FUND PROFILE
PIMCO TOTAL RETURN FUND
ADMINISTRATIVE CLASS SHARES
OCTOBER __, 1999
This profile summarizes key information about the Fund that is included in
the Fund's Prospectus. The Fund's Prospectus includes additional
information about the Fund, including a more detailed description of the
risks associated with investing in the Fund that you may want to consider
before you invest. You may obtain the Prospectus and other information
about the Fund at no cost by calling us at 1-800-927-4648 or by visiting
our Web site at www.pimco.com.
P I M C O
F U N D S
<PAGE>
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks maximum total return, consistent with preservation of
capital and prudent investment management.
WHAT IS THE FUND'S PRINCIPAL INVESTMENT STRATEGY?
The Fund seeks to achieve its investment objective by investing under
normal circumstances at least 65% of its assets in a diversified portfolio
of fixed income instruments of varying maturities. The average portfolio
duration of this Fund normally varies within a three- to six-year time
frame based on PIMCO's forecast for interest rates. Duration is a measure
of the expected life of a fixed income security that is used to determine
the sensitivity of the security's price to changes in interest rates.
The Fund invests primarily in investment grade debt securities, but may
invest up to 10% of its assets in high yield securities ("junk bonds")
rated B or higher by Moody's or S&P or, if unrated, determined by PIMCO to
be of comparable quality. 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 Fund
will normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in currency exchange rates.
The Fund may invest all of its assets in derivative instruments, such as
options, futures contracts or swap agreements, or in mortgage- or
asset-backed securities. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions to earn income. Rather
than investing directly in the securities in which it primarily invests,
the Fund may use other investment techniques to gain exposure to market
movements related to such securities, such as entering into a series of
contracts to buy or sell such securities. The "total return" sought by the
Fund consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in interest
rates or improving credit fundamentals for a particular sector or security.
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its
past fiscal year. You may obtain these reports at no cost by calling us.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
You could lose money on an investment in the Fund. The principal risks of
investing in the Fund are:
o Interest Rate Risk: As interest rates rise, the value of fixed income
securities in the Fund's portfolio is likely to decrease. Securities
with longer durations tend to be more sensitive to changes in interest
rates.
o Credit Risk: The Fund could lose money if the issuer or guarantor of a
fixed income security, or the counterparty to a derivative contract,
is unable or unwilling to meet its financial obligations.
o Market Risk: The value of securities owned by the Fund may go up or
down, sometimes rapidly or unpredictably. Securities may decline in
value due to factors affecting securities markets generally or
particular industries.
o Issuer Risk: The value of a security may decline for a number of
reasons which directly relate to the issuer, such as management
performance, financial leverage and reduced demand for the issuer's
goods or services.
o Derivatives Risk: When the Fund invests in a derivative instrument, it
could lose more than the principal amount invested. Derivatives are
subject to a number of risks, such as liquidity, interest rate,
market, credit and management risk. They also involve the risk of
improper valuation. Changes in the value of a derivative may not
correlate perfectly with the underlying asset, rate or index.
o Liquidity Risk: Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing the Fund from
selling the illiquid securities at an advantageous time or price.
o Mortgage Risk: Rising interest rates tend to extend the duration of
mortgage-related securities, making them more sensitive to changes in
interest rates. When interest rates decline, borrowers may pay off
their mortgages sooner than expected. This can reduce the returns of a
Fund because the Fund will have to reinvest that money at the lower
prevailing interest rates.
o Foreign Investment Risk: When the Fund invests in foreign securities,
it may experience more rapid and extreme changes in value than if it
invested exclusively in U.S. securities. The securities markets of
many foreign countries are relatively small. Reporting, accounting and
auditing standards of foreign countries differ from U.S. standards.
Also, nationalization, expropriation, taxation, political changes or
diplomatic developments could adversely affect the Fund's investments
in a foreign country.
o Currency Risk: When the Fund invests in securities denominated in
foreign currencies, it is subject to the risk that those currencies
will decline in value relative to the U.S. Dollar, or, in the case of
hedging positions, that the U.S. Dollar will decline in value relative
to the currency being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for reasons such as
changes in interest rates, government intervention or political
developments.
o Leveraging Risk: The Fund may engage in transactions that give rise to
a form of leverage. Leverage may cause the Fund to sell holdings when
it may not be advantageous to do so. Leverage, including borrowing,
will cause the Fund to be more volatile than if the Fund had not been
leveraged.
o Management Risk: There is no guarantee that the investment techniques
and risk analyses applied by PIMCO will produce the desired results.
HOW HAS THE FUND PERFORMED?
The bar chart and table below provide some indication of the risks of
investing in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare with the
returns of a broad-based securities market index and an index of similar
funds. The bar chart and table show performance of the Fund's
Administrative Class shares net of fees. For periods prior to the inception
date of the Administrative Class (9/8/94), performance information is based
on the performance of the Fund's Institutional Class shares. The prior
Institutional Class performance has been adjusted to reflect the actual
12b-1/service fees and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
CALENDAR YEAR TOTAL RETURNS
1989: 13.96%
1990: 7.77%
1991: 19.29%
1992: 9.49%
1993: 12.27%
1994: -3.81%
1995: 19.38%
1996: 4.53%
1997: 9.89%
1998: 9.50%
During the period shown in the bar chart, the highest quarterly return was
8.19% (2nd Quarter 1989) and the lowest quarterly return was -3.03% (3rd
Quarter 1987). As of September 30, 1999, the Fund's year-to-date return was
____%.
Average Annual Total Returns
for the periods ended September 30, 1999
1 year 5 years 10 Years
Total Return Fund,
Administrative Class ___% ___% ___%
Aggregate Bond Index(1) ___% ___% ___%
Lipper Intermediate Investment
Grade Debt Fund Avg.(2) ___% ___% ___%
(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index of investment
grade, U.S. dollar-denominated fixed income securities of domestic issuers
having a maturity greater than one year. It is not possible to invest directly
in the index.
