<PAGE>
As filed with the Securities and Exchange Commission on April 2, 1999
File Nos. 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. 44 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 48 /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) 760-4867
Robert W. Helm, Esq. R. Wesley Burns
Dechert Price & Rhoads Pacific Investment Management Company
1775 Eye Street, N.W. 840 Newport Center Drive
Washington, D.C. 20006 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)
/ / on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(2)
/ / 75 days after filing pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
EXPLANATORY NOTE
This post-effective amendment no. 44 to the registration statement of PIMCO
Funds on Form N-1A (File No. 33-12113) does not affect the prospectus relating
to Class A, Class B and Class C shares of all of the then-existing Funds, or the
prospectuses for the Class D shares of the Funds, each dated August 1, 1998,
each of which is incorporated herein by reference from post-effective amendment
no. 41 to the registration statement as filed on July 31, 1998 (File No. 33-
12113). The amendment also does not affect the currently effective prospectus
for Class A shares of the PIMCO Total Return Fund. The prospectus describing the
Class A shares of the PIMCO Total Return Fund, as filed December 11, 1998
pursuant to Rule 497(e) under the Securities Act, is incorporated herein by
reference. In addition, the Supplements relating to Class A, B and C shares and
Class D Shares of the PIMCO Long Duration and Convertible Bond Funds is
incorporated herein by reference from post-effective amendment no. 43 to the
registration statement as filed on January 15, 1999.
<PAGE>
CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
PART A
Institutional Class and Administrative Class Prospectus
Information Required in Prospectus
----------------------------------
Item Number Heading
----------- -------
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 Not Applicable
6 Dividends, Distributions and Taxes;
Other Information
7 Purchase of Shares; Net Asset Value
8 Redemption of Shares
9 Not Applicable
<PAGE>
PART A
Class A, Class B, and Class C Prospectuses
Information Required in Prospectus
----------------------------------
Item Number Heading
----------- -------
1 Cover Page
2 Schedule of Fees
3 Financial Highlights
4 Investment Objectives and Policies;
Characteristics and Risks of Securities and
Investment Techniques
5 Management of the Trust
5A Not Applicable
6 Distributions; Taxes; Description
of the Trust
7 How to Buy Shares; Alternative Purchase
Arrangements; Exchange Privilege; Distributor
and Distribution and Servicing Plans; How Net
Asset Value is Determined
8 How to Redeem
9 Not Applicable
<PAGE>
PART A
Class D Prospectuses
Information Required in Prospectus
----------------------------------
Item Number Heading
----------- -------
1 Cover Page
2 Schedule of Fees
3 Financial Highlights
4 Investment Objectives and Policies;
Characteristics and Risks of Securities and
Investment Techniques
5 Management of the Trust
5A Not Applicable
6 Distributions; Taxes; Description
of the Trust
7 How to Buy Shares; Exchange Privilege;
Distributor; How Net Asset Value is Determined
8 How to Redeem
9 Not Applicable
<PAGE>
PART A
PIMCO Total Return Fund
Class A Prospectus
Information Required in Prospectus
----------------------------------
Item Number Heading
----------- -------
1 Cover Page
2 Schedule of Fees
3 Financial Highlights
4 Investment Objective and Policies;
Characteristics and Risks of Securities
and Investment Techniques
5 Management of the Trust
5A Not Applicable
6 Distributions; Taxes; Description of
the Trust
7 How to Buy Shares; Exchange Privilege;
Distributor and Distribution and
Servicing Plan; How Net Asset Value is
Determined
8 How to Redeem
9 Not Applicable
<PAGE>
PART B
Information Required in Statement of Additional Information
-----------------------------------------------------------
Item Number Heading
----------- -------
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
<PAGE>
[LOGO FOR PIMCO
FUNDS PROSPECTUS]
PIMCO Funds Prospectus
<TABLE>
<CAPTION>
<S> <C> <C>
Pacific __________________________________________________________________________________
Investment SHORT DURATION BONDS FUNDS
Management Money Market Fund Low Duration Fund II
Series Short-Term Fund Low Duration Fund III
Low Duration Fund Low Duration Mortgage Fund
June 1, 1999 ----------------------------------------------------------------------------------
INTERMEDIATE DURATION BOND FUNDS
Shares Classes Moderate Duration Fund Total Return Fund III
Real Return Bond Fund Total Return Mortgage Fund
Ins Institutional Total Return Fund Commercial Mortgage Securities Fund
Total Return Fund II High Yield Fund
----------------------------------------------------------------------------------
Adm Administration LONG DURATION BOND FUNDS
Long-Term U.S. Government Fund Long Duration Fund
----------------------------------------------------------------------------------
INTERNATIONAL BOND FUNDS
Global Bond Fund International Bond Fund
Global Bond Fund II Emerging Markets Bond Fund
Foreign Bond Fund Emerging Markets Bond Fund II
----------------------------------------------------------------------------------
TAX EXEMPT BOND FUNDS
Municipal Bond Fund
----------------------------------------------------------------------------------
STOCK AND BOND FUNDS
Strategic Balanced Fund Convertible Bond Fund
----------------------------------------------------------------------------------
STOCK FUNDS
StocksPLUS Fund StocksPLUS Short Strategy Fund
</TABLE>
[LOGO FOR PIMCO FUNDS]
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 2, 1999
PIMCO Funds: Pacific Investment Management Series
Prospectus
June 1, 1999
PIMCO Funds (the "Trust") is an open-end management investment company ("mutual
fund") consisting of twenty-seven 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.
This Prospectus describes two classes of shares offered by each Fund: the
"Institutional Class" and the "Administrative Class." Through separate
prospectuses, certain Funds may offer up to four additional classes of shares,
Class A, Class B, Class C and Class D shares. See "Other Information--Multiple
Classes of Shares."
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. 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 will vary.
A Statement of Additional Information, dated June 1, 1999, as amended or
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. The
Securities and Exchange Commission maintains an Internet World Wide Web site
(at www.sec.gov) which contains the Statement of Additional Information,
materials that are incorporated by reference into this Prospectus and the
Statement of Additional Information, and other information about the Funds. The
Statement of Additional Information is available without charge and may be
obtained by writing or calling:
PIMCO Funds
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Telephone: (800) 927-4648
(800) 987-4626 (PIMCO Infolink Audio Response Network)
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.
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, and entail risk, including the possible loss of
principal.
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.
Each of the Funds, except the PIMCO Money Market and Municipal Bond Funds, 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.
The PIMCO High Yield, Emerging Markets Bond and Emerging Markets Bond II Funds
may invest all of their 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")."
1 PIMCO Funds: Pacific Investment Management Series
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................................................... 3
Expense Information..................................................... 7
Financial Highlights.................................................... 9
Investment Objectives and Policies...................................... 19
Investment Restrictions................................................. 30
Characteristics and Risks of Securities and Investment Techniques....... 33
Management of the Trust................................................. 51
Purchase of Shares...................................................... 55
Redemption of Shares.................................................... 58
Portfolio Transactions.................................................. 60
Net Asset Value......................................................... 61
Dividends, Distributions and Taxes...................................... 62
Other Information....................................................... 64
Appendix A -- Description of Duration................................... A-1
Appendix B -- Description of Securities Ratings......................... B-1
</TABLE>
Prospectus 2
<PAGE>
PROSPECTUS SUMMARY
PIMCO Funds (the "Trust") is an open-end management investment company
("mutual fund") organized as a Massachusetts business trust on February 19,
1987. The Trust consists of twenty-seven separate investment portfolios (the
"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>
<S> <C> <C> <C> <C>
Short Duration Bond
Funds Primary Investments Duration Credit Quality(1) Foreign(2)
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Money market instruments less than
or equal to
90 days Min 95% Aaa or 0%
dollar- Prime 1; less
weighted than or equal to
average 5% Aa or Prime 2
maturity
- -----------------------------------------------------------------------------------------------------------------------------
Short-Term Money market instruments and short maturity fixed 0-1 yr B to Aaa; max 0-5%
income securities 10% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Low Duration Short and intermediate maturity fixed income securities 1-3 yrs B to Aaa; max 0-20%
10% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Low Duration II Same as Low Duration Fund, except quality and foreign 1-3 yrs A to Aaa 0%
issuer restrictions
- -----------------------------------------------------------------------------------------------------------------------------
Low Duration III Same as Low Duration Fund, except prohibitions on 1-3 yrs B to Aaa; max 0-20%
firms engaged in socially sensitive practices 10% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Low Duration Short and intermediate maturity mortgage-related 1-3 yrs Baa to Aaa; max 0%
Mortgage securities 10% below Aaa
- -----------------------------------------------------------------------------------------------------------------------------
Intermediate Duration Bond Funds
- -----------------------------------------------------------------------------------------------------------------------------
Moderate Duration Short and intermediate maturity fixed income securities 2-5 yrs B to Aaa; max 0-20%
10% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Real Return Bond Inflation-indexed fixed income securities N/A, but see B to Aaa; max 0-35%
Fund 10% below Baa
description
- -----------------------------------------------------------------------------------------------------------------------------
Total Return Intermediate maturity fixed income securities 3-6 yrs B to Aaa; max 0-20%
10% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Total Return II Same as Total Return Fund, except quality and foreign 3-6 yrs Baa to Aaa 0%
issuer restrictions
- -----------------------------------------------------------------------------------------------------------------------------
Total Return III Same as Total Return Fund, except prohibitions on firms 3-6 yrs B to Aaa; max 0-20%
engaged in socially sensitive practices 10% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Total Return Intermediate maturity mortgage-related securities 2-6 yrs Baa to Aaa; max 0%
Mortgage 10% below Aaa
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Commercial mortgage-backed securities 3-8 yrs B to Aaa; max 0%
Securities 35% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
High Yield Higher yielding fixed income securities 2-6 yrs B to Aaa; min 0%
65% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Long Duration Bond
Funds
- -----------------------------------------------------------------------------------------------------------------------------
Long-Term U.S. Long-term maturity fixed income securities greater than A to Aaa 0%
Government or equal to
8 yrs
- -----------------------------------------------------------------------------------------------------------------------------
Long Duration Long-term maturity fixed income securities greater than B to Aaa; max 0-20%
or equal to 10% below Baa
8 yrs
- -----------------------------------------------------------------------------------------------------------------------------
International Bond
Funds
- -----------------------------------------------------------------------------------------------------------------------------
Global Bond Intermediate maturity U.S. and foreign fixed 3-7 yrs B to Aaa; max 25-75%
income securities 10% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Global Bond II Intermediate maturity U.S. and hedged foreign fixed 3-7 yrs B to Aaa; max 25-75%
income securities 10% below Baa
- -----------------------------------------------------------------------------------------------------------------------------
Foreign Bond Intermediate maturity hedged foreign fixed income 3-7 yrs B to Aaa; max greater than
securities 10% below Baa or equal 85%
- -----------------------------------------------------------------------------------------------------------------------------
International Bond Foreign fixed income securities (Fund offered only to 0-8 yrs Baa to Aaa greater than
PIMCO private account clients) or equal 65%
- -----------------------------------------------------------------------------------------------------------------------------
Emerging Markets Emerging market fixed income securities 0-8 yrs B to Aaa greater than
Bond or equal 80%
- -----------------------------------------------------------------------------------------------------------------------------
Emerging Markets Emerging market fixed income securities (Fund offered 0-8 yrs B to Aaa; max greater than
Bond II only to PIMCO private account clients) 10% below BB or equal 80%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
3 PIMCO Funds: Pacific Investment Management Series
<PAGE>
PROSPECTUS SUMMARY (continued)
<TABLE>
<S> <C> <C> <C> <C>
Tax Exempt Bond Primary Investments Duration Credit Quality(1) Foreign(2)
Funds
- --------------------------------------------------------------------------------------------------------------------------
Municipal Bond Investment grade municipal securities (tax-exempt bonds) 3-10 yrs Ba to Aaa; max 0%
10% below Baa
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Stock and Bond
Funds
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Strategic Balanced Same as Total Return and StocksPLUS Funds according to 0-6 yrs B to Aaa; max 0-20%
PIMCO's allocation strategy 10% below Baa
- --------------------------------------------------------------------------------------------------------------------------
Convertible Bond Convertible Securities N/A Caa to Aaa; max 0-20%
35% below Baa and
10% below B
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Stock Funds
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
StocksPLUS S&P 500 stock index derivatives backed by a portfolio 0-1 yr B to Aaa; max 0-20%
of short-term fixed income securities 10% below Baa
- --------------------------------------------------------------------------------------------------------------------------
StocksPLUS Short Inversely correlated S&P 500 derivatives backed by a 0-1 yr B to Aaa; max 0-20%
Strategy portfolio of short-term fixed income securities 10% below Baa
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As rated by Moody's Investors Service, 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 Global Bond, Global Bond II, Foreign Bond,
International Bond, Emerging Markets Bond and Emerging Markets Bond II
Funds. Percentage limitations for these six Funds relate to securities of
foreign issuers, denominated in any currency. Each Fund (except the PIMCO
Low Duration II, Total Return II, Long-Term U.S. Government and Municipal
Bond Funds) may invest beyond these limits in U.S. dollar-denominated
securities of foreign issuers. Neither the PIMCO Low Duration II, Total
Return II, Long-Term U.S. Government nor Municipal Bond Funds may invest in
any securities of foreign issuers.
Investment Objectives of the PIMCO Funds
The investment objective of each of the PIMCO Money Market and Short-Term
Funds is to seek to obtain maximum current income consistent with preservation
of capital and daily liquidity. The investment objective of the PIMCO Real
Return Bond Fund is to seek to realize maximum real return, consistent with the
preservation of real capital and prudent investment management. The investment
objective of the PIMCO Global Bond Fund II is to seek maximum total return,
consistent with the preservation of capital. The investment objective of the
PIMCO Municipal Bond Fund is to seek high current income exempt from federal
income tax, consistent with preservation of capital. Capital appreciation is a
secondary objective of the PIMCO Municipal Bond Fund. 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
Convertible Bond Fund is to seek to realize maximum total return, consistent
with prudent investment management. The investment objective of the PIMCO
StocksPLUS Fund is to seek to achieve a total return which exceeds the total
return performance of the Standard & Poor's 500 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.
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
this 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.
Prospectus 4
<PAGE>
PROSPECTUS SUMMARY (continued)
Generally, 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, although this may not be
true in the case of inflation-indexed bonds. 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 Ratings Services ("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.
Investors should carefully consider the possible tax consequences from
investing in the PIMCO Real Return Bond Fund. The Fund invests primarily in
securities that for tax purposes may be considered to have been issued
originally at a discount. Accordingly, the Fund may be required to make annual
distributions to shareholders in excess of the cash received by the Fund in a
given period from those investments. See "Characteristics and Risks of
Securities and Investment Techniques -- Inflation-Indexed Bonds" and
"Dividends, Distributions and Taxes" for additional information.
Some of the Funds offer their shares to both retail and institutional
investors. Institutional shareholders, some of whom also may be investment
advisory clients of PIMCO, may hold large positions in certain of the Funds.
Such shareholders may on occasion make large redemptions of their holdings in
the Funds to meet their liquidity needs, in connection with strategic
adjustments to their overall portfolio of investments, or for other purposes.
Large redemptions from some Funds could require the Adviser to liquidate
portfolio positions when it is not most desirable to do so. Liquidation of
portfolio holdings also may cause a Fund to realize taxable capital gains.
The PIMCO Real Return Bond, Commercial Mortgage Securities, Global Bond,
Global Bond II, Foreign Bond, International Bond, Emerging Markets Bond and
Emerging Markets Bond II Funds are "non-diversified" for purposes of the
Investment Company Act of 1940 (the "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. See "Investment Objectives
and Policies" and "Characteristics and Risks of Securities and Investment
Techniques" for additional information.
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
5 PIMCO Funds: Pacific Investment Management Series
<PAGE>
PROSPECTUS SUMMARY (continued)
$158 billion of assets under management as of December 31, 1998. The Adviser is
a subsidiary of PIMCO Advisors L.P. ("PIMCO Advisors"), which had approximately
$244 billion of assets under management as of December 31, 1998. See
"Management of the Trust."
Purchase of Shares
This Prospectus describes two classes of shares of each Fund: the
"Institutional Class" and the "Administrative Class." Shares of the
Institutional Class are offered primarily for direct investment by
institutional investors (Institutional Class shares may also be offered through
certain financial intermediaries that charge their customers transaction or
other fees with respect to the customers' investments in the Funds). Shares of
the Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers, and other intermediaries, and each Fund pays service
and distribution fees to such entities for services they provide to such Fund's
shareholders of that class. Administrative Class shares of certain Funds are
not currently available for investment.
Shares of the Institutional Class and Administrative 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 $5 million,
subject to certain exceptions. Shares of either class may also be offered to
clients of the Adviser and its affiliates. Shares of the PIMCO International
Bond and Emerging Markets Bond II Funds are offered only to private account
clients of PIMCO. See "Purchase of Shares."
Redemptions and Exchanges
Institutional Class and Administrative Class shares 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.
Institutional Class and Administrative Class shares of any Fund may be
exchanged on the basis of relative net asset values, for shares of the same
class of any other Fund of the Trust offered generally to the public, except
that only private account clients of PIMCO may purchase shares of the PIMCO
International Bond and Emerging Markets Bond II Funds. Shares of a Fund may
also be exchanged for shares of the same class of a series of PIMCO Funds:
Multi-Manager Series, an affiliated mutual fund family, composed primarily of
equity portfolios managed by the subsidiary partnerships of PIMCO Advisors. See
"Redemption of Shares."
Prospectus 6
<PAGE>
EXPENSE INFORMATION
Shareholder Transaction Expenses (Institutional Class and Administrative
Class):
<TABLE>
<S> <C>
Maximum initial sales charge imposed on purchases (as a percentage of
offering price at time of purchase).................................... None
Maximum sales charge imposed on reinvested dividends (as a percentage of
offering price at time of purchase).................................... None
Maximum 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
Low Duration Mortgage Fund.......... 0.25 0.25 0.50
Moderate Duration Fund.............. 0.25 0.20 0.45
Real Return Bond 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
Total Return Mortgage Fund.......... 0.25 0.25 0.50
Commercial Mortgage Securities Fund. 0.40 0.25 0.65
High Yield Fund..................... 0.25 0.25 0.50
Long-Term U.S. Government Fund...... 0.25 0.25 0.50
Long Duration Fund.................. 0.25 0.25 0.50
Global Bond Fund.................... 0.25 0.30 0.55
Global Bond Fund II................. 0.25 0.30 0.55
Foreign Bond Fund................... 0.25 0.25 0.50
International Bond Fund............. 0.25 0.25 0.50
Emerging Markets Bond Fund.......... 0.45 0.40 0.85
Emerging Markets Bond Fund II....... 0.45 0.40 0.85
Municipal Bond Fund................. 0.25 0.25 0.50
Strategic Balanced Fund............. 0.40 0.25 0.65
Convertible Bond Fund............... 0.40 0.25 0.65
StocksPLUS Fund..................... 0.40 0.25 0.65
StocksPLUS Short Strategy Fund...... 0.40 0.25 0.65
<CAPTION>
Advisory Administrative 12b-1 (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
Low Duration Mortgage Fund. 0.25 0.25 0.25 0.75
Moderate Duration Fund..... 0.25 0.20 0.25 0.70
Real Return Bond 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
Total Return Mortgage Fund. 0.25 0.25 0.25 0.75
Commercial Mortgage
Securities Fund........... 0.40 0.25 0.25 0.90
High Yield Fund............ 0.25 0.25 0.25 0.75
Long-Term U.S. Government
Fund...................... 0.25 0.25 0.25 0.75
Long Duration Fund......... 0.25 0.25 0.25 0.75
Global Bond Fund........... 0.25 0.30 0.25 0.80
Global Bond Fund II........ 0.25 0.30 0.25 0.80
Foreign Bond Fund.......... 0.25 0.25 0.25 0.75
International Bond Fund.... 0.25 0.25 0.25 0.75
Emerging Markets Bond Fund. 0.45 0.40 0.25 1.10
Emerging Markets Bond Fund
II........................ 0.45 0.40 0.25 1.10
Municipal Bond Fund........ 0.25 0.25 0.25 0.75
Strategic Balanced Fund.... 0.40 0.25 0.25 0.90
Convertible Bond Fund...... 0.40 0.25 0.25 0.90
StocksPLUS Fund............ 0.40 0.25 0.25 0.90
StocksPLUS Short Strategy
Fund...................... 0.40 0.25 0.25 0.90
</TABLE>
7 PIMCO Funds: Pacific Investment Management Series
<PAGE>
EXPENSE INFORMATION (continued)
For a more detailed discussion of the Funds' fees and expenses, see "Fund
Administrator," "Advisory and Administrative Fees," and "Service and
Distribution 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
Low Duration Mortgage Fund................... 5 16 28 63
Moderate Duration Fund....................... 5 14 25 57
Real Return Bond 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
Total Return Mortgage Fund................... 5 16 28 63
Commercial Mortgage Securities Fund.......... 7 21 36 81
High Yield Fund.............................. 5 16 28 63
Long-Term U.S. Government Fund............... 5 16 28 63
Long Duration Fund........................... 5 16 28 63
Global Bond Fund............................. 6 18 31 69
Global Bond Fund II.......................... 6 18 31 69
Foreign Bond Fund............................ 5 16 28 63
International Bond Fund...................... 5 16 28 63
Emerging Markets Bond Fund................... 9 27 47 105
Emerging Markets Bond Fund II................ 9 27 47 105
Municipal Bond Fund.......................... 5 16 28 63
Strategic Balanced Fund...................... 7 21 36 81
Convertible Bond Fund........................ 7 21 36 81
StocksPLUS Fund.............................. 7 21 36 81
StocksPLUS Short Strategy 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
Low Duration Mortgage Fund................... 8 24 42 93
Moderate Duration Fund....................... 7 22 39 87
Real Return Bond 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
Total Return Mortgage Fund................... 8 24 42 93
Commercial Mortgage Securities Fund.......... 9 29 50 111
High Yield Fund.............................. 8 24 42 93
Long-Term U.S. Government Fund............... 8 24 42 93
Long Duration Fund........................... 8 24 42 93
Global Bond Fund............................. 8 26 44 99
Global Bond Fund II.......................... 8 26 44 99
Foreign Bond Fund ........................... 8 24 42 93
International Bond Fund...................... 8 24 42 93
Emerging Markets Bond Fund................... 11 35 61 134
Emerging Markets Bond Fund II................ 11 35 61 134
Municipal Bond Fund.......................... 8 24 42 93
Strategic Balanced Fund...................... 9 29 50 111
Convertible Bond Fund........................ 9 29 50 111
StocksPLUS Fund.............................. 9 29 50 111
StocksPLUS Short Strategy 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. The information is based upon each Funds' current
fees and expenses. 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.
Prospectus 8
<PAGE>
FINANCIAL HIGHLIGHTS
The following information regarding selected per share data and ratios for
shares of certain of the Funds is part of the Trust's audited financial
statements, which are included in the Trust's Annual Report dated March 31,
1998, and the Trust's unaudited financial statements, which are included in
the Trust's Semiannual Report dated September 30, 1998, both of which are
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 PricewaterhouseCoopers LLP, independent
accountants, whose opinion thereon is also included in the Annual Report,
which may be obtained without charge. The Trust's Semiannual report also may
be obtained without charge. Information is presented for each Fund of the
Trust which had investment operations during the reporting periods.
Information regarding the PIMCO Money Market and Total Return II Funds
reflects the operational history of the Money Market Fund and PIMCO Managed
Bond and Income Fund, respectively, two former series of PIMCO Funds:
Multi-Manager Series which were reorganized as series of the Trust as of
November 1, 1995. On that date, the investment advisory responsibilities of
Pacific Life Insurance Company (formerly Pacific Mutual Life Insurance
Company) with respect to the Money Market Fund were assumed by PIMCO.
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
9/30/98* $ 1.00 $0.03(+) $ 0.00 (+) $0.03 $(0.03) $ 0.00 $ 0.00 $0.00
3/31/98 1.00 0.05(+) 0.00 (+) 0.05 (0.05) 0.00 0.00 0.00
3/31/97 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 0.00
11/195-3/31/96 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
9/30/98* 1.00 0.03(+) 0.00 (+) 0.03 (0.03) 0.00 0.00 0.00
3/31/98 1.00 0.05(+) 0.00 (+) 0.05 (0.05) 0.00 0.00 0.00
3/31/97 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 0.00
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
9/30/98* $10.06 $0.29(+) $(0.02)(+) $0.27 $(0.29) $ 0.00 $ 0.00 $0.00
3/31/98 10.00 0.62(+) 0.06 (+) 0.68 (0.60) (0.01) (0.01) 0.00
3/31/97 9.92 0.61 0.08 0.69 (0.59) (0.02) 0.00 0.00
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
Administrative Class
9/30/98* 10.06 0.28(+) (0.02)(+) 0.26 (0.28) 0.00 0.00 0.00
3/31/98 10.00 0.59(+) 0.07 (+) 0.66 (0.58) (0.01) (0.01) 0.00
3/31/97 9.92 0.58 0.08 0.66 (0.57) (0.01) 0.00 0.00
3/31/96(c) 9.98 0.11 (0.07) 0.04 (0.10) 0.00 0.00 0.00
</TABLE>
- --------
<TABLE>
<S> <C>
* Unaudited + Per share amounts based on average number of shares outstanding
(a) From commencement of operations, March 1, 1991. during the period.
(b) From commencement of operations, January 25, 1995. (c) From commencement of operations, February 1, 1996.
</TABLE>
9 PIMCO Funds: Pacific Investment Management Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Ratio of Net
Net Asset Net Assets Ratio of Investment
Tax Basis Value End Expenses to Income to Portfolio
Return Total End Total of Period Average Average Turnover
of Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.03) $ 1.00 2.66% $ 47,902 0.35% 5.27%+ N/A
0.00 (0.05) 1.00 5.40 55,335 0.35 5.29 N/A
0.00 (0.05) 1.00 5.19 23,497 0.40 5.08 N/A
0.00 (0.02) 1.00 2.58 25,935 0.33+ 5.44+ N/A
0.00 (0.06) 1.00 5.67 7,741 0.40 5.53 N/A
0.00 (0.03) 1.00 3.53 7,454 0.40 3.52 N/A
0.00 (0.03) 1.00 2.83 5,836 0.40 2.78 N/A
0.00 (0.04) 1.00 3.85 7,817 0.40 4.02 N/A
0.00 (0.04) 1.00 3.78 45,406 0.53+ 5.20 N/A
0.00 (0.03) 1.00 2.57 2,428 0.60+ 4.98+ N/A
0.00 (0.05) 1.00 5.12 749 0.60 5.04 N/A
0.00 (0.05) 1.00 4.94 12 0.66 4.83 N/A
0.00 (0.02) 1.00 2.47 10 0.61+ 5.95+ N/A
0.00 (0.05) 1.00 4.21 10 0.68+ 5.94+ N/A
$0.00 $(0.29) $10.04 2.73% $ 334,079 0.45%+ 5.79%+ 49%
0.00 (0.62) 10.06 7.06 172,846 0.45 6.12 48
0.00 (0.61) 10.00 7.12 156,515 0.47 6.12 77
0.00 (0.68) 9.92 8.49 101,797 0.58 6.86 215
0.00 (0.56) 9.79 4.46 90,114 0.50 5.67 79
0.00 (0.47) 9.92 3.66 73,176 0.50 4.87 46
0.00 (0.37) 10.03 3.94 46,905 0.50 3.67 55
0.00 (0.56) 10.01 5.66 44,172 0.50 5.52 95
0.00 (0.78) 10.02 8.44 44,820 0.50 7.83 115
0.00 (0.86) 9.99 8.86 13,649 0.50 8.61 140
0.00 (0.80) 10.00 8.29 14,401 0.50 8.57 178
0.00 (0.28) 10.04 2.61 1,774 0.69+ 5.50+ 49
0.00 (0.60) 10.06 6.80 5,147 0.70 5.86 48
0.00 (0.58) 10.00 6.86 4,513 0.72 5.87 77
0.00 (0.10) 9.92 0.41 3,999 0.52+ 4.44+ 215
</TABLE>
- --------
+ Annualized.
Prospectus 10
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<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>
Low Duration
Fund
Institutional
Class
9/30/98* $10.18 $0.33(+) $ 0.11 (+) $ 0.44 $(0.33) $ 0.00 $ 0.00 $0.00
3/31/98 9.98 0.65(+) 0.23 (+) 0.88 (0.63) (0.02) (0.03) 0.00
3/31/97 9.95 0.64 0.03 0.67 (0.63) (0.01) 0.00 0.00
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
Administrative
Class
9/30/98* 10.18 0.32(+) 0.11 (+) 0.43 (0.32) 0.00 0.00 0.00
3/31/98 9.98 0.63(+) 0.22 (+) 0.85 (0.60) (0.02) (0.03) 0.00
3/31/97 9.95 0.62 0.03 0.65 (0.60) (0.02) 0.00 0.00
3/31/96 9.76 0.63 0.21 0.84 (0.65) 0.00 0.00 0.00
3/31/95(d) 9.67 0.18 0.07 0.25 (0.14) 0.00 0.00 0.00
Low Duration
Fund II
Institutional
Class
9/30/98* $10.00 $0.30(+) $ 0.16 (+) $ 0.46 $(0.30) $ 0.00 $ 0.00 $0.00
3/31/98 9.81 0.22(+) 0.59 (+) 0.81 (0.56) (0.04) (0.02) 0.00
3/31/97 9.82 0.62 (0.03) 0.59 (0.58) (0.02) 0.00 0.00
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(e) 10.00 0.28 0.03 0.31 (0.27) 0.00 0.00 0.00
Administrative
Class
9/30/98* 10.00 0.29(+) 0.16 (+) 0.45 (0.29) 0.00 0.00 0.00
3/31/98(f) 10.03 0.14(+) (0.08)(+) 0.06 (0.08) (0.01) 0.00 0.00
Low Duration
Fund III
Institutional
Class
9/30/98* $10.05 $0.30(+) $ 0.10 (+) $ 0.40 $(0.30) $ 0.00 $ 0.00 $0.00
3/31/98 9.91 0.53(+) 0.24 (+) 0.77 (0.60) 0.00 (0.03) 0.00
3/31/97(g) 10.00 0.15 (0.09) 0.06 (0.15) 0.00 0.00 0.00
Low Duration
Mortgage Fund
Institutional
Class
9/30/98* $10.13 $0.33(+) $ 0.14 (+) $ 0.47 $(0.33) $ 0.00 $ 0.00 $0.00
3/31/98(h) 10.00 0.43(+) 0.14 (+) 0.57 (0.42) 0.00 (0.02) 0.00
Moderate
Duration Fund
Institutional
Class
9/30/98* $10.14 $0.30(+) $ 0.31 (+) $ 0.61 $(0.30) $ 0.00 $ 0.00 $0.00
3/31/98 9.83 0.38(+) 0.56 (+) 0.94 (0.60) 0.00 (0.03) 0.00
3/31/97(g) 10.00 0.15 (0.17) (0.02) (0.15) 0.00 0.00 0.00
Real Return
Bond Fund
Institutional
Class
9/30/98* $ 9.77 $0.29(+) $ 0.15 (+) $ 0.44 $(0.29) $ 0.00 $ 0.00 $0.00
3/31/98 9.93 0.44(+) 0.05 (+) 0.49 (0.48) (0.03) (0.14) 0.00
3/31/97(i) 9.92 0.11 (0.02) 0.09 (0.08) 0.00 0.00 0.00
</TABLE>
- --------
<TABLE>
<S> <C>
* Unaudited + Per share amounts based on average number of shares outstanding
(d) From commencement of operations, January 3, 1995. during the period.
(e) From commencement of operations, November 1, 1991. (g) From commencement of operations, December 31, 1996.
(f) From commencement of operations, February 2, 1998. (h) From commencement of operations, July 31, 1997.
(i) From commencement of operations, January 29, 1997.
</TABLE>
11 PIMCO Funds: Pacific Investment Management Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Net Asset Net Assets Ratio of Ratio of Net
Tax Basis Value End Expenses to Investment Portfolio
Return Total End Total of Period Average Income to Average Turnover
of Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.33) $10.29 4.42% $3,050,047 0.43%*+ 6.52%+ 128%
0.00 (0.68) 10.18 9.00 2,759,531 0.43 6.39 309
0.00 (0.64) 9.98 6.97 2,797,001 0.43 6.46 240
0.00 (0.68) 9.95 9.13 2,677,574 0.42 6.88 209
(0.09) (0.63) 9.76 3.60 2,332,032 0.41 6.46 77
0.00 (0.72) 10.04 4.56 2,298,255 0.43 6.05 43
0.00 (0.87) 10.30 9.91 1,403,594 0.45 7.21 68
0.00 (0.90) 10.20 11.30 906,650 0.50 8.08 37
0.00 (0.88) 10.02 10.60 516,325 0.57 8.97 44
0.00 (0.89) 9.89 11.36 317,425 0.60 8.83 162
0.00 (0.93) 9.70 6.49 172,046 0.60 8.83 56
0.00 (0.32) 10.29 4.29 146,633 0.68+ 6.25+ 128
0.00 (0.65) 10.18 8.73 46,186 0.68 6.16+ 309
0.00 (0.62) 9.98 6.71 23,564 0.68 6.21 240
0.00 (0.65) 9.95 8.83 2,536 0.69 6.73 209
(0.02) (0.16) 9.76 2.53 771 0.66+ 6.93+ 77
$ 0.00 $(0.30) $10.16 4.65% $ 412,547 0.50%+ 5.93%+ 256%
0.00 (0.62) 10.00 8.29 401,204 0.50 5.98 335
0.00 (0.60) 9.81 6.33 339,375 0.51 6.31 237
(0.02) (0.65) 9.82 7.30 253,299 0.48 6.61 225
(0.02) (0.63) 9.77 4.80 170,866 0.47 6.35 102
0.00 (0.63) 9.94 3.15 141,411 0.50 5.73 54
0.00 (0.67) 10.25 8.95 101,025 0.50 6.16 95
0.00 (0.27) 10.04 7.72+ 31,027 0.51+ 6.80+ 13
0.00 (0.29) 10.16 4.52 7,710 0.76+ 5.80+ 256
0.00 (0.09) 10.00 0.58 56 0.75+ 8.53+ 335
$ 0.00 $(0.30) $10.15 4.09% $ 24,579 0.50%+ 5.97%+ 83%
0.00 (0.63) 10.05 7.93 $ 23,896 0.50 5.98 307
0.00 (0.15) 9.91 0.58 10,056 0.49+ 6.00+ 155
$ 0.00 $(0.33) $10.27 4.74% $ 3,914 2.76%+(j) 6.52%+ 34%
0.00 (0.44) 10.13 5.86 3,748 1.81(k) 6.30 486
$ 0.00 $(0.30) $10.45 6.13% $ 257,229 0.44%+ 5.80%+ 82%
0.00 (0.63) 10.14 9.80 239,152 0.45 3.75 96
0.00 (0.15) 9.83 (0.25) 13,458 0.44+ 6.01+ 49
$ 0.00 $(0.29) $ 9.92 4.53% $5,790 0.54%+ 5.82%+ 445%
0.00 (0.65) 9.77 4.70 5,526 0.52 4.46 967
0.00 (0.08) 9.93 0.09 5,638 0.51+ 6.54+ 160
</TABLE>
- --------
+ Annualized.
(j) Ratio of expenses to average net assets excluding interest expense on
reverse repurchase agreements is .51%.
(k) Ratio of expenses to average net assets excluding interest expense on
reverse repurchase agreements is .50%.
Prospectus 12
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<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
Institutional Class
9/30/98* $10.62 $0.33(+) $ 0.47 (+) $ 0.80 $(0.33) $ 0.00 $ 0.00 $ 0.00
3/31/98 10.27 0.64(+) 0.62 (+) 1.26 (0.62) (0.02) (0.27) 0.00
3/31/97 10.29 0.68 (0.02) 0.66 (0.66) (0.02) 0.00 0.00
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
Administrative Class
9/30/98* 10.62 0.31(+) 0.48 (+) 0.79 (0.32) 0.00 0.00 0.00
3/31/98 10.27 0.61(+) 0.63 (+) 1.24 (0.60) (0.02) (0.27) 0.00
3/31/97 10.29 0.66(+) (0.02)(+) 0.64 (0.64) (0.02) 0.00 0.00
3/31/96 10.01 0.80 0.29 1.09 (0.60) (0.09) (0.12) 0.00
3/31/95(l) 10.00 0.31 0.06 0.37 (0.32) (0.03) 0.00 0.00
Total Return Fund II
Institutional Class
9/30/98* $10.26 $0.30(+) $ 0.54 (+) $ 0.84 $(0.30) $ 0.00 $ 0.00 $ 0.00
3/31/98 9.85 0.63(+) 0.52 (+) 1.15 (0.60) (0.03) (0.11) 0.00
3/31/97(b) 9.89 0.61 (0.02) 0.59 (0.62) (0.01) 0.00 0.00
11/1/95-3/31/96 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(m) 10.00 0.49 0.23 0.72 (0.49) 0.00 (0.24) 0.00
Administrative Class
9/30/98* 10.26 0.28(+) 0.55 (+) 0.83 (0.29) 0.00 0.00 0.00
3/31/98 9.85 0.60(+) 0.52 (+) 1.12 (0.57) (0.03) (0.11) 0.00
3/31/97 9.89 0.59 (0.02) 0.57 (0.60) (0.01) 0.00 0.00
3/31/96 10.22 0.24 (0.17) 0.07 (0.26) 0.00 (0.09) (0.05)
10/31/95(n) 9.34 0.56 0.88 1.44 (0.55) 0.00 (0.01) 0.00
Total Return Fund III
Institutional Class
9/30/98* $ 9.55 $0.29(+) $ 0.42 (+) $ 0.71 $(0.29) $ 0.00 $ 0.00 $ 0.00
3/31/98 9.15 0.57(+) 0.56 (+) 1.13 (0.54) (0.03) (0.16) 0.00
3/31/97 9.13 0.55 0.05 0.60 (0.55) (0.02) 0.00 (0.01)
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(o) 10.00 0.63 0.58 1.21 (0.63) 0.00 (0.27) 0.00
Administrative Class
9/30/98* 9.55 0.28(+) 0.42 (+) 0.70 (0.28) 0.00 0.00 0.00
3/31/98(p) 9.12 0.54(+) 0.58 (+) 1.12 (0.50) (0.03) (0.16) 0.00
Total Return Mortgage Fund
Institutional Class
9/30/98* $10.24 $0.29(+) $ 0.22 (+) $ 0.51 $(0.29) $ 0.00 $ 0.00 $ 0.00
3/31/98(h) 10.00 0.41(+) 0.30 (+) 0.71 (0.46) 0.00 (0.01) 0.00
</TABLE>
- --------
<TABLE>
<S> <C>
(l) From commencement of operations, September 8, 1994. (o) From commencement of operations, May 1, 1991.
(m) From commencement of operations, December 30, 1991. (p) From commencement of operations, April 11, 1997.
(n) From commencement of operations, November 30, 1994.
</TABLE>
13 PIMCO Funds: Pacific Investment Management Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Net Asset Net Assets Ratio of Ratio of Net
Tax Basis Value End Expenses to Investment Portfolio
Return Total End Total of Period Average Income to Average Turnover
of Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.33) $11.09 7.67% $19,607,819 0.43%+ 6.14%+ 103%
0.00 (0.91) 10.62 12.63 16,484,119 0.43 6.06 206
0.00 (0.68) 10.27 6.60 12,528,536 0.43 6.60 173
0.00 (0.83) 10.29 11.14 10,247,605 0.42 6.85 221
(0.02) (0.63) 10.02 4.22 7,239,735 0.41 6.72 98
0.00 (1.18) 10.25 4.55 5,008,160 0.41 6.27 177
0.00 (1.07) 10.91 15.29 3,155,441 0.43 7.07 90
0.00 (1.15) 10.46 14.90 1,813,935 0.46 8.18 110
0.00 (0.91) 10.15 13.74 975,619 0.49 9.10 99
0.00 (0.93) 9.77 11.36 659,663 0.60 8.60 110
0.00 (1.09) 9.62 5.96 192,613 0.60 8.53 195
0.00 (0.32) 11.09 7.54 1,107,029 0.68+ 5.83+ 103
0.00 (0.89) 10.62 12.36 481,730 0.68 5.74 206
0.00 (0.66) 10.27 6.34 151,194 0.68 6.35 173
0.00 (0.81) 10.29 10.99 104,618 0.68 6.64 221
(0.01) (0.36) 10.01 3.76 9,037 0.66+ 6.54+ 98
$ 0.00 $(0.30) $10.80 8.33% $ 862,092 0.50%+ 5.77%+ 86%
0.00 (0.74) 10.26 11.99 574,587 0.50 6.15 361
0.00 (0.63) 9.85 6.15 478,451 0.50 6.38 293
0.00 (0.40) 9.89 0.78 455,583 0.51+ 6.36+ 73
0.00 (0.63) 10.21 15.96 442,091 0.50 6.47 41
(0.06) (0.62) 9.39 (3.58) 357,900 0.50 5.22 99
0.00 (0.96) 10.38 13.79 371,260 0.50 5.38 50
0.00 (0.73) 9.99 7.52 287,113 0.50+ 5.83+ 134
0.00 (0.29) 10.80 8.19 60,103 0.74+ 5.34+ 86
0.00 (0.71) 10.26 11.71 15,172 0.75 5.86 361
0.00 (0.61) 9.85 5.88 5,304 0.75 6.13 293
0.00 (0.40) 9.89 0.57 3,320 0.76+ 6.06+ 73
0.00 (0.56) 10.22 15.92 3,163 0.76+ 6.22+ 41
$ 0.00 $(0.29) $ 9.97 7.54% $ 442,417 0.50%+ 5.96%+ 68%
0.00 (0.73) 9.55 12.62 365,249 0.51 5.99 183
0.00 (0.58) 9.15 6.76 193,297 0.51 6.21 90
0.00 (0.75) 9.13 10.06 142,223 0.50 6.82 177
(0.08) (0.62) 8.99 4.92 99,497 0.50 6.95 146
0.00 (1.19) 9.18 5.64 97,522 0.50 6.00 95
0.00 (1.89) 9.81 14.47 65,349 0.51 6.06 161
0.00 (0.90) 10.31 13.61+ 47,908 0.60+ 6.75+ 521
0.00 (0.28) 9.97 7.40 1,793 0.76+ 5.75+ 68
0.00 (0.69) 9.55 12.46 178 0.76+ 5.85+ 183
$ 0.00 $(0.29) $10.46 5.08% $ 3,770 0.51%+ 5.66%+ 102%
0.00 (0.47) 10.24 6.69 3,588 0.52+ 6.07+ 593
</TABLE>
- --------
+ Annualized.
Prospectus 14
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<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>
High Yield Fund
Institutional Class
9/30/98* $11.66 $0.48(+) $(0.51)(+) $(0.03) $(0.48) $ 0.00 $ 0.00 $ 0.00
3/31/98 11.10 0.98(+) 0.65 (+) 1.63 (0.98) 0.00 0.00 (0.09)
3/31/97 10.94 0.92 0.34 1.26 (0.97) 0.00 (0.13) 0.00
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(q) 10.00 0.24 0.41 0.65 (0.24) 0.00 0.00 0.00
Administrative Class
9/30/98* 11.66 0.47(+) (0.51)(+) (0.04) (0.47) 0.00 0.00 0.00
3/31/98 11.10 0.95(+) 0.65 (+) 1.60 (0.95) 0.00 0.00 (0.09)
3/31/97 10.94 0.85(+) 0.38 (+) 1.23 (0.94) 0.00 (0.13) 0.00
3/31/96 10.41 1.02(+) 0.54 (+) 1.56 (0.98) 0.00 (0.05) 0.00
3/31/95(r) 10.14 0.23 0.25 0.48 (0.21) 0.00 0.00 0.00
Long-Term U.S. Gov't Fund
Institutional Class
9/30/98* $10.57 $0.36(+) $ 1.06 (+) $ 1.42 $(0.35) $ 0.00 $ 0.00 $ 0.00
3/31/98 9.39 0.52(+) 1.34 (+) 1.86 (0.62) 0.00 (0.06) 0.00
3/31/97 9.96 0.79 (0.35) 0.44 (0.68) 0.00 0.00 (0.33)
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(s) 10.00 0.64 0.85 1.49 (0.64) 0.00 (0.03) 0.00
Administrative Class
9/30/98* 10.57 0.34(+) 1.06 (+) 1.40 (0.33) 0.00 0.00 0.00
3/31/98(t) 10.17 0.26(+) 0.51 (+) 0.77 (0.31) 0.00 (0.06) 0.00
Global Bond Fund
Institutional Class
9/30/98* $ 9.70 $0.28(+) $ 0.45 (+) $ 0.73 $(0.28) $ 0.00 $ 0.00 $ 0.00
3/31/98 9.86 0.66(+) (0.10)(+) 0.56 (0.53) 0.00 0.00 (0.19)
3/31/97 10.05 0.70 (0.01) 0.69 (0.44) 0.00 (0.44) 0.00
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(u) 10.00 0.16 (0.15) 0.01 (0.16) 0.00 0.00 0.00
Administrative Class
9/30/98* 9.70 0.28(+) 0.45 (+) 0.73 (0.28) 0.00 0.00 0.00
3/31/98 9.86 0.59(+) (0.05)(+) 0.54 (0.51) 0.00 0.00 (0.19)
3/31/97(v) 10.28 0.51 (0.23) 0.28 (0.26) 0.00 (0.44) 0.00
Global Bond Fund II
Institutional Class
9/30/98* $ 9.92 $0.29(+) $ 0.10 (+) $ 0.39 $(0.28) $ 0.00 $ 0.00 $ 0.00
3/31/98(w) 9.82 0.06(+) 0.09 (+) 0.15 0.00 (0.05) 0.00 0.00
Foreign Bond Fund
Institutional Class
9/30/98* $10.74 $0.32(+) $ 0.20 (+) $ 0.52 $(0.31) $ 0.00 $ 0.00 $ 0.00
3/31/98 10.41 0.66(+) 0.61 (+) 1.27 (0.63) 0.00 (0.31) 0.00
3/31/97 10.50 0.80 1.00 1.80 (0.40) 0.00 (1.49) 0.00
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(x) 10.00 0.16 0.34 0.50 (0.16) 0.00 0.00 0.00
</TABLE>
- --------
(q) From commencement of operations, (v) From commencement of operations,
December 16, 1992. July 31, 1996. Formerly the
PIMCO Global Fund.
(r) From commencement of operations,
January 16, 1995. (w) From commencement of operations,
February 25, 1998.
(s) From commencement of operations,
July 1, 1991. (x) From commencement of operations,
December 3, 1992. Formerly the
(t) From commencement of operations, PIMCO Foreign Fund.
September 23, 1997.
(u) From commencement of operations,
November 23, 1993. Formerly the
PIMCO Global Fund.
15 PIMCO Funds: Pacific Investment Management Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Net Asset Net Assets Ratio of Ratio of Net
Tax Basis Value End Expenses to Investment Portfolio
Return Total End Total of Period Average Income to Average Turnover
of Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.48) $11.15 (0.27)% $1,795,413 0.50%+ 8.36%+ 30%
0.00 (1.07) 11.66 15.26 1,628,930 0.50 8.52 37
0.00 (1.10) 11.10 12.04 744,498 0.50 8.77 67
0.00 (1.06) 10.94 15.70 536,983 0.47 9.28 66
0.00 (0.97) 10.42 8.81 336,310 0.48 9.37 78
0.00 (0.97) 10.52 10.65 219,976 0.50 8.40 112
0.00 (0.24) 10.41 24.43+ 24,069 0.50+ 8.24+ 30
0.00 (0.47) 11.15 (0.39) 118,773 0.75+ 8.14+ 30
0.00 (1.04) 11.66 14.98 69,937 0.75 8.21 37
0.00 (1.07) 11.10 11.76 10,428 0.76 8.48 67
0.00 (1.03) 10.94 15.54 1,007 0.80+ 9.16+ 66
0.00 (0.21) 10.41 4.66 41 0.73+ 10.12+ 78
$0.00 $(0.35) $11.64 13.66% $ 123,647 0.54%+ 6.56%+ 111%
0.00 (0.68) 10.57 20.23 48,547 0.51 4.88 177
0.00 (1.01) 9.39 4.48 19,995 0.63 7.63 402
0.00 (1.38) 9.96 14.83 32,511 0.56 6.80 238
0.00 (0.62) 9.85 5.50 32,349 0.50 6.62 89
0.00 (1.96) 9.96 4.13 25,978 0.50 5.37 98
0.00 (1.82) 11.36 23.42 22,946 0.50 6.16 320
0.00 (0.67) 10.82 20.57+ 15,900 0.50+ 7.91+ 428
0.00 (0.33) 11.64 13.49 5,312 0.81+ 6.17+ 111
0.00 (0.37) 10.57 7.60 4,957 0.76+ 4.87+ 177
$0.00 $(0.28) $10.15 7.61% $ 275,923 0.56%+ 5.75%+ 36%
0.00 (0.72) 9.70 5.85 256,274 0.55 6.64 389
0.00 (0.88) 9.86 6.78 215,631 0.56 7.51 911
0.00 (0.99) 10.05 12.04 133,833 0.58 5.88 1,083
0.00 (0.53) 9.87 10.35 76,476 0.64 5.59 461
0.00 (0.16) 9.85 0.08 40,485 0.50+ 4.55+ 132
0.00 (0.28) 10.15 7.61 929 0.83+ 5.69+ 36
0.00 (0.70) 9.70 5.57 1,548 0.80 6.39 389
0.00 (0.70) 9.86 2.97 346 0.78+ 5.66+ 911
$0.00 $(0.28) $10.03 4.02% 27,426 0.56%+ 5.76%+ 69%
0.00 (0.05) 9.92 1.02 24,517 0.55+ 6.24+ 369
$0.00 $(0.31) $10.95 4.88% $ 491,207 0.50%+ 6.00%+ 161%
0.00 (0.94) 10.74 12.64 392,198 0.50 6.32 280
0.00 (1.89) 10.41 17.69 234,880 0.50 7.88 984
0.00 (0.87) 10.50 21.80 258,493 0.52 5.83 1,234
(0.61) (0.61) 9.38 (1.85) 232,700 0.47 6.44 299
0.00 (0.98) 10.18 7.79 498,521 0.54 5.12 260
0.00 (0.16) 10.34 16.23+ 178,895 0.65+ 4.97+ 123
</TABLE>
- --------
+ Annualized.
Prospectus 16
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<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>
Administrative Class
9/30/98* 10.74 0.30(+) 0.20 (+) 0.50 (0.29) 0.00 0.00 0.00
3/31/98 10.41 0.63(+) 0.61 (+) 1.24 (0.60) 0.00 (0.31) 0.00
3/31/97(y) 10.54 0.59 (0.67) (0.08) (0.05) 0.00 0.00 0.00
International Bond Fund
Institutional Class
9/30/98* $ 7.18 $0.15(+) $ 0.13 (+) $ 0.28 $(0.10) $ 0.00 $ 0.00 $ 0.00
3/31/98 7.79 0.64 0.19 0.83 (0.25) 0.00 (0.24) (0.95)
3/31/97 8.04 0.84 0.42 1.26 (0.50) 0.00 (1.01) 0.00
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(z) 10.00 0.15 (0.27) (0.12) (0.10) 0.00 0.00 0.00
Emerging Markets Bond Fund
Institutional Class
9/30/98* $ 9.67 $0.40(+) $(2.85)(+) $(2.45) $(0.40) $ 0.00 $ 0.00 $ 0.00
3/31/98(h) 10.00 0.46(+) (0.18)(+) 0.28 (0.46) 0.00 (0.15) 0.00
Emerging Markets Bond Fund II
Institutional Class
9/30/98(aa)* $10.00 $0.40(+) $(1.35)(+) $(0.95) $(0.38) $ 0.00 $ 0.00 $ 0.00
Municipal Bond Fund
Institutional Class
9/30/98* $ 9.97 $0.22(+) $ 0.28 (+) $ 0.50 $(0.22) $ 0.00 $ 0.00 $ 0.00
3/31/98(bb) 10.00 0.11 (0.03) 0.08 (0.11) 0.00 0.00 0.00
Administrative Class
9/30/98*(cc) 10.25 0.00(+) 0.00 (+) 0.00 0.00 0.00 0.00 0.00
Strategic Balanced Fund
Institutional Class
9/30/98* $12.60 $0.16(+) $(0.41)(+) $(0.25) $(0.15) $ 0.00 $ 0.00 $ 0.00
3/31/98 10.32 1.30(+) 2.05 3.35 (0.84) 0.00 (0.23) 0.00
3/31/97(dd) 10.00 0.85 0.31 1.16 (0.63) 0.00 (0.21) 0.00
StocksPLUS Fund
Institutional Class
9/30/98* $14.09 $0.21(+) $(1.18)(+) $(0.97) $(0.19) $ 0.00 $ 0.00 $ 0.00
3/31/98 11.46 1.90(+) 3.23 (+) 5.13 (1.41) 0.00 (1.09) 0.00
3/31/97 11.16 1.27 0.82 2.09 (1.27) 0.00 (0.52) 0.00
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(ee) 10.00 0.34 0.10 0.44 (0.34) (0.01) (0.10) (0.47)
Administrative Class
9/30/98* 14.06 0.16(+) (1.16)(+) (1.00) (0.18) 0.00 0.00 0.00
3/31/98 11.46 1.89(+) 3.19 (+) 5.08 (1.39) 0.00 (1.09) 0.00
3/31/97(ff) 11.56 0.14 (0.09) 0.05 (0.15) 0.00 0.00 0.00
</TABLE>
- --------
<TABLE>
<S> <C>
(y) From commencement of operations, January 28, 1997. (cc) From commencement of operations, September 30, 1998.
(z) From commencement of operations, December 13, 1989. (dd) From commencement of operations, June 28, 1996.
Formerly the PIMCO International Fund. (ee) From commencement of operations, May 14, 1993.
(aa) From commencement of operations, April 8, 1998. (ff) From commencement of operations, January 7, 1997.
(bb) From commencement of operations, December 31, 1997. ++ Gain distribution includes $0.14 per share characterized
for tax purposes as distributions from ordinary income.
</TABLE>
17 PIMCO Funds: Pacific Investment Management Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Net Asset Net Assets Ratio of Ratio of Net
Tax Basis Value End Expenses to Investment Portfolio
Return Total End Total of Period Average Income to Average Turnover
of Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.00 (0.29) 10.95 4.75 1,547 0.75+ 5.74+ 161
0.00 (0.91) 10.74 12.34 315 0.75 6.07 280
0.00 (0.05) 10.41 (0.72) 30 0.79+ 7.63+ 984
$0.00 $(0.10) $ 7.36 3.93% $ 528,004 0.52% 4.08% 154%
0.00 (1.44) 7.18 11.49 730,622 0.51 8.17 255
0.00 (1.51) 7.79 15.86 957,950 0.50 7.17 875
0.00 (0.52) 8.04 15.08 2,271,940 0.50 6.09 1,046
0.00 (2.26) 7.44 (1.27) 45,950 0.43 5.90 674
0.00 (1.31) 9.93 6.54 2,296,978 0.43 5.51 370
0.00 (0.53) 10.53 10.61 2,589,677 0.46 6.67 301
0.00 (0.98) 10.02 10.97 1,314,661 0.51 8.24 201
0.00 (0.93) 9.94 11.55 609,660 0.55 8.23 202
0.00 (0.10) 9.78 (4.18)+ 407,210 0.75+ 7.94+ 49
$0.00 $(0.40) $ 6.82 (25.91)% $ 3,106 0.92%+ 9.43%+ 217%
0.00 (0.61) 9.67 3.10 3,676 0.86+ 7.21+ 695
$0.00 $(0.38) $ 8.67 (9.69)% $ 90,722 0.86%+ 8.73%+ 113%
$0.00 $(0.22) $10.25 5.04% $ 6,375 0.50%+ 4.32%+ 41%
0.00 (0.11) 9.97 0.78 3,023 0.50+ 4.46+ 60
0.00 0.00 10.25 0.00 100 0.75+ 0.00+ 41
$0.00 $(0.15) $12.20 (2.00)% $ 37,747 0.65%+ 2.52%+ 21%
0.00 (1.07) 12.60 33.40 38,806 0.65 10.84 56
0.00 (0.84) 10.32 11.83 10,360 0.90+ 9.72+ 95
$0.00 $(0.19) $12.93 (6.99)% $ 421,977 0.65%+ 3.01%+ 63%
0.00 (2.50) 14.09 47.75 416,600 0.65 13.74 30
0.00 (1.79) 11.46 19.44 235,829 0.65 11.78 47
0.00 (2.71) 11.16 34.07 151,869 0.70 15.23 102
0.00 (0.76) 10.48 18.64 46,498 0.50 11.89 177
0.00 (0.92) 9.52 1.55 14,330 0.50+ 4.00+ 33
0.00 (0.18) 12.88 (7.22) 3,889 0.90+ 2.25+ 63
0.00 (2.48) 14.06 47.19 2,143 0.90 13.49 30
0.00 (0.15) 11.46 0.34 682 0.95+ 4.83+ 47
</TABLE>
- --------
+ Annualized.
Prospectus
18
<PAGE>
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. For temporary, defensive or emergency purposes, a
Fund may invest without limit in U.S. debt securities, including short-term
money market securities, when in the opinion of the Adviser it is appropriate
to do so. It is impossible to predict for how long such alternative strategies
will be utilized. 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 this Prospectus and "Investment Objectives and Policies" in the
Statement of Additional Information.
In selecting securities for each 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.
Fixed Income Funds
With the exception of the PIMCO Strategic Balanced, Convertible Bond,
StocksPLUS and StocksPLUS Short Strategy Funds, each remaining Fund (together,
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 and Short-Term Funds 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. The investment objective of
the PIMCO Real Return Bond Fund is to seek to realize maximum real return,
consistent with the preservation of real capital and prudent investment
management. For a discussion of "real return," see "Total Return and Real
Return," below. The investment objective of the PIMCO Global Bond Fund II is
to seek maximum total return, consistent with the preservation of capital. The
investment objective of the PIMCO Municipal Bond Fund is to seek high current
income exempt from federal income tax, consistent with preservation of
capital. Capital appreciation is a secondary objective of the PIMCO Municipal
Bond Fund. Each of the remaining Fixed Income Funds seeks to maximize total
return, consistent with preservation of capital and prudent investment
management.
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 descriptions 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; inflation-indexed bonds issued by
both governments and corporations; structured notes, including hybrid or
"indexed" securities, catastrophe bonds, and loan participations; delayed
funding loans and revolving credit facilities; bank certificates of deposit,
fixed time deposits and bankers' acceptances; repurchase agreements and
reverse repurchase agreements; debt securities issued by states or local
governments and their agencies, authorities and other instrumentalities;
obligations of foreign governments or their subdivisions, agencies and
instrumentalities; and obligations of international agencies or
19 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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 and Municipal Bond Funds, may invest
all of its assets in derivative instruments or in mortgage- or asset-backed
securities. Each of the Fixed Income Funds, except the PIMCO Money Market
Fund, may adhere to its investment policy by entering into a series of
purchase and sale contracts or utilizing other investment techniques by which
it may obtain market exposure to the securities in which it primarily invests.
In addition, each of the Fixed Income Funds may lend its portfolio
securities to brokers, dealers and other financial institutions in order to
earn income. Each of the Fixed Income Funds may purchase and sell options and
futures subject to the limits discussed below, engage in credit spread trades
and enter into forward foreign currency contracts.
Each of the PIMCO Real Return Bond, Global Bond, Global Bond II, Foreign
Bond, International Bond, Emerging Markets Bond and Emerging Markets Bond II
Funds will normally invest at least 80% of its total assets in "bonds." For
this purpose, each of these Funds considers the various types of debt or fixed
income securities in which it invests, as specifically described elsewhere in
this Prospectus, to be "bonds" as referenced in that Fund's name. The use of
this name is not meant to restrict a Fund's investment to the narrow category
of debt securities that are formally called "bonds."
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 PIMCO Global Bond, Emerging Markets Bond and
Emerging Markets Bond II Funds) 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 Real Return Bond, Commercial Mortgage Securities, Global Bond,
Global Bond II, Foreign Bond, International Bond, Emerging Markets Bond and
Emerging Markets Bond II Funds are "non-diversified" for purposes of the 1940
Act, meaning that they may invest a greater percentage of their assets in the
securities of one issuer than the other Funds. The Funds are still, however,
subject to diversification requirements imposed by the Internal Revenue Code
of 1986, as amended, which means that as of the end of each calendar quarter,
a Fund may have no more than 25% of its assets invested in the securities of a
single issuer, and may, with respect to 50% of its assets, have no more than
5% of its assets invested in the securities of a single issuer. 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.
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 397 days or less from the date of purchase. The dollar-weighted average
portfolio maturity of the Fund will not exceed 90 days. The Fund may invest in
the following: obligations of the U.S. Government (including its agencies and
instrumentalities); short-term corporate debt securities of domestic and
foreign corporations; obligations of domestic and foreign commercial banks,
savings banks, and savings and loan associations; and commercial paper. The
Prospectus 20
<PAGE>
Fund may invest more than 25% of its total assets in securities or obligations
issued by U.S. banks.
The Fund may invest only in securities that comply with the quality,
maturity and diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940, which regulates money market funds.
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 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 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 Low Duration Mortgage Fund invests under normal circumstances at least
80% of its assets in a diversified portfolio of mortgage-related securities.
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 Aaa by Moody's
or AAA by S&P, subject to a minimum rating of Baa by Moody's or BBB by S&P
(or, if unrated, determined by the Adviser to be of comparable quality). The
average portfolio duration of this Fund will normally vary within a one- to
three-year time frame based on the Adviser's view of the potential for total
return offered by a particular duration strategy. The Fund may invest without
limit in U.S. dollar-denominated securities of foreign issuers. The total rate
of return and share price for this Fund are expected to exhibit less
volatility than that of the PIMCO Total Return Mortgage Fund because its
duration will be shorter.
21 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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 five-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 Real Return Bond Fund invests under normal circumstances at least 65%
of its total assets in inflation-indexed bonds issued by U.S. and foreign
governments, their agencies or instrumentalities. 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). The Fund may invest up to 35% of its
assets in other types of fixed income instruments, including securities
denominated in foreign currencies, (and the Fund may also invest beyond this
limit in U.S. dollar-denominated securities of foreign issuers).
Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted according to the rate of inflation. Such bonds generally
are issued at an interest rate lower than non-inflation related bonds, but are
expected to retain their value against inflation over time. For a more
complete discussion of inflation-indexed bonds, including the risks associated
with investing in such securities, see "Characteristics and Risks of
Securities and Investment Techniques--Inflation-Indexed Bonds." See
"Dividends, Distributions and Taxes" for information about the possible tax
consequences of investing in the Fund and in inflation-indexed bonds.
In managing fixed income securities, one of the principal tools generally
used by the Adviser is "duration," which is a measure of the expected life of
a fixed income security on a present value basis, incorporating a bond's
yield, coupon interest payments, final maturity and call features. See
"Appendix A--Description of Duration." Because of the unique features of
inflation-indexed bonds, the Adviser utilizes a modified form of duration for
the PIMCO Real Return Bond Fund ("modified real duration") which measures
price changes in such bonds as a result of changes in real, rather than
nominal, interest rates. Although there is no limit on the modified real
duration of the PIMCO Real Return Bond Fund, it is expected that the average
modified real duration of the Fund will normally vary approximately within the
range of the average modified real duration of all inflation-indexed bonds
issued by the U.S. Treasury in the aggregate.
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.
Prospectus 22
<PAGE>
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 Total Return Mortgage Fund has the same policies as the PIMCO Low
Duration Mortgage Fund, except that its average portfolio duration will
normally vary within a two- to six-year time frame based on the Adviser's view
of the potential for total return offered by a particular duration strategy.
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 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).
Securities rated below investment grade may be referred to as "junk bonds."
The remainder of the Fund's assets may be invested in investment grade (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) fixed income securities. 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 ("Junk Bonds")."
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 normally have a minimum average portfolio duration of eight
years. For point of reference, the dollar-weighted average portfolio maturity
of the Fund is
23 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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 (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). 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 Long Duration Fund invests under normal circumstances at least 65% of
its assets in a diversified portfolio of fixed income securities of varying
maturities. The Fund will normally have a minimum average portfolio duration
of eight years. 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 more volatility
than that of the PIMCO Total Return Fund because its duration will normally be
longer.
PIMCO Global Bond 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 seven-year time frame.
PIMCO Global Bond Fund II has the same policies as the PIMCO Global Bond
Fund, except as set forth below. The PIMCO Global Bond Fund II expects to
hedge its foreign currency exposure so that generally no more than 25% of the
Fund's total net assets will be invested in unhedged foreign currency-
denominated securities. The PIMCO Global Bond Fund II may not borrow in excess
of 10% of the value of its total assets and then only from banks as a
temporary measure to facilitate the meeting of redemption requests (not for
leverage), or for extraordinary or emergency purposes. The PIMCO Global Bond
Fund II may only engage in short sales that are "against the box," and may not
loan its portfolio securities if their market value exceeds 25% of the total
assets of the Fund. In addition, the PIMCO Global Bond Fund II is subject to
different fundamental and non-fundamental investment restrictions than the
PIMCO Global Bond Fund. See "Investment Restrictions" in this Prospectus and
in the Statement of Additional Information.
PIMCO Foreign Bond 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
Prospectus 24
<PAGE>
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 seven-year time frame.
The PIMCO Foreign Bond Fund differs from the PIMCO Global Bond and Global
Bond II Funds primarily in the extent to which assets are invested in the
securities of issuers located outside the United States. The Adviser will
select these 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 Bond Fund is available only to private account clients
of PIMCO. The Fund invests in a portfolio of fixed income securities
denominated in major foreign currencies, baskets of foreign currencies, and
the U.S. dollar. 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 Bond 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.
PIMCO Emerging Markets Bond Fund invests in a portfolio of fixed income
securities denominated in foreign currencies and the U.S. dollar. Under normal
market conditions, the Fund will invest at least 80% of its assets in fixed
income securities of issuers that are economically tied to countries with
emerging securities markets. The Fund may invest up to 20% of its assets in
other types of fixed income instruments, including securities of issuers
located in, or securities denominated in currencies of, countries with
developed foreign securities markets. The Fund also may invest up to 10% of
its assets in shares of investment companies that invest primarily in emerging
market debt securities. The average portfolio duration of the Fund will vary
based on the Adviser's view of the potential for total return offered by a
particular duration strategy and, under normal market conditions, is not
expected to exceed eight years.
The Adviser has broad discretion to identify and invest in countries that it
considers to qualify as emerging securities markets. However, the Adviser
generally considers an emerging securities market to be one located in any
country that is defined as an emerging or developing economy by any of the
following: the International Bank for Reconstruction and Development (i.e.,
the World Bank), including its various offshoots, such as the International
Finance Corporation, or the United Nations or its authorities. The Fund
considers an issuer to be economically tied to a country if (1) the issuer is
organized under the laws of, or maintains its principal place of business in,
the country, (2) its securities are principally traded in the country's
securities markets, or (3) the issuer derived at least half of its revenues or
profits from goods produced or sold, investments made, or services performed
in the country, or has at least half of its assets in that country.
25 PIMCO Funds: Pacific Investment Management Series
<PAGE>
The Fund emphasizes countries with relatively low gross national product per
capita and with the potential for rapid economic growth. The Adviser will
select the Fund's 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. The Fund likely will concentrate its
investments in Asia, Africa, the Middle East, Latin America and the developing
countries of Europe. Accordingly, the Fund will be particularly susceptible to
the effects of political and economic developments in these regions. This
effect may be exacerbated by a relative scarcity of issuers in certain of
these markets, which may result in the Fund being highly concentrated in a
small number of issuers. For a further discussion of the special risks of
investing in foreign and emerging market countries, see "Characteristics and
Risks of Securities and Investment Techniques--Foreign Securities."
The Fund's investments in emerging market fixed income securities may be
represented by futures contracts (including related options) with respect to
such securities, options on such securities, equity securities (including
common stocks) upon the conversion of convertible securities, or securities
the return on which is derived primarily from emerging securities markets,
when the Adviser deems it appropriate to do so.
The Fund may invest substantially all of its assets in securities 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). Such
securities are sometimes referred to as "junk bonds." While these securities
generally provide greater potential opportunity for capital appreciation and
higher yields than investments in higher rated securities, they also entail
greater risk, including the possibility of default or bankruptcy of the issuer
of the securities. Risk of default or bankruptcy may be greater in periods of
economic uncertainty or recession, as the issuers may be less able to
withstand general economic downturns affecting the regions in which the Fund
invests. The Adviser seeks to reduce risk through diversification, credit
analysis and attention to current developments and trends in emerging market
economies and markets. The value of most 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 ("Junk Bonds")."
PIMCO Emerging Markets Bond Fund II is available only to private account
clients of PIMCO. The Fund has the same policies as the PIMCO Emerging Markets
Bond Fund, except that the Fund (i) may only invest up to 15% of its assets in
securities denominated in currencies of emerging market countries, and (ii)
may only invest up to 10% of its assets in securities rated B by Moody's or
S&P (or, if unrated, determined by the Adviser to be of comparable quality).
PIMCO Municipal Bond Fund seeks high current income exempt from federal
income tax, consistent with preservation of capital. Capital appreciation is a
secondary objective. The Fund seeks its objectives by investing in debt
securities whose interest is, in the opinion of bond counsel for the issuer at
the time of issuance, exempt from federal income tax ("Municipal Bonds").
Municipal Bonds generally are issued by states and local governments and their
agencies, authorities and other instrumentalities. It is a policy of the Fund
that, under normal market conditions, at least 80% of its net assets will be
invested in Municipal Bonds. The Fund may invest up to 20% of net assets in
U.S. Government securities, money market instruments and/or "private activity"
bonds. Under normal circumstances, the average portfolio duration of the PIMCO
Municipal Bond Fund will vary within a three- to ten-year time frame, based on
the Adviser's forecast for interest rates.
The Fund may invest up to 10% of its net assets, under normal market
conditions, in Municipal Bonds or "private activity" bonds which are rated
below Baa by Moody's or BBB by S&P but which are rated at least Ba by Moody's
or BB by S&P (or, if unrated, determined by the Adviser to be of comparable
quality). For information on the risks associated
Prospectus 26
<PAGE>
with investments in securities rated below investment grade, see "Appendix B--
Description of Securities Ratings."
Stock and Bond Funds
The Stock and Bond Funds are the PIMCO Strategic Balanced and Convertible
Bond Funds. The investment objective of 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 Convertible Bond Fund is to seek to realize maximum total return,
consistent with prudent investment management.
PIMCO Strategic Balanced Fund invests in the securities eligible for
purchase by the PIMCO StocksPLUS and Total Return Funds. The percentage of the
Fund's assets invested in equity and fixed income exposure will vary in
accordance with a methodology developed by the Adviser. The methodology is
based upon the Adviser's long-standing process of economic forecasting of
business cycle stages and consideration of the risk and reward potential of
equity and fixed income securities. 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
methodology for selecting the optimal blend of equity and fixed income
exposure will be successful.
PIMCO Convertible Bond Fund invests under normal circumstances at least 65%
of its assets in a diversified portfolio of convertible securities.
Convertible securities include but are not limited to: corporate bonds,
debentures, notes or preferred stocks and their hybrids than can be converted
into (exchanged for) common stock or other securities, such as warrants or
options, which provide an opportunity for equity participation. The Fund may
invest up to 35% of its assets in convertible securities that are rated below
investment grade but rated Caa or higher by Moody's or CCC or higher by
Standard & Poor's (or, if unrated, determined by the Adviser to be of
comparable quality). The Fund may only invest up to 10% of its assets in
convertible securities rated Caa or CCC (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. In
addition, the Fund may invest up to 35% of its assets in common stocks or in
non-convertible securities eligible for purchase by the Fixed Income Funds.
