCKPLUS FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 160,654
<INVESTMENTS-AT-VALUE> 160,646
<RECEIVABLES> 1,901
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 162,552
<PAYABLE-FOR-SECURITIES> 9,562
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,121
<TOTAL-LIABILITIES> 10,683
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,791
<SHARES-COMMON-STOCK> 13,607
<SHARES-COMMON-PRIOR> 4,435
<ACCUMULATED-NII-CURRENT> 1,762
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,114
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 202
<NET-ASSETS> 151,869
<DIVIDEND-INCOME> 13
<INTEREST-INCOME> 12,432
<OTHER-INCOME> 0
<EXPENSES-NET> 512
<NET-INVESTMENT-INCOME> 11,933
<REALIZED-GAINS-CURRENT> 9,202
<APPREC-INCREASE-CURRENT> (738)
<NET-CHANGE-FROM-OPS> 20,397
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,982
<DISTRIBUTIONS-OF-GAINS> 9,475
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,821
<NUMBER-OF-SHARES-REDEEMED> 113
<SHARES-REINVESTED> 222
<NET-CHANGE-IN-ASSETS> 105,371
<ACCUMULATED-NII-PRIOR> 1,176
<ACCUMULATED-GAINS-PRIOR> 22
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 325
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 512
<AVERAGE-NET-ASSETS> 78,125
<PER-SHARE-NAV-BEGIN> 10.48
<PER-SHARE-NII> 0.91
<PER-SHARE-GAIN-APPREC> 2.48
<PER-SHARE-DIVIDEND> 1.05
<PER-SHARE-DISTRIBUTIONS> 1.66
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.16
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 071
<NAME> GROWTH STOCK FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 6,792
<INVESTMENTS-AT-VALUE> 7,893
<RECEIVABLES> 104
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 7,999
<PAYABLE-FOR-SECURITIES> 101
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9
<TOTAL-LIABILITIES> 110
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,058
<SHARES-COMMON-STOCK> 668
<SHARES-COMMON-PRIOR> 1,125
<ACCUMULATED-NII-CURRENT> 255
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 475
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,101
<NET-ASSETS> 7,889
<DIVIDEND-INCOME> 151
<INTEREST-INCOME> 13
<OTHER-INCOME> 0
<EXPENSES-NET> 54
<NET-INVESTMENT-INCOME> 110
<REALIZED-GAINS-CURRENT> 3,160
<APPREC-INCREASE-CURRENT> (458)
<NET-CHANGE-FROM-OPS> 2,812
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 109
<DISTRIBUTIONS-OF-GAINS> 2,750
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 69
<NUMBER-OF-SHARES-REDEEMED> 713
<SHARES-REINVESTED> 102
<NET-CHANGE-IN-ASSETS> (7,540)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 319
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 54
<AVERAGE-NET-ASSETS> 11,113
<PER-SHARE-NAV-BEGIN> 13.71
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 2.84
<PER-SHARE-DIVIDEND> 0.14
<PER-SHARE-DISTRIBUTIONS> 5.12
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.81
<EXPENSE-RATIO> 0.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 081
<NAME> INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 4,205,697
<INVESTMENTS-AT-VALUE> 4,185,489
<RECEIVABLES> 949,137
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,441
<TOTAL-ASSETS> 5,137,067
<PAYABLE-FOR-SECURITIES> 2,413,516
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 451,611
<TOTAL-LIABILITIES> 2,865,127
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,254,524
<SHARES-COMMON-STOCK> 282,404
<SHARES-COMMON-PRIOR> 6,179
<ACCUMULATED-NII-CURRENT> 27,949
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 35,341
<ACCUM-APPREC-OR-DEPREC> 24,808
<NET-ASSETS> 2,271,940
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 121,909
<OTHER-INCOME> 0
<EXPENSES-NET> 9,267
<NET-INVESTMENT-INCOME> 112,642
<REALIZED-GAINS-CURRENT> 114,220
<APPREC-INCREASE-CURRENT> 24,171
<NET-CHANGE-FROM-OPS> 251,033
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 149,154
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 335,250
<NUMBER-OF-SHARES-REDEEMED> 76,839
<SHARES-REINVESTED> 17,814
<NET-CHANGE-IN-ASSETS> 2,225,990
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 44
<OVERDIST-NET-GAINS-PRIOR> 84,950
<GROSS-ADVISORY-FEES> 4,938
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,267
<AVERAGE-NET-ASSETS> 1,849,240
<PER-SHARE-NAV-BEGIN> 7.44
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.49
<PER-SHARE-DIVIDEND> 0.52
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.04
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 091
<NAME> TOTAL RETURN FUND III
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 164,891
<INVESTMENTS-AT-VALUE> 163,563
<RECEIVABLES> 21,805
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 178
<TOTAL-ASSETS> 185,546
<PAYABLE-FOR-SECURITIES> 42,981
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 342
<TOTAL-LIABILITIES> 43,323
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 145,453
<SHARES-COMMON-STOCK> 15,583
<SHARES-COMMON-PRIOR> 11,063