(2) The Lipper Intermediate Investment Grade Debt Fund Average is a total return
performance average of Funds tracked by Lipper Analytical Services, Inc. that
invest at least 65% of their assets in investment-grade debt issues with
dollar-weighted average maturities of five to ten years. It does not take into
account sales charges.
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you may pay if you buy and hold
Administrative Class shares of the Fund:
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets, shown as a percentage of average daily net assets)
Advisory Fee 0.25%
Distribution (12b-1) and/or Service Fees 0.25%
Other Expenses1 0.18%
Total Annual Operating Expenses 0.68%
1 Other Expenses reflects a 0.18% Administrative Fee paid by the class.
Examples: The Examples are intended to help you compare the cost of
investing in the Fund with the costs of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Fund for the time
periods indicated, and then redeem all your shares at the end of those
periods. The Example also assumes a 5% return each year, the reinvestment
of all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, the
Examples show what your costs would be based on these assumptions.
1 year 3 years 5 years 10 years
Total Return Fund,
Administrative Class $69 $218 $379 $847
WHO IS THE FUND'S INVESTMENT ADVISER?
Pacific Investment Management Company ("PIMCO"), a subsidiary of PIMCO
Advisors L.P., serves as investment adviser to the Fund. PIMCO is an
investment management company founded in 1971, and had over $172 billion in
assets under management as of June 30, 1999. PIMCO manages the investment
and reinvestment of the assets of the Fund and is responsible for placing
orders for the purchase and sale of the Fund's investments. The Fund's
portfolio is managed by William H. Gross. A Fixed Income Portfolio Manager,
Mr. Gross is a Managing Director, Chief Investment Officer and one of the
founders of PIMCO. He has managed the Total Return Fund since its inception
on May 11, 1987.
HOW DO I BUY FUND SHARES?
The minimum initial investment to open an account directly with the Fund is
$5 million. You may purchase Fund shares in one of the following ways:
o Opening an account by completing and signing a Client Registration
Application, mailing it to us at the address shown on the back cover,
and wiring funds. Wiring instructions can be obtained by calling us at
1-800-927-4648.
o Exchanging Administrative Class shares in any amount from another
PIMCO Funds account. n Additional purchases in any amount can be made
by calling us at 1-800-927-4648 and wiring funds.
HOW DO I SELL (REDEEM) FUND SHARES?
You may sell (redeem) all or part of your Fund shares on any business day.
You may sell by:
o Sending a written request by mail to PIMCO Funds.
o Telephone us at 1-800-927-4648 and a Shareholder Services associate
will assist you.
o By sending a fax to our Shareholder Services department at
1-949-725-6830.
HOW ARE FUND DISTRIBUTIONS MADE AND TAXED?
The Fund pays dividends to shareholders monthly and pays realized capital
gains, if any, annually. Dividend and capital gain distributions will be
reinvested in additional shares of the Fund unless you elect to have them
paid in cash. Distributions may be taxable as ordinary income, capital
gains, or a combination of the two. The rate you pay on capital gains
distributions may vary depending on how long the Fund held the securities
that generated the gains. The Fund will advise shareholders annually of the
amount and nature of the dividends paid to them.
Shareholders should also bear in mind that the sale or exchange of shares
may give rise to a taxable event.
WHAT OTHER SERVICES ARE AVAILABLE FROM THE FUND?
The Fund and PIMCO's Shareholder Services offer several programs to
investors:
o The ability to exchange shares of the Fund for the same class of
shares of any other PIMCO Fund (except PIMCO International Bond and
Emerging Markets Bond II Funds).
o Account and Fund information is available 24 hours every day through
Infolink, PIMCO Funds' audio response system, by calling
1-800-987-4626.
o Information about PIMCO Funds can be obtained on PIMCO's Institutional
Web site at www.pimco.com.
P I M C O
F U N D S
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Phone: 1-800-927-4648
Fax: 1-949-725-6830
PIMCO Infolink Audio Response Network:
1-800-987-4626
Web Site: www.pimco.com
<PAGE>
FUND PROFILE
PIMCO REAL RETURN BOND FUND
INSTITUTIONAL CLASS SHARES
OCTOBER __, 1999
This profile summarizes key information about the Fund that is included in
the Fund's Prospectus. The Fund's Prospectus includes additional
information about the Fund, including a more detailed description of the
risks associated with investing in the Fund that you may want to consider
before you invest. You may obtain the Prospectus and other information
about the Fund at no cost by calling us at 1-800-927-4648 or by visiting
our Web site at www.pimco.com.
P I M C O
F U N D S
<PAGE>
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks maximum real return, consistent with preservation of real
capital and prudent investment management.
WHAT IS THE FUND'S PRINCIPAL INVESTMENT STRATEGY?