Stock Funds
The Stock Funds are the PIMCO StocksPLUS and StocksPLUS Short Strategy
Funds. The investment objective of PIMCO StocksPLUS Fund is to seek to achieve
a total return which exceeds the total return performance of the 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.
Each of the Stock 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 Stock
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 Stock Funds may lend its portfolio
securities to brokers, dealers and other financial institutions in order to
earn income. Each of the Stock 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
Stock Funds may invest up to 20% of its assets in securities denominated in
foreign currencies, may purchase and sell options and futures on foreign
currencies, and may enter into forward currency contracts.
27 PIMCO Funds: Pacific Investment Management Series
<PAGE>
The Stock Funds differ in composition or strategy as follows:
PIMCO StocksPLUS Fund 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 in an attempt to equal or exceed the performance of
the S&P 500. The Adviser expects that under normal market conditions, the Fund
will invest substantially all of its assets in S&P 500 derivatives, backed by
a portfolio of fixed income securities. 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. 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. The Fund will seek to remain invested in S&P 500
derivatives or S&P 500 stocks even when the S&P 500 is declining.
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 500 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."
To the extent that the Fund invests in S&P 500 derivatives backed by a
portfolio of fixed income securities, under certain conditions, generally in a
market where the value of both S&P 500 derivatives and fixed income securities
are declining, the Fund may experience greater losses than would be the case
if it were to invest directly in a portfolio of S&P 500 stocks.
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 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 segregation of assets determined to be
Prospectus 28
<PAGE>
liquid by the Adviser in accordance with procedures established by the Board
of Trustees, 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 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.
The Adviser will actively manage the fixed income portion of the Fund's
investment portfolio that is used as coverage for 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
the Adviser'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.
Total Return and Real 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.
Generally, when interest rates are falling, a portfolio with a shorter
duration 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.
29 PIMCO Funds: Pacific Investment Management Series
<PAGE>
"Real Return," or "Inflation Adjusted Return," as referenced in the name and
investment objective of the PIMCO Real Return Bond Fund, is a measure of the
change in purchasing power of money invested in a particular instrument after
adjusting for inflation. An investment in a security generating a high nominal
return (such as a typical U.S. Government Treasury bond) may not generate a
high real return once inflation is considered. For example, an instrument
generating a 9% nominal return at a time when inflation is 6% has a real
return of approximately 3%; that is, the purchasing power of the money
invested in that instrument would only increase by approximately 3%. On the
other hand, an inflation-indexed instrument generating a 5% real return would
generate a 5% increase in purchasing power regardless of the rate of
inflation. As stated above, the investment objective of the Fund is to seek to
achieve maximum real return. The total return (not adjusted for inflation)
attained by this Fund may be less than the total return attained by other of
the PIMCO Funds that do not invest primarily in inflation-indexed securities.
In the case of inflation-indexed bonds, changes in market value are tied to
the relationship between nominal interest rates and the rate of inflation. If
inflation were to rise at a faster rate than nominal interest rates, real
interest rates might decline, leading to an increase in value of inflation-
indexed bonds. In contrast, if nominal interest rates increase at a faster
rate than inflation, real interest rates might increase, leading to a decrease
in value of inflation-indexed bonds.
INVESTMENT RESTRICTIONS
Each Fund's investment objective (except the PIMCO Global Fund II) 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) (a) 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, or, in the case of the PIMCO Municipal Bond
Fund, an industrial development revenue bonds based, directly or
indirectly, on the credit of private entities in any one industry;
except that this restriction does not apply (i) to securities issued
or guaranteed by the U.S. Government or its agencies or
instrumentalities (or repurchase agreements with respect thereto)
and (ii) with respect to the Money Market Fund, to securities or
obligations issued by U.S. banks. Investments of the PIMCO Municipal
Bond Fund, in utilities, gas, electric water and telephone companies
will be considered as being in separate industries;
(b) for the Global Bond Fund II, concentrate more than 25% of the value
of its total assets in any one industry (The SEC staff takes the
position that investments in government securities of a single
foreign country, including agencies and instrumentalities of such
government, to the extent such obligations are backed by the assets
and revenues of such government, represent investments in a separate
industry for these purposes.);
(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 PIMCO Real Return Bond, Commercial Mortgage
Securities, Global Bond, Global Bond II, Foreign Bond, International
Bond, Emerging Markets Bond or Emerging Markets Bond II Funds). For the
purpose of this restriction, each state and each separate political
subdivision, agency, authority or instrumentality of such state, each
multi-state agency or authority, and each guarantor, if any, are treated
as separate issuers of Municipal Bonds;
Prospectus 30
<PAGE>
(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 Real Return Bond, Commercial
Mortgage Securities, Global Bond, Global Bond II, Foreign Bond,
International Bond, Emerging Markets Bond or Emerging Markets Bond II
Funds);
(4) (a) 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;
(b) for the Global Bond Fund II, purchase or sell real estate, although
it may purchase securities of issuers which deal in real estate,
including securities of real estate investment trusts, and may
purchase securities which are secured by interests in real estate;
(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 (this restriction is not applicable to the Global Bond
Fund II.);
(6) for the Total Return III, High Yield, International Bond 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) (a) 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);
(b) for the Global Bond Fund II: (i) borrow money in excess of 10% of
the value (taken at the lower of cost or current value) of the
Fund's total assets (not including the amount borrowed) at the time
the borrowing is made, and then only from banks as a temporary
measure to facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely disposition of
portfolio investments or for extraordinary or emergency purposes
(Such borrowings will be repaid before any additional investments
are purchased.); or (ii) pledge, hypothecate, mortgage or otherwise
encumber its assets in excess of 10% of the Fund's total assets
(taken at cost) and then only to secure borrowings permitted above;
(The deposit of securities or cash or cash equivalents in escrow in
connection with the writing of covered call or put options,
respectively, is not deemed to be pledges or other encumbrances.)
(For the purpose of this restriction, collateral arrangements with
respect to the writing of options, futures contracts, options on
futures contracts, and collateral arrangements with respect to
initial and variation margin are not deemed to be a pledge of assets
and neither such arrangements nor the purchase or sale of futures or
related options are deemed to be the issuance of a senior security.)
31 PIMCO Funds: Pacific Investment Management Series
<PAGE>
(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. (This restriction is not applicable to the Global Bond
Fund II.)
(9) (a) 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
(b) for the Global Bond Fund II, underwrite securities issued by other
persons except to the extent that, in connection with the
disposition of its portfolio investments, it may be deemed to be an
underwriter under federal securities laws; or
(10)(a) for the Total Return III, High Yield, 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, Low Duration Mortgage, Moderate Duration, Real Return
Bond, Total Return, Total Return II, Total Return Mortgage,
Commercial Mortgage Securities, Long-Term U.S. Government, Long
Duration, Global Bond, Foreign Bond, International Bond, Emerging
Markets Bond, Emerging Markets Bond II, Strategic Balanced,
Convertible Bond and StocksPLUS Short Strategy 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.
To the extent a Fund covers its commitment under a reverse repurchase
agreement (or economically similar transaction) by the segregation of assets
determined to be liquid in accordance with procedures adopted by the Trustees,
equal in value to the amount of the Fund's commitment to repurchase, such an
agreement will not be considered a "senior security" by the Fund and therefore
will not be subject to the 300% asset coverage requirement otherwise
applicable to borrowings by the Fund.
Each Fund is also subject to non-fundamental restrictions and policies
(which may be changed without shareholder approval) relating to the investment
of its assets and activities. As indicated above, certain fundamental
investment restrictions do not apply to certain Funds. However, certain non-
fundamental restrictions, set forth in the Statement of Additional
Information, place comparable limitations on these Funds. See "Investment
Restrictions" in the Statement of Additional Information.
Unless otherwise indicated, all limitations applicable to Fund investments
(as stated above and elsewhere in this Prospectus and in the 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
Prospectus 32
<PAGE>
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.
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
33 PIMCO Funds: Pacific Investment Management Series
<PAGE>
discussed separately below under "High Yield Securities ("Junk Bonds")."
Convertible Securities
Each Fund (except the PIMCO Money Market and Municipal Bond Funds) may
invest in convertible securities, which may offer higher income than the
common stocks into which they are convertible. The convertible securities in
which the Funds may invest consist of bonds, notes, debentures and preferred
stocks which may be converted or exchanged at a stated or determinable
exchange ratio into underlying shares of common stock. A convertible security
entitles the holder to receive interest or dividends until the convertible
security matures or is redeemed, converted or exchanged.
Because of the conversion feature, the price of the convertible security
will normally fluctuate in some proportion to changes in the price of the
underlying asset, and as such is subject to risks relating to the activities
of the issuer and/or general market and economic conditions. The income
component of a convertible security may tend to cushion the security against
declines in the price of the underlying asset. However, the income component
of convertible securities causes fluctuations based upon changes in interest
rates and the credit quality of the issuer. In addition, convertible
securities are often lower-rated securities. See "High Yield Securities ("Junk
Bonds')."
A Fund may be required to permit the issuer of a convertible security to
redeem the security, convert it into the underlying asset, or sell it to a
third party. If the issuer chooses to do so, it could force a Fund to convert
or sell a security before the holder would otherwise choose, which may have an
adverse effect on a Fund's ability to achieve its investment objectives.
While the Fixed Income Funds intend to invest primarily in fixed income
securities, each may invest in convertible securities or equity securities.
While some countries or companies may be regarded as favorable investments,
pure fixed income opportunities may be unattractive or limited due to
insufficient supply, legal or technical restrictions. In such cases, a Fund
may consider equity securities or convertible securities to gain exposure to
such investments.
Loan Participations and Assignments
Certain Funds may invest in fixed- and floating-rate loans arranged through
private negotiations between an issuer of debt instruments and one or more
financial institutions ("lenders"). Generally, the Funds' investments in loans
are expected to take the form of loan participations and assignments of
portions of loans from third parties.
Large loans to corporations or governments may be shared or syndicated among
several lenders, usually banks. The Funds may participate in such syndicates,
or can buy part of a loan, becoming a direct lender. Participations and
assignments involve special types of risk, including limited marketability and
the risks of being a lender. See "Illiquid Securities" for a discussion of the
limits on a Fund's investments in loan participations and assignments with
limited marketability. If a Fund purchases a participation, it may only be
able to enforce its rights through the lender, and may assume the credit risk
of the lender in addition to the borrower. In assignments, the Funds' rights
against the borrower may be more limited than those held by the original
lender.
Delayed Funding Loans and Revolving Credit Facilities
The Funds (except the PIMCO Money Market and Municipal Bond Funds) may also
enter into, or acquire participations in, delayed funding loans and revolving
credit facilities. Delayed funding loans and revolving credit facilities are
borrowing arrangements in which the lender agrees to make loans up to a
maximum amount upon demand by the borrower during a specified term. A
revolving credit facility differs from a delayed funding loan in that as the
borrower repays the loan, an amount equal to the repayment may be borrowed
again during the term of the revolving
Prospectus 34
<PAGE>
credit facility. These commitments may have the effect of requiring a Fund to
increase its investment in a company at a time when it might not otherwise
decide to do so (including at a time when the company's financial condition
makes it unlikely that such amounts will be repaid).
The Funds may acquire a participation interest in delayed funding loans or
revolving credit facilities from a bank or other financial institution. See
"Loan Participations and Assignments." The terms of the participation require
the Fund to make a pro rata share of all loans extended to the borrower and
entitles the Fund to a pro rata share of all payments made by the borrower.
Delayed funding loans and revolving credit facilities usually provide for
floating or variable rates of interest. To the extent that a Fund is committed
to advance additional funds, it will at all times segregate assets, determined
to be liquid by the Adviser in accordance with procedures established by the
Board of Trustees, in an amount sufficient to meet such commitments.
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. The PIMCO
Money Market Fund may invest in a variable rate security having a stated
maturity in excess of 397 calendar days if the interest rate will be adjusted,
and the Fund may demand payment of principal from the issuer, within that
period.
Each Fund may invest in floating rate debt instruments ("floaters") and
(except the PIMCO Money Market and Municipal Bond Funds) engage in credit
spread trades. 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. A credit
spread trade is an investment position relating to a difference in the prices
or interest rates of two securities or currencies, where the value of the
investment position is determined by movements in the difference between the
prices or interest rates, as the case may be, of the respective securities or
currencies.
Each Fund (except the PIMCO Money Market and Municipal Bond Funds) 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% (10% in the case of the PIMCO Low
Duration Mortgage and Total Return Mortgage Funds) 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.
Inflation-Indexed Bonds
Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted according to the rate of inflation. Two structures are
common. The U.S. Treasury and some other issuers use a structure that accrues
inflation into the principal value of the bond. Most other issuers pay out the
CPI accruals as part of a semiannual coupon.
Inflation-indexed securities issued by the U.S. Treasury have maturities of
five, ten or thirty years, although it is possible that securities with other
maturities will be issued in the future. The U.S. Treasury securities pay
interest on a
35 PIMCO Funds: Pacific Investment Management Series
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semi-annual basis, equal to a fixed percentage of the inflation-adjusted
principal amount. For example, if a Fund purchased an inflation-indexed bond
with a par value of $1,000 and a 3% real rate of return coupon (payable 1.5%
semi-annually), and inflation over the first six months were 1%, the mid-year
par value of the bond would be $1,010 and the first semi-annual interest
payment would be $15.15 ($1,010 times 1.5%). If inflation during the second
half of the year resulted in the whole years' inflation equalling 3%, the end-
of-year par value of the bond would be $1,030 and the second semi-annual
interest payment would be $15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the principal
value of inflation-indexed bonds will be adjusted downward, and consequently
the interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal
upon maturity (as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds, even during a period of deflation. However,
the current market value of the bonds is not guaranteed, and will fluctuate.
The Funds may also invest in other inflation related bonds which may or may
not provide a similar guarantee. If a guarantee of principal is not provided,
the adjusted principal value of the bond repaid at maturity may be less than
the original principal.
The value of inflation-indexed bonds is expected to change in response to
changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if inflation were to rise at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds.
While these securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline
in value. If interest rates rise due to reasons other than inflation (for
example, due to changes in currency exchange rates), investors in these
securities may not be protected to the extent that the increase is not
reflected in the bond's inflation measure.
The periodic adjustment of U.S. inflation-indexed bonds is tied to the
Consumer Price Index for Urban Consumers ("CPI-U"), which is calculated
monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of
changes in the cost of living, made up of components such as housing, food,
transportation and energy. Inflation-indexed bonds issued by a foreign
government are generally adjusted to reflect a comparable inflation index,
calculated by that government. There can be no assurance that the CPI-U or any
foreign inflation index will accurately measure the real rate of inflation in
the prices of goods and services. Moreover, there can be no assurance that the
rate of inflation in a foreign country will be correlated to the rate of
inflation in the United States.
Any increase in the principal amount of an inflation-indexed bond will be
considered taxable ordinary income, even though investors do not receive their
principal until maturity. See "Dividends, Distributions and Taxes" for
information about the possible tax consequences of investing in the PIMCO Real
Return Bond Fund and in inflation-indexed bonds.
Mortgage-Related and Other Asset-Backed Securities
Each of the Funds (except the PIMCO Money Market, Municipal Bond and
Convertible Bond Funds) may invest all of its assets in mortgage- or other
asset-backed securities. The Convertible Bond Fund may invest up to 35% of its
assets in such 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 other fixed income investments, 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
Prospectus 36
<PAGE>
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. The rate of prepayments on underlying
mortgages will affect the price and volatility of a mortgage-related security,
and may have the effect of shortening or extending the effective maturity of
the security beyond what was anticipated at the time of purchase. To the
extent that unanticipated rates of prepayment on underlying mortgages increase
the effective maturity of a mortgage-related security, the volatility of such
security can be expected to increase.
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. Interest and pre-paid principal on a CMO are paid, in most cases,
on a monthly basis. 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.
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-related or asset-backed
securities.
37 PIMCO Funds: Pacific Investment Management Series
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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 mortgage dollar
rolls (see "Reverse Repurchase Agreements, Dollar Rolls, and Borrowings"), 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 interest-only,
or "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% (10% in the case of the PIMCO Low Duration Mortgage and
Total Return Mortgage Funds) 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.
Municipal Bonds
The PIMCO Municipal Bond Fund invests in Municipal Bonds which are generally
issued by states and local governments and their agencies, authorities and
other instrumentalities. The Municipal Bonds which the PIMCO Municipal Bond
Fund may purchase include general obligation bonds and limited obligation
bonds (or revenue bonds), including industrial development bonds issued
pursuant to former federal tax law. General obligation bonds are obligations
involving the credit of an issuer possessing taxing power and are payable from
such issuer's general revenues and not from any particular source. Limited
obligation bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Tax-exempt "private activity"
bonds and industrial development bonds generally are also revenue bonds and
thus are not payable from the issuer's general revenues. The PIMCO Municipal
Bond Fund may invest in Municipal Bonds with credit enhancements such as
letters of credit, municipal bond insurance and Standby Bond Purchase
Agreements. The PIMCO Municipal Bond Fund may also invest in municipal lease
obligations, as well as securities derived from Municipal Bonds, such as
residual interest bonds and participation interests.
Municipal Bonds are subject to credit and market risk. Credit risk relates
to the ability of the issuer to make payments of principal and interest. The
ability of an issuer to make such payments could be affected by litigation,
legislation or other political events or the bankruptcy of the issuer. Market
risk relates to changes in a security's value as a result of changes in
interest rates. Lower rated Municipal Bonds generally provide higher yields
but are subject to greater credit and market risk than higher quality
Municipal Bonds.
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.
Prospectus 38
<PAGE>
Reverse Repurchase Agreements, Dollar Rolls, and Borrowings
A reverse repurchase agreement involves the sale of a security by a Fund and
its agreement to repurchase the instrument at a specified time and price.
Under a reverse repurchase agreement, the Fund continues to receive any
principal and interest payments on the underlying security during the term of
the agreement. The Fund generally will segregate assets determined to be
liquid by the Adviser in accordance with procedures established by the Board
of Trustees to cover its obligations under reverse repurchase agreements and,
to this extent, a reverse repurchase agreement (or economically similar
transaction) will not be considered a "senior security" subject to the 300%
asset coverage requirements otherwise applicable to borrowings by a Fund.
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
segregate assets determined to be liquid by the Adviser in accordance with
procedures established by the Board of Trustees, to cover its obligations
under dollar rolls.
To the extent that positions in reverse repurchase agreements, dollar rolls
or similar transactions are not covered through the maintenance of segregated
liquid assets at least equal to the amount of any forward purchase commitment,
such transactions would be subject to the Funds' limitations on borrowings,
which would restrict the aggregate of such transactions (plus any other
borrowings) to 33 1/3% (for each Fund except the PIMCO Global Bond Fund II) of
a Fund's total assets. Apart from such transactions, a Fund will not borrow
money, except for temporary administrative purposes. The PIMCO Global Bond
Fund II may not borrow in excess of 10% of the value of its total assets and
then only from banks as a temporary measure to facilitate the meeting of
redemption requests (not for leverage) or for extraordinary or emergency
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% (25% in the case of the PIMCO Global Bond Fund II) of
the total assets of the Fund.
Each Fund's performance will continue to reflect changes in the value of the
securities loaned and will also reflect the receipt of either interest through
investment of cash collateral by the Fund in permissible investments, or a
fee, if the collateral is U.S. Government securities. Securities lending
involves the risk of loss of rights in the collateral or delay in recovery of
the collateral should the borrower fail to return the securities loaned or
become insolvent. The Funds may pay lending fees to the party arranging the
loan.
39 PIMCO Funds: Pacific Investment Management Series
<PAGE>
When-Issued, Delayed Delivery, 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 segregate until
the settlement date assets determined to be liquid by the Adviser in
accordance with procedures established by the Board of Trustees, 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
segregated.
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, delayed
delivery 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 Total Return III, High Yield 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
segregated assets determined to be liquid by the Adviser in accordance with
procedures established by the Board of Trustees 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. The PIMCO Global Bond
Fund II may only engage in short sales that are "against the box."
Foreign Securities
Each of the Funds (except the PIMCO Low Duration II, Total Return II, Long-
Term U.S. Government and Municipal Bond Funds) may invest directly in fixed
income securities of non-U.S. issuers. The PIMCO Money Market, Low Duration
Mortgage, Total Return Mortgage, Commercial Mortgage Securities and High Yield
Funds may only invest in U.S. dollar-denominated fixed income securities of
non-U.S. issuers. Each of the Stock and Bond and Stock Funds may invest
directly in foreign equity securities.
Prospectus 40
<PAGE>
Except for the PIMCO Emerging Markets Bond and Emerging Markets Bond II
Funds, each of the Funds will concentrate its investments in securities of
issuers based in developed countries. However, the PIMCO Short-Term, Low
Duration and Low Duration III Funds may each invest up to 5% of its assets in
securities of issuers based in the emerging market countries in which the
PIMCO Emerging Markets Bond and Emerging Markets Bond II Funds may invest, and
each of the remaining Fixed Income Funds that may invest in foreign securities
may invest up to 10% of its assets in such securities. In addition, the
Convertible Bond Fund may invest up to 10% of its assets in such securities.
Individual foreign economies may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross domestic product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. The securities markets, values of securities, yields and
risks associated with securities markets in different countries may change
independently of each other. 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.
Certain of the Funds, and particularly the PIMCO Emerging Markets Bond and
Emerging Markets Bond II Funds, may invest in the securities of issuers based
in countries with developing economies. Investing in developing (or "emerging
market") 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. A number of emerging
market countries restrict, to varying degrees, foreign investment in
securities. Repatriation of investment income, capital, and the proceeds of
sales by foreign investors may require governmental registration and/or
approval in some emerging market countries. A number of the currencies of
emerging market countries have experienced significant declines against the
U.S. dollar in recent years, and devaluation may occur subsequent to
investments in these currencies by a Fund. Inflation and rapid fluctuations in
inflation rates have had, and may continue to have, negative effects on the
economies and securities markets of certain emerging market countries. Many of
the emerging securities markets are relatively small, have low trading
volumes, suffer periods of relative illiquidity, and are characterized by
significant price volatility. There is a risk in emerging market countries
that a future economic or political crisis could lead to price controls,
forced mergers of companies, expropriation or confiscatory taxation, seizure,
nationalization, or creation of government monopolies, any of which may have a
detrimental effect on a Fund's investment.
Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned companies; the
41 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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 significantly smaller market capitalization of
securities markets. Also, any change in the leadership or policies of Eastern
European countries, or the countries that exercise a significant influence
over those countries, may halt the expansion of or reverse the liberalization
of foreign investment policies now occurring and adversely affect existing
investment opportunities.
In addition, emerging securities markets may have different clearance and
settlement procedures, which may be unable to keep pace with the volume of
securities transactions or otherwise make it difficult to engage in such
transactions. Settlement problems may cause a Fund to miss attractive
investment opportunities, hold a portion of its assets in cash pending
investment, or delay in disposing of a portfolio security. Such a delay could
result in possible liability to a purchaser of the security.
Each of the Fixed Income Funds (except the PIMCO Low Duration II, Total
Return II, Long-Term U.S. Government and Municipal Bond 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.
Certain of the Funds also may invest in sovereign debt (other than Brady
Bonds) issued by governments, their agencies or instrumentalities, or other
government-related entities located in emerging market countries. Holders of
sovereign debt may be requested to particpate in the rescheduling of such debt
and to extend further loans to governmental entities. In addition, there is no
bankruptcy proceeding by which defaulted sovereign debt may be collected.
A Fund's investments in foreign currency denominated debt obligations and
hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Fund's
income distributions to constitute returns of capital for tax purposes or
require the Fund to make distributions exceeding book income to qualify as a
regulated investment company for federal tax purposes.
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. For
example, significant uncertainty surrounds the introduction of the euro (a
common currency for the European Union) in January 1999 and its effect on the
value of securities denominated in local European currencies.
Prospectus 42
<PAGE>
These and other 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 exchange contract, the
Fund "locks in" the exchange rate between the currency it will deliver and the
currency it will receive for the duration of the contract. As a result, a Fund
reduces its exposure to changes in the value of the currency it will deliver
and increases its exposure to changes in the value of the currency it will
exchange into. The effect on the value of a Fund is similar to selling
securities denominated in one currency and purchasing securities denominated
in another. 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. Each Fund will segregate assets determined to be liquid
by the Adviser in accordance with procedures established by the Board of
Trustees, to cover its obligations under forward foreign currency exchange
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 Bond, Emerging Markets Bond, Emerging Markets Bond II and Convertible
Bond Funds, 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, the PIMCO
Emerging Markets Bond Fund may invest up to 100% 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, determined by
the Adviser to be of comparable quality). In addition, each of the PIMCO
Short-Term, Low Duration, Low Duration III, Moderate Duration, Real Return
Bond, Total Return, Total Return III, Long Duration, Global Bond, Global Bond
II, Foreign Bond, Strategic Balanced, StocksPLUS and StocksPLUS Short Strategy
Funds may invest up to 10% of its assets in such securities. The Emerging
Markets Bond Fund II may invest up to 10% of its assets in securities rated B
by Moody's or S&P and may invest up to 100% of its assets in securities rated
Ba by Moody's or BB by S&P (or, if not rated, determined by the Adviser to be
of comparable quality). The Municipal Bond Fund may invest up to 10% of its
assets in securities rated lower than Baa by Moody's or BBB by S&P but rated
at least Ba by Moody's or BB by S&P. The Convertible Bond Fund may invest up
to 35% of its assets in securities rated lower than Baa by Moody's or BBB by
S&P but rated at least Caa by Moody's or CCC by S&P (or, if not rated,
determined by the Adviser to be of comparable quality. 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.
43 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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.
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.
Prospectus 44
<PAGE>
During the year ended March 31, 1998, 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
- ---- ------- --- --- --- ------- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term 17% 35% 2% 15% 16% 9% 6% 0%
Low Duration 6 75 1 1 5 7 5 0
Low Duration III 40 54 0 4 0 2 0 0
Moderate Duration 23 45 2 8 6 9 7 0
Total Return 20 47 0 13 6 8 6 0
Total Return III 16 44 1 17 9 8 5 0
High Yield 5 2 0 0 2 6 43 42
Global Bond 34 44 4 10 1 3 4 0
Global Bond II 65 21 3 6 0 2 3 0
Foreign Bond 54 31 4 2 1 2 6 0
Emerging Markets Bond 16 14 0 0 0 18 47 5
Strategic Balanced 17 58 1 9 4 2 9 0
StocksPLUS 26 38 1 10 11 7 7 0
</TABLE>
These figures are intended solely to provide disclosure about each Fund's
asset composition during its most recent fiscal year. 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.
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 and
Municipal Bond Funds) also may enter into swap agreements with respect to
foreign currencies, interest rates, and securities indexes. The Funds may use
these techniques to hedge against changes in interest rates, foreign currency
exchange rates or securities prices or as part of their overall investment
strategies. The Funds (except the PIMCO Money Market and Municipal Bond Funds)
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 segregate
assets determined to be liquid by the Adviser in accordance with procedures
established by the Board of Trustees (or, as permitted by applicable
regulation, enter into certain offsetting positions) to cover its obligations
under options, futures, and swaps to limit leveraging of the Fund.
Derivative instruments are considered for these purposes 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 depends upon cash flows from
underlying assets, such as mortgage-related or asset-backed securities. Each
Fund (except the PIMCO Money Market and Municipal Bond Funds) may invest all
of its assets in derivative instruments, subject only to the Fund's investment
objective and policies. The value of some derivative
45 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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. Also,
suitable derivative transactions may not be available in all circumstances.
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
otherwise, due to the possible inability of a Fund to purchase or sell a
portfolio security at a time that otherwise would be favorable or the possible
need 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. In addition, a
Fund's use of such instruments may cause the Fund to realize higher amounts of
short-term capital gains (generally taxed at ordinary income tax rates) than
if it had not used such instruments.
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 "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
Prospectus 46
<PAGE>
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 security 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 security 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 in which certain Funds may invest 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 (except the PIMCO Money Market and Municipal Bond
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 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
47 PIMCO Funds: Pacific Investment Management Series
<PAGE>
against amounts owed to the Fund), and any accrued but unpaid net amounts owed
to a swap counterparty will be covered by the segregation of assets determined
to be liquid by the Adviser in accordance with procedures established by the
Board of Trustees, to limit 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 and Municipal Bond Funds) may invest in
interest rate futures contracts and options thereon ("futures options"), and
to the extent it may invest in foreign currency-denominated securities, may
also invest in foreign currency futures contracts and options thereon. The
PIMCO Municipal Bond Fund may purchase and sell futures contracts on U.S.
Government securities and Municipal Bonds, as well as purchase put and call
options on such futures contracts. Each of the Stock and Bond and Stock Funds
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."
Prospectus 48
<PAGE>
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.
Hybrid Instruments
A hybrid instrument can combine the characteristics of securities, futures,
and options. For example, the principal amount or interest rate of a hybrid
could be tied (positively or negatively) to the price of some commodity,
currency or securities index or another interest rate (each a "benchmark").
The interest rate or (unlike most fixed income securities) the principal
amount payable at maturity of a hybrid security may be increased or decreased,
depending on changes in the value of the benchmark.
Hybrids can be used as an efficient means of pursuing a variety of
investment goals, including currency hedging, duration management, and
increased total return. Hybrids may not bear interest or pay dividends. The
value of a hybrid or its interest rate may be a multiple of a benchmark and,
as a result, may be leveraged and move (up or down) more steeply and rapidly
than the benchmark. These benchmarks may be sensitive to economic and
political events, such as commodity shortages and currency devaluations, which
cannot be readily foreseen by the purchaser of a hybrid. Under certain
conditions, the redemption value of a hybrid could be zero. Thus, an
investment in a hybrid may entail significant market risks that are not
associated with a similar investment in a traditional, U.S. dollar-denominated
bond that has a fixed principal amount and pays a fixed rate or floating rate
of interest. The purchase of hybrids also exposes a Fund to the credit risk of
the issuer of the hybrids. These risks may cause significant fluctuations in
the net asset value of the Fund. Accordingly, no Fund will invest more than 5%
of its assets in hybrid instruments.
Certain issuers of structured products such as hybrid instruments may be
deemed to be investment companies as defined in the 1940 Act. As a result, the
Funds' investments in these products will be subject to limits applicable to
investments in investment companies and may be subject to restrictions
contained in the 1940 Act.
Catastrophe Bonds
Each of the Fixed Income Funds (except the PIMCO Money Market Fund), the
Stock and Bond Funds and the PIMCO StocksPLUS Fund may invest in "catastrophe
bonds." Catastrophe bonds are fixed income securities, for which the return of
principal and payment of interest is contingent on the non-occurrence of a
specific "trigger" catastrophic event, such as a hurricane or an earthquake.
They may be issued by government agencies, insurance companies, reinsurers,
special purpose corporations or other on-shore or off-shore entities. If a
trigger event causes losses exceeding a specific amount in the geographic
region and time period specified in a bond, a Fund investing in the bond may
lose a portion or all of its principal invested in the bond. If no trigger
event occurs, the Fund will recover its principal plus interest. For some
catastrophe bonds, the trigger event or losses may be based on companywide
losses, index-portfolio losses, industry indices, or readings of scientific
instruments rather than specified actual losses. Often the catastrophe bonds
provide for extensions of maturity that are mandatory, or optional at the
discretion of the issuer, in order to process and audit loss claims in those
cases where a trigger event has, or possibly has, occurred. In addition to the
specified trigger events, catastrophe bonds may also expose the Fund to
certain unanticipated risks including but not limited to issuer (credit)
default, adverse regulatory or jurisdictional interpretations, and adverse tax
consequences.
49 PIMCO Funds: Pacific Investment Management Series
<PAGE>
Catastrophe bonds are a relatively new type of financial instrument. As
such, there is no significant trading history of these securities, and there
can be no assurance that a liquid market in these instruments will develop.
See "Illiquid Securities" below. Lack of a liquid market may impose the risk
of higher transaction costs and the possibility that a Fund may be forced to
liquidate positions when it would not be advantageous to do so. Catastrophe
bonds are typically rated, and a Fund will only invest in catastrophe bonds
that meet the credit quality requirements for the Fund.
Investment in Investment Companies
Each of the Funds may invest up to 10% of its total assets in securities of
other investment companies, such as closed-end management investment
companies, or in pooled accounts or other investment vehicles. As a
shareholder of an investment company, a Fund may indirectly bear service and
other fees which are in addition to the fees the Fund pays its service
providers.
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). Certain illiquid
securities may require pricing at fair value as determined in good faith under
the supervision of the Board of Trustees. The Adviser may be subject to
significant delays in disposing of illiquid securities, and transactions in
illiquid securities may entail registration expenses and other transaction
costs that are higher than those for transactions in liquid securities. 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 and other securities which legally or in
the Adviser's opinion may be deemed illiquid (not including 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).
Illiquid securities may include privately placed securities, which are sold
directly to a small number of investors, usually institutions. Unlike public
offerings, such securities are not registered under the federal securities
laws. Although certain of these securities may be readily sold, for example,
under Rule 144A, others may be illiquid, and their sale may involve
substantial delays and additional costs.
Service Systems--Year 2000 Problem
Many of the services provided to the Funds depend on the smooth functioning
of computer systems. Many systems in use today cannot distinguish between the
year 1900 and the year 2000. Should any of the service systems fail to process
information properly, that could have an adverse impact on the Funds'
operations and services provided to shareholders. The Adviser, Distributor,
Shareholder Servicing and Transfer Agent, Custodian, and certain other service
providers to the Funds have reported that each is working toward mitigating
the risks associated with the so-called "year 2000 problem." However, there
can be no assurance that the problem will be corrected in all respects and
that the Funds' operations and services provided to shareholders will not be
adversely affected, nor can there be any assurance that the year 2000 problem
will not have an adverse effect on the entities whose securities are held by
the Funds or on domestic or global markets or economies, generally.
Prospectus 50
<PAGE>
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, R. Wesley Burns, Vern
O. Curtis, Brent R. Harris, Thomas P. Kemp, 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 management company founded in 1971, and had
approximately $158 billion in assets under management as of December 31, 1998.
PIMCO is a subsidiary of PIMCO Advisors L.P. ("PIMCO Advisors"). The general
partners of PIMCO Advisors are PIMCO Partners, G.P. and PIMCO Advisors
Holdings L.P. ("PAH"). PIMCO Partners, G.P. is a general partnership between
PIMCO Holding LLC, a Delaware limited liability company and an indirect
wholly-owned subsidiary of Pacific Life Insurance Company, and PIMCO Partners
LLC, a California limited liability company controlled by the current Managing
Directors and two former Managing Directors of PIMCO. PIMCO Partners, G.P. is
the sole general partner of PAH. PIMCO's address is 840 Newport Center Drive,
Suite 300, 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."
51 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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>
Portfolio Manager and Business Experience (past
Fund five years)
---- -----------------------------------------------
<C> <S>
Money Market Fund Leslie Barbi, Senior Vice President, PIMCO. As
a Fixed Income Portfolio Manager for PIMCO
since 1993, Ms. Barbi has managed assets for
various institutional accounts, and has managed
the PIMCO Money Market Fund since November 1,
1995.
Short-Term Fund William H. Gross, Managing Director, PIMCO. A
Low Duration Fund Fixed Income Portfolio Manager, Mr. Gross is
Low Duration Fund II one of the founders of PIMCO and has managed
Low Duration Fund III the PIMCO Low Duration, Low Duration II, Low
Moderate Duration Fund Duration III, Total Return, Total Return II and
Total Return Fund Total Return III Funds since their inception,
Total Return Fund II May 11, 1987, November 1, 1991, December 31,
Total Return Fund III 1996, May 11, 1987, December 30, 1991, and May
Strategic Balanced Fund 1, 1991, respectively. Mr. Gross is the leader
StocksPLUS Fund of the team which has managed the PIMCO Short-
Term, StocksPLUS, Strategic Balanced and
Moderate Duration Funds since January 6, 1998.
Low Duration Mortgage Fund William C. Powers, Managing Director, PIMCO. As
a Fixed Income Portfolio Manager for PIMCO
since 1991, Mr. Powers has managed assets for
various institutional accounts, and has managed
the Low Duration Mortgage Fund since its
inception, July 31, 1997.
Real Return Bond Fund John Brynjolfsson, Vice President, PIMCO. As a
Fixed Income Portfolio Manager for PIMCO since
1989, Mr. Brynjolfsson has managed assets for
various institutional accounts, and has managed
the PIMCO Real Return Bond Fund since its
inception, January 29, 1997.
Total Return Mortgage Fund Pasi Hamalainen, Executive Vice President,
Long-Term U.S. Government Fund PIMCO. As a Fixed Income Portfolio Manager for
Long Duration Fund PIMCO since 1994, Mr. Hamalainen has managed
assets for various institiutional accounts, and
has managed the PIMCO Long-Term U.S. Government
Fund since July 1, 1997 and the Total Return
Mortgage Fund since its inception, July 31,
1997. Prior to joining PIMCO in 1994, Mr.
Hamalainen, held a fellowship at The Wharton
School and assisted in teaching in the MBA
program and the Aresty Institute of Executive
Education.
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.
Global Bond Fund Lee R. Thomas, III, Managing Director and
Global Bond Fund II Senior International Portfolio Manager, PIMCO.
Foreign Bond Fund As a Fixed Income Portfolio Manager for PIMCO
International Bond Fund since 1995, Mr. Thomas has managed assets for
various institiutional accounts, and has
managed the PIMCO Foreign Bond, Global Bond and
International Bond Funds since July 13, 1995,
and the PIMCO Global Bond Fund II since October
1, 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.
Emerging Markets Bond Fund Michael J. Rosborough, Senior Vice President,
Emerging Markets Bond Fund II PIMCO . As a Fixed Income Portfolio Manager for
PIMCO since 1994, Mr. Rosborough has managed
assets for various institutional accounts, and
has managed the Emerging Markets Bond and
Emerging Markets Bond II Funds since their
inception on August 1, 1997 and April 3, 1998,
respectively. Prior to joining PIMCO in 1994,
Mr. Rosborough was associated with RBC Dominion
in Tokyo as a Vice President and Manager in
foreign fixed income.
Municipal Bond Fund Benjamin Ehlert, Executive Vice President,
PIMCO. As a Fixed Income Portfolio Manager for
PIMCO since 1986, Mr. Ehlert has managed assets
for various institutional accounts, and has
managed the PIMCO Municipal Bond Fund since its
inception on December 31, 1997.
Convertible Bond Fund Sandra K. Durn, Vice President, PIMCO. A
Convertible Bond Portfolio Manager, Ms. Durn
joined PIMCO in 1999 to manage the Convertible
Bond Fund. Prior to joining PIMCO in 1999, Ms.
Durn was associated with Nicholas-Applegate
Capital Management where she was a Convertible
Securities Portfolio Manager from 1995 to 1999,
and a Quantitative Analyst since 1994.
</TABLE>
Prospectus 52
<PAGE>
Prior Performance of Portfolio Manager for Convertible Bond Fund
As portfolio manager for the PIMCO Convertible Bond Fund, Ms. Durn is
primarily responsible for the day-to-day management of the Fund's portfolio.
Prior to joining PIMCO, Ms. Durn served as the portfolio manager of the
Nicholas-Applegate Convertible Fund (the "N-A Fund") from December 1, 1996
through February 28, 1999, and during that time had full discretionary
authority over the selection of investments for the N-A Fund. The N-A Fund has
substantially similar investment policies, strategies and objectives as those
of the PIMCO Convertible Bond Fund. The N-A Fund offers three retail classes
and two institutional classes. On February 28, 1999, the N-A Fund had
approximately $295.5 million in total net assets.
Average annual total returns of the Institutional and Advisory Classes of
the N-A Fund for the one-year period ended December 31, 1998 and for the
entire period during which Ms. Durn managed the N-A Fund, compared with the
performance of the CS First Boston Convertible Index, were:
<TABLE>
<CAPTION>
N-A Fund (a)
----------------------
Institutional Advisory
Class Class CS First Boston
------------- -------- Index (b)
<S> <C> <C> <C>
One-year (ended 12/31/98) 21.48% 21.34% 6.55%
Ms. Durn's N-A Fund Tenure
(December 1, 1996 through
February 28,1999) 20.49% 20.23% 9.75%
</TABLE>
(a) Average annual total return reflecting changes in share prices and
reinvestment of dividends and distributions during the period, net of Fund
expenses.
(b) The CS First Boston Index is an unmanaged market-weighted index
representing the universe of convertible securities, whether they are
convertible preferred stocks or convertible bonds. It reflects the
reinvestment of income dividends and capital gains distributions, if any,
but does not reflect deductions for advisory fees, brokerage commissions
or markups, or other expenses of investing.
The N-A Fund's Lipper Analytical Services, Inc. rankings for the one-year
period ended December 31, 1998 and for the period Ms. Durn managed the Fund
were:
Lipper Rankings--Convertible Stock Fund Category (a)
One-year (ended 12/31/98) 1 out of 58 funds
Ms. Durn's N-A Fund Tenure (December 1, 1996 through February 28, 1999) 1
out of 42 funds
(a) Lipper is an industry research firm whose rankings are based on total
return performance and do not reflect the effect of sales charges. Each
fund is ranked within a universe of funds similar in investment objective.
Past performance is not indicative of future returns. Rankings reflect the
Institutional Class.
Share prices and investment returns will fluctuate reflecting market
conditions, as well as changes in company-specific fundamentals of portfolio
securities. For the periods shown above, the expenses of the N-A Fund were
higher than the anticipated expenses of the PIMCO Convertible Bond Fund.
Expense levels will affect a fund's performance. The PIMCO Convertible Bond
Fund and the N-A Fund are separate funds and the historical performance of the
N-A Fund is not indicative of the potential performance of the PIMCO
Convertible Bond Fund. Data regarding the N-A Fund is for informational
purposes only and PIMCO Funds has no affiliation with and is not endorsed by
the N-A Fund.
Fund Administrator
PIMCO also serves as administrator for the Funds' Institutional Class and
Administrative Class shares pursuant to an administration agreement with the
Trust. PIMCO provides administrative services for Institutional Class and
53 PIMCO Funds: Pacific Investment Management Series
<PAGE>
Administrative Class shareholders of 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 Funds (and not PIMCO) are 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 fees payable with respect to the Administrative Class shares,
and may include certain other expenses as permitted by the Trust's Multi-Class
Plan adopted pursuant to Rule 18f-3 under the 1940 Act and subject to review
and approval by the Trustees.
Advisory and Administrative Fees
The 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, Strategic Balanced,
Convertible Bond, StocksPLUS and
StocksPLUS Short Strategy Funds............................. 0.40%
Emerging Markets Bond and Emerging Markets Bond II Funds..... 0.45%
All other Funds.............................................. 0.25%
<CAPTION>
Administrative
Fund Fee Rate
---- --------------
<S> <C>
Money Market, Short-Term and Moderate Duration Funds......... 0.20%
Low Duration and Total Return Funds.......................... 0.18%
Global Bond and Global Bond II Funds......................... 0.30%
Emerging Markets Bond and Emerging Markets Bond II Funds..... 0.40%
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 and Distribution 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 the Plans, 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 and
marketing of shares
Prospectus 54
<PAGE>
and/or the provision of certain shareholder services (in the case of the
Distribution Plan) or the administration of plans or programs that use Fund
shares as their funding medium (in the case of the Administrative Services
Plan), and to reimburse certain other 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 and Administrative 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 other than service fees paid with respect to Administrative Class
shares. Service agents may impose additional or different conditions on the
purchase or redemption of Fund shares by their customers and may charge their
customers transaction or other account fees on the purchase and redemption of
Fund 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 Funds Distributors LLC
(the "Distributor"), a wholly owned subsidiary of PIMCO Advisors. The
Distributor, which is located at 2187 Atlantic Street, Stamford, Connecticut
06902, is a broker-dealer registered with the SEC.
PURCHASE OF SHARES
Each Fund offers its shares in up to six classes: Institutional Class,
Administrative Class, Class A, Class B, Class C, and Class D. This Prospectus
relates only to the Institutional Class and Administrative Class shares of the
Funds. For information regarding Class A, Class B, Class C, and Class D
shares, see "Other Information--Multiple Classes of Shares" below.
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 and high net worth
individuals (Institutional Class shares may also be offered through certain
financial intermediaries that charge their customers transaction or other fees
with respect to their customers' investments in the Funds). Shares of the
Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers, and other intermediaries, and each Fund pays
service and/or distribution fees to such entities for services they provide to
shareholders of that class.
Shares of either the Institutional Class or the Administrative 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 $5
million, except that the minimum initial investment for a registered
investment adviser purchasing Institutional Class shares for its clients
through omnibus accounts is $250,000 per Fund. Shares of either class may also
be offered to clients of the Adviser and its affiliates and to the benefit
plans of the Adviser and its affiliates. Shares of the PIMCO International
Bond and
55 PIMCO Funds: Pacific Investment Management Series
<PAGE>
Emerging Markets Bond II Funds are offered only to clients of PIMCO who
maintain separately managed private accounts. In addition, the minimum initial
investment does not apply to shares of the Institutional Class offered through
fee-based programs sponsored and maintained by a registered broker-dealer and
approved by the Distributor pursuant to which each investor pays an asset
based fee to a financial intermediary for investment advisory and/or
administrative services.
Pension and profit-sharing plans, employee benefit trusts and employee
benefit plan alliances and "wrap account" programs established with broker-
dealers or other financial intermediaries may purchase shares of either class
only if the plan or program for which the shares are being acquired will
maintain an omnibus or pooled account for each Fund and will not require a
Fund to pay any type of administrative payment per participant account to any
third party. A financial intermediary through which shares may be purchased
may restrict the frequency or timing of purchases or redemptions of Fund
shares by their customers, which may have the effect of limiting a
shareholder's ability to respond to changing market conditions.
The investment minimums discussed in this section do not apply to
participants in PIMCO Advisors Portfolio Strategies, a managed product
sponsored by PIMCO Advisors.
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 300, 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 National Financial Data Services (the "Transfer Agent"), 330
W. 9th Street, 4th Floor, Kansas City, Missouri 64105. 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
Life Insurance Company; 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.
A purchase order, together with payment in proper form, received by the
Transfer Agent prior to the close of regular trading on the New York Stock
Exchange (the "Exchange") (normally 4:00 p.m., Eastern time) on a day the
Trust is open for business will be effected at that day's net asset value. In
order to facilitate efficient operation of the PIMCO StocksPLUS, StocksPLUS
Short Strategy and Strategic Balanced Funds, the Trust requests that all
purchase or exchange orders for these Funds be received by the Transfer Agent
at least one hour prior to the close of regular trading on the Exchange
(normally 3:00 p.m., Eastern time). An order received after the close of
regular trading on the Exchange will be effected at the net asset value
determined on the next business day. However, orders received by certain
retirement plans and other financial intermediaries by the close of business
and communicated to the Transfer Agent by 9:00 a.m., Eastern time, on the
following business day will be effected at the net asset value determined on
the prior business day. The Trust is "open for business" on each day the
Exchange is open for trading, which excludes the following holidays: New
Year's Day, Martin Luther King, Jr. 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.
Prospectus 56
<PAGE>
With respect to the Funds whose policy is to declare dividends daily (i.e.,
each of the Fixed Income Funds except the PIMCO International Bond 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 federal funds wire is received.
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.
Other Purchase Information
Purchases of a Fund's Institutional Class and Administrative Class 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, or to redeem shares, in whole or in part,
when, in the judgment of management, such suspension or rejection is in the
best interests of the Trust. The Trust and the Distributor may also waive the
minimum initial investment for certain investors.
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 share price
appears evident.
Institutional Class and Administrative Class 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. The administrator of a plan or employee benefits office can provide
participants or employees with detailed information on how to participate in
the plan and how to elect a Fund as an investment option. Participants in a
retirement or savings plan may be permitted to elect different investment
options, alter the amounts contributed to the plan, or change how
contributions are allocated among investment options in accordance with the
plan's specific provisions. The terms of a plan may restrict the frequency or
timing of a participant's contributions, allocations or redemptions, which may
have the effect of limiting a participant's ability to respond to
57 PIMCO Funds: Pacific Investment Management Series
<PAGE>
changing market conditions. The plan administrator or employee benefits office
should be consulted for details. For questions about participant accounts,
participants should contact their employee benefits office, the plan
administrator, or the organization that provides recordkeeping services for
the plan. 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 an order with the plan administrator, and the time the
order is forwarded to the Transfer Agent for execution.
REDEMPTION OF SHARES
Redemptions by Mail
Institutional Class and Administrative Class shares may be redeemed by
submitting a written request to PIMCO Funds, 840 Newport Center Drive, Suite
300, 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 (949) 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 million or more may be initiated by telephone, but must be confirmed in
writing by an authorized party prior to processing.
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.
Prospectus 58
<PAGE>
Other Redemption Information
Redemption requests for Fund shares are effected at the net asset value per
share next determined after receipt in good order of the redemption request by
the Trust or its designee. A redemption request received by the Trust or its
designee prior to the close of regular trading on the Exchange (normally 4:00
p.m., Eastern time) on a day the Trust is open for business, is effective on
that day. A redemption request received after that time becomes effective on
the next business day.
Payment of the redemption price will ordinarily be wired to the investor's
bank one business day after the redemption request, 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 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 Institutional Class and Administrative Class
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. 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. This mandatory redemption policy does not apply
to participants in PIMCO Advisors Portfolio Strategies, a managed product
sponsored by PIMCO Advisors.
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.
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 Bond and Emerging Markets Bond II Funds
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 PIMCO Funds: Multi-Manager Series, an
affiliated mutual fund family composed 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 PIMCO
Funds at the same address and telephone number as the Trust.
59 PIMCO Funds: Pacific Investment Management Series
<PAGE>
Exchanges may be made only with respect to Funds, or series of PIMCO Funds:
Multi-Manager 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 for tax purposes as a redemption followed by a purchase and
may result in a capital gain or loss, and special rules may apply in computing
tax basis when determining gain or loss. See "Taxation" in the Statement of
Additional Information. Although each Fund will attempt to give shareholders
prior notice whenever it is reasonably able to do so, it may impose additional
restrictions on exchanges at any time.
The Trust reserves the right to refuse exchange purchases if, in the
judgment of the Adviser, the purchase would adversely affect a Fund and its
shareholders. In particular, a pattern of exchanges characteristic of "market-
timing" strategies may be deemed by the Adviser to be detrimental to the Trust
or a particular Fund. Currently, the Trust limits the number of "round trip"
exchanges an investor may make. An investor makes a "round trip" exchange when
the investor purchases shares of a particular Fund, subsequently exchanges
those shares for shares of a different Fund, and then exchanges back into the
originally purchased Fund. The Trust has the right to refuse any exchange for
any investor who completes (by making the exchange back into shares of the
originally purchased Fund) more than six round trip exchanges in any twelve-
month period. Although the Trust has no current intention of terminating or
modifying the exchange privilege other than as set forth in the preceding
sentence, it reserves the right to do so 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.
A change in the securities held by a Fund is known as "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. The use of certain
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. High
portfolio turnover (e.g., over 100%) involves correspondingly greater expenses
to a Fund, including commissions or dealer mark-ups and other transaction
costs on the sale of securities and reinvestments in other securities. Such
sales may result in realization of taxable gains (including short-term capital
gains which are generally taxed at ordinary income tax rates). See "Dividends,
Distributions and Taxes." The portfolio turnover rate for each Fund for which
financial highlights are provided in this Prospectus is set forth under
"Financial Highlights." The portfolio turnover rate for certain of the
remaining Funds is incorporated by reference in the Statement of Additional
Information.
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. The Adviser may
aggregate orders for the Funds with simultaneous transactions entered into on
behalf of other clients of the Adviser so long as price and transaction
expenses are averaged either for that transaction or for the day.
Prospectus 60
<PAGE>
NET ASSET VALUE
The net asset value per share of each of the Institutional Class and
Administrative Class is determined once each day as of 4:00 p.m., Eastern
time, or as of such other time designated by the New York Stock Exchange as
the close of public trading for that day ("closing"). Net asset value per
share of a class is determined 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 any day on which the New York Stock
Exchange is closed.
In determining their daily net asset values, the Funds use price data
obtained from the Exchange that the Funds believe to be representative of the
current market value of securities held by the Funds as of the time selected
by the Funds for the calculation of net asset value. Such price data is
typically transmitted to the Funds soon after 4:00 p.m. Eastern time, and
typically reflects last quoted prices for securities as of the close of public
trading on the Exchange on that day. Such prices may not reflect later
adjustments to securities prices made after the close of public trading, due
to unanticipated delays in order processing, late settlements between dealers
and other Exchange members, or after-hours trading of the same securities
conducted on other exchanges. The Funds have determined that it is not
practical to postpone the daily calculation of net asset value to account for
such post-closing adjustments. For U.S.-traded securities, the Funds therefore
intend to use prices quoted as of 4:00 p.m. Eastern time for all securities in
their portfolios regardless of the impact of any post-closing adjustments, as
long as, in the view of the Funds, such prices represent the current market
value of such securities as of the time selected by the Funds for the
calculation of net asset value.
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 may be
valued at current market value or 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.
Each Fund's liabilities are allocated among its classes. The total of such
liabilities allocated to a class plus that class' distribution and/or
servicing fees and any other expenses specially allocated to that class are
then deducted from the
61 PIMCO Funds: Pacific Investment Management Series
<PAGE>
class' proportionate interest in the Fund's assets, and the resulting amount
for each class is divided by the number of shares of that class outstanding to
produce the "net asset value" per share. Under certain circumstances, the per
share net asset value of the Administrative Class shares of the Funds that do
not declare regular income dividends on a daily basis may be lower than the
per share net asset value of the Institutional Class shares as a result of the
daily expense accruals of the service fee applicable to the Administrative
Class shares. Generally, for Funds that pay income dividends, those dividends
are expected to differ over time by approximately the amount of the expense
accrual differential between a particular Fund's classes.
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 Bond 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 Bond, Stock and Bond and Stock 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 and distribution 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.
Shareholders subject to U.S. federal income tax will be subject to tax on
dividends received from a Fund, regardless of whether received in cash or
reinvested in additional shares. Distributions received by tax-exempt
shareholders generally will not be subject to federal income tax to the extent
permitted under applicable tax law. 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 derived from the
Fund's net capital gain (that is, the excess of net long-term gain over net
short-term loss) 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, short-term capital gain, 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. Each Fund
will advise shareholders annually of the amount and nature of the dividends
paid to them.
Dividends paid to shareholders by the PIMCO Municipal Bond Fund which are
derived from interest on Municipal Bonds are expected to be designated by the
Fund as "exempt-interest dividends," and shareholders generally may exclude
such dividends from gross income for federal income tax purposes. However, if
a shareholder receives social security or railroad retirement benefits, the
shareholder may be taxed on a portion of those benefits as a result of
receiving tax-exempt income. In addition, certain exempt-interest dividends
could, as discussed below, cause certain shareholders to
Prospectus 62
<PAGE>
become subject to the alternative minimum tax and may increase the alternative
minimum tax liability of shareholders already subject to this tax.
To the extent that dividends paid to shareholders by the PIMCO Municipal
Bond Fund are derived from taxable interest or from capital gains, such
dividends will be subject to federal income tax. Any gain realized on a
redemption of shares will be taxable gain, subject to any applicable tax
exemption for which an investor may qualify.
Dividends derived from interest on certain U.S. Government securities may be
exempt from state and local taxes, although interest on mortgage-backed U.S.
Government securities (for example, interest on FNMA and GNMA Certificates) is
generally not so exempt. The distributions of "exempt-interest dividends" paid
by the PIMCO Municipal Bond Fund may be exempt from state and local taxation
when received by a shareholder to the extent that they are derived from
interest on Municipal Bonds issued by the state or political subdivision in
which such shareholder resides. The federal exemption for "exempt-interest
dividends" attributable to Municipal Bonds does not necessarily result in
exemption of such dividends from income for the purpose of state and local
taxes. The Trust will report annually on a state-by-state basis the source of
income the PIMCO Municipal Bond Fund receives on Municipal Bonds that was paid
out as dividends during the preceding year.
The Code also provides that exempt-interest dividends allocable to interest
received from "private activity bonds" issued after August 7, 1986 are an item
of tax preference for individual and corporate alternative minimum tax at the
applicable rate for individuals and corporations. Therefore, if the PIMCO
Municipal Bond Fund invests in such private activity bonds, certain of its
shareholders may become subject to the alternative minimum tax on that part of
its distributions to them that are derived from interest income on such bonds,
and certain shareholders already subject to such tax may have increased
liability therefor. However, it is the present policy of the PIMCO Municipal
Bond Fund to invest no more than 20% of its assets in such bonds. Other
provisions of the Code affect the tax treatment of distributions from the
PIMCO Municipal Bond Fund for corporations, casualty insurance companies, and
financial institutions. In particular, under the Code, for corporations,
alternative minimum taxable income will be increased by a percentage of the
amount by which the corporation's "adjusted current earnings" (which includes
various items of tax exempt income) exceeds the amount otherwise determined to
be alternative minimum taxable income. Accordingly, an investment in the PIMCO
Municipal Bond Fund may cause shareholders to be subject to (or result in an
increased liability under) the alternative minimum tax.
Dividends to shareholders of the PIMCO Municipal Bond Fund derived from
money market instruments and U.S. Government securities are generally taxable
as ordinary income. The Fund may seek to reduce fluctuations in its net asset
value by engaging in portfolio strategies involving options on securities,
futures contracts, and options on futures contracts. Any gain derived by the
Fund from the use of such instruments, including by reason of "marking to
market," will be treated as a combination of short-term and long-term capital
gain and, if not offset by realized capital losses incurred by the Fund, will
be distributed to shareholders (possibly requiring the liquidation of other
portfolio securities) and will be taxable to shareholders as a combination of
ordinary income and long-term capital gain.
Interest accrued by a Fund from inflation-indexed bonds will be includable
in the Fund's gross income in the period in which it accrues. Periodic
adjustments for inflation in the principal value of these securities also may
give rise to original issue discount, which, likewise, will be includable in
the Fund's gross income on a current basis, regardless of whether the Fund
receives any cash payments. See "Taxation--Original Issue Discount" in the
Statement of Additional Information. Amounts includable in a Fund's gross
income become subject to tax-related distribution requirements. Accordingly, a
Fund may be required to make annual distributions to shareholders in excess of
the cash received in a
63 PIMCO Funds: Pacific Investment Management Series
<PAGE>
given period from these investments. As a result, the Fund may be required to
liquidate certain investments at a time when it is not advantageous to do so.
If the principal value of an inflation-indexed bond is adjusted downward in
any period as a result of deflation, the reduction may be treated as a loss to
the extent the reduction exceeds coupon payments received in that period; in
that case, the amount distributable by the Fund may be reduced and amounts
distributed previously in the taxable year may be characterized in some
circumstances as a return of capital.
Taxable shareholders should note that the timing of their investment could
have undesirable tax consequences. If shares are purchased on or just before
the record date of 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 also 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 such disclaimer is inoperative or the
Trust itself is unable to meet its obligations, and thus should be considered
remote.
Multiple Classes of Shares
In addition to Institutional and Administrative Class shares, certain Funds
also offer Class A, Class B, Class C, and Class D shares through separate
prospectuses. This Prospectus relates only to the Institutional Class and
Administrative Class shares of the Funds. The other classes of the Funds have
different sales charges and expense levels, which will affect performance
accordingly. To obtain more information about the other classes of shares,
please call the Distributor at 800-426-0107 (for Class A, Class B and Class C)
or 888-87-PIMCO (for Class D).
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 or Fund have separate voting rights with respect to matters that only
affect that class or Fund. See "Other Information--Voting Rights" in the
Statement of Additional Information.
Prospectus 64
<PAGE>
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 March 10, 1999, the following were
shareholders of record of at least 25% of the outstanding voting securities of
the indicated Funds: Combined Master Retirement Trust (Dallas, Texas) with
respect to PIMCO Money Market Fund; Sprint Retirement Savings Plan (Boston,
Massachusetts) with respect to the PIMCO Low Duration Fund II; Loyola Academy
Endowment Fund (Chicago, Illinois) and Sisters of St. Joseph/Michigan
(Nazareth, Michigan) with respect to the PIMCO Low Duration Fund III; Pacific
Investment Management Company (Newport Beach, California) with respect to the
PIMCO Low Duration Mortgage, Total Return Mortgage and Emerging Markets Bond
Funds; Canterbury/Uniform Code Council (Pittsburgh, Pennsylvania) with respect
to the PIMCO Global Bond Fund II; Charles Schwab & Co., Inc. (San Francisco,
California) with respect to the PIMCO Foreign Bond Fund; and California
Community Foundation (Los Angeles, California) and Carpenters Health and
Security Trust of Western Washington (Seattle, Washington) with respect to the
PIMCO Strategic Balanced Fund.
To the extent such shareholders are also the beneficial owners of such
securities, they may be deemed to control (as that term is defined in the 1940
Act) the relevant Fund. 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).
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. The tax equivalent yield of the PIMCO Municipal
Bond Fund's shares may also be advertised, calculated like yield except that,
for any given tax bracket, net investment income will be calculated as the sum
of (i) any taxable income of the class plus (ii) the tax exempt income of the
class divided by the difference between 1 and the effective federal income tax
rates for taxpayers in that tax bracket.
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. Total return for each
class is measured by comparing the value of an investment in the Fund at the
beginning of the relevant period to the redemption value of the investment
65 PIMCO Funds: Pacific Investment Management Series
<PAGE>
in the Fund at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions at net asset value). The Funds may
advertise total return using alternative methods that reflect all elements of
return, but that may be adjusted to reflect the cumulative impact of
alternative fee and expense structures, such as the currently effective
advisory and administrative fees for the Funds.
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 indexes, such as the Standard & Poor's 500 Composite Stock Price
Index, the Lehman Brothers Aggregate Bond Index, the Lehman Brothers Mortgage-
Backed Securities 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 J.P. Morgan Emerging Markets Bond Index
Plus, 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.
Prospectus 66
<PAGE>
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. For inflation-indexed bonds, duration is calculated on
the basis of modified real duration, which measures price changes of
inflation-indexed bonds on the basis of changes in real, rather than nominal,
interest rates. 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: Pacific Investment Management Series A-1
<PAGE>
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.
B-1 Prospectus
<PAGE>
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
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 Ratings Services
Corporate and Municipal Bond Ratings
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by S&P. 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.
PIMCO Funds: Pacific Investment Management Series B-2
<PAGE>
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.
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 least 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.
CI: The rating CI 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.
B-3 Prospectus
<PAGE>
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.
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
An S&P 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 S&P by the issuer or obtained from other sources it considers
reliable. S&P 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.
PIMCO Funds: Pacific Investment Management Series B-4
<PAGE>
<TABLE>
<S> <C>
-----------------------------------------------------------------------------------------
PIMCO Funds: INVESTMENT ADVISER AND ADMINISTRATOR
Pacific Investment PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660
Management Series -----------------------------------------------------------------------------------------
CUSTODIAN
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, MO 64105
-----------------------------------------------------------------------------------------
TRANSFER AGENT
National Financial Data Services, 330 W. 9th Street, 4th Floor, Kansas City, MO 64105
-----------------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105
-----------------------------------------------------------------------------------------
LEGAL COUNSEL
Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C. 20006
-----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
For More Information To request a free copy Information about the
The following documents are of these documents or Trust (including the
available that offer further to make inquiries about SAI) can be reviewed
information on the Funds of the Funds, please write and copied at the
PIMCO Funds: Pacific or call: Securities and
Investment Management Series. Exchange Commission's
PIMCO Funds: Pacific Public Reference Room
Annual/Semi-Annual Reports to Investment Management in Washington, D.C.
Shareholders The Trust's Series Information on the
annual and semi-annual reports 840 Newport Center Drive operation of the
include a discussion of the Suite 300 public reference room
market conditions and invest- Newport Beach, CA 92660 may be obtained by
ment strategies that signifi- calling the Commission
cantly affected the Funds' Telephone: at 1-800-SEC-0330.
performance during its last 1-800-927-4648 Reports and other
fiscal year or other period. 1-800-987-4626 (PIMCO information about the
Infolink Audio Response Trust are available on
Statement of Additional Network) the Commission's
information (SAI) The SAI Internet site at
contains additional informa- www.sec.gov, and
tion about the Funds. A copies of that infor-
current SAI has been filed mation may be
with the Securities and obtained, upon payment
Exchange Commission, and is of a duplicating fee,
incorporated into this by writing the Public
prospectus by reference. Reference Section of
SEC File Number: 811-5028 the Commission,
Washington, D.C.
20549-6009.
</TABLE>
[LOGO OF PIMCO FUNDS]
PIMCO Funds
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660
www.pimco.com
<PAGE>
PIMCO FUNDS PROSPECTUS
<TABLE>
<C> <S> <C>
Pacific SHORT DURATION BOND FUNDS HIGH YIELD BOND FUNDS
Investment Money Market Fund High Yield Fund
Management Short-Term Fund
Series Low Duration Fund
TAX-EXEMPT BOND FUNDS
June 1, 1999 Municipal Bond Fund
INTERMEDIATE DURATION BOND FUNDS
Share Classes Total Return Fund
A B C INFLATION-INDEXED BOND FUNDS
Real Return Bond Fund
LONG DURATION BOND FUNDS
Long-Term U.S. Government Fund CONVERTIBLE BOND FUNDS
Convertible Bond Fund
INTERNATIONAL BOND FUNDS
Global Bond Fund II STOCK AND BOND FUNDS
Foreign Bond Fund Strategic Balanced Fund
Emerging Markets Bond Fund
ENHANCED INDEX STOCK FUNDS
StocksPLUS Fund
P I M C O
-------------
FUNDS
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this prospectus is not complete an may be changed. We may
not sell these securities until the registration statement filed with the Se-
curities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities,
in any state where the offer or sale is not permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 2, 1999
PIMCO Funds: Pacific Investment Management Series
Prospectus
June 1, 1999
PIMCO Funds (the "Trust") is an open-end series management investment company
offering fourteen separate investment portfolios (each a "Fund") in this Pro-
spectus, each with different investment objectives and strategies. The Trust is
designed to provide access to the professional investment management services
offered by Pacific Investment Management Company ("Pacific Investment Manage-
ment"), which serves as investment adviser (the "Adviser") to the Funds. The
address of PIMCO Funds is 840 Newport Center Drive, Suite 300, Newport Beach,
CA 92660.
Each Fund offers three classes of shares in this Prospectus: Class A shares
(generally sold subject to an initial sales charge), Class B shares (sold sub-
ject to a contingent deferred sales charge) and Class C shares (sold subject to
an asset based sales charge). Through separate prospectuses, certain Funds and
other series of the Trust may offer up to three additional classes of shares,
Class D, Institutional Class and Administrative Class shares. See "Alternative
Purchase Arrangements."
This Prospectus concisely describes the information investors should know be-
fore investing in Class A, Class B or Class C shares of the Funds. Please read
this Prospectus carefully and keep it for further reference. Information about
the investment objective of each Fund, along with a detailed description of the
types of securities in which each Fund may invest and of investment policies
and restrictions applicable to each Fund, 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 each Fund's investments will change, the
investment returns and net asset value per share of each Fund will vary.
A Statement of Additional Information, dated June 1, 1999, as amended or sup-
plemented from time to time, is available free of charge by writing to PIMCO
Funds Distributors LLC (the "Distributor"), 2187 Atlantic Street, Stamford,
Connecticut 06902, or by telephoning 1-800-426-0107. The Statement of Addi-
tional Information, which contains more detailed information about the Trust,
has been filed with the Securities and Exchange Commission and is incorporated
by reference in this Prospectus. The Securities and Exchange Commission main-
tains an Internet World Wide Web site (at www.sec.gov) which contains the
Statement of Additional Information, materials that are incorporated by refer-
ence into this Prospectus and the Statement of Additional Information, and
other information about the Funds.
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 ac-
curacy or adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
Shares of the Funds are not deposits or obligations of, or guaranteed or en-
dorsed 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, and entail risk, including the possible loss of principal.
Investment in the 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.
Each of the Funds, except the Money Market Fund and the Municipal Bond 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 invest-
ments in particular derivative instruments.
The High Yield and Emerging Markets Bond Funds may invest all of their 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 con-
sider these risks before investing in the High Yield Fund. See "Characteristics
and Risks of Securities and Investment Techniques--High Yield Securities ("Junk
Bonds")."
TABLE OF CONTENTS
<TABLE>
<S> <C>
PIMCO Funds Overview..................... 3
Financial Highlights..................... 8
Investment Objectives and Policies....... 14
Investment Risks and Considerations...... 22
Characteristics and Risks of Securities
and Investment Techniques............... 23
Performance Information.................. 38
How to Buy Shares........................ 40
Alternative Purchase Arrangements........ 43
Exchange Privilege....................... 52
</TABLE>
<TABLE>
<S> <C>
How to Redeem..................... 53
Distributor and Distribution and
Servicing Plans................... 57
How Net Asset Value Is Determined
.................................. 60
Distributions..................... 61
Taxes............................. 62
Management of the Trust........... 64
Description of the Trust.......... 68
Mailings to Shareholders.......... 69
Appendix A--Description of
Duration.......................... 70
Appendix B--Description of
Securities Ratings................ 71
</TABLE>
2 PIMCO Funds: Pacific Investment Management Series
<PAGE>
PIMCO Funds Overview
Pacific Investment Management, a subsidiary of PIMCO Advisors
L.P., is the investment adviser of all the Funds. Pacific Invest-
ment Management is one of the premier fixed income investment man-
agement firms in the U.S. As of December 31, 1998, Pacific Invest-
ment Management had approximately $158 billion in assets under
management. Pacific Investment Management invests in all sectors
of the fixed income market, using its total return philosophy--
seeking capital appreciation as well as yield.
<TABLE>
<CAPTION>
PIMCO Primary
Fund Name Objective Duration Credit Quality/(1)/
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund Short Duration Money Market Fund Maximum current income, consistent Less than or equal to Min 95% Aaa or Prime
Profiles Bond Funds with preservation of capital and 90 days dollar-weighted 1; less than or equal
daily liquidity average maturity to 5% A or Prime 2
----------------------------------------------------------------------------------------------------------
Short-Term Fund Maximum current income, consistent 0-1 year B to Aaa; max
with preservation of capital and 10% below Baa
daily liquidity
----------------------------------------------------------------------------------------------------------
Low Duration Fund Maximum total return consistent 1-3 years B to Aaa; max-
with preservation of real capital 10% below Baa
and prudent investment management
--------------------------------------------------------------------------------------------------------------------------
Intermediate Total Return Fund Maximum total return, consistent 3-6 years B to Aaa; max
Duration with preservation of capital 10% below Baa
Bond Funds and prudent investment management
--------------------------------------------------------------------------------------------------------------------------
Long Duration Long-Term U.S. Maximum total return, consistent Greater than A to Aaa
Bond Funds Government Fund with preservation of capital or equal to
and prudent investment management 8 years
--------------------------------------------------------------------------------------------------------------------------
International Global Bond Fund Maximum total return, consistent 3-7 years B to Aaa; max
Bond Funds with preservation of capital 10% below Baa
(U.S. and non-U.S.)
----------------------------------------------------------------------------------------------------------
Foreign Bond Fund Maximum total return, consistent with 3-7 years B to Aaa; max
preservation of capital and prudent 10% below Baa
investment management (non-U.S.)