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 380
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 217
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 142,223
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,760
<OTHER-INCOME> 0
<EXPENSES-NET> 602
<NET-INVESTMENT-INCOME> 8,158
<REALIZED-GAINS-CURRENT> 2,985
<APPREC-INCREASE-CURRENT> (924)
<NET-CHANGE-FROM-OPS> 10,219
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,160
<DISTRIBUTIONS-OF-GAINS> 1,687
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,560
<NUMBER-OF-SHARES-REDEEMED> 1,040
<SHARES-REINVESTED> 1,000
<NET-CHANGE-IN-ASSETS> 42,726
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 1,212
<OVERDIST-NET-GAINS-PRIOR> 650
<GROSS-ADVISORY-FEES> 326
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 603
<AVERAGE-NET-ASSETS> 119,559
<PER-SHARE-NAV-BEGIN> 8.99
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> 0.17
<PER-SHARE-DIVIDEND> 0.63
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.13
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 111
<NAME> FOREIGN FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 561,706
<INVESTMENTS-AT-VALUE> 562,016
<RECEIVABLES> 52,147
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 405
<TOTAL-ASSETS> 614,568
<PAYABLE-FOR-SECURITIES> 355,383
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 692
<TOTAL-LIABILITIES> 356,075
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 251,507
<SHARES-COMMON-STOCK> 24,612
<SHARES-COMMON-PRIOR> 24,805
<ACCUMULATED-NII-CURRENT> 3,281
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,810
<ACCUM-APPREC-OR-DEPREC> 6,515
<NET-ASSETS> 258,493
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,276
<OTHER-INCOME> 0
<EXPENSES-NET> 1,250
<NET-INVESTMENT-INCOME> 14,026
<REALIZED-GAINS-CURRENT> 26,188
<APPREC-INCREASE-CURRENT> 6,805
<NET-CHANGE-FROM-OPS> 47,019
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,027
<DISTRIBUTIONS-OF-GAINS> 6,513
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,828
<NUMBER-OF-SHARES-REDEEMED> 9,773
<SHARES-REINVESTED> 1,752
<NET-CHANGE-IN-ASSETS> 25,793
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 5,995
<OVERDIST-NET-GAINS-PRIOR> 20,359
<GROSS-ADVISORY-FEES> 640
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,252
<AVERAGE-NET-ASSETS> 240,689
<PER-SHARE-NAV-BEGIN> 9.38
<PER-SHARE-NII> 0.96
<PER-SHARE-GAIN-APPREC> 1.03
<PER-SHARE-DIVIDEND> 0.59
<PER-SHARE-DISTRIBUTIONS> 0.28
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> 0.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 121
<NAME> GLOBAL FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 221,192
<INVESTMENTS-AT-VALUE> 221,093
<RECEIVABLES> 20,347
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 469
<TOTAL-ASSETS> 241,909
<PAYABLE-FOR-SECURITIES> 107,810
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 266
<TOTAL-LIABILITIES> 108,076
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 133,022
<SHARES-COMMON-STOCK> 13,313
<SHARES-COMMON-PRIOR> 7,751
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 16
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 445
<ACCUM-APPREC-OR-DEPREC> 1,272
<NET-ASSETS> 133,833
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,368
<OTHER-INCOME> 0
<EXPENSES-NET> 592
<NET-INVESTMENT-INCOME> 5,776
<REALIZED-GAINS-CURRENT> 4,700
<APPREC-INCREASE-CURRENT> (205)
<NET-CHANGE-FROM-OPS> 10,271
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,778
<DISTRIBUTIONS-OF-GAINS> 3,794
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,460
<NUMBER-OF-SHARES-REDEEMED> 1,408
<SHARES-REINVESTED> 590
<NET-CHANGE-IN-ASSETS> 57,357
<ACCUMULATED-NII-PRIOR> 1,199
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,563
<GROSS-ADVISORY-FEES> 265
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 592
<AVERAGE-NET-ASSETS> 98,612
<PER-SHARE-NAV-BEGIN> 9.87
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.72
<PER-SHARE-DIVIDEND> 0.61
<PER-SHARE-DISTRIBUTIONS> 0.38
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.05
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 141
<NAME> LOW DURATION II FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 351,999
<INVESTMENTS-AT-VALUE> 350,232
<RECEIVABLES> 33,081
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 383,315
<PAYABLE-FOR-SECURITIES> 129,842
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 174
<TOTAL-LIABILITIES> 130,016
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 257,534
<SHARES-COMMON-STOCK> 25,805
<SHARES-COMMON-PRIOR> 17,497
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,362
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 899
<ACCUM-APPREC-OR-DEPREC> (1,974)
<NET-ASSETS> 253,299
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,155
<OTHER-INCOME> 0
<EXPENSES-NET> 1,032
<NET-INVESTMENT-INCOME> 14,123
<REALIZED-GAINS-CURRENT> 992
<APPREC-INCREASE-CURRENT> (783)