The Fund seeks its investment objective by investing under normal
circumstances at least 65% of its assets in inflation-indexed bonds of
varying maturities issued by the U.S. and non-U.S. governments, their
agencies or instrumentalities, and corporations. Inflation-indexed bonds
are fixed income securities that are structured to provide protection
against inflation. The value of the bond's principal or the interest rate
paid on the bond is adjusted to track changes in an official inflation
measure. The U.S. Treasury uses the Consumer Price Index for Urban
Consumers as the inflation measure. Inflation-indexed bonds issued by a
foreign government are generally adjusted to reflect a comparable inflation
index, calculated by that government. "Real return" is a measure of the
change in purchasing power of money invested in a particular instrument
after adjusting for inflation.
Duration is a measure of the expected life of a fixed income security that
is used to determine the sensitivity of the security's price to changes in
interest rates. Because of the unique features of inflation-indexed bonds,
PIMCO uses a modified form of duration for the Fund ("real duration") which
measures price changes as a result of changes in "real" interest rates. A
"real" interest rate is the market interest rate minus expected inflation.
There is no limit on the real duration of the Fund, but it is expected that
the average real duration of the Fund will normally vary approximately
within the range of the average real duration of all inflation-indexed
bonds issued by the U.S. Treasury in the aggregate, which as of July 20,
1999 was 9.2 years. For point of reference, it is expected that the average
portfolio duration (as opposed to real duration) of the Fund will generally
vary within a one- to five-year time frame, although this range is subject
to change. The Fund may invest in fixed income securities of any maturity.
The Fund invests primarily in investment grade securities, but may invest
up to 10% of its assets in high yield securities ("junk bonds") rated B or
higher by Moody's or S&P, or, if unrated, determined by PIMCO to be of
comparable quality. The Fund may invest up to 35% of its assets in
non-inflation indexed fixed income instruments. The Fund also may invest up
to 35% 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 Fund will normally hedge at least 75% of its exposure
to foreign currency to reduce the risk of loss due to fluctuations in
currency exchange rates. The Fund is non-diversified, which means that it
may concentrate its assets in a smaller number of issuers than a
diversified Fund.
The Fund may invest all of its assets in derivative instruments, such as
options, futures contracts or swap agreements, or in mortgage- or
asset-backed securities. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions to earn income. Rather
than investing directly in the securities in which it primarily invests,
the Fund may use other investment techniques to gain exposure to market
movements related to such securities, such as entering into a series of
contracts to buy or sell such securities.
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its
past fiscal year. You may obtain these reports at no cost by calling us.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
You could lose money on an investment in the Fund. The principal risks of
investing in the Fund are:
Interest Rate Risk: As interest rates rise, the value of fixed income
securities in the Fund's portfolio is likely to decrease. Securities with
longer durations tend to be more sensitive to changes in interest rates.
Credit Risk: The Fund could lose money if the issuer or guarantor of a
fixed income security, or the counterparty to a derivative contract, is
unable or unwilling to meet its financial obligations.
Market Risk: The value of securities owned by the Fund may go up or down,
sometimes rapidly or unpredictably. Securities may decline in value due to
factors affecting securities markets generally or particular industries.
<PAGE>
Issuer Risk: The value of a security may decline for a number of reasons
which directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer's goods or services.
Derivatives Risk: When the Fund invests in a derivative instrument, it
could lose more than the principal amount invested. Derivatives are subject
to a number of risks, such as liquidity, interest rate, market, credit and
management risk. They also involve the risk of improper valuation. Changes
in the value of a derivative may not correlate perfectly with the
underlying asset, rate or index.
Liquidity Risk: Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing the Fund from selling
the illiquid securities at an advantageous time or price.
Concentration Risk: Concentration of investments in a small number of
issuers, industries or foreign currencies increases risk. Because the Fund
is non-diversified, it may be more susceptible to risks associated with a
single economic, political or regulatory occurrence than a more diversified
portfolio might be.
Foreign Investment Risk: When the Fund invests in foreign securities, it
may experience more rapid and extreme changes in value than if it invested
exclusively in U.S. securities. The securities markets of many foreign
countries are relatively small. Reporting, accounting and auditing
standards of foreign countries differ from U.S. standards. Also,
nationalization, expropriation, taxation, political changes or diplomatic
developments could adversely affect the Fund's investments in a foreign
country.
Currency Risk: When the Fund invests in securities denominated in foreign
currencies, it is subject to the risk that those currencies will decline in
value relative to the U.S. Dollar, or, in the case of hedging positions,
that the U.S. Dollar will decline in value relative to the currency being
hedged. Currency rates in foreign countries may fluctuate significantly
over short periods of time for reasons such as changes in interest rates,
government intervention or political developments.
Leveraging Risk: The Fund may engage in transactions that give rise to a
form of leverage. Leverage may cause the Fund to sell holdings when it may
not be advantageous to do so. Leverage, including borrowing, will cause the
Fund to be more volatile than if the Fund had not been leveraged.
Management Risk: There is no guarantee that the investment techniques and
risk analyses applied by PIMCO will produce the desired results.
HOW HAS THE FUND PERFORMED?
The bar chart and table below provide some indication of the risks of
investing in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare with the
returns of a broad-based securities market index and an index of similar
funds. The bar chart and table show performance of the Fund's Institutional
Class shares net of fees. Past performance is no guarantee of future
results.