----------------------------------------------------------------------------------------------------------
Emerging Markets Maximum total return, consistent with 0-8 years B to Aaa
Bond Fund preservation of capital and prudent
investment management (non-U.S.)
--------------------------------------------------------------------------------------------------------------------------
High Yield High Yield Maximum total return, consistent 2-6 years B to Aaa; min
Bond Funds Fund with preservation of capital
and prudent investment management
--------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Municipal Bond High current income exempt from 3-10 years Ba to Aaa; max
Bond Funds Fund federal income tax, consistent with 10% below Baa
preservation of capital
--------------------------------------------------------------------------------------------------------------------------
Inflation- Real Return Bond Maximum real return, consistent Not applicable, B to Aaa; max
Indexed Bond Fund with preservation of real capital but see Fund 10% below Baa
Funds and prudent investment management description
--------------------------------------------------------------------------------------------------------------------------
Convertible Convertible Bond Maximum total return, consistent N/A Caa to Aaa; max
Bond Funds Fund with prudent investment 35% below Baa
management and 10% below B
--------------------------------------------------------------------------------------------------------------------------
Stock and Bond Strategic Balanced Maximum total return, consistent 0-6 years B to Aaa; max
Funds Fund with preservation of capital 10% below Baa
and prudent investment management
--------------------------------------------------------------------------------------------------------------------------
Enhanced Index StocksPLUS Total return which exceeds that 0-1 year B to Aaa; max
Stock Funds Fund/(2)/ of the S&P 500 10% below Baa
</TABLE>
1. As rated by Moody's Investors Service, Inc., or if unrated,
determined to be of comparable quality. For specific information
concerning the credit quality of the securities in each Fund's
portfolio, see "Investment Objectives and Policies."
2. The StocksPLUS Fund may invest all of its assets in stock index
futures backed by short-term bonds.
Prospectus 3
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
--------------------------------------------------------------------
<S> <C> <C> <C>
Maximum initial sales charge
imposed on purchases
(as a percentage of offering
price at time of purchase)
Total Return, Long-Term U.S.
Government, Global Bond II,
Foreign Bond, Emerging
Markets Bond, High Yield,
Strategic
Balanced and Convertible
Bond Funds 4.50% None None
Low Duration, Municipal Bond,
Real Return Bond and
StocksPLUS Funds 3.00% None None
Short-Term Fund 2.00% None None
Money Market Fund None(/1/) None None
--------------------------------------------------------------------
Maximum sales charge imposed on
reinvested dividends
(as a percentage of net asset
value at time of purchase) None None None
--------------------------------------------------------------------
Maximum contingent deferred
sales charge ("CDSC")
(as a percentage of original
purchase price) 1%(/2/) 5%(/3/) 1%(/4/)
--------------------------------------------------------------------
Exchange Fee None(/1/) None None
</TABLE>
Shareholder
Transaction
Expenses
1. Regular sales charges apply when Class A shares of the Money
Market Fund (on which no sales charge was paid at time of pur-
chase) are exchanged for shares of any other Fund.
2. Imposed only in certain circumstances where Class A shares are
purchased without a front-end sales charge at the time of pur-
chase. See "Alternative Purchase Arrangements" in this Prospectus.
3. The maximum CDSC is imposed on shares redeemed in the first
year. For shares held longer than one year, the CDSC declines ac-
cording to the schedule set forth under "Alternative Purchase Ar-
rangements--Deferred Sales Charge Alternative--Class B Shares" in
this Prospectus.
4. The CDSC on Class C shares is imposed only on shares redeemed
in the first year.
<TABLE>
<CAPTION>
Example: You would Example: You would
pay the pay the following
following expenses expenses on a
on a $1,000 $1,000
investment investment
assuming (1) 5% assuming (1) 5%
annual return and annual return and
(2) redemption at (2) no redemption:
Annual Fund Operating Expenses the end of each
(As a percentage of average net assets): time period:
Total
Admini- Fund
Advisory strative 12b-1 Operating Year Year
Fund Fee Fee Fees(/1/) Expenses 1 3 5 10 1 3 5 10
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market .15% .35% .10%(/2/) .60%(/3/) $ 6 $19 $ 33 $ 75 $ 6 $19 $ 33 $ 75
------------------------------------------------------------------------------------------------------
Short-Term .25 .35 .25 .85 29 47 66 123 29 47 66 123
------------------------------------------------------------------------------------------------------
Low Duration .25 .40 .25 .90 39 58 78 137 39 58 78 137
------------------------------------------------------------------------------------------------------
Total Return .25 .40 .25 .90 54 72 93 151 54 72 93 151
------------------------------------------------------------------------------------------------------
Long-Term U.S.
Government .25 .40 .25 .90 54 72 93 151 54 72 93 151
------------------------------------------------------------------------------------------------------
Global Bond II .25 .45 .25 .95 54 74 95 156 54 74 95 156
------------------------------------------------------------------------------------------------------
Foreign Bond .25 .45 .25 .95 54 74 95 156 54 74 95 156
------------------------------------------------------------------------------------------------------
Emerging Markets Bond .45 .55 .25 1.25 57 83 111 189 57 83 111 189
------------------------------------------------------------------------------------------------------
High Yield .25 .40 .25 .90 54 72 93 151 54 72 93 151
------------------------------------------------------------------------------------------------------
Municipal Bond .25 .35 .25 .85 38 56 N/A N/A 38 56 N/A N/A
------------------------------------------------------------------------------------------------------
Real Return Bond .25 ,40 .25 .90 39 58 78 137 39 58 78 137
------------------------------------------------------------------------------------------------------
Convertible Bond .40 .40 .25 1.05 55 77 100 167 55 77 100 167
------------------------------------------------------------------------------------------------------
Strategic Balanced .40 .40 .25 1.05 55 77 100 167 55 77 100 167
------------------------------------------------------------------------------------------------------
StocksPLUS .40 .40 .25 1.05 40 62 86 154 40 62 86 154
------------------------------------------------------------------------------------------------------
</TABLE>
Class A
Shares
1. 12b-1 fees represent servicing fees which are paid to the Dis-
tributor and repaid to participating brokers, certain banks and
other financial intermediaries. See "Distributor and Distribution
and Servicing Plans."
2. The Distributor has voluntarily undertaken to reduce the 12b-1
fee it receives with respect to the Money Market Fund to .10% of
the Fund's average daily net assets until further notice. Absent
such undertaking, the 12b-1 fee would be .20% of the Fund's aver-
age daily net assets.
3. Absent the undertaking noted, the "Total Fund Operating Ex-
penses" for the Money Market Fund would be .70% of the Fund's av-
erage daily net assets.
4 PIMCO Funds: Pacific Investment Management Series
<PAGE>
<TABLE>
<CAPTION>
Example: You would Example: You would
pay the following pay the following
expenses on a expenses on a
$1,000 investment $1,000 investment
assuming (1) 5% assuming (1) 5%
annual return and annual return and
(2) redemption at (2) no redemption:
Annual Fund Operating Expenses the end of each
(As a percentage of average net assets): time period:
Total
Admini- Fund
Advisory strative 12b-1 Operating Year Year
Fund Fee Fee Fees(/1/) Expenses 1 3 5 10 1 3 5 10
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market .15% .35% 1.00% 1.50% $65 $77 $102 $143 $15 $47 $ 82 $143
----------------------------------------------------------------------------------------------------------
Short-Term .25 .35 1.00 1.60 66 80 107 160 16 50 87 160
----------------------------------------------------------------------------------------------------------
Low Duration .25 .40 1.00 1.65 67 82 110 166 17 52 90 166
Class B ----------------------------------------------------------------------------------------------------------
Shares Total Return .25 .40 1.00 1.65 67 82 110 166 17 52 90 166
----------------------------------------------------------------------------------------------------------
Long-Term U.S.
Government .25 .40 1.00 1.65 67 82 110 166 17 52 90 166
----------------------------------------------------------------------------------------------------------
Global Bond II .25 .45 1.00 1.70 67 84 112 171 17 54 92 171
----------------------------------------------------------------------------------------------------------
Foreign Bond .25 .45 1.00 1.70 67 84 112 171 17 54 92 171
----------------------------------------------------------------------------------------------------------
Emerging Markets Bond .45 .55 1.00 2.00 70 93 128 204 20 63 108 204
----------------------------------------------------------------------------------------------------------
High Yield .25 .40 1.00 1.65 67 82 110 166 17 52 90 166
----------------------------------------------------------------------------------------------------------
Municipal Bond .25 .35 1.00 1.60 66 80 N/A N/A 16 50 N/A N/A
----------------------------------------------------------------------------------------------------------
Real Return Bond .25 .40 1.00 1.65 67 82 110 166 17 52 90 166
----------------------------------------------------------------------------------------------------------
Convertible Bond .40 .40 1.00 1.80 68 87 117 182 18 57 97 182
----------------------------------------------------------------------------------------------------------
Strategic Balanced .40 .40 1.00 1.80 68 87 117 182 18 57 97 182
----------------------------------------------------------------------------------------------------------
StocksPLUS .40 .40 1.00 1.80 68 87 117 182 18 57 97 182
----------------------------------------------------------------------------------------------------------
</TABLE>
1. 12b-1 fees which equal or are less than .25% represent servic-
ing fees which are paid to the Distributor and repaid to partici-
pating brokers, certain banks and other financial intermediaries.
12b-1 fees which exceed .25% represent aggregate distribution and
servicing fees. See "Distributor and Distribution and Servicing
Plans."
Prospectus 5
<PAGE>
<TABLE>
<CAPTION>
Example: You would Example: You
pay the following would pay the
expenses on a following
$1,000 investment expenses on a
assuming (1) 5% $1,000 investment
annual return and assuming (1) 5%
(2) redemption at annual return and
the end of each (2) no
Annual Fund Operating Expenses time period: redemption:
(As a percentage of average net assets):
Total
Admini- Fund
Advisory strative 12b-1 Operating Year Year
Fund Fee Fee Fees(/1/) Expenses 1 3 5 10 1 3 5 10
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market .15% .35% .10(/2/)% .60(/3/)% $16 $19 $ 33 $ 75 $ 6 $19 $33 $ 75
-------------------------------------------------------------------------------------------------------------------
Short-Term .25 .35 .55(/2/) 1.15(/3/) 22 37 63 140 12 37 63 140
-------------------------------------------------------------------------------------------------------------------
Low Duration .25 .40 .75 1.40 24 44 77 168 14 44 77 168
-------------------------------------------------------------------------------------------------------------------
Total Return .25 .40 1.00 1.65 27 52 90 195 17 52 90 195
-------------------------------------------------------------------------------------------------------------------
Long-Term U.S.
Government .25 .40 1.00 1.65 27 52 90 195 17 52 90 195
-------------------------------------------------------------------------------------------------------------------
Global Bond II .25 .45 1.00 1.70 27 54 92 201 17 54 92 201
-------------------------------------------------------------------------------------------------------------------
Foreign Bond .25 .45 1.00 1.70 27 54 92 201 17 54 92 201
-------------------------------------------------------------------------------------------------------------------
Emerging Markets Bond .45 .55 1.00 2.00 30 63 108 233 20 63 108 233
-------------------------------------------------------------------------------------------------------------------
High Yield .25 .40 1.00 1.65 27 52 90 195 17 52 90 195
-------------------------------------------------------------------------------------------------------------------
Municipal Bond .25 .35 .75(/2/) 1.35(/3/) 24 43 N/A N/A 14 43 N/A N/A
-------------------------------------------------------------------------------------------------------------------
Real Return Bond .25 .40 .75(/2/) 1.40(/3/) 24 44 77 168 14 44 77 168
-------------------------------------------------------------------------------------------------------------------
Convertible Bond .40 .40 1.00 1.80 28 57 97 212 18 57 97 212
-------------------------------------------------------------------------------------------------------------------
Strategic Balanced .40 .40 1.00 1.80 28 57 97 212 18 57 97 212
-------------------------------------------------------------------------------------------------------------------
StocksPLUS .40 .40 .75(/2/) 1.55(/3/) 26 49 84 185 16 49 84 185
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Class C
Shares
1. 12b-1 fees which equal or are less than .25% represent servic-
ing fees which are paid to the Distributor and repaid to partici-
pating brokers, certain banks and other financial intermediaries.
12b-1 fees which exceed .25% represent aggregate distribution and
servicing fees. See "Distributor and Distribution and Servicing
Plans."
2. The Distributor has voluntarily undertaken to reduce the 12b-1
fee it may receive with respect to each of the Money Market,
Short-Term, Municipal Bond, Real Return Bond and StocksPLUS Funds
to the following annual rates based on the Fund's average daily
net assets until further notice: Money Market--.10%; Short-Term--
.55%; Municipal Bond--.75%; Real Return Bond--.75%; and
StocksPLUS--.75%. Absent such undertakings, the 12b-1 fee for each
such Fund would be as follows: Money Market--.20%; Short-Term--
1.00%; Municipal Bond--1.00%; Real Return Bond--1.00%; and
StocksPLUS--1.00%.
3. Absent the undertakings noted, the "Total Fund Operating Ex-
penses" for the Money Market, Short-Term, Municipal Bond, Real Re-
turn Bond and StocksPLUS Funds would be as follows (based on aver-
age daily net assets): Money Market--.70%; Short-Term--1.60%; Mu-
nicipal Bond--1.60%; Real Return Bond--1.65%; and StocksPLUS--
1.80%.
The purpose of the foregoing tables is to assist investors in un-
derstanding the various costs and expenses of the Trust that are
borne directly or indirectly by Class A, Class B and Class C
shareholders of the Funds. The information is based upon each
Funds' current fees and expenses. The Examples for Class A shares
assume payment of the current maximum applicable sales load. Due
to the 12b-1 distribution fee imposed on Class B and Class C
shares, a Class B or Class C shareholder of the Trust may, depend-
ing on the length of time the shares are held, pay more than the
economic equivalent of the maximum front-end sales charges permit-
ted by relevant rules of the National Association of Securities
Dealers, Inc.
NOTE: The figures shown in the Examples are entirely hypothetical.
They are not representations of past or future performance or ex-
penses; actual performance and/or expenses may be more or less
than shown.
6 PIMCO Funds: Pacific Investment Management Series
<PAGE>
(This page left blank intentionally)
Prospectus 7
<PAGE>
Financial Highlights
The following information regarding selected per share data and ratios for
shares of certain of the Funds is part of the Trust's audited financial state-
ments, which are included in the Trust's Annual Report dated March 31, 1998,
and the Trust's unaudited financial statements, which are included in the
Trust's Semiannual Report dated September 30, 1998, both of which are incorpo-
rated by reference in the Statement of Additional Information. The Trust's au-
dited financial statements and selected per share data and ratios appearing be-
low have been examined by PricewaterhouseCoopers LLP, independent accountants,
whose opinion thereon is also included in the Annual Report, which may be ob-
tained without charge. The Trust's Semiannual Report also may be obtained with-
out charge. Information is presented for each Fund described herein which had
investment operations during the reporting periods. Information regarding the
Global Bond Fund II reflects the operational history of the Global Income Fund,
a former series of PIMCO Advisors Funds that was reorganized as a series of the
Trust on January 17, 1997.
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
Class A
09/30/98* $ 1.00 $0.03(+) $ 0.00 (+) $0.03 $(0.03) $ 0.00 $ 0.00 $0.00
03/31/98 1.00 0.05(+) 0.00 (+) 0.05 (0.05) 0.00 0.00 0.00
03/31/97(a) 1.00 0.01 0.00 0.01 (0.01) 0.00 0.00 0.00
Class B
09/30/98* 1.00 0.02(+) 0.00 (+) 0.02 (0.02) 0.00 0.00 0.00
03/31/98 1.00 0.04(+) 0.00 (+) 0.04 (0.04) 0.00 0.00 0.00
03/31/97(a) 1.00 0.01 0.00 0.01 (0.01) 0.00 0.00 0.00
Class C
09/30/98* 1.00 0.03(+) 0.00 (+) 0.03 (0.03) 0.00 0.00 0.00
03/31/98 1.00 0.05(+) 0.00 (+) 0.05 (0.05) 0.00 0.00 0.00
03/31/96(a) 1.00 0.01 0.00 0.01 (0.01) 0.00 0.00 0.00
Short-Term Fund
Class A
09/30/98* $10.06 $0.27(+) $(0.02) (+) $0.25 $(0.27) $ 0.00 $ 0.00 $0.00
03/31/98 10.00 0.55(+) 0.09 (+) 0.64 (0.56) (0.01) (0.01) 0.00
03/31/97(b) 10.04 0.10 (0.03) 0.07 (0.10) (0.01) 0.00 0.00
Class B
09/30/98* 10.06 0.23(+) (0.02) (+) 0.21 (0.23) 0.00 0.00 0.00
03/31/98 10.00 0.50(+) 0.08 (+) 0.58 (0.50) (0.01) (0.01) 0.00
03/31/97(b) 10.04 0.09 (0.03) 0.06 (0.10) 0.00 0.00 0.00
Class C
09/30/98* 10.06 0.26(+) (0.02) (+) 0.24 (0.26) 0.00 0.00 0.00
03/31/98 10.00 0.54(+) 0.07 (+) 0.61 (0.53) (0.01) (0.01) 0.00
03/31/97(b) 10.04 0.09 (0.03) 0.06 (0.10) 0.00 0.00 0.00
Low Duration Fund
Class A
09/30/98* $10.18 $0.31(+) $ 0.11 (+) $0.42 $(0.31) $ 0.00 $ 0.00 $0.00
03/31/98 9.98 0.60(+) 0.23 (+) 0.83 (0.58) (0.02) (0.03) 0.00
03/31/97(a) 10.02 0.12 (0.03) 0.09 (0.12) (0.01) 0.00 0.00
Class B
09/30/98* 10.18 0.27(+) 0.11 (+) 0.38 (0.27) 0.00 0.00 0.00
03/31/98 9.98 0.53(+) 0.22 (+) 0.75 (0.50) (0.02) (0.03) 0.00
03/31/97(a) 10.02 0.10 (0.03) 0.07 (0.11) 0.00 0.00 0.00
Class C
09/30/98* 10.18 0.28(+) 0.11 (+) 0.39 (0.28) 0.00 0.00 0.00
03/31/98 9.98 0.55(+) 0.23 (+) 0.78 (0.53) (0.02) (0.03) 0.00
03/31/97(a) 10.02 0.11 (0.03) 0.08 (0.11) (0.01) 0.00 0.00
</TABLE>
- -------
*Unaudited
(+)Per share amounts based on average number of shares outstanding during the
period.
(a)From commencement of operations, January 13, 1997.
(b)From commencement of operations, January 20, 1997.
8 PIMCO Funds: Pacific Investment Management Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Ratio of Net
Net Asset Net Assets Ratio of Investment
Tax Basis Value End Expenses to Income to Portfolio
Return Total End Total of Period Average Average Turnover
of Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.03) $ 1.00 2.49% $116,154 0.58%+ 5.03%+ N/A
0.00 (0.05) 1.00 5.10 41,375 0.60 5.02 N/A
0.00 (0.01) 1.00 1.01 43,589 0.57+ 4.44+ N/A
0.00 (0.02) 1.00 2.06 11,697 1.50+ 4.11+ N/A
0.00 (0.04) 1.00 4.21 2,937 1.50 4.15 N/A
0.00 (0.01) 1.00 0.83 3,143 1.41+ 3.62+ N/A
0.00 (0.03) 1.00 2.53 96,244 0.59+ 5.03+ N/A
0.00 (0.05) 1.00 5.14 55,696 0.60 5.05 N/A
0.00 (0.01) 1.00 1.02 85,398 0.58+ 4.47+ N/A
$0.00 $(0.27) $10.04 2.52% $ 51,469 0.84%+ 5.29%+ 49%
0.00 (0.58) 10.06 6.64 24,182 0.85 5.48 48
0.00 (0.11) 10.00 0.66 2,533 0.86+ 5.07+ 77
0.00 (0.23) 10.04 2.14 1,579 1.60+ 4.63+ 49
0.00 (0.52) 10.06 5.96 1,258 1.60 4.97 48
0.00 (0.10) 10.00 0.58 114 1.62+ 4.83+ 77
0.00 (0.26) 10.04 2.37 12,470 1.15+ 5.07+ 49
0.00 (0.55) 10.06 6.33 6,763 1.15 5.33 48
0.00 (0.10) 10.00 0.63 1,359 1.14+ 4.78+ 77
$0.00 $(0.31) $10.29 4.18% $164,055 0.90%+ 5.99%+ 128%
0.00 (0.63) 10.18 8.49 109,531 0.90 5.93 309
0.00 (0.13) 9.98 0.85 59,348 0.91+ 5.84+ 240
0.00 (0.27) 10.29 3.79 45,918 1.65+ 5.22+ 128
0.00 (0.55) 10.18 7.68 17,624 1.65 5.16 309
0.00 (0.11) 9.98 0.68 5,296 1.67+ 5.03+ 240
0.00 (0.28) 10.29 3.92 83,835 1.40+ 5.52+ 128
0.00 (0.58) 10.18 8.01 68,766 1.40 5.46 309
0.00 (0.12) 9.98 0.75 63,606 1.42+ 5.36+ 240
</TABLE>
- -------
+Annualized.
Prospectus 9
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<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
Class A
09/30/98* $10.62 $0.31(+) $ 0.47 (+) $ 0.78 $(0.31) $ 0.00 $ 0.00 $0.00
03/31/98 10.27 0.58(+) 0.63 (+) 1.21 (0.57) (0.02) (0.27) 0.00
03/31/97(a) 10.40 0.12 (0.12) 0.00 (0.13) 0.00 0.00 0.00
Class B
09/30/98* 10.62 0.26(+) 0.47 (+) 0.73 (0.26) 0.00 0.00 0.00
03/31/98 10.27 0.50(+) 0.63 (+) 1.13 (0.50) (0.01) (0.27) 0.00
03/31/97(a) 10.40 0.11 (0.12) (0.01) (0.12) 0.00 0.00 0.00
Class C
09/30/98* 10.62 0.26(+) 0.48 (+) 0.74 (0.27) 0.00 0.00 0.00
03/31/98 10.27 0.51(+) 0.63 (+) 1.14 (0.51) (0.01) (0.27) 0.00
03/31/97(a) 10.40 0.11 (0.12) (0.01) (0.12) 0.00 0.00 0.00
Long-Term U.S. Government
Fund
Class A
09/30/98* $10.57 $0.33(+) $ 1.07 (+) $ 1.40 $(0.33) $ 0.00 $ 0.00 $0.00
03/31/98 9.39 0.48(+) 1.34 (+) 1.82 (0.58) 0.00 (0.06) 0.00
03/31/97(b) 9.67 0.32 (0.47) (0.15) (0.13) 0.00 0.00 0.00
Class B
09/30/98* 10.57 0.29(+) 1.06 (+) 1.35 (0.28) 0.00 0.00 0.00
03/31/98 9.39 0.39(+) 1.35 (+) 1.74 (0.50) 0.00 (0.06) 0.00
03/31/97(b) 9.67 0.29 (0.47) (0.18) (0.10) 0.00 0.00 0.00
Class C
09/30/98* 10.57 0.29(+) 1.06 (+) 1.35 (0.28) 0.00 0.00 0.00
03/31/98 9.39 0.39(+) 1.35 (+) 1.74 (0.50) 0.00 (0.06) 0.00
03/31/97(b) 9.67 0.29 (0.47) (0.18) (0.10) 0.00 0.00 0.00
Global Bond Fund II
Class A
09/30/98* $ 9.92 $0.27(+) $ 0.10 (+) $ 0.37 $(0.26) $ 0.00 $ 0.00 $0.00
03/31/98 10.84 0.64(+) 0.51 (+) 1.15 0.00 (0.54) (1.53) 0.00
10/01/96--03/31/97 10.96 0.66 (0.16) 0.50 (0.22) 0.00 (0.40) 0.00
09/30/96(c) 10.00 0.32(d) 0.95 1.27 (0.31) 0.00 0.00 0.00
Class B
09/30/98* 9.92 0.24(+) 0.10 (+) 0.34 (0.23) 0.00 0.00 0.00
03/31/98 10.84 0.66(+) 0.41 (+) 1.07 0.00 (0.46) (1.53) 0.00
10/01/96--03/31/97 10.96 0.62 (0.16) 0.46 (0.18) 0.00 (0.40) 0.00
09/30/96(c) 10.00 0.30(d) 0.92 1.22 (0.26) 0.00 0.00 0.00
Class C
09/30/98* 9.92 0.24(+) 0.10 (+) 0.34 (0.23) 0.00 0.00 0.00
03/31/98 10.84 0.55(+) 0.52 (+) 1.07 0.00 (0.46) (1.53) 0.00
10/01/96--03/31/97 10.96 0.62 (0.16) 0.46 (0.18) 0.00 (0.40) 0.00
09/30/96(c) 10.00 0.30(d) 0.92 1.22 (0.26) 0.00 0.00 0.00
Foreign Bond Fund
Class A
09/30/98* $10.74 $0.28(+) $ 0.21 (+) $ 0.49 $(0.28) $ 0.00 $ 0.00 $0.00
03/31/98 10.41 0.61(+) 0.62 (+) 1.23 (0.59) 0.00 (0.31) 0.00
03/31/97(b) 10.59 0.59 (0.72) (0.13) (0.05) 0.00 0.00 0.00
Class B
09/30/98* 10.74 0.25(+) 0.21 (+) 0.46 (0.25) 0.00 0.00 0.00
03/31/98 10.41 0.53(+) 0.61 (+) 1.14 (0.50) 0.00 (0.31) 0.00
03/31/97(b) 10.59 0.58 (0.72) (0.14) (0.04) 0.00 0.00 0.00
Class C
09/30/98* 10.74 0.25(+) 0.20 (+) 0.45 (0.24) 0.00 0.00 0.00
03/31/98 10.41 0.52(+) 0.62 (+) 1.14 (0.50) 0.00 (0.31) 0.00
03/31/97(b) 10.59 0.58 (0.72) (0.14) (0.04) 0.00 0.00 0.00
</TABLE>
- -------
*Unaudited.
(c) From commencement of operations, October 2, 1995.
(d) Reflects voluntary waiver of investment advisory fee of $12,041 (.01 per
share) by the Adviser.
10 PIMCO Funds: Pacific Investment Management Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Ratio of Net
Net Asset Net Assets Ratio of Investment
Tax Basis Value End Expenses to Income to Portfolio
Return Total End Total of Period Average Average Turnover
of Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.31) $11.09 7.42% $771,709 0.90%+ 5.64%+ 103%
0.00 (0.86) 10.62 12.11 533,893 0.90 5.46 206
0.00 (0.13) 10.27 0.02 115,742 0.91+ 6.08+ 173
0.00 (0.26) 11.09 7.02 338,707 1.65+ 4.84+ 103
0.00 (0.78) 10.62 11.26 186,932 1.65 4.74 206
0.00 (0.12) 10.27 (0.10) 74,130 1.67+ 5.28+ 173
0.00 (0.27) 11.09 7.02 535,890 1.65+ 4.89+ 103
0.00 (0.79) 10.62 11.28 405,037 1.65 4.83 206
0.00 (0.12) 10.27 (0.11) 329,104 1.67+ 5.32+ 173
$0.00 $(0.33) $11.64 13.50% $ 15,073 0.94%+ 6.07%+ 111%
0.00 (0.64) 10.57 19.78 6,161 0.91 4.49 177
0.00 (0.13) 9.39 (1.72) 1,204 1.12+ 6.91+ 402
0.00 (0.28) 11.64 13.01 25,589 1.68+ 5.25+ 111
0.00 (0.56) 10.57 18.85 7,516 1.66 4.64 177
0.00 (0.10) 9.39 (1.92) 454 1.87+ 4.95+ 402
0.00 (0.28) 11.64 13.01 24,719 1.68+ 5.19+ 111
0.00 (0.56) 10.57 18.86 7,258 1.66 4.64 177
0.00 (0.10) 9.39 (1.83) 275 1.88+ 5.52+ 402
$0.00 $(0.26) $10.03 3.81% $ 4,073 0.96%+ 5.37%+ 69%
0.00 (2.07) 9.92 11.21 6,816 0.95 5.88 369
0.00 (0.62) 10.84 4.55 7,652 2.05+ 5.60+ 307
0.00 (0.31) 10.96 15.01 7,360 1.27(e) 4.88(f) 1,246
0.00 (0.23) 10.03 3.43 4,324 1.71+ 4.62+ 69
0.00 (1.99) 9.92 10.39 4,473 1.70 5.12 369
0.00 (0.58) 10.84 4.17 3,925 2.57+ 4.22+ 307
0.00 (0.26) 10.96 14.54 3,240 2.49(e) 4.09(f) 1,246
0.00 (0.23) 10.03 3.41 6,134 1.71+ 4.61+ 69
0.00 (1.99) 9.92 10.39 6,096 1.70 5.12 369
0.00 (0.58) 10.84 4.17 5,323 2.43+ 4.14+ 307
0.00 (0.26) 10.96 14.54 3,459 2.49(e) 4.09(f) 1,246
$0.00 $(0.28) $10.95 4.64% $ 22,389 0.95%+ 5.55%+ 161%
0.00 (0.90) 10.74 12.14 9,582 0.95 5.88 280
0.00 (0.05) 10.41 (1.21) 704 0.97+ 4.95+ 984
0.00 (0.25) 10.95 4.32 17,229 1.70+ 4.80+ 161
0.00 (0.81) 10.74 11.29 10,631 1.70 5.13 280
0.00 (0.04) 10.41 (1.34) 1,221 1.75+ 3.73+ 984
0.00 (0.24) 10.95 4.25 24,685 1.70+ 4.80+ 161
0.00 (0.81) 10.74 11.29 17,080 1.70 5.13 280
0.00 (0.04) 10.41 (1.32) 1,788 1.76+ 4.09+ 984
</TABLE>
- -------
+Annualized.
(e)The Ratio of Expenses to Average Net Assets without the waiver would have
been 1.57%.
(f)The Ratio of Net Investment Income to Average Net Assets without the waiver
would have been 4.58%.
Prospectus 11
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<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>
Emerging Markets Bond
Fund
Class A
09/30/98* $ 9.67 $ 0.39(+) $(2.85)(+) $(2.46) $(0.39) $ 0.00 $ 0.00 $ 0.00
03/31/98(g) 10.00 0.44(+) (0.18)(+) 0.26 (0.44) 0.00 (0.15) 0.00
Class B
09/30/98* 9.67 0.35(+) (2.85)(+) (2.50) (0.35) 0.00 0.00 0.00
03/31/98(g) 10.00 0.40(+) (0.20)(+) 0.20 (0.38) 0.00 (0.15) 0.00
Class C
09/30/98* 9.67 0.35(+) (2.85)(+) (2.50) (0.35) 0.00 0.00 0.00
09/30/97(g) 10.00 0.38(+) (0.18)(+) 0.20 (0.38) 0.00 (0.15) 0.00
High Yield Fund
Class A
09/30/98* $11.66 $ 0.46(+) $(0.51) (+) $(0.05) $(0.46) $ 0.00 $ 0.00 $ 0.00
03/31/98 11.10 0.93(+) 0.66 (+) 1.59 (0.94) 0.00 0.00 (0.09)
03/31/97(a) 11.18 0.17 (0.05) 0.12 (0.20) 0.00 0.00 0.00
Class B
09/30/98* 11.66 0.41(+) (0.50) (+) (0.09) (0.42) 0.00 0.00 0.00
03/31/98 11.10 0.84(+) 0.66 (+) 1.50 (0.85) 0.00 0.00 (0.09)
03/31/97(a) 11.18 0.15 (0.05) 0.10 (0.18) 0.00 0.00 0.00
Class C
09/30/98* 11.66 0.42(+) (0.51) (+) (0.09) (0.42) 0.00 0.00 0.00
03/31/98 11.10 0.85(+) 0.65 (+) 1.50 (0.85) 0.00 0.00 (0.09)
03/31/97(a) 11.18 0.15 (0.05) 0.10 (0.18) 0.00 0.00 0.00
Municipal Bond Fund
Class A
09/30/98* $ 9.97 $ 0.20(+) $ 0.28 (+) $ 0.48 $(0.20) $ 0.00 $ 0.00 $ 0.00
Class B
09/30/98* 9.97 0.17(+) 0.27 (+) 0.44 (0.16) 0.00 0.00 0.00
Class C
09/30/98* 9.97 0.18(+) 0.27 (+) 0.45 (0.17) 0.00 0.00 0.00
Real Return Bond Fund
Class A
09/30/98* $ 9.77 $ 0.27(+) $ 0.15 (+) $ 0.42 $(0.27) $ 0.00 $ 0.00 $ 0.00
03/31/98 9.93 0.40(+) 0.03 (+) 0.43 (0.42) (0.03) (0.14) 0.00
03/31/97(h) 10.00 0.11(+) (0.10)(+) 0.01 (0.08) 0.00 0.00 0.00
Class B
09/30/98* 9.77 0.23(+) 0.15 (+) 0.38 (0.23) 0.00 0.00 0.00
03/31/98 9.93 0.33(+) 0.03 (+) 0.36 (0.36) (0.02) (0.14) 0.00
03/31/97(h) 10.00 0.09 (0.10) (0.01) (0.06) 0.00 0.00 0.00
Class C
09/30/98* 9.77 0.24(+) 0.15 (+) 0.39 (0.24) 0.00 0.00 0.00
03/31/98 9.93 0.35(+) 0.04 (+) 0.39 (0.38) (0.03) (0.14) 0.00
03/31/97(h) 10.00 0.09 (0.10) (0.01) (0.06) 0.00 0.00 0.00
StocksPLUS Fund
Class A
09/30/98* $14.06 $ 0.15(+) $(1.15)(+) $(1.00) $(0.16) $ 0.00 $ 0.00 $ 0.00
03/31/98 11.46 1.66(+) 3.41 (+) 5.07 (1.38) 0.00 (1.09) 0.00
03/31/97(b) 11.91 (0.10) (0.20) (0.30) (0.15) 0.00 0.00 0.00
Class B
09/30/98* 14.01 0.10(+) (1.15)(+) (1.05) (0.12) 0.00 0.00 0.00
03/301/98 11.44 1.61(+) 3.35 (+) 4.96 (1.30) 0.00 (1.09) 0.00
03/31/97(b) 11.91 (0.13) (0.20) (0.33) (0.14) 0.00 0.00 0.00
Class C
09/30/98* 14.03 0.12(+) (1.15)(+) (1.03) (0.13) 0.00 0.00 0.00
03/31/98 11.45 1.64(+) 3.35 (+) 4.99 (1.32) 0.00 (1.09) 0.00
03/31/97(b) 11.91 (0.12) (0.20) (0.32) (0.14) 0.00 0.00 0.00
</TABLE>
- -------
*Unaudited.
(g) From commencement of operations, July 31, 1997.
(h) From commencement of operations, January 29, 1997.
12 PIMCO Funds: Pacific Investment Management Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Net Asset Net Assets Ratio of Ratio of Net
Tax Basis Value End Expenses to Investment Portfolio
Return Total End Total of Period Average Income to Average Turnover
of Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.39) $ 6.82 (26.06)% $ 166 1.31%+ 8.85%+ 217%
0.00 (0.59) 9.67 2.84 317 1.26 6.93 695
0.00 (0.35) 6.82 (26.36) 122 2.08+ 7.99+ 217
0.00 (0.53) 9.67 2.29 304 2.01 6.33 695
0.00 (0.35) 6.82 (26.36) 148 2.08+ 8.19+ 217
0.00 (0.53) 9.67 2.29 136 2.01 6.11 695
$0.00 $(0.46) $11.15 (0.47)% $ 77,940 0.90%+ 7.95%+ 30%
0.00 (1.03) 11.66 14.80 70,858 0.90 8.02 37
0.00 (0.20) 11.10 1.06 28,873 0.92+ 8.28+ 67
0.00 (0.42) 11.15 (0.84) 190,061 1.65+ 7.19+ 30
0.00 (0.94) 11.66 13.94 156,099 1.65 7.27 37
0.00 (0.18) 11.10 0.86 60,269 1.67+ 7.52+ 67
0.00 (0.42) 11.15 (0.84) 286,704 1.65+ 7.22+ 30
0.00 (0.94) 11.66 13.95 284,836 1.65 7.36 37
0.00 (0.18) 11.10 0.88 205,297 1.68+ 7.56+ 67
$0.00 $(0.20) $10.25 4.85% $ 7,870 0.88%+ 4.03%+ 41%
0.00 (0.16) 10.25 4.46 5,084 1.60+ 3.30+ 41
0.00 (0.17) 10.25 4.58 37,626 1.35+ 3.59+ 41
$0.00 $(0.27) $ 9.92 4.32% $ 462 0.93%+ 5.39%+ 445%
0.00 (0.59) 9.77 4.12 370 0.92 4.06 967
0.00 (0.08) 9.93 0.15 1 0.90+ 6.14+ 160
0.00 (0.23) 9.92 3.92 2,717 1.68+ 4.59+ 445
0.00 (0.52) 9.77 3.50 1,496 1.67 3.32 967
0.00 (0.06) 9.93 (0.08) 509 1.59+ 3.43+ 160
0.00 (0.24) 9.92 4.05 1,950 1.43+ 4.94+ 445
0.00 (0.55) 9.77 3.73 490 1.42 3.56 967
0.00 (0.06) 9.93 (0.07) 148 1.62+ 5.13+ 160
$0.00 $(0.16) $12.90 (7.16)% $ 81,735 1.05%+ 2.16%+ 63%
0.00 (2.47) 14.06 47.07 62,970 1.05 13.34 30
0.00 (0.15) 11.46 (2.59) 5,790 1.10+ (10.69)+ 47
0.00 (0.12) 12.84 (7.55) 146,790 1.80+ 1.47+ 63
0.00 (2.39) 14.01 46.11 99,039 1.80 12.60 30
0.00 (0.14) 11.44 (2.81) 8,281 1.88+ (15.13)+ 47
0.00 (0.13) 12.87 (7.39) 125,666 1.55+ 1.74+ 63
0.00 (2.41) 14.03 46.38 96,960 1.55 12.85 30
0.00 (0.14) 11.45 (2.71) 11,254 1.65+ (12.79)+ 47
</TABLE>
- -------
+Annualized.
Prospectus 13
<PAGE>
Investment Objectives and Policies
The investment objective and general investment policies of each
Fund are described below. There can be no assurance that the in-
vestment objective of any Fund will be achieved. For temporary,
defensive or emergency purposes, a Fund may invest without limit in
U.S. debt securities, including short-term money market securi-
ties, when in the opinion of the Adviser it is appropriate to do
so. It is impossible to predict for how long such alternative
strategies will be utilized. The value of all securities and other
instruments held by the Funds will vary from time to time in re-
sponse to a wide variety of market factors. Consequently, the net
asset value per share of each Fund will vary, except that the Money
Market Fund will 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 investment objective of the Global Bond Fund II described
in this Prospectus may be changed by the Board of Trustees without
shareholder approval. The investment objective of each other Fund
is fundamental and may not be changed without shareholder approval
by vote of a majority of the outstanding shares of that Fund. If
there is a change in a Fund's investment objective, including a
change approved by a shareholder vote, shareholders should con-
sider whether the Fund remains an appropriate investment in light
of their then current financial position and needs.
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 de-
scribed more fully under "Characteristics and Risks of Securities
and Investment Techniques" in this Prospectus and "Investment Ob-
jectives and Policies" in the Statement of Additional Information.
In selecting securities for each 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 char-
acteristics (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.
Fixed With the exception of the Strategic Balanced, Convertible Bond and
Income Fund StocksPLUS Funds, each remaining Fund (together, the "Fixed Income
Descriptions 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 Money Market and Short-Term
Funds is to seek to obtain maximum current income consistent with
preservation of capital and daily liquidity. The 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 success-
ful in doing so. The investment objective of the Real Return Bond
Fund is to seek to realize maximum real return, consistent with the
preservation of real capital and prudent investment manage-ment.
For a discussion of "real return," see "Total Return and Real
Return," below. The investment objective of the Municipal Bond Fund
is to seek high current income exempt from federal in-come tax,
consistent with preservation of capital. Capital appre-ciation is a
secondary objective of the Municipal Bond Fund. The investment
objective of the Global Bond Fund II is to seek maximum total
return, consistent with the preservation of capital. Each of the
remaining Fixed Income Funds seeks to maximize total return,
consistent with preservation of capital and prudent investment
management.
Each of the Fixed Income Funds will invest at least 65% of its
assets in the following types of securities, which, unless specif-
ically provided otherwise in the descriptions of the Funds that
follow, may be issued by domestic or foreign entities and denomi-
nated in U.S. dollars or foreign currencies: securities issued or
guaranteed by the U.S. Government, its agencies or instrumentali-
ties ("U.S. Government securities"); corporate debt securities,
including convertible securities and corporate commercial paper;
mortgage-backed and other asset-backed securities; inflation-in-
dexed bonds issued by both governments and corporations; struc-
tured notes, including hybrid or "indexed" securities, catastrophe
bonds, and loan participations; delayed funding loans and revol-
ving credit facilities; bank certificates of deposit, fixed time
deposits and bankers' acceptances; repurchase agreements and re-
verse repurchase agreements; debt securities issued by states or
local governments and their agencies, authorities and other in-
strumentalities; obligations of foreign govern-
14 PIMCO Funds: Pacific Investment Management Series
<PAGE>
ments 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 ac-
cording 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 Money
Market Fund and the Municipal Bond Fund, may invest all of its as-
sets in derivative instruments or in mortgage- or asset-backed se-
curities. Each of the Fixed Income Funds, except the Money Market
Fund, may adhere to its investment policy by entering into a se-
ries of purchase and sale contracts or utilizing other investment
techniques by which it may obtain market exposure to the securi-
ties in which it primarily invests.
In addition, each of the Fixed Income Funds may lend its port-
folio securities to brokers, dealers and other financial institu-
tions in order to earn income. Each of the Fixed Income Funds may
purchase and sell options and futures subject to the limits dis-
cussed below, engage in credit spread trades and enter into for-
ward foreign currency contracts.
Each of the Real Return Bond, Global Bond II, Foreign Bond, and
Emerging Markets Bond Funds will normally invest at least 80% of
its total assets in "bonds." For this purpose, each of these Funds
considers the various types of debt or fixed income securities in
which it invests, as specifically described elsewhere in this Pro-
spectus, to be "bonds" as referenced in that Fund's name. The use
of this name is not meant to restrict a Fund's investment to the
narrow category of debt securities that are formally called
"bonds."
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 Emerging Markets Bond 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 ad-
versely effect yield and return.
The compositions of the Fixed Income Funds differ as follows:
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 as-
sets, measured at the time of investment, in a diversified portfo-
lio 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 in-
vestments in securities will be limited to U.S. dollar-denominated
securities that mature in 397 days or less from the date of pur-
chase. The dollar-weighted average portfolio maturity of the Fund
will not exceed 90 days. The Fund may invest in the following: ob-
ligations of the U.S. Government (including its agencies and in-
strumentalities); short-term corporate debt securities of domestic
and foreign corporations; obligations of domestic and foreign com-
mercial banks, savings banks, and savings and loan associations;
and commercial paper. The Fund may invest more than 25% of its to-
tal assets in securities or obligations issued by U.S. banks.
The Fund may invest only in securities that comply with the
quality, maturity and diversification requirements of Rule 2a-7
under the Investment Company Act of 1940, which regulates money
market funds.
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 in-
vest up to 10% of its assets in fixed income securities that are
rated below investment grade (rated below Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard and Poor's Ratings
Services ("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).
For information on the risks associated with investments in secu-
rities 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.
Prospectus 15
<PAGE>
Low Duration Fund invests in a diversified portfolio of fixed in-
come securities of varying maturities. The average portfolio dura-
tion 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 "Ap-
pendix B--Description of Securities Ratings." The Fund may invest
up to 20% of its assets in securities denominated in foreign cur-
rencies, and may invest beyond this limit in U.S. dollar-denomi-
nated securities of foreign issuers. The total rate of return for
this Fund is expected to exhibit less volatility than that of the
Total Return Fund because its duration will be shorter.
Total Return Fund invests under normal circumstances at least 65%
of its assets in a diversified portfolio of fixed income securi-
ties 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--De-
scription 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 secu-
rities 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 Long-Term U.S. Government Fund because
its duration will normally be shorter.
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 normally have a mini-
mum average portfolio duration of eight years. For point of refer-
ence, 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 nor-
mally associated with longer duration investments. The Long-Term
U.S. Government Fund's investments in fixed income securities are
limited to those of U.S. dollar-denominated securities 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).
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 se-
curities 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 securi-
ties rated Aa by Moody's or AA by S&P.
Global Bond Fund II invests in a portfolio of fixed income securi-
ties denominated in major currencies, baskets of foreign curren-
cies (such as the ECU), and the U.S. dollar. Under normal circum-
stances, at least 65% of the Fund's assets will be invested in
fixed income securities of issuers located in at least three coun-
tries (one of which may be the United States), which may be repre-
sented by futures contracts (including related options) with re-
spect 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 domes-
tic 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, de-
termined by the Adviser to be of comparable quality). For informa-
tion 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 nor-
mally vary within a three- to seven-year time frame.
16 PIMCO Funds: Pacific Investment Management Series
<PAGE>
The Foreign Bond Fund differs from the Global Bond Fund II pri-
marily in the extent to which assets are invested in the securi-
ties of issuers located outside the United States. The Adviser
will select these 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 rele-
vant.
Foreign Bond Fund invests in a portfolio of fixed income securi-
ties 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 con-
tracts (including related options) with respect to such securi-
ties, 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, deter-
mined by the Adviser to be of comparable quality). Securities
rated below investment grade may sometimes be referred to as "junk
bonds." For information on the risks associated with investments
in securities rated below investment grade, see "Appendix B--De-
scription of Securities Ratings." The average portfolio duration
of this Fund will normally vary within a three- to seven-year time
frame.
Emerging Markets Bond Fund invests in a portfolio of fixed income
securities denominated in foreign currencies and the U.S. dollar.
Under normal market conditions, the Fund will invest at least 80%
of its assets in fixed income securities of issuers that are eco-
nomically tied to countries with emerging securities markets. The
Fund may invest up to 20% of its assets in other types of fixed
income instruments, including securities of issuers located in, or
securities denominated in currencies of, countries with developed
foreign securities markets. The Fund also may invest up to 10% of
its assets in shares of investment companies that invest primarily
in emerging market debt securities. The average portfolio duration
of the Fund will vary based on the Adviser's view of the potential
for total return offered by a particular duration strategy and,
under normal market conditions, is not expected to exceed eight
years.
The Adviser has broad discretion to identify and invest in
countries that it considers to qualify as emerging securities mar-
kets. However, the Adviser generally considers an emerging securi-
ties market to be one located in any country that is defined as an
emerging or developing economy by any of the following: the Inter-
national Bank for Reconstruction and Development (i.e., the World
Bank), including its various offshoots, such as the International
Finance Corporation, or the United Nations or its authorities. The
Fund considers an issuer to be economically tied to a country if
(1) the issuer is organized under the laws of, or maintains its
principal place of business in, the country, (2) its securities
are principally traded in the country's securities markets, or (3)
the issuer derived at least half of its revenues or profits from
goods produced or sold, investments made, or services performed in
the country, or has at least half of its assets in that country.
The Fund emphasizes countries with relatively low gross na-
tional product per capita and with the potential for rapid eco-
nomic growth. The Adviser will select the Fund's country and cur-
rency composition based on its evaluation of relative interest
rates, inflation rates, exchange rates, monetary and fiscal poli-
cies, trade and current account balances, and any other specific
factors the Adviser believes to be relevant. The Fund likely will
concentrate its investments in Asia, Africa, the Middle East,
Latin America and the developing countries of Europe. Accordingly,
the Fund will be particularly susceptible to the effects of polit-
ical and economic developments in these regions. This effect may
be exacerbated by a relative scarcity of issuers in certain of
these markets, which may result in the Fund being highly concen-
trated in a small number of issuers. For a further discussion of
the special risks of investing in foreign and emerging market
countries, see "Characteristics and Risks of Securities and In-
vestment Techniques--Foreign Securities."
Prospectus 17
<PAGE>
The Fund's investments in emerging market fixed income securi-
ties may be represented by futures contracts (including related
options) with respect to such securities, options on such securi-
ties, equity securities (including common stocks) upon the conver-
sion of convertible securities, or securities the return on which
is derived primarily from emerging securities markets, when the
Adviser deems it appropriate to do so.
The Fund may invest substantially all of its assets in securi-
ties 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 compa-
rable quality). Such securities are sometimes referred to as "junk
bonds." While these securities generally provide greater potential
opportunity for capital appreciation and higher yields than in-
vestments in higher rated securities, they also entail greater
risk, including the possibility of default or bankruptcy of the
issuer of the securities. Risk of default or bankruptcy may be
greater in periods of economic uncertainty or recession, as the
issuers may be less able to withstand general economic downturns
affecting the regions in which the Fund invests. The Adviser seeks
to reduce risk through diversification, credit analysis and atten-
tion to current developments and trends in emerging market econo-
mies and markets. The value of all fixed income securities, in-
cluding those held by the Fund, can be expected to change in-
versely with interest rates. For a further discussion of the spe-
cial risks of investing in lower rated securities, see "Character-
istics and Risks of Securities and Investment Techniques--High
Yield Securities ("Junk Bonds")."
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). 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 du-
ration strategy. The Fund may invest in securities of foreign is-
suers, 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.
Securities rated below investment grade may sometimes be referred
to as "junk bonds." 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 Securi-
ties ("Junk Bonds")."
Municipal Bond Fund seeks high current income exempt from federal
income tax, consistent with preservation of capital. Capital ap-
preciation is a secondary objective. The Fund seeks its objectives
by investing in debt securities whose interest is, in the opinion
of bond counsel for the issuer at the time of issuance, exempt
from federal income tax ("Municipal Bonds"). Municipal Bonds gen-
erally are issued by states and local governments and their agen-
cies, authorities and other instrumentalities. It is a policy of
the Fund that, under normal market conditions, at least 80% of its
net assets will be invested in Municipal Bonds. The Fund may in-
vest up to 20% of its net assets in U.S. Government securities,
money market instruments and/or "private activity" bonds. Under
normal circumstances, the average portfolio duration of the Munic-
ipal Bond Fund will vary within a three- to ten-year time frame,
based on the Adviser's forecast for interest rates.
The Fund may invest up to 10% of its net assets in Municipal
Bonds or "private activity" bonds which are rated below Baa by
Moody's or BBB by S&P but which are rated at least Ba by Moody's
or BB by S&P (or, if unrated,
18 PIMCO Funds: Pacific Investment Management Series
<PAGE>
determined by the Adviser to be of comparable quality). For infor-
mation on the risks associated with investments in securities
rated below investment grade, see "Appendix B--Description of Se-
curities Ratings."
Real Return Bond Fund invests under normal circumstances at least
65% of its total assets in inflation-indexed bonds issued by U.S.
and foreign governments, their agencies or instrumentalities. 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).The Fund may invest up to 35% of its assets in
other types of fixed income instruments, including securities de-
nominated in foreign currencies, (and the Fund may also invest be-
yond this limit in U.S. dollar-denominated securities of foreign
issuers).
Inflation-indexed bonds are fixed income securities whose prin-
cipal value is periodically adjusted according to the rate of in-
flation. Such bonds generally are issued at an interest rate lower
than non-inflation related bonds, but are expected to retain their
value against inflation over time. For a more complete discussion
of inflation-indexed bonds, including the risks associated with
investing in such securities, see "Characteristics and Risks of
Securities and Investment Techniques--Inflation-Indexed Bonds."
See "Taxes" for information about the possible tax consequences of
investing in the Fund and in inflation-indexed bonds.
In managing fixed income securities, one of the principal tools
generally used by the Adviser is "duration," which is a measure of
the expected life of a fixed income security on a present value
basis, incorporating a bond's yield, coupon interest payments, fi-
nal maturity and call features. See "Appendix A--Description of
Duration." Because of the unique features of inflation-indexed
bonds, the Adviser utilizes a modified form of duration for the
Real Return Bond Fund ("modified real duration") which measures
price changes in such bonds as a result of changes in real, rather
than nominal, interest rates. Although there is no limit on the
modified real duration of the Real Return Bond Fund, it is ex-
pected that the average modified real duration of the Fund will
normally vary approximately within the range of the average modi-
fied real duration of all inflation-indexed bonds issued by the
U.S. Treasury in the aggregate.
Stock and Strategic Balanced Fund, as its investment objective, seeks to re-
Bond Fund alize maximum total return, consistent with preservation of capi-
Description tal and prudent investment management. The Fund invests in the se-
curities eligible for purchase by the StocksPLUS and Total Return
Funds. The percentage of the Fund's assets invested in equity and
fixed income exposure will vary in accordance with a methodology
developed by the Adviser. The methodology is based upon the Advis-
er's long-standing process of economic forecasting of business cy-
cle stages and consideration of the risk and reward potential of
equity and fixed income securities. 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 as-
surance that the Adviser's methodology for selecting the optimal
blend of equity and fixed income exposure will be successful.
Class A, Class B and Class C shares of the Strategic Balanced
Fund are not offered as of the date of this Prospectus; however,
investment opportunities in this Fund may be available in the
future.
Convertible
Bond
Fund Description
Convertible Bond Fund, as its investment objective, seeks to real-
ize maximum total return, consistent with prudent investment man-
agement. The Fund invests under normal circumstances at least 65%
of its assets in a diversified portfolio of convertible securi-
ties. Convertible securities include but are not limited to the
following: corporate bonds, debentures, notes or preferred stocks
and their hybrids that can be converted into (exchanged for) com-
mon stock or other securities, such as warrants or options, which
provide an opportunity for equity participation. The Fund may in-
vest up to 35% of its assets in convertible securities that are
rated below investment grade but rated Caa or higher by Moody's or
CCC or higher by Standard & Poor's (or, if unrated, determined by
the Adviser to be of comparable quality). The Fund may only invest
up to 10% of its assets in convertible securities rated Caa or CCC
(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--De-
scription of Securities Ratings." The Fund may also
Prospectus 19
<PAGE>
invest up to 20% of its assets in securities denominated in for-
eign currencies, and may invest beyond this limit in U.S. dollar-
denominated securities of foreign issuers. In addition, the Fund
may invest up to 35% of its assets in common stocks or in non-con-
vertible securities eligible for purchase by the Fixed Income
Funds.
Class A, Class B and Class C shares of the Convertible Bond
Fund are not offered as of the date of this Prospectus; however,
investment opportunities in this Fund may be available in the fu-
ture.
StocksPLUS Fund, as its investment objective, seeks to achieve to-
Enhanced tal return which exceeds the total return performance of the Stan-
Index dard & Poor's 500 Composite Stock Price Index ("S&P 500").
Stock Fund StocksPLUS is the name of a proprietary portfolio management
Description 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 Adviser expects that under normal market conditions,
the Fund will invest substantially all of its assets in S&P 500
derivatives, backed by a portfolio of fixed income securities. 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 du-
ration which is normally not expected to exceed one year. See "Ap-
pendix 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. S&P chooses the
stocks to be included in the S&P 500 solely on a statistical ba-
sis. 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. The Fund will seek to remain
invested in S&P 500 derivatives or S&P 500 stocks even when the
S&P 500 is declining.
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 par-
ticular weighting in the S&P 500.
Positions in S&P 500 futures and options on futures will be en-
tered into only to the extent they constitute permissible posi-
tions for the Fund according to applicable rules of the Commodity
Futures Trading Commission ("CFTC"). From time to time, the Ad-
viser may be constrained in its ability to use S&P 500 derivatives
either by requirements of the Internal Revenue Code or by an unan-
ticipated inability to close out positions when it would be most
advantageous to do so. A large number of investors use S&P 500 de-
rivatives for both hedging and speculative purposes, and although
generally this helps guarantee a liquid market in those instru-
ments, at times liquidity may be limited. For more information
about S&P 500 derivatives, see "Characteristics and Risks of Secu-
rities and Investment Techniques--Derivative Instruments."
Assets of the StocksPLUS Fund not invested in equity securities
may be invested in securities eligible for purchase by the Fixed
Income Funds. The Fund 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, the StocksPLUS Fund may lend its portfolio securities
to brokers, dealers and other financial institutions in order to
earn income. The Fund may also invest all of its assets in deriva-
tive instruments, as described under "Characteristics of Securi-
ties and Investment Techniques--Derivative Instruments." In addi-
tion, the Fund may invest up to 20% of its assets in securities
denominated in foreign currencies, may purchase and sell options
and futures on foreign currencies, and may enter into forward for-
eign currency contracts.
20 PIMCO Funds: Pacific Investment Management Series
<PAGE>
To the extent that the Fund invests in S&P 500 derivatives
backed by a portfolio of fixed income securities, under certain
conditions, generally in a market where the value of both S&P 500
derivatives and fixed income securities are declining, the Fund
may experience greater losses than would be the case if it were to
invest directly in a portfolio of S&P 500 stocks.
Total The "total return" sought by certain of the Funds will consist of
Return and interest and dividends from underlying securities, capital appre-
Real Return ciation 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 port-
folio 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 in-
come securities (and therefore their capital appreciation or de-
preciation) is largely a function of changes in the current level
of interest rates. Generally, when interest rates are falling, a
portfolio with a shorter duration will not generate as high a
level of total return as a portfolio with a longer duration. Con-
versely, when interest rates are rising, a portfolio with a
shorter duration will generally outperform longer duration portfo-
lios. 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 mar-
ket 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 num-
ber 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 condi-
tions, and foreign currency exchange rates. Historically, the to-
tal return performance of equity-oriented portfolios has generally
been greater over the long term than fixed income portfolios. How-
ever, 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.
"Real Return," or "Inflation Adjusted Return," as referenced in
the name and investment objective of the Real Return Bond Fund, is
a measure of the change in purchasing power of money invested in a
particular instrument after adjusting for inflation. An investment
in a security generating a high nominal return (such as a typical
U.S. Government Treasury bond) may not generate a high real return
once inflation is considered. For example, an instrument generat-
ing a 9% nominal return at a time when inflation is 6% has a real
return of approximately 3%; that is, the purchasing power of the
money invested in that instrument would only increase by approxi-
mately 3%. On the other hand, an inflation-indexed instrument gen-
erating a 5% real return would generate a 5% increase in purchas-
ing power regardless of the rate of inflation. As stated above,
the investment objective of the Fund is to seek to achieve maximum
real return. The total return (not adjusted for inflation) at-
tained by this Fund may be less than the total return attained by
other of the Funds that do not invest primarily in inflation-in-
dexed securities.
In the case of inflation-indexed bonds, changes in market value
are tied to the relationship between nominal interest rates and
the rate of inflation. If inflation were to rise at a faster rate
than nominal interest rates, real interest rates might decline,
leading to an increase in value of inflation-indexed bonds. In
contrast, if nominal interest rates increase at a faster rate than
inflation, real interest rates might increase, leading to a de-
crease in value of inflation-indexed bonds.
Prospectus 21
<PAGE>
Investment Risks and Considerations
The following are some of the principal risks of investing in the
Funds. Investors should read this Prospectus carefully for a more
complete discussion of the risks relating to an investment in the
Funds. 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. Gen-
erally, 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, although this may not be true in the case of inflation-
indexed bonds. In addition, certain of the Funds may invest in se-
curities rated lower than Baa by Moody's or 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 posi-
tions 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 Money Market Fund) may use derivative in-
struments, consisting of futures, options, options on futures, and
swap agreements, for hedging purposes or as part of their invest-
ment 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 securi-
ties being hedged and the value of the particular derivative in-
strument, and the risk that unexpected changes in interest rates
may adversely affect the value of a Fund's investments in particu-
lar derivative instruments. Unless otherwise indicated, all limi-
tations applicable to Fund investments (as stated in this Prospec-
tus and in the 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 invest-
ment portfolio, resulting from market fluctuations or other
changes in a Fund's total assets, will not require a Fund to dis-
pose of an investment until the Adviser determines that is practi-
cable 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 sev-
eral assigned ratings.
Investors should carefully consider the possible tax conse-
quences from investing in the Real Return Bond Fund. The Fund in-
vests primarily in securities that for tax purposes may be consid-
ered to have been issued originally at a discount. Accordingly,
the Fund may be required to make annual distributions to share-
holders in excess of the cash received by the Fund in a given pe-
riod from those investments. See "Characteristics and Risks of Se-
curities and Investment Techniques--Inflation-Indexed Bonds" and
"Taxes" for additional information.
The Real Return Bond, Global Bond II, Foreign Bond and Emerging
Markets Bond Funds are "non-diversified" for purposes of the In-
vestment 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. The Funds are still, however,
subject to diversification requirements imposed by the Internal
Revenue Code of 1986, as amended, which means that as of the end
of each calendar quarter, a Fund may have no more than 25% of its
assets invested in the securities of a single issuer, and may,
with respect to 50% of its assets, have no more than 5% of its as-
sets invested in the securities of a single issuer. As "non-diver-
sified" portfolios, these Funds may be more susceptible to risks
associated with a single economic, political or regulatory occur-
rence than a diversified portfolio might be.
The Funds offer their shares to both retail and institutional
investors. Institutional shareholders, some of whom also may be
investment advisory clients of Pacific Investment Management, may
hold large positions in certain of the Funds. Such shareholders
may on occasion make large redemptions of their holdings in the
Funds to meet their liquidity needs, in connection with strategic
adjustments to their overall portfolio of investments, or for
other purposes. Large redemptions from some Funds could require
the Adviser to liquidate portfolio positions when it is not most
desirable to do so. Liquidation of portfolio holdings also may
cause a Fund to realize taxable capital gains.
22 PIMCO Funds: Pacific Investment Management Series
<PAGE>
Characteristics and Risks of
Securities and Investment Techniques
The following describes in greater detail different types of secu-
rities 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. U.S. Government securities are obligations of, or guaranteed by,
Government the U.S. Government, its agencies or instrumentalities. The U.S.
Securities 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 Na-
tional 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 is-
suer 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 pur-
chased 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 securi-
ties of similar maturities. Custodial receipts issued in connec-
tion 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 rep-
resented by such receipt is a debt obligation of the U.S. Trea-
sury. Other zero coupon Treasury securities (STRIPs and CUBEs) are
direct obligations of the U.S. Government.
Corporate Corporate debt securities include corporate bonds, debentures,
Debt notes and other similar corporate debt instruments, including con-
Securities vertible 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 de-
scribed 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 securi-
ties 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 Secu-
rities Ratings." Investments in high yield securities are dis-
cussed separately below under "High Yield Securities ("Junk
Bonds")."
Convertible Each Fund (except the Money Market and Municipal Bond Funds) may
Securities invest in convertible securities, which may offer higher income
than the common stocks into which they are convertible. The con-
vertible securities in which the Funds may invest consist of
bonds, notes, debentures and preferred stocks which may be con-
verted or exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. A convertible security en-
titles the holder to receive interest or dividends until the con-
vertible security matures or is redeemed, converted or exchanged.
Because of the conversion feature, the price of the convertible
security will normally fluctuate in some proportion to changes in
the price of the underlying asset, and as such is subject to risks
relating to the activities of the issuer
Prospectus 23
<PAGE>
and/or general market and economic conditions. The income compo-
nent of a convertible security may tend to cushion the security
against declines in the price of the underlying asset. However,
the income component of convertible securities causes fluctuations
based upon changes in interest rates and the credit quality of the
issuer. In addition, convertible securities are often lower-rated
securities. See, "High Yield Securities ("Junk Bonds')."
A Fund may be required to permit the issuer of a convertible
security to redeem the security, convert it into the underlying
asset, or sell it to a third party. If the issuer chooses to do
so, it could force a Fund to convert or sell a security before the
holder would otherwise choose, which may have an adverse effect on
a Fund's ability to achieve its investment objectives.
While the Fixed Income Funds intend to invest primarily in
fixed income securities, each may invest in convertible securities
or equity securities. While some countries or companies may be re-
garded as favorable investments, pure fixed income opportunities
may be unattractive or limited due to insufficient supply, legal
or technical restrictions. In such cases, a Fund may consider eq-
uity securities or convertible securities to gain exposure to such
investments.
Loan
Participations
and
Assignments
Certain Funds may invest in fixed- and floating-rate loans ar-
ranged through private negotiations between an issuer of debt in-
struments and one or more financial institutions ("lenders"). Gen-
erally, the Funds' investments in loans are expected to take the
form of loan participations and assignments of portions of loans
from third parties.
Large loans to corporations or governments may be shared or
syndicated among several lenders, usually banks. The Funds may
participate in such syndicates, or can buy part of a loan, becom-
ing a direct lender. Participations and assignments involve spe-
cial types of risk, including limited marketability and the risks
of being a lender. See "Illiquid Securities" for a discussion of
the limits on a Fund's investments in loan participations and as-
signments with limited marketability. If a Fund purchases a par-
ticipation, it may only be able to enforce its rights through the
lender, and may assume the credit risk of the lender in addition
to the borrower. In assignments, the Funds' rights against the
borrower may be more limited than those held by the original lend-
er.
Delayed The Funds (except the PIMCO Money Market and Municipal Bond Funds)
Funding may also enter into, or acquire participations in, delayed funding
Loans and loans and revolving credit facilities. Delayed funding loans and
Revolving revolving credit facilities are borrowing arrangements in which
Credit the lender agrees to make loans up to a maximum amount upon demand
Facilities by the borrower during a specified term. A revolving credit facil-
ity differs from a delayed funding loan in that as the borrower
repays the loan, an amount equal to the repayment may be borrowed
again during the term of the revolving credit facility. These com-
mitments may have the effect of requiring a Fund to increase its
investment in a company at a time when it might not otherwise de-
cide to do so (including at a time when the company's financial
condition makes it unlikely that such amounts will be repaid).
The Funds may acquire a participation interest in delayed fund-
ing loans or revolving credit facilities from a bank or other fi-
nancial institution. See "Loan Participations and Assignments."
The terms of the participation require the Fund to make a pro rata
share of all loans extended to the borrower and entitles the Fund
to a pro rata share of all payments made by the borrower. Delayed
funding loans and revolving credit facilities usually provide for
floating or variable rates of interest. To the extent that a Fund
is committed to advance additional funds, it will at all times
segregate assets, determined to be liquid by the Adviser in accor-
dance with procedures established by the Board of Trustees, in an
amount sufficient to meet such commitments.
Variable
and Variable and floating rate securities provide for a periodic ad-
Floating justment in the interest rate paid on the obligations. The terms
Rate of such obligations must provide that interest rates are adjusted
Securities periodically based upon an interest rate adjustment index as pro-
vided 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. The Money Mar-
ket Fund may invest in a variable rate security having a stated
maturity in excess of 397 calendar days if the interest rate will
be adjusted, and the Fund may demand payment of principal from the
issuer, within the period.
24 PIMCO Funds: Pacific Investment Management Series
<PAGE>
Each Fund may invest in floating rate debt instruments ("float-
ers") and (except the Money Market and Municipal Bond Funds) en-
gage in credit spread trades. 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. A credit spread trade is an investment position relating
to a difference in the prices or interest rates of two securities
or currencies, where the value of the investment position is de-
termined by movements in the difference between the prices or in-
terest rates, as the case may be, of the respective securities or
currencies.
Each Fund (except the Money Market Fund and the Municipal Bond
Fund) may also invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater re-
sets in the opposite direction from the market rate of interest to
which the inverse floater is indexed. An inverse floating rate se-
curity may exhibit greater price volatility than a fixed rate ob-
ligation of similar credit quality. The Funds have adopted a pol-
icy 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.
Inflation- Inflation-indexed bonds are fixed income securities whose princi-
Indexed pal value is periodically adjusted according to the rate of infla-
Bonds tion. Two structures are common. The U.S. Treasury and some other
issuers use a structure that accrues inflation into the principal
value of the bond. Most other issuers pay out the CPI accruals as
part of a semiannual coupon.
Inflation-indexed securities issued by the U.S. Treasury have
maturities of five, ten or thirty years, although it is possible
that securities with other maturities will be issued in the fu-
ture. The U.S. Treasury securities pay interest on a semi-annual
basis, equal to a fixed percentage of the inflation-adjusted prin-
cipal amount. For example, if an investor purchased an inflation-
indexed bond with a par value of $1,000 and a 3% real rate of re-
turn coupon (payable 1.5% semi-annually), and inflation over the
first six months were 1%, the mid-year par value of the bond would
be $1,010 and the first semi-annual interest payment would be
$15.15 ($1,010 times 1.5%). If inflation during the second half of
the year resulted in the whole years' inflation equalling 3%, the
end-of-year par value of the bond would be $1,030 and the second
semi-annual interest payment would be $15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the
principal value of inflation-indexed bonds will be adjusted down-
ward, and consequently the interest payable on these securities
(calculated with respect to a smaller principal amount) will be
reduced. Repayment of the original bond principal upon maturity
(as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds, even during a period of defla-
tion. However, the current market value of the bonds is not guar-
anteed, and will fluctuate. The Funds may also invest in other in-
flation related bonds which may or may not provide a similar guar-
antee. If such a guarantee of principal is not provided, the ad-
justed principal value of the bond repaid at maturity may be less
than the original principal.
The value of inflation-indexed bonds is expected to change in
response to changes in real interest rates. Real interest rates in
turn are tied to the relationship between nominal interest rates
and the rate of inflation. Therefore, if inflation were to rise at
a faster rate than nominal interest rates, real interest rates
might decline, leading to an increase in value of inflation-in-
dexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, lead-
ing to a decrease in value of inflation-indexed bonds.
While these securities are expected to be protected from long-
term inflationary trends, short-term increases in inflation may
lead to a decline in value. If interest rates rise due to reasons
other than inflation (for example, due to changes in currency ex-
change rates), investors in these securities may not be protected
to the extent that the increase is not reflected in the bond's in-
flation measure.
The periodic adjustment of U.S. inflation-indexed bonds is tied
to the Consumer Price Index for Urban Consumers ("CPI-U"), which
is calculated monthly by the U.S. Bureau of Labor Statistics. The
CPI-U is a measurement of changes in the cost of living, made up
of components such as housing, food, transportation and energy.
Inflation-indexed bonds issued by a foreign government are gener-
ally adjusted to reflect a comparable inflation index, calculated
by that government. There can be no assurance that the CPI-U or
any foreign inflation index will accurately measure the
Prospectus 25
<PAGE>
real rate of inflation in the prices of goods and services. More-
over, there can be no assurance that the rate of inflation in a
foreign country will be correlated to the rate of inflation in the
United States.
Any increase in the principal amount of an inflation-indexed
bond will be considered taxable ordinary income, even though in-
vestors do not receive their principal until maturity. See "Taxes"
for information about the possible tax consequences of investing
in the Real Return Bond Fund and in inflation-indexed bonds.
Mortgage- Each of the Funds (except the Money Market, Municipal Bond and
Related And Convertible Bond Funds) may invest all of its assets in mortgage-
Other or other asset-backed securities. The Convertible Bond Fund may
Asset- invest up to 35% of its assets in such securities. The value of
Backed some mortgage- or asset-backed securities in which the Funds in-
Securities vest may be particularly sensitive to changes in prevailing inter-
est rates, and, like the other investments of the Funds, the abil-
ity 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 in-
terests 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 borrow-
ers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities). Early re-
payment of principal on some mortgage-related securities (arising
from prepayments of principal due to sale of the underlying prop-
erty, refinancing, or foreclosure, net of fees and costs which may
be incurred) may expose a Fund to a lower rate of return upon re-
investment 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 securi-
ties, 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 prepay-
ment features may not increase as much as other fixed income secu-
rities. The rate of prepayments on underlying mortgages will af-
fect the price and volatility of a mortgage-related security, and
may have the effect of shortening or extending the effective matu-
rity of the security beyond what was anticipated at the time of
purchase. To the extent that unanticipated rates of prepayment on
underlying mortgages increase the effective maturity of a mort-
gage-related security, the volatility of such security can be ex-
pected to increase.