<NET-CHANGE-FROM-OPS> 14,332
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,645
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 479
<NUMBER-OF-SHARES-SOLD> 16,786
<NUMBER-OF-SHARES-REDEEMED> 9,818
<SHARES-REINVESTED> 1,339
<NET-CHANGE-IN-ASSETS> 82,433
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 1,081
<OVERDIST-NET-GAINS-PRIOR> 2,651
<GROSS-ADVISORY-FEES> 576
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,034
<AVERAGE-NET-ASSETS> 213,577
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> 0.63
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.02
<PER-SHARE-NAV-END> 9.82
<EXPENSE-RATIO> 0.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 151
<NAME> MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 25,295
<INVESTMENTS-AT-VALUE> 25,295
<RECEIVABLES> 655
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 25,951
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 6
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,945
<SHARES-COMMON-STOCK> 25,935
<SHARES-COMMON-PRIOR> 7,741
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 25,945
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 415
<OTHER-INCOME> 0
<EXPENSES-NET> 24
<NET-INVESTMENT-INCOME> 391
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 391
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 365
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,183
<NUMBER-OF-SHARES-REDEEMED> 5,376
<SHARES-REINVESTED> 387
<NET-CHANGE-IN-ASSETS> 18,194
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24
<AVERAGE-NET-ASSETS> 17,249
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 152
<NAME> MONEY MARKET FUND - ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 25,295
<INVESTMENTS-AT-VALUE> 25,295
<RECEIVABLES> 655
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 25,951
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 6
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,945
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 25,945
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 415
<OTHER-INCOME> 0
<EXPENSES-NET> 24
<NET-INVESTMENT-INCOME> 391
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 391
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4
<NUMBER-OF-SHARES-REDEEMED> 4
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18,194
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24
<AVERAGE-NET-ASSETS> 10
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 161
<NAME> TOTAL RETURN FUND II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 586,100
<INVESTMENTS-AT-VALUE> 586,412
<RECEIVABLES> 32,641
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 619,054
<PAYABLE-FOR-SECURITIES> 158,959
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,192
<TOTAL-LIABILITIES> 160,151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 462,937
<SHARES-COMMON-STOCK> 46,054
<SHARES-COMMON-PRIOR> 43,309
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 329
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,980
<ACCUM-APPREC-OR-DEPREC> (1,725)
<NET-ASSETS> 458,903
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,210
<OTHER-INCOME> 0
<EXPENSES-NET> 979
<NET-INVESTMENT-INCOME> 12,231
<REALIZED-GAINS-CURRENT> 2,375
<APPREC-INCREASE-CURRENT> (11,327)
<NET-CHANGE-FROM-OPS> 3,279
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,156
<DISTRIBUTIONS-OF-GAINS> 6,293
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,595
<NUMBER-OF-SHARES-REDEEMED> 2,564
<SHARES-REINVESTED> 1,714
<NET-CHANGE-IN-ASSETS> 13,649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,664
<OVERDISTRIB-NII-PRIOR> 5
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 487
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 979
<AVERAGE-NET-ASSETS> 458,390
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> (0.17)
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.14
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.89
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 162
<NAME> TOTAL RETURN FUND II- ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 586,100
<INVESTMENTS-AT-VALUE> 586,412
<RECEIVABLES> 32,641
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 619,054
<PAYABLE-FOR-SECURITIES> 158,959
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,192
<TOTAL-LIABILITIES> 160,151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 462,937
<SHARES-COMMON-STOCK> 336
<SHARES-COMMON-PRIOR> 309
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 329
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,980
<ACCUM-APPREC-OR-DEPREC> (1,725)
<NET-ASSETS> 458,903
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,210
<OTHER-INCOME> 0
<EXPENSES-NET> 979
<NET-INVESTMENT-INCOME> 12,231
<REALIZED-GAINS-CURRENT> 2,375
<APPREC-INCREASE-CURRENT> (11,327)
<NET-CHANGE-FROM-OPS> 3,279
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 82