CALENDAR YEAR TOTAL RETURNS
1998: 5.21%
During the period shown in the bar chart, the highest quarterly return was
3.19% (3rd Quarter 1998) and the lowest quarterly return was -0.05% (4th
Quarter 1998). As of September 30, 1999, the Fund's year-to-date return was
____%.
Average Annual Total Returns
for periods ended September 30, 1999
Since
1 year Inception(3)
Real Return Bond Fund,
Institutional Class ___% ___%
Brothers Inflation
Linked Treasury Index(1) ___% ___%
Lipper Short U.S.
Government Fund Avg.(2) ___% ___%
(1) The Lehman Brothers Inflation Linked Treasury Index is an unmanaged index
consisting of the U.S. Treasury Inflation Protected Securities market. It is not
possible to invest directly in the index.
(2) The Lipper Short U.S. Government Fund Average is a total return performance
average of Funds tracked by Lipper Analytical Services, Inc. that invest at
least 65% of their assets in securities issued or guaranteed by the U.S.
government, its agencies, or its instrumentalities, with dollar-weighted average
maturities of less than three years. It does not take into account sales
charges.
(3) The Fund began operations on 1/29/97. Index comparisons began on 1/31/97.
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you may pay if you buy and hold
Institutional Class shares of the Fund:
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets, shown as a percentage of average daily net assets)
Advisory Fee 0.25%
Distribution (12b-1) and/or Service Fees None
Other Expenses1 0.27%
Total Annual Operating Expenses 0.52%
1 Other Expenses reflects a 0.25% Administrative Fee paid by the class.
Examples: The Examples are intended to help you compare the cost of
investing in the Fund with the costs of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Fund for the time
periods indicated, and then redeem all your shares at the end of those
periods. The Example also assumes a 5% return each year, the reinvestment
of all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, the
Examples show what your costs would be based on these assumptions.
1 year 3 years 5 years 10 years
Real Return Bond Fund,
Institutional Class $53 $167 $291 $653
WHO IS THE FUND'S INVESTMENT ADVISER?
Pacific Investment Management Company ("PIMCO"), a subsidiary of PIMCO
Advisors L.P., serves as investment adviser to the Fund. PIMCO is an
investment management company founded in 1971, and had over $172 billion in
assets under management as of June 30, 1999. PIMCO manages the investment
and reinvestment of the assets of the Fund and is responsible for placing
orders for the purchase and sale of the Fund's investments.
The Fund's portfolio is managed by John Brynjolfsson. Mr. Brynjolfsson is a
Senior Vice President of PIMCO. He joined PIMCO as a Portfolio Manager in
1989, and has managed fixed income accounts for various institutional
clients and funds since that time. He has managed the Real Return Bond Fund
since its inception in January 1997.
HOW DO I BUY FUND SHARES?
The minimum initial investment to open an account directly with the Fund is
$5 million. The minimum initial investment for a registered investment
adviser purchasing Institutional Class shares for its clients through
omnibus accounts is $250,000. You may purchase Fund shares in one of the
following ways:
o Opening an account by completing and signing a Client Registration
Application, mailing it to us at the address shown on the back cover,
and wiring funds. Wiring instructions can be obtained by calling us at
1-800-927-4648.
o Exchanging Institutional Class shares in any amount from another PIMCO
Funds account. n Additional purchases in any amount can be made by
calling us at 1-800-927-4648 and wiring funds.
HOW DO I SELL (REDEEM) FUND SHARES?
You may sell (redeem) all or part of your Fund shares on any business day.
You may sell by:
o Sending a written request by mail to PIMCO Funds.
o Telephone us at 1-800-927-4648 and a Shareholder Services associate
will assist you.
o By sending a fax to our Shareholder Services department at
1-949-725-6830.
HOW ARE FUND DISTRIBUTIONS MADE AND TAXED?
The Fund pays dividends to shareholders monthly and pays realized capital
gains, if any, annually. Dividend and capital gain distributions will be
reinvested in additional shares of the Fund unless you elect to have them
paid in cash. Distributions may be taxable as ordinary income, capital
gains, or a combination of the two. The rate you pay on capital gains
distributions may vary depending on how long the Fund held the securities
that generated the gains. The Fund will advise shareholders annually of the
amount and nature of the dividends paid to them.
Investors should carefully consider the possible tax consequences from
investing in the Fund. Periodic adjustments for inflation to the principal
value of inflation-indexed bonds held by the Fund may give rise to original
issue discount, which would be included in the Fund's gross income.
Accordingly, the Fund may be required to make annual distributions to
shareholders in excess of the cash received by the Fund. Also, if the
principal value of an inflation-indexed bond is adjusted downward, amounts
previously distributed in the taxable year may be characterized in some
circumstances as a return of capital.
Shareholders should also bear in mind that the sale or exchange of shares
may give rise to a taxable event.
WHAT OTHER SERVICES ARE AVAILABLE FROM THE FUND?
The Fund and PIMCO's Shareholder Services offer several programs to
investors:
o The ability to exchange shares of the Fund for the same class of
shares of any other PIMCO Fund (except PIMCO International Bond and
Emerging Markets Bond II Funds).
o Account and Fund information is available 24 hours every day through
Infolink, PIMCO Funds' audio response system, by calling
1-800-987-4626.
o Information about PIMCO Funds can be obtained on PIMCO's Institutional
Web site at www.pimco.com.