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. Govern-
ment (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 bank-
ers and other secondary market issuers) may be supported by vari-
ous 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 mort-
gage poolers.
Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-
related instruments. Interest and pre-paid principal on a CMO are
paid, in most cases, on a monthly basis. CMOs may be collateral-
ized 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 pay-
ments 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.
26 PIMCO Funds: Pacific Investment Management Series
<PAGE>
Commercial Mortgage-Backed Securities include securities that re-
flect an interest in, and are secured by, mortgage loans on com-
mercial real property. The market for commercial mortgage-backed
securities developed more recently and in terms of total outstand-
ing 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 secu-
rities 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-related or asset-backed securities.
Mortgage-Related Securities include securities other than those
described above that directly or indirectly represent a participa-
tion in, or are secured by and payable from, mortgage loans on
real property, such as mortgage dollar rolls (see "Reverse Repur-
chase Agreements, Dollar Rolls, and Borrowings"), CMO residuals or
stripped mortgage-backed securities ("SMBS"), and may be struc-
tured 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 remain-
der of the principal. In the most extreme case, one class will re-
ceive all of the interest (the interest-only, or "IO" class),
while the other class will receive all of the principal (the prin-
cipal-only, or "PO" class). The yield to maturity on an IO class
is extremely sensitive to the rate of principal payments (includ-
ing prepayments) on the related underlying mortgage assets, and a
rapid rate of principal payments may have a material adverse ef-
fect 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 se-
curities that have been offered to investors. For a discussion of
the characteristics of some of these instruments, see the State-
ment of Additional Information.
Municipal The Municipal Bond Fund invests in Municipal Bonds which are gen-
Bonds erally issued by states and local governments and their agencies,
authorities and other instrumentalities. The Municipal Bonds which
the Municipal Bond Fund may purchase include general obligation
bonds and limited obligation bonds (or revenue bonds), including
industrial development bonds issued pursuant to former federal tax
law. General obligation bonds are obligations involving the credit
of an issuer possessing taxing power and are payable from such is-
suer's general revenues and not from any particular source. Lim-
ited obligation bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific
revenue source. Tax-exempt "private activity" bonds and industrial
development bonds generally are also revenue bonds and thus are
not payable from the issuer's general revenues. The Municipal Bond
Fund may invest in Municipal Bonds with credit enhancements such
as letters of credit, municipal bond insurance and Standby Bond
Purchase Agreements. The Municipal Bond Fund may also invest in
municipal lease obligations, as well as securities derived from
Municipal Bonds, such as residual interest bonds and participation
interests.
Municipal Bonds are subject to credit and market risk. Credit
risk relates to the ability of the issuer to make payments of
principal and interest. The ability of an issuer to make such pay-
ments could be affected by litigation, legislation or other polit-
ical events or the bankruptcy of the issuer. Market risk relates
to changes in a security's value as a result of changes in inter-
est rates. Lower rated Municipal Bonds generally provide higher
yields but are subject to greater credit and market risk than
higher quality Municipal Bonds.
Repurchase For the purpose of achieving income, each of the Funds may enter
Agreements into repurchase agreements, which entail the purchase of a portfo-
lio-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 repur-
chase 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 Money Market Fund) (taken at current market value)
in repurchase agreements maturing in more than seven days.
Prospectus 27
<PAGE>
Reverse A reverse repurchase agreement involves the sale of a security by
Repurchase a Fund and its agreement to repurchase the instrument at a speci-
Agreements, fied time and price. Under a reverse repurchase agreement, the
Dollar Fund continues to receive any principal and interest payments on
Rolls, and the underlying security during the term of the agreement. The Fund
Borrowings generally will segregate assets determined to be liquid by the Ad-
viser in accordance with procedures established by the Board of
Trustees to cover its obligations under reverse repurchase agree-
ments and, to this extent, a reverse repurchase agreement (or eco-
nomically similar transaction) will not be considered a "senior
security" subject to the 300% asset coverage requirements other-
wise applicable to borrowings by a Fund.
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 simi-
lar 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 pur-
chase as well as by any interest earned on the proceeds of the se-
curities sold. The Fund also could be compensated through the re-
ceipt of fee income equivalent to a lower forward price. The Fund
will segregate assets determined to be liquid by the Adviser in
accordance with procedures established by the Board of Trustees to
cover its obligations under dollar rolls.
To the extent that positions in reverse repurchase agreements,
dollar rolls or similar transactions are not covered through the
maintenance of segregated liquid assets at least equal to the
amount of any forward purchase commitment, such transactions would
be subject to the Funds' limitations on borrowings, which would
restrict the aggregate of such transactions (plus any other
borrowings) to 33 1/3% (for each Fund except the Global Bond
Fund II) of such Fund's total assets. Apart from such transac-
tions, a Fund will not borrow money, except for temporary adminis-
trative purposes. The Global Bond Fund II may not borrow in excess
of 10% of the value of its total assets and then only from banks
as a temporary measure to facilitate the meeting of redemption re-
quests (not for leverage) or for extraordinary or emergency pur-
poses.
Loans of For the purpose of achieving income, each Fund may lend its port-
Portfolio folio securities to brokers, dealers, and other financial institu-
Securities tions, 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 re-
turn 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% (25% in the case of the Global
Bond Fund II) of the total assets of the Fund.
Each Fund's performance will continue to reflect changes in the
value of the securities loaned and will also reflect the receipt
of either interest, through investment of cash collateral by the
Fund in permissible investments, or a fee, if the collateral is
U.S. Government securities. Securities lending involves the risk
of loss of rights in the collateral or delay in recovery of the
collateral should the borrower fail to return the security loaned
or become insolvent. The Funds may pay lending fees to the party
arranging the loan.
When-
Issued, Each of the Funds may purchase or sell securities on a when-is-
Delayed sued, delayed delivery, or forward commitment basis. These trans-
Delivery actions involve a commitment by the Fund to purchase or sell secu-
And Forward rities for a predetermined price or yield, with payment and deliv-
Commitment ery taking place more than seven days in the future, or after a
Transactionsperiod longer than the customary settlement period for that type
of security. When such purchases are outstanding, the Fund will
segregate until the settlement date assets determined to be liquid
by the Adviser in accordance with procedures established by the
Board of Trustees, in an amount sufficient to meet the purchase
price. Typically, no income accrues on securities a Fund has
28
PIMCO Funds: Pacific Investment Management Series
<PAGE>
committed to purchase prior to the time delivery of the securities
is made, although a Fund may earn income on securities it has seg-
regated.
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 invest-
ments. If the Fund remains substantially fully invested at a time
when when-issued, delayed delivery, or forward commitment pur-
chases are outstanding, the purchases may result in a form of lev-
erage.
When the Fund has sold a security on a when-issued, delayed de-
livery, 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 secu-
rities, 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,
delayed delivery 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 pur-
chase or sell securities on a when-issued, delayed delivery, or
forward commitment basis.
Short Sales Each of the Funds (except the High Yield and StocksPLUS Funds) 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 po-
sitions 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 as-
set coverage in the form of segregated assets determined to be
liquid by the Adviser in accordance with procedures established by
the Board of Trustees or otherwise cover its position in a permis-
sible 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. The Global
Bond Fund II may only engage in short sales that are "against the
box."
Foreign Each of the Funds (except the Long-Term U.S. Government and Munic-
Securities ipal Bond Funds) may invest directly in fixed income securities of
non-U.S. issuers. The Money Market and High Yield Funds may only
invest in U.S. dollar-denominated fixed income securities of non-
U.S. issuers. The Strategic Balanced, Convertible Bond and
StocksPLUS Funds may invest directly in foreign equity securities.
Except for the Emerging Markets Bond Fund, each of the Funds
will concentrate its investments in securities of issuers based in
developed countries. However, the Short-Term and Low Duration
Funds may each invest up to 5% of its assets in securities of is-
suers based in the emerging market countries in which the Emerging
Markets Bond Fund may invest, and each of the remaining Fixed In-
come Funds that may invest in foreign securities may invest up to
10% of its assets in such securities.
Individual foreign economies may differ favorably or unfavor-
ably from the U.S. economy in such respects as growth of gross do-
mestic product, rate of inflation, capital reinvestment, re-
sources, self-sufficiency and balance of payments position. The
securities markets, values of securities, yields, and risks asso-
ciated with securities markets in different countries may change
independently of each other. Investing in the securities of is-
suers in any foreign country involves special risks and considera-
tions not typically associated with investing in U.S. companies.
Shareholders should consider carefully the substantial risks in-
volved in investing in securities issued by companies and govern-
ments of foreign nations. These risks include: differences in ac-
counting, auditing and financial reporting standards; generally
higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory tax-
ation; adverse changes in investment or exchange control regula-
tions (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, for-
eign
Prospectus 29
<PAGE>
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 custo-
dial fees than apply to domestic custodial arrangements and trans-
action costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denomi-
nated or quoted in currencies other than the U.S. dollar.
Certain of the Funds, and particularly the Emerging Markets
Bond Fund, will invest in the securities of issuers based in coun-
tries with developing economies. Investing in developing (or
"emerging market") 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. A number of emerging market countries re-
strict, to varying degrees, foreign investment in securities. Re-
patriation of investment income, capital, and the proceeds of
sales by foreign investors may require governmental registration
and/or approval in some emerging market countries. A number of the
currencies of emerging market countries have experienced signifi-
cant declines against the U.S. dollar in recent years, and devalu-
ation may occur subsequent to investments in these currencies by a
Fund. Inflation and rapid fluctuations in inflation rates have
had, and may continue to have, negative effects on the economies
and securities markets of certain emerging market countries. Many
of the emerging securities markets are relatively small, have low
trading volumes, suffer periods of relative illiquidity, and are
characterized by significant price volatility. There is a risk in
emerging market countries that a future economic or political cri-
sis could lead to price controls, forced mergers of companies, ex-
propriation or confiscatory taxation, seizure, nationalization, or
creation of government monopolies, any of which may have a detri-
mental effect on a Fund's investment.
Additional risks of investing in emerging market countries may
include: currency exchange rate fluctuations; greater social, eco-
nomic and political uncertainty and instability (including the
risk of war); more substantial governmental involvement in the
economy; less governmental supervision and regulation of the secu-
rities markets and participants in those markets; unavailability
of currency hedging techniques in certain emerging market coun-
tries; the fact that companies in emerging market countries may be
newly organized and may be smaller and less seasoned companies;
the difference in, or lack of, auditing and financial reporting
standards, which may result in unavailability of material informa-
tion about issuers; the risk that it may be more difficult to ob-
tain and/or enforce a judgment in a court outside the United
States; and significantly smaller market capitalization of securi-
ties markets. Also, any change in the leadership or policies of
Eastern European countries, or the countries that exercise a sig-
nificant influence over those countries, may halt the expansion of
or reverse the liberalization of foreign investment policies now
occurring and adversely affect existing investment opportunities.
In addition, emerging securities markets may have different
clearance and settlement procedures, which may be unable to keep
pace with the volume of securities transactions or otherwise make
it difficult to engage in such transactions. Settlement problems
may cause a Fund to miss attractive investment opportunities, hold
a portion of its assets in cash pending investment, or delay in
disposing of a portfolio security. Such a delay could result in
possible liability to a purchaser of the security.
Each of the Fixed Income Funds (except the Long-Term U.S. Gov-
ernment and Municipal Bond Funds) may invest in Brady Bonds. Brady
Bonds are securities created through the exchange of existing com-
mercial 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 col-
lateralized 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 arrange-
ments or to requests for new credit, which may
30 PIMCO Funds: Pacific Investment Management Series
<PAGE>
<TABLE>
<C> <S>
cause the Fund to suffer a loss of interest or principal on any of
its holdings. For further information, see the Statement of Addi-
tional Information.
Certain of the Funds also may invest in sovereign debt (other
than Brady Bonds) issued by governments, their agencies or instru-
mentalities, or other government-related entities located in
emerging market countries. Holders of sovereign debt may be re-
quested to participate in the rescheduling of such debt and to ex-
tend further loans to governmental entities. In addition, there is
no bankruptcy proceeding by which defaulted sovereign debt may be
collected.
A Fund's investments in foreign currency denominated debt obli-
gations and hedging activities will likely produce a difference
between its book income and its taxable income. This difference
may cause a portion of the Fund's income distributions to consti-
tute returns of capital for tax purposes or require the Fund to
make distributions exceeding book income to qualify as a regulated
investment company for federal tax purposes.
Foreign Currency Foreign currency exchange rates may fluctuate significantly over
Transactions short periods of time. They generally are determined by the forces
of supply and demand in the foreign exchange markets and the rela-
tive merits of investments in different countries, actual or per-
ceived 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.
For example, significant uncertainty surrounds the introduction of
the euro (a common currency for the European Union) in January
1999 and its effect on the value of securities denominated in lo-
cal European currencies. These and other 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 for-
ward basis to reduce the risks of adverse changes in foreign ex-
change rates. A forward foreign currency exchange contract in-
volves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the
time of the contract. By entering into a forward foreign currency
exchange contract, the Fund "locks in" the exchange rate between
the currency it will deliver and the currency it will receive for
the duration of the contract. As a result, a Fund reduces its ex-
posure 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 cur-
rency would limit any potential gain which might be realized by a
Fund if the value of the hedged currency increases. A Fund may en-
ter into these contracts for the purpose of hedging against for-
eign exchange risk arising from the Fund's investment or antici-
pated investment in securities denominated in foreign currencies.
A Fund also may enter into these contracts for purposes of in-
creasing 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. Each Fund will segregate assets determined
to be liquid by the Adviser in accordance with procedures estab-
lished by the Board of Trustees, to cover its obligations under
forward foreign currency exchange 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 cur-
rency warrants and other instruments whose return is linked to
foreign currency exchange rates. Each Fund that may invest in se-
curities denominated in foreign currencies, except the Emerging
Markets Bond and Convertible Bond Funds, will use these techniques
to hedge at least 75% of its exposure to foreign currency. For a
description of these instruments, see "Derivative Instruments" be-
low and the Statement of Additional Information.
</TABLE>
Prospectus 31
<PAGE>
<TABLE>
<C> <S>
High Yield The High Yield Fund invests at least 65% of its assets, and the
Securities Emerging Markets Bond Fund may invest up to 100% of its assets, in
("Junk Bonds") 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, determined by the Adviser to be of comparable quality). In
addition, each of the Short-Term, Low Duration, Total Return,
Global Bond II, Foreign Bond, Real Return Bond, Strategic Balanced
and StocksPLUS Funds may invest up to 10% of its assets in such
securities. The Municipal Bond Fund may invest up to 10% of its
assets in securities rated lower than Baa by Moody's or BBB by S&P
but rated at least Ba by Moody's or BB by S&P. The Convertible
Bond Fund may invest up to 35% of its assets in securities rated
lower than Baa by Moody's or BBB by S&P but rated at least Caa by
Moody's or CCC by S&P (or, if unrated, determined by the Adviser
to be of comparable quality). 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 se-
curities 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.
High yield securities may be more susceptible to real or per-
ceived 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 ex-
ample, 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 periodi-
cally 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 se-
curities 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 inter-
est of shareholders.
</TABLE>
32 PIMCO Funds: Pacific Investment Management Series
<PAGE>
During the year ended March 31, 1998, 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.
Fixed Income Securities Ratings
<TABLE>
<CAPTION>
Below
Fund Prime 1 Aaa Aa A Prime 1 Baa Ba B
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term 17% 35% 2% 15% 16% 9% 6% 0%
--------------------------------------------------------------------
Low Duration 6 75 1 1 5 7 5 0
--------------------------------------------------------------------
Total Return 20 47 0 13 6 8 6 0
--------------------------------------------------------------------
Global Bond II 65 21 3 6 0 2 3 0
--------------------------------------------------------------------
Foreign Bond 54 31 4 2 1 2 6 0
--------------------------------------------------------------------
Emerging Markets Bond 16 14 0 0 0 18 47 5
--------------------------------------------------------------------
High Yield 5 2 0 0 2 6 43 42
--------------------------------------------------------------------
Strategic Balanced 17 58 1 9 4 2 9 0
--------------------------------------------------------------------
StocksPLUS 26 38 1 10 11 7 7 0
</TABLE>
These figures are intended solely to provide disclosure about
each Fund's asset composition during its most recent fiscal year.
The asset composition after this time may or may not be approxi-
mately 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.
Derivative To the extent permitted by the investment objectives and policies
Instruments of the Funds, the Funds may (except the Money Market Fund) pur-
chase and write call and put options on securities, securities in-
dexes and foreign currencies, and enter into futures contracts and
use options on futures contracts as further described below. The
Funds (except the Money Market Fund and the Municipal Bond Fund)
also may enter into swap agreements with respect to foreign cur-
rencies, interest rates, and securities indexes. The Funds may use
these techniques to hedge against changes in interest rates, for-
eign currency exchange rates or securities prices or as part of
their overall investment strategies. The Funds (except the Money
Market Fund and the Municipal Bond Fund) may also purchase and
sell options relating to foreign currencies for purposes of in-
creasing exposure to a foreign currency or to shift exposure to
foreign currency fluctuations from one country to another. Each
Fund will segregate assets determined to be liquid by the Adviser
in accordance with procedures established by the Board of Trustees
(or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under options,
futures, and swaps to limit leveraging of the Fund.
Derivative instruments are considered for these purposes 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 depends upon cash flows from underlying assets,
such as mortgage-related or asset-backed securities. Each Fund
(except the Money Market Fund and the Municipal Bond Fund) may in-
vest 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 particu-
larly sensitive to changes in prevailing interest rates, and, like
the other investments of the Funds, the ability of a Fund to suc-
cessfully utilize these instruments may depend in part upon the
ability of the Adviser to forecast interest rates and other eco-
nomic 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.
Prospectus 33
<PAGE>
The Funds might not employ any of the strategies described be-
low, and no assurance can be given that any strategy used will
succeed. If the Adviser incorrectly forecasts interest rates, mar-
ket 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. Also, suitable
derivative transactions may not be available in all circumstances.
The use of these strategies involves certain special risks, in-
cluding a possible imperfect correlation, or even no correlation,
between price movements of derivative instruments and price move-
ments of related investments. While some strategies involving de-
rivative instruments can reduce the risk of loss, they can also
reduce the opportunity for gain or even result in losses by off-
setting favorable price movements in related investments or other-
wise, due to the possible inability of a Fund to purchase or sell
a portfolio security at a time that otherwise would be favorable
or the possible need to sell a portfolio security at a disadvanta-
geous time because the Fund is required to maintain asset coverage
or offsetting positions in connection with transactions in deriva-
tive instruments, and the possible inability of a Fund to close
out or to liquidate its derivatives positions. In addition, a
Fund's use of such instruments may cause the Fund to realize
higher amounts of short-term capital gains (generally taxed at or-
dinary income tax rates) than if it had not used such instruments.
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 substan-
tial increases in prices of securities the Fund intends to pur-
chase pending its ability to invest in such securities in an or-
derly 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 op-
tion (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 op-
tion to deliver the underlying security upon payment of the exer-
cise price or to pay the exercise price upon delivery of the un-
derlying 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 mul-
tiplier 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 pur-
chased, which could result in a net gain or loss depending on
whether the amount realized on the sale is more or less than the
premium and other transaction costs paid on the put or call option
which is sold. A Fund may write a call or put option only if the
option is "covered" by the Fund holding a position in the under-
lying 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 combina-
tion 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 ex-
ercise 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 security above the exer-
cise 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 no-
tice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the un-
derlying security 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
34 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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 re-
lated security. There can be no assurance that a liquid market
will exist when a Fund seeks to close out an option position. Fur-
thermore, 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. Cur-
rency 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 in which certain Funds may invest dif-
fer 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 cer-
tain written over-the-counter options.
Swap Agreements The Funds (except the Money Market Fund and the
Municipal Bond Fund) 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 stan-
dard swap transaction, two parties agree to exchange the returns
(or differentials in rates of return) earned or realized on par-
ticular predetermined investments or instruments, which may be ad-
justed for an interest factor. The gross returns to be exchanged
or "swapped" between the parties are generally calculated with re-
spect to a "notional amount," i.e., the return on or increase in
value of a particular dollar amount invested at a particular in-
terest rate, in a particular foreign currency, or in a "basket" of
securities representing a particular index. Forms of swap agree-
ments include interest rate caps, under which, in return for a
premium, one party agrees to make payments to the other to the ex-
tent that interest rates exceed a specified rate, or "cap"; inter-
est 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 calculate the
obligations of the parties to the agreement on a "net basis." Con-
sequently, 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 net amounts owed to a swap counterparty
will be covered by the segregation of assets determined to be liq-
uid by the Adviser in accordance with procedures established by
the Board of Trustees, to limit 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. Be-
cause 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 In-
ternal Revenue Code may limit
Prospectus 35
<PAGE>
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 govern-
ment regulation, could adversely affect a Fund's ability to termi-
nate 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 Money Market and Municipal Bond
Funds) may invest in interest rate futures contracts and options
thereon ("futures options"), and to the extent it may invest in
foreign currency-denominated securities, may also invest in for-
eign currency futures contracts and options thereon. The Municipal
Bond Fund may purchase and sell futures contracts on U.S. Govern-
ment securities and Municipal Bonds, as well as purchase put and
call options on such futures contracts. The Strategic Balanced,
Convertible Bond and StocksPLUS Funds 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 portfo-
lio 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 con-
tract 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 in-
struments are relatively new and without a significant trading
history. As a result, there is no assurance that an active second-
ary market will develop or continue to exist. Lack of a liquid
market for any reason may prevent a Fund from liquidating an unfa-
vorable position, and the Fund would remain obligated to meet mar-
gin 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 as-
sets 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 op-
tions which are standardized and traded on a U.S. or foreign ex-
change or board of trade, or similar entity, or quoted on an auto-
mated quotation system. Each Fund will use financial futures con-
tracts and related options only for "bona fide hedging" purposes,
as such term is defined in applicable regulations of the CFTC or,
with respect to positions in financial futures and related options
that do not qualify as "bona fide hedging" positions, will enter
such positions only to the extent that aggregate initial margin
deposits plus premiums paid by it for open futures option posi-
tions, less the amount by which any such positions are "in-the-
money," would not exceed 5% of the Fund's net assets.
Hybrid A hybrid instrument can combine the characteristics of securities,
Instruments futures, and options. For example, the principal amount or
interest rate of a hybrid could be tied (positively or negatively)
to the price of some commodity, currency or securities index or
another interest rate (each a "benchmark"). The interest rate or
(unlike most fixed income securities) the principal amount payable
at maturity of a hybrid security may be increased or decreased,
depending on changes in the value of the benchmark.
Hybrids can be used as an efficient means of pursuing a variety
of investment goals, including currency hedging, duration manage-
ment, and increased total return. Hybrids may not bear interest or
pay dividends. The value of a hybrid or its interest rate may be a
multiple of a benchmark and, as a result, may be leveraged and
move (up or down) more steeply and rapidly than the benchmark.
These benchmarks may be sensitive to economic and political
events, such as commodity shortages and currency devaluations,
which cannot be readily foreseen by the purchaser of a hybrid. Un-
der certain conditions, the redemption value of a hybrid could be
zero. Thus, an investment in a hybrid may entail signifi-
36 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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cant market risks that are not associated with a similar invest-
ment in a traditional, U.S. dollar-denominated bond that has a
fixed principal amount and pays a fixed rate or floating rate of
interest. The purchase of hybrids also exposes a Fund to the
credit risk of the issuer of the hybrids. These risks may cause
significant fluctuations in the net asset value of the Fund. Ac-
cordingly, no Fund will invest more than 5% of its assets in hy-
brid instruments.
Certain issuers of structured products such as hybrid instru-
ments may be deemed to be investment companies as defined in the
1940 Act. As a result, the Funds' investments in these products
will be subject to limits applicable to investments in investment
companies and may be subject to restrictions contained in the 1940
Act.
Catastrophe Bonds Each Fund (except the Money Market Fund) may invest in "catastro-
phe bonds." Catastrophe bonds are fixed income securities, for
which the return of principal and payment of interest is contin-
gent on the non-occurrence of a specific "trigger" catastrophic
event, such as a hurricane or an earthquake. They may be issued by
government agencies, insurance companies, reinsurers, special pur-
pose corporations or other on-shore or off-shore entities. If a
trigger event causes losses exceeding a specific amount in the ge-
ographic region and time period specified in a bond, a Fund in-
vesting in the bond may lose a portion or all of its principal in-
vested in the bond. If no trigger event occurs, the Fund will re-
cover its principal plus interest. For some catastrophe bonds, the
trigger event or losses may be based on companywide losses, index-
portfolio losses, industry indices, or readings of scientific in-
struments rather than specified actual losses. Often the catastro-
phe bonds provide for extensions of maturity that are mandatory,
or optional at the discretion of the issuer, in order to process
and audit loss claims in those cases where a trigger event has, or
possibly has, occurred. In addition to the specified trigger
events, catastrophe bonds may also expose the Fund to certain un-
anticipated risks including but not limited to issuer (credit) de-
fault, adverse regulatory or jurisdictional interpretations, and
adverse tax consequences.
Catastrophe bonds are a relatively new type of financial in-
strument. As such, there is no significant trading history of
these securities, and there can be no assurance that a liquid mar-
ket in these instruments will develop. See "Illiquid Securities"
below. Lack of a liquid market may impose the risk of higher
transaction costs and the possibility that a Fund may be forced to
liquidate positions when it would not be advantageous to do so.
Catastrophe bonds are typically rated, and a Fund will only invest
in catastrophe bonds that meet the credit quality requirements for
the Fund.
Investment in Each of the Funds may invest up to 10% of its total assets in se-
Investment curities of other investment companies, such as closed-end manage-
Companies ment investment companies, or in pooled accounts or other invest-
ment vehicles. As a shareholder of an investment company, a Fund
may indirectly bear service and other fees which are in addition
to the fees the Fund pays its service providers.
Portfolio Turnover The length of time a Fund has held a particular security is not
generally a consideration in investment decisions. The investment
policies of a Fund may lead to frequent changes in the Fund's in-
vestments, particularly in periods of volatile market movements. A
change in the securities held by a Fund is known as "portfolio
turnover." High portfolio turnover (e.g., over 100%) involves cor-
respondingly greater expenses to a Fund, including commissions or
dealer mark-ups and other transaction costs on the sale of securi-
ties and reinvestments in other securities. See "Management of the
Trust--Portfolio Transactions." Such sales may result in realiza-
tion of taxable capital gains (including short-term capital gains
which are generally taxed at ordinary income tax rates). See "Tax-
es." The portfolio turnover rate for certain of the Funds is set
forth under "Financial Highlights." The portfolio turnover rate
for certain of the Funds, which offer Institutional or Administra-
tive Class shares, is incorporated by reference in the Statement
of Additional Information.
Illiquid Securities Each of the Funds may invest up to 15% of its net assets in illiq-
uid securities (10% in the case of the Money Market Fund). Certain
illiquid securities may require pricing at fair value as deter-
mined in good faith under the supervision of the Board of Trust-
ees. The Adviser may be subject to significant delays in disposing
of illiquid securities, and transac- tions in illiquid securities
may entail registration expenses and other transaction costs that
are higher than those for transactions in liquid securities. The
term "illiquid securities" for this purpose means securities that
cannot be disposed
</TABLE>
Prospectus 37
<PAGE>
<TABLE>
<C> <S>
of within seven days in the ordinary course of business at approx-
imately the amount at which a Fund has valued the securities. Il-
liquid securities are considered to include, among other things,
written over-the-counter options, securities or other liquid as-
sets being used as cover for such options, repurchase agreements
with maturities in excess of seven days, certain loan participa-
tion interests, fixed time deposits which are not subject to pre-
payment or provide for withdrawal penalties upon prepayment (other
than overnight deposits), securities that are subject to legal or
contractual restrictions on resale and other securities which le-
gally or in the Adviser's opinion may be deemed illiquid (not in-
cluding securities issued pursuant to Rule 144A under the Securi-
ties Act of 1933 and certain commercial paper that Pacific Invest-
ment Management has determined to be liquid under procedures ap-
proved by the Board of Trustees).
Illiquid securities may include privately placed securities,
which are sold directly to a small number of investors, usually
institutions. Unlike public offerings, such securities are not
registered under the federal securities laws. Although certain of
these securities may be readily sold, for example, under Rule
144A, others may be illiquid, and their sale may involve substan-
tial delays and additional costs.
Service Systems-- Many of the services provided to the Funds depend on the smooth
Year 2000 Problem functioning of computer systems. Many systems in use today cannot
distinguish between the year 1900 and the year 2000. Should any of
the service systems fail to process information properly, that
could have an adverse impact on the Funds' operations and services
provided to shareholders. The Adviser, Distributor, Shareholder
Servicing and Transfer Agent, Custodian, and certain other service
providers to the Funds have reported that each is working toward
mitigating the risks associated with the so-called "year 2000
problem." However, there can be no assurance that the problem will
be corrected in all respects and that the Funds' operations and
services provided to shareholders will not be adversely affected,
nor can there be any assurance that the year 2000 problem will not
have an adverse effect on the entities whose securities are held
by the Funds or on domestic or global markets or economies,
generally.
Performance Information
From time to time the Trust may make available certain information
about the performance of the Class A, Class B and Class C shares
of some or all of the Funds. Information about a Fund's perfor-
mance is based on that Fund's (or its predecessor's) record to a
recent date and is not intended to indicate future performance.
Performance information is computed separately for each Fund's
Class A, Class B and Class C shares in accordance with the formu-
las described below. Because Class B and Class C shares bear the
expense of the distribution fee attending the deferred sales
charge (Class B) and asset based sales charge (Class C) alterna-
tives and certain other expenses, it is expected that, under nor-
mal circumstances, the yield and the level of performance of a
Fund's Class B and Class C shares will be lower than that of the
Fund's Class A shares although an investment in Class B or Class C
shares is not reduced by the front-end sales charge generally ap-
plicable to an investment in Class A shares.
From time to time, the yield and total return for each class of
shares of the Funds may be included in advertisements or reports
to shareholders or prospective investors. Yield quotations for the
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 sev-
en-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 cal-
culate current yield, but reflects the compounding effect on earn-
ings of reinvested dividends. For the remaining Funds, quotations
of yield for a Fund or class will be based on the investment in-
come per share (as defined by the Securities and Exchange Commis-
sion) 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. The tax equivalent yield of the Mu-
nicipal Bond Fund's Class A, Class B and Class C shares
</TABLE>
38 PIMCO Funds: Pacific Investment Management Series
<PAGE>
may also be advertised, calculated like yield except that, for any
given tax bracket, net investment income will be calculated as the
sum of (i) any taxable income of the class plus (ii) the tax ex-
empt income of the class divided by the difference between 1 and
the effective federal income tax rates for taxpayers in that tax
bracket.
The total return of Class A, Class B and/or Class C shares of
all Funds may be included in advertisements or other written mate-
rial. When a Fund's total return is advertised with respect to its
Class A, Class B and Class C shares, it will be calculated for the
past year, the past five years, and the past ten years (or if the
Fund has been offered for a period shorter than one, five or ten
years, that period will be substituted) since the establishment of
the Fund (or its predecessor series of PIMCO Advisors Funds for
the Global Bond Fund II), as more fully described in the Statement
of Additional Information. For periods prior to the initial offer-
ing date of a particular class of shares, total return presenta-
tions for the class will be based on the historical performance of
an older class of the Fund (if any) restated to reflect current
sales charges (if any) of the newer class. The older class to be
used in each case is set forth in the Statement of Additional In-
formation. For these purposes, the performance of the older class
will also be restated to reflect any different operating expenses
(such as different administrative fees and/or 12b-1/servicing fee
charges) associated with the newer class. In certain cases, such a
restatement will result in performance of the newer class which is
higher than if the performance of the older class were not re-
stated to reflect the different operating expenses of the newer
class. In such cases, the Trust's advertisements will also, to the
extent appropriate, show the lower performance figure reflecting
the actual operating expenses incurred by the older class for pe-
riods prior to the initial offering date of the newer class. Total
return for each class is measured by comparing the value of an in-
vestment in the Fund at the beginning of the relevant period (in
the case of Class A shares, giving effect to the maximum initial
sales charge) to the redemption value of the investment in the
Fund at the end of the period (assuming immediate reinvestment of
any dividends or capital gains distributions at net asset value
and giving effect to the deduction of the maximum CDSC which would
be payable). Total return may be advertised using alternative
methods that reflect all elements of return, but that may be ad-
justed to reflect the cumulative impact of alternative fee and ex-
pense structures, such as the currently effective advisory and ad-
ministrative fees for the Funds.
The Funds may also provide current distribution information to
its shareholders in shareholder reports or other shareholder com-
munications, or in certain types of sales literature provided to
prospective investors. Current distribution information for a par-
ticular class of a Fund will be based on distributions for a spec-
ified 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 distri-
butions 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 in-
vestment income for that period.
Performance information for the Trust may also be compared to
various unmanaged indexes, such as the Standard & Poor's 500 Com-
posite Stock Price Index, the Lehman Brothers Aggregate Bond In-
dex, the Lehman Brothers Mortgage-Backed Securities Index, the
Merrill Lynch 1 to 3 Year Treasury Index, the Lehman Intermediate
and 20+ Year Treasury Blend Index, the Lehman BB Intermediate Cor-
porate Index, indexes prepared by Lipper Analytical Services, the
J.P. Morgan Global Index, the J.P. Morgan Emerging Markets Bond
Index Plus, 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 advis-
ers. Unmanaged indexes (i.e., other than Lipper) generally do not
reflect deductions for administrative and management costs and ex-
penses. The Adviser may also report to shareholders or to the pub-
lic in advertisements concerning the performance of the Adviser as
adviser to clients other than the Trust, and on the comparative
performance or standing of the Adviser in relation to other money
managers. Such comparative information may be compiled or provided
by independent ratings services or by news organizations. Any per-
formance information, whether related to the Funds or to the Ad-
viser, should be considered in light of the Funds' investment ob-
jectives and policies, characteristics and quality of the Funds'
portfolios, and the market conditions during the time period indi-
cated, and should not be considered to be
Prospectus 39
<PAGE>
representative of what may be achieved in the future. For a de-
scription 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 in-
vestor's total return or yield may be in any future period.
How to Buy Shares
Class A, Class B and Class C shares of each Fund of the Trust are
continuously offered through the Trust's principal underwriter,
PIMCO Funds Distributors LLC (the "Distributor"), and through
other firms which have dealer agreements with the Distributor
("participating brokers") or which have agreed to act as introduc-
ing brokers for the Distributor ("introducing brokers").
There are two ways to purchase Class A, Class B or Class C
shares: either 1) through your dealer or broker which has a dealer
agreement with the Distributor; or 2) directly by mailing a PIMCO
Funds account application (the "account application") with pay-
ment, as described below under the heading Direct Investment, to
the Distributor (if no dealer is named in the account application,
the Distributor may act as dealer).
Each Fund currently offers and sells three classes of shares in
this Prospectus (Class A, Class B and Class C). Class A, Class B
and Class C shares of the Strategic Balanced and Convertible Bond
Funds are not offered as of the date of this Prospectus; however,
investment opportunities in these Funds may be available in the
future. Shares may be purchased at a price equal to their net as-
set value per share next determined after receipt of an order,
plus a sales charge which, at the election of the purchaser, may
be imposed either (i) at the time of the purchase in the case of
Class A shares (the "initial sales charge alternative"), (ii) on a
contingent deferred basis in the case of Class B shares (the "de-
ferred sales charge alternative"), or (iii) by the deduction of an
ongoing asset based sales charge in the case of Class C shares
(the "asset based sales charge alternative"). In certain circum-
stances, Class A and Class C shares are also subject to a CDSC.
See "Alternative Purchase Arrangements." Purchase payments for
Class B and Class C shares are fully invested at the net asset
value next determined after acceptance of the trade. Purchase pay-
ments for Class A shares, less the applicable sales charge, are
invested at the net asset value next determined after acceptance
of the trade.
All purchase orders received by the Distributor prior to the
close of regular trading (normally 4:00 p.m., Eastern time) on the
New York Stock Exchange (the "Exchange"), on a regular business
day, are processed at that day's offering price. However, orders
received by the Distributor from dealers or brokers after the of-
fering price is determined that day will receive such offering
price if the orders were received by the dealer or broker from its
customer prior to such determination and were transmitted to and
received by the Distributor prior to its close of business that
day (normally 5:00 p.m., Eastern time) or, in the case of certain
retirement plans, received by the Distributor prior to 9:30 a.m.,
Eastern time on the next business day. Purchase orders received on
other than a regular business day will be executed on the next
succeeding regular business day. The Distributor, in its sole dis-
cretion, may accept or reject any order for purchase of Fund
shares. The sale of shares will be suspended during any period in
which the Exchange is closed for other than weekends or holidays,
or if permitted by the rules of the Securities and Exchange Com-
mission, when trading on the Exchange is restricted or during an
emergency which makes it impracticable for the Funds to dispose of
their securities or to determine fairly the value of their net as-
sets, or during any other period as permitted by the Securities
and Exchange Commission for the protection of investors.
Except for purchases through the PIMCO Funds Auto-Invest plan,
the PIMCO Funds Auto-Exchange plan, investments pursuant to the
Uniform Gifts to Minors Act, and tax-qualified and wrap programs
referred to below under "Tax-Qualified Retirement Plans" and
"Sales at Net Asset Value", the minimum initial investment in
Class A, Class B or Class C shares of any Fund of the Trust or any
series of PIMCO Funds: Multi-Manager Series is $2,500, and the
minimum additional investment is $100 per Fund. For information
about dealer commissions, see "Alternative Purchase
40 PIMCO Funds: Pacific Investment Management Series
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Arrangements" below. Persons selling Fund shares may receive dif-
ferent compensation for selling Class A, Class B or Class C
shares. Normally, Fund shares purchased through participating bro-
kers are held in the investor's account with that broker. No share
certificates will be issued unless specifically requested in writ-
ing by an investor or broker-dealer.
Direct Investment Investors who wish to invest in Class A, Class B or Class C shares
of the Trust directly, rather than through a participating broker,
may do so by opening an account with the Distributor. To open an
account, an investor should complete the account application. All
shareholders who open direct accounts with the Distributor will
receive from the Distributor individual confirmations of each pur-
chase, redemption, dividend reinvestment, exchange or transfer of
Trust shares, including the total number of Trust shares owned as
of the confirmation date, except that purchases which result from
the reinvestment of daily-accrued dividends and/or distributions
will be confirmed once each calendar quarter. See "Distributions"
below. Information regarding direct investment or any other fea-
tures or plans offered by the Trust may be obtained by calling the
Distributor at 1-800-426-0107 or by calling your broker.
Purchase by Mail Investors who wish to invest directly may send a check payable to
PIMCO Funds Distributors LLC, along with a completed application
form to:
PIMCO Funds Distributors LLC
P.O. Box 9688
Providence, RI 02940-9688
Purchases are accepted subject to collection of checks at full
value and conversion into federal funds. Payment by a check drawn
on any member of the Federal Reserve System can normally be con-
verted into federal funds within two business days after receipt
of the check. Checks drawn on a non-member bank may take up to 15
days to convert into federal funds. In all cases, the purchase
price is based on the net asset value next determined after the
purchase order and check are accepted, even though the check may
not yet have been converted into federal funds.
Subsequent Subsequent purchases of Class A, Class B or Class C shares can be
Purchases of made as indicated above by mailing a check with a letter describ-
Shares ing the investment or with the additional investment portion of a
confirmation statement. Except for subsequent purchases through
the PIMCO Funds Auto-Invest plan, the PIMCO Funds Auto-Exchange
plan, tax-qualified programs and PIMCO Funds Fund Link referred to
below, and except during periods when an Automatic Withdrawal plan
is in effect, the minimum subsequent purchase is $100 in any Fund.
All payments should be made payable to PIMCO Funds Distributors
LLC and should clearly indicate the shareholder's account number.
Checks should be mailed to the address above under "Purchase by
Mail."
Tax-Qualified The Distributor makes available retirement plan services and docu-
Retirement Plans ments for Individual Retirement Accounts (IRAs), including Roth
IRAs, for which Boston Safe Deposit & Trust Company serves as
trustee and for IRA accounts established with Form 5305-SIMPLE un-
der the Internal Revenue Code of 1986, as amended (the "Code").
These accounts include Simplified Employee Pension Plan (SEP) and
Salary Reduction Simplified Employee Pension Plan (SAR/SEP) IRA
accounts and prototype documents. In addition, prototype documents
are available for establishing 403(b)(7) Custodial Accounts with
Boston Safe Deposit & Trust Company as custodian. This type of
plan is available to employees of certain non-profit organiza-
tions.
The Distributor also makes available prototype documents for
establishing Money Purchase and/or Profit Sharing Plans and 401(k)
Retirement Savings Plans. These prototype plans require certain
minimum per participant account sizes and certain minimum aggre-
gate investments in the Trust, but are not subject to the small
account fees described below that will apply to other plans. In-
vestors should call the Distributor at 1-800-426-0107 for further
information about these plans and should consult with their own
tax advisers before establishing any retirement plan. Investors
who
</TABLE>
Prospectus 41
<PAGE>
<TABLE>
<C> <S>
maintain their accounts with participating brokers should consult
their broker about similar types of accounts that may be offered
through the broker. The minimum initial investment for all tax
qualified plans (except for employer- sponsored plans, SIMPLE
IRAs, SEPs and SAR/SEPs) is $1,000 per Fund and the minimum subse-
quent investment is $100 and the minimum initial investment for
employer-sponsored plans, SIMPLE IRAs, SEPs and SAR/SEPs and the
minimum subsequent investment per Fund for all such plans is $50.
PIMCO Funds The PIMCO Funds Auto-Invest plan provides for periodic investments
Auto-Invest into the shareholder's account with the Trust by means of auto-
matic transfers of a designated amount from the shareholder's bank
account. The minimum investment for eligibility in the PIMCO Funds
Auto-Invest plan is $1,000 per Fund. Subsequent investments may be
made monthly or quarterly, and may be in any amount subject to a
minimum of $50 per month for each Fund in which shares are pur-
chased through the plan. Further information regarding the PIMCO
Funds Auto-Invest plan is available from the Distributor or par-
ticipating brokers. You may enroll by completing the appropriate
section on the account application, or you may obtain an Auto-In-
vest application by calling the Distributor or your broker.
PIMCO Funds The PIMCO Funds Auto-Exchange plan establishes regular, periodic
Auto-Exchange exchanges from one Fund to another Fund or a series of PIMCO
Funds: Multi-Manager Series which offers Class A, Class B or Class
C shares. The plan provides for regular investments into a share-
holder's account in a specific Fund by means of automatic ex-
changes of a designated amount from another Fund account of the
same class of shares and with identical account registration.
Exchanges may be made monthly or quarterly, and may be in any
amount subject to a minimum of $1,000 to open a new Fund account
and of $50 for any existing Fund account for which shares are pur-
chased through the plan. Further information regarding the PIMCO
Funds Auto-Exchange plan is available from the Distributor at1-
800-426-0107 or participating brokers. You may enroll by complet-
ing an application which may be obtained from the Distributor or
by telephone request at 1-800-426-0107. For more information on
exchanges, see "Exchange Privilege."
PIMCO Funds PIMCO Funds Fund Link ("Fund Link") connects your Fund account
Fund Link with a bank account. Fund Link may be used for subsequent pur-
chases and for redemptions and other transactions described under
"How to Redeem." Purchase transactions are effected by electronic
funds transfers from the shareholder's account at a U.S. bank or
other financial institution that is an Automated Clearing House
("ACH") member. Investors may use Fund Link to make subsequent
purchases of shares in amounts from $50 to $10,000. To initiate
such purchases, call 1-800-426-0107. All such calls will be re-
corded. Fund Link is normally established within 45 days of re-
ceipt of a Fund Link application by First Data Investor Services
Group, Inc. (the "Transfer Agent"). The minimum investment by Fund
Link is $50 per Fund. Shares will be purchased on the regular
business day the Distributor receives the funds through the ACH
system, provided the funds are received before the close of regu-
lar trading on the Exchange. If the funds are received after the
close of regular trading, the shares will be purchased on the next
regular business day.
Fund Link privileges must be requested on the account applica-
tion. To establish Fund Link on an existing account, complete a
Fund Link application, which is available from the Distributor or
your broker, with signatures guaranteed from all shareholders of
record for the account. See "Signature Guarantee" below. Such
privileges apply to each shareholder of record for the account un-
less and until the Distributor receives written instructions from
a shareholder of record canceling such privileges. Changes of bank
account information must be made by completing a new Fund Link ap-
plication signed by all owners of record of the account, with all
signatures guaranteed. The Distributor, the Transfer Agent and the
Fund may rely on any telephone instructions believed to be genuine
and will not be responsible to shareholders for any damage, loss
or expenses arising out of such instructions. The Fund reserves
the right to amend, suspend or discontinue Fund Link privileges at
any time without prior notice. Fund Link does not apply to shares
held in broker "street name" accounts.
</TABLE>
42 PIMCO Funds: Pacific Investment Management Series
<PAGE>
<TABLE>
<C> <S>
Signature When a signature guarantee is called for, the shareholder should
Guarantee have "Signature Guaranteed" stamped under his signature and guar-
anteed by any of the following entities: U.S. banks, foreign banks
having a U.S. correspondent bank, credit unions, savings associa-
tions, U.S. registered dealers and brokers, municipal securities
dealers and brokers, government securities dealers and brokers,
national securities exchanges, registered securities associations
and clearing agencies (each an "Eligible Guarantor Institution").
The Distributor reserves the right to reject any signature guaran-
tee pursuant to its written signature guarantee standards or pro-
cedures, which may be revised in the future to permit it to reject
signature guarantees from Eligible Guarantor Institutions that do
not, based on credit guidelines, satisfy such written standards or
procedures. The Trust may change the signature guarantee require-
ments from time to time upon notice to shareholders, which may be
given by means of a new or supplemented Prospectus.
Account Registration Changes in registration or account privileges may be made in writ-
Changes ing to the Transfer Agent. Signature guarantees may be required.
See "Signature Guarantee" above. All correspondence must include
the account number and must be sent to:
PIMCO Funds Distributors LLC
P.O. Box 9688
Providence, RI 02940-9688
Small Account Fee Because of the disproportionately high costs of servicing accounts
with low balances, a fee at an annual rate of $16, paid to Pacific
Investment Management, the Funds' administrator, will automati-
cally be deducted from direct accounts with balances falling below
a minimum level. The valuation of accounts and the deduction are
expected to take place during the last five days of each calendar
quarter. The fee will be deducted in quarterly installments from
accounts with balances below $2,500 except for Uniform Gift to Mi-
nors, IRA, Roth IRA and Auto-Invest accounts, for which the limit
is $1,000. Effective April 1, 1999, except for prototype plans de-
scribed above, the fee will apply to employer-sponsored retirement
accounts, Money Purchase and/or Profit Sharing plans, 401(k)
plans, 403(b)(7) custodial accounts, SIMPLE IRAs, SEPs and
SAR/SEPs. (A separate custodial fee may apply to IRAs, Roth IRAs
and other retirement accounts.) No fee will be charged on any ac-
count of a shareholder if the aggregate value of all of the share-
holder's accounts is at least $50,000. No small account fee will
be charged to employee and employee-related accounts of PIMCO Ad-
visors and/or its affiliates.
Minimum Account Due to the relatively high cost to the Funds of maintaining small
Size accounts, you are asked to maintain an account balance of at least
the amount necessary to open the type of account involved. If your
balance is below such minimum for three months or longer, the
Fund's administrator shall have the right (except in the case of
employer-sponsored retirement accounts) to close your account af-
ter giving you 60 days in which to increase your balance. Your ac-
count will not be liquidated if the reduction in size is due
solely to market decline in the value of your Fund shares or if
the aggregate value of all your accounts in PIMCO Funds exceeds
$50,000.
Alternative Purchase Arrangements
The Trust offers investors three classes of shares in this Pro-
spectus (Class A, Class B and Class C) which bear sales charges in
different forms and amounts and which bear different levels of ex-
penses. Through separate prospectuses, certain of the Funds offer
up to three additional classes of shares, Class D, Institutional
Class and Administrative Class shares. Class D shares are offered
through financial intermediaries. Institutional Class and Adminis-
trative Class shares are offered to pension and profit sharing
plans, employee benefit plans, endowments, foundations, corpora-
tions and other high net worth individuals. Class D, Institutional
Class and Administrative Class shares are sold without sales
charges and have different expenses than Class A, Class B and
Class C shares. As a result of lower sales charges and/or operat-
ing expenses, Class D, Administrative Class and Institutional
Class shares are generally expected to achieve
</TABLE>
Prospectus 43
<PAGE>
higher investment returns than Class A, Class B or Class C shares.
To obtain more information about the other classes of shares,
please call the Distributor at 1-800-927-4648 (for Institutional
and Administrative Classes) or 1-888-87-PIMCO (for Class D).
The alternative purchase arrangements offered in this Prospec-
tus are designed to enable a retail investor to choose the method
of purchasing Fund shares that is most beneficial to the investor
based on all factors to be considered, which include: the amount
and intended length of the investment; the particular Fund; and
whether the investor intends to exchange shares for shares of
other Funds. Generally, when making an investment decision, in-
vestors should consider the anticipated life of an intended in-
vestment in the Funds, the accumulated distribution and servicing
fees plus CDSCs on Class B or Class C shares, the initial sales
charge plus accumulated servicing fees on Class A shares (plus a
CDSC in certain circumstances), the possibility that the antici-
pated higher return on Class A shares due to the lower ongoing
charges will offset the initial sales charge paid on such shares,
the automatic conversion of Class B shares to Class A shares and
the difference in the CDSCs applicable to Class A, Class B and
Class C shares.
Class A The initial sales charge alternative (Class A) might be
preferred by investors purchasing shares of sufficient aggregate
value to qualify for reductions in the initial sales charge appli-
cable to such shares. Similar reductions are not available on the
contingent deferred sales charge alternative (Class B) or the as-
set based sales charge alternative (Class C). Class A shares are
subject to a servicing fee but are not subject to a distribution
fee and, accordingly, such shares are expected to pay correspond-
ingly higher dividends on a per share basis. However, because ini-
tial sales charges are deducted at the time of purchase, not all
of the purchase payment for Class A shares is invested initially.
Class B and Class C shares might be preferable to investors who
wish to have all purchase payments invested initially, although
remaining subject to higher distribution and servicing fees and,
for certain periods, being subject to a CDSC. An investor who
qualifies for an elimination of the Class A initial sales charge
should also consider whether he or she anticipates redeeming
shares in a time period which will subject such shares to a CDSC
as described below. See "Initial Sales Charge Alternative--Class A
Shares--Class A Deferred Sales Charge" below.
Class B Class B shares might be preferred by investors who intend
to invest in the Funds for longer periods and who do not intend to
purchase shares of sufficient aggregate value to qualify for sales
charge reductions applicable to Class A shares. Both Class B and
Class C shares can be purchased at net asset value without an ini-
tial sales charge. However, unlike Class C shares, Class B shares
convert into Class A shares after the shares have been held for
seven years. After the conversion takes place, the shares will no
longer be subject to a CDSC, and will be subject to the servicing
fees charged for Class A shares which are lower than the distribu-
tion and servicing fees charged on either Class B or Class C
shares. See "Deferred Sales Charge Alternative--Class B Shares"
below. Class B shares are not available for purchase by employer
sponsored retirement plans.
Class C Class C shares might be preferred by investors who intend
to purchase shares which are not of sufficient aggregate value to
qualify for Class A sales charges of 1% or less and who wish to
have all purchase payments invested initially. Class C shares are
preferable to Class B shares for investors who intend to maintain
their investment for intermediate periods and therefore may also
be preferable for investors who are unsure of the intended length
of their investment. Unlike Class B shares, Class C shares are not
subject to a CDSC after they have been held for one year and are
subject to only a 1% CDSC during the first year. However, because
Class C shares do not convert into Class A shares, Class B shares
are preferable to Class C shares for investors who intend to main-
tain their investment in the Funds for long periods. See "Asset
Based Sales Charge Alternative--Class C Shares" below.
In determining which class of shares to purchase, an investor
should always consider whether any waiver or reduction of a sales
charge or a CDSC is available. See generally "Initial Sales Charge
Alternative--Class A Shares" and "Waiver of Contingent Deferred
Sales Charges" below.
44 PIMCO Funds: Pacific Investment Management Series
<PAGE>
The maximum single purchase of Class B shares of the Trust and
series of PIMCO Funds: Multi-Manager Series accepted is $249,999.
The maximum single purchase of Class C shares of the Trust and se-
ries of PIMCO Funds: Multi-Manager Series accepted is $999,999.
The Funds may refuse any order to purchase shares.
For a description of the Distribution and Servicing Plans and
distribution and servicing fees payable thereunder with respect to
Class A, Class B and Class C shares, see "Distributor and Distri-
bution and Servicing Plans" below.
Waiver of Contingent Deferred Sales Charges The CDSC applicable to
Class A and Class C shares is currently waived for (i) any partial
or complete redemption in connection with (a) required minimum
distributions to IRA account owners or beneficiaries who are age
70 1/2 or older or (b) distributions to participants in employer-
sponsored retirement plans upon attaining age 59 1/2 or on account
of death or disability; (ii) any partial or complete redemption in
connection with a qualifying loan or hardship withdrawal from an
employer sponsored retirement plan; (iii) any complete redemption
in connection with a distribution from a qualified employer re-
tirement plan in connection with termination of employment or ter-
mination of the employer's plan and the transfer to another em-
ployer's plan or to an IRA (with the exception of a Roth IRA);
(iv) any partial or complete redemption following death or dis-
ability (as defined in the Code) of a shareholder (including one
who owns the shares as joint tenant with his or her spouse) from
an account in which the deceased or disabled is named, provided
the redemption is requested within one year of the death or ini-
tial determination of disability; (v) any redemption resulting
from a return of an excess contribution to a qualified employer
retirement plan or an IRA (with the exception of a Roth IRA); (vi)
up to 10% per year of the value of an account which (a) has the
value of at least $10,000 at the start of such year and (b) is
subject to an Automatic Withdrawal Plan; (vii) redemptions by
Trustees, officers and employees of the Trust, and by directors,
officers and employees of the Distributor and the Adviser; (viii)
redemptions effected pursuant to a Fund's right to involuntarily
redeem a shareholder's account if the aggregate net asset value of
shares held in such shareholder's account is less than a minimum
account size specified in such Fund's prospectus; (ix) involuntary
redemptions caused by operation of law; (x) redemption of shares
of any Fund that is combined with another Fund, investment compa-
ny, or personal holding company by virtue of a merger, acquisition
or other similar reorganization transaction; (xi) redemptions by a
shareholder who is a participant making periodic purchases of not
less than $50 through certain employer sponsored savings plans
that are clients of a broker-dealer with which the Distributor has
an agreement with respect to such purchases; (xii) redemptions ef-
fected by trustees or other fiduciaries who have purchased shares
for employer sponsored plans, the trustee, administrator, fiducia-
ry, broker, trust company or registered investment adviser for
which has an agreement with the Distributor with respect to such
purchases; or (xiii) redemptions in connection with IRA accounts
established with Form 5305-SIMPLE under the Code for which the
Trust is the designated financial institution.
The CDSC applicable to Class B shares is currently waived for
any partial or complete redemption in each of the following cases:
(a) in connection with required minimum distributions to IRA ac-
count owners or to plan participants or beneficiaries who are age
70 1/2 or older; (b) following death or disability (as defined in
the Code) of a shareholder (including one who owns the shares as
joint tenant with his or her spouse) from an account in which the
deceased or disabled is named, provided the redemption is re-
quested within one year of the death or initial determination of
disability; and (c) up to 10% per year of the value of an account
which (i) has a value of at least $100,000 at the start of such
year and (ii) is subject to an Automatic Withdrawal Plan. See "How
to Redeem--Automatic Withdrawal Plan."
The Distributor may require documentation prior to waiver of
the CDSC for any class, including distribution letters, certifica-
tion by plan administrators, applicable tax forms, death certifi-
cates, physicians' certificates, etc.
Prospectus 45
<PAGE>
<TABLE>
<C> <S>
Initial Sales Charge Class A shares are sold at a public offering price equal to their
Alternative -- net asset value per share plus a sales charge, as set forth below.
Class A Shares As indicated below under "Class A Deferred Sales Charge," certain
investors that purchase $1,000,000 ($250,000 in the case of the
Short-Term Fund) or more of any Fund's Class A shares (and thus
pay no initial sales charge) may be subject to a 1% CDSC if they
redeem such shares during the first 18 months after their pur-
chase.
Total Return, Long-Term U.S. Government, Global Bond II, Foreign
Bond, Emerging Markets Bond, High Yield, Strategic Balanced and
Convertible Bond Funds
</TABLE>
<TABLE>
<CAPTION>
Sales Charge Discount or
as % of Net Sales Charge Commission to
Amount of Amount as % of the Public Dealers as % of
Purchase Invested Offering Price Public Offering Price
--------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 4.71% 4.50% 4.00%
--------------------------------------------------------------------------
$50,000 - $99,999 4.17% 4.00% 3.50%
--------------------------------------------------------------------------
$100,000 - $249,999 3.63% 3.50% 3.00%
--------------------------------------------------------------------------
$250,000 - $499,999 2.56% 2.50% 2.00%
--------------------------------------------------------------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
--------------------------------------------------------------------------
$1,000,000+ 0.00%(/1/) 0.00%(/1/) 0.50%(/2/)
</TABLE>
<TABLE>
<C> <S>
Low Duration, Municipal Bond, Real Return Bond and StocksPLUS
Funds
</TABLE>
<TABLE>
<CAPTION>
Sales Charge Discount or
as % of Net Sales Charge Commission to
Amount of Amount as % of the Public Dealers as % of
Purchase Invested Offering Price Public Offering Price
--------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 3.09% 3.00% 2.50%
--------------------------------------------------------------------------
$50,000 - $99,999 2.56% 2.50% 2.00%
--------------------------------------------------------------------------
$100,000 - $249,999 2.04% 2.00% 1.75%
--------------------------------------------------------------------------
$250,000 - $499,999 1.52% 1.50% 1.25%
--------------------------------------------------------------------------
$500,000 - $999,999 1.27% 1.25% 1.00%
--------------------------------------------------------------------------
$1,000,000+ 0.00%(/1/) 0.00%(/1/) 0.50%(/2/)
Short-Term Fund
<CAPTION>
Sales Charge Discount or
as % of Net Sales Charge Commission to
Amount of Amount as % of the Public Dealers as % of
Purchase Invested Offering Price Public Offering Price
--------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 2.04% 2.00% 1.75%
--------------------------------------------------------------------------
$50,000 - $99,999 1.78% 1.75% 1.50%
--------------------------------------------------------------------------
$100,000 - $249,999 1.52% 1.50% 1.25%
--------------------------------------------------------------------------
$250,000+ 0.00%(/1/) 0.00%(/1/) 0.25%(/2/)
</TABLE>
<TABLE>
<C> <S>
1. As shown, investors that purchase more than $1,000,000 of any
Fund's Class A shares ($250,000 in the case of the Short-Term
Fund) will not pay any initial sales charge on such purchase. How-
ever, except with regard to purchases of Class A shares of the
Money Market Fund, purchasers of $1,000,000 ($250,000 in the case
of the Short-Term Fund) or more of Class A shares (other than
those purchasers described below under "Sales at Net Asset Value"
where no commission is paid) will be subject to a CDSC of 1% if
such shares are redeemed during the first 18 months after such
shares are purchased unless such purchaser is eligible for a
waiver of the CDSC as described under "Waiver of Contingent De-
ferred Sales Charges" above. See "Class A Deferred Sales Charge"
below.
2. The Distributor will pay a commission to dealers who sell
amounts of $1,000,000 ($250,000 in the case of the Short-Term
Fund) or more of Class A shares (or who sell Class A shares at net
asset value to certain employer-sponsored plans as outlined in
"Sales at Net Asset Value") of each of the Funds except for the
Money Market Fund (for which no payment is made) and the Short-
Term Fund, according to the following schedule: 0.50% of the first
$2,000,000 and 0.25% of amounts over $2,000,000; and 0.25% of
sales of Class A shares of the Short-Term Fund in excess of
$250,000.
</TABLE>
46 PIMCO Funds: Pacific Investment Management Series
<PAGE>
No initial sales charge applies to purchases of Class A shares
of the Money Market Fund. However, if a shareholder exchanges
Class A shares of the Money Market Fund, for which no sales load
was paid at the time of purchase, for Class A shares of any other
Fund, the sales charge shown above for the other Fund applies at
the time of the exchange.
Each Fund receives the entire net asset value of its Class A
shares purchased by investors. The Distributor receives the sales
charge shown above less any applicable discount or commission
"reallowed" to participating brokers in the amounts indicated in
the table above. The Distributor may, however, elect to reallow
the entire sales charge to participating brokers for all sales
with respect to which orders are placed with the Distributor for
any particular Fund during a particular period. During such peri-
ods as may from time to time be designated by the Distributor, the
Distributor will pay an additional amount of up to .50% of the
purchase price on sales of Class A shares of all or selected Funds
purchased to each participating broker which obtains purchase or-
ders in amounts exceeding thresholds established from time to time
by the Distributor. From time to time, the Distributor, its parent
and/or its affiliates may make additional payments to one or more
participating brokers based upon factors such as the level of
sales or the length of time clients' assets have remained in the
Trust.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are issued at net asset
value and are not subject to any sales charges.
Under the circumstances described below, investors may be enti-
tled to pay reduced sales charges for Class A shares.
Combined Purchase Privilege Investors may qualify for a reduced
sales charge by combining purchases of the Class A shares of one
or more Funds or series of PIMCO Funds: Multi-Manager Series which
offer Class A shares (together, "eligible PIMCO Funds") into a
"single purchase," if the resulting purchase totals at least
$50,000. The term single purchase refers to:
(i) a single purchase by an individual, or concurrent
purchases, which in the aggregate are at least equal to
the prescribed amounts, by an individual, his or her
spouse and their children under the age of 21 years
purchasing Class A shares of the eligible PIMCO Funds
for his, her or their own account;
(ii) a single purchase by a trustee or other fiduciary
purchasing shares for a single trust, estate or
fiduciary account although more than one beneficiary is
involved; or
(iii) a single purchase for the employee benefit plans of a
single employer.
For further information, call the Distributor at 1-800-426-0107 or
your broker.
Cumulative Quantity Discount (Right of Accumulation) A purchase of
additional Class A shares of any eligible PIMCO Fund may qualify
for a Cumulative Quantity Discount at the rate applicable to the
discount bracket obtained by adding:
(i) the investor's current purchase;
(ii) the value (at the close of business on the day of the
current purchase) of all Class A shares of any eligible
PIMCO Fund (other than the Money Market Fund) held by
the investor computed at the maximum offering price; and
(iii) the value of all shares described in paragraph (ii)
owned by another shareholder eligible to be combined
with the investor's purchase into a "single purchase" as
defined above under "Combined Purchase Privilege."
For example, if you owned Class A shares of the Total Return
Fund worth $25,000 at the current maximum offering price and
wished to purchase Class A shares of the Global Bond Fund II worth
an additional $30,000, the sales charge for the $30,000 purchase
would be at the 4.00% rate applicable to a single $55,000 purchase
of shares of the Global Bond Fund II, rather than the 4.50% rate.
Letter of Intent An investor may also obtain a reduced sales
charge by means of a written Letter of Intent, which expresses an
intention to invest not less than $50,000 within a period of 13
months in Class A shares of any eligible
Prospectus 47
<PAGE>
PIMCO Fund(s) (other than the Money Market Fund). Each purchase of
shares under a Letter of Intent will be made at the public offer-
ing price or prices applicable at the time of such purchase to a
single transaction of the dollar amount indicated in the Letter.
At the investor's option, a Letter of Intent may include purchases
of Class A shares of any eligible PIMCO Fund (other than the Money
Market Fund) made not more than 90 days prior to the date the Let-
ter of Intent is signed; however, the 13-month period during which
the Letter is in effect will begin on the date of the earliest
purchase to be included and the sales charge on any purchases
prior to the Letter will not be adjusted.
Investors qualifying for the Combined Purchase Privilege de-
scribed above may purchase shares of the eligible PIMCO Funds un-
der a single Letter of Intent. For example, if at the time you
sign a Letter of Intent to invest at least $100,000 in Class A
shares of any Fund (other than the Money Market Fund), you and
your spouse each purchase Class A shares of the Global Bond Fund
II worth $30,000 (for a total of $60,000), it will only be neces-
sary to invest a total of $40,000 during the following 13 months
in Class A shares of any of the Funds (other than the Money Market
Fund) to qualify for the 3.50% sales charge on the total amount
being invested (the sales charge applicable to an investment of
$100,000 in any of the Funds other than the Money Market, Short-
Term, Low Duration, Real Return Bond, Municipal Bond and
StocksPLUS Funds).
A Letter of Intent is not a binding obligation to purchase the
full amount indicated. The minimum initial investment under a Let-
ter of Intent is 5% of such amount. Shares purchased with the
first 5% of such amount will be held in escrow (while remaining
registered in your name) to secure payment of the higher sales
charge applicable to the shares actually purchased in the event
the full intended amount is not purchased. If the full amount in-
dicated is not purchased, a sufficient amount of such escrowed
shares will be involuntarily redeemed to pay the additional sales
charge applicable to the amount actually purchased, if necessary.
Dividends on escrowed shares, whether paid in cash or reinvested
in additional eligible PIMCO Fund shares, are not subject to es-
crow. When the full amount indicated has been purchased, the es-
crow will be released.
If you wish to enter into a Letter of Intent in conjunction
with your initial investment in Class A shares of a Fund, you
should complete the appropriate portion of the account
application. If you are a current Class A shareholder desiring to
do so you can obtain a form of Letter of Intent by contacting the
Distributor at 800-426-0107 or any broker participating in this
program.
Reinstatement Privilege A Class A shareholder who has caused any
or all of his shares (other than Money Market Fund shares that
were not acquired by exchanging Class A shares of another Fund) to
be redeemed may reinvest all or any portion of the redemption pro-
ceeds in Class A shares of any eligible PIMCO Fund at net asset
value without any sales charge, provided that such reinvestment is
made within 120 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net as-
set value next determined. See "How Net Asset Value is Deter-
mined." A reinstatement pursuant to this privilege will not cancel
the redemption transaction and, consequently, any gain or loss so
realized may be recognized for federal tax purposes except that no
loss may be recognized to the extent that the proceeds are rein-
vested in shares of the same Fund within 30 days. The reinstate-
ment privilege may be utilized by a shareholder only once, irre-
spective of the number of shares redeemed, except that the privi-
lege may be utilized without limit in connection with transactions
whose sole purpose is to transfer a shareholder's interest in a
Fund to his Individual Retirement Account or other qualified re-
tirement plan account. An investor may exercise the reinstatement
privilege by written request sent to the Distributor or to the in-
vestor's broker.
Sales at Net Asset Value Each Fund may sell its Class A shares at
net asset value without a sales charge to (a) current or retired
officers, trustees, directors or employees of the Trust, the Ad-
viser or the Distributor, a parent, brother or sister of any such
officer, trustee, director or employee or a spouse or child of any
of the foregoing persons, or any trust, profit sharing or pension
plan for the benefit of any such person and to any other person if
the Distributor anticipates that there will be minimal sales ex-
penses associated with the sale, (b) current or retired trustees
of PIMCO Funds: Multi-Manager Series, a registered investment com-
pany for which PIMCO Advisors L.P., an affiliate of the Adviser,
acts as
48 PIMCO Funds: Pacific Investment Management Series
<PAGE>
investment adviser, (c) current registered representatives and
other full-time employees of participating brokers or such per-
sons' spouses or for trust or custodial accounts for their minor
children, (d) trustees or other fiduciaries purchasing shares for
certain plans sponsored by employers, professional organizations
or associations, or charitable organizations, the trustee, admin-
istrator, fiduciary, broker, trust company or registered invest-
ment adviser for which has an agreement with the Distributor with
respect to such purchases (including provisions related to minimum
levels of investment in the Trust), and to participants in such
plans and their spouses purchasing for their accounts(s) or IRAs
(with the exception of Roth IRAs), (e) participants investing
through accounts known as "wrap accounts" established with brokers
or dealers approved by the Distributor where such brokers or deal-
ers are paid a single, inclusive fee for brokerage and investment
management services, (f) client accounts of broker-dealers or reg-
istered investment advisers affiliated with such broker-dealers
with which the Distributor has an agreement for the use of PIMCO
Funds in particular investment products or programs, and (g) ac-
counts for which a trust company affiliated with the Trust or the
Adviser serves as trustee or custodian. As described above, the
Distributor will not pay any initial commission to dealers upon
the sale of Class A shares to the purchasers described in this
paragraph except for sales to purchasers described under (d) in
this paragraph.
Notification of Distributor An investor or participating broker
must notify the Distributor whenever a quantity discount or re-
duced sales charge is applicable to a purchase and must provide
the Distributor with sufficient information at the time of pur-
chase to verify that each purchase qualifies for the privilege or
discount. Upon such notification, the investor will receive the
lowest applicable sales charge. The quantity discounts described
above may be modified or terminated at any time.
Class A Deferred Sales Charge For all Funds except the Money Mar-
ket Fund, investors who purchase $1,000,000 ($250,000 in the case
of the Short-Term Fund) or more of Class A shares (and, thus, pur-
chase such shares without any initial sales charge) may be subject
to a 1% CDSC (the "Class A CDSC") if such shares are redeemed
within 18 months of their purchase. The Class A CDSC does not ap-
ply to investors purchasing $1,000,000 or more of any Fund's Class
A shares ($250,000 in the case of the Short-Term Fund) if such in-
vestors are otherwise eligible to purchase Class A shares without
any sales charge because they are described under "Sales at Net
Asset Value" above.
For purchases subject to the Class A CDSC, a 1% CDSC will apply
for any redemption of such Class A shares that occurs within 18
months of their purchase. No CDSC will be imposed if the shares
redeemed have been acquired through the reinvestment of dividends
or capital gains distributions or if the amount redeemed is de-
rived from increases in the value of the account above the amount
of purchase payments subject to the CDSC. In determining whether a
CDSC is payable, it is assumed that Class A shares acquired
through the reinvestment of dividends and distributions are re-
deemed first, and thereafter that Class A shares that have been
held by an investor for the longest period of time are redeemed
first.
The Class A CDSC does not apply to Class A shares of the Money
Market Fund but, if Money Market Fund Class A shares are purchased
in a transaction that, for any other Fund, would be subject to the
CDSC (i.e., a purchase of $1,000,000 ($250,000 in the case of the
Short-Term Fund) or more) and are subsequently exchanged for Class
A shares of any other Fund, a Class A CDSC will apply to the
shares of the Fund acquired by exchange for a period of 18 months
from the date of the exchange.
The Class A CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For more
information about the Class A CDSC, call the Distributor at 1-800-
426-0107.
Participating Brokers Investment dealers and other financial in-
termediaries provide varying arrangements for their clients to
purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange
with their clients for other investment or administrative services
and may independently
Prospectus 49
<PAGE>
<TABLE>
<C> <S>
establish and charge transaction fees and/or other additional
amounts to their clients for such services, which charges would
reduce clients' return. Firms also may hold Fund shares in nominee
or street name as agent for and on behalf of their customers. In
such instances, the Trust's transfer agent will have no informa-
tion with respect to or control over accounts of specific share-
holders. Such shareholders may obtain access to their accounts and
information about their accounts only from their broker. In addi-
tion, certain privileges with respect to the purchase and redemp-
tion of shares or the reinvestment of dividends may not be avail-
able through such firms. Some firms may participate in a program
allowing them access to their clients' accounts for servicing in-
cluding, without limitation, transfers of registration and divi-
dend payee changes; and may perform functions such as generation
of confirmation statements and disbursement of cash dividends.