<DISTRIBUTIONS-OF-GAINS> 43
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22
<NUMBER-OF-SHARES-REDEEMED> 8
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 13,649
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,664
<OVERDISTRIB-NII-PRIOR> 5
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 487
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 979
<AVERAGE-NET-ASSETS> 3,252
<PER-SHARE-NAV-BEGIN> 10.22
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> (0.17)
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.14
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.89
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 171
<NAME> HIGH YIELD FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 514,138
<INVESTMENTS-AT-VALUE> 522,453
<RECEIVABLES> 19,643
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 542,099
<PAYABLE-FOR-SECURITIES> 3,402
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 707
<TOTAL-LIABILITIES> 4,109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 525,389
<SHARES-COMMON-STOCK> 49,062
<SHARES-COMMON-PRIOR> 32,289
<ACCUMULATED-NII-CURRENT> 3,604
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 682
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,315
<NET-ASSETS> 537,990
<DIVIDEND-INCOME> 643
<INTEREST-INCOME> 44,302
<OTHER-INCOME> 0
<EXPENSES-NET> 2,172
<NET-INVESTMENT-INCOME> 42,773
<REALIZED-GAINS-CURRENT> 9,316
<APPREC-INCREASE-CURRENT> 11,913
<NET-CHANGE-FROM-OPS> 64,002
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 42,753
<DISTRIBUTIONS-OF-GAINS> 2,427
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,025
<NUMBER-OF-SHARES-REDEEMED> 14,184
<SHARES-REINVESTED> 3,932
<NET-CHANGE-IN-ASSETS> 201,639
<ACCUMULATED-NII-PRIOR> 1,534
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 4,132
<GROSS-ADVISORY-FEES> 1,187
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,182
<AVERAGE-NET-ASSETS> 460,735
<PER-SHARE-NAV-BEGIN> 10.42
<PER-SHARE-NII> 1.04
<PER-SHARE-GAIN-APPREC> 0.54
<PER-SHARE-DIVIDEND> 1.01
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> 0.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 172
<NAME> HIGH YIELD FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 514,138
<INVESTMENTS-AT-VALUE> 522,453
<RECEIVABLES> 19,643
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 542,099
<PAYABLE-FOR-SECURITIES> 3,402
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 707
<TOTAL-LIABILITIES> 4,109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 525,389
<SHARES-COMMON-STOCK> 92
<SHARES-COMMON-PRIOR> 4
<ACCUMULATED-NII-CURRENT> 3,604
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 682
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,315
<NET-ASSETS> 537,990
<DIVIDEND-INCOME> 643
<INTEREST-INCOME> 44,302
<OTHER-INCOME> 0
<EXPENSES-NET> 2,172
<NET-INVESTMENT-INCOME> 42,773
<REALIZED-GAINS-CURRENT> 9,316
<APPREC-INCREASE-CURRENT> 11,913
<NET-CHANGE-FROM-OPS> 64,002
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 90
<NUMBER-OF-SHARES-REDEEMED> 4
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 201,639
<ACCUMULATED-NII-PRIOR> 1,534
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 4,132
<GROSS-ADVISORY-FEES> 1,187
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,182
<AVERAGE-NET-ASSETS> 267
<PER-SHARE-NAV-BEGIN> 10.41
<PER-SHARE-NII> 1.02
<PER-SHARE-GAIN-APPREC> 0.54
<PER-SHARE-DIVIDEND> 0.98
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.94
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000810893
<NAME> PIMCO FUNDS
<SERIES>
<NUMBER> 191
<NAME> VERSASTYLE EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 5,938
<INVESTMENTS-AT-VALUE> 6,737
<RECEIVABLES> 102
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,840
<PAYABLE-FOR-SECURITIES> 86
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 91
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,634
<SHARES-COMMON-STOCK> 555
<SHARES-COMMON-PRIOR> 506
<ACCUMULATED-NII-CURRENT> 238
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 79
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 798
<NET-ASSETS> 6,749
<DIVIDEND-INCOME> 137
<INTEREST-INCOME> 11
<OTHER-INCOME> 0
<EXPENSES-NET> 39
<NET-INVESTMENT-INCOME> 109
<REALIZED-GAINS-CURRENT> 925
<APPREC-INCREASE-CURRENT> 544
<NET-CHANGE-FROM-OPS> 1,578
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 109
<DISTRIBUTIONS-OF-GAINS> 465
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 44
<NET-CHANGE-IN-ASSETS> 1,578
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 143
<GROSS-ADVISORY-FEES> 25
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39
<AVERAGE-NET-ASSETS> 6,040
<PER-SHARE-NAV-BEGIN> 10.22
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 2.44
<PER-SHARE-DIVIDEND> 0.21
<PER-SHARE-DISTRIBUTIONS> 0.91
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.17
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