P I M C O
F U N D S
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Phone: 1-800-927-4648
Fax: 1-949-725-6830
PIMCO Infolink Audio Response Network:
1-800-987-4626
Web Site: www.pimco.com
<PAGE>
FUND PROFILE
PIMCO MUNICIPAL BOND FUND
INSTITUTIONAL CLASS SHARES
OCTOBER __, 1999
This profile summarizes key information about the Fund that is included in
the Fund's Prospectus. The Fund's Prospectus includes additional
information about the Fund, including a more detailed description of the
risks associated with investing in the Fund that you may want to consider
before you invest. You may obtain the Prospectus and other information
about the Fund at no cost by calling us at 1-800-927-4648 or by visiting
our Web site at www.pimco.com.
P I M C O
F U N D S
<PAGE>
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks high current income exempt from federal income tax,
consistent with preservation of capital. Capital appreciation is a
secondary objective.
WHAT IS THE FUND'S PRINCIPAL INVESTMENT STRATEGY?
The Fund seeks to achieve its investment objective by investing under
normal circumstances at least 80% of its net assets in debt securities
whose interest is, in the opinion of bond counsel for the issuer at the
time of issuance, exempt from federal income tax ("Municipal Bonds").
Municipal Bonds generally are issued by states and local governments and
their agencies, authorities and other instrumentalities. The average
portfolio duration of the Fund normally varies within a three- to ten-year
time frame, based on PIMCO's forecast for interest rates. Duration is a
measure of the expected life of a fixed income security that is used to
determine the sensitivity of the security's price to changes in interest
rates.
The Fund may invest up to 20% of its net assets in U.S. Government
securities, money market instruments and/or "private activity" bonds. For
shareholders subject to the federal alternative minimum tax ("AMT"),
distributions derived from "private activity" bonds must be included in
their AMT calculations. The Fund invests primarily in investment grade debt
securities, but may invest up to 10% of its net assets in Municipal Bonds
or "private activity" bonds which are high yield securities ("junk bonds")
rated at least Ba by Moody's or BB by S&P, or, if unrated, determined by
PIMCO to be of comparable quality. The Fund may invest more than 25% of its
assets in bonds of issuers in the same state.
The Fund may purchase and write call and put options, futures and options
on futures on U.S. Government securities and municipal bonds, and invest in
mortgage- or asset-backed securities. The Fund may lend its portfolio
securities to brokers, dealers and other financial institutions to earn
income. Rather than investing directly in the securities in which it
primarily invests, the Fund may use other investment techniques to gain
exposure to market movements related to such securities, such as entering
into a series of contracts to buy or sell such securities. Capital
appreciation, if any, generally arises from decreases in interest rates or
improving credit fundamentals for a particular state, municipality or
issuer.
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its
past fiscal year. You may obtain these reports at no cost by calling us.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
You could lose money on an investment in the Fund. The principal risks of
investing in the Fund are:
Interest Rate Risk: As interest rates rise, the value of fixed income
securities in the Fund's portfolio is likely to decrease. Securities with
longer durations tend to be more sensitive to changes in interest rates.
Credit Risk: The Fund could lose money if the issuer or guarantor of a
fixed income security, or the counterparty to a derivative contract, is
unable or unwilling to meet its financial obligations.
Market Risk: The value of securities owned by the Fund may go up or down,
sometimes rapidly or unpredictably. Securities may decline in value due to
factors affecting securities markets generally or particular industries.
Issuer Risk: The value of a security may decline for a number of reasons
which directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer's goods or services.
Derivatives Risk: When the Fund invests in a derivative instrument, it
could lose more than the principal amount invested. Derivatives are subject
to a number of risks, such as liquidity, interest rate, market, credit and
management risk. They also involve the risk of improper valuation. Changes
in the value of a derivative may not correlate perfectly with the
underlying asset, rate or index.
Liquidity Risk: Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing the Fund from selling
the illiquid securities at an advantageous time or price.
<PAGE>
Leveraging Risk: The Fund may engage in transactions that give rise to a
form of leverage. Leverage may cause the Fund to sell holdings when it may
not be advantageous to do so. Leverage, including borrowing, will cause the
Fund to be more volatile than if the Fund had not been leveraged.
Management Risk: There is no guarantee that the investment techniques and
risk analyses applied by PIMCO will produce the desired results.
HOW HAS THE FUND PERFORMED?
The bar chart and table below provide some indication of the risks of
investing in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare with the
returns of a broad-based securities market index and an index of similar
funds. The bar chart and table show performance of the Fund's Institutional
Class shares net of fees. Past performance is no guarantee of future
results.
CALENDAR YEAR TOTAL RETURNS
1998: 6.07%
During the period shown in the bar chart, the highest quarterly return was
3.33% (3rd Quarter 1998) and the lowest quarterly return was 0.18% (4th
Quarter 1998). As of September 30, 1999, the Fund's year-to-date return was
____%.
Average Annual Total Returns
for periods ended September 30, 1999
Since
1 year Inception(3)
Municipal Bond Fund, Institutional Class ___% ___%
General Municipal Bond Index(1) ___% ___%
Lipper General Municipal Fund Avg.(2) ___% ___%
(1) The Lehman General Municipal Bond Index is an unmanaged index of municipal
bonds. It is not possible to invest directly in the index.
(2) The Lipper General Municipal Debt Fund Average is a total return performance
average of Funds tracked by Lipper Analytical Services, Inc. that invest at
least 65% of their assets in municipal debt issues in the top four credit
ratings. It does not take into account sales charges.
(3) December 31, 1997.