This Prospectus should be read in connection with such firms' ma-
terial regarding their fees and services.
Deferred Sales Class B shares are sold at their current net asset value without
Charge Alternative -- any initial sales charge. The full amount of an investor's pur-
Class B Shares chase payment will be invested in shares of the Fund(s) selected.
A CDSC will be imposed on Class B shares of all Funds if an in-
vestor redeems an amount which causes the current value of the in-
vestor's account for a Fund to fall below the total dollar amount
of purchase payments subject to the CDSC, except that no CDSC is
imposed if the shares redeemed have been acquired through the re-
investment of dividends or capital gains distributions or if the
amount redeemed is derived from increases in the value of the ac-
count above the amount of purchase payments subject to the CDSC.
Class B shares of the Money Market and Short-Term Funds are not
offered for initial purchase but may be obtained through exchanges
of Class B shares of other Funds. See "Exchange Privilege" below.
Class B shares are not available for purchase by employer spon-
sored retirement plans.
Whether a CDSC is imposed and the amount of the CDSC will de-
pend on the number of years since the investor made a purchase
payment from which an amount is being redeemed. Purchases are sub-
ject to the CDSC according to the following schedule:
</TABLE>
<TABLE>
<CAPTION>
Year Since Purchase Percentage Contingent
Payment was Made Deferred Sales Charge
-------------------------------------------
<S> <C>
First 5%
-------------------------------------------
Second 4
-------------------------------------------
Third 3
-------------------------------------------
Fourth 3
-------------------------------------------
Fifth 2
-------------------------------------------
Sixth 1
-------------------------------------------
Seventh 0*
</TABLE>
<TABLE>
<C> <S>
*After the seventh year, Class B shares convert into Class A shares
as described below.
In determining whether a CDSC is payable, it is assumed that
the purchase payment from which a redemption is made is the earli-
est purchase payment from which a redemption or exchange has not
already been fully effected.
The following example will illustrate the operation of the
Class B CDSC:
Assume that an individual opens an account and makes a purchase
payment of $10,000 for Class B shares of a Fund (except the Money
Market and Short-Term Funds) and that six months later the value
of the investor's account for that Fund has grown through invest-
ment performance and reinvestment of distributions to $11,000. The
investor then may redeem up to $1,000 from that Fund ($11,000 mi-
nus $10,000) without incurring a CDSC. If the investor should re-
deem $3,000, a CDSC would be imposed on $2,000 of the redemption
(the amount by which the investor's account for the Fund was re-
duced below the amount of the purchase payment). At the rate of
5%, the Class B CDSC would be $100.
</TABLE>
50 PIMCO Funds: Pacific Investment Management Series
<PAGE>
<TABLE>
<C> <S>
In determining whether an amount is available for redemption
without incurring a CDSC, the purchase payments made for all Class
B shares in the shareholder's account with the particular Fund are
aggregated, and the current value of all such shares is aggregat-
ed. Any CDSC imposed on a redemption of Class B shares is paid to
the Distributor.
Class B shares are subject to higher distribution fees than
Class A shares for a fixed period after their purchase, after
which they automatically convert to Class A shares and are no
longer subject to such higher distribution fees. Class B shares of
each Fund automatically convert into Class A shares after they
have been held for seven years.
For sales of Class B shares made and services rendered to Class
B shareholders, the Distributor intends to make payments to par-
ticipating brokers, at the time a shareholder purchases Class B
shares, of 4% of the purchase amount for each of the Funds. During
such periods as may from time to time be designated by the Dis-
tributor, the Distributor will pay selected participating brokers
an additional amount of up to .50% of the purchase price on sales
of Class B shares of all or selected Funds purchased to each par-
ticipating broker which obtains purchase orders in amounts exceed-
ing thresholds established from time to time by the Distributor.
The Class B CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For more
information about the Class B CDSC, call the Distributor at 1-800-
426-0107.
Asset Based Sales Class C shares are sold at their current net asset value without
Charge Alternative -- any initial sales charge. A CDSC is imposed on Class C shares of
Class C Shares all Funds if an investor redeems an amount which causes the cur-
rent value of the investor's account for a Fund to fall below the
total dollar amount of purchase payments subject to the CDSC, ex-
cept that no CDSC is imposed if the shares redeemed have been ac-
quired through the reinvestment of dividends or capital gains dis-
tributions or if the amount redeemed is derived from increases in
the value of the account above the amount of purchase payments
subject to the CDSC. All of an investor's purchase payments are
invested in shares of the Fund(s) selected.
Whether a CDSC is imposed and the amount of the CDSC will de-
pend on the number of years since the investor made a purchase
payment from which an amount is being redeemed. Purchases are sub-
ject to the CDSC according to the following schedule:
</TABLE>
<TABLE>
<CAPTION>
Year Since Purchase Percentage Contingent
Payment was Made Deferred Sales Charge
-------------------------------------------
<S> <C>
First 1
-------------------------------------------
Thereafter 0
</TABLE>
<TABLE>
<C> <S>
In determining whether a CDSC is payable, it is assumed that
the purchase payment from which the redemption is made is the ear-
liest purchase payment (from which a redemption or exchange has
not already been effected).
The following example will illustrate the operation of the
Class C CDSC:
Assume that an individual opens an account and makes a purchase
payment of $10,000 for Class C shares of a Fund and that six
months later the value of the investor's account for that Fund has
grown through investment performance and reinvestment of distribu-
tions to $11,000. The investor then may redeem up to $1,000 from
that Fund ($11,000 minus $10,000) without incurring a CDSC. If the
investor should redeem $3,000, a CDSC would be imposed on $2,000
of the redemption (the amount by which the investor's account for
the Fund was reduced below the amount of the purchase payment). At
the rate of 1%, the Class C CDSC would be $20.
In determining whether an amount is available for redemption
without incurring a CDSC, the purchase payments made for all Class
C shares in the shareholder's account with the particular Fund are
aggregated, and the current value of all such shares is aggregat-
ed. Any CDSC imposed on a redemption of Class C shares is paid to
the Distributor. Unlike Class B shares, Class C shares do not au-
tomatically convert to any other class of shares of the Funds.
</TABLE>
Prospectus 51
<PAGE>
Except as described below, for sales of Class C shares made and
services rendered to Class C shareholders, the Distributor expects
to make payments to participating brokers, at the time the share-
holder purchases Class C shares, of 1.00% (representing .75% dis-
tribution fees and .25% servicing fees) of the purchase amount for
all Funds except the Money Market, Short-Term, Low Duration, Mu-
nicipal Bond, Real Return Bond and StocksPLUS Funds. For the Low
Duration, Municipal Bond, Real Return Bond and StocksPLUS Funds,
the Distributor expects to make payments of .75% (representing
.50% distribution fees and .25% service fees); for the Short-Term
Fund, the Distributor expects to make payments of .55% (represent-
ing .30% distribution fees and .25% service fees); and for the
Money Market Fund, the Distributor expects to make no payment. For
sales of Class C shares made to participants making periodic pur-
chases of not less than $50 through certain employer sponsored
savings plans which are clients of a broker-dealer with which the
Distributor has an agreement with respect to such purchases, no
payments are made at the time of purchase. During such periods as
may from time to time be designated by the Distributor, the Dis-
tributor will pay an additional amount of up to .50% of the pur-
chase price on sales of Class C shares of all or selected Funds
purchased to each participating broker which obtains purchase or-
ders in amounts exceeding thresholds established from time to time
by the Distributor.
The Class C CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For more
information about the Class C CDSC, contact the Distributor at 1-
800-426-0107.
Exchange Privilege
A shareholder may exchange Class A, Class B and Class C shares of
any Fund for the same Class of shares of any other Fund in an ac-
count with identical registration on the basis of their respective
net asset values (except that a sales charge will apply on ex-
changes of Class A shares of the Money Market Fund on which no
sales charge was paid at the time of purchase). Class A, Class B
and Class C shares of each Fund may also be exchanged for shares
of the same class of a series which offers such classes (except
for the Opportunity Fund if a restriction applies) of PIMCO Funds:
Multi-Manager Series (including the PIMCO Funds Asset Allocation
Series portfolios, which are so-called "funds-of-funds" portf-
olios), an affiliated mutual fund family composed primarily of eq-
uity portfolios managed by the subsidiary partnerships of PIMCO
Advisors L.P. Class A shares of the Money Market Fund may be ex-
changed for Class A shares of any other Fund, but the usual sales
charges applicable to investments in such other Fund apply on
shares for which no sales load was paid at the time of purchase.
There are currently no exchange fees or charges. All other ex-
changes, including exchanges from PIMCO Funds Asset Allocation Se-
ries portfolios into the Funds or series of PIMCO Funds: Multi-
Manager Series are subject to the $2,500 minimum initial purchase
requirement for each Fund, except with respect to tax-qualified
programs and exchanges effected through the PIMCO Funds Auto-Ex-
change plan. An exchange will constitute a taxable sale for fed-
eral income tax purposes.
Investors who maintain their account with the Distributor may
exchange shares by a written exchange request sent to PIMCO Funds
Distributors LLC, P.O. Box 9688, Providence, RI 02940-9688 or, un-
less the investor has specifically declined telephone exchange
privileges on the account application or elected in writing not to
utilize telephone exchanges, by a telephone request to the Dis-
tributor at 1-800-426-0107. The Trust will employ reasonable pro-
cedures to confirm that instructions communicated by telephone are
genuine, and may be liable for any losses due to unauthorized or
fraudulent instructions if it fails to employ such procedures. The
Trust will require a form of personal identification prior to act-
ing on a caller's telephone instructions, will provide written
confirmations of such transactions and will record telephone in-
structions. Exchange forms are available from the Distributor at
1-800-426-0107 and may be used if there will be no change in the
registered name or address of the shareholder. Changes in regis-
tration information or account privileges may be made in writing
to the Transfer Agent, First Data Investor Services Group, Inc.,
P.O. Box 9688, Providence, RI 02940-9688, or by use of forms which
are available from the Distributor. A
52 PIMCO Funds: Pacific Investment Management Series
<PAGE>
signature guarantee is required. See "How to Buy Shares--Signature
Guarantee." Telephone exchanges may be made between 9:00 a.m.,
Eastern time and the close of regular trading (normally 4:00 p.m.,
Eastern time) on the Exchange on any day the Exchange is open
(generally weekdays other than normal holidays). The Trust re-
serves the right to refuse exchange purchases if, in the judgment
of the Adviser, the purchase would adversely affect the Fund and
its shareholders. In particular, a pattern of exchanges character-
istic of "market-timing" strategies may be deemed by the Adviser
to be detrimental to the Trust or a particular Fund. Currently,
the Trust limits the number of "round trip" exchanges an investor
may make. An investor makes a "round trip" exchange when the in-
vestor purchases shares of a particular Fund, subsequently ex-
changes these shares for shares of a different Fund and then ex-
changes back into the originally purchased Fund. The Trust has the
right to refuse any exchange for any investor who completes (by
making the exchange back into the shares of the originally pur-
chased Fund) more than six round trip exchanges in any twelve-
month period. Although the Trust has no current intention of ter-
minating or modifying the exchange privilege other than as set
forth in the preceding sentence, it reserves the right to do so at
any time. Except as otherwise permitted by Securities and Exchange
Commission regulations, the Trust will give 60 days' advance no-
tice to shareholders of any termination or material modification
of the exchange privilege. For further information about exchange
privileges, contact your participating broker or call the Transfer
Agent at 1-800-426-0107.
With respect to Class B and Class C shares, or Class A shares
subject to a CDSC, if less than all of an investment is exchanged
out of a Fund, any portion of the investment attributable to capi-
tal appreciation and/or reinvested dividends or capital gains dis-
tributions will be exchanged first, and thereafter any portions
exchanged will be from the earliest investment made in the Fund
from which the exchange was made. Shareholders should take into
account the effect of any exchange on the applicability of any
CDSC that may be imposed upon any subsequent redemption. Although
the Class A CDSC does not apply to Class A shares of the Money
Market Fund, Class A shares purchased in a transaction that would
otherwise be subject to the Class A CDSC (i.e., most purchases of
$1,000,000 or more) are subsequently exchanged for Class A shares
of any other Fund, a Class A CDSC will apply to the shares of the
Fund acquired by exchange for a period of 18 months from the date
of the exchange. See "Initial Sales Charge Alternative--Class A
Shares--Class A Deferred Sales Charge" above.
Investors may also select the PIMCO Funds Auto-Exchange plan
which establishes automatic periodic exchanges. For further infor-
mation on automatic exchanges see "How to Buy Shares--PIMCO Funds
Auto-Exchange" above.
How to Redeem
Class A, Class B or Class C shares may be redeemed through a par-
ticipating broker, by telephone, by submitting a written redemp-
tion request directly to the Transfer Agent (for non-broker ac-
counts), or through an Automatic Withdrawal Plan or PIMCO Funds
Fund Link.
A CDSC may apply to a redemption of Class A, Class B or Class C
shares. See "Alternative Purchase Arrangements" above. Shares are
redeemed at their net asset value next determined after a proper
redemption request has been received, less any applicable CDSC.
There is no charge by the Distributor (other than an applicable
CDSC) with respect to a redemption; however, a participating bro-
ker who processes a redemption for an investor may charge custom-
ary commissions for its services. Dealers and other financial
services firms are obligated to transmit orders promptly. Requests
for redemption received by dealers or other firms prior to the
close of regular trading (normally 4:00 p.m., Eastern time) on the
Exchange on a regular business day and received by the Distributor
prior to the close of the Distributor's business day will be con-
firmed at the net asset value effective as of the closing of the
Exchange on that day, less any applicable CDSC.
Prospectus 53
<PAGE>
<TABLE>
<C> <S>
Direct Redemption A shareholder's original account application permits the share-
holder to redeem by written request and by telephone (unless the
shareholder specifically elects not to utilize telephone redemp-
tions) and to elect one or more of the additional redemption pro-
cedures described below. A shareholder may change the instructions
indicated on his original account application, or may request ad-
ditional redemption options, only by transmitting a written direc-
tion to the Transfer Agent. Requests to institute or change any of
the additional redemption procedures will require a signature
guarantee.
Redemption proceeds will normally be mailed to the redeeming
shareholder within seven days or, in the case of wire transfer or
Fund Link redemptions, sent to the designated bank account within
one business day. Fund Link redemptions may be received by the
bank on the second or third business day. In cases where shares
have recently been purchased by personal check, redemption pro-
ceeds may be withheld until the check has been collected, which
may take up to 15 days. To avoid such withholding, investors
should purchase shares by certified or bank check or by wire
transfer.
Written Requests To redeem shares in writing (whether or not represented by certif-
icates), a shareholder must send the following items to the Trans-
fer Agent, First Data Investor Services Group, Inc., P.O. Box
9688, Providence, RI 02940-9688.
(1) a written request for redemption signed by all registered
owners exactly as the account is registered on the
Transfer Agent's records, including fiduciary titles, if
any, and specifying the account number and the dollar
amount or number of shares to be redeemed;
(2) for certain redemptions described below, a guarantee of
all signatures on the written request or on the share
certificate or accompanying stock power, if required, as
described under "How to Buy Shares--Signature Guarantee";
(3) any share certificates issued for any of the shares to be
redeemed (see "Certificated Shares" below); and
(4) any additional documents which may be required by the
Transfer Agent for redemption by corporations,
partnerships or other organizations, executors,
administrators, trustees, custodians or guardians, or if
the redemption is requested by anyone other than the
shareholder(s) of record.
Transfers of shares are subject to the same requirements. A
signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record for
the account, to be sent to the address of record for that account.
To avoid delay in redemption or transfer, shareholders having any
questions about these requirements should contact the Transfer
Agent in writing or call the Distributor at 1-800-426-0107 before
submitting a request. Redemption or transfer requests will not be
honored until all required documents in the proper form have been
received by the Transfer Agent. This redemption option does not
apply to shares held in broker "street name" accounts.
If the proceeds of the redemption (i) exceed $50,000, (ii) are
to be paid to a person other than the record owner, (iii) are to
be sent to an address other than the address of the account on the
Transfer Agent's records, or (iv) are to be paid to a corporation,
partnership, trust or fiduciary, the signature(s) on the redemp-
tion request and on the certificates, if any, or stock power must
be guaranteed as described above, except that the Distributor may
waive the signature guarantee requirement for redemptions up to
$2,500 by a trustee of a qualified retirement plan, the adminis-
trator for which has an agreement with the Distributor.
Telephone The Trust accepts telephone requests for redemption of shares for
Redemptions amounts up to $50,000 within any 7 calendar day period, except for
investors who have specifically declined telephone redemption
privileges on the account application or elected in writing not to
utilize telephone redemptions. The proceeds of a telephone redemp-
tion will be sent to the record shareholder at his record address.
Changes in account information must be made in a written authori-
zation with a signature guarantee. See "How to Buy Shares--Signa-
ture Guarantee". Telephone redemptions will not be accepted during
the 30-day period following any change in an account's record ad-
dress. This redemption option does not apply to shares held in
broker "street name" accounts.
By completing an account application, an investor agrees that
the Trust, the Distributor and the Transfer Agent shall not be li-
able for any loss incurred by the investor by reason of the Trust
accepting unauthorized telephone redemp-
</TABLE>
54 PIMCO Funds: Pacific Investment Management Series
<PAGE>
<TABLE>
<C> <S>
tion requests for his account if the Trust reasonably believes the
instructions to be genuine. Thus, shareholders risk possible
losses in the event of a telephone redemption not authorized by
them. The Trust may accept telephone redemption instructions from
any person identifying himself as the owner of an account or the
owner's broker where the owner has not declined in writing to uti-
lize this service. The Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine,
and may be liable for any losses due to unauthorized or fraudulent
instructions if it fails to employ such procedures. The Trust will
require a form of personal identification prior to acting on a
caller's telephone instructions, will provide written confirma-
tions of such transactions and will record telephone instructions.
A shareholder making a telephone redemption should call the
Distributor at 1-800-426-0107 and state (i) the name of the share-
holder as it appears on the Transfer Agent's records, (ii) his ac-
count number with the Trust, (iii) the amount to be withdrawn and
(iv) the name of the person requesting the redemption. Usually the
proceeds are sent to the investor on the next Trust business day
after the redemption is effected, provided the redemption request
is received prior to the close of regular trading (normally 4:00
p.m., Eastern time) on the Exchange that day. If the redemption
request is received after the close of the Exchange, the redemp-
tion is effected on the following Trust business day at that day's
net asset value and the proceeds are usually sent to the investor
on the second following Trust business day. The Trust reserves the
right to terminate or modify the telephone redemption service at
any time. During times of severe disruptions in the securities
markets, the volume of calls may make it difficult to redeem by
telephone, in which case a shareholder may wish to send a written
request for redemption as described under "Written Requests"
above. Telephone communications may be recorded by the Distributor
or the Transfer Agent.
Fund Link If a shareholder has established Fund Link, the shareholder may
Redemptions redeem shares by telephone and have the redemption proceeds sent
to a designated account at a financial institution. Fund Link is
normally established within 45 days of receipt of a Fund Link ap-
plication by the Transfer Agent. To use Fund Link for redemptions,
call the Distributor at 1-800-426-0107. Subject to the limitations
set forth above under "Telephone Redemptions," the Distributor,
the Trust and the Transfer Agent may rely on instructions by any
registered owner believed to be genuine and will not be responsi-
ble to any shareholder for any loss, damage or expense arising out
of such instructions. Requests received by the Transfer Agent
prior to the close of regular trading (normally 4:00 p.m., Eastern
time) on the Exchange on a business day will be processed at the
net asset value on that day and the proceeds (less any CDSC) will
normally be sent to the designated bank account on the following
business day and received by the bank on the second or third busi-
ness day. If the redemption request is received after the close of
regular trading on the Exchange, the redemption is effected on the
following business day. Shares purchased by check may not be re-
deemed through Fund Link until such shares have been owned (i.e.,
paid for) for at least 15 days. Fund Link may not be used to re-
deem shares held in certificated form. Changes in bank account in-
formation must be made by completing a new Fund Link application,
signed by all owners of record of the account, with all signatures
guaranteed. See "How to Buy Shares--Signature Guarantee." See "How
to Buy Shares-- PIMCO Funds Fund Link" for information on estab-
lishing the Fund Link privilege. The Trust may terminate the Fund
Link program at any time without notice to shareholders. This re-
demption option does not apply to shares held in broker "street
name" accounts.
PIMCO Funds PIMCO Funds Automated Telephone System ("ATS") is an automated
Automated telephone system that enables shareholders to perform a number of
Telephone System account transactions automatically using a touch-tone telephone.
ATS may be used on already-established Fund accounts after you ob-
tain a Personal Identification Number (PIN) by calling the special
ATS number: 1-800-223-2413.
Purchasing Shares. You may purchase shares in amounts up to
$100,000 by telephone by calling 1-800-223-2413. You must have es-
tablished ATS privileges to link your bank account with the Fund
to pay for these purchases.
Exchanging Shares. With the PIMCO Funds Exchange Privilege, you
can exchange shares automatically by telephone from your Fund Link
Account to another PIMCO Funds account you have already estab-
lished by calling 1-800-223-2413. Please refer to "Exchange Privi-
lege" below for details.
</TABLE>
Prospectus 55
<PAGE>
<TABLE>
<C> <S>
Redemptions. You may redeem shares by telephone automatically by
calling 1-800-223-2413 and the Fund will send the proceeds di-
rectly to your Fund bank account. Please refer to "How to Redeem"
below for details.
Expedited Wire If a shareholder has given authorization for expedited wire re-
Transfer Redemptions demption, shares can be redeemed and the proceeds sent by federal
wire transfer to a single previously designated bank account. Re-
quests received by the Trust prior to the close of the Exchange
will result in shares being redeemed that day at the next deter-
mined net asset value (less any CDSC) and normally the proceeds
being sent to the designated bank account the following business
day. The bank must be a member of the Federal Reserve wire system.
Delivery of the proceeds of a wire redemption request may be de-
layed by the Trust for up to 7 days if the Distributor deems it
appropriate under then current market conditions. Once authoriza-
tion is on file, the Trust will honor requests by any person iden-
tifying himself as the owner of an account or the owner's broker
by telephone at 1-800-426-0107 or by written instructions. The
Trust cannot be responsible for the efficiency of the Federal Re-
serve wire system or the shareholder's bank. The Trust does not
currently charge for wire transfers. The shareholder is responsi-
ble for any charges imposed by the shareholder's bank. The minimum
amount that may be wired is $2,500. The Trust reserves the right
to change this minimum or to terminate the wire redemption privi-
lege. Shares purchased by check may not be redeemed by wire trans-
fer until such shares have been owned (i.e., paid for) for at
least 15 days. Expedited wire transfer redemptions may be autho-
rized by completing a form available from the Distributor. Wire
redemptions may not be used to redeem shares in certificated form.
To change the name of the single bank account designated to re-
ceive wire redemption proceeds, it is necessary to send a written
request with signatures guaranteed to PIMCO Funds Distributors
LLC, P.O. Box 9688, Providence, RI 02940-9688. See "How to Buy
Shares-- Signature Guarantee." This redemption option does not ap-
ply to shares held in broker "street name" accounts.
Certificated Shares To redeem shares for which certificates have been issued, the cer-
tificates must be mailed to or deposited with the Trust, duly en-
dorsed or accompanied by a duly endorsed stock power or by a writ-
ten request for redemption. Signatures must be guaranteed as de-
scribed under "How to Buy Shares--Signature Guarantee." Further
documentation may be requested from institutions or fiduciary ac-
counts, such as corporations, custodians (e.g., under the Uniform
Gifts to Minors Act), executors, administrators, trustees or
guardians ("institutional account owners"). The redemption request
and stock power must be signed exactly as the account is regis-
tered, including indication of any special capacity of the regis-
tered owner.
Automatic An investor who owns or buys shares of a Fund having a net asset
Withdrawal Plan value of $10,000 or more may open an Automatic Withdrawal Plan and
have a designated sum of money (not less than $100 per Fund) paid
monthly (or quarterly) to the investor or another person. Such a
plan may be established by completing the appropriate section of
the Account Application or you may obtain an Automatic Withdrawal
Plan Application from the Distributor or your broker. If an Auto-
matic Withdrawal Plan is set up after the account is established
providing for payment to a person other than the record share-
holder or to an address other than the address of record, a signa-
ture guarantee is required. See "How to Buy Shares--Signature
Guarantee." Class A, Class B and Class C shares of any Fund are
deposited in a plan account and all distributions are reinvested
in additional shares of that class of the Fund at net asset value.
Shares in a plan account are then redeemed at net asset value
(less any applicable CDSC) to make each withdrawal payment. Any
applicable CDSC may be waived for certain redemptions under an Au-
tomatic Withdrawal Plan. See "Alternative Purchase Arrangements--
Waiver of Contingent Deferred Sales Charges."
Redemptions for the purpose of withdrawals are ordinarily made
on the business day preceding the day of payment at that day's
closing net asset value and checks are mailed on the day of pay-
ment selected by the shareholder. The Transfer Agent may acceler-
ate the redemption and check mailing date by one day to avoid
weekend delays. Payment will be made to any person the investor
designates; however, if the shares are registered in the name of a
trustee or other fiduciary, payment will be made only to the fidu-
ciary, except in the case of a profit-sharing or pension plan
where
</TABLE>
56 PIMCO Funds: Pacific Investment Management Series
<PAGE>
payment will be made to the designee. As withdrawal payments may
include a return of principal, they cannot be considered a guaran-
teed annuity or actual yield of income to the investor. The re-
demption of shares in connection with an Automatic Withdrawal Plan
may result in a gain or loss for tax purposes. Continued withdraw-
als in excess of income will reduce and possibly exhaust invested
principal, especially in the event of a market decline. The main-
tenance of an Automatic Withdrawal Plan concurrently with pur-
chases of additional shares of the Fund would be disadvantageous
to the investor because of the CDSC that may become payable on
such withdrawals in the case of Class A, Class B or Class C shares
and because of the initial sales charge in the case of Class A
shares. For this reason, the minimum investment accepted for a
Fund while an Automatic Withdrawal Plan is in effect for that Fund
is $1,000, and an investor may not maintain a plan for the accumu-
lation of shares of the Fund (other than through reinvestment of
distributions) and an Automatic Withdrawal Plan at the same time.
The Trust or the Distributor may terminate or change the terms of
the Automatic Withdrawal Plan at any time.
Because the Automatic Withdrawal Plan may involve invasion of
capital, investors should consider carefully with their own finan-
cial advisers whether the plan and the specified amounts to be
withdrawn are appropriate in their circumstances. The Trust and
the Distributor make no recommendations or representations in this
regard.
Distributor and Distribution and Servicing Plans
The Distributor, a wholly owned subsidiary of PIMCO Advisors L.P.,
is the principal underwriter of the Trust's shares and in that
connection makes distribution and servicing payments to partici-
pating brokers and servicing payments to certain banks and other
financial intermediaries in connection with the sale of Class B
and Class C shares and servicing payments to participating bro-
kers, certain banks and other financial intermediaries in connec-
tion with the sale of Class A shares. In the case of Class A
shares, these parties are also compensated based on the amount of
the front-end sales charge reallowed by the Distributor, except in
cases where Class A shares are sold without a front-end sales
charge (although the Distributor may pay brokers additional com-
pensation in connection with sales of Class A shares without a
sales charge). In the case of Class B shares, participating bro-
kers and other financial intermediaries are compensated by an ad-
vance of a sales commission by the Distributor. In the case of
Class C shares, part or all of the first year's distribution and
servicing fee is generally paid at the time of sale. Pursuant to a
Distribution Contract with the Trust, with respect to each Fund's
Class A, Class B and Class C shares, the Distributor bears various
other promotional and sales related expenses, including the cost
of printing and mailing prospectuses to persons other than current
shareholders. The Distributor, located at 2187 Atlantic Street,
Stamford, Connecticut 06902, is a broker-dealer registered with
the Securities and Exchange Commission.
Class A Servicing Fees As compensation for services rendered and
expenses borne by the Distributor in connection with personal
services rendered to Class A shareholders of the Trust and the
maintenance of Class A shareholder accounts, the Trust pays the
Distributor servicing fees up to the annual rates set forth below
(calculated as a percentage of each Fund's average daily net as-
sets attributable to Class A shares):
<TABLE>
<CAPTION>
Servicing
Fund Fee
--------------------------------
<S> <C>
All Funds except the
Money Market Fund .25%
--------------------------------
Money Market Fund* .10%
</TABLE>
*Subject to increase by action of the Trust's Trustees to a rate
not exceeding .25% per annum. Also, subject to increase to a rate
not exceeding .20% if the Distributor ceases to voluntarily waive
any portion of the fee.
Prospectus 57
<PAGE>
Class B Distribution and Servicing Fees As compensation for serv-
ices rendered and expenses borne by the Distributor in connection
with the distribution of Class B shares of the Trust and, in con-
nection with personal services rendered to Class B shareholders of
the Trust and the maintenance of Class B shareholder accounts, the
Trust pays the Distributor servicing fees and distribution fees up
to the annual rates set forth below (calculated as a percentage of
each Fund's average daily net assets attributable to Class B
shares):
<TABLE>
<CAPTION>
Servicing Distribution
Fund Fee Fee
---------------------------------
<S> <C> <C>
All Funds .25% .75%
</TABLE>
Class C Distribution and Servicing Fees As compensation for serv-
ices rendered and expenses borne by the Distributor in connection
with the distribution of Class C shares of the Trust and, in con-
nection with personal services rendered to Class C shareholders of
the Trust and the maintenance of Class C shareholder accounts, the
Trust pays the Distributor servicing fees and distribution fees up
to the annual rates set forth below (calculated as a percentage of
each Fund's average daily net assets attributable to Class C
shares):
<TABLE>
<CAPTION>
Servicing Distribution
Fund Fee Fee
----------------------------------------
<S> <C> <C>
Total Return,
Long-Term U.S.
Government,
Global
Bond II,
Foreign
Bond, Emerging
Markets Bond,
High Yield,
Strategic
Balanced and
Convertible
Bond Funds .25% .75%
----------------------------------------
Low Duration,
Municipal Bond,
Real Return
Bond and
StocksPLUS
Funds* .25% .50%
----------------------------------------
Short-Term Fund* .25% .30%
----------------------------------------
Money Market
Fund* .10% .00%
</TABLE>
*Subject to increase by action of the Trust's Trustees to a rate
not exceeding .75% per annum with respect to the distribution fee
on shares of the Low Duration and Money Market Funds, and .25% per
annum with respect to the servicing fee on shares of the Money
Market Fund. With respect to the servicing fee on shares of the
Money Market Fund, such fee is subject to increase to a rate of
.20% if the Distributor ceases to voluntarily waive any portion of
the fee. With respect to the distribution fee on shares of each of
the Short-Term, Real Return Bond, Municipal Bond and StocksPLUS
Funds, such fee is subject to an increase to a rate of .75% if the
Distributor ceases to voluntarily waive any portion of the fee.
The Class A servicing fees and Class B and Class C distribution
and servicing fees paid to the Distributor are made under Distri-
bution and Servicing Plans adopted pursuant to Rule 12b-l under
the 1940 Act and are of the type known as "compensation" plans.
This means that, although the Trustees of the Trust are expected
to take into account the expenses of the Distributor and its pred-
ecessors in their periodic review of the Distribution and Servic-
ing Plans, the fees are payable to compensate the Distributor for
services rendered even if the amount paid exceeds the Distribu-
tor's expenses.
The distribution fee applicable to Class B and Class C shares
may be spent by the Distributor on any activities or expenses pri-
marily intended to result in the sale of Class B or Class C
shares, respectively, including compensation to, and expenses (in-
cluding overhead and telephone expenses) of, financial consultants
or other employees of the Distributor or of participating or in-
troducing brokers who engage in distribution of Class B or Class C
shares, printing of prospectuses and reports for other than exist-
ing Class B or Class C shareholders, advertising, and preparation,
printing and distribution of sales literature. The servicing fee,
applicable to Class A, Class B and Class C shares of the Trust,
may be spent by the Distributor on personal services rendered to
shareholders of the Trust and the maintenance of shareholder ac-
counts, including compensation to, and expenses (including tele-
phone and overhead expenses) of, financial consultants or other
employees of participating or introducing brokers, certain banks
and other financial intermediaries who aid in the processing of
purchase or redemption requests or the processing of dividend pay-
ments, who provide
58 PIMCO Funds: Pacific Investment Management Series
<PAGE>
information periodically to shareholders showing their positions
in a Fund's shares, who forward communications from the Trust to
shareholders, who render ongoing advice concerning the suitability
of particular investment opportunities offered by the Trust in
light of the shareholders' needs, who respond to inquiries from
shareholders relating to such services, or who train personnel in
the provision of such services. Distribution and servicing fees
may also be spent on interest relating to unreimbursed distribu-
tion or servicing expenses from prior years.
Many of the Distributor's sales and servicing efforts involve
the Trust as a whole, so that fees paid by Class A, Class B or
Class C shares of any Fund may indirectly support sales and ser-
vicing efforts relating to the other Funds' shares of the same
class. In reporting its expenses to the Trustees, the Distributor
itemizes expenses that relate to the distribution and/or servicing
of a single Fund's shares, and allocates other expenses among the
Funds based on their relative net assets. Expenses allocated to
each Fund are further allocated among its classes of shares annu-
ally based on the relative sales of each class, except for any ex-
penses that relate only to the sale or servicing of a single
class. The Distributor may make payments to brokers (and with re-
spect to servicing fees only, to certain banks and other financial
intermediaries) of up to the following percentages annually of the
average daily net assets attributable to shares in the accounts of
their customers or clients:
Class A Shares
<TABLE>
<CAPTION>
Servicing
Fee(/1/)
-------------------------------
<S> <C>
All Funds except the
Money Market Fund .25%
-------------------------------
Money Market Fund .10%
</TABLE>
Class B Shares(/2/)
<TABLE>
<CAPTION>
Servicing
Fee
-------------------
<S> <C>
All Funds .25%
</TABLE>
Class C Shares--purchased on or after 7/1/91(/3/)
<TABLE>
<CAPTION>
Servicing Distribution
Fee(/1/) Fee(/1/)
---------------------------------------
<S> <C> <C>
Total Return,
Long-Term U.S.
Government,
Global Bond II,
Foreign Bond,
Emerging
Markets Bond,
High Yield,
Strategic
Balanced and
Convertible
Bond Funds .25% .65%
---------------------------------------
Low Duration,
Municipal Bond,
Real Return
Bond and
StocksPLUS
Funds .25% .45%
---------------------------------------
Short-Term Fund .25% .25%
---------------------------------------
Money Market
Fund .10% .00%
</TABLE>
Class C Shares--purchased before 7/1/91
<TABLE>
<CAPTION>
Servicing
Fee(/1/)
--------------------------------
<S> <C>
All Funds except the
Money Market Fund .25%
--------------------------------
Money Market Fund .10%
</TABLE>
1. Applies, in part, to Class A, Class B and Class C shares of the
Trust issued to former shareholders of PIMCO Advisors Funds in
connection with the reorganizations/mergers of series of PIMCO Ad-
visors Funds as/with Funds of the Trust in a transaction which
took place on January 17, 1997.
2. Payable only with respect to shares outstanding for one year or
more.
3. Payable only with respect to shares outstanding for one year or
more except in the case of shares for which no payment is made to
the party at the time of sale.
Prospectus 59
<PAGE>
The Distributor may from time to time pay additional cash bo-
nuses or other incentives to selected participating brokers in
connection with the sale or servicing of Class A, Class B and
Class C shares of the Funds. On some occasions, such bonuses or
incentives may be conditioned upon the sale of a specified minimum
dollar amount of the shares of a Fund and/or all of the Funds to-
gether or a particular class of shares, during a specific period
of time. The Distributor currently expects that such additional
bonuses or incentives will not exceed .50% of the amount of any
sale. Pacific Investment Management (in its capacity as adminis-
trator) may also pay participating brokers and other intermediar-
ies for transfer agency and other services.
If in any year the Distributor's expenses incurred in connec-
tion with the distribution of Class B and Class C shares and, for
Class A, Class B and Class C Shares, in connection with the ser-
vicing of shareholders and the maintenance of shareholder ac-
counts, exceed the distribution and/or servicing fees paid by the
Trust, the Distributor would recover such excess only if the Dis-
tribution and Servicing Plan with respect to such class of shares
continues to be in effect in some later year when the distribution
and/or servicing fees exceed the Distributor's expenses. The Trust
is not obligated to repay any unreimbursed expenses that may exist
at such time, if any, as the relevant Distribution and Servicing
Plan terminates.
From time to time, expenses of principal underwriters incurred
in connection with the sale of shares of the Funds and in connec-
tion with the servicing of shareholders of the Funds and the main-
tenance of shareholder accounts may exceed the distribution and
servicing fees collected by the Distributor. As of March 31, 1998,
such expenses were approximately $2,927,000 in excess of payments
under the Funds' Class A Distribution and Servicing Plan,
$12,538,000 in excess of payments under the Funds' Class B Distri-
bution and Servicing Plan, and $222,000 in excess of payments un-
der the Funds' Class C Distribution and Servicing Plan.
How Net Asset Value Is Determined
The net asset value per share of each of Class A, Class B, and
Class C is determined once each day as of 4:00 p.m., Eastern time,
or as of such other time designated by the New York Stock Exchange
as the close of public trading for that day ("closing"). Net asset
value per share of a class is determined 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 any day on which the New York Stock Exchange is
closed.
In determining their daily net asset values, the Funds use
price data obtained from the Exchange that the Funds believe to be
representative of the current market value of securities held by
the Funds as of the time selected by the Funds for the calculation
of net asset value. Such price data is typically transmitted to
the Funds soon after 4:00 p.m. Eastern time, and typically re-
flects last quoted prices for securities as of the close of public
trading on the Exchange on that day. Such prices may not reflect
later adjustments to securities prices made after the close of
public trading, due to unanticipated delays in order processing,
late settlements between dealers and other Exchange members, or
after-hours trading of the same securities conducted on other ex-
changes. The Funds have determined that it is not practical to
postpone the daily calculation of net asset value to account for
such post-closing adjustments. For U.S.-traded securities, the
Funds therefore intend to use prices quoted as of 4:00 p.m. East-
ern time for all securities in their portfolios regardless of the
impact of any post-closing adjustments, as long as, in the view of
the Funds, such prices represent the current market value of such
securities as of the time selected by the Funds for the calcula-
tion of net asset value.
The 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 assum-
ing a constant accretion of a discount or amortization of a pre-
mium to maturity. See the Statement of Additional Information for
a description of certain conditions and procedures followed by the
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 val-
ue. Market value is determined on the basis of last reported sales
prices, or if no sales are reported, as is the case for
60 PIMCO Funds: Pacific Investment Management Series
<PAGE>
most securities traded over-the-counter, at the mean between rep-
resentative bid and asked quotations obtained from a quotation re-
porting system or from established market makers. Fixed income se-
curities, 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 ac-
count appropriate factors such as institutional-sized trading in
similar groups of securities, yield, quality, coupon rate, maturi-
ty, type of issue, trading characteristics, and other market data.
Quotations of foreign securities in foreign currency are con-
verted to U.S. dollar equivalents using foreign exchange quota-
tions received from independent dealers. Short-term investments
having a maturity of 60 days or less may be valued at current mar-
ket value or at amortized cost, when the Board of Trustees deter-
mines that amortized cost is their fair value. Certain fixed in-
come 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 compa-
rable 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.
Each Fund's liabilities are allocated among its classes. The
total of such liabilities allocated to a class plus that class's
distribution and/or servicing fees and any other expenses spe-
cially allocated to that class are then deducted from the class's
proportionate interest in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that
class outstanding to produce the class's "net asset value" per
share. Under certain circumstances, the per share net asset value
of the Class B and Class C shares of the Funds that do not declare
regular income dividends on a daily basis may be lower than the
per share net asset value of the Class A shares as a result of the
daily expense accruals of the distribution fee applicable to the
Class B and Class C shares. Generally, for Funds that pay income
dividends, those dividends are expected to differ over time by ap-
proximately the amount of the expense accrual differential between
a particular Fund's classes.
Distributions
Each Fund pays out as dividends substantially all of its net in-
vestment income (which comes from dividends and interest it re-
ceives or is deemed to receive from its investments) and net real-
ized short-term capital gains. For these purposes and for federal
income tax purposes, a portion of the premiums from certain ex-
pired call or put options written by the Fund, net gains from
closing purchase and sale transactions with respect to such op-
tions, and net gains from futures transactions are treated as
short-term capital gains. Each Fund distributes substantially all
of its net realized capital gains, if any, after giving effect to
any available capital loss carry-over.
Shares begin earning dividends on the day after the date that
funds are received by the Trust for the purchase of shares. For
the Fixed Income Funds, dividends are declared daily from net in-
vestment income to shareholders of record at the close of the pre-
vious business day, and distributed to shareholders monthly. The
Strategic Balanced, Convertible Bond and StocksPLUS 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.
All dividends and/or distributions will be paid in the form of
additional shares of the class of shares of the Fund to which the
dividends and/or distributions relate or, at the election of the
shareholder, of another Fund of the Trust or a series of PIMCO
Funds: Multi-Manager Series as described below, at net asset val-
ue, unless the shareholder elects to receive cash (either paid to
shareholders directly or credited to their account with their par-
ticipating broker). If a shareholder has elected to receive divi-
dends and/or capital gain distributions in cash and the postal or
other delivery service is unable to deliver checks to the share-
holder's address of record, such shareholder's distributions will
automatically be invested in the Money Market Fund until such
shareholder is located. Dividends paid by each Fund with
Prospectus 61
<PAGE>
respect to each class of shares are calculated in the same manner
and at the same time, but dividends on Class B and
Class C shares are expected to be lower than dividends on Class A
shares as a result of the distribution fee applicable to Class B
and Class C shares. There are no sales charges on reinvested divi-
dends.
Class A, Class B and Class C shareholders of the Trust may
elect to invest dividends and/or distributions paid by any Fund in
shares of the same class of any other Fund of the Trust or a se-
ries of PIMCO Funds: Multi-Manager Series (including any PIMCO
Funds Asset Allocation Series portfolio) which offers such class
of shares at net asset value. The shareholder must have an account
existing in the Fund selected for investment with the identical
registered name and address and must elect this option on the ac-
count application, on a form provided for that purpose or by a
telephone request to the Transfer Agent at 1-800-426-0107. For
further information on this option, contact your broker or call
the Distributor at 1-800-426-0107.
Taxes
Each Fund intends to qualify as a regulated investment company an-
nually and to elect to be treated as a regulated investment com-
pany under the Code. As such, a Fund generally will not pay fed-
eral 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.
Shareholders subject to U.S. federal income tax will be subject
to tax on dividends received from a Fund, regardless of whether
received in cash or reinvested in additional shares. Distributions
received by tax-exempt shareholders will not be subject to federal
income tax to the extent permitted under applicable tax law. All
shareholders must treat dividends, other than capital gain divi-
dends or dividends that represent a return of capital to share-
holders, as ordinary income.
Dividends designated by a Fund as capital gain dividends de-
rived from the Fund's net capital gain (that is, the excess of net
long-term gain over net short-term loss) are taxable to sharehold-
ers 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, short-term capital gain, 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 Octo-
ber, November or December of a calendar year are taxable to share-
holders (who 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. Each Fund will advise shareholders
annually of the amount and nature of the dividends paid to them.
Dividends paid to shareholders by the Municipal Bond Fund which
are derived from interest on Municipal Bonds are expected to be
designated by the Fund as "exempt-interest dividends," and share-
holders may generally exclude such dividends from gross income for
federal income tax purposes. However, if a shareholder receives
social security or railroad retirement benefits, the shareholder
may be taxed on a portion of those benefits as a result of receiv-
ing tax-exempt income. In addition, certain exempt-interest divi-
dends could, as discussed below, cause certain shareholders to be-
come subject to the alternative minimum tax and may increase the
alternative minimum tax liability of shareholders already subject
to this tax.
To the extent that dividends paid to shareholders by the Munic-
ipal Bond Fund are derived from taxable interest or from capital
gains, such dividends will be subject to federal income tax. Any
gain realized on a redemption of shares will be taxable gain, sub-
ject to any applicable tax exemption for which an investor may
qualify.
Dividends derived from interest on certain U.S. Government se-
curities may be exempt from state and local taxes, although inter-
est on mortgage-backed U.S. Government securities (for example,
interest on FNMA and GNMA Certificates) is generally not so ex-
empt. The distributions of "exempt-interest dividends" paid by the
Municipal Bond Fund may be exempt from state and local taxation
when received by a shareholder to the extent that they are derived
from interest on Municipal Bonds issued by the state or political
subdivision in which such shareholder resides. The federal
62 PIMCO Funds: Pacific Investment Management Series
<PAGE>
exemption for "exempt-interest dividends" attributable to Munici-
pal Bonds does not necessarily result in exemption of such divi-
dends from income for the purpose of state and local taxes. The
Trust will report annually on a state-by-state basis the source of
income the Municipal Bond Fund receives on Municipal Bonds that
was paid out as dividends during the preceding year.
The Code also provides that exempt-interest dividends allocable
to interest received from "private activity bonds" issued after
August 7, 1986 are an item of tax preference for individual and
corporate alternative minimum tax at the applicable rate for indi-
viduals and corporations. Therefore, if the Municipal Bond Fund
invests in such private activity bonds, certain of its sharehold-
ers may become subject to the alternative minimum tax on that part
of its distributions to them that are derived from interest income
on such bonds, and certain shareholders already subject to such
tax may have increased liability therefor. However, it is the
present policy of the Municipal Bond Fund to invest no more than
20% of its assets in such bonds. Other provisions of the Code af-
fect the tax treatment of distributions from the Municipal Bond
Fund for corporations, casualty insurance companies, and financial
institutions. In particular, under the Code, for corporations, al-
ternative minimum taxable income will be increased by a percentage
of the amount by which the corporation's "adjusted current earn-
ings" (which includes various items of tax exempt income) exceeds
the amount otherwise determined to be alternative minimum taxable
income. Accordingly, an investment in the Municipal Bond Fund may
cause shareholders to be subject to (or result in an increased li-
ability under) the alternative minimum tax.
Dividends to shareholders of the Municipal Bond Fund derived
from money market instruments and U.S. Government securities are
generally taxable as ordinary income. The Fund may seek to reduce
fluctuations in its net asset value by engaging in portfolio
strategies involving options on securities, futures contracts, and
options on futures contracts. Any gain derived by the Fund from
the use of such instruments, including by reason of "marking to
market," will be treated as a combination of short-term and long-
term capital gain and, if not offset by realized capital losses
incurred by the Fund, will be distributed to shareholders (possi-
bly requiring the liquidation of other portfolio securities) and
will be taxable to shareholders as a combination of ordinary in-
come and long-term capital gain.
Interest accrued by a Fund from inflation-indexed bonds will be
includable in the Fund's gross income in the period in which it
accrues. Periodic adjustments for inflation in the principal value
of these securities also may give rise to original issue discount,
which, likewise, will be includable in the Fund's gross income on
a current basis, regardless of whether the Fund receives any cash
payments. See "Taxation--Original Issue Discount" in the Statement
of Additional Information. Amounts includable in a Fund's gross
income become subject to tax-related distribution requirements.
Accordingly, a Fund may be required to make annual distributions
to shareholders in excess of the cash received in a given period
from these investments. As a result, the Fund may be required to
liquidate certain investments at a time when it is not advanta-
geous to do so. If the principal value of an inflation-indexed
bond is adjusted downward in any period as a result of deflation,
the reduction may be treated as a loss to the extent the reduction
exceeds coupon payments received in that period; in that case, the
amount distributable by the Fund may be reduced and amounts dis-
tributed previously in the taxable year may be characterized in
some circumstances as a return of capital.
Taxable shareholders should note that the timing of their in-
vestment could have undesirable tax consequences. Dividends and
distributions on a Fund's shares are generally subject to federal
income tax as described herein to the extent they do not exceed
the Fund's realized income and gains, even though such dividends
and distributions may economically represent a return of a partic-
ular shareholder's investment. Such distributions are likely to
occur in respect of shares purchased at a time when the Fund's net
asset value reflects gains that are either unrealized or realized
but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects
unrealized losses.
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.
Prospectus 63
<PAGE>
<TABLE>
<C> <S>
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, R.
Wesley Burns, Vern O. Curtis, Brent R. Harris, Thomas P. Kemp, 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 serves as investment adviser ("Ad-
viser") to the Funds pursuant to an investment advisory contract.
The Adviser is an investment management company founded in 1971,
and had approximately $158 billion in assets under management as
of December 31, 1998.
Pacific Investment Management is a subsidiary of PIMCO Advisors
L.P. ("PIMCO Advisors"). The general partners of PIMCO Advisors
are PIMCO Partners, G.P. and PIMCO Advisors Holdings L.P. PIMCO
Partners, G.P. is
a general partnership between PIMCO Holding LLC, a Delaware lim-
ited liability company and an indirect wholly-owned subsidiary of
Pacific Life Insurance Company, and PIMCO Partners LLC, a Califor-
nia limited liability company controlled by the current Managing
Directors and two former Managing Directors of Pacific Investment
Management. PIMCO Partners, G.P. is the sole general partner of
PIMCO Advisors Holdings L.P. Pacific Investment Management's ad-
dress is 840 Newport Center Drive, Suite 300, Newport Beach, Cali-
fornia 92660. Pacific Investment Management is registered as an
investment adviser with the Securities and Exchange Commission and
as a commodity trading advisor with the CFTC.
The Adviser manages the investment and reinvestment of the as-
sets 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 "Portfo-
lio Transactions" in the Statement of Additional Information.
</TABLE>
64 PIMCO Funds: Pacific Investment Management Series
<PAGE>
Information about the individual portfolio managers responsible
for management of the Trust's currently operational Funds offered
in this Prospectus, including their occupations for the past five
years, is provided below.
<TABLE>
<CAPTION>
Portfolio Manager and Business
Fund Experience (past five years)
-------------------------------------------------------------------------
<C> <S>
Money Market Fund Leslie Barbi, Senior Vice President,
Pacific Investment Management. As a
Fixed Income Portfolio Manager for
Pacific Investment Management since
1993, Ms. Barbi has managed assets
for various institutional accounts,
and has managed the Money Market Fund
since November 1, 1995.
-------------------------------------------------------------------------
Short-Term Fund William H. Gross, Managing Director,
Low Duration Fund Pacific Investment Management. A
Total Return Fund Fixed Income Portfolio Manager, Mr.
Strategic Balanced Fund Gross is one of the founders of Pa-
StocksPLUS Fund cific Investment Management and has
managed the Total Return and Low Du-
ration Funds since their inception,
May 11, 1987. Mr. Gross is the leader
of the team which has managed the
Short-Term, Strategic Balanced and
StocksPLUS Funds since January 6,
1998.
-------------------------------------------------------------------------
Long-Term U.S. Government Pasi Hamalainen, Executive Vice Pres-
Fund ident, Pacific Investment Management.
As a Fixed Income Portfolio Manager
for Pacific Investment Management
since 1994, Mr. Hamalainen has man-
aged assets for various institutional
accounts, and has managed the Long-
Term U.S. Government Fund since July
1, 1997. Prior to joining Pacific In-
vestment Management in 1994, Mr.
Hamalainen, held a fellowship at The
Wharton School and assisted in teach-
ing the MBA program and the Aresty
Institute of Executive Education.
-------------------------------------------------------------------------
Global Bond Fund II Lee R. Thomas, III, Managing Director
Foreign Bond Fund and Senior International Portfolio
Manager, Pacific Investment Management.
As a Fixed Income Portfolio Manager for
Pacific Investment Management since
1995, Mr. Thomas has managed assets
for various institutional accounts,
and has managed the Foreign Bond Fund
since July 13, 1995, and the Global
Bond Fund II since October 1, 1995.
Prior to joining Pacific Investment
Management in 1995, Mr. Thomas was
associated with Investcorp as a mem-
ber of the management committee re-
sponsible for global securities and
foreign exchange trading.
-------------------------------------------------------------------------
Emerging Markets Bond Fund Michael J. Rosborough, Senior Vice
President, Pacific Investment Manage-
ment. As a Fixed Income Portfolio Manager
for Pacific Investment Management since
1994, Mr. Rosborough has managed assets
for various institutional accounts, and
has managed the Emerging Markets Bond
and Emerging Markets Bond II Funds
since their inception on August 1,
1997 and April 3, 1998, respectively.
Prior to joining Pacific Investment
Management in 1994, Mr. Rosborough
was associated with RBC Dominion in
Tokyo as a Vice President and Manager
in foreign fixed income.
-------------------------------------------------------------------------
High Yield Fund Benjamin Trosky, Managing Director,
Pacific Investment Management. A
Fixed Income Portfolio Manager, Mr.
Trosky joined Pacific Investment
Management in 1990 and has managed
the High Yield Fund since its incep-
tion, December 16, 1992.
-------------------------------------------------------------------------
Municipal Bond Fund Benjamin Ehlert, Executive Vice Pres-
ident, Pacific Investment Management.
As a Fixed Income Portfolio Manager
for Pacific Investment Management
since 1986, Mr. Ehlert has managed
assets for various institutional ac-
counts, and has managed the PIMCO Mu-
nicipal Bond Fund since its inception
on December 31, 1997.
-------------------------------------------------------------------------
Real Return Bond Fund John Brynjolfsson, Vice President,
Pacific Investment Management. As a
FixedIncome Portfolio Manager for Pacific
Investment Management since 1989,
Mr. Brynjolfsson has managed assets
for various institutional accounts,
and has managed the Real Return Bond
Fund since its inception, January 29,
1997.
-------------------------------------------------------------------------
Convertible Bond Fund Sandra K. Durn, Vice President, Pa-
cific Investment Management. A Con-
vertible Bond Portfolio Manager,
Ms. Durn joined Pacific Investment
Management in 1999 to manage the Con-
vertible Bond Fund. Prior to joining
Pacific Investment Management in
1999, Ms. Durn was associated with
Nicholas-Applegate Capital Management
where she was a Convertible Securi-
ties Portfolio Manager from 1995 to
1999, and a Quantitative Analyst
since 1994.
</TABLE>
Prospectus 65
<PAGE>
Prior
Performance As portfolio manager for the PIMCO Convertible Bond Fund, Ms. Durn
of is primarily responsible for the day-to-day management of the
Portfolio Fund's portfolio. Prior to joining PIMCO, Ms. Durn served as the
Manager for portfolio manager of the Nicholas-Applegate Convertible Fund (the
Convertible "N-A Fund") from December 1, 1996 through February 28, 1999, and
Bond Fund during that time had full discretionary authority over the selec-
tion of investments for the N-A Fund. The N-A Fund has substan-
tially similar investment policies, strategies and objectives as
those of the PIMCO Convertible Bond Fund. The N-A Fund offers
three retail classes, as well as two institutional classes. On
February 28, 1999, the N-A Fund had approximately $295.5 million
in total net assets.
Average annual total returns of Class A, Class B and Class C of
the N-A Fund for the one-year period ended December 31, 1998 and
for the entire period during which Ms. Durn managed the N-A Fund,
compared with the performance of the CS First Boston Convertible
Index, were:
<TABLE>
<CAPTION>
N-A Fund CS First
------------------------------------------- Boston
Class A(a) Class A(b) Class B(c) Class C(c) Index(d)
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
One-year (ended
12/31/98) 20.80% 14.46% 16.21% 20.07% 6.55%
Ms. Durn's N-A Fund Ten-
ure (December 1, 1996
through February 28,
1999) 19.76% 16.92% 18.10% 19.02% 9.75%
</TABLE>
(a) Average annual total return at net asset value excluding sales
load.
(b) Average annual total return at public offering price,
reflecting maximum sales load of 5.25%, changes in share
prices and reinvestment of dividends and distributions during
the period, net of fund expenses.
(c) Average annual total return at public offering price,
reflecting changes in share prices and reinvestment of
dividends and distributions during the period, net of fund
expenses.
(d) The CS First Boston Index is an unmanaged market-weighted
index representing the universe of convertible securities,
whether they are convertible preferred stocks or convertible
bonds. It reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect
deductions for advisory fees, brokerage commissions or
markups, or other expenses of investing.
The N-A Fund's Lipper Analytical Services, Inc. rankings for
the one-year period ended December 31, 1998 and for the period Ms.
Durn managed the Fund were:
Lipper Rankings -- Convertible Stock Fund Category (a)
<TABLE>
<S> <C> <C>
One-year (ended 12/31/98) 3 out of 58 funds
Ms. Durn's N-A Fund Tenure (December 1, 1996 3 out of 42 funds
through February 28, 1999)
</TABLE>
(a) Lipper is an industry research firm whose rankings are based
on total return performance and do not reflect the effect of
sales charges. Each fund is ranked within a universe of funds
similar in investment objective. Past performance is not
indicative of future returns. Rankings reflect Class A.
Share prices and investment returns will fluctuate reflecting
market conditions, as well as changes in company-specific funda-
mentals of portfolio securities. For the periods shown above, the
expenses of the N-A Fund were higher than the anticipated expenses
of the PIMCO Convertible Bond Fund. Expense levels will affect a
fund's performance. The PIMCO Convertible Bond Fund and the N-A
Fund are separate funds and the historical performance of the N-A
Fund is not indicative of the potential performance of the PIMCO
Convertible Bond Fund. Data regarding the N-A Fund is for informa-
tional purposes only and PIMCO Funds has no affiliation with and
is not endorsed by the N-A Fund.
66 PIMCO Funds: Pacific Investment Management Series
<PAGE>
<TABLE>
<S> <C>
Fund Administrator Pacific Investment Management also serves as administrator for the
Funds' Class A, Class B and Class C shares pursuant to an adminis-
tration agreement with the Trust. Pacific Investment Management
provides administrative services for Class A, Class B and Class C
shareholders of the Funds, which include clerical help and ac-
counting, bookkeeping, internal audit services, and certain other
services required by the Funds, preparation of reports to the
Funds' shareholders and regulatory filings. Pacific Investment
Management may also retain certain of its affiliates to provide
certain of these services. In addition, Pacific Investment Manage-
ment, at its own expense, arranges for the provision of legal, au-
dit, custody, transfer agency (including sub-transfer agency and
other administrative services) 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 Funds (and not Pacific Investment Management) are responsi-
ble for the following expenses: (i) salaries and other compensa-
tion of any of the Trust's executive officers and employees who
are not officers, directors, stockholders or employees of Pacific
Investment Management or its subsidiaries or affiliates; (ii)
taxes and governmental fees; (iii) brokerage fees and commissions
and other portfolio transaction expenses; (iv) the costs of bor-
rowing money, including interest expenses; (v) fees and expenses
of the Trustees who are not "interested persons" of Pacific In-
vestment Management or the Trust, and any counsel retained exclu-
sively for their benefit; (vi) extraordinary expenses, including
costs of litigation and indemnification expenses; (vii) expenses,
such as organizational expenses, which are capitalized in accor-
dance with generally accepted accounting principles; and (viii)
any expenses allocated or allocable to a specific class of shares,
which include distribution and servicing fees payable with respect
to Class A, Class B and Class C shares, and may include certain
other expenses as permitted by the Trust's Multi-Class Plan
adopted pursuant to Rule 18f-3 under the 1940 Act, subject to re-
view and approval by the Trustees.
Advisory and The Funds feature fixed advisory and administrative fee rates. For
Administrative Fees providing investment advisory and administrative services to the
Funds as described above, Pacific Investment Management receives
monthly fees from each Fund at an annual rate (i) based on the av-
erage daily net assets of the Fund for advisory fees and, (ii) at-
tributable in the aggregate to the Fund's Class A, Class B and
Class C shares for administrative fees, as follows:
</TABLE>
<TABLE>
<CAPTION>
Advisory
Fund Fee Rate
-----------------------------------------------------
<S> <C>
Money Market Fund .15%
-----------------------------------------------------
Strategic Balanced, Convertible Bond
and StocksPLUS Funds .40%
-----------------------------------------------------
Emerging Markets Bond Fund .45%
-----------------------------------------------------
All other Funds .25%
<CAPTION>
Administrative
Fund Fee Rate
-----------------------------------------------------
<S> <C>
Money Market, Short-Term and Munici-
pal Bond Funds .35%
-----------------------------------------------------
Global Bond II and Foreign Bond Funds .45%
-----------------------------------------------------
Emerging Markets Bond Fund .55%
-----------------------------------------------------
All other Funds .40%
</TABLE>
<TABLE>
<S> <C>
Both the investment advisory contract and administration agree-
ment with respect to Class A, Class B and Class C shares of the
Funds may be terminated by the Trustees at any time on 60 days'
written notice. The investment advisory contract may be terminated
by Pacific Investment Management on 60 days' written notice. Fol-
lowing the expiration of the one-year period commencing with the
effectiveness of the administration agreement, it may be
terminated by Pacific Investment Management on 60 days' written
notice. Following its initial two-year term, the investment advi-
sory contract will continue from year to year if approved by the
Trustees. Following its initial one-year term, the administration
agreement with respect to Class A, Class B and Class C shares of
the Funds will continue from year-to-year if approved by the
Trustees.
</TABLE>
Prospectus 67
<PAGE>
<TABLE>
<S> <C>
Portfolio Pursuant to the advisory contract, the Adviser places orders for
Transactions the purchase and sale of portfolio investments for the Funds' ac-
counts 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 ef-
fecting the transaction.
The Adviser manages the Funds without regard generally to re-
strictions on portfolio turnover, except those imposed on its
ability to engage in short-term trading by provisions of the fed-
eral tax laws. The use of certain derivative instruments with rel-
atively short maturities may tend to exaggerate the portfolio
turnover rate for some of the Funds. Trading in fixed income secu-
rities does not generally involve the payment of brokerage commis-
sions, 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. The portfolio turnover rate for
each Fund for which financial highlights are provided in this Pro-
spectus is set forth under "Financial Highlights."
Some securities considered for investments 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 pol-
icies of a Fund and one or more of these clients served by the Ad-
viser 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. The Adviser may
aggregate orders for the Funds with simultaneous transactions en-
tered into on behalf of other clients of the Adviser so long as
price and transaction expenses are averaged either for that trans-
action or for the day.
Description of the Trust
Capitalization The Trust was organized as a Massachusetts business trust on Feb-
ruary 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 cir-
cumstances, 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 also pro-
vides for indemnification out of Trust property for all loss and
expense of any shareholder held personally liable for the obliga-
tions of the Trust. The risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circum-
stances in which such disclaimer is inoperative or the Trust it-
self is unable to meet its obligations, and thus should be consid-
ered remote.
Multiple Classes In addition to Class A, Class B and Class C shares, certain Funds
Of Shares also offer Class D, Institutional Class and Administrative Class
shares through separate prospectuses. See "Alternative Purchase
Arrangements." These other classes of shares of the Funds may have
different sales charges and expense levels, which will affect per-
formance accordingly. This Prospectus relates only to the Class A,
Class B and Class C shares of the Funds.
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 re-
quired to hold regular annual meetings of Trust shareholders and
does not intend to do so. Shareholders of a class of shares or
Fund have separate voting rights with respect to matters that only
affect that class or Fund. See "Other Information--Voting Rights"
</TABLE> in the Statement of Additional Information.
68 PIMCO Funds: Pacific Investment Management Series
<PAGE>
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 March 10, 1999,
the following were shareholders of record of at least 25% of the
outstanding voting securities of the indicated Fund: Combined Master
Retirement Trust (Dallas, Texas) with respect to the Money Market
Fund; Canterbury/Uniform Code Council (Pittsburgh, Pennsylvania)
with respect to the Global Bond Fund II; Charles Schwab & Co., Inc.
(San Francisco, California) with respect to the Foreign Bond Fund;
Pacific Investment Management Company (Newport Beach, California)
with respect to the Emerging Markets Bond Fund; and California
Community Foundation (Los Angeles, California) and Carpenter Health
and Security Trust of Washington (Seattle, Washington) with respect
to the Strategic Balanced Fund. To the extent such shareholders are
also the beneficial owners of those shares, they may be deemed to
control (as that term is defined in the 1940 Act) the relevant Fund.
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).
Mailings to Shareholders
To reduce the volume of mail shareholders receive, it is antici-
pated that only one copy of most Trust reports, such as the
Trust's annual report, will be mailed to a shareholder's household
(same surname, same address). A shareholder may call 1-800-227-
7337 if additional shareholder reports are desired.
Prospectus 69
<PAGE>
Appendix A
Description of Duration
Duration is a measure of the expected life of a fixed income secu-
rity that was developed as a more precise alternative to the con-
cept 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 securi-
ty). However, "term to maturity" measures only the time until a
fixed income security provides its final payment, taking no ac-
count 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. Dura-
tion management is one of the fundamental tools used by the Advis-
er.
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 occur-
ring 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 dura-
tion by approximately the same amount that selling an equivalent
amount of the underlying securities would.
There are some situations where even the standard duration cal-
culation 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 inter-
est rate exposure corresponds to the frequency of the coupon re-
set. For inflation-indexed bonds, duration is calculated on the
basis of modified real duration, which measures price changes of
inflation-indexed bonds on the basis of changes in real, rather
than nominal, interest rates. 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 in-
corporate the anticipated economic life of a security into the de-
termination of its interest rate exposure.
70 PIMCO Funds: Pacific Investment Management Series
<PAGE>
<TABLE>
<S> <C>
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 com-
parability to rated securities. A Fund's use of average quality
criteria is intended to be a guide for those institutional invest-
ors 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 in-
vestments 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 par-
ticular rating category will vary. Following is a description of
Moody's and S&P's ratings applicable to fixed income securities.
Moody's Investors Corporate and Municipal Bond Ratings
Service, Inc. 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 pro-
tected by a large or by an exceptionally stable margin and princi-
pal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to im-
pair 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 se-
curities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obliga-
tions. Factors giving security to principal and interest are con-
sidered adequate but elements may be present that suggest a sus-
ceptibility 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 el-
ements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very mod-
erate 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 pe-
riod of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such is-
sues 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 pros-
pects of ever attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3 in each ge-
neric 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 in-
dicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
</TABLE>
Prospectus 71
<PAGE>
<TABLE>
<S> <C>
Corporate Short-Term Debt Ratings
Moody's short-term debt ratings are opinions of the ability of is-
suers 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 indem-
nity 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 em-
ployed; conservative capitalization structure with moderate reli-
ance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash genera-
tion; 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 ob-
ligations. This will normally be evidenced by many of the charac-
teristics 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 ob-
ligations. The effect of industry characteristics and market com-
positions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt protec-
tion measurements and may require relatively high financial lever-
age. 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
Ratings Services
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by S&P. Ca-
pacity 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 ca-
pacity to pay interest and repay principal for debt in this cate-
gory than in higher-rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having predomi-
nantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least 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 un-
certainties or exposure to adverse business, financial, or eco-
nomic 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.
</TABLE>
72 PIMCO Funds: Pacific Investment Management Series
<PAGE>
B: Debt rated B has a greater vulnerability to default but cur-
rently 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 re-
pay principal. The B rating category is also used for debt subor-
dinated 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 re-
payment 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 ac-
tual 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 rat-
ing. The C rating may be used to cover a situation where a bank-
ruptcy petition has been filed, but debt service payments are con-
tinued.
CI: The rating CI is reserved for income bonds on which no in-
terest 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 modi-
fied 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 com-
pletion 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 com-
pletion. The investor should exercise his own judgment with re-
spect 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 indica-
tion that an obligation will exhibit no volatility or variability
in total return.
N.R.: Not rated.
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
An S&P 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 catego-
ries, 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 designa-
tion is satisfactory. However, the relative degree of safety is
not as high as for issues designated A-1.
Prospectus 73
<PAGE>
A-3: Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the ad-
verse effects of changes in circumstances than obligations carry-
ing the higher designations.
B: Issues rated B are regarded as having only speculative ca-
pacity 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 mar-
ket price or suitability for a particular investor. The ratings
are based on current information furnished to S&P by the issuer or
obtained from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occa-
sion, rely on unaudited financial information. The ratings may be
changed, suspended, or withdrawn as a result of changes in or un-
availability of such information.
74 PIMCO Funds: Pacific Investment Management Series
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
------------------------------------------------------------------------------------------
PIMCO Funds: INVESTMENT ADVISOR AND ADMINISTRATOR
Pacific Investment
Management Series Pacific Investment Management Company, 840 Newport Center Drive, Suite 300,
Newport Beach, CA 92660
------------------------------------------------------------------------------------------
DISTRIBUTOR
PIMCO Funds Distributors LLC, 2187 Atlantic Street, Stamford, CT 06902
------------------------------------------------------------------------------------------
CUSTODIAN
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, MO 64105
------------------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
First Data Investor Services Group, Inc., P.O. Box 9688, Providence, RI 02940-9688
------------------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105
------------------------------------------------------------------------------------------
LEGAL COUNSEL
Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C. 20006-2401
------------------------------------------------------------------------------------------
For further information about the PIMCO Funds, call 1-800-426-0107 or visit our Web site
at http://www.pimcofunds.com.
</TABLE>
<PAGE>
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this Supplement is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Supplement is not an
offer to sell securities, and we are not soliciting offers to buy these
securities, in any state where the offer or sale is not permitted.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 2, 1999
PIMCO FUNDS: Pacific Investment Management Series
CLASS J AND CLASS K
Supplement dated June __, 1999
to the Institutional Class and Administrative Class Prospectus dated June __,
1999
This Supplement describes two additional classes of shares of each series
("Funds") of PIMCO Funds: Pacific Investment Management Company (the "Trust"),
Class J and Class K, and supplements certain information regarding the Funds in
the Prospectus dated June __, 1999. The caption headings used in this
Supplement correspond to those used in the Prospectus. Class J and Class K
shares may be offered or sold only outside of the United States, and this
information does not constitute an offer of Class J and Class K shares to any
person who resides within the United States.
Class J and Class K shares are available for the following Funds: Short-term,
Low Duration, Low Duration II, Total Return, Total Return II, High Yield, Global
Bond, Foreign Bond, Strategic Balanced, StocksPLUS.
PROSPECTUS SUMMARY
The section "Prospectus Summary" is supplemented as follows:
Purchase Of Shares
This Prospectus also describes Class J and Class K shares of the Funds.
Class J and Class K shares are offered in Japan solely to Japanese investors.
Class J shares are offered primarily through Japanese broker dealers, and Class
K shares are offered primarily through Japanese banks or other Japanese
financial institutions (together with broker dealers, "Japanese financial
intermediaries"). The minimum initial investment in Class J and Class K shares
is 100 shares. For Class J shares and Class K shares, each Fund pays services
and/or distribution fees to Japanese financial intermediaries for services
provided to shareholders.
Redemptions and Exchanges
Shares of Class J and Class K may be exchanged for shares of the same class
of any other Fund.