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you may pay if you buy and hold
Institutional Class shares of the Fund:
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets, shown as a percentage of average daily net assets)
Advisory Fee 0.25%
Distribution (12b-1) and/or Service Fees None
Other Expenses1 0.25%
Total Annual Operating Expenses 0.50%
1 Other Expenses reflects a 0.25% Administrative Fee paid by the class.
Examples: The Examples are intended to help you compare the cost of
investing in the Fund with the costs of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Fund for the time
periods indicated, and then redeem all your shares at the end of those
periods. The Example also assumes a 5% return each year, the reinvestment
of all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, the
Examples show what your costs would be based on these assumptions.
1 year 3 years 5 years 10 years
Municipal Bond Fund,
Institutional Class $51 $160 $280 $628
WHO IS THE FUND'S INVESTMENT ADVISER?
Pacific Investment Management Company ("PIMCO"), a subsidiary of PIMCO
Advisors L.P., serves as investment adviser to the Fund. PIMCO is an
investment management company founded in 1971, and had over $172 billion in
assets under management as of June 30, 1999. PIMCO manages the investment
and reinvestment of the assets of the Fund and is responsible for placing
orders for the purchase and sale of the Fund's investments.
The Fund's portfolio is managed by Benjamin Ehlert. Mr. Ehlert is an
Executive Vice President of PIMCO. He has been a Portfolio Manager for
PIMCO since 1986,and has managed fixed income accounts for various
institutional clients and funds since that time. He has managed the
Municipal Bond Fund since its inception in December 1997.
HOW DO I BUY FUND SHARES?
The minimum initial investment to open an account directly with the Fund is
$5 million. The minimum initial investment for a registered investment
adviser purchasing Institutional Class shares for its clients through
omnibus accounts is $250,000. You may purchase Fund shares in one of the
following ways:
o Opening an account by completing and signing a Client Registration
Application, mailing it to us at the address shown on the back cover,
and wiring funds. Wiring instructions can be obtained by calling us at
1-800-927-4648.
o Exchanging Institutional Class shares in any amount from another PIMCO
Funds account. n Additional purchases in any amount can be made by
calling us at 1-800-927-4648 and wiring funds.
HOW DO I SELL (REDEEM) FUND SHARES?
You may sell (redeem) all or part of your Fund shares on any business day.
You may sell by:
o Sending a written request by mail to PIMCO Funds.
o Telephone us at 1-800-927-4648 and a Shareholder Services associate
will assist you.
o By sending a fax to our Shareholder Services department at
1-949-725-6830.
HOW ARE FUND DISTRIBUTIONS MADE AND TAXED?
The Fund pays dividends to shareholders monthly and pays realized capital
gains, if any, annually. Dividend and capital gain distributions will be
reinvested in additional shares of the Fund unless you elect to have them
paid in cash.
Dividends paid to shareholders of the Fund and derived from Municipal Bond
interest are expected to be designated by the Fund as "exempt-interest
dividends" and shareholders may generally exclude such dividends from gross
income for federal income tax purposes. The federal tax exemption for
"exempt-interest dividends" from Municipal Bonds does not necessarily
result in the exemption of such dividends from state and local taxes. The
interest on "private activity" bonds is a tax-preference item for purposes
of the federal alternative minimum tax. As a result, for shareholders that
are subject to the alternative minimum tax, income derived from "private
activity" bonds will not be exempt from federal income tax.
Dividends derived from taxable interest or capital gains will be subject to
federal income tax. Distributions may be taxable as ordinary income,
capital gains, or a combination of the two. The rate you pay on capital
gains distributions may vary depending on how long the Fund held the
securities that generated the gains. The Fund will advise shareholders
annually of the amount and nature of the dividends paid to them.
Shareholders should also bear in mind that the sale or exchange of shares
may give rise to a taxable event.
WHAT OTHER SERVICES ARE AVAILABLE FROM THE FUND?
The Fund and PIMCO's Shareholder Services offer several programs to
investors:
o The ability to exchange shares of the Fund for the same class of
shares of any other PIMCO Fund (except PIMCO International Bond and
Emerging Markets Bond II Funds).
o Account and Fund information is available 24 hours every day through
Infolink, PIMCO Funds' audio response system, by calling
1-800-987-4626.
o Information about PIMCO Funds can be obtained on PIMCO's Institutional
Web site at www.pimco.com.
<PAGE>
P I M C O
F U N D S
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Phone: 1-800-927-4648
Fax: 1-949-725-6830
PIMCO Infolink Audio Response Network:
1-800-987-4626
Web Site: www.pimco.com
<PAGE>
FUND PROFILE
PIMCO STRATEGIC BALANCED FUND
INSTITUTIONAL CLASS SHARES
OCTOBER __, 1999
This profile summarizes key information about the Fund that is included in
the Fund's Prospectus. The Fund's Prospectus includes additional
information about the Fund, including a more detailed description of the
risks associated with investing in the Fund that you may want to consider
before you invest. You may obtain the Prospectus and other information
about the Fund at no cost by calling us at 1-800-927-4648 or by visiting
our Web site at www.pimco.com.
P I M C O
F U N D S
<PAGE>
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks maximum total return, consistent with preservation of
capital and prudent investment management.
WHAT IS THE FUND'S PRINCIPAL INVESTMENT STRATEGY?