EXPENSE INFORMATION
The section "Expense Information" is supplemented as follows:
<TABLE>
<CAPTION>
Shareholder Transaction Expenses: Class J Class K
<S> <C> <C>
Sales Load Imposed on Purchases 3.50% 2.50%
Sales Load Imposed on Reinvested Dividends None None
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Redemption Fee None None
Exchange Fee None None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average daily net assets):
<TABLE>
<CAPTION>
Advisory Fee Administrative 12b-1 (Service) Total
Class J Share Fee Fee Fee(1) Expenses
<S> <C> <C> <C> <C>
Short-Term .25% .25% .70% 1.20%
Low Duration .25% .25% .70% 1.20%
Low Duration II .25% .25% .70% 1.20%
Total Return .25% .25% .70% 1.20%
Total Return II .25% .25% .70% 1.20%
High Yield .25% .25% .70% 1.20%
Global Bond .25% .30% .70% 1.25%
Foreign Bond .25% .25% .70% 1.20%
Strategic Balanced .40% .25% .70% 1.35%
StocksPLUS .40% .25% .70% 1.35%
</TABLE>
<TABLE>
<CAPTION>
Advisory Fee Administrative 12b-1 (Service) Total
Class K Shares Fee Fee Fee(1) Expenses
<S> <C> <C> <C> <C>
Short-Term .25% .25% 1.00% 1.50%
Low Duration .25% .25% 1.00% 1.50%
Low Duration II .25% .25% 1.00% 1.50%
Total Return .25% .25% 1.00% 1.50%
Total Return II .25% .25% 1.00% 1.50%
High Yield .25% .25% 1.00% 1.50%
Global Bond .25% .30% 1.00% 1.55%
Foreign Bond .25% .25% 1.00% 1.50%
Strategic Balanced .40% .25% 1.00% 1.65%
StocksPLUS .40% .25% 1.00% 1.65%
</TABLE>
(1) 12b-1 fees which equal or are less than .25% represent servicing fees which
are paid to the Distributor and repaid to participating brokers, certain banks
and other financial
2
<PAGE>
intermediaries. 12b-1 fees which exceed .25% represent aggregate
distribution and servicing fees. Due to the 12b-1 (service) fee, a Class J
or Class K shareholder of the Trust may, depending on the length of time
the shares are held, pay more than the economic equivalent of the maximum
front-end sales charges permitted by relevant rules of the National
Association of Securities Dealers, Inc.
Example of Fund Expenses:
You would pay the following expenses on a $1000 investment assuming (1) a
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Class J Shares 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Short-Term $47 $72 $ 99 $175
Low Duration $47 $72 $ 99 $175
Low Duration II $47 $47 $ 47 $175
Total Return $47 $72 $ 99 $175
Total Return II $47 $72 $ 99 $175
High Yield $47 $72 $ 99 $175
Global Bond $47 $73 $101 $181
Foreign Bond $47 $72 $ 99 $175
Strategic Balanced $48 $76 $106 $192
StocksPLUS $48 $76 $106 $192
</TABLE>
<TABLE>
<CAPTION>
Class K Shares 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Short-Term $40 $71 $105 $200
Low Duration $40 $71 $105 $200
Low Duration II $40 $71 $105 $200
Total Return $40 $71 $105 $200
Total Return II $40 $71 $105 $200
High Yield $40 $71 $105 $200
Global Bond $40 $73 $107 $205
Foreign Bond $40 $71 $165 $200
Strategic Balanced $41 $76 $112 $216
StocksPLUS $41 $76 $112 $216
</TABLE>
3
<PAGE>
MANAGEMENT OF THE TRUST
The section "Management of the Trust" is supplemented as follows:
Service and Distribution Fees
The Trust has adopted a distribution and servicing plan with respect to
each of the Class J and Class K shares of each Fund ("Class J-K Plans"). Under
the terms of each Class J-K Plan, the Trust is permitted to reimburse, out of
the average daily net assets for a particular Fund attributed to that class, in
an amount up 0.70% for Class J shares or 1.00% for Class K shares on an annual
basis, financial intermediaries that provide services in connection with the
distribution and marketing of shares and/or the provision of certain shareholder
services, and to reimburse certain other related expenses. Fees paid pursuant
to either Plan, in an amount up to 0.25% on an annual basis of the average daily
net assets of that Class, 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.
The Class J-K Plans are adopted pursuant to Rule 12b-1 under the 1940 Act
and are of the type known as "compensation" plans. This means that, although
the Trustees of the Trust are expected to take into account the expenses of the
Distributor and its predecessors in their periodic review of the Plans, the fees
are payable to compensate the Distributor for services rendered even if the
amount paid exceeds the Distributor's expenses.
The distribution fee applicable to Class J and Class K shares may be spent
by the Distributor on any activities or expenses primarily intended to result in
the sale in Japan of Class J or Class K shares respectively, including
compensation to, and expenses (including overhead and telephone expenses) of,
financial consultants or other employees of the Distributor or of participating
or introducing brokers who engage in distribution of Class J or Class K shares,
printing of prospectuses and reports for other than existing Class J or Class K
shareholders, advertising, and preparation, printing and distribution of sales
literature. The servicing fee, applicable to Class J and Class K shares of the
Trust, may be spent by the Distributor on personal services rendered to Class J
and Class K shareholders of the Trust and the maintenance of shareholder
accounts, including compensation to, and expenses (including telephone and
overhead expenses) of, financial consultants or other employees of participating
or introducing brokers, certain banks and other financial intermediaries who aid
in the processing of purchase or redemption requests or the processing of
dividend payments, who provide information periodically to Class J or Class K
shareholders showing their positions in a Fund's shares, who forward
communications from the Trust to shareholders, who render ongoing advice
concerning the suitability of particular investment opportunities offered by the
Trust in light of the shareholders' needs, who respond to inquiries from
shareholders relating to such services, or who train personnel in the provision
of such services. Distribution and servicing fees may also be spent on interest
relating to unreimbursed distribution or servicing expenses from prior years.
Many of the Distributor's sales and servicing efforts involve the Trust as
a whole, so that fees paid by Class J shares or Class K shares of any Fund may
indirectly support sales and
4
<PAGE>
servicing efforts relating to the other Funds' shares of the same class. In
reporting its expenses to the Trustees, the Distributor itemizes expenses that
relate to the distribution and/or servicing of a single Fund's shares, and
allocates other expenses among the Funds based on their relative net assets.
Expenses allocated to each Fund are further allocated among its classes of
shares annually based on the relative sales of each class, except for any
expenses that relate only to the sale or servicing of a single class.
Class J or Class K shares purchased may be subject to additional fees other
than those described herein imposed by financial intermediaries. Such financial
intermediaries are responsible for transmitting a schedule of any such fees and
any additional information regarding conditions of purchases or redemptions to
their customers.
PURCHASE OF SHARES
The section "Purchase of Shares" is supplemented as follows:
Each Fund also offers its shares in two additional classes: Class J and
Class K. This Prospectus also relates to Class J and Class K shares, of the
Funds.
Class J and Class K shares are offered solely in Japan to Japanese
investors. Class J shares are offered primarily through Japanese broker-dealers
and Class K shares are offered primarily through Japanese banks and other
Japanese financial institutions. Each Fund pays service and/or distribution
fees to such Japanese financial intermediaries for services provided to
shareholders of these classes.
The minimum initial investment for Class J and Class K shares is 100
shares.
5
<PAGE>
Initial Investment
An account in Class J and Class K shares may be opened by completing and
signing a Client Registration Application as provided by your Japanese financial
intermediary.
Additional Investments
Additional investments in Class J and Class K shares may be made at any
time at the relevant net asset value for a particular class by contacting your
Japanese financial intermediary. The minimum additional investment is 10
shares.
Other Purchase Information
Class J and Class K shares are qualified and registered for sale solely to
Japanese investors in Japan. These classes are not available for purchase in
the United States, and information regarding Class J and Class K shares does not
constitute an offer or sale to any person residing in the United States.
REDEMPTION OF SHARES
The section "Redemption of Shares" is supplemented as follows:
Class J and Class K Redemptions
Redemptions of Class J and Class K shares may only be made through your
Japanese financial intermediaries, subject to conditions established by such
intermediaries.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The section "Dividends, Distributions And Taxes" is supplemented as follows:
Dividends from net investment income with respect to Class J and Class K
shares will be lower than those paid with respect to Institutional Class shares
and Administrative Class shares, reflecting the payment of higher service and
distribution fees by those classes.
Taxation of Japanese Shareholders
Withholding of Income Tax on Dividends Paid on Class J or Class K shares:
Under the 1972 Convention and U.S. federal tax law, dividends paid on Class J or
Class K shares beneficially held by a person who is a resident of Japan, and not
a citizen or resident of the United States, or by a Japanese corporation (a
"Japanese beneficial holder") are, in general, subject to withholding of U.S.
federal income tax at a rate of 15% of the gross dividend. However, if a
Japanese beneficial holder has a permanent establishment in the United States,
and
6
<PAGE>
the Class J or Class K shares held by such Japanese beneficial holder are
effectively connected with such permanent establishment and, in addition, the
dividends are effectively connected with the conduct by the Japanese beneficial
holder of a trade or business in the United States, the dividend will be subject
to U.S. federal net income taxation at regular income tax rates. Distributions
of long-term net realized capital gains will not be subject to withholding of
U.S. federal income tax.
Income Tax on Sale of the Fund's shares: Under the 1972 Convention and
U.S. federal tax law, a Japanese beneficial holder of Class J or Class K shares
is not, in general, subject to U.S. federal income tax on gains (and is not
allowed a deduction for losses) realized on the sale of such shares unless (i)
the shares in question are effectively connected with a permanent establishment
in the United States of the Japanese beneficial holder and such gain is
effectively connected with the conduct of a trade or business carried on by such
holder within the United States or (ii) in the case of an individual holder, the
holder is present in the United States for a period or periods aggregating 183
days or more during the year of the sale and certain other conditions are met.
State and Local Tax: A Japanese beneficial holder of Class J or Class K
shares may be subject to state and local tax in addition to the federal tax on
income referred above.
Estate and Gift Taxes: Under existing law, upon the death of a Japanese
individual who is a beneficial holder of Class J or Class K shares, such shares
will be deemed to be property situated within the United States and will be
subject to U.S. federal estate tax. If at the time of death the deceased holder
is a resident of Japan and not a citizen or resident of the United States, such
tax will be imposed at graduated rates from 18% to 55% on the total value (less
allowable deductions and allowable credits) of the decedent's property situated
within the United States. In general, there is no gift tax on gifts of Class J
or Class K shares by a Japanese beneficial holder.
The availability of reduced U.S. taxation pursuant to the 1972 Convention
or the applicable estate tax convention depends upon compliance with established
procedures for claiming the benefits thereof and may further, in some
circumstances, depend upon making a satisfactory demonstration to U.S. tax
authorities that a Japanese investor in Class J or Class K shares qualifies as a
Japanese beneficial holder under U.S. domestic tax law and the 1972 Convention.
OTHER INFORMATION
The section "Other Information" is supplemented as follows:
Multiple Classes of Shares
In addition to Institutional Class, Administrative Class, Class J and Class
K shares, certain Funds also offer Class A, Class B, Class C and Class D shares
through separate
7
<PAGE>
prospectuses. This Prospectus relates only to the Institutional Class,
Administrative Class, Class J and Class K shares of the Funds.
# # # #
INVESTORS SHOULD RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
8
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this statement of additional information is not complete and
may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
statement of additional information is not an offer to sell securities, and we
are not soliciting offers to buy these securities, in any state where the offer
or sale is not permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 2, 1999
PIMCO Funds:
Pacific Investment Management Series
Statement of Additional Information
PIMCO Funds (the "Trust") is an open-end management investment company
("mutual fund") currently consisting of twenty-seven 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 Low Duration Mortgage Fund; the PIMCO Moderate
Duration Fund; the PIMCO Real Return Bond Fund; the PIMCO Total Return Fund; the
PIMCO Total Return Fund II; the PIMCO Total Return Fund III; the PIMCO Total
Return Mortgage Fund; the PIMCO Commercial Mortgage Securities Fund; the PIMCO
High Yield Fund; the PIMCO Long-Term U.S. Government Fund; the PIMCO Long
Duration Fund; the PIMCO Global Bond Fund; the PIMCO Global Bond Fund II; the
PIMCO Foreign Bond Fund; the PIMCO International Bond Fund; the PIMCO Emerging
Markets Bond Fund; the PIMCO Emerging Markets Bond Fund II; the PIMCO Municipal
Bond Fund; the PIMCO Strategic Balanced Fund; the PIMCO Convertible Bond Fund;
the PIMCO StocksPLUS Fund; and the PIMCO StocksPLUS Short Strategy Fund. Shares
of the PIMCO International Bond Fund and PIMCO Emerging Markets Bond 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 300, 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 a Prospectus for the Trust. Each Fund offers up to
eight classes of shares, offered through four Prospectuses. Class A, Class B,
and Class C shares of certain Funds are offered through the "Class A, B and C
Prospectus," and Institutional Class and Administrative Class shares of the
Funds are offered through the "Institutional Prospectus", each dated dated June
1, 1999, Class D shares of certain Funds are offered through the "Class D
Prospectus," dated August 1, 1998, and Class A shares of the Total Return Fund
also are offered through a separate prospectus, dated December 11, 1998, each as
amended or supplemented from time to time (collectively, the "Prospectuses"). A
copy of each Prospectus may be obtained free of charge at the address and
telephone number listed below. Additionally, Class J and Class K shares for
certain Funds are offered solely to Japanese investors in Japan. This
information does not constitute an offer of Class J shares or Class K shares to
any person who resides within the United States.
Class A, B and C Prospectus
Institutional Prospectus: and Class D Prospectus:
PIMCO Funds PIMCO Funds Distributors LLC
840 Newport Center Drive 2187 Atlantic Street
Suite 300 Stamford, Connecticut 06902
Newport Beach, California 92660 Telephone: (800) 426-0107
Telephone: (800) 927-4648 (Current Shareholders)
(800) 800-0952 (New Accounts)
June 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<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.................... 4
Foreign Securities.................................................... 8
Foreign Currency Transactions......................................... 9
Foreign Currency Exchange-Related Securities.......................... 11
Bank Obligations...................................................... 12
Loan Participations................................................... 13
Delayed Funding Loans and Revolving Credit Facilities................. 14
Short Sales........................................................... 15
Derivative Instruments................................................ 15
Warrants to Purchase Securities....................................... 22
Illiquid Securities................................................... 22
Municipal Bonds....................................................... 23
Social Investment Policies............................................ 25
INVESTMENT RESTRICTIONS.................................................... 25
Fundamental Investment Restrictions................................... 25
Non-Fundamental Investment Restrictions............................... 28
Non-Fundamental Operating Policies Relating to the
Sale of Shares of PIMCO Total Return Fund in Japan.................. 30
MANAGEMENT OF THE TRUST.................................................... 31
Trustees and Officers................................................. 31
Compensation Table.................................................... 35
Investment Adviser.................................................... 36
Fund Administrator.................................................... 38
DISTRIBUTION OF TRUST SHARES............................................... 41
Distributor and Multi-Class Plan...................................... 41
Contingent Deferred Sales Charge and Initial
Sales Charge........................................................ 42
Distribution and Servicing Plans for Class A,
Class B and Class C Shares.......................................... 43
Distribution and Administrative Services Plans
for Administrative Class Shares..................................... 48
Plan for Class D Shares............................................... 49
Distribution and Servicing Plan for Class J
Shares and Class K Shares........................................... 51
Purchases, Exchanges and Redemptions.................................. 51
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... 53
Investment Decisions.................................................. 53
Brokerage and Research Services....................................... 53
Portfolio Turnover.................................................... 54
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NET ASSET VALUE........................................................... 55
TAXATION.................................................................. 55
Distributions........................................................ 57
Sales of Shares...................................................... 58
Backup Withholding................................................... 58
Options, Futures and Forward Contracts, and Swap
Agreements......................................................... 58
Short Sales.......................................................... 59
Passive Foreign Investment Companies................................. 59
Foreign Currency Transactions........................................ 60
Foreign Taxation..................................................... 60
Original Issue Discount and Market Discount.......................... 60
Other Taxation....................................................... 61
OTHER INFORMATION......................................................... 62
Capitalization....................................................... 62
Performance Information.............................................. 62
Potential College Cost Table......................................... 70
Voting Rights........................................................ 73
The Reorganization of the PIMCO Money Market and
Total Return II Funds.............................................. 98
The Reorganization of the PIMCO Global Bond Fund II.................. 98
Code of Ethics....................................................... 98
Year 2000 Compliance Efforts......................................... 99
Custodian, Transfer Agent and Dividend Disbursing Agent.............. 100
Independent Accountants.............................................. 100
Counsel.............................................................. 100
Registration Statement............................................... 100
Financial Statements................................................. 101
</TABLE>
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INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and general investment policies of each Fund are
described in the Prospectuses. Additional information concerning the
characteristics of certain of the Funds' investments is 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
Fund's total assets made for temporary administrative purposes. Any borrowings
for temporary administrative purposes in excess of 5% of the Fund's 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. As noted below, a
Fund also may enter into certain transactions, including reverse repurchase
agreements, mortgage dollar rolls, and sale-buybacks, that can be viewed as
constituting a form of borrowing or financing transaction by the Fund. To the
extent a Fund covers its commitment under a reverse repurchase agreement (or
economically similar transaction) by the segregation of assets determined in
accordance with procedures adopted by the Trustees, equal in value to the amount
of the Fund's commitment to repurchase, such an agreement will not be considered
a "senior security" by the Fund and therefore will not be subject to the 300%
asset coverage requirement otherwise applicable to borrowings by the Funds.
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. The PIMCO Global
Bond Fund II may not borrow in excess of 10% of the value of its total assets
and then only from banks as a temporary measure to facilitate the meeting of
redemption requests (not for leverage) or for extraordinary or emergency
purposes.
In addition to borrowing for temporary purposes, a Fund may enter into
reverse repurchase agreements, mortgage dollar rolls, and economically similar
transactions. 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. Under a reverse repurchase agreement,
the Fund continues to receive any principal and interest payments on the
underlying security during the term of the agreement. The Fund typically will
segregate assets determined to be liquid by the Adviser in accordance with
procedures established by the Board of Trustees, equal (on a daily mark-to-
market basis) to its obligations under reverse repurchase agreements. However,
reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. To the extent
that positions in reverse repurchase agreements are not covered through the
segregation of liquid assets at least equal to the amount of any forward
purchase commitment, such transactions would be subject to the Funds'
limitations on borrowings, which would restrict the aggregate of such
transactions (plus any other borrowings) to 33 1/3% (for each Fund except the
PIMCO Global Bond Fund II) of a Fund's total assets.
A "mortgage dollar roll" is similar to a reverse repurchase agreement 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
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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
segregated liquid assets equal in value to the securities subject to repurchase
by the Fund. As with reverse repurchase agreements, to the extent that
positions in dollar roll agreements are not covered by segregated liquid assets
at least equal to the amount of any forward purchase commitment, such
transactions would be subject to the Funds' limitations on borrowings.
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.
A Fund also may effect simultaneous purchase and sale transactions that are
known as "sale-buybacks". A sale-buyback is similar to a reverse repurchase
agreement, except that in a sale-buyback, the counterparty who purchases the
security is entitled to receive any principal or interest payments make on the
underlying security pending settlement of the Fund's repurchase of the
underlying security. A Fund's obligations under a sale-buyback typically would
be offset by liquid assets equal in value to the amount of the Fund's forward
commitment to repurchase the subject security.
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 debt securities in which the Funds may invest are
convertible securities. A convertible debt 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 non-
convertible 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.
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Securities rated Baa and BBB are the lowest which are considered
"investment grade" obligations. Moody's Investor Service, 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 Ratings Services ("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" or "junk bonds") 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. 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.
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 investing in such securities 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 Committees
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 a Fund to expenses such as legal fees and may make a
Fund an "insider" of the issuer for purposes of the federal securities laws, and
therefore may restrict such Fund's ability to trade in or acquire additional
positions in a particular security when it might otherwise desire to do so.
Participation by a 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. A Fund will participate on such committees only when
the Adviser believes that such participation
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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." Certain of 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 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 rate of prepayments on underlying mortgages will affect the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment
on underlying mortgages increase in the effective maturity of a mortgage-related
security, the volatility of such security can be expected to increase.
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.
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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.)
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
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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 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 mortgage dollar rolls, CMO residuals or stripped
mortgage-backed securities ("SMBS"). 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
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flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets.
In particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
interest-only ("IO") class of stripped mortgage-backed securities. See "Other
Mortgage-Related Securities--Stripped Mortgage-Backed Securities." In addition,
if a series of a CMO includes a class that bears interest at an adjustable rate,
the yield to maturity on the related CMO residual will also be extremely
sensitive to changes in the level of the index upon which interest rate
adjustments are based. As described below with respect to stripped mortgage-
backed securities, in certain circumstances a Fund may fail to recoup fully its
initial investment in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets. Transactions in CMO residuals are generally completed only after
careful review of the characteristics of the securities in question. In
addition, CMO residuals may, or pursuant to an exemption therefrom, may not have
been registered under the Securities Act of 1933, as amended (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. 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 recoup some or all of
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 ReceivablesSM
("CARSSM"). CARSSM 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 CARSSM 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 CARSSM may be affected by
early prepayment of principal on the underlying vehicle sales contracts. If the
letter of credit is
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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.
Foreign Securities
All Funds (except the PIMCO Low Duration II, Total Return II, Long-Term
U.S. Government and Municipal Bond Funds) may invest in 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,
Low Duration Mortgage and Total Return Mortgage Funds may invest in securities
of foreign issuers only if they are U.S. dollar-denominated.
Securities traded in certain emerging market countries, including the
emerging market countries in Eastern Europe, may be subject to risks in addition
to risks typically posed by international investing due to the inexperience of
financial intermediaries, the lack of modern technology, and the lack of a
sufficient capital base to expand business operations. Additionally, former
Communist regimes of a number of Eastern European countries previously
expropriated a large amount of property, the claims on which have not been
entirely settled. There can be no assurance that a Fund's investments in
Eastern Europe will not also be expropriated, nationalized or otherwise
confiscated.
Each of the Fixed Income Funds (except the PIMCO Low Duration II, Total
Return II, Long-Term U.S. Government and Municipal Bond 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: 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 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").
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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.
Investment in sovereign debt can involve a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not be
able or willing to repay the principal and/or interest when due in accordance
with the terms of the debt. A governmental entity's willingness or ability to
repay principal and interest due in a timely manner may be affected by, among
other factors, its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
governmental entity's policy toward the International Monetary Fund, and the
political constraints to which a governmental entity may be subject.
Governmental entities may also depend on expected disbursements from foreign
governments, multilateral agencies and others to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend funds to the governmental entity, which may further
impair such debtor's ability or willingness to service its debts in a timely
manner. Consequently, governmental entities may default on their sovereign
debt. Holders of sovereign debt (including the Funds) may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which sovereign
debt on which governmental entities have defaulted may be collected in whole or
in part.
Each of the PIMCO Emerging Markets Bond Fund and PIMCO Emerging Markets
Bond Fund II will consider an issuer to be economically tied to a country with
an emerging securities market if (1) the issuer is organized under the laws of,
or maintains its principal place of business in, the country, (2) its securities
are principally traded in the country's securities markets, or (3) the issuer
derived at least half of its revenues or profits from goods produced or sold,
investments made, or services performed in the country, or has at least half of
its assets in that country.
Foreign Currency Transactions
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 may engage in
foreign currency transactions either on a spot (cash) basis at the rate
prevailing in the currency exchange market at the time or through forward
currency contracts ("forwards") with terms generally of less than one year.
Funds may engage in these transactions 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.
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A forward 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 forwards used for non-hedging purposes will be covered by the
segregation with the Trust's custodian of assets determined to be liquid by the
Adviser in accordance with procedures established by the Board of Trustees, and
are marked to market daily. Although forwards 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. Forwards will be used primarily to adjust the
foreign exchange exposure of each Fund with a view to protecting the outlook,
and the Funds might be expected to enter into such contracts under the following
circumstances:
Lock In. When the Adviser desires to lock in the U.S. dollar price on the
purchase or sale of a security denominated in a foreign currency.
Cross Hedge. If a particular currency is expected to decrease against
another currency, a Fund may sell the currency expected to decrease and purchase
a currency which is expected to increase against the currency sold in an amount
approximately equal to some or all of the Fund's portfolio holdings denominated
in the currency sold.
Direct Hedge. If the Adviser wants to a eliminate substantially all of the
risk of owning a particular currency, and/or if the Adviser thinks that a Fund
can benefit from price appreciation in a given country's bonds but does not want
to hold the currency, it may employ a direct hedge back into the U.S. dollar.
In either case, a Fund would enter into a forward contract to sell the currency
in which a portfolio security is denominated and purchase U.S. dollars at an
exchange rate established at the time it initiated the contract. The cost of
the direct hedge transaction may offset most, if not all, of the yield advantage
offered by the foreign security, but a Fund would hope to benefit from an
increase (if any) in value of the bond.
Proxy Hedge. The Adviser might choose to use a proxy hedge, which may be
less costly than a direct hedge. In this case, a Fund, having purchased a
security, will sell a currency whose value is believed to be closely linked to
the currency in which the security is denominated. Interest rates prevailing in
the country whose currency was sold would be expected to be closer to those in
the U.S. and lower than those of securities denominated in the currency of the
original holding. This type of hedging entails greater risk than a direct hedge
because it is dependent on a stable relationship between the two currencies
paired as proxies and the relationships can be very unstable at times.
Costs of Hedging. When a Fund purchases a foreign bond with a higher
interest rate than is available on U.S. bonds of a similar maturity, the
additional yield on the foreign bond could be substantially reduced or lost if
the Fund were to enter into a direct hedge by selling the foreign currency and
purchasing the U.S. dollar. This is what is known as the "cost" of hedging.
Proxy hedging attempts to reduce this cost through an indirect hedge back to the
U.S. dollar.
It is important to note that hedging costs are treated as capital
transactions and are not, therefore, deducted from a Fund's dividend
distribution and are not reflected in its yield. Instead such costs will, over
time, be reflected in a Fund's net asset value per share.
Tax Consequences of Hedging. Under applicable tax law, the Funds may be
required to limit their gains from hedging in foreign currency forwards,
futures, and options. Although the Funds are expected to comply with such
limits, the extent to which these limits apply is subject to tax regulations as
yet unissued. Hedging may also result in the application of the marked-to-
market and straddle provisions of the Internal Revenue Code. Those provisions
could result in an increase (or decrease) in the amount of taxable dividends
paid by the Funds and could affect whether dividends paid by the Funds are
classified as capital gains or ordinary income.
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Foreign Currency Exchange-Related Securities
Foreign currency warrants. Foreign currency warrants such as Currency
Exchange WarrantsSM ("CEWsSM") 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 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 ("PERLsSM") 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
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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 ("PIPsSM") 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 may 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.
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, Low Duration Mortgage, Total
Return Mortgage, Commercial Mortgage Securities, High Yield 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, Low Duration Mortgage, Total Return Mortgage, Commercial Mortgage
Securities, High Yield 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
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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 (except the PIMCO Municipal Bond 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.
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
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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 loan participations
are considered to be debt obligations for purposes of the Trust's investment
restriction relating to the lending of funds or assets by a Portfolio.
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 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.
Delayed Funding Loans and Revolving Credit Facilities
The Funds (except the PIMCO Money Market and Municipal Bond Funds) may enter
into, or acquire participations in, delayed funding loans and revolving credit
facilities. Delayed funding loans and revolving credit facilities are borrowing
arrangements in which the lender agrees to make loans up to a maximum amount
upon demand by the borrower during a specified term. These commitments may have
the effect of requiring a Fund to increase its investment in a company at a time
when it might not otherwise decide to do so (including at a time when the
company's financial condition makes it unlikely that such amounts will be
repaid). To the extent that a Fund is committed to advance additional funds, it
will at all times segregate assets, determined to be liquid by the Adviser in
accordance with procedures established by the Board of Trustees, in an amount
sufficient to meet such commitments. The Funds may invest in delayed funding
loans and revolving credit facilities with credit quality comparable to that of
issuers of its securities investments. Delayed funding loans and revolving
credit facilities may be subject to restrictions on transfer, and only limited
opportunities may exist to resell such instruments. As a result, a Fund may be
unable to sell such investments at an opportune time or may have to resell them
at less than fair market value. The Funds currently intend to treat delayed
funding loans and revolving credit facilities for which there is no readily
available market as illiquid for purposes of the Funds' limitation on illiquid
investments. For a further discussion of the risks involved in investing in
loan participations and other forms of direct indebtedness see "Loan
Participations." Participation interests in revolving credit facilities will be
subject to the limitations discussed in "Loan Participations." Delayed funding
loans and revolving credit facilities are considered to be debt obligations for
purposes of the Trust's investment restriction relating to the lending of funds
or assets by a Portfolio.
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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 segregated
assets determined to be liquid by the Adviser in accordance with procedures
established by the Board of Trustees. 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 of the segregated assets 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. The
PIMCO Global Bond Fund II may only engage in short sales that are "against the
box."
Derivative Instruments
In pursuing their individual objectives the Funds may, as described in the
Prospectuses, 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
(except the PIMCO Money Market and Municipal Bond 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 (except the PIMCO Money Market and Municipal Bond 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 objective.
Options on Securities and Indexes. A Fund may, to the extent specified for
the Fund in the Prospectuses, 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.
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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 features 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 assets determined to be liquid by
the Adviser in accordance with procedures established by the Board of Trustees,
in such amount are segregated 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 assets determined to be liquid
by the Adviser in accordance with procedures established by the Board of
Trustees, 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
segregated assets determined to be liquid by the Adviser in accordance with
procedures established by the Board of Trustees. A put option on a security or
an index is "covered" if the Fund segregates assets determined to be liquid by
the Adviser in accordance with procedures established by the Board of Trustees
equal to the exercise price. 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 segregated assets determined to be
liquid by the Adviser in accordance with procedures established by the Board of
Trustees.
If an option written by a Fund expires unexercised, 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 exchange traded 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. 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
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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, as
specified for that Fund in the Prospectuses. 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 Prospectuses. An interest rate, foreign currency or index
futures contract provides for the future sale by one party and purchase by
another party of 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 euro. It is expected that other futures
contracts will be developed and traded in the future.
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A Fund may purchase and write call and put futures options, as specified
for that Fund in the Prospectuses. 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 assets determined to be liquid by the Adviser in accordance
with procedures established by the Board of Trustees ("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.
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
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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) assets determined to be liquid by the
Adviser in accordance with procedures established by the Board of Trustees,
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) assets determined to be liquid by the
Adviser in accordance with procedures established by the Board of Trustees, 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) assets determined to be
liquid by the Adviser in accordance with procedures established by the Board of
Trustees, 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 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) assets determined to be
liquid by the Adviser in accordance with procedures established by the Board of
Trustees, 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.
To the extent that securities with maturities greater than one year are
used to segregate assets to cover a Fund's obligations under futures contracts
and related options, 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
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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
Prospectuses.
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 contracts on U.S. Government securities historically have reacted
to an increase or decrease in interest rates in a manner similar to that in
which the underlying U.S. Government securities reacted. To the extent,
however, that the PIMCO Municipal Bond Fund enters into such futures contracts,
the value of such futures will not vary in direct proportion to the value of the
Fund's holdings of Municipal Bonds (as defined below). Thus, the anticipated
spread between the price of the futures contract and the hedged security may be
distorted due to differences in the nature of the markets. The spread also may
be distorted by differences in initial and variation margin requirements, the
liquidity of such markets and the participation of speculators in such markets.
Futures 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
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events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lesser
trading volume.
Swap Agreements. The Funds (except the PIMCO Money Market and Municipal
Bond 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
segregation of assets determined to be liquid by the Adviser in accordance with
procedures established by the Board of Trustees, 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 Fund's
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
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credit union, insurance company, investment company subject to regulation under
the 1940 Act, commodity pool, corporation, partnership, proprietorship,
organization, trust or other entity, employee benefit plan, governmental entity,
broker-dealer, futures commission merchant, natural person, or regulated foreign
person. To be eligible, natural persons and most other entities must have total
assets exceeding $10 million; commodity pools and employee benefit plans must
have assets exceeding $5 million. In addition, an eligible swap transaction must
meet three conditions. First, the swap agreement may not be part of a fungible
class of agreements that are standardized as to their material economic terms.
Second, the creditworthiness of parties with actual or potential obligations
under the swap agreement must be a material consideration in entering into or
determining the terms of the swap agreement, including pricing, cost or credit
enhancement terms. Third, swap agreements may not be entered into and traded on
or through a multilateral transaction execution facility.
This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a safe harbor for swap transactions from regulation as futures
or commodity option transactions under the CEA or its regulations. The Policy
Statement applies to swap transactions settled in cash that (1) have
individually tailored terms, (2) lack exchange-style offset and the use of a
clearing organization or margin system, (3) are undertaken in conjunction with a
line of business, and (4) are not marketed to the public.
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. Warrants acquired in
units or attached to securities will be deemed 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 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).
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Municipal Bonds
It is a policy of the PIMCO Municipal Bond Fund to have 80% of its net
assets invested in debt obligations the interest on which, in the opinion of
bond counsel to the issuer at the time of issuance, is exempt from federal
income tax ("Municipal Bonds"). The Fund may invest up to 10% of its net assets
in Municipal Bonds rated in the fifth highest rating category by Moody's or S&P,
or unrated obligations determined by the Adviser to be of quality comparable to
obligations so rated. A description of these ratings is set forth in Appendix B
to the Prospectuses. The ability of the Fund to invest in securities other than
Municipal Bonds is limited by a requirement of the Internal Revenue Code that at
least 50% of the Fund's total assets be invested in Municipal Bonds at the end
of each calendar quarter. See "Taxes."
Municipal Bonds share the attributes of debt/fixed income securities in
general, but are generally issued by states, municipalities and other political
subdivisions, agencies, authorities and instrumentalities of states and multi-
state agencies or authorities. The Municipal Bonds which the PIMCO Municipal
Bond Fund may purchase include general obligation bonds and limited obligation
bonds (or revenue bonds), including industrial development bonds issued pursuant
to former federal tax law. General obligation bonds are obligations involving
the credit of an issuer possessing taxing power and are payable from such
issuer's general revenues and not from any particular source. Limited
obligation bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Tax-exempt private activity
bonds and industrial development bonds generally are also revenue bonds and thus
are not payable from the issuer's general revenues. The credit and quality of
private activity bonds and industrial development bonds are usually related to
the credit of the corporate user of the facilities. Payment of interest on and
repayment of principal of such bonds is the responsibility of the corporate user
(and/or any guarantor).
Under the Internal Revenue Code, certain limited obligation bonds are
considered "private activity bonds" and interest paid on such bonds is treated
as an item of tax preference for purposes of calculating federal alternative
minimum tax liability.
The PIMCO Municipal Bond Fund may invest in municipal lease obligations. A
lease is not a full faith and credit obligation of the issuer and is usually
backed only by the borrowing government's unsecured pledge to make annual
appropriations for lease payments. There have been challenges to the legality of
lease financing in numerous states, and, from time to time, certain
municipalities have considered not appropriating money for lease payments. In
deciding whether to purchase a lease obligation, the PIMCO Municipal Bond Fund
would assess the financial condition of the borrower, the merits of the project,
the level of public support for the project, and the legislative history of
lease financing in the state. These securities may be less readily marketable
than other municipals. The PIMCO Municipal Bond Fund may also purchase unrated
lease obligations if determined by the Adviser to be of comparable quality to
rated securities in which the Fund is permitted to invest.
The PIMCO Municipal Bond Fund may seek to enhance its yield through the
purchase of private placements. These securities are sold through private
negotiations, usually to institutions or mutual funds, and may have resale
restrictions. Their yields are usually higher than comparable public securities
to compensate the investor for their limited marketability. The PIMCO Municipal
Bond Fund may not invest more than 15% of its net assets in illiquid securities,
including unmarketable private placements.
Some longer-term Municipal Bonds give the investor the right to "put" or
sell the security at par (face value) within a specified number of days
following the investor's request-usually one to seven days. This demand feature
enhances a security's liquidity by shortening its effective maturity and enables
it to trade at a price equal to or very close to par. If a demand feature
terminates prior to being exercised, the PIMCO Municipal Bond Fund would hold
the longer-term security, which could experience substantially more volatility.
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The PIMCO Municipal Bond Fund may invest in municipal warrants, which are
essentially call options on Municipal Bonds. In exchange for a premium, they
give the purchaser the right, but not the obligation, to purchase a Municipal
Bond in the future. The PIMCO Municipal Bond Fund might purchase a warrant to
lock in forward supply in an environment where the current issuance of bonds is
sharply reduced. Like options, warrants may expire worthless and they may have
reduced liquidity. The PIMCO Municipal Bond Fund will not invest more than 5%
of its net assets in municipal warrants.
The PIMCO Municipal Bond Fund may invest in Municipal Bonds with credit
enhancements such as letters of credit, municipal bond insurance and Standby
Bond Purchase Agreements ("SBPAs"). Letters of credit that are issued by a
third party, usually a bank, to enhance liquidity and ensure repayment of
principal and any accrued interest if the underlying Municipal Bond should
default. Municipal bond insurance, which is usually purchased by the bond
issuer from a private, nongovernmental insurance company, provides an
unconditional and irrevocable guarantee that the insured bond's principal and
interest will be paid when due. Insurance does not guarantee the price of the
bond or the share price of any fund. The credit rating of an insured bond
reflects the credit rating of the insurer, based on its claims-paying ability.
The obligation of a municipal bond insurance company to pay a claim extends over
the life of each insured bond. Although defaults on insured Municipal Bonds have
been low to date and municipal bond insurers have met their claims, there is no
assurance this will continue. A higher-than-expected default rate could strain
the insurer's loss reserves and adversely affect its ability to pay claims to
bondholders. The number of municipal bond insurers is relatively small, and not
all of them have the highest rating. An SBPA is a liquidity facility provided to
pay the purchase price of bonds that cannot be re-marketed. The obligation of
the liquidity provider (usually a bank) is only to advance funds to purchase
tendered bonds that cannot be remarketed and does not cover principal or
interest under any other circumstances. The liquidity provider's obligations
under the SBPA are usually subject to numerous conditions, including the
continued creditworthiness of the underlying borrower.
The PIMCO Municipal Bond Fund may invest in Residual Interest Bonds, which
are created by dividing the income stream provided by an underlying bond to
create two securities, one short term and one long term. The interest rate on
the short-term component is reset by an index or auction process normally every
seven to 35 days. After income is paid on the short-term securities at current
rates, the residual income goes to the long-term securities. Therefore, rising
short-term interest rates result in lower income for the longer-term portion,
and vice versa. The longer-term bonds can be very volatile and may be less
liquid than other Municipal Bonds of comparable maturity. The PIMCO Municipal
Bond Fund will not invest more than 10% of its total assets in Residual Interest
Bonds.
The PIMCO Municipal Bond Fund also may invest in participation interests.
Participation interests are various types of securities created by converting
fixed rate bonds into short-term, variable rate certificates. These securities
have been developed in the secondary market to meet the demand for short-term,
tax-exempt securities. The Fund will invest only in securities deemed tax-exempt
by a nationally recognized bond counsel, but there is no guarantee the interest
will be exempt because the IRS has not issued a definitive ruling on the matter.
Municipal Bonds are subject to credit and market risk. Generally, prices
of higher quality issues tend to fluctuate less with changes in market interest
rates than prices of lower quality issues and prices of longer maturity issues
tend to fluctuate more than prices of shorter maturity issues.
The PIMCO Municipal Bond Fund may purchase and sell portfolio investments
to take advantage of changes or anticipated changes in yield relationships,
markets or economic conditions. The Fund may also sell Municipal Bonds due to
changes in the Adviser's evaluation of the issuer or cash needs resulting from
redemption requests for Fund shares. The secondary market for Municipal Bonds
typically has been less liquid than that for taxable debt/fixed income
securities, and this may affect the Fund's ability to sell particular Municipal
Bonds at then-current market prices, especially in periods when other investors
are attempting to sell the same securities.
24
<PAGE>
Prices and yields on Municipal Bonds are dependent on a variety of factors,
including general money- market conditions, the financial condition of the
issuer, general conditions of the Municipal Bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
A number of these factors, including the ratings of particular issues, are
subject to change from time to time. Information about the financial condition
of an issuer of Municipal Bonds may not be as extensive as that which is made
available by corporations whose securities are publicly traded.
Obligations of issuers of Municipal Bonds are subject to the provisions of
bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Reform Act
of 1978, affecting the rights and remedies of creditors. Congress or state
legislatures may seek to extend the time for payment of principal or interest,
or both, or to impose other constraints upon enforcement of such obligations.
There is also the possibility that as a result of litigation or other
conditions, the power or ability of issuers to meet their obligations for the
payment of interest and principal on their Municipal Bonds may be materially
affected or their obligations may be found to be invalid or unenforceable. Such
litigation or conditions may from time to time have the effect of introducing
uncertainties in the market for Municipal Bonds or certain segments thereof, or
of materially affecting the credit risk with respect to particular bonds.
Adverse economic, business, legal or political developments might affect all or
a substantial portion of the Fund's Municipal Bonds in the same manner.
Social Investment Policies
The PIMCO Low Duration Fund III and PIMCO Total Return Fund III 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
Fundamental Investment Restrictions
Each Fund's investment objective, except for the PIMCO Global Bond Fund II,
as set forth in the Prospectuses 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) (a) 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,
or, in the case of the PIMCO Municipal Bond Fund, in industrial development
revenue bonds based, directly or indirectly, on the credit of private
entities in any one 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.
25
<PAGE>
banks. Investments of the PIMCO Municipal Bond Fund in utilities, gas,
electric, water and telephone companies will be considered as being in
separate industries;
(b) for the Global Bond Fund II, concentrate more than 25% of the value of
its total assets in any one industry (The SEC staff takes the position that
investments in government securities of a single foreign country (including
agencies and instrumentalities of such government, to the extent such
obligations are backed by the assets and revenues of such government)
represent investments in a separate industry for these purposes.);
(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 Real Return Bond,
Commercial Mortgage Securities, Global Bond, Global Bond II, Foreign Bond,
International Bond, Emerging Markets Bond or the Emerging Markets Bond II
Funds.). For the purpose of this restriction, each state and each separate
political subdivision, agency, authority or instrumentality of such state,
each multi-state agency or authority, and each guarantor, if any, are
treated as separate issuers of Municipal Bonds;
(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 Real Return Bond, Commercial Mortgage
Securities, Global Bond, Global Bond II, Foreign Bond, International Bond,
Emerging Markets Bond or the Emerging Markets Bond II Funds.);
(4) (a) 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;
(b) for the Global Bond Fund II, purchase or sell real estate, although it
may purchase securities of issuers which deal in real estate, including
securities of real estate investment trusts, and may purchase securities
which are secured by interests in real estate;
(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 Prospectuses 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 (This
restriction is not applicable to the Global Bond Fund II, but see non-
fundamental restriction "F".);
(6) for the Total Return III, High Yield, International Bond 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) (a) 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 Prospectuses 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
26
<PAGE>
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);
(b) for the Global Bond Fund II, borrow money in excess of 10% of the value
(taken at the lower of cost or current value) of the Fund's total assets
(not including the amount borrowed) at the time the borrowing is made, and
then only from banks as a temporary measure to facilitate the meeting of
redemption requests (not for leverage) which might otherwise require the
untimely disposition of portfolio investments or for extraordinary or
emergency purposes (Such borrowings will be repaid before any additional
investments are purchased.); or pledge, hypothecate, mortgage or otherwise
encumber its assets in excess of 10% of the Fund's total assets (taken at
cost) and then only to secure borrowings permitted above (The deposit of
securities or cash or cash equivalents in escrow in connection with the
writing of covered call or put options, respectively, is not deemed to be
pledges or other encumbrances. For the purpose of this restriction,
collateral arrangements with respect to the writing of options, futures
contracts, options on futures contracts, and collateral arrangements with
respect to initial and variation margin are not deemed to be a pledge of
assets and neither such arrangements nor the purchase or sale of futures or
related options are deemed to be the issuance of a senior security.);
(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 (This restriction is not
applicable to the Global Bond Fund II, but see non-fundamental restriction
"G".);
(9) (a) 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;
(b) for the Global Bond Fund II, underwrite securities issued by other
persons except to the extent that, in connection with the disposition of
its portfolio investments, it may be deemed to be an underwriter under
federal securities laws; or
(10) (a) for the Total Return III, High Yield, 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 Prospectuses
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, Low Duration Mortgage, Moderate Duration, Total Return, Total
Return II, Total Return Mortgage, Commercial Mortgage Securities, Long-Term
U.S. Government, Long Duration, Global Bond, Foreign Bond, International,
Emerging Markets Bond, Emerging Markets Bond II, Strategic Balanced,
Convertible Bond and StocksPLUS Short Strategy 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
Prospectuses and in this Statement of Additional Information.
Non-Fundamental Investment Restrictions
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:
27
<PAGE>
(A) (a) 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);
(b) for the Global Bond Fund II, invest in (a) securities which at the
time of such investment are not readily marketable, (b) securities the
disposition of which is restricted under federal securities laws, (c)
repurchase agreements maturing in more than seven days (d) OTC options (to
the extent described below), and (e) IO/PO stripped mortgage-backed
securities (as defined in the Prospectuses) if, as a result, more than 15%
of the Fund's net assets, taken at current value, would then be invested in
securities described in (a), (b), (c), (d) and (e) above (For the purpose
of this restriction securities subject to a 7-day put option or convertible
into readily saleable securities or commodities are not included with
subsections (a) or (b).); or purchase securities the disposition of which
is restricted under the federal securities laws (excluding for purposes of
this restriction securities offered and sold pursuant to Rule 144A of the
Securities Act of 1933 and Section 4(2) commercial paper) if, as a result,
such investments would exceed 10% of the value of the net assets of the
Fund;
(B) (a) 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, Long Duration,
Municipal Bond, Global Bond, Foreign Bond, Strategic Balanced, Convertible
Bond and StocksPLUS Short Strategy 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;
(b) for the Global Bond Fund II, purchase securities on margin, except
such short-term credits as may be necessary for the clearance of purchases
and sales of securities (For this purpose, the deposit or payment by the
Fund of initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a security
on margin.);
(C) invest more than 5% (10% in the case of the PIMCO Low Duration Mortgage and
Total Return Mortgage Funds) 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 (This restriction is not
applicable to the Global Bond Fund II, but see fundamental investment
restriction 7(b).);
(D) borrow money (excluding uncovered dollar rolls, reverse repurchase
agreements, sale-buybacks, and economically similar transactions, which are
subject to the Fund's fundamental borrowing restriction), except for
temporary administrative purposes (This restriction is not applicable to
the Global Bond Fund II, but see fundamental investment restriction 7(b).);
(E) for the Global Bond Fund II, make short sales of securities or maintain a
short position for the account of the Fund unless at all times when a short
position is open the Fund owns an equal amount of such securities or owns
securities which, without payment of any further consideration,
28
<PAGE>
are convertible into or exchangeable for securities of the same issue as,
and equal in amount to, the securities sold short;
(F) for the Global Bond Fund II, purchase or sell commodities or commodity
contracts except that the Fund may purchase and sell financial futures
contracts and related options;
(G) for the Global Bond Fund II, make loans, except by purchase of debt
obligations or by entering into repurchase agreements or through the
lending of the Fund's portfolio securities with respect to not more than
25% of its total assets;
(H) for the Global Bond Fund II, write (sell) or purchase options except that
the Fund may (a) write covered call options or covered put options on
securities that it is eligible to purchase (and on stock indices) and enter
into closing purchase transactions with respect to such options, and (b) in
combination therewith, or separately, purchase put and call options on
securities it is eligible to purchase; provided that the premiums paid by
the Fund on all outstanding options it has purchased do not exceed 5% of
its total assets (The Fund may enter into closing sale transactions with
respect to options it has purchased.);
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 Bond, Emerging Markets Bond and Emerging Markets Bond II
Funds, will hedge at least 75% of its exposure to foreign currency using the
techniques described in the Prospectuses. 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)(a)
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 (except the PIMCO Global Bond Fund II), such excess shall
be subject to the 300% asset coverage requirement of that restriction.
To the extent a Fund covers its commitment under a reverse repurchase
agreement (or economically similar transaction) by the segregation of assets
determined to be liquid in accordance with procedures adopted by the Trustees,
equal in value to the amount of the Fund's commitment to repurchase, such an
agreement will not be considered a "senior security" by the Fund and therefore
will not be subject to the 300% asset coverage requirement otherwise applicable
to borrowings by the Fund.
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
29
<PAGE>
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 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.
The Funds interpret their policies with respect to borrowing and lending to
permit such activities as may be lawful for the Funds, to the full extent
permitted by the 1940 Act or by exemption from the provisions therefrom pursuant
to exemptive order of the SEC. The Funds have filed an application
seeking an order from the SEC to permit the Funds to enter into transactions
among themselves with respect to the investment of daily cash balances of the
Funds in shares of the PIMCO Money Market Fund, as well as the use of daily
excess cash balances of the PIMCO Money Market Fund in inter-fund lending
transactions with the other Funds for temporary cash management purposes. The
interest paid by a Fund in such an arrangement will be less than that otherwise
payable for an overnight loan, and will be in excess of the overnight rate the
PIMCO Money Market Fund could otherwise earn as lender in such a transaction.
Non-Fundamental Operating Policies Relating to the Sale of Shares of PIMCO Total
Return Fund in Japan
In connection with an offering of Administrative Class shares of the PIMCO
Total Return Fund in Japan, the Trust has adopted the following non-fundamental
operating policies (which may be changed without shareholder approval) with
respect to the PIMCO Total Return Fund. These non-fundamental policies will
remain in effect only so long as (i) they are required in accordance with
standards of the Japanese Securities Dealers Association and (ii) shares of the
PIMCO Total Return Fund are being offered in Japan.
(1) The Trust will not sell shares of the PIMCO Total Return Fund in Japan
except through PIMCO Funds Distributors LLC.
(2) The Trust has appointed, and will maintain the appointment of, a bank or
trust company as the place for safe-keeping of its assets in connection
with the PIMCO Total Return Fund.
(3) The Tokyo District Court shall have the jurisdiction over any and all
litigation related to transactions in any class of shares of the PIMCO
Total Return Fund acquired by Japanese investors as required by Article 26,
Item 4 of the Rules Concerning Transactions of Foreign Securities of the
Japan Securities Dealers Association.
(4) The PIMCO Total Return Fund may not make short sales of securities or
maintain a short position for the account of the Fund unless the total
current value of the securities being the subject of short sales or of the
short position is equal to or less than the net asset value of the PIMCO
Total Return Fund.
30
<PAGE>
(5) The PIMCO Total Return Fund may not borrow money in excess of 10% of the
value (taken at the lower of cost or current value) of its total assets
(not including the amount borrowed) at the time the borrowing is made,
except for extraordinary or emergency purposes, such as in the case of a
merger, amalgamation or the like.
(6) The PIMCO Total Return Fund may not acquire more than 50% of the
outstanding voting securities of any issuer, if aggregated with the portion
of holding in such securities by any and all other mutual funds managed by
PIMCO.
(7) The PIMCO Total Return Fund may not invest more than 15% of its total
assets in voting securities privately placed, mortgage securities or
unlisted voting securities which cannot be readily disposed of. This
restriction shall not be applicable to securities determined by PIMCO to be
liquid and for which a market price (including a dealer quotation) is
generally obtainable or determinable.
(8) None of the portfolio securities of the PIMCO Total Return Fund may be
purchased from or sold or loaned to any Trustee of the Trust, PIMCO, acting
as investment adviser of the Trust, or any affiliate thereof or any of
their directors, officers or employees, or any major shareholder thereof
(meaning a shareholder who holds to the actual knowledge of PIMCO, on his
own account whether in his own or other name (as well as a nominee's name),
10% or more of the total issued outstanding shares of such a company)
acting as principal or for their own account unless the transaction is made
within the investment restrictions set forth in the Fund's prospectus and
statement of additional information and either (i) at a price determined by
current publicly available quotations (including a dealer quotation) or
(ii) at competitive prices or interest rates prevailing from time to time
on internationally recognized securities markets or internationally
recognized money markets (including a dealer quotation).
All percentage limitations on investments described in the restrictions
relating to the sale of shares in Japan will apply at the time of the making of
an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment. If any violation of the foregoing investment restrictions occurs,
the Trust will, promptly after discovery of the violation, take such action as
may be necessary to cause the violation to cease, which shall be the only
obligation of the Trust and the only remedy in respect of the violation.
If any of the foregoing standards shall, at any time when shares of the
PIMCO Total Return Fund are being offered for subscription by the Trust in Japan
or thereafter, no longer be required in accordance with the standards of the
Japanese Securities Dealers Association, then such standards shall no longer
apply.
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 300, Newport Beach, California 92660):
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<PAGE>
<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 and Managing Director, PIMCO; Board of Governors,
Age 39 Trustee Investment Company Institute; Director,
Harris Holdings; Director, Harris Oil
Company; Chairman and Director, PIMCO
Commercial Mortgage Securities Trust, Inc.;
Chairman and Trustee, PIMCO Variable
Insurance Trust.
R. Wesley Burns* President and Trustee Managing Director, PIMCO; President and
Age 39 Director, PIMCO Commercial Mortgage
Securities Trust, Inc.; President and
Trustee, PIMCO Variable Insurance Trust;
Executive Vice President, PIMCO Funds:
Multi-Manager Series. Formerly Executive Vice
President, PIMCO.
Guilford C. Babcock Trustee Associate Professor of Finance, University of
1575 Circle Drive Southern California; Director, PIMCO
San Marino, California Commercial Mortgage Securities Trust, Inc.;
91108 Trustee, PIMCO Variable Insurance Trust;
Age 68 Director, Growth Fund of America and
Fundamental Investors Fund of the Capital
Group; Director, Good Hope Medical Foundation.
Vern O. Curtis Trustee Private Investor; Director, PIMCO Commercial
14158 N.W. Bronson Creek Drive Mortgage Securities Trust, Inc.; Trustee,
Portland, Oregon PIMCO Variable Insurance Trust; Director,
97229 American Office Park Properties, Inc., a Real
Age 64 Estate Investment Trust; Director, Fresh
Choice, Inc. Formerly charitable work, The
Church of Jesus Christ of Latter Day Saints.
Thomas P. Kemp Trustee Private Investor; Director, PIMCO Commercial
1141 Marine Drive Mortgage Securities Trust, Inc.; Trustee,
Laguna Beach, California PIMCO Variable Insurance Trust. Formerly
92651 Co-Chairman, U.S. Committee to Assist Russian
Age 68 Reform; Director, Union Financial Corp.;
Senior Consultant, World Cup 1994 Organizing
Committee.
</TABLE>
32
<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 Director, PacPro (formerly Western Printing);
29 Chatham Court Director, PIMCO Commercial Mortgage
Newport Beach, California Securities Trust, Inc.; Trustee, PIMCO
92660 Variable Insurance Trust. Formerly Director,
Age 61 California State Lottery; Chief Executive
Officer, Orange County, California.
Michael G. Dow Senior Vice President Account Manager, PIMCO. Formerly Fixed
Age 35 Income Specialist, Salomon Brothers, Inc.;
Vice President Operations, Citibank NA Global
Consumer Banking Group.
William H. Gross Senior Vice President Managing Director, PIMCO; Senior Vice
Age 54 President, PIMCO Variable Insurance Trust.
Margaret Isberg Senior Vice President Managing Director, PIMCO.
Age 42
Jeffrey M. Sargent Senior Vice President Vice President and Manager of Investment
Age 35 Operations Shareholder Services, PIMCO; Vice
President, PIMCO Commercial Mortgage
Securities Trust, Inc., PIMCO Funds:
Multi-Manager Series and PIMCO Variable
Insurance Trust.
Leland T. Scholey Senior Vice President Senior Vice President, PIMCO. Formerly Vice
Age 46 President, PIMCO.
Raymond C. Hayes Vice President Account Manager, PIMCO. Formerly Marketing
Age 54 Director, Pacific Financial Asset Management
Corporation.
Thomas J. Kelleher, III Vice President Vice President, PIMCO. Previously associated
Age 48 with Delaware, Mellon and Girard Trusts.
Henrik P. Larsen Vice President Manager, Fund Administration, PIMCO; Vice
Age 29 President, PIMCO Commercial Mortgage
Securities Trust, Inc. and PIMCO Variable
Insurance Trust. Formerly Supervisor, PIMCO.
Daniel T. Ludwig Vice President Account Manager, PIMCO. Formerly Vice
Age 40 President, Fidelity Investments;
Institutional Sales Representative, CS First
Boston.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation(s)
Name, Address and Age the Trust During the Past Five Years
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Andre Mallegol Vice President Vice President, PIMCO. Formerly associated
Age 32 with Fidelity Investments Institutional
Services Company.
James F. Muzzy Vice President Managing Director, PIMCO; Senior Vice
Age 59 President, PIMCO Variable Insurance Trust.
Douglas J. Ongaro Vice President Account Manager, PIMCO. Formerly Regional
Age 38 Marketing Manager, Charles Schwab & Co., Inc.
David J. Pittman Vice President Vice President, PIMCO. Formerly a senior
Age 51 executive with Bank of America, the Northern
Trust Co. and NationsBank.
Mark A. Romano Vice President Vice President, PIMCO. Previously associated
Age 40 with Wells Fargo's institutional money
management group and First Interstate's
Pacifica family of mutual funds.
William S. Thompson, Jr. Vice President Chief Executive Officer and Managing
Age 53 Director, PIMCO; Senior Vice President, PIMCO
Variable Insurance Trust. Formerly Managing
Director, Salomon Brothers, Inc.
John P. Hardaway Treasurer Vice President and Manager of Investment
Age 41 Operations Accounting, PIMCO; Treasurer,
PIMCO Commercial Mortgage Securities Trust,
Inc., PIMCO Funds: Multi-Manager Series and
PIMCO Variable Insurance Trust.
Garlin G. Flynn Secretary Specialist, PIMCO; Secretary, PIMCO
Age 52 Commercial Mortgage Securities Trust, Inc.
and PIMCO Variable Insurance Trust; Assistant
Secretary, PIMCO Funds: Multi-Manager Series.
Formerly Senior Fund Administrator, PIMCO;
Senior Mutual Fund Analyst, PIMCO Advisors
Institutional Services.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation(s)
Name, Address and Age the Trust During the Past Five Years
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph D. Hattesohl Assistant Treasurer Vice President and Manager of Financial Reporting
Age 35 and Taxes, PIMCO; Assistant Treasurer, PIMCO Funds:
Multi-Manager Series, PIMCO Commercial
Mortgage Securities Trust, Inc. and PIMCO
Variable Insurance Trust. Formerly, Manager
of Fund Taxation, PIMCO; Director
of Financial Reporting, Carl I. Brown & Co.;
Tax Manager, Price Waterhouse LLP.
Michael J. Willemsen Assistant Secretary Manager, PIMCO; Assistant Secretary, PIMCO
Age 39 Commercial Mortgage Securities Trust, Inc.
and PIMCO Variable Insurance Trust. Formerly
Project Lead, PIMCO.
</TABLE>
___________________
*Each of Mr. Harris and Mr. Burns is an "interested person" of the Trust (as
that term is defined in the 1940 Act) because of his affiliations with PIMCO.
Compensation Table
The following table sets forth information regarding compensation received by
the Trustees for the fiscal year ended March 31, 1998.
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation Trust and Fund Complex
Name and Position from Trust/1/ Paid to Trustees/2/
----------------- ------------ -----------------------
<S> <C> <C>
Guilford C. Babcock $57,500 $70,500
Trustee
Vern O. Curtis $60,090 $74,123
Trustee
Thomas P. Kemp $57,500 $70,500
Trustee
William J. Popejoy $57,500 $70,500
Trustee
</TABLE>
/1/ Each Trustee, other than those affiliated with the Adviser or its
affiliates, receives an annual retainer of $45,000 plus $3,000 for each
Board of Trustees meeting attended in person and $500 for each meeting
attended telephonically, plus reimbursement of related expenses. In
addition, a Trustee serving as a Committee Chair, other than those
affiliated with the Adviser or its affiliates, receives an additional
annual retainer of $1,500. For the fiscal year ended March 31, 1998, the
unaffiliated Trustees as a group received compensation in the amount of
$232,590.
/2/ Each Trustee also serves as a Director of PIMCO Commercial Mortgage
Securities Trust, Inc., a registered closed-end management investment
company, and as a Trustee of PIMCO Variable Insurance Trust, a registered
open-end management investment company. For their services to PIMCO
Commerical Mortgage Securities Trust, Inc., the Directors listed above
received an annual retainer of $6,000 plus $1,000 for each Board of
Directors meeting attended in person and $500 for each meeting attended
telephonically, plus reimbursement of related expenses. In addition, a
35
<PAGE>
Director serving as a Committee Chair, other than those affiliated with the
Adviser or its affiliates, receives an additional annual retainer of $500.
For the one year period ended March 31, 1998, the unaffiliated Directors as
a group received compensation in the amount of $42,790.
The Trustees listed above, for their services as Trustees of PIMCO Variable
Insurance Trust, receive an annual retainer of $4,000 plus $1,500 for each
Board of Trustees meeting attended in person and $250 for each meeting
attended telephonically, plus reimbursement of related expenses. In
addition, a Trustee serving as a Committee Chair, other than those
affiliated with the Adviser or its affiliates, receives an additional
annual retainer of $500. For the one year period ended March 31, 1998, the
unaffiliated Trustees as a group received compensation in the amount of
$10,243.
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. The general partners of PIMCO Advisors
are PIMCO Partners, G.P. and PIMCO Advisors Holdings L.P. ("PAH"). PIMCO
Partners, G.P. is a general partnership between PIMCO Holding LLC, a Delaware
limited liability company and an indirect wholly-owned subsidiary of Pacific
Life Insurance Company, and PIMCO Partners LLC, a California limited liability
company controlled by the current Managing Directors and two former Managing
Directors of PIMCO. PIMCO Partners, G.P. is the sole general partner of PAH.
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 November 22, 1994, as supplemented at meetings
held on October 1, 1995, November 21, 1995, February 27, 1996, November 19,
1996, January 14, 1997, May 27, 1997, February 24, 1998, and August 25, 1998,
and was last approved by the Trustees on August 25, 1998 and 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.
36
<PAGE>
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, Strategic Balanced,
Convertible Bond, StocksPLUS, and StocksPLUS Short
Strategy Funds........................................... 0.40%
Emerging Markets Bond and Emerging Markets Bond II Funds... 0.45%
All other Funds............................................ 0.25%
</TABLE>
For the fiscal years ended March 31, 1998, 1997, and 1996, the aggregate
amount of the advisory fees paid by each operational Fund was as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 3/31/98 3/31/97 3/31/96
- --------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Money Market Fund* $ 205,384 $ 67,626 $ 10,118
Short-Term Fund 487,226 311,485 249,319
Low Duration Fund 7,416,427 6,877,132 6,267,607
Low Duration Fund II 869,853 685,047 575,730
Low Duration Fund III 32,700 6,114 N/A
Low Duration Mortgage Fund 5,914 N/A N/A
Moderate Duration Fund 294,466 6,525 N/A
Real Return Bond Fund 18,838 2,453 N/A
Total Return Fund 38,327,843 29,232,090 22,775,075
Total Return Fund II* 1,145,766 1,171,011 486,935
Total Return Fund III 701,110 423,216 327,029
Total Return Mortgage Fund 5,679 N/A N/A
High Yield Fund 3,670,999 1,983,580 1,186,819
Long-Term U.S. Government Fund 117,242 64,058 101,042
Global Bond Fund 642,260 423,547 264,783
Global Bond Fund II** 50,123 41,683 N/A
Foreign Bond Fund 811,698 541,283 640,157
International Bond Fund 2,045,487 2,810,494 4,937,820
Emerging Markets Bond Fund 11,365 N/A N/A
Strategic Balanced Fund 117,547 31,660 N/A
StocksPLUS Fund 1,919,328 779,413 324,388
- --------------------
</TABLE>
*The PIMCO Money Market Fund, for the fiscal year ended October 31, 1995, paid
aggregate advisory fees in the amount of $14,500. The PIMCO Total Return Fund
II, for the fiscal year ended October 31, 1995, paid aggregate advisory fees in
the amount of $1,009,081. See "The Reorganization of the PIMCO Money Market and
Total Return II Funds" for additional information.
**The PIMCO Global Bond Fund II, for the fiscal year ended September 30, 1996,
paid aggregate management fees in the amount of $54,325, pursuant to a
management contract between PIMCO Advisors Funds and PIMCO Advisors, under which
PIMCO Advisors provided or procured investment advisory services for the Fund.
See "The Reorganization of the PIMCO Global Bond Fund II" for additional
information.
In connection with the former expense limitation provision, which was
terminated October 1, 1995, the Adviser reimbursed advisory fees for the fiscal
years ended March 31, 1998, 1997, and 1996, in the following amounts:
37
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 3/31/98 3/31/97 3/31/96
- ---- ------- ------- -------
<S> <C> <C> <C>
Short-Term Fund $ 0 $ 0 $ 10,244
Low Duration Fund II 0 0 0
Total Return Fund III 0 0 1,775
High Yield Fund 0 0 0
Long-Term U.S. Government Fund 0 0 13,554
Global Bond Fund 0 0 (17,114)
StocksPLUS Fund 0 0 26,176
</TABLE>
Fund Administrator
PIMCO also serves as Administrator to the Funds pursuant to an
administration agreement (the "Administration Agreement") with the Trust. 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. PIMCO may in turn use the facilities or assistance of
its affiliates to provide certain services under the Administration Agreement,
on terms agreed between PIMCO and such affiliates. 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 for each Fund (each expressed as a percentage of the Fund's
average daily net assets attributable to its classes of shares on an annual
basis):
38
<PAGE>
<TABLE>
<CAPTION>
Administrative Fee Rate
-----------------------
Institutional and Class A,
Fund Administrative Class B and C Class D*
- ---- -------------------- -------- -------
<S> <C> <C> <C>
Money Market 0.20% 0.35% 0.45%
Short-Term Fund 0.20% 0.35% 0.50%
Low Duration and Total Return
Funds 0.18% 0.40% 0.50%
Moderate Duration Fund 0.20% 0.40% 0.65%
Municipal Bond Fund 0.25% 0.35% 0.60%
Global Bond and Global Bond II
Funds 0.30% 0.45% 0.70%
Foreign Bond and International
Bond Funds 0.25% 0.45% 0.70%
Emerging Markets Bond and Emerging
Markets Bond II Funds 0.40% 0.55% 0.80%
All other Funds 0.25% 0.40% 0.65%
</TABLE>
____________________________________________
* As described below, the Administration Agreement includes a plan adopted
under Rule 12b-1 which provides for the payment of up to .25% of the Class
D Administrative Fee rate as reimbursement for expenses in respect of
activities that may be deemed to be primarily intended to result in the
sale of Class D shares.
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 distribution and service fees payable with
respect to different classes of shares and administrative fees as described
above, and may include certain other expenses as permitted by the Trust's
Amended and Restated Multi-Class Plan adopted pursuant to Rule 18f-3 under the
1940 Act and subject to review and approval by the Trustees.
The Administration Agreement may be terminated by the Trustees, or by a
vote of a majority of the outstanding voting securities of the Trust, Fund, or
Class as applicable, at any time on 60 days' written notice. Following the
expiration of the one-year period commencing with the effectiveness of the
Administration Agreement, it may be terminated by PIMCO, also on 60 days'
written notice.
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 February 24, 1998, as supplemented on August 25, 1998 and February 23,
1999. 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 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.
39
<PAGE>
Under the Administration Agreement, the Administrator or an affiliate may
pay financial service firms a portion of the Class D administration fees in
return for the firms' services (normally not to exceed an annual rate of .35% of
a Fund's average daily net assets attributable to Class D shares purchase
through such firms). The Administration Agreement includes a plan specific to
Class D shares that has been adopted in conformity with the requirements set
forth under Rule 12b-1 of the 1940 Act to allow for payment of up to .25% per
annum of the Class D administrative fees as reimbursement for expenses in
respect of activities that may be deemed to be primarily intended to result in
the sale of Class D shares. The principal types of activities for which such
payments may be made are services in connection with the distribution and
marketing of Class D shares and/or the provision of shareholder services. See
"Distribution of Trust Shares - Plan for Class D Shares."
For the fiscal years ended March 31, 1998, 1997, and 1996, the aggregate
amount of the administration fees paid by each operational Fund was as follows
(Class D shares were not offered during the periods listed):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 3/31/98 3/31/97 3/31/96
- ---- ------- ------- -------
<S> <C> <C> <C>
Money Market Fund* $ 423,936 $ 117,570 $ 13,462
Short-Term Fund 410,894 249,655 137,477
Low Duration Fund 5,665,996 5,005,045 3,520,078
Low Duration Fund II 869,853 685,047 391,248
Low Duration Fund III 32,700 6,114 N/A
Low Duration Mortgage Fund 5,914 N/A N/A
Moderate Duration Fund 235,572 5,220 N/A
Real Return Bond Fund 21,841 2,503 N/A
Total Return Fund 29,219,721 21,266,359 13,084,413
Total Return Fund II* 1,145,766 1,171,011 486,935
Total Return Fund III 701,110 423,216 217,584
Total Return Mortgage Fund 5,679 N/A N/A
High Yield Fund 4,258,485 2,071,177 842,032
Long-Term U.S. Government Fund 130,444 64,374 65,155
Global Bond Fund 770,719 508,256 208,234
Global Bond Fund II** 87,617 14,646 N/A
Foreign Bond Fund 849,691 540,519 428,175
International Bond Fund 2,045,487 2,810,494 3,800,674
Emerging Markets Bond Fund 10,526 N/A N/A
Strategic Balanced Fund 73,467 19,788 N/A
StocksPLUS Fund 1,392,509 491,519 149,888
</TABLE>
- --------------------
*The PIMCO Money Market Fund, for the fiscal year ended October 31, 1995, paid
aggregate administration fees in the amount of $24,166. The PIMCO Total Return
Fund II, for the fiscal year ended October 31, 1995, paid aggregate
administration fees in the amount of $1,009,081. See "The Reorganization of the
PIMCO Money Market and Total Return II Funds" for additional information.
**The PIMCO Global Bond Fund II, for the fiscal year ended September 30, 1996,
paid aggregate management fees in the amount of $54,325, pursuant to a
management contract between PIMCO Advisors Funds and PIMCO Advisors, under which
PIMCO Advisors provided or procured administrative services for the Fund. See
"The Reorganization of the PIMCO Global Bond Fund II" for additional
information.
In connection with the former expense limitation provision which was
terminated October 1, 1995, the Administrator reimbursed administration fees for
the fiscal years ended March 31, 1998, 1997, and 1996, in the following amounts:
40
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 3/31/98 3/31/97 3/31/96
- ---- ------- ------- -------
<S> <C> <C> <C>
Short-Term Fund $ 0 $ 0 $ 2,923
Low Duration Fund II 0 0 0
Total Return Fund III 0 0 507
High Yield Fund 0 0 0
Long-Term U.S. Government Fund 0 0 3,867
Global Bond Fund 0 0 (4,884)
StocksPLUS Fund 0 0 7,469
</TABLE>
DISTRIBUTION OF TRUST SHARES
Distributor and Multi-Class Plan
PIMCO Funds Distributors LLC (the "Distributor") serves as the distributor
of each class of the Trust's shares pursuant to a distribution contract
("Distribution Contract") with the Trust 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 or class without
penalty, at any time, by the Fund or class by not more than 60 days' nor less
than 30 days' written notice to the Distributor, or by the Distributor upon not
more than 60 days' nor less than 30 days' written notice to the Trust. The
Distributor is not obligated to sell any specific amount of Trust shares.
The Distribution Contract will continue in effect with respect to each Fund
and each class of shares thereof for successive one-year periods, provided that
each such continuance is specifically approved (i) by the vote of a majority of
the 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 Distribution
Contract, the Administration Agreement or the Distribution and/or Servicing
Plans described below; and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose. If the
Distribution Contract is terminated (or not renewed) with respect to one or more
Funds or classes thereof, it may continue in effect with respect to any class of
any Fund as to which it has not been terminated (or has been renewed).
The Trust offers eight classes of shares: Class A, Class B, Class C, Class
D, Class J, Class K, the Institutional Class and the Administrative Class. Class
J and Class K shares are offered only in Japan.
Class A, Class B and Class C shares of the Trust are offered through firms
("participating brokers") which are members of the National Association of
Securities Dealers, Inc. ("NASD"), and which have dealer agreements with the
Distributor, or which have agreed to act as introducing brokers for the
Distributor ("introducing brokers").
Class D shares are generally offered to clients of financial service firms,
such as broker-dealers or registered investment advisors, with which the
Distributor has an agreement for the use of PIMCO Funds: Pacific Investment
Management Series in particular investment products, programs or accounts for
which a fee may be charged.
Institutional Class shares are offered primarily for direct investment by
investors such as pension and profit sharing plans, employee benefit trusts,
endowments, foundations, corporations and high net individuals. (Institutional
Class shares may also be offered through certain financial intermediaries that
charge their customers transaction or other fees with respect to the customer's
investment in the Funds.) Administrative Class shares are offered primarily
through employee benefit plans alliances, broker-dealers, and other
intermediaries, and each Fund pays service or distribution fees to such entities
for services they provide to Administrative Class shareholders.
41
<PAGE>
Class J and Class K shares are offered through Japanese broker dealers,
banks and other financial institutions. Class J and Class K shares are offered
to the Japanese public as well as though various Japanese investment products,
programs or accounts for which a fee may be charged by investment intermediaries
in addition to those described in the Prospectus and SAI.
The Trust has adopted an Amended and Restated Multi-Class Plan ("Multi-
Class Plan") pursuant to Rule 18f-3 under the 1940 Act. Under the Multi-Class
Plan, shares of each class of each 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 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. In addition, each class may have a differing sales charge
structure, and differing exchange and conversion features.
Contingent Deferred Sales Charge and Initial Sales Charge
As described in the Class A, B and C Prospectus under the caption "How to
Redeem," a contingent deferred sales charge is imposed upon certain redemptions
of the Class A, Class B and Class C shares. No contingent deferred sales charge
is currently imposed upon redemptions of Class D, Institutional Class or
Administrative Class shares. Because contingent deferred sales charges are
calculated on a Fund-by-Fund basis, shareholders should consider whether to
exchange shares of one Fund for shares of another Fund prior to redeeming an
investment if such an exchange would reduce the contingent deferred sales charge
applicable to such redemptions.
During the fiscal years ended March 31, 1998 and March 31, 1997, the
Distributor received the following aggregate amounts in contingent deferred
sales charges on Class A shares, Class B shares and Class C shares of the Funds:
<TABLE>
<CAPTION>
Year Ended 3/31/98 Year Ended 3/31/97
------------------ ------------------
<S> <C> <C>
Class A $37,724 $ 670
Class B $694,715 $85,380
Class C $246,969 $44,409
</TABLE>
For the fiscal year ended September 30, 1996, the Distributor received $0,
$1,946 and $2,704 in contingent deferred sales charges on Class A, Class B and
Class C shares, respectively, of the Global Bond Fund II while the Fund was a
series of PIMCO Advisors Funds ("PAF"). See "The Reorganization of the PIMCO
Global Bond Fund II."
In certain cases described in the Class A, B and C Prospectus, the
contingent deferred sales charge is waived on redemptions of Class A, Class B or
Class C shares for certain classes of individuals or entities on account of (i)
the fact that the Trust's sales-related expenses are lower for certain of such
classes than for classes for which the contingent deferred sales charge is not
waived, (ii) waiver of the contingent deferred sales charge with respect to
certain of such classes is consistent with certain Internal Revenue Code
policies concerning the favored tax treatment of accumulations, and (iii) with
respect to certain of such classes, considerations of fairness, and competitive
and administrative factors.
As described in the Class A, B and C Prospectus under the caption
"Alternative Purchase Arrangements -- Class A," Class A shares of the Trust
(except with respect to the Money Market Fund) are sold pursuant to an initial
sales charge, which declines as the amount of purchase reaches certain defined
levels. For the fiscal years ended March 31, 1998 and March 31, 1997, the
Distributor received an aggregate of $2,598,104 and 389,133, respectively, and
retained $186,443 and $45,871, respectively, in initial sales charges paid by
Class A shareholders of the Trust.
42
<PAGE>
For the fiscal year ended September 30, 1996, the Distributor received
$48,106, and retained $9,896, in initial sales charges paid by shareholders of
the Class A shares of the Global Bond Fund II while the Fund was a series of
PAF.
Distribution and Servicing Plans for Class A, Class B and Class C Shares
As stated in the text of the Class A, B and C Prospectus under the caption
"Distributor and Distribution and Servicing Plans," Class A, Class B and Class C
shares of the Trust are continuously offered through participating brokers which
are members of the NASD and which have dealer agreements with the Distributor,
or which have agreed to act as introducing brokers.
Pursuant to separate Distribution and Servicing Plans for Class A, Class B
and Class C shares (the "Retail Plans"), as described in the Class A, B and C
Prospectus, in connection with the distribution of Class B and Class C shares of
the Trust, the Distributor receives certain distribution fees from the Trust,
and in connection with personal services rendered to Class A, Class B and Class
C shareholders of the Trust and the maintenance of shareholder accounts, the
Distributor receives certain servicing fees from the Trust. Subject to the
percentage limitations on these distribution and servicing fees set forth in the
Class A, B and C Prospectus, the distribution and servicing fees may be paid
with respect to services rendered and expenses borne in the past with respect to
Class A, Class B and Class C shares as to which no distribution and servicing
fees were paid on account of such limitations. As described in the Class A, B
and C Prospectus, the Distributor pays (i) all or a portion of the distribution
fees it receives from the Trust to participating and introducing brokers, and
(ii) all or a portion of the servicing fees it receives from the Trust to
participating and introducing brokers, certain banks and other financial
intermediaries.
Each Retail Plan may be terminated with respect to any Fund to which the
Plan relates by vote of a majority of the Trustees who are not interested
persons of the Trust (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or the Distribution
Contract ("Disinterested Trustees") or by vote of a majority of the outstanding
voting securities of the relevant class of that Fund. Any change in any Retail
Plan that would materially increase the cost to the class of shares of any Fund
to which the Plan relates requires approval by the affected class of
shareholders of that Fund. The Trustees review quarterly written reports of such
costs and the purposes for which such costs have been incurred. Each Retail Plan
may be amended by vote of the Disinterested Trustees cast in person at a meeting
called for the purpose. As long as the Retail Plans are in effect, selection and
nomination of those Trustees who are not interested persons of the Trust shall
be committed to the discretion of such Disinterested Trustees.
The Retail Plans will continue in effect with respect to each Fund and each
class of shares thereof for successive one-year periods, provided that each such
continuance is specifically approved (i) by the vote of a majority of the
Disinterested Trustees and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose.
The Retail Plans went into effect for the Funds in January 1997. If a
Retail Plan is terminated (or not renewed) with respect to one or more Funds, it
may continue in effect with respect to any class of any Fund as to which it has
not been terminated (or has been renewed).
The Trustees believe that the Retail Plans will provide benefits to the
Trust. The Trustees believe that the Retail Plans will result in greater sales
and/or fewer redemptions of Trust shares, although it is impossible to know for
certain the level of sales and redemptions of Trust shares that would occur in
the absence of the Retail Plans or under alternative distribution schemes.
Although the Funds' expenses are essentially fixed, the Trustees believe that
the effect of the Retail Plans on sales and/or redemptions may benefit the Trust
by reducing Fund expense ratios and/or by affording greater flexibility to
Portfolio Managers. From time to time, expenses of the Distributor incurred in
connection with the sale of Class B and Class C shares of the Funds, and in
connection with the servicing of Class B and Class C shareholders
43
<PAGE>
of the Funds and the maintenance of shareholder accounts, may exceed the
distribution and servicing fees collected by the Distributor. The Trustees
consider such unreimbursed amounts, among other factors, in determining whether
to cause the Funds to continue payments of distribution and servicing fees in
the future with respect to Class B and Class C shares.
Payments Pursuant to Class A Plan
For the fiscal year ended March 31, 1998, the Trust paid the Distributor an
aggregate of $1,180,030 pursuant to the Distribution and Servicing Plan for
Class A shares, of which the indicated amounts were attributable to the
following Funds:
<TABLE>
<S> <C>
Year Ended
3/31/98
Fund -------
- ----
Money Market Fund $ 38,216
Short-Term Fund 23,033
Low Duration Fund 192,859
Real Return Fund 1,143
Total Return Fund 679,157
High Yield Fund 121,858
Long-Term U.S. Government Fund 8,199
Global Bond Fund II 20,868
Foreign Bond Fund 10,245
Emerging Markets Bond Fund 316
StocksPLUS Fund 84,136
</TABLE>
During the fiscal year ended March 31, 1998, the amounts collected pursuant
to the Distribution and Servicing Plan for Class A shares were used as follows:
sales commissions and other compensation to sales personnel, $885,022;
preparing, printing and distributing sales material and advertising (including
preparing, printing and distributing prospectuses to non-shareholders), and
other expenses (including data processing, legal and operations), $295,008.
These totals, if allocated among (i) compensation and (ii) sales materials and
other expenses for each Fund, were as follows:
<TABLE>
Sales Material
and Other
Fund Compensation Expenses Total
- ---- ------------ -------- -----
<S> <C> <C> <C>
Money Market Fund $ 28,662 $ 9,554 $ 38,216
Short-Term Fund 17,275 5,758 23,033
Low Duration Fund 144,644 48,215 192,859
Real Return Bond Fund 857 286 1,143
Total Return Fund 509,368 169,789 679,157
High Yield Fund 91,393 30,465 121,858
Long-Term U.S. Government Fund 6,149 2,050 8,199
Global Bond Fund II 15,651 5,217 20,868
Foreign Bond Fund 7,684 2,561 10,245
Emerging Markets Bond Fund 237 79 316
StocksPLUS Fund 63,102 21,034 84,136
</TABLE>
44
<PAGE>
Payments Pursuant to Class B Plan
For the fiscal year ended March 31, 1998, the Trust paid the Distributor an
aggregate of $2,884,164 pursuant to the Distribution and Servicing Plan for
Class B shares, of which the indicated amounts were attributable to the
following Funds:
<TABLE>
<CAPTION>
<S> <C>
Year Ended
Fund 3/31/98
- ---- ----------
Money Market Fund $ 27,747
Short-Term Fund 7,508
Low Duration Fund 95,153
Real Return Fund 9,701
Total Return Fund 1,153,121
High Yield Fund 1,013,423
Long-Term U.S. Government Fund 28,337
Global Bond Fund II 42,965
Foreign Bond Fund 58,084
Emerging Markets Bond Fund 928
StocksPLUS Fund 447,197
</TABLE>
During the fiscal year ended March 31, 1998, the amounts collected pursuant
to the Distribution and Servicing Plan for Class B shares were used as follows:
sales commissions and other compensation to sales personnel, $2,163,124;
preparing, printing and distributing sales material and advertising (including
preparing, printing and distributing prospectuses to non-shareholders), and
other expenses (including data processing, legal and operations), $721,040.
These totals, if allocated among (i) compensation and (ii) sales materials and
other expenses for each Fund, were as follows:
<TABLE>
<CAPTION>
Sales Material
and Other
Fund Compensation Expenses Total
- ---- ------------ -------- -----
<S> <C> <C> <C>
Money Market Fund $ 20,810 $ 6,937 $ 27,747
Short-Term Fund 5,631 1,877 7,508
Low Duration Fund 71,365 23,788 95,153
Real Return Bond Fund 7,276 2,425 9,701
Total Return Fund 864,841 288,280 1,153,121
High Yield Fund 760,067 253,356 1,013,423
Long-Term U.S. Government Fund 21,253 7,084 28,337
Global Bond Fund II 32,224 10,741 42,965
Foreign Bond Fund 43,563 14,521 58,084
Emerging Markets Bond Fund 696 232 928
StocksPLUS Fund 335,398 111,799 447,197
</TABLE>
Payments Pursuant to Class C Plan
For the fiscal year ended March 31, 1998, the Trust paid the Distributor an
aggregate of $7,026,337 pursuant to the Distribution and Servicing Plan for
Class C shares, of which the indicated amounts were attributable to the
following Funds:
45
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Fund March 31, 1998
- ---- --------------
<S> <C>
Money Market Fund $ 59,070
Short-Term Fund 22,612
Low Duration Fund 461,997
Real Return Fund 4,292
Total Return Fund 3,510,589
High Yield Fund 2,415,721
Long-Term U.S. Government Fund 26,880
Global Bond Fund II 56,574
Foreign Bond Fund 91,131
Emerging Markets Bond Fund 635
StocksPLUS Fund 376,836
</TABLE>
During the fiscal year ended March 31, 1998, the amounts collected pursuant
to the Distribution and Servicing Plan for Class C shares were used as follows:
sales commissions and other compensation to sales personnel, $5,269,753;
preparing, printing and distributing sales material and advertising (including
preparing, printing and distributing prospectuses to non-shareholders), and
other expenses (including data processing, legal and operations), $1,756,584.
These totals, if allocated among (i) compensation and (ii) sales materials and
other expenses for each Fund, were as follows:
<TABLE>
<CAPTION>
Sales Material
and Other
Fund Compensation Expenses Total
- ---- ------------ --------- -----
<S> <C> <C> <C>
Money Market Fund $ 44,302 $ 14,768 $ 59,070
Short-Term Fund 16,959 5,653 22,612
Low Duration Fund 346,498 115,499 461,997
Real Return Bond Fund 3,219 1,073 4,292
Total Return Fund 2,632,942 877,647 3,510,589
High Yield Fund 1,811,791 603,930 2,415,721
Long-Term U.S. Government Fund 20,160 6,720 26,880
Global Bond Fund II 42,431 14,143 56,574
Foreign Bond Fund 68,348 22,783 91,131
Emerging Markets Bond Fund 476 159 635
StocksPLUS Fund 282,627 94,209 376,836
</TABLE>
From time to time, expenses of principal underwriters incurred in
connection with the distribution of Class B and Class C shares of the Funds, and
in connection with the servicing of Class A, Class B and Class C shareholders of
the Funds and the maintenance of Class A, Class B and Class C shareholder
accounts, may exceed the distribution and/or servicing fees collected by the
Distributor. Class A, Class B and Class C Distribution and Servicing Plans,
which are similar to the Trust's current Plans, were in effect prior to January
17, 1997 in respect of the series of PAF that was the predecessor of the Global
Bond Fund II. As of March 31, 1998, such expenses were approximately $6,411,000
in excess of payments under the Class A Plan, and $17,203,000 in excess of
payments under the Class B Plan. There were no excess payments under the Class
C Plan.
46
<PAGE>
The allocation of such excess (on a pro rata basis) among the Funds listed
below as of March 31, 1998 was as follows:
<TABLE>
<CAPTION>
Fund Class A Class B Class C
- ---- ------- ------- -------
<S> <C> <C> <C>
Money Market Fund $ 484,846 $ 108,780 $0
Short-Term Fund 172,669 44,984 0
Low Duration Fund 832,750 620,660 0
Total Return Fund 3,800,154 6,575,246 0
Real Return Fund 2,644 52,809 0
High Yield Fund 505,638 5,496,743 0
Long-Term U.S. Government Fund 43,850 265,244 0
Global Bond Fund II 48,705 158,301 0
Foreign Bond Fund 68,239 375,002 0
Emerging Markets Bond Fund 2,262 10,727 0
StockPLUS Fund 449,243 3,494,504 0
</TABLE>
The allocation of such excess (on a pro rata basis) among the Funds,
calculated as a percentage of net assets of each Fund listed below as of March
31, 1998 was as follows:
<TABLE>
<CAPTION>
Fund Class A Class B Class C
- ---- ------- ------- -------
<S> <C> <C> <C>
Money Market Fund 0.72% 3.54% 0.00%
Short-Term Fund 0.72 3.54 0.00
Low Duration Fund 0.72 3.54 0.00
Total Return Fund 0.72 3.54 0.00
Real Return Fund 0.72 3.54 0.00
High Yield Fund 0.72 3.54 0.00
Long-Term U.S. Government Fund 0.72 3.54 0.00
Global Bond Fund II 0.72 3.54 0.00
Foreign Bond Fund 0.72 3.54 0.00
Emerging Markets Bond Fund 0.72 3.54 0.00
StockPLUS Fund 0.72 3.54 0.00
</TABLE>
Distribution and Administrative Services Plans for Administrative Class Shares
The Trust has adopted an Administrative Services Plan and an Administrative
Distribution Plan (together, the "Administrative Plans") with respect to the
Administrative Class shares of each Fund.
Under the terms of the Administrative Distribution Plan, the Trust is
permitted to reimburse, out of the assets attributable to the Administrative
Class shares 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 for costs and
expenses incurred in connection with the distribution and marketing of
Administrative Class shares and/or the provision of certain shareholder services
to its customers that invest in Administrative Class shares of the Funds. Such
services may include, but are not limited to, the following: providing
facilities to answer questions from prospective investors about a 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 Trust is permitted
to reimburse, out of the assets attributable to the Administrative Class shares
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 certain
administrative services for Administrative Class shareholders. Such services
may include, but are not limited to, the following functions: receiving,
aggregating and processing shareholder orders; furnishing shareholder sub-
47
<PAGE>
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 Administrative
Class Distribution Plan and the Administrative Services Plan, but may not
receive fees under both plans with respect to the same assets.
Each Administrative 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 Administrative 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 Administrative 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 disinterested Trustees defined above. The Administrative Class 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 Administrative Class.
Each Administrative Plan provides that it shall continue in effect so long
as such continuance is specifically approved at least annually by the Trustees
and the disinterested Trustees defined above. Each Administrative 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 Administrative 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 Administrative Class shares may be used in any
month to pay expenses under the Plan. Each Plan requires that Administrative
Class shares incur no interest or carrying charges.
Rules of the 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 some, if not
all, of the fees paid pursuant to both Administrative Plans will qualify as
"service fees" and therefore will not be limited by NASD rules.
Payments Pursuant to the Administrative Plans
For the fiscal year ended March 31, 1998, the Administrative Class shares
of the Funds paid aggregate fees under the Administrative Plans to qualified
service providers in the following amounts:
<TABLE>
<CAPTION>
Fund Service Fees Distribution Fees Total
- ---- ------------ ----------------- -----
<S> <C> <C> <C>
Money Market Fund $ 649 $ 22 $ 671
Short-Term Fund 8,922 1,417 10,339
Low Duration Fund 61,713 10,937 72,650
Total Return Fund 594,316 97,634 691,950
Total Return Fund II 10,550 11,585 22,135
Total Return Fund III 305 10 315
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Fund Service Fees Distribution Fees Total
- ---- ------------ ----------------- -----
<S> <C> <C> <C>
High Yield Fund 49,492 10,587 60,079
Long-Term U.S. Government Fund 5,340 - 5,340
Global Bond Fund II 1,018 7,934 8,952
Foreign Bond Fund - 535 535
StocksPLUS Fund 1,942 1,051 2,993
</TABLE>
Plan for Class D Shares
As described under "Management of the Trust- Fund Administrator," the
Funds' Administration Agreement includes a plan (the "Class D Plan") adopted
pursuant to Rule 12b-1 under the 1940 Act which provides for the payment of up
to .25% of the Class D administrative fees as reimbursement for expenses in
respect of activities that may be deemed to be primarily intended to result in
the sale of Class D shares.
Specifically, the Administration Agreement provides that the Administrator
shall provide in respect of Class D shares (either directly or by procuring
through other entities, including various financial services firms such as
broker-dealers and registered investment advisors ("Service Organizations"))
some or all of the following services and facilities in connection with direct
purchases by shareholders or in connection with products, programs or accounts
offered by such Service Organizations ("Special Class D Services"): (i)
facilities for placing orders directly for the purchase of a Fund's shares and
tendering a Fund's Class D shares for redemption; (ii) advertising with respect
to a Fund's Class D shares; (iii) providing information about the Funds; (iv)
providing facilities to answer questions from prospective investors about the
Funds; (v) receiving and answering correspondence, including requests for
prospectuses and statements of additional information; (vi) preparing, printing
and delivering prospectuses and shareholder reports to prospective shareholders;
(vii) assisting investors in applying to purchase Class D shares and selecting
dividend and other account options; and (viii) shareholder services provided by
a Service Organization that 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;
issuing confirmations for transactions by shareholders; performing similar
account administrative services; providing such shareholder communications and
recordkeeping services as may be required for any program for which the Service
Organization is a sponsor that relies on Rule 3a-4 under the 1940 Act; and
providing such other similar services as may reasonably be requested to the
extent the Service Organization is permitted to do so under applicable statutes,
rules, or regulations.
The Administrator has entered into an agreement with the Distributor under
which the distributor is compensated for providing or procuring certain of the
Class D Services at the rate of .25% per annum of all assets attributable to
Class D shares sold through the Distributor.
The Trust and the Administrator understand that some or all of the Special
Class D Services pursuant to the Administration Agreement may be deemed to
represent services primarily intended to result in the sale of Class D shares.
The Administration Agreement includes the Class D Plan to account for this
possibility. The Administration Agreement provides that any portion of the fees
paid thereunder in respect of Class D shares representing reimbursement for the
Administrator's and the Distributor's expenditures and internally allocated
expenses in respect of Class D Services of any Fund shall not exceed the rate of
.25% per annum of the average daily net assets of such Fund attributable to
Class D shares.
In accordance with Rule 12b-1 under the 1940 Act, the Class D Plan may not
be amended to increase materially the costs which Class D shareholders may bear
under the Plan without approval of a majority of the outstanding Class D shares,
and by vote of a majority of both (i) the Trustees of the Trust
49
<PAGE>
and (ii) those Trustees ("disinterested Class D Plan 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, cast in person at a meeting called for the purpose of
voting on the Plan and any related amendments. The Class D Plan may not take
effect until approved by a vote of a majority of both (i) the Trustees of the
Trust and (ii) the disinterested Class D Plan Trustees. In addition, the Class D
Plan may not take effect unless it is approved by the vote of a majority of the
outstanding Class D shares and it shall continue in effect so long as such
continuance is specifically approved at least annually by the Trustees and the
disinterested Class D Plan Trustees.
With respect to the Class D Plan, the Administration Agreement requires the
Administrator to present reports as to out-of-pocket expenditures and internal
expenses allocations of the Administrator and the Distributor at least quarterly
and in a manner that permits the disinterested Class D Plan Trustees to
determine that portion of the Class D administrative fees paid thereunder which
represents reimbursements in respect of Special Class D Services.
Rules of the 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 Class D Plan will qualify as "service
fees" and therefore will not be limited by NASD rules.
Distribution and Servicing Plan for Class J and Class K Shares
Class J and Class K each has a separate distribution and servicing plan
(the "Class J-K Plans"). Distribution fees paid pursuant to the Class J-K Plans
may only be paid in connection with services provided with respect to Class J
and Class K shares.
As stated in the Prospectus relating to Class J and Class K shares under
the caption "Service and Distribution Fees," the Distributor pays (i) all or a
portion of the distribution fees it receives from the Trust to participating and
introducing brokers, and (ii) all or a portion of the servicing fees it receives
from the Trust to participating and introducing brokers, certain banks and other
financial intermediaries.
Each Class J-K Plan may be terminated with respect to any Fund to which the
Class J-K Plan relates by vote of a majority of the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or the
Distribution Contract ("Disinterested Trustees") or by vote of a majority of the
outstanding voting securities of the relevant class of that Fund. Pursuant to
Rule 12b-1, any change in either Class J-K Plan that would materially increase
the cost to the class of shares of any Fund to which the Plan relates requires
approval by the affected class of shareholders of that Fund. The Trustees review
quarterly written reports of such costs and the purposes for which such costs
have been incurred. Each Class J-K Plan may be amended by vote of the
Disinterested Trustees cast in person at a meeting called for the purpose. As
long as the Class J-K Plans are in effect, selection and nomination of those
Trustees who are not interested persons of the Trust shall be committed to the
discretion of such Disinterested Trustees.
The Class J-K Plans will continue in effect with respect to each Fund and
each class of shares thereof for successive one-year periods, provided that each
such continuance is specifically approved (i) by the vote of a majority of the
Disinterested Trustees and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose.
If a Class J-K Plan is terminated (or not renewed) with respect to one or
more Funds, it may continue in effect with respect to any class of any Fund as
to which it has not been terminated (or has been renewed).
50
<PAGE>
The Trustees believe that the Class J-K Plans will provide benefits to the
Trust. The Trustees believe that the Class J-K Plans will result in greater
sales and/or fewer redemptions of Trust shares, although it is impossible to
know for certain the level of sales and redemptions of Trust shares that would
occur in the absence of the Class J-K Plans or under alternative distribution
schemes. Although the Funds' expenses are essentially fixed, the Trustees
believe that the effect of the Class J-K Plans on sales and/or redemptions may
benefit the Trust by reducing Fund expense ratios and/or by affording greater
flexibility to Portfolio Managers. From time to time, expenses of the
Distributor incurred in connection with the sale of Class J and Class K shares
of the Funds, and in connection with the servicing of Class J and Class K
shareholders of the Funds and the maintenance of shareholder accounts, may
exceed the distribution and servicing fees collected by the Distributor. The
Trustees consider such unreimbursed amounts, among other factors, in determining
whether to cause the Funds to continue payments of distribution and servicing
fees in the future with respect to Class J and Class K shares.
Purchases, Exchanges and Redemptions
Purchases, exchanges and redemptions of Class A, Class B, Class C and Class
D shares are discussed in the Class A, B and C and Class D Prospectuses under
the headings "How to Buy Shares," "Exchange Privilege," and "How to Redeem," and
that information is incorporated herein by reference. Purchases, exchanges and
redemptions of Institutional and Administrative Class shares and Class J and
Class K shares are discussed in the Institutional Prospectus under the headings
"Purchase of Shares," "Redemption of Shares," and "Net Asset Value," and in the
Class J and Class K supplement thereto, 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.
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.
Certain shares of the Funds are not qualified or registered for sale in all
states and Class J and Class K shares are not qualified or registered for sale
in the United States. Prospective investors should inquire as to whether shares
of a particular Fund or class 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.
As described in the Class A, B and C and Class D Prospectuses under the
caption "Exchange Privilege," and in the Institutional Prospectus under the
caption "Redemption of Shares," a shareholder may exchange shares of any Fund
for shares of any other Fund of the Trust (except the PIMCO International Fund
and the PIMCO Emerging Markets Bond Fund II, each of which is only available to
private account clients of PIMCO) or any series of PIMCO Funds: Multi-Manager
Series, within the same class on the basis of their respective net asset values.
The original purchase date(s) of shares exchanged for purposes of calculating
any contingent deferred sales charge will carry over to the investment in the
new Fund. For example, if a shareholder invests in the Class C shares of one
Fund and 6 months later (when the contingent
51
<PAGE>
deferred sales charge upon redemption would normally be 1%) exchanges his shares
for Class C shares of another Fund, no sales charge would be imposed upon the
exchange but the investment in the other Fund would be subject to the 1%
contingent deferred sales charge until one year after the date of the
shareholder's investment in the first Fund as described in the Class A, B and C
Prospectus under "Alternative Purchase Arrangements." With respect to Class B or
Class C shares, or Class A shares subject to a contingent deferred sales charge,
if less than all of an investment is exchanged out of a Fund, any portion of the
investment attributable to capital appreciation and/or reinvested dividends or
capital gains distributions will be exchanged first, and thereafter any portions
exchanged will be from the earliest investment made in the Fund from which the
exchange was made.
Orders for exchanges accepted prior to the close of regular trading on the
New York Stock Exchange on any day the Trust is open for business will be
executed at the respective net asset values determined as of the close of
business that day. Orders for exchanges received after the close of regular
trading on the Exchange on any business day will be executed at the respective
net asset values determined at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Trust.
Therefore, the Trust, in addition to its right to reject any exchange, reserves
the right to adopt a policy of terminating the exchange privilege of any
shareholder who makes more than a specified number of exchanges in a 12-month
period or in any calendar quarter; provided, that if such a limitation on
exchanges is adopted, exchanges into the PIMCO Money Market Fund from any other
Fund would not be counted. The Trust reserves the right to modify or
discontinue the exchange privilege at any time.
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.
The Trust is committed to paying in cash all requests for redemptions by
any shareholder of record of the Funds, limited in amount with respect to each
shareholder during any 90-day period to the lesser of (i) $250,000, or (ii) 1%
of the net asset value of the Trust at the beginning of such period. Although
the Trust will normally redeem all shares for cash, it may, in unusual
circumstances, redeem amounts in excess of the lesser of (i) or (ii) above by
payment in kind of securities held in the Funds' portfolios.
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 a
specified amount, the minimums of which are currently set at $250 for Class A,
Class B and Class C shares, $2,000 for Class D shares, and $100,000 for
Institutional Class and Administrative Class shares ($10,000 with respect to
Institutional Class and Administrative Class accounts opened before January 1,
1995). The Prospectuses may set higher minimum account balances for one or more
classes from time to time depending upon the Trust's current policy. 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
the specified amount 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. The Trust may also
charge periodic account fees for accounts that fall below minimum balances, as
described in the Prospectuses.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Investment Decisions
52
<PAGE>
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.
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 relevant Fund 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.
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. The Adviser may also receive
research or research credits from brokers which are generated from underwriting
commissions when purchasing new issues of fixed income securities or other
assets for a Fund. 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 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.
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Consistent with the Rules 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 their ability to engage in short-
term trading by provisions of the federal tax laws, see "Taxation." The use of
certain 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 Institutional Prospectus and
"How Net Asset Value is Determined" in the Class A, B and C Prospectus, the
Trust's net asset value per share for the purpose of pricing purchase and
redemption orders will be determined once on each day on which the New York
Stock Exchange is open for trading as of the close of regular trading
(ordinarily 4:00 p.m., Eastern time). Net asset value will not be determined on
the following holidays: New Year's Day, Martin Luther King, Jr. 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
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required to maintain a dollar-weighted average portfolio maturity of 90 days or
less, to limit its investments to instruments having remaining maturities of 397
days or less (except securities held subject to repurchase agreements having 397
days 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.
TAXATION
The following summarizes certain additional federal income tax
considerations generally affecting the Funds and their shareholders. The
discussion is for general information only and does not purport to consider all
aspects of U.S. federal income taxation that might be relevant to beneficial
owners of shares of the Funds. The discussion is based upon current provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), existing
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all of which are subject to change, which change could
be retroactive. The discussion applies only to beneficial owners of Fund shares
in whose hands such shares are capital assets within the meaning of Section 1221
of the Code, and may not apply to certain types of beneficial owners of shares
(such as insurance companies, tax exempt organizations, and broker-dealers) who
may be subject to special rules. Persons who may be subject to tax in more than
one country should consult the provisions of any applicable tax treaty to
determine the potential tax consequences to them. Prospective investors should
consult their own tax advisers with regard to the federal tax consequences of
the purchase, ownership and disposition of Fund shares, as well as the tax
consequences arising under the laws of any state, foreign country, or other
taxing jurisdiction. The discussion here and in the Prospectuses is not
intended as a substitute for careful tax planning.
Each Fund intends to qualify annually and elect to be treated as a
regulated investment company under 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) 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 (c) distribute each taxable year the sum of
(i) 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) and (ii) 90% of its tax exempt interest, net of expenses
allocable thereto. 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 related
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, all or 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, and (3) all ordinary income and capital gains for
previous years
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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.
The PIMCO Municipal Bond Fund must have at least 50% of its total assets
invested in Municipal Bonds at the end of each calendar quarter so that
dividends derived from its net interest income on Municipal Bonds and so
designated by the Fund will be "exempt-interest dividends," which are generally
exempt from federal income tax when received by an investor. Certain exempt-
interest dividends, as described in the Class A, B and C Prospectus, may
increase alternative minimum taxable income for purposes of determining a
shareholder's liability for the alternative minimum tax. In addition, exempt-
interest dividends allocable to interest from certain "private activity bonds"
will not be tax exempt for purposes of the regular income tax to shareholders
who are "substantial users" of the facilities financed by such obligations or
"related persons" of "substantial users." The tax-exempt portion of dividends
paid for a calendar year constituting "exempt-interest dividends" will be
designated after the end of that year and will be based upon the ratio of net
tax-exempt income to total net income earned by the Fund during the entire year.
That ratio may be substantially different than the ratio of net tax-exempt
income to total net income earned during a portion of the year. Thus, an
investor who holds shares for only a part of the year may be allocated more or
less tax-exempt interest dividends than would be the case if the allocation were
based on the ratio of net tax-exempt income to total net income actually earned
by the Fund while the investor was a shareholder. All or a portion of interest
on indebtedness incurred or continued by a shareholder to purchase or carry
shares of the PIMCO Municipal Bond Fund will not be deductible by the
shareholder. The portion of interest that is not deductible is equal to the
total interest paid or accrued on the indebtedness multiplied by the percentage
of the Fund's total distributions (not including distributions of the excess of
net long-term capital gains over net short-term capital losses) paid to the
shareholder that are exempt-interest dividends. Under rules used by the
Internal Revenue Service for determining when borrowed funds are considered used
for the purpose of purchasing or carrying particular assets, the purchase of
shares may be considered to have been made with borrowed funds even though such
funds are not directly traceable to the purchase of shares.
Shareholders of the PIMCO Municipal Bond Fund receiving social security or
railroad retirement benefits may be taxed on a portion of those benefits as a
result of receiving tax exempt income (including exempt-interest dividends
distributed by the Fund). The tax may be imposed on up to 50% of a recipient's
benefits in cases where the sum of the recipient's adjusted gross income (with
certain adjustments, including tax-exempt interest) and 50% of the recipient's
benefits, exceeds a base amount. In addition, up to 85% of a recipient's
benefits may be subject to tax if the sum of the recipient's adjusted gross
income (with certain adjustments, including tax-exempt interest) and 50% of the
recipient's benefits exceeds a higher base amount. Shareholders receiving
social security or railroad retirement benefits should consult with their tax
advisors.
In years when a Fund distributes amounts in excess of its earnings and
profits, such distributions may be treated in part as a return of capital. A
return of capital is not taxable to a shareholder and has the effect of reducing
the shareholder's basis in the shares. Since certain of the PIMCO Municipal
Bond Fund's expenses attributable to earning tax-exempt income do not reduce
such Fund's current earnings and profits, it is possible that distributions, if
any, in excess of such Fund's net tax-exempt and taxable income will be treated
as taxable dividends to the extent of such Fund's remaining earnings and profits
(i.e., the amount of such expenses).
Distributions
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Except for exempt-interest dividends paid by the PIMCO Municipal Bond Fund,
all dividends and distributions of a Fund, whether received in shares or cash,
generally are taxable and must be reported on each shareholder's federal income
tax return. 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 Fund 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 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
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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 Trust intends 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 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.
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 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,
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relating to the taxation of excess distributions, would not apply.
Alternatively, 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 and reported as ordinary income. Any mark-
to-market losses and any loss from an actual disposition of PFIC shares would be
deductible as ordinary losses to the extent of any net mark-to-market gains
included in income in prior years. 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 and the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, and may subject a Fund itself
to tax on certain income from PFIC shares, the amount that must be distributed
to shareholders and 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 Global Bond, Global Bond II, Foreign
Bond, International Bond, Emerging Markets Bond or Emerging Markets Bond II
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.
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 Global Bond, Global Bond II, Foreign Bond,
International Bond, Emerging Markets Bond or Emerging Markets Bond II 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
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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 and Market 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.
Constructive Sales
Recently enacted rules may affect the timing and character of gain if a
Fund engages in transactions that reduce or eliminate its risk of loss with
respect to appreciated financial positions. If a Fund enters into certain
transactions in property while holding substantially identical property, the
Fund would be treated as if it had sold and immediately repurchased the property
and would be taxed on any gain (but not loss) from the constructive sale. The
character of gain from a constructive sale would depend upon the Fund's holding
period in the property. Loss from a constructive sale would be recognized when
the property was subsequently disposed of, and its character would depend on the
Fund's holding period and the application of various loss deferral provisions of
the Code.
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
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obligations"). However, some states may exempt all or a portion of such
distributions from income tax to 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 were 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. As noted
below, in accordance with methods approved by the Securities and Exchange
Commission in various pronouncements, total return presentations for periods
prior to the inception date of a particular class of a Fund are based on the
historical performance of an older class of the Fund (specified below) restated
to reflect the current sales charges (if any) of the newer class, but not
reflecting any higher operating expenses such as 12b-1 distribution and
servicing fees and administration fees associated with the newer class. All
other things being equal, such higher expenses would have adversely affected
(i.e., reduced) total return for the newer classes by the amount of such higher
expenses compounded over the relevant periods. 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.
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:
61
<PAGE>
Effective Yield = [(Base Period Return +1)365/7] - 1
The effective yield of the PIMCO Money Market Fund for the seven day period
ended September 30, 1998 was as follows: Institutional Class - 5.34%,
Administrative Class - 5.42%, Class A - 5.17%, Class B - 4.17% and Class C -
5.14%.
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 were 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 September 30, 1998, the yield of the Funds
was as follows (all numbers are annualized) (Class D shares were not offered
during the period listed):
62
<PAGE>
Yield for Period
Ended September 30, 1998
------------------------
<TABLE>
<CAPTION>
Institutional Administrative
Fund Class Class Class A Class B Class C Class D
- -------------------------------- ---------------- ------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund 5.35% 5.37% 5.11% 4.18% 5.12% N/A
Short-Term Fund 5.78% 5.66% 5.43% 4.69% 5.18% 5.62%
Low Duration Fund 6.05% 5.80% 5.41% 4.82% 5.08% 5.73%
Low Duration Fund II 5.43% 5.18% N/A N/A N/A N/A
Low Duration Fund III 5.32% N/A N/A N/A N/A N/A
Low Duration Mortgage Fund 5.81% N/A N/A N/A N/A N/A
Moderate Duration Fund 6.07% N/A N/A N/A N/A N/A
Real Return Bond Fund 5.46% N/A 4.92% 4.31% 4.53% 5.08%
Total Return Fund 5.95% 5.69% 5.23% 4.72% 4.73% 5.64%
Total Return Fund II 5.37% 5.12% N/A N/A N/A N/A
Total Return Fund III 5.97% 5.72% N/A N/A N/A N/A
Total Return Mortgage Fund 5.77% N/A N/A N/A N/A N/A
High Yield Fund 8.74% 8.49% 7.95% 7.58% 7.58% 8.36%
Municipal Bond Fund 4.09% N/A 3.62% 3.00% 3.24% 3.74%
Long-Term U.S. Govt. Fund 5.29% 5.05% 4.69% 4.12% 4.10% N/A
Global Bond Fund 6.01% 5.78% N/A N/A N/A N/A
Global Bond Fund II 6.12% N/A 5.39% 4.99% 4.99% N/A
Foreign Bond Fund 6.30% 6.06% 5.59% 5.11% 5.11% 5.86%
International Bond Fund 6.24% N/A N/A N/A N/A N/A
Emerging Markets Bond Fund 11.82% N/A 10.89% 10.59% 10.72% N/A
Emerging Markets Bond Fund II 8.37% N/A N/A N/A N/A N/A
Strategic Balanced Fund 5.70% N/A N/A N/A N/A 5.22%
StocksPLUS Fund 5.54% 5.29% 5.01% 4.41% 4.66% 5.15%
</TABLE>
The yield of each such Fund will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and operating
expenses of the Trust allocated to the Fund or its classes of shares. These
factors, possible differences in the methods used in calculating yield (and the
tax exempt status of distributions for the PIMCO Municipal Bond Fund) should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of a Fund's various classes of
shares. These yields do not take into account any applicable contingent
deferred sales charges.
The PIMCO Municipal Bond Fund may advertise a tax equivalent yield of each
class of its shares, calculated as described above except that, for any given
tax bracket, net investment income of each class will be calculated using as
gross investment income an amount equal to the sum of (i) any taxable income of
each class of the Fund plus (ii) the tax exempt income of each class of the Fund
divided by the difference between 1 and the effective federal income tax rates
for taxpayers in that tax bracket. For example, taxpayers with the marginal
federal income tax rates indicated in the following table would have to earn the
tax equivalent yields shown in order to realize an after-tax return equal to the
corresponding tax-exempt yield shown.
63
<PAGE>
<TABLE>
<CAPTION>
A tax-exempt yield of
Filing Status is equivalent to a taxable yield of
Single (Married filing jointly) 3% 4% 5% 6% 7%
Taxable income Marginal tax rate*
<S> <C> <C> <C> <C> <C> <C> <C>
$23,350 or less $39,000 or less 15% 3.53% 4.71% 5.88% 7.06% 8.24%
Over $23,350 but Over $39,000 but 28% 4.17% 5.56% 6.94% 8.33% 9.72 %
not over $56,550 not over $94,250
Over $56,550 but Over $94,250 but 31% 4.35% 5.80% 7.25% 8.70% 10.14%
not over $117,950 not over $143,600
Over $117,950 but Over $143,600 but 36% 4.69% 6.25% 7.81% 9.38% 10.94%
not over $256,500 not over $256,500
Over $256,500 Over $256,500 39.6% 4.97% 6.62% 8.28% 9.93% 11.59%
- -------------------
</TABLE>
* These marginal tax rates do not take into account the effect of the phaseout
of itemized deductions and personal exemptions.
As is shown in the above table, the advantage of tax-exempt investing
becomes more advantageous to an investor as his or her marginal tax rate
increases.
The Trust, in its advertisements, may refer to pending legislation from
time to time and the possible impact of such legislation on investors,
investment strategy and related matters. This would include any tax proposals
and their effect on marginal tax rates and tax-equivalent yields. At any time
in the future, yields and total return may be higher or lower than past yields
and there can be no assurance that any historical results will continue.
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). Except as noted below all total return figures reflect the
deduction of a proportional share of Fund or class expenses on an annual basis,
and assume that (i) the maximum sales load (or other charges deducted from
payments) is deducted from the initial $1,000 payment and that the maximum
contingent deferred sales charge, if any, is deducted at the times, in the
amounts, and under the terms disclosed in the Prospectuses and (ii) 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. Quotations of total return
may also be shown for other periods. Any such information would be accompanied
by standardized total return information.
The table below sets forth the average annual total return of each class of
shares of the following Funds for the periods ended September 30, 1998. For
periods prior to the "Inception Date" of a particular class of a Fund's shares,
total return presentations for the class are based on the historical performance
of Institutional Class shares of the Fund (the oldest class) adjusted, as
necessary, to reflect any current sales charges (including any contingent
deferred sales charges) associated with the newer class and any different
operating expenses associated with the newer class, such as 12b-1 distribution
and servicing fees (which are not paid by the Institutional Class) and
administrative fee charges.
64
<PAGE>
Total Return for Periods Ended September 30, 1998*
<TABLE>
<CAPTION>
Since Inception Inception Inception
of Fund Date of Date of
Fund Class** 1 Year 5 Years 10 Years (Annualized) Fund Class
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Institutional 5.39% 5.06% N/A 4.68% 03/01/91 03/01/91
Administrative 5.21 4.82 4.44 01/25/95
Class A 5.07 4.79 4.41 01/13/97
Class B 4.18 3.87 3.49 01/13/97
Class C 5.12 4.80 4.43 01/13/97
- ------------------------------------------------------------------------------------------------------------
Short-Term Institutional 5.84% 6.26% 6.49% 6.55% 10/07/87 10/07/87
Administrative 5.59 6.00 6.23 6.29 02/01/96
Class A 3.31 5.41 5.85 5.94 01/20/97
Class B -0.35 4.75 5.30 5.36 01/20/97
Class C 4.11 5.52 5.75 5.82 01/20/97
Class D 5.53 5.94 6.18 6.24 04/08/98
- ------------------------------------------------------------------------------------------------------------
Low Duration Institutional 7.97% 6.85% 8.36% 8.32% 05/11/87 05/11/87
Administrative 7.71 6.58 8.09 8.06 01/03/95
Class A 4.25 5.71 7.53 7.53 01/13/97
Class B 1.66 5.23 7.05 7.02 01/13/97
Class C 5.99 5.83 7.33 7.29 01/13/97
Class D 7.62 6.51 8.02 7.98 04/08/98
- ------------------------------------------------------------------------------------------------------------
Low Duration II Institutional 8.22% 6.27% N/A 6.74% 11/01/91 11/01/91
7.94 6.00 6.48
- ------------------------------------------------------------------------------------------------------------
Low Duration Institutional 7.39% N/A N/A 7.24% 12/31/96 12/31/96
III
- ------------------------------------------------------------------------------------------------------------
Low Duration Institutional 8.46% N/A N/A 9.25% 07/31/97 07/31/97
Mortgage
- ------------------------------------------------------------------------------------------------------------
Moderate Institutional 10.03% N/A N/A 8.99% 12/31/96 12/31/96
Duration
- ------------------------------------------------------------------------------------------------------------
Real Return Institutional 6.60% N/A N/A 5.61% 01/29/97 01/29/97
Bond Class A 2.97 3.28 01/29/97
Class B 0.40 2.09 01/29/97
Class C 4.65 4.64 01/29/97
Class D 6.18 5.19 04/08/98
- ------------------------------------------------------------------------------------------------------------
Total Return Institutional 12.54% 7.96% 10.38% 10.08% 05/11/87 05/11/87
Administrative 12.25 7.70 10.12 9.82 09/08/94
Class A 6.97 6.49 9.38 9.15 01/13/97
Class B 6.17 6.39 9.09 8.79 01/13/97
Class C 10.l9 6.69 9.09 8.79 01/13/97
Class D 12.21 7.64 10.05 9.75 04/08/98
- ------------------------------------------------------------------------------------------------------------
Total Return II Institutional 13.10% 7.78% N/A 8.87% 12/30/91 12/30/91
Administrative 12.81 7.51 8.59 11/30/94
- ------------------------------------------------------------------------------------------------------------
Total Return Institutional 12.68% 8.04% N/A 10.01% 05/01/91 05/01/91
III Administrative 12.40 7.76 9.74 04/11/97
- ------------------------------------------------------------------------------------------------------------
Total Return Institutional 10.25% N/A N/A 10.29% 07/31/97 07/31/97
Mortgage 9.83 9.87
- ------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
Since Inception Inception Inception
of Fund Date of Date of
Fund Class** 1 Year 5 Years 10 Years (Annualized) Fund Class
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield Institutional 5.07% 10.88% N/A 11.83% 12/16/92 12/16/92
Administrative 4.82 10.61 11.56 01/16/95
Class A -0.05 9.45 10.53 01/13/97
Class B -0.93 9.40 10.51 01/13/97
Class C 2.91 9.68 10.62 01/13/97
Class D 4.70 10.48 11.43 04/08/98
- ------------------------------------------------------------------------------------------------------------
Long-Term U.S. Institutional 22.67% 9.92% N/A 13.82% 07/01/91 07/01/91
Government Administrative 22.34 9.66 13.57 09/23/97
Class A 16.70 8.51 12.70 01/20/97
Class B 16.26 8.41 12.59 01/20/97
Class C 20.27 8.70 12.61 01/20/97
- ------------------------------------------------------------------------------------------------------------
Global Bond Institutional 8.63% N/A N/A 8.78% 11/23/93 11/23/93
Administrative 8.50 8.56 07/31/96
- ------------------------------------------------------------------------------------------------------------
Foreign Bond Institutional 10.53% 10.68% N/A 11.45% 12/03/92 12/03/92
Administrative 10.26 10.41 11.19 01/28/97
Class A 5.08 9.18 10.09 01/20/97
Class B 4.28 9.11 10.06 01/20/97
Class C 8.21 9.38 10.16 01/20/97
Class D 10.07 10.21 10.98 04/08/98
- ------------------------------------------------------------------------------------------------------------
International Institutional 7.17% 8.94% N/A 9.35% 12/13/89 12/13/89
Bond
- ------------------------------------------------------------------------------------------------------------
Emerging Institutional -24.78% N/A N/A -20.61% 07/31/97 07/31/97
Markets Bond Administrative -25.71 -21.47 09/30/98
Class A -28.45 -23.98 07/31/97
Class B -29.07 -24.00 07/31/97
Class C -26.35 -21.55 07/31/97
- ------------------------------------------------------------------------------------------------------------
Emerging Institutional N/A N/A N/A -9.69% 04/08/98 04/08/98
Markets Bond
II
- ------------------------------------------------------------------------------------------------------------
Municipal Bond Institutional N/A N/A N/A 5.88%+ 12/31/97 12/31/97
Administrative 5.33+ 09/30/98
Class A 2.42+ 04/01/98
Class B 0.00+ 04/01/98
Class C 4.19+ 04/01/98
Class D 5.59+ 04/08/98
- ------------------------------------------------------------------------------------------------------------
Strategic Institutional 9.78% N/A N/A 18.37% 06/28/96 06/28/96
Balanced Class D 9.49 17.94 04/08/98
- ------------------------------------------------------------------------------------------------------------
StocksPLUS Institutional 8.48% 20.78% N/A 20.42% 05/13/93 05/13/93
Administrative 8.05 20.42 20.06 01/07/97
Class A 4.80 19.58 19.28 01/20/97
Class B 2.66 19.21 18.99 01/20/97
Class C 6.62 19.71 19.36 01/20/97
Class D 8.05 20.31 19.96 04/08/98
- ------------------------------------------------------------------------------------------------------------
</TABLE>
+ unannualized
* Average annual total return presentations for a particular class of shares
assume payment of the current maximum sales charge (if any) applicable to that
class at the time of purchase and assume that the maximum CDSC (if any) for
Class A, Class B and Class C shares was deducted at the times, in the amounts,
and under the terms discussed in the Class A, B and C Prospectus.
66
<PAGE>
** For all Funds listed above, Class A, Class B, Class C, Class D and
Administrative Class total return presentations for periods prior to the
Inception Date of that class reflect the prior performance of Institutional
Class shares of the Fund (the oldest class) adjusted to reflect the actual
sales charges (none in the case of Class D and Administrative Class) of the
newer class. The adjusted performance also reflects the higher Fund operating
expenses associated with Class A, Class B, Class C, Class D and Administrative
Class shares. These include (i) 12b-1 distribution and servicing fees, which
are not paid by the Institutional Class but are paid by Class B and Class C
(at a maximum rate of 1.00% per annum) and Class A and the Administrative
Class (at a maximum rate of 0.25% per annum), and may be paid by Class D (at a
maximum of 0.25% per annum), and (ii) administration fee charges associated
with Class A, Class B and Class C shares (at a maximum differential of 0.22%
per annum) and Class D shares (at a maximum differential of 0.45% per annum).
The table below sets forth the average annual total return of certain classes
of shares of the PIMCO Global Bond Fund II (which was a series of PIMCO
Advisors Funds ("PAF") prior to its reorganization as a Fund of the Trust on
January 17, 1997) for the periods ended September 30, 1998. Accordingly,
"Inception Date of Fund" refers to the inception date of the PAF predecessor
series. Since Class A shares were offered since the inception of PIMCO Global
Bond Fund II, total return presentations for periods prior to the Inception Date
of the Institutional Class are based on the historical performance of Class A
shares, adjusted to reflect that the Institutional Class does not have a sales
charge, and the different operating expenses associated with the Institutional
Class, such as 12b-1 distribution and servicing fees and administration fee
charges.
Total Return for Periods Ended September 30, 1998*
<TABLE>
<CAPTION>
Since Inception
of Fund Inception Inception
(Annual- Date of Date of
Fund Class** 1 Year 5 Years 10 Years ized) Fund Class
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Global Bond II Institutional 7.87% N/A N/A 11.56% 10/02/95 02/25/98
Class A 2.62 9.44 10/02/95
Class B 2.27 9.45 10/02/95
Class C 5.75 10.27 10/02/95
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Average annual total return presentations for a particular class of shares
assume payment of the current maximum sales charge (if any) applicable to that
class at the time of purchase and assume that the maximum CDSC (if any) for
Class A, Class B and Class C shares was deducted at the times, in the amounts,
and under the terms discussed in the Class A, B and C Prospectus.
** Institutional Class total return presentations for periods prior to the
Inception Date of that class reflect the prior performance of Class A shares
of the former PAF series, adjusted to reflect the fact that there are no sales
charges on Institutional Class shares of the Fund. The adjusted performance
also reflects any different operating expenses associated with Institutional
Class shares. These include (i) 12b-1 distribution and servicing fees, which
are not paid by the Institutional Class but are paid by Class A (at a maximum
rate of 0.25% per annum), and (ii) administration fee charges, which are lower
for Institutional class shares (at a differential of 0.15% per annum).
Note also that, prior to January 17, 1997, Class A, Class B and Class C shares
of the PIMCO Global Bond Fund II were subject to a variable level of expenses
for such services as legal, audit, custody and transfer agency services. As
described in the Class A, B and C Prospectus, for periods subsequent to
January 17, 1997, Class A, Class B and Class C shares of the Trust are subject
to a fee structure which essentially fixes these expenses (along with other
administrative expenses) under a single
67
<PAGE>
administrative fee based on the average daily net assets of the Fund
attributable to Class A, Class B and Class C shares. Under the current fee
structure, the PIMCO Global Bond Fund II is expected to have lower total Fund
operating expenses than its predecessor had under the fee structure for PAF
(prior to January 17, 1997). All other things being equal, the higher expenses
of PAF would have adversely affected total return performance for the Fund
after January 17, 1997.
The method of adjustment used in the table above for periods prior to the
Inception Date of Institutional Class shares of the PIMCO Global Bond Fund II
resulted in performance for the period shown which is higher than if the
historical Class A performance were not adjusted to reflect the lower
operating expenses of the newer class. The following table shows the lower
performance figures that would be obtained if the performance for the
Institutional Class was calculated by tacking to the Institutional Class'
actual performance the actual performance of Class A shares (with their higher
operating expenses) for periods prior to the initial offering date of the
newer class (i.e. the total return presentations below are based, for periods
prior to the inception date of the Institutional Class, on the historical
performance of Class A shares adjusted to reflect the current sales charges
associated with Class A shares, but not reflecting lower operating expenses
---
associated with the Institutional Class, such as lower administrative fee
charges and/or distribution and servicing fee charges).
Total Return for Periods Ended September 30, 1998
(with no adjustment for operating expenses of the Institutional
Class for periods prior to its Inception Date)
<TABLE>
<CAPTION>
Since Inception
of Fund
Fund Class 1 Year 5 Years 10 Years (Annualized)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Global Bond II Institutional 7.71% N/A N/A 11.23%
- --------------------------------------------------------------------------------------------------
</TABLE>
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.
For the month ended September 30, 1998, the current distribution rates
(annualized) for the Funds were as follows (Class D shares were not offered
during the period listed):
68
<PAGE>
Distribution Rate
-----------------
<TABLE>
<CAPTION>
Institutional Administrative
Fund Class Class Class A Class B Class C Class D
- ---- ----- ----- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund 5.22% 5.24% 5.00% 3.96% 5.00% N/A
Short-Term Fund 5.95% 5.70% 5.55% 4.82% 5.25% 5.66%
Low Duration Fund 6.72% 6.48% 6.27% 5.52% 5.77% 6.41%
Low Duration Fund II 5.93% 5.68% N/A N/A N/A N/A
Low Duration Fund III 6.17% N/A N/A N/A N/A N/A
Low Duration Mortgage Fund 6.41% N/A N/A N/A N/A N/A
Moderate Duration Fund 5.64% N/A N/A N/A N/A N/A
Real Return Bond Fund 5.70% N/A 5.30% 4.55% 4.80% 5.30%
Total Return Fund 5.98% 5.73% 5.51% 4.76% 4.77% 5.67%
Total Return Fund II 5.68% 5.45% N/A N/A N/A N/A
Total Return Fund III 6.23% 5.99% N/A N/A N/A N/A
Total Return Mortgage Fund 5.60% N/A N/A N/A N/A N/A
High Yield Fund 8.80% 8.59% 8.43% 7.66% 7.66% 8.43%
Municipal Bond Fund 4.26% N/A 3.91% 3.17% 3.41% 3.90%
Long-Term U.S. Govt. Fund 5.11% 4.85% 4.75% 3.94% 3.91% N/A
Global Bond Fund 5.89% 7.31% N/A N/A N/A N/A
Global Bond Fund II 5.28% N/A 4.86% 4.18% 4.16% N/A
Foreign Bond Fund 5.26% 5.02% 4.77% 4.01% 4.02% 4.76%
International Bond Fund N/A N/A N/A N/A N/A N/A
Emerging Markets Bond Fund 11.95% N/A 11.55% 10.75% 10.95% N/A
Emerging Markets Bond Fund II 10.20% N/A N/A N/A N/A N/A
Strategic Balanced Fund N/A N/A N/A N/A N/A N/A
StocksPLUS Fund N/A N/A N/A N/A 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 Lehman
Brothers Mortgage-Backed Securities 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 J.P. Morgan Emerging Markets Bond
Index Plus, 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.
Advertisements and information relating to the PIMCO Global Bond Fund II may
use data comparing the total returns of the top foreign bond market as compared
to the total return of the U.S. bond market for a particular year. For instance,
the following table sets forth the total return of the top foreign
69
<PAGE>
bond market compared to the total return for the U.S. bond market for the years
1986 through 1997. Performance is shown in U.S. dollar terms, hedged for
currency rate changes and is no way indicative of the performance of the PIMCO
Global Bond Fund II.
<TABLE>
<CAPTION>
Top Foreign
Year Performer U.S.
---- ----------- ----
<S> <C> <C> <C>
1986 +13.1% Japan +15.7%
1987 +12.8 UK +1.9
1988 +15.0 France +7.0
1989 +10.0 Canada +14.4
1990 +11.0 Australia +8.6
1991 +20.0 Australia +15.3
1992 +10.5 UK +7.2
1993 +20.0 Italy +11.0
1994 -0.9 Japan -3.4
1995 +21.0 Netherlands +18.3
1996 +18.8 Spain +2.7
1997 +13.5 UK +9.6
</TABLE>
Source: Salomon Brothers World Government Bond Index 1986-1997.
The Trust may use, in its advertisements and other information, data
concerning the projected cost of a college education in future years based on
1996/1997 costs of college and an assumed rate of increase for such costs. For
example, the table below sets forth the projected cost of four years of college
at a public college and a private college assuming a steady increase in both
cases of 3% per year. In presenting this information, the Trust is making no
prediction regarding what will be the actual growth rate in the cost of a
college education, which may be greater or less than 3% per year and may vary
significantly from year to year. The Trust makes no representation that an
investment in any of the Funds will grow at or above the rate of growth of the
cost of a college education.
Potential College Cost Table
<TABLE>
<CAPTION>
Start Public Private Start Public Private
Year College College Year College College
- ---- ------- ------- ----- ------- -------
<S> <C> <C> <C> <C> <C>
1997 $13,015 $57,165 2005 $16,487 $72,415
1998 $13,406 $58,880 2006 $16,982 $74,587
1999 $13,808 $60,646 2007 $17,491 $76,825
2000 $14,222 $62,466 2008 $18,016 $79,130
2001 $14,649 $64,340 2009 $18,557 $81,504
2002 $15,088 $66,270 2010 $19,113 $83,949
2003 $15,541 $68,258 2011 $19,687 $86,467
2004 $16,007 $70,306 2012 $20,278 $89,061
</TABLE>
Costs assume a steady increase in the annual cost of college of 3% per year from
a 1996-97 base year amount. Actual rates of increase may be more or less than 3%
and may vary.
In its advertisements and other materials, the Trust may compare the returns
over periods of time of investments in stocks, bonds and treasury bills to each
other and to the general rate of inflation. For example, the average annual
return of each during the 25 years from 1974 to 1998 was:
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<PAGE>
*Stocks: 14.9%
Bonds: 9.9%
T-Bills: 7.0%
Inflation: 5.2%
*Returns of unmanaged indices do not reflect past or future performance of
any of the Funds of PIMCO Funds: Pacific Investment Management Series. Stocks
are represented by Ibbotson's Common Stock Total Return Index. Bonds are
represented by Ibbotson's Long-term Corporate Bond Index. T-bills are
represented by Ibbotson's Treasury Bill Index and Inflation is represented by
the Cost of Living Index. These are all unmanaged indices, which can not be
invested in directly. While Treasury bills are insured and offer a fixed rate of
return, both the principal and yield of investment securities will fluctuate
with changes in market conditions. Source: Ibbotson, Roger G., and Rex A.
Sinquefiled, Stocks, Bonds, Bill and Inflation (SBBI), 1989, updated in Stocks,
Bonds, Bills and Inflation 1999 Yearbook, Ibbotson Associates, Chicago. All
rights reserved.
The Trust may also compare the relative historic returns and range of
returns for an investment in each of common stocks, bonds and treasury bills to
a portfolio that blends all three investments. For example, over the 25 years
from 1974-1998, the average annual return of stocks comprising the Ibbotson's
Large Company Stock Total Return Index ranged from -26.5% to 37.4% while the
annual return of a hypothetical portfolio comprised 40% of such common stocks,
40% of bonds comprising the Ibbotson's Long-term Corporate bond Index and 20% of
Treasury bills comprising the Ibbottson's Treasury Bill Index (a "mixed
portfolio") would have ranged from -10.2% to 28.2% over the same period. The
average annual returns of each investment for each of the years from 1974
through 1998 is set forth in the following table.
<TABLE>
<CAPTION>
MIXED
YEAR STOCKS BONDS T-BILLS INFLATION PORTFOLIO
- -------- ------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1974 -26.47% -3.06% 8.00% 12.26% -10.21%
1975 37.20% 14.64% 5.80% 7.01% 21.90%
1976 23.84% 18.65% 5.08% 4.81% 18.01%
1977 -7.18% 1.71% 5.12% 6.77% -1.17%
1978 6.56% -0.07% 7.18% 9.03% 4.03%
1979 18.44% -4.18% 10.38% 13.31% 7.78%
1980 32.42% 2.61% 11.24% 12.40% 14.17%
1981 -4.91% -0.96% 14.71% 8.94% 0.59%
1982 21.41% 43.79% 10.54% 3.87% 28.19%
1983 22.51% 4.70% 8.80% 3.80% 12.64%
1984 6.27% 16.39% 9.85% 3.95% 11.03%
1985 32.16% 30.90% 7.72% 3.77% 26.77%
1986 18.47% 19.85% 6.16% 1.13% 16.56%
1987 5.23% -0.27% 5.46% 4.41% 3.08%
1988 16.81% 10.70% 6.35% 4.42% 12.28%
1989 31.49% 16.23% 8.37% 4.65% 20.76%
1990 -3.17% 6.87% 7.52% 6.11% 2.98%
1991 30.55% 19.79% 5.88% 3.06% 21.31%
1992 7.67% 9.39% 3.51% 2.90% 7.53%
1993 10.06% 13.17% 2.89% 2.75% 9.84%
1994 1.31% -5.76% 3.90% 2.67% -1.00%
1995 37.40% 27.20% 5.60% 2.70% 26.90%
1996 23.10% 1.40% 5.20% 3.30% 10.84%
1997 33.40% 12.90% 7.10% 1.70% 19.94%
1998 28.58% 10.76% 4.86% 1.61% 16.70%
</TABLE>
*Returns of unmanaged indices do not reflect past or future performance of any
of the Funds of PIMCO Funds: Pacific Investment Management Series. Stocks are
represented by Ibbotson's Large Company Stock
71
<PAGE>
Total Return Index. Bonds are represented by Ibbotson's Long-term Corporate Bond
Index. T'bills are represented by Ibbotson's Treasury Bill Index and Inflation
is represented by the Cost of Living Index. These are all unmanaged indices,
which can not be invested in directly. While Treasury bills are insured and
offer a fixed rate of return, both the principal and yield of investment
securities will fluctuate with changes in market conditions. Source: Ibbotson,
Roger G., and Rex A. Sinquefiled, Stocks, Bonds, Bill and Inflation (SBBI),
1989, updated in Stocks, Bonds, Bills and Inflation 1997 Yearbook, Ibbotson
Associates, Chicago. All rights reserved.
The Trust may use in its advertisement and other materials examples designed
to demonstrate the effect of compounding when an investment is maintained over
several or many years. For example, the following table shows the annual and
total contributions necessary to accumulate $200,000 of savings (assuming a
fixed rate of return) over various periods of time:
<TABLE>
<CAPTION>
Investment Annual Total Total
Period Contribution Contribution Saved
- ---------------- ------------ ------------ --------
<S> <C> <C> <C>
30 Years $ 1,979 $ 59,370 $200,000
25 Years $ 2,955 $ 73,875 $200,000
20 Years $ 4,559 $ 91,180 $200,000
15 Years $ 7,438 $111,570 $200,000
10 Years $13,529 $135,290 $200,000
</TABLE>
This hypothetical example assumes a fixed 7% return compounded annually and a
guaranteed return of principal. The example is intended to show the benefits of
a long-term, regular investment program, and is in no way representative of any
past or future performance of a PIMCO Fund. There can be no guarantee that you
will be able to find an investment that would provide such a return at the times
you invest and an investor in any of the PIMCO Funds should be aware that
certain of the PIMCO Funds have experienced periods of negative growth in the
past and may again in the future.
The Trust may set forth in its advertisements and other materials
information regarding the relative reliance in recent years on personal savings
for retirement income versus reliance on Social Security benefits and company
sponsored retirement plans. For example, the following table offers such
information for 1997:
% of Income for Individuals
Aged 65 Years and Older in 1997*
--------------------------------
Social Security
Year and Pension Plans Other
---- ----------------- -----
1997 43% 57%
* For individuals with an annual income of at least $51,000. Other
includes personal savings, earnings and other undisclosed sources of income.
Source: Social Security Administration.
Articles or reports which include information relating to performance,
rankings and other characteristics of the Funds may appear in various national
publications and services including, but not limited to: The Wall Street
Journal, Barron's, Pensions and Investments, Forbes, Smart Money, Mutual Fund
Magazine, The New York Times, Kiplinger's Personal Finance, Fortune, Money
Magazine, Morningstar's Mutual Fund Values, CDA Investment Technologies and The
Donoghue Organization. Some or all of these publications or reports may publish
their own rankings or performance reviews of mutual funds, including the Funds,
and may provide information relating to the Adviser, including descriptions of
assets under management and client base, and opinions of the author(s) regarding
the skills of personnel and employees of the Adviser who have portfolio
management responsibility. From time to time, the Trust may
72
<PAGE>
include references to or reprints of such publications or reports in its
advertisements and other information relating to the Funds.
From time to time, the Trust may set forth in its advertisements and other
materials information about the growth of a certain dollar-amount invested in
one or more of the Funds over a specified period of time and may use charts and
graphs to display that growth.
From time to time, the Trust may set forth in its advertisements and other
materials the names of and additional information regarding investment analysts
employed by the Adviser who assist with portfolio management and research
activities on behalf of the Funds. The following lists various analysts
associated with the Adviser: Jane Howe, Mark Hudoff, Doris Nakamura and Ray
Kennedy.
Ibbotson Associates ("Ibbotson") has analyzed the risk and returns of the
Funds and relevant benchmark market indexes in a variety of market conditions.
Based on its independent research and analysis, Ibbotson has developed model
portfolios of the Funds and series of PIMCO Funds: Multi-Manager Series ("MMS")
which indicate how, in Ibbotson's opinion, a hypothetical investor with a 5+
year investment horizon might allocate his or her assets among the Funds and
series of MMS. Ibbotson bases its model portfolios on five levels of investor
risk tolerance which it developed and defines as ranging from "Very
Conservative" (low volatility; emphasis on capital preservation, with some
growth potential) to "Very Aggressive" (high volatility; emphasis on long-term
growth potential). However, neither Ibbotson nor the Trust offers Ibbotson's
model portfolios as investments. Moreover, neither the Trust, the Adviser nor
Ibbotson represent or guarantee that investors who allocate their assets
according to Ibbotson's models will achieve their desired investment results.
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 March 10, 1999, the following persons owned of record or
beneficially 5% or more of the noted class of shares of the following
Funds:
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<PAGE>
As of March 10, 1999, the following persons owned of record or beneficially
5% or more of the noted class of shares of the following Funds:
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Beneficially Shares of
Owned Class Owned
----- -----------
<S> <C> <C>
PIMCO Money Market Fund
Institutional
Combined Master Retirement Trust 257,264,584.480 82.36%*
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240
Administrative
Maltrust & Co. (Hooker & Holcombe, Inc.) 2,647,413.450 26.29%
225 Essex Street
Salem, Massachusetts 01970
Security Trust for Group Health Cooperative of 982,331.610 9.75%
Puget Sound 403b Group Cust Account
2525 E. Camelback #570
Phoenix, Arizona 85016
Class A
Carn & Co. 7,714,591.930 10.03%
PIMCO Advisors
401K Savings and Investment Plan
Attention: Mutual Fund Department
P. O. Box 96211
Washington D.C. 20090-6211
PIMCO Short-Term Fund
Institutional
Soka University of America 6,704,510.365 13.60%
26800 W. Mulholland Highway
Attention: Arnold Kawasaki
Calabasas, California 91302
Trustees of Columbia University in 4,269,587.457 8.66%
the City of New York
Office of Investments
475 Riverside Dr., Suite 401
New York, New York 10115
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Charles Schwab & Co., Inc. ** 4,088,769.585 8.30%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
Bankers Trust Company FBO: 3,715,077.868 7.54%
Georgia-Pacific Corporation Master Trust for Employee
648 Grassmere Business Park Rd.
Advisor Services Group, 2nd Floor
Nashville, Tennessee 37211
State Street Bank & Trust Ttee FBO 3,427,834.849 6.96%
Schwan's Sales Enterprises Profit Sh Plan
200 Newport Avenue
7th Floor
North Quincy, Massachusetts 02171
National Gallery of Art 3,004,030.969 6.10%
4th and Constitution Avenue
N.W. Room 605
Washington, DC 20565
Northern Trust Company as TTEE FBO 2,773,337.650 5.63%
Trigon Services, Inc.
P.O. Box 92956
Chicago, Illinois 60675
FTC & Co. Ayyn: DATAlynx House Account 2,476,657.792 5.03%
P.O. Box 173736
Denver, Colorado 80217-3736
Administrative
Investors Fiduciary Trust Company Cust FBO 498,937.454 52.40%
Centurion Trust Company
Attn: Trust Operations
801 Pennsylvania
Kansas City, Missouri 64105
FTC and Company 169,645.996 17.82%
Attn: DATAlynx #083
P.O. Box 173736
Denver, Colorado 80217
Lau & Co. c/o Frost 48,208.798 5.06%
National Bank
P. O. Box 2479
San Antonio, Texas 78298-2479
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Class A
MLPF&S For the Sole Benefit of its Customers ** 1,729,009.006 22.53%
Attention: Fund Administration #97MY2
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Mr. Ronald S. Taft TR 642,290.695 8.37%
Artist Management Inc.