The Fund seeks to achieve its investment objective by normally investing in
a combination of fixed income securities and equity securities or
derivatives on equity securities. The percentage of the Fund's assets
invested in equities and equity derivatives or in fixed income securities
will be determined based on methodology, developed by PIMCO, that forecasts
stages in the business cycle and considers the risk and reward potential of
equity and fixed income securities within specific phases of the business
cycle. The Fund's equity exposure will vary between 45% and 75% of assets,
and its fixed income exposure will vary between 25% and 55%.
The Fund's equity exposure normally consists of S&P 500 derivatives, backed
by a portfolio of short-term fixed income instruments. PIMCO uses S&P 500
derivatives in addition to or in place of S&P 500 stocks to attempt to
equal or exceed the performance of the S&P 500. The value of S&P 500
derivatives closely track changes in the value of the index. However, S&P
500 derivatives may be purchased with a fraction of the assets that would
be needed to purchase the equity securities directly, so that the remainder
of the assets may be invested in fixed income instruments. PIMCO 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. Though the
Fund does not normally invest directly in S&P 500 securities, when S&P 500
derivatives appear to be overvalued relative to the S&P 500, the Fund may
invest the equity portion of its assets in a "basket" of S&P 500 stocks.
The Fund's fixed income exposure will normally consist of a diversified
portfolio of fixed income instruments of varying maturities. The securities
may be of any maturity. The average portfolio duration of the fixed income
portion of the Fund's assets will normally vary within a three- to six-year
time frame. Duration is a measure of the expected life of a fixed income
security that is used to determine the sensitivity of the security's price
to changes in interest rates.
The fixed income instruments in which the Fund invests are primarily
investment grade, but the Fund may invest up to 10% of its assets in high
yield securities ("junk bonds") rated B or higher by Moody's or S&P, or, if
unrated, determined by PIMCO to be of comparable quality. 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 Fund will normally hedge at least 75% of
its exposure to foreign currency to reduce the risk of loss due to
fluctuations in currency exchange rates.
The Fund may invest all of its assets in derivative instruments, such as
options, futures contracts or swap agreements. The Fund may lend its
portfolio securities to brokers, dealers and other financial institutions
to earn income. Rather than investing directly in the securities in which
it primarily invests, the Fund may use other investment techniques to gain
exposure to market movements related to such securities, such as entering
into a series of contracts to buy or sell such securities. The "total
return" sought by the Fund consists of net income earned on the Fund's
investments, plus capital appreciation, if any, which generally arises from
decreases in interest rates or improving credit fundamentals for a
particular sector or security.
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its
past fiscal year. You may obtain these reports at no cost by calling us.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
You could lose money on an investment in the Fund. The principal risks of
investing in the Fund are:
Market Risk: The value of securities owned by the Fund may go up or
down, sometimes rapidly or unpredictably. Securities may decline in
value due to factors affecting securities markets generally or
particular industries. Equity securities generally have greater price
volatility than fixed income securities.
Issuer Risk: The value of a security may decline for a number of
reasons which directly relate to the issuer, such as management
performance, financial leverage and reduced demand for the issuer's
goods or services.
<PAGE>
Interest Rate Risk: As interest rates rise, the value of fixed income
securities in the Fund's portfolio is likely to decrease. Securities
with longer durations tend to be more sensitive to changes in interest
rates.
Credit Risk: The Fund could lose money if the issuer or guarantor of a
fixed income security, or the counterparty to a derivative contract,
is unable or unwilling to meet its financial obligations.
Derivatives Risk: When the Fund invests in a derivative instrument, it
could lose more than the principal amount invested. Derivatives are
subject to a number of risks, such as liquidity, interest rate,
market, credit and management risk. They also involve the risk of
improper valuation. Changes in the value of a derivative may not
correlate perfectly with the underlying asset, rate or index.
Liquidity Risk: Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing the Fund from
selling the illiquid securities at an advantageous time or price.
Foreign Investment Risk: When the Fund invests in foreign securities,
it may experience more rapid and extreme changes in value than if it
invested exclusively in U.S. securities. The securities markets of
many foreign countries are relatively small. Reporting, accounting and
auditing standards of foreign countries differ from U.S. standards.
Also, nationalization, expropriation, taxation, political changes or
diplomatic developments could adversely affect the Fund's investments
in a foreign country.
Currency Risk: When the Fund invests in securities denominated in
foreign currencies, it is subject to the risk that those currencies
will decline in value relative to the U.S. Dollar, or, in the case of
hedging positions, that the U.S. Dollar will decline in value relative
to the currency being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for reasons such as
changes in interest rates, government intervention or political
developments.
Mortgage Risk: Rising interest rates tend to extend the duration of
mortgage-related securities, making them more sensitive to changes in
interest rates. When interest rates decline, borrowers may pay off
their mortgages sooner than expected. This can reduce the returns of a
Fund because the Fund will have to reinvest that money at the lower
prevailing interest rates.
Leveraging Risk: The Fund may engage in transactions that give rise to
a form of leverage. Leverage may cause the Fund to sell holdings when
it may not be advantageous to do so. Leverage, including borrowing,
will cause the Fund to be more volatile than if the Fund had not been
leveraged.
Management Risk: There is no guarantee that the investment techniques
and risk analyses applied by PIMCO will produce the desired results.
HOW HAS THE FUND PERFORMED?
The bar chart and table below provide some indication of the risks of
investing in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare with the
returns of a broad-based securities market index and an index of similar
funds. The bar chart and table show performance of the Fund's Institutional
Class shares net of fees. Past performance is no guarantee of future
results.
CALENDAR YEAR TOTAL RETURNS
1997: 24.17%
1998: 19.66%
During the period shown in the bar chart, the highest quarterly return was
12.23% (2nd Quarter 1997) and the lowest quarterly return was -4.60% (3rd
Quarter 1998). As of September 30, 1999, the end of the most recent
calendar quarter, the Fund's year-to-date return was ____%.
Average Annual Total Returns
for periods ended September 30, 1999
Since
1 year Inception(4)
Strategic Balanced Fund,
Institutional Class ___% ___%
S&P 500 Index(1) ___% ___%
S&P 500 and Lehman Aggregate
(2)Bond Index Blend ___% ___%
Lipper Balanced Fund Avg(3) ___% ___%
<PAGE>
(1) The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of common stocks. It is not possible to invest directly in the index.
(2) This index is a static blend consisting 60% of the S&P 500 Composite Stock
Price Index and 40% of the Lehman Brothers Aggregate Bond Index. This blended
index reflects the Fund's investment strategy more accurately than the S&P 500
Index. It is not possible to invest directly in the index.
(3) The Lipper Balanced Fund Average is a total return performance average of
Funds tracked by Lipper Analytical Services, Inc., whose primary objective is to
conserve principal by maintaining at all times a balanced portfolio of both
stocks and bonds. It does not take into account sales charges.
(4) The Fund began operations on 6/28/96. Index comparisons began on 6/30/96.
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you may pay if you buy and hold
Institutional Class shares of the Fund:
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets, shown as a percentage of average daily net assets)
Advisory Fee 0.40%
Distribution (12b-1) and/or Service Fees None
Other Expenses1 0.25%
Total Annual Operating Expenses 0.65%
1 Other Expenses reflects a 0.25% Administrative Fee paid by the class.
Examples: The Examples are intended to help you compare the cost of
investing in the Fund with the costs of investing in other mutual funds.
The Examples assume that you invest $10,000 in the Fund for the time
periods indicated, and then redeem all your shares at the end of those
periods. The Example also assumes a 5% return each year, the reinvestment
of all dividends and distributions, and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, the
Examples show what your costs would be based on these assumptions.
1 year 3 years 5 years 10 years
Strategic Balanced Fund,
Institutional Class $66 $208 $362 $810
WHO IS THE FUND'S INVESTMENT ADVISER?
Pacific Investment Management Company ("PIMCO"), a subsidiary of PIMCO
Advisors L.P., serves as investment adviser to the Fund. PIMCO is an
investment management company founded in 1971, and had over $172 billion in
assets under management as of June 30, 1999. PIMCO manages the investment
and reinvestment of the assets of the Fund and is responsible for placing
orders for the purchase and sale of the Fund's investments. The Fund's
portfolio is managed by a team led by William H. Gross. Mr. Gross is a
Managing Director, Chief Investment Officer and one of the founders of
PIMCO and he has managed fixed income accounts for various institutional
clients and funds for years. He has led the team managing the Strategic
Balanced Fund since January 1998.
HOW DO I BUY FUND SHARES?
The minimum initial investment to open an account directly with the Fund is
$5 million. The minimum initial investment for a registered investment
adviser purchasing Institutional Class shares for its clients through
omnibus accounts is $250,000. You may purchase Fund shares in one of the
following ways:
o Opening an account by completing and signing a Client Registration
Application, mailing it to us at the address shown on the back cover,
and wiring funds. Wiring instructions can be obtained by calling us at
1-800-927-4648.
o Exchanging Institutional Class shares in any amount from another PIMCO
Funds account. n Additional purchases in any amount can be made by
calling us at 1-800-927-4648 and wiring funds.
HOW DO I SELL (REDEEM) FUND SHARES?
You may sell (redeem) all or part of your Fund shares on any business day.
You may sell by:
o Sending a written request by mail to PIMCO Funds.
o Telephone us at 1-800-927-4648 and a Shareholder Services associate
will assist you.
o By sending a fax to our Shareholder Services department at
1-949-725-6830.
HOW ARE FUND DISTRIBUTIONS MADE AND TAXED?
The Fund pays dividends to shareholders quarterly and pays realized capital
gains, if any, annually. Dividend and capital gain distributions will be
reinvested in additional shares of the Fund unless you elect to have them
paid in cash. Distributions may be taxable as ordinary income, capital
gains, or a combination of the two. The rate you pay on capital gains
distributions may vary depending on how long the Fund held the securities
that generated the gains. The Fund will advise shareholders annually of the
amount and nature of the dividends paid to them.
Shareholders should also bear in mind that the sale or exchange of shares
may give rise to a taxable event.
WHAT OTHER SERVICES ARE AVAILABLE FROM THE FUND?
The Fund and PIMCO's Shareholder Services offer several programs to
investors:
o The ability to exchange shares of the Fund for the same class of
shares of any other PIMCO Fund (except PIMCO International Bond and
Emerging Markets Bond II Funds).
o Account and Fund information is available 24 hours every day through
Infolink, PIMCO Funds' audio response system, by calling
1-800-987-4626.
o Information about PIMCO Funds can be obtained on PIMCO's Institutional
Web site at www.pimco.com.
P I M C O
F U N D S
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Phone: 1-800-927-4648
Fax: 1-949-725-6830
PIMCO Infolink Audio Response Network:
1-800-987-4626
Web Site: www.pimco.com