Defined Benefit Pension Plan 61284
18 W. 55th Street, Apt. 4
New York, New York 10019-5368
PaineWebber FBO 561,171.154 7.31%
Adventist Healthcare Inc. - Fixed Income
Dan Bowen
1801 Research Boulevard, Suite 300
Rockville, Maryland 20850-3152
Mr. Ronald S. Taft TR 478,619.704 6.24%
Ronald S. Taft Employee Defined Benefit Plan 1184
18 W. 55th Street, Apt. 4
New York, New York 10019-5368
Class B
MLPF&S For the Sole Benefit of its Customers ** 183,715.538 51.35%
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Donaldson Lufkin Jenrette 36,004.072 10.06%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303-9998
Class C
MLPF&S For the Sole Benefit of its Customers ** 465,426.309 30.52%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Prudential Securities FBO 99,724.378 6.54%
Oakwood Orthopaedic Clinic PA
PS P&T DTD 12/30/1974
Drs. Manning & Evins TTEES
Greenville, South Carolina 29605-4235
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Class D
Charles Schwab & Co., Inc.** 214,790.401 99.61%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
PIMCO Low Duration Fund
Institutional
Charles Schwab & Co., Inc. Rein** 34,418,444.551 10.17%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
Administrative
FIIOC as Agent for Certain Employee Benefits Plan** 2,350,985.929 18.63%
100 Magellan KW1C
Covington, Kentucky 41015
Centurion Trust Co. 2,209,127.519 17.51%
801 Pennsylvania
Kansas City, Missouri 64105
McClatchy Newspapers Defined Comp. Inv. Plan 1,712,773.448 13.57%
550 Kearny Street #600
San Francisco, California 94108
Bankers Trust TTEE FBO 1,381,814.586 10.95%
Mapco Coal
100 Plaza One
Jersey City, New Jersey 07311-3999
Sonnenschein, Nath &Rosenthal 1,238,980.321 9.82%
P. O. Box 419260
Kansas City, Missouri 64141-6260
FIIOC as agent for Certain Non-Qualified Employees 682,749.359 5.41%
Benefit Plans**
100 Magellan Way (KWIC)
Covington, Kentucky 41015
Class A
MLPF&S For the Sole Benefit of its Customers ** 4,550,732.072 25.29%
Attention: Fund Administration
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Richard J. Steinhelper Tr 3,549,676.987 19.72%
Michigan Tooling Association
Benefit Plans Investment Trust
28237 Orchard Lake Road
P. O. Box 9151
Farmington Hills, Michigan 48333-9151
Class B
MLPF&S For the Sole Benefit of its Customers ** 1,418,399.536 22.76%
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class C
MLPF&S For the Sole Benefit of its Customers ** 3,012,711.388 28.01%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.** 538,730.761 94.56%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
PIMCO Low Duration Fund II
Institutional
Sprint Retirement Savings Plan 15,236,499.486 36.67%*
82 Devonshire Street - E1GA
Boston, Massachusetts 02109
American Bible Society 6,758,433.338 16.26%
1865 Broadway
New York, New York 10023
Salt River Project Decom Trust 3,960,877.861 9.53%
P. O. Box 52025
Phoenix, Arizona 85072
Bankers Trust Company TTEE FBO 2,338,801.114 5.63%
Nestle USA Inc. Savings Trust
100 Plaza One
Mailstop 3048
Jersey City, New Jersey 07311-3999
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
University of Illinois Foundation 2,310,811.820 5.56%
1305 West Green Street
Urbana, Illinois 61801
Administrative
Integris Retirement Pension Plan 1,088,157.723 48.67%
9520 North May Avenue, Suite 200
Oklahoma City, Oklahoma 73120-2711
Integris Baptist Med. Ctr. Funded Dep 503,727.177 22.53%
9520 North May Avenue, Suite 200
Oklahoma City, Oklahoma 73120-2711
Integris Baptist Medical Center Foundation, Inc. 444,580.518 19.88%
9520 North May Avenue, Suite 200
Oklahoma City, Oklahoma 73120-2711
Integris SW Med. Ctr. Funded Dep 168,946.270 7.56%
9520 North May Avenue, Suite 200
Oklahoma City, Oklahoma 73120-2711
PIMCO Low Duration Fund III
Institutional
Loyola Academy Endowment Fund 1,007,892.343 38.05%*
135 S. LaSalle Street
P. O. Box 1443
Chicago, Illinois 60690
Sisters of St. Joseph/Michigan 770,770.124 29.10%*
3427 Gull Road
P. O. Box 13
Nazareth, Michigan 49074
St. John Health System 574,284.957 21.68%
22101 Moross Road
Detroit, Michigan 48236
Charles Schwab & Co., Inc. Rein** 231,513.902 8.74%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
PIMCO Low Duration Mortgage Fund
Institutional
Pacific Investment Management Company 367,096.023 89.66%*
840 Newport Center Drive
Newport Beach, California 92660
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Charles Schwab & Co., Inc. Rein** 42,349.431 10.34%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
PIMCO Moderate Duration Fund
Institutional
Sparrow Health Systems 6,043,935.893 18.92%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, Pennsylvania 15230-3198
Columbus Circle Trust Co-SV** 4,201,275.114 13.15%
1 Station Place Metro Center
Stamford, Connecticut 06902
Baystate Health System Inc. 2,888,423.020 9.04%
Mutual Funds Operations
P. O. Box 3198
Pittsburgh, Pennsylvania 15230-3198
The Children's Hospital Association 2,217,745.693 6.94%
1056 E. 19th Avenue B020
Denver, Colorado 80218
Samaritan Health System Retirement Income Plan 1,978,353.132 6.19%
300 S. Grand Ave. 40th Floor
Los Angeles, California 90071
St. John Hospital of Detroit, Michigan 1,876,161.482 5.87%
P. O. Box 771072
Detroit, Michigan 48277-1072
Washington Teamsters 1,831,487.363 5.73%
Attention: Jack Cowan
2323 Eastlake Avenue E.
Seattle, Washington 98102
PIMCO Real Return Bond Fund
Institutional
Schroder Wertheim & Co., Inc. 552,617.826 35.16%
Mutual Fund Control Account
c/o Lewco Securities
34 Exchange Place 4th Fl
Jersey City, New Jersey 07311
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
National Financial Services Corporation ** 482,643.165 30.70%
1 World Financial Center
200 Liberty Street
New York, New York 10281
Charles Schwab & Co., Inc. Rein** 208,440.765 13.26%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
Brent R. Harris or Elizabeth E. Harris, JTWROS 154,191.501 9.81%
c/o 800 Newport Center Drive
Newport Beach, California 92660
Class A
Lewco Securities Corp. FBO 512,022.792 92.01%
A/C# H30-627865-6-01
34 Exchange Place, 4th Floor
Jersey City, New Jersey 07311
Class B
MLPF&S For the Sole Benefit of its Customers ** 64,966.554 17.60%
Attention: Fund Administration
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Everen Clearing Corp. 36,593.761 9.91%
A/C# 3276-2387
Barbara K. Fritzberg
111 East Kilbourn Avenue
Milwaukee, Wisconsin 53202
Donaldson Lufkin Jenrette 36,535.520 9.90%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303-9998
Dain Rauscher Inc. FBO 25,081.933 6.79%
Evangelical Free Church of America
EFCM Project & Capital #2
Attention: William V. Arvold III
901 East 78th Street
Minneapolis, Minnesota 55420-1300
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Class C
PaineWebber CDN FBO 21,187.178 9.02%
John A. Conner
P.O. Box 3321
Weehawken, New Jersey 07087-8154
MLPF&S For the Sole Benefit of its Customers ** 18,492.666 7.88%
Attention: Fund Administration
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Bear Stearns Securities Corp. 14,846.692 6.32%
For the Benefit of 722-06610-16
1 MetroTech Center North
Brooklyn, New York 11201-3870
Class D
PIMCO Advisors L.P. 10,710.821 56.25%
800 Newport Center Drive
Newport Beach, California 92660
Charles Schwab & Co., Inc.** 8,331.741 43.75%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
PIMCO Total Return Fund
Institutional
Charles Schwab & Co., Inc. Rein** 147,783,008.199 7.25%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
Administrative
Nikko Securities Co., Ltd.** 67,568,213.000 36.90%
3-1 Marunouchi 3Chrome, Chiyodaku
Tokyo, Japan 101-0064
FIIOC as Agent for Certain Employee Benefits Plan** 33,457,592.622 18.27%
100 Magellan KW1C
Covington, Kentucky 41015
National Financial Services Corporation ** 25,516,100.460 13.93%
1 World Financial Center
200 Liberty Street
New York, New York 10281
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
American Express Trust Company ** 11,696,181.923 6.39%
N10/996
P. O. Box 534
Minneapolis, Minnesota 55440-0534
Class A
MLPF&S For the Sole Benefit of its Customers ** 54,768,547.349 51.03%
Attention: Fund Administration
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class B
MLPF&S For the Sole Benefit of its Customers ** 19,276,764.226 38.43%
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class C
MLPF&S For the Sole Benefit of its Customers ** 23,263,965.508 35.14%
Attention: Fund Administration
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.** 2,854,547.477 95.53%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
Total Return Fund II
Institutional
John Muir/Mt. Diablo Health System 11,032,956.414 11.79%
1400 Treat Boulevard
Walnut Creek, California 94598
Charles Schwab & Co., Inc. Rein** 9,351,817.761 10.00%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
IUE AFL-CIO Pension Plan 6,639,593.698 7.10%
1460 Broad Street
Blommfield, New Jersey 07003
The Trustees of GMP Employers Pension 5,755,957.172 6.15%
205 W. 4th Street, Suite 225
Cincinnati, Ohio 45202
</TABLE>
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<CAPTION>
<S> <C> <C>
Macmillan Bloedel Pension Plan 5,619,421.958 6.01%
c/o State Street Bank and Trust Co.
200 Newport Avenue #JQ7
North Quincy, Massachusetts 02171
Fleet National Bank Cust FBO Polytechnic 5,472,184.777 5.85%
University
Attn: Leila Rice a/c 0005119450
P.O. Box 92800
Rochester, New York 14609
Witco Corporation Retirement Plan 5,354,950.593 5.72%
One American Lane
Greenwich, Connecticut 06831
Reeving & Co. (ARCO) by State Street Bank 4,812,016.380 5.14%
and Trust Company
One Enterprise Drive
North Quincy, Massachusetts 02171-2126
Administrative
Twin City Pipe Trades Retire Plan 3,958,038.465 53.03%
2525 E. Camelback Rd. #570
Phoenix, Arizona 85016
Integris Retirement Pension Plan 1,063,519.122 14.25%
9520 North May Avenue, Suite 200
Oklahoma City, Oklahoma 73120-2711
Integris Baptist Med. Ctr. Funded Dep. 495,245.493 6.64%
9520 North May Avenue, Suite 200
Oklahoma City, Oklahoma 73120-2711
Integris Baptist Medical Center Foundation, Inc. 434,634.395 5.82%
9520 North May Avenue, Suite 200
Oklahoma City, Oklahoma 73120-2711
PIMCO Total Return Fund III
Institutional
Archdiocese of LA/Corp/Diocese Tucson 11,532,329.508 22.81%
3424 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010-2241
Mac & Co Acct SPDF7002552 4,094,730.365 8.10%
Mutual Funds Operations
P.O. Box 3198
Pittsburgh, Pennsylvania 15230-3198
</TABLE>
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<CAPTION>
<S> <C> <C>
Diocese of Orange 3,286,833.940 6.50%
2811 East Villa Road
Orange, California 92667
Charles Schwab & Co., Inc. Rein** 2,528,927.914 5.00%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
Administrative
Lumpkin Foundation (PaineWebber) 171,127.685 85.30%
P. O. Box 1097
Mattoon, Illinois 61938
Dubuque Bank & Trust Co. ** 24,683.050 12.30%
Attention: Trust Department
Dubuque, Iowa 5200-0747
PIMCO Total Return Mortgage Fund
Institutional
Pacific Investment Management Company 365,464.765 90.68%*
840 Newport Center Drive
Newport Beach, California 92660
Charles Schwab & Co., Inc. Rein** 33,236.793 8.25%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
Class D 10,299.682 57.59%
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, California 92660
Charles Schwab & Co., Inc.** 7,585.332 42.41%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
PIMCO High Yield Fund
Institutional 26,565,912.607 15.36%
Charles Schwab & Co., Inc. Rein**
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
</TABLE>
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<TABLE>
<S> <C> <C>
Administrative 15,552,157.451 77.44%
National Financial Services Corporation**
1 World Financial Center
200 Liberty Street
New York, New York 10281
2,034,748.643 10.13%
FIIOC as Agent for Certain Employee Benefits Plan**
100 Magellan KW1C
Covington, Kentucky 41015
Class A 2,626,967.006 20.99%
MLPF&S For the Sole Benefit of its Customers**
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class B 6,571,896.505 27.12%
MLPF&S For the Sole Benefit of its Customers**
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class C 5,899,302.157 18.30%
MLPF&S For the Sole Benefit of its Customers**
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.** 623,561.332 93.59%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
PIMCO Long-Term U.S. Government Fund
Institutional
The St. Joe Company Salaried Pension Plan 5,142,367.093 31.35%
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
The St. Joe Company Hourly Pension Plan 1,780,644.180 10.85%
1650 Prudential Drive, Suite 400
Jacksonville, Florida 32207
Allianz Defined Contribution Plan 1,742,203.496 10.62%
P. O. Box 92956
Chicago, Illinois 60675
</TABLE>
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<S> <C> <C>
Chicago Symphony Orchestra 1,434,412.540 8.74%
220 South Michigan Avenue
Chicago, Illinois 60604
Society of the Holy Child Jesus Retirement 917,014.020 5.59%
P. O. Box 34480
West Bethesda, Maryland 20827-0480
Administrative
FIIOC as Agent for Certain Employee Benefits Plan** 788,515.170 73.91%
100 Magellan KW1C
Covington, Kentucky 41015
New York Life Trust Company** 85,086.168 7.98%
51 Madison Avenue, Room 117A
New York, New York 10010
National Financial Services Corporation** 81,423.471 7.63%
1 World Financial Center
200 Liberty Street
New York, New York 10281
Key Trust Company - PRISM 76,190.652 7.14%
4900 Tiedeman Road
Brooklyn, Ohio 44144
Class A
Prudential Bank & Trust Co. 504,283.084 17.79%
Defined Contribution Plan
For the Benefit of Plan Participants
30 Scranton Office Park
Scranton, Pennsylvania 18507-1755
MLPF&S For the Sole Benefit of its Customers** 429,480.000 15.15%
Attention: Fund Administration #97MY2
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class B
MLPF&S For the Sole Benefit of its Customers** 1,334,199.412 38.54%
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
</TABLE>
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<S> <C> <C>
Class C
MLPF&S For the Sole Benefit of its Customers** 1,358,016.984 44.79%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
PIMCO Global Bond Fund
Institutional
Walker Art Center, Inc. 3,387,206.223 12.43%
Vineland Place
Minneapolis, Minnesota 55403
Kamehameha Schools 2,237,740.662 8.21%
P. O. Box 3466
Honolulu, Hawaii 96801
University of Denver (Colorado Seminary) 2,126,040.810 7.80%
2199 South University Blvd.
Denver, Colorado 80208
Hobart and William Smith Colleges 1,991,367.838 7.31%
337 Pulteney Street
Geneva, New York 14456
Worcester Polytechnic 1,638,334.726 6.01%
100 Institute Road
Worcester, Massachusetts 01609
Sunkist Master Trust 1,564,723.314 5.74%
14130 Riverside Drive
Sherman Oaks, California 91423
Administrative
FIIOC as Agent for Certain Employee Benefits Plan** 136,411.162 98.55%
100 Magellan KW1C
Covington, Kentucky 41015
PIMCO Global Bond Fund II
Institutional
Canterbury/Uniform Code Council 1,733,156.005 59.29%*
Mutual Funds Operations
Pittsburgh, Pennsylvania 15230-3198
GMP & Employers Retiree Trust 973,462.150 33.30%
MIDF965N032
Mutual Funds Operations
Pittsburgh, Pennsylvania 15230-3198
</TABLE>
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<C> <S> <S>
Class A
MLPF&S For the Sole Benefit of its Customers** 33,294.350 11.97%
Attention: Fund Administration #97RD3
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class B
MLPF&S For the Sole Benefit of its Customers** 106,318.752 23.03%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class C
MLPF&S For the Sole Benefit of its Customers** 110,952.352 18.79%
Attention: Fund Administration #97UU0
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
PIMCO Foreign Bond Fund
Institutional
Charles Schwab & Co., Inc. Rein** 27,396,348.183 56.12%*
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
Donaldson Lufkin Jennrette** 9,573,061.379 19.61%
1 Pershing Plaza
P. O. Box 2052
Jersey City, New Jersey 07399
Administrative
CBNA FBO Clients of Benefit Plans 133,102.319 68.87%
1500 Genesee Street
Utica, New York 13502
National Financial Services Corporation** 41,234.933 21.33%
1 World Financial Center
200 Liberty Street
New York, New York 10281
Class A
MLPF&S For the Sole Benefit of its Customers** 174,911.692 6.68%
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
</TABLE>
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<S> <C> <C>
Class B
MLPF&S For the Sole Benefit of its Customers** 194,738.902 9.94%
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class C
MLPF&S For the Sole Benefit of its Customers** 169,912.720 6.25%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.** 742,027.473 99.46%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
PIMCO International Bond Fund
Institutional
State Universities Retirement 3,730,019.978 6.61%
c/o Northern Trust Company
P.O. Box 92956
Chicago, Illinois 60675
Commonwealth of Pennsylvania 3,190,013.870 5.66%
Public School Employees Retire System
c/o Provident National Bank
200 Stevens Drive, Suite 440
Lester, Pennsylvania 19113
Northern Trust Company FBO: Lucent 2,956,689.906 5.24%
Technologies Inc. Master A/C 2251940
P. O. Box 92923
Chicago, Illinois 60675
Chevron Corporation 2,919,518.093 5.18%
Bankers Trust Company
P. O. Box 1008
Church Street Station
New York, New York 10008
</TABLE>
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<S> <C> <C>
PIMCO Emerging Markets Bond Fund
Institutional
Pacific Investment Management Company 403,650.417 84.13%*
840 Newport Center Drive
Newport Beach, California 92660
Charles Schwab & Co., Inc. Rein** 51,225.456 10.68%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
Administrative
PIMCO Advisors L.P. 15,531.413 100.00%
800 Newport Center Drive
Newport Beach, California 92660
Class A
MLPF&S For the Sole Benefit of its Customers** 4,869.000 21.48%
Attention: Fund Administration #97RD2
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Painewebber for the Benefit of L.A. Razette & 3,275.084 14.45%
Clara M. Razette JTWROS
3357 Sabal Springs Blvd.
North Fort Myers, Florida 33917-2023
Julie D. Roth TR 3,218.585 14.20%
UA JUN 06 96
J&M Roth Family Trust
34300 Lantern Bay Drive, Apt. 9
Dana Point, California 92629-2858
Steve M. Foulke & Maria M. Foulke 2,425.940 10.70%
Community Property
1 Altimira
Coto de Caza, California 92679-4901
Patricia D. Rodilosso Cust. 2,266.035 10.00%
FBO Christopher Adam Rodilosso
Unif GIFT MIN ACT NJ
9 River Edge Drive
Rumson, New Jersey 07760-1025
</TABLE>
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<TABLE>
<S> <C> <C>
Thomas Rodilosso & 1,735.334 7.66%
Patricia D. Rodilosso
Joint TEN WROS NOT TC
9 River Edge Drive
Rumson, New Jersey 07760-1025
Patricia D. Rodilosso Cust. 1,180.665 5.21%
FBO Matthew Rodilosso
Unif GIFT MIN ACT NJ
9 River Edge Drive
Rumson, New Jersey 07760-1025
Class B
Donaldson Lufkin Jenrette Securities Corp. Inc.** 8,741.364 17.01%
P.O. Box 2052
Jersey City, New Jersey 07303-9998
MLPF&S For the Sole Benefit of its Customers** 8,603.000 16.74%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
PaineWebber FBO 4,908.206 9.55%
Rosalyn Helford
1655 Lake Cook Road, Apt. 149
Highland Park, Illinois 60035-4400
Harvey W. Loyd 4,805.451 9.35%
P.O. Box 203
Bridgeport, Alabama 35740-0203
PaineWebber FBO 3,528.433 6.87%
Richard Hirschtritt TTEE
The Bess Waller Trust UAD 5 24 84
C/O Abranson and Fox
1 East Wacker Drive, Suite 3800
Chicago, Illinois 60601-2005
Class C
MLPF&S For the Sole Benefit of its Customers** 7,828.194 26.05%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
NFSC FEBO #120-077852 5,201.855 17.31%
FMT CO CUST IRA
FBO John J. Jordan
P. O. Box 466
Rye Beach, New Hampshire 03871
</TABLE>
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<TABLE>
<S> <C> <C>
CIBC Oppenheimer Corp. FBO 4,176.072 13.90%
020-66126-24
P. O. Box 3484
Church Street Station
New York, New York 10008-8484
Raymond James & Assoc. Inc. 3,489.592 11.61%
For Elite Acct #82729810
Janet A. Delsantro
REV Trust UA DTD 3 23 98
14505 Aeries Way Drive, Apt. 224
Fort Meyers, Florida 33912-1721
Orlin TE SLAA TR 3,472.222 11.56%
Patrick J. Rowland Rev Trust
U/A Dated 12/7/93 as Amended
3800 W. 80th Street
Bloomington, Minnesota 55431-4420
PIMCO Emerging Markets Bond Fund II
Institutional
Northeast Utilities 2,032,468.426 15.82%
IT Division 027-002C
20 Cabot Road
Medford, Massachusetts 02155-5160
Northern Trust Company FBO: 1,902,771.721 14.81%
Deluxe Corporation #22-53693
P.O. Box 92923
Chicago, Illinois 60675
Nebraska Public Employees Retirement System 870,653.081 6.78%
P. O. Box 1992
Boston, Massachusetts 02105-1992
Olin Corporation 762,821.104 5.94%
c/o BT Services Tennessee, Inc.
648 Grassemere Business Park Road
Advisors Services Group, 2nd Floor
Nashville, Tennessee 37211
Midwest Operating Engineers 716,514.832 5.58%
P. O. Box 92923
Chicago, Illinois 60675
</TABLE>
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<TABLE>
<S> <C> <C>
Samaritan Health System 670,047.088 5.22%
P.O. Box 92923
Chicago, Illinois 60675
Northern Trust Company FBO Tektronix Inc. 657,521.729 5.12%
P.O. Box 92923
Chicago, Illinois 60675
PIMCO Municipal Bond Fund
Institutional
James L. Parker TTEE Lyda Hunt - Maragaret Trust 178,303.663 30.73%
5000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-7254
Brent R. Harris or Elizabeth E. Harris, JTWROS 148,787.233 25.65%
c/o 800 Newport Center Drive
Newport Beach, California 92660
Phyllis K. Curtis 72,534.274 12.50%
14158 N. W. Bronson Creek Drive
Portland, Oregon 97229
MediaOne VEBA Trust 60,002.301 10.34%
188 Inverness Drive West
Englewood, Colorado 80112
National Investors Services Corp. For The 38,050.876 6.56%
Exclusive Benefit of Our Customers
55 Water Street, 32nd Floor
New York, New York 10041-3299
Nelly B. Monroe 34,991.912 6.03%
57 Long Hill Farm
Guilford, Connecticut 06437
John L. Johnson 34,464.698 5.94%
7831 Stanford
Dallas, Texas 75225-8209
Administrative
James Brownlee & Carla Brownlee TEN COM 11,045.007 12.55%
2652 N. 3853rd Road
Sheridan, Illinois 60551-9570
PIMCO Advisors L.P. 7,608.696 8.65%
800 Newport Center Drive
Newport Beach, California 92660
</TABLE>
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<S> <C> <C>
Joy L. McNeese 7,112.593 8.08%
8438 Porter Lane
Alexandria, Virginia 22308-2142
David L. Scrase 6,157.635 7.00%
IMPAC
16 Calle Cholla
Placitas, New Mexico 87043-9310
William C. Tidball & Ann G. Tidball JT WROS 6,027.991 6.85%
5669 Rayburn Avenue
Alexandria, Virginia 22311-5704
Elizabeth A. Maloney 4,960.339 5.64%
6021 Landon Lane
Bethesda, Maryland 20817-6256
Isabelle Lightfoot Wilson 4,527.644 5.15%
17 Gloucester Court
Eastampton, New Jersey 08060-3229
Class A
MLPF&S For the Sole Benefit of its Customers ** 201,027.814 29.17%
Attention: Fund Administration #97RD3
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Nationsbanc Montgomery Securities 86,554.924 12.56%
712-02020-10
Attention: Mutual Funds - 4th Floor
600 Montgomery Street
San Francisco, California 94111
Joseph R White 80,856.805 11.73%
P. O. Box 572
Waltham, Massachusetts 02254-0572
Duane B. Hopper and Anne D. Hopper JTWROS 34,713.822 5.04%
P.O. Box 5123
Charlottesville, Virginia 22905-5123
Class B
MLPF&S For the Sole Benefit of its Customers ** 132,587.450 23.28%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
</TABLE>
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<TABLE>
<S> <C> <C>
Dain Rauscher Incorporated FBO 66,529.644 11.68%
K. K. Kinsey Trustee
K. K. Kinsey Rev Intervivos TR
UA DTD 04-18-1997
2801 NE 14th Street
Ft. Lauderdale, Florida 33304
Prudential Securities Inc. FBO 57,846.124 10.16%
Ruth G. Battel
6 Willowbank Ct.
Mahwah, New Jersey 07430-2909
Class C
MLPF&S For the Sole Benefit of its Customers** 596,309.474 16.01%
Attention: Fund Administration #97UU0
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.** 23,786.192 69.61%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
PIMCO Strategic Balanced Fund
Institutional
California Community Foundation 2,583,682.546 46.86%*
606 South Olive Street, Suite 2400
Los Angeles, California 90014
Carpenters Health and Security Trust 2,107,398.696 38.22%*
of Western Washington
P.O. Box 1929
Seattle, Washington 98111
Pacific Asset Management LLC 569,336.779 10.33%
700 Newport Center Drive
Newport Beach, California 92660-6307
Class D
PIMCO Advisors L.P. 8,704.955 64.43%
800 Newport Center Drive
Newport Beach, California 92660
</TABLE>
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<S> <C> <C>
Charles Schwab & Co., Inc.** 3,928.498 29.08%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
PIMCO StocksPLUS Fund
Institutional
Charles Schwab & Co., Inc. Rein** 5,060,172.095 14.46%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104
St. Cloud Hospital 3,315,341.011 9.47%
1406 6th Avenue N.
St. Cloud, Minnesota 56301
Firstar Trust Company Agent 2,161,780.804 6.18%
Firstar Des Moines TTEE Iowa Methodist Medical Center
P.O. Box 1787
Milwaukee, Wisconsin 53201
Administrative
Colorado County Off and Emp (Sungard) 546,879.031 71.60%
1666 S. University Blvd. #D
Denver, Colorado 80210
New York Life Trust Company 76,250.778 9.98%
51 Madison Avenue, Room 117A
New York, New York 10010
National Financial Services Corporation** 69,495.952 9.10%
1 World Financial Center
200 Liberty Street
New York, New York 10281
Public Service of New Mexico #90701 58,448.145 7.65%
The Vanguard Group
P. O. Box 2600 VM 421
Valley Forge, Pennsylvania 19482
Class A
MLPF&S For the Sole Benefit of its Customers** 1,229,121.372 12.23%
Attention: Fund Administration #97M34
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
</TABLE>
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<TABLE>
<S> <C> <C>
FTC & Co.** 580,168.186 5.77%
Attention: Datalynx #179
P. O. Box 173736
Denver, Colorado 80217-3736
Class B
MLPF&S For the Sole Benefit of its Customers** 2,735,180.596 14.43%
Attention: Fund Administration #97M35
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class C
MLPF&S For the Sole Benefit of its Customers** 2,727,499.972 16.96%
Attention: Fund Administration #97M36
4800 Deer Lake Drive E. Floor 3
Jacksonville, Florida 32246-6484
Class D
Charles Schwab & Co., Inc.** 105,470.184 92.31%
Special Custody Accounts FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
</TABLE>
* 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 believed to be held only as nominee.
The Reorganization of the PIMCO Money Market and Total Return II Funds
On November 1, 1995, the Money Market Fund and the PIMCO Managed Bond and
Income Fund, two former series of PIMCO Funds: Equity Advisors Series, were
reorganized as series of the Trust, 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
Funds: Equity Advisors Series. In connection with the Reorganization, the
Funds changed their fiscal year end from October 31 to March 31.
The Reorganization of the PIMCO Global Bond Fund II
On January 17, 1997, the Global Income Fund, a former series of PIMCO
Advisors Funds, was reorganized as a series of the Trust, and was renamed the
PIMCO Global Bond Fund II. All information presented for this Fund prior to
that date represents its operational history as a series of PIMCO Advisors
Funds. In connection with the Reorganization, the Fund changed its fiscal year
end from September 30 to March 31.
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
98
<PAGE>
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 prohibited from effecting certain transactions, allowed to effect
certain exempt transactions, 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.
Year 2000 Compliance Efforts
Many of the world's computer systems may be unable to correctly recognize,
interpret or use dates beyond the year 1999. This inability might lead to
significant business disruptions. PIMCO Advisors and PIMCO are taking steps to
assure that their computer systems will function properly. PIMCO Advisors has
designated a team of information and business professionals to address the Year
2000 problem and developed a written Year 2000 Plan.
The PIMCO Advisors Year 2000 Plan consists of five general phases:
Awareness, Assessment, Remediation, Testing, and Implementation. During the
Awareness phase, the Year 2000 team informs the employees of PIMCO Advisors and
its subsidiaries, including the highest levels of management, about the Year
2000 problem. A written Year 2000 Plan and budget is prepared and approved by
the PIMCO Advisors Management Board. During the Assessment phase, the Year 2000
team prepares an inventory of information technology ("IT") and non-IT systems
used in PIMCO Advisors and its subsidiaries business. Systems are classified as
software, hardware, and embedded chips. Separately, systems are also classified
as mission critical and non-mission critical systems. As the inventory is
compiled and verified, each system is preliminarily assessed for Year 2000
compliance. This preliminary assessment is made by obtaining manufacturers'
representations that a given product is Year 2000 compliant or other evidence of
compliance. Systems for which no such evidence can be obtained are identified
as candidates for correction or replacement ("Remediation"). During the
Remediation phase, software, hardware, and embedded chips identified during the
Assessment phase to be non-Year 2000 compliant are corrected or replaced.
Necessarily, further corrections and replacements may need to be made after the
Remediation phase has been completed as a result of problems identified during
the Testing phase or otherwise. During the Testing phase, PIMCO Advisors
performs internal testing, point-to-point testing, and industry testing
programs. Testing generally will be performed in order of criticality (mission
critical, then non-mission critical). PIMCO Advisors does not plan to test non-
mission critical systems that are not used in its business (e.g., software
applications incidentally installed on PCs). PIMCO Advisors and PIMCO plan on
participating in the Securities Industry Association's industry-wide testing
forum. During the Implementation phase, systems that have been tested and
identified as being Year 2000 Compliant are put into normal business operation
and contingency plans are finalized.
As all investment advisers, PIMCO Advisors' and PIMCO's business operations
are heavily dependent upon a complex worldwide network of financial systems that
utilize date fields. PIMCO Advisors' and PIMCO's ability to endure any adverse
effects of the transition to Year 2000 is highly dependent upon the efforts of
third parties, particularly brokers, dealers, and custodians. The failure of
third party organizations to resolve their own processing issues with respect to
the Year 2000 Problem in a timely manner could have a material adverse effect on
PIMCO Advisors' or PIMCO's business. The management of PIMCO Advisors and PIMCO
believe that the transition to Year 2000 will not have a material adverse effect
on their business or operations as of the date of this Statement of Additional
Information. However, complications as yet unidentified may arise in internal
or external systems, with data providers, with other securities firms or
institutions, with other counterparties, or even with general economic
conditions related to the Year 2000 in general. Although PIMCO Advisors'
efforts and expenditures on Year 2000 issues are substantial, there can be no
assurances that clients or others will not suffer from disruptions or adverse
results arising as a consequence of entering Year 2000.
99
<PAGE>
Custodian, Transfer Agent and Dividend Disbursing Agent
Investors Fiduciary Trust Company ("IFTC") 801 Pennsylvania, Kansas City,
Missouri 64105 serves as custodian for assets of all Funds. Pursuant to a sub-
custody agreement between IFTC and State Street Bank and Trust Company ("State
Street"), State Street serves as subcustodian of the Trust for the custody of
the foreign securities acquired by those Funds that invest in foreign
securities. Under the agreement, State Street may hold the foreign securities at
its principal office at 225 Franklin Street, Boston, Massachusetts 02110, and at
State Street's branches, and subject to approval by the Board of Trustees, at a
foreign branch of a qualified U.S. bank, with an eligible foreign subcustodian,
or with an eligible foreign securities depository.
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.
National Financial Data Services, 330 W. 9th Street, 4th Floor, Kansas
City, Missouri serves as transfer agent and dividend disbursing agent for the
Institutional Class and Administrative Class shares of the Funds. First Data
Investor Services Group, Inc., P.O. Box 9688, Providence, Rhode Island 02940-
9688 serves as transfer agent and dividend disbursing agent for the Class A,
Class B, Class C and Class D shares of the Funds.
Independent Accountants
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105, serves
as independent public accountants for all Funds. PricewaterhouseCoopers LLP
provides audit services, tax return preparation and assistance and consultation
in connection with review of SEC filings. Prior to November 1, 1995, Deloitte &
Touche LLP served as independent accountants for the PIMCO Money Market and
Total Return II Funds. See "The Reorganization of the PIMCO Money Market and
Total Return II Funds" for additional information.
Counsel
Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, D.C. 20006,
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 Prospectuses 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 Prospectuses 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
100
<PAGE>
such contract or other documents filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference.
Financial Statements
Financial statements for the Trust as of March 31, 1998 for its fiscal year
then ended, including notes thereto, and the reports of PricewaterhouseCoopers
LLP thereon dated May 22, 1998, are incorporated by reference from the Trust's
1998 Annual Reports, and unaudited financial statements as of September 30, 1998
for the period then ending are incorporated from the Trust's September 30, 1998
Semiannual Reports. A copy of the Reports delivered with this Statement of
Additional Information should be retained for future reference. Financial
statements for the PIMCO Municipal Bond Fund as of March 31, 1998, including
notes thereto, and the report of PricewaterhouseCoopers LLP thereon dated May
22, 1998, are included herein.
101
<PAGE>
Report of Independent Accountants
May 22, 1998
To the Board of Trustees and
Shareholders of the PIMCO Funds
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of income, changes in
net assets and the financial highlights present fairly, in all material
respects, the financial position of the Municipal Bond Fund (the "Fund") at
March 31, 1998, and the results of its operations, the changes in its net assets
and the financial highlights for the period January 2, 1998 (commencement of
operations) through March 31, 1998, 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
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
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 audit, which included
confirmation of securities at March 31, 1998 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.
<PAGE>
PIMCO FUNDS
MUNICIPAL BOND FUND
STATEMENT OF ASSETS & LIABILITIES
March 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments at value (cost $2,942,244) $2,933,369
Cash 149
Receivable for securities sold 148,896
Interest receivable 40,932
----------
Total Assets 3,123,346
----------
LIABILITIES:
Payable for investments purchased 98,734
Accrued advisory fee 639
Accrued administration fee 639
Other 31
Total Liabilities 100,043
----------
NET ASSETS: $3,023,303
==========
Net assets consist of:
Paid-in capital $3,032,779
Accumulated undistributed realized loss (560)
Distributions in excess of net investment income prior years (41)
Unrealized depreciation (8,875)
Net assets $3,023,303
==========
Net asset value per share* (303,272 shares outstanding) $ 9.97
==========
</TABLE>
*Offering price.
See Notes to Financial Statements
<PAGE>
PIMCO FUNDS
MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 2, 1998* THROUGH MARCH 31, 1998
<TABLE>
<S> <C>
INTEREST INCOME: $36,345
EXPENSES
Advisory fees 1,800
Administration fees 1,800
Trustees' fee 7
-------
Total Expenses 3,607
-------
NET INVESTMENT INCOME 32,738
-------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss on investments (560)
Net unrealized depreciation on investments (8,875)
-------
Net loss (9,435)
-------
NET INCREASE IN ASSETS RESULTING FROM OPERATIONS $23,303
=======
</TABLE>
* Commencement of operations
See Notes to Financial Statements
<PAGE>
PIMCO FUNDS
MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 2, 1998* THROUGH MARCH 31, 1998
<TABLE>
<S> <C>
INCREASE IN NET ASSETS FROM:
Operations:
Net investment income $ 32,738
Net realized loss on investments (560)
Net unrealized depreciation on investments (8,875)
----------
Net increase (decrease) resulting from operations 23,303
----------
DISTRIBUTIONS TO SHAREHOLDER:
Net investment income (32,780)
FUND SHARE TRANSACTIONS:
Receipts for shares sold 3,000,000
Issued as reinvestment of distributions 32,780
----------
Net increase from fund share transactions 3,032,780
----------
TOTAL INCREASE IN NET ASSETS $3,023,303
==========
NET ASSETS:
Beginning of period $
----------
End of period** $3,023,303
----------
**Including net undistributed (overdistributed)
investment income of: $ (41)
----------
</TABLE>
*Commencement of operations.
See Notes to Financial Statements
<PAGE>
PIMCO FUNDS
MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD JANUARY 2, 1998* THROUGH MARCH 31, 1998
<TABLE>
<S> <C>
Net Asset Value at Beginning of Period $10.00
Net investment income 0.11
Net realized/unrealized loss on investments (0.03)
------
Total income from operations 0.08
------
Dividends from net investment income (0.11)
------
Net Asset Value at End of Period 9.97
------
Total Return 0.77%
Ratio of expenses to net average assets** 0.50%
Ratio of net investment income to average net assets** 4.46%
Portfolio turnover rate 60.41%
Net assets (000's) $3,023
</TABLE>
*Commencement of operations.
**Annualized.
See Notes to Financial Statements
<PAGE>
PIMCO FUNDS
Municipal Bond Fund
Notes to Financial Statements - March 31, 1998
________________________________________________________________________________
1. Organization
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 (the "Act"), as amended, as an open-end investment management
company. The Trust currently consists of twenty-five separate investment
funds. Information presented in these financial statements pertains only to
the Municipal Bond Fund (the "Fund"). The Fund commenced operation on
January 2, 1998. The Fund seeks high current income exempt from federal
income tax, consistent with the preservation of capital. The Fund is
authorized to offer six classes of shares. As of March 31, 1998 the Fund
has only one class of shares outstanding; the Institutional Class.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
Security Valuation. Portfolio securities and other financial instruments
for which market quotations 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 markers. 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. 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.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
sold are recorded on the identified cost basis. Interest income is recorded
on the accrual basis commencing on the settlement date of the transaction,
and includes the accretion of discounts and amortization of premiums.
Dividends and Distributions to Shareholders. Dividends from net investment
income of the Fund, are declared on each day the Trust is open for business
and are distributed to shareholders monthly.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles.
<PAGE>
PIMCO FUNDS
Municipal Bond Fund
Notes to Financial Statements - March 31, 1998
________________________________________________________________________________
These differences are primarily due to differing treatments for such items
as wash sales, net operating losses and capital loss carryforwards.
Federal Income Taxes. The 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.
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.
3. Fees, Expenses, and Related Party Transactions
Investment Advisory Fee. Pacific Investment Management Company ("PIMCO")
serves as investment adviser (the "Adviser") to the Fund, pursuant to an
investment advisory contract. The Adviser receives a monthly fee based on
average daily net assets of the Fund at an annual rate of 0.25% from the
Fund.
Administration Fee. PIMCO also serves as administrator (the
"Administrator"), and provides administrative services to the Fund for
which it receives a monthly fee based on average daily net assets of the
Fund at an annual rate of 0.25% from the Fund.
Other Expenses. The Fund is responsible for certain other 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 may include certain other expenses as permitted by
the Trust's Multi-Class Plan adopted pursuant to Rule 18f-3 under the 1940
Act and subject to review and approval by the Trustees.
4. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from the sales of securities,
excluding short-term securities, for the period ended March 31, 1998 were
$4,716,478 and $1,779,140, respectively.
<PAGE>
PIMCO FUNDS
Municipal Bond Fund
Notes to Financial Statements - March 31, 1998
________________________________________________________________________________
5. Shares of Beneficial Interest
As of March 31, 1998, the Fund has 303,272 Institutional Class shares
outstanding, all of which are owned by PIMCO. Activity during the period
was as follows:
<TABLE>
<S> <C>
Shares sold 300,000
Issued as reinvestment of dividends 3,272
Redeemed --
-------
Net Increase 303,272
-------
</TABLE>
<PAGE>
PIMCO FUNDS
Municipal Bond Fund
Schedule of Investments - March 31, 1998
________________________________________________________________________________
<TABLE>
<CAPTION>
Maturity Principal
Security Date Rate Amount Value
______________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (96.83%)
Alabama 4.86%
Huntsville HLTH SER A 6/01/2017 5.000% 150,000 $146,813
--------
146,813
--------
Arizona 4.95%
PIMA County, Arizona Community College District 7/01/2016 5.000% 150,000 149,625
--------
149,625
--------
California 8.25%
Los Angeles County Metropolitan Transportation Authority 7/01/2018 4.750% 150,000 141,563
Southern California Public Power Authority 7/01/2005 5.500% 100,000 107,750
--------
249,313
--------
Colorado 4.79%
E-470 Public Highway Authority Colorado Redevelopment 9/01/2026 5.000% 150,000 144,938
--------
144,938
--------
District of Columbia 4.90%
District of Columbia Revenue 2/01/2011 4.750% 150,000 148,125
--------
148,125
--------
Georgia 3.49 %
Dawson County School District 4/01/2012 4.900% 105,000 105,656
--------
105,656
--------
Massachusetts 9.77%
Massachusetts-CONS LN-SER C 8/01/2017 5.000% 150,000 146,625
METHUEN (FGIC) 11/01/2016 5.000% 150,000 148,875
--------
295,500
--------
Michigan 3.29%
Michigan State Building Authority Revenue Bonds 10/15/2014 5.000% 100,000 99,375
--------
99,375
--------
</TABLE>
See Notes to Financial Statements
<PAGE>
PIMCO FUNDS
Municipal Bond Fund
Schedule of Investments - March 31, 1998
________________________________________________________________________________
<TABLE>
<CAPTION>
Maturity Principal
Security Date Rate Amount Value
______________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Mississippi 4.96%
Mississippi State Dept. Corrections CTF 1/01/2008 4.600% 150,000 150,000
--------
150,000
--------
New Jersey 9.87%
New Jersey State Transportation TR FD 6/15/2018 5.000% 150,000 147,750
Rutgers State University, New Jersey 5/01/2011 4.800% 150,000 150,563
--------
298,313
--------
New Mexico 4.94%
Bernalillo County, New Mexico 12/01/2013 4.750% 150,000 149,250
--------
149,250
--------
New York 6.53%
New York Dorm-St. Clare Hosp B 2/15/2009 4.900% 100,000 98,625
New York State Urban Development Corp. 1/01/2009 4.800% 100,000 98,875
--------
197,500
--------
Ohio 3.34%
Ohio State PUB FACS COMMN 11/01/1999 4.500% 100,000 101,125
--------
101,125
--------
Puerto Rico 4.92%
Puerto Rico Commonwealth Aqueduct & Sewer 7/01/2015 5.000% 150,000 148,875
--------
148,875
--------
Texas 14.70%
Beaumont, Texas Indpt Sch Dist 2/15/2016 5.000% 150,000 147,938
Pflugerville, Texas Independent School District 8/15/2017 5.000% 150,000 146,813
Waco, Texas 2/01/2011 4.800% 150,000 149,810
--------
444,561
--------
</TABLE>
See Notes to Financial Statements
<PAGE>
PIMCO FUNDS
Municipal Bond Fund
Schedule of Investments - March 31, 1998
________________________________________________________________________________
<TABLE>
<CAPTION>
Maturity Principal
Security Date Rate Amount Value
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Washington 3.27%
King Hospital 1 REF AMBAC 9/01/2010 4.750% 100,000 98,500
----------
98,500
----------
Total Municipal Bonds and Notes (Cost $2,936,344) $2,927,469
==========
Short-Term Instruments 0.20%
State Street Global Advisors Tax Free Money Market* 4/1/1998 3.070% 5,900 $ 5,900
----------
(Cost $5,900) 5,900
----------
Total Investments (Total Costs: $2,942,244)** $2,933,369
----------
Other Assets and Liabilities (2.97%) 89,934
----------
Net Assets (100%) $3,023,303
==========
</TABLE>
* The 7 day annualized yield was 3.11% at March 31, 1998.
** At March 31, 1998, net unrealized depreciation for tax purposes was
$8,875, which is comprised of gross appreciation of $5,776 and gross
depreciation of $14,651. The tax cost of investments is $2,942,244.
See Notes to Financial Statements
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial statements for the Trust as of March 31, 1998, and for its fiscal
year then ended, including notes thereto, and the reports of
PricewaterhouseCoopers LLP thereon, dated May 22, 1998 are incorporated by
reference from the Annual Reports. Financial statements for the Trust as
of September 30, 1998, and for its period then ended, including notes
thereto, are incorporated by reference from the Semiannual Reports.
Financial statements for PIMCO Municipal Bond Fund as of March 31, 1998,
including notes thereto, and the report of PricewaterhouseCoopers LLP
thereon, dated May 22, 1998, are included in the Statement of Additional
Information.
(b) Exhibits
(1) (i) Declaration of Trust of Registrant/8/
(ii) Form of Amended and Restated Establishment and Designation of
Series of Shares of Beneficial Interest/9/
(iii) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Long Duration Fund/12/
(iv) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Convertible Bond Fund/13/
(2) Form of By-laws of Registrant/8/
(3) Not applicable
(4) Not applicable
(5) (i) Form of Investment Advisory Contract/8/
(ii) Form of Amendment to Investment Advisory Contract/8/
(iii) Form of Supplement to Investment Advisory Contract Relating to
StocksPLUS Short Strategy Fund/3/
(iv) Form of Supplement to Investment Advisory Contract Relating to
Balanced Fund/4/
-1-
<PAGE>
(v) Form of Supplement to Investment Advisory Contract Relating to
Global Bond Fund II/6/
(vi) Form of Supplement to Investment Advisory Contract Relating to
Real Return Bond Fund/6/
(vii) Form of Supplement to Investment Advisory Contract Relating to
Low Duration Mortgage Fund, Total Return Mortgage Fund,
Emerging Markets Bond Fund, and Emerging Markets Bond Fund
II/7/
(viii) Form of Supplement to Investment Advisory Contract Relating to
Municipal Bond Fund /10/
(ix) Form of Supplement to Investment Advisory Contract Relating to
Long Duration Fund/12/
(x) Form of Supplement to Investment Advisory Contract Relating to
Convertible Bond Fund
(6) (i) Form of Amended and Restated Distribution Contract /10/
(ii) Form of Supplement to Distribution Contract Relating to Long
Duration Fund/12/
(iii) Form of Supplement to Distribution Contract Relating to
Convertible Bond Fund
(7) Not applicable
(8) Form of Custodian Agreement/8/
(9) (i) Form of Amended and Restated Administration Agreement /10/
(ii) Form of Supplement to Amended and Restated Administration
Agreement relating to Long Duration Fund/12/
(iii) Form of Supplement to Amended and Restated Administration
Agreement Relating to Convertible Bond Fund
(iv) Form of Shareholder Servicing Agreement /10/
(v) Form of Transfer Agency Agreement/8/
(vi) Form of Transfer Agency Agreement with Shareholder Services,
Inc./2/
-2-
<PAGE>
(10) (i) Opinion of Counsel/11/
(ii) Consent of Counsel/8/
(11) Consents of Price Waterhouse LLP
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) (i) Form of Distribution and Servicing Plan for Class A Shares/5/
(ii) Form of Distribution and Servicing Plan for Class B Shares/5/
(iii) Form of Distribution and Servicing Plan for Class C Shares/5/
(iv) Form of Amended and Restated Distribution Plan for
Administrative Class Shares/8/
(v) Form of Amended and Restated Administrative Services Plan for
Administrative Class Shares/8/
(vi) Form of Distribution and Servicing Plan for Class J Shares *
(vii) Form of Distribution and Servicing Plan for Class K Shares *
(16) Calculation of Performance/1/
(17) Financial Data Schedules
(18) Form of Amended and Restated Multi-Class Plan adopted pursuant to
Rule 18f-3/12/
(19) Powers of Attorney and Secretary's Certificate/7/
_____________________
* To be filed by amendment.
/1/ Filed with Post-Effective Amendment No. 23 on June 1, 1995.
-3-
<PAGE>
/2/ Filed with Post Effective Amendment No. 33 to the Registration
Statement of PIMCO Advisors Funds (File No. 2-87203) on November 30,
1995.
/3/ Filed with Post-Effective Amendment No. 27 on January 16, 1996.
/4/ Filed with Post-Effective Amendment No. 28 on April 1, 1996.
/5/ Filed with Registration Statement on Form N-14 (File No. 333-12871) on
September 27, 1996.
/6/ Filed with Post Effective Amendment No. 33 on January 13, 1997.
/7/ Filed with Post-Effective Amendment No. 36 on July 11, 1997.
/8/ Filed with Post-Effective Amendment No. 37 on November 17, 1997.
/9/ Filed with Post-Effective Amendment No. 39 on January 15, 1998.
/10/ Filed with Post-Effective Amendment No. 40 on March 13, 1998.
/11/ Filed with Post-Effective Amendment No. 41 on July 31, 1998.
/12/ Filed with Post-Effective Amendment No. 42 on September 11, 1998.
/13/ Filed with Post-Effective Amendment No. 43 on January 15, 1999.
Item 25. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------
No person is controlled by or under common control with the Registrant.
Item 26. Number of Holders of Securities
-------------------------------
N/A
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, public policy as expressed in the Act and,
-4-
<PAGE>
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 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
----------------------------------------------------
The directors and officers of PIMCO and their business and other
connections are as follows:
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Allan, George C. Senior Vice President, PIMCO and PIMCO Management, Inc.
Ariza, Jr., Augustine Vice President, PIMCO and PIMCO Management, Inc.
Arnold, Tamara J. Senior Vice President, PIMCO and PIMCO Management, Inc.
Asay, Michael R. Senior Vice President, PIMCO and PIMCO Management, Inc.
Baker, Brian P. Vice President, PIMCO and PIMCO Management, Inc.
Barbi, Leslie A. Executive Vice President, PIMCO and PIMCO Management, Inc.
Beaumont, Stephen B. Vice President, PIMCO and PIMCO Management, Inc.
Benz, William R. II Managing Director, PIMCO; Director and Managing Director,
PIMCO Management, Inc.; Member of PIMCO Partners LLC.
Bishop, Gregory A. Vice President, PIMCO and PIMCO Management, Inc.
Brynjolfsson, John B. Senior Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Burns, R. Wesley Managing Director, PIMCO and PIMCO Management, Inc.; President
and Trustee of the Trust and PIMCO Variable Insurance Trust;
President and Director of PIMCO Commercial Mortgage Securities
Trust, Inc.; Executive Vice President, PIMCO Funds:
Multi-Manager Series; Director, PIMCO Advisors Funds plc.
Callin, Sabrina C. Vice President, PIMCO and PIMCO Management, Inc.
Clark, Marcia K. Vice President, PIMCO and PIMCO Management, Inc.
Cohen, Carl J. Vice President, PIMCO and PIMCO Management, Inc.
Coleman, Jerry Vice President, PIMCO and PIMCO Management, Inc.
Cummings, Doug Vice President, PIMCO and PIMCO Management, Inc.
Cupps, Wendy W. Senior Vice President, PIMCO and PIMCO Management, Inc.
Dialynas, Chris Managing Director, PIMCO and PIMCO Management, Inc.
Dorff, David J. Vice President, PIMCO and PIMCO Management, Inc.
Dow, Michael Senior Vice President, PIMCO, PIMCO Management, Inc. and
the Trust.
Dunn, Anita Vice President, PIMCO and PIMCO Management, Inc.
Durn, Sandra Vice President, PIMCO
Ehlert, A. Benjamin Executive Vice President, PIMCO and PIMCO Management, Inc.
Ettl, Robert A. Executive Senior Vice President, PIMCO and PIMCO
Management, Inc.
Evans, Stephanie D. Vice President, PIMCO and PIMCO Management, Inc.
Faillace, Anthony L. Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Fitzgerald, Robert M. Chief Financial Officer and Treasurer, PIMCO, PIMCO Management,
Inc., Cadence Capital Management, Inc., NFJ Investment Group,
NFJ Management, Inc., Parametric Portfolio Associates,
Parametric Management Inc., StocksPLUS Management Inc. and
PIMCO Funds Distributors LLC; Chief Financial Officer and
Assistant Treasurer, Cadence Capital Management; Chief
Financial Officer and Treasurer, Columbus Circle Investors and
Columbus Circle Investors Management Inc.; Chief Financial
Officer, Columbus Circle Trust Company; Director, Senior Vice
President and Chief Financial Officer, Oppenheimer Group, Inc.;
Chief Financial Officer and Senior Vice President, PIMCO
Advisors; Director, Senior Vice President and Chief Financial
Officer, PIMCO Global Advisors LLC.
Foulke, Steve A. Vice President, PIMCO and PIMCO Management, Inc.
Garbuzov, Yuri P. Vice President, PIMCO and PIMCO Management, Inc.
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 and PIMCO
Variable Insurance Trust; Member of Management Board, PIMCO
Advisors; Member of PIMCO Partners LLC.
Hague, John L. Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.; Member of PIMCO Partners LLC.
Hally, Gordon C. Executive Vice President, PIMCO and PIMCO Management, Inc.
Hamalainen, Pasi M. Executive Vice President, PIMCO and PIMCO Management, Inc.
Hardaway, John P. Senior Vice President, PIMCO and PIMCO Management, Inc.;
Treasurer of the Trust, PIMCO Variable Insurance Trust, PIMCO
Funds: Multi-Manager Series and PIMCO Commercial Mortgage
Securities Trust, Inc.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
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
Management Board, PIMCO Advisors; Chairman, PIMCO Variable
Insurance Trust; Member of PIMCO Partners LLC.
Hattesohl, Joseph D. Vice President, PIMCO and PIMCO Management, Inc. Assistant
Treasurer, the Trust, PIMCO Variable Insurance Trust, PIMCO
Funds: Multi-Manager Series and PIMCO Commercial Mortgage
Securities Trust, Inc.
Hayes, Raymond C. Vice President, PIMCO, PIMCO Management, Inc. and the Trust.
Herin, Robert G. Vice President, PIMCO and PIMCO Management, Inc.
Hinman, David C. Senior Vice President, PIMCO and PIMCO Management, Inc.
Hocson, Liza Vice President, PIMCO and PIMCO Management, Inc.
Hodge, Douglas M. Executive Vice President, PIMCO and PIMCO Management, Inc.
Holden, Brent L. Executive Vice President, PIMCO and PIMCO Management, Inc.
Holloway, Dwight F., Jr. Senior Vice President, PIMCO and PIMCO Management, Inc.
Howe, Jane T. Vice President, PIMCO and PIMCO Management, Inc.
Hudoff, Mark Senior Vice President, PIMCO and PIMCO Management, Inc.
Isberg, Margaret E. Managing Director, PIMCO and PIMCO Management, Inc.; Senior
Vice President of the Trust.
Kelleher, Thomas J. Vice President, PIMCO and PIMCO Management, Inc.
Keller, James M. Senior Vice President, PIMCO, PIMCO Management, Inc. and
the Trust.
Kennedy, Raymond G. Senior Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Kiesel, Mark R. Vice President, PIMCO and PIMCO Management, Inc.
Kilmer, Sharon Executive Vice President, PIMCO and PIMCO Management, Inc.
Kirkbaumer, Steven P. Vice President, PIMCO and PIMCO Management, Inc.
Larsen, Henrik P. Vice President, PIMCO Commercial Mortgage Securities Trust,
Inc., PIMCO Variable Insurance Trust, and the Trust.
Loftus, John S. Executive Vice President, PIMCO and PIMCO Management, Inc.;
Vice President and Assistant Secretary, StocksPLUS
Management, Inc.
Lown, David Vice President, PIMCO and PIMCO Management, Inc.
Ludwig, Daniel T. Vice President of Trust
Lyon, Laura, M. Vice President, PIMCO and PIMCO Management, Inc.
Mallegol, Andre J. Vice President, PIMCO and PIMCO Management, Inc.
Martin, Scott W. Vice President, PIMCO and PIMCO Management, Inc.
Martini, Michael E. Vice President, PIMCO and PIMCO Management, Inc.
Mather, Scott A. Senior Vice President, PIMCO
Mayer, Benjamin L. Vice President, PIMCO and PIMCO Management, Inc.
McDevitt, Joseph E. Executive Vice President, PIMCO and PIMCO Management, Inc.;
Director and Chief Executive Officer, PIMCO Global Advisors
(Europe) Limited.
Metsch, Mark E. Vice President, PIMCO and PIMCO Management, Inc.
Molloy, Marie Vice President, PIMCO and PIMCO Management, Inc.
Muzzy, James F. Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.; Director and Vice President, StocksPLUS
Management, Inc.; Member of PIMCO Partners LLC; Vice President
of the Trust.
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Nakamura, Doris S. Vice President, PIMCO and PIMCO Management, Inc.
Nellemann, Mark D. Vice President, PIMCO and PIMCO Management, Inc.
Nguyen, Vinh T. Controller, PIMCO; Vice President and Controller, PIMCO
Advisors, Columbus Circle Investors Management, Inc., Cadence
Capital Management, Inc., NJF Management, Inc., Parametric
Management, Inc., StocksPLUS Management, Inc., PIMCO Funds
Distributors LLC, PIMCO Management, Inc., PIMCO Global
Advisors LLC.
Ongaro, Douglas J. Vice President, PIMCO, PIMCO Management, Inc. and the Trust.
Otterbein, Thomas J. Senior Vice President, PIMCO and PIMCO Management, Inc.
Palghat, Kumar N. Vice President, PIMCO and PIMCO Management, Inc.
Paradis, Victoria M. Vice President, PIMCO and PIMCO Management, Inc.
Perez, Keith Vice President, PIMCO and PIMCO Management, Inc.
Philipp, Elizabeth M. Vice President, PIMCO and PIMCO Management, Inc.
Pittman, David J. Vice President, PIMCO, PIMCO Management, Inc. and the Trust.
Podlich, William F. III Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.; Member of Management Board, PIMCO Advisors;
Member of PIMCO Partners LLC.
Powers, William C. Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.; Senior Vice President, PIMCO Commercial
Mortgage Securities Trust, Inc.; Member of PIMCO Partners LLC.
Randall, Terry A. Vice President, PIMCO and PIMCO Management, Inc.
Romano, Mark Vice President, PIMCO, PIMCO Management, Inc. and the Trust
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Roney, Scott L. Senior Vice President, PIMCO and PIMCO Management, Inc.;
Director and Chief Executive Officer, PIMCO Global Advisors
(Japan) Limited.
Rosborough, Michael J. Senior Vice President, PIMCO and PIMCO Management, Inc.
Rowe, Cathy T. Vice President, PIMCO and PIMCO Management, Inc.
Ruthen, Seth R. Vice President, PIMCO and PIMCO Management, Inc.
Sargent, Jeffrey M. Vice President, PIMCO, PIMCO Management, Inc. and PIMCO Funds:
Multi-Manager Series; Senior Vice President of the Trust, PIMCO
Variable Insurance Trust, PIMCO Commercial Mortgage Securities
Trust, Inc.
Schmider, Ernest L. Executive Vice President, Secretary, Chief Administrative and
Legal Officer, PIMCO and PIMCO Management, Inc.; Secretary,
PIMCO Partners LLC; Director, Assistant Secretary and Assistant
Treasurer, StocksPLUS Management, Inc.; Senior Vice President,
PIMCO Advisors.
Scholey, Leland T. Senior Vice President, PIMCO, PIMCO Management, Inc. and
the Trust.
Schulist, Stephen O. Vice President, PIMCO and PIMCO Management, Inc.
Scibisz, Iwona E. Vice President, PIMCO and PIMCO Management, Inc.
Selby, Richard W. Senior Vice President, PIMCO and PIMCO Management, Inc.
Seliga, Denise C. Vice President, PIMCO and PIMCO Management, Inc.
Seymour, Rita J. Vice President, PIMCO and PIMCO Management, Inc.
Sullivan, Christopher Vice President, PIMCO and PIMCO Management, Inc.
Sylwester, Cheryl L. Vice President, PIMCO and PIMCO Management, Inc.
Theodore, Kyle, J. Vice President, PIMCO and PIMCO Management, Inc.
Thomas, Lee R. Director and Managing Director, PIMCO and PIMCO
Management, Inc.; Member PIMCO Partners LLC.
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Thompson, William S. Jr. Chief Executive Officer and Managing Director, PIMCO; Director,
Managing Director and Chief Executive Officer, PIMCO
Management, Inc.; Director and President, StocksPLUS
Management, Inc.; Senior Vice President of PIMCO Variable
Insurance Trust; Vice President of the Trust and PIMCO
Commercial Mortgage Securities Trust, Inc.; Member of
Management Board, PIMCO Advisors; Member, President and Chief
Executive Officer of PIMCO Partners LLC; President and Chief
Executive Officer, PIMCO Partners GP.
Trinidad, Ronaele K. Vice President, PIMCO and PIMCO Management, Inc.
Trosky, Benjamin L. Managing Director and Management Board Member, PIMCO; Director
and Managing Director, PIMCO Management, Inc.; Senior Vice
President, PIMCO Commercial Mortgage Securities Trust, Inc.;
Member of Management Board, PIMCO Advisors; Member of PIMCO
Partners LLC.
Tyson, Richard E. Vice President, PIMCO and PIMCO Management, Inc.
Van de Zilver, Peter A. Vice President, PIMCO and PIMCO Management, Inc.
Wegener, Marilyn Vice President, PIMCO and PIMCO Management, Inc.
Weil, Richard M. Assistant Secretary, PIMCO, PIMCO Management, Inc., Columbus
Circle Investors, Columbus Circle Investors Management, Inc.,
Cadence Capital Management, and PIMCO Funds Distributors LLC;
General Counsel, PIMCO Advisors; Secretary, Cadence Capital
Management, Inc. NFJ Management, Inc., Parametric Management,
Inc., NFJ Investment Group, Parametric Portfolio Associates,
and StocksPLUS Management, Inc.; Vice President, PIMCO Funds:
Multi-Manager Series; Senior Vice President Legal and
Secretary, PIMCO Global Advisors LLC.
Westhead, Paul C. Vice President, PIMCO and PIMCO Management, Inc.
Wood, George H. Executive Vice President, PIMCO and PIMCO Management, Inc.
Yetter, Michael A. Senior Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Young, David Vice President, PIMCO.
</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.
Item 29. Principal Underwriters
----------------------
(a) PIMCO Funds Distributors LLC (the "Distributor") serves as Distributor of
Shares of the Trust. The Distributor also acts as the principal
underwriter for PIMCO Funds: Multi-Manager 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>
Aartz, Erik M. Vice President None
Booth, Jeffrey L. Vice President None
Bosch, James D. Regional Vice President None
Brennan, Deborah P. Vice President, Compliance None
Officer
Burnham, Chris Vice Chairman None
Clark, Timothy R. Senior Vice President None
Fessel, Jonathan P. Vice President None
Fitzgerald, Robert M. Chief Financial Officer and None
Treasurer
Gallagher, Michael J. Regional Vice President None
Goldsmith, David S. Vice President None
Gray, Ronald H. Vice President None
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Hussey, John B. Regional Vice President None
Jobe, Stephen R. Vice President None
Jones, Jonathan C. Vice President None
Lazcano, Raymond Vice President None
Lynch, William E. Senior Vice President None
McCarthy, Jacqueline A. Vice President None
Maloney, Kevin D. Compliance Officer None
Meyers, Andrew J. Executive Vice President None
Moyer, Fiora N. Regional Vice President None
Neugebauer, Phil J. Vice President None
Nguyen, Vinh T. Vice President, Controller None
Pearlman, Joffrey H. Regional Vice President None
Russell, Mathew M. Vice President None
Schott, Newton B., Jr. Executive Vice President/ None
Secretary, Chief Administrative/
Legal Officer and Secretary
Smith, Robert M. Vice President None
Spear, Ellen Z. Vice President None
Sullivan, Daniel W. Regional Vice President None
Stone, David P. Regional Vice President None
Thomas, William H., Jr. Regional Vice President None
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Treadway, Stephen J. Director, Chairman, President None
and Chief Executive Officer
Troyer, Paul H. Senior Vice President None
Trumbore, Brian F. Executive Vice President None
Weil, Richard M. Assistant Secretary None
Zimmerman, Glen A. Vice President None
</TABLE>
_________________
* The business address of all 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, Investors Fiduciary Trust Company,
801 Pennsylvania, Kansas City, Missouri 64105, and Shareholder
Services, Inc., P.O. Box 5866, Denver, Colorado 80217.
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 latter of the effective date of a post-effective
amendment to Registrant's 1933 Act registration statement which
provides for the addition of a new series of Registrant or the date on
which shares of such series are first sold (other than shares sold for
seed money).
(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.
-15-
<PAGE>
(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.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 44 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 2nd day of April, 1999.
PIMCO FUNDS
(Registrant)
By:
-----------------------------------------
R. Wesley Burns*
President
*By: /s/ Jeffrey L. Steele
-----------------------------------------
Jeffrey L. Steele, 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:
Signature Title Date
- --------- ----- ----
- ---------------------------- Trustee April 2, 1999
Guilford C. Babcock*
- ---------------------------- Trustee April 2, 1999
Thomas P. Kemp*
- ---------------------------- Trustee April 2, 1999
Brent R. Harris*
- ---------------------------- Trustee April 2, 1999
William J. Popejoy*
- ---------------------------- Trustee April 2, 1999
Vern O. Curtis*
- ---------------------------- President April 2, 1999
R. Wesley Burns* (Principal Executive
Officer)
<PAGE>
- ---------------------------- Treasurer April 2, 1999
John P. Hardaway* (Principal Financial and
Accounting Officer)
*By: /s/ Jeffrey L. Steele
------------------------
Jeffrey L. Steele,
as attorney-in-fact
___________________
* Pursuant to power of attorney filed with Post-Effective Amendment No. 36 to
Registration Statement No. 33-12113 on July 11, 1997.
<PAGE>
PIMCO Funds
INDEX TO EXHIBITS FILED WITH
POST-EFFECTIVE AMENDMENT NO. 44
Exhibit 5(x) Form of Supplement to Investment Advisory Contract Relating to
Convertible Bond.
Exhibit 6(iii) Form of Supplement to Distribution Contract Relating to
Convertible Bond Fund.
Exhibit 9(iii) Form of Supplement to Amended and Restated Administration
Agreement Relating to Convertible Bond Fund.
Exhibit 11 Consents of Price Waterhouse LLP (EDGAR Exhibit 99.B11).
Exhibit 17 Financial Data Schedules (EDGAR Exhibit 27).
<PAGE>
EXHIBIT 5(x)
SUPPLEMENT TO
INVESTMENT ADVISORY CONTRACT
PIMCO Funds: Pacific Investment Management Series
840 Newport Center Drive
Newport Beach, California 92660
_________________ , 1999
Pacific Investment Management Company
840 Newport Center Drive
Newport Beach, California 92660
RE: Convertible Bond Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
Pacific Investment Management Company (the "Adviser") as follows:
1. This Trust is an open-end investment company organized as a Massachusetts
business trust, and consisting of such investment Fund as have been or may
be established by the Trustees of the Trust from time to time. A separate
series of shares of beneficial interest of the Trust is offered to
investors with respect to each investment portfolio. The Convertible Bond
Fund (the "Fund") is a separate investment portfolio of the Trust.
2. The Trust and the Adviser have entered into an Investment Advisory Contract
("Contract") dated November 22, 1994, as amended, pursuant to which the
Trust has employed the Adviser to provide investment advisory and other
services specified in the Contract, and the Adviser has accepted such
employment.
3. As provided in paragraph 1 of the Contract, the Trust hereby appoints the
Adviser to serve as Investment Adviser with respect to the Fund, and the
Adviser accepts such appointment, the terms and conditions of such
employment to be governed by the Contract, which is hereby incorporated
herein by reference.
4. As provided in paragraph 6 of the Contract and subject to further
conditions as set forth therein, the Trust shall with respect to the Fund
pay the Adviser a monthly fee on the first business day of each month,
based upon the average daily value (as determined on each business day at
the time set forth in the Prospectus for
<PAGE>
determining net asset value per share) of the net assets of the Fund during
the preceding month a fee at an annual rate of .40%.
5. This Supplement and the Contract shall become effective with respect to the
Fund on ______________, 1999 and shall continue in effect with respect to
the Fund for a period of more than two years from that date only so long as
the continuance is specifically approved at least annually (a) by the vote
of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Fund or by the Trust's Board of Trustees and (b) by the vote,
cast in person at a meeting called for the purpose, of a majority of the
Trust's trustees who are not parties to this Contract or "interested
persons" (as defined in the 1940 Act) of any such party. This Contract may
be terminated with respect to the Trust at any time, without the payment of
any penalty, by a vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of the Fund or by a vote of a majority of the
Trust's entire Board of Trustees on 60 days' written notice to the Adviser
or by the Adviser on 60 days' written notice to the Trust. This Contract
shall terminate automatically in the event of its assignment (as defined in
the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust and
the Adviser, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO FUNDS: PACIFIC INVESTMENT
MANAGEMENT SERIES
By: ____________________________
Title:
ACCEPTED:
PACIFIC INVESTMENT MANAGEMENT COMPANY
By: ________________________________
Title:
<PAGE>
EXHIBIT 6(iii)
SUPPLEMENT TO
DISTRIBUTION CONTRACT
PIMCO Funds: Pacific Investment Management Series
840 Newport Center Drive
Newport Beach, California 92660
_______________, 1999
PIMCO Funds Distributors LLC
2187 Atlantic Avenue
Stamford, CT 06902
RE: Convertible Bond Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
PIMCO Funds Distributors LLC (the "Distributor") as follows:
1. The Trust is an open-end management investment company organized as a
Massachusetts business trust and consisting of such separate investment
portfolios as have been or may be established by the Trustees of the Trust from
time to time. A separate class of shares of beneficial interest in the Trust is
offered to investors with respect to each investment portfolio. The PIMCO
Convertible Bond Fund (the "Fund") is a separate investment Fund of the Trust.
2. The Trust and the Distributor have entered into a Distribution Contract
(the "Contract") dated April 1, 1998, pursuant to which the Distributor has
agreed to be the distributor of shares of the Trust.
3. As provided in paragraph 1 of the Contract, the Distributor hereby adopts
the Contract with respect to the Fund and the Distributor hereby acknowledges
that the Contract shall pertain to the Fund, the terms and conditions of such
Contract being hereby incorporated herein by reference.
<PAGE>
4. This Supplement and the Contract shall become effective with respect to
the Fund on _______________, 1999 and shall continue in effect until such time
as there shall remain no unsold balance of shares registered under the 1933 Act,
provided that this Contract shall continue in effect for a period of more than
- --------
two years from the effective date of this Supplement only so long as such
continuance is specifically approved at least annually by (a) the Trust's Board
of Trustees or by the vote of a majority of the Trust's outstanding voting
securities (as defined in the Investment Company Act of (the "1940 Act") and (b)
by the vote, cast in person at a meeting called for the purpose, of a majority
of the Trust's Trustees who are not parties to this Contract or "interested
persons" (as defined in the 1940 Act) of any such party. This Contract shall
terminate automatically in the event of its assignment (as defined in the 1940
Act). This Contract may, in any event, be terminated at any time without the
payment of any penalty, by the Trust upon 60 days' written notice to the
Distributor and by the Distributor upon 60 days' written notice to the Trust.
If the foregoing correctly sets forth the agreement between the Trust and the
Distributor, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO Funds: Pacific Investment Management
Series
By:
------------------------------------
Title:
Accepted:
PIMCO Funds Distributors LLC
By:
-----------------------------------
Title:
<PAGE>
EXHIBIT 9(iii)
SUPPLEMENT TO
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
PIMCO Funds: Pacific Investment Management Series
840 Newport Center Drive
Newport Beach, California 92660
_________________ , 1999
Pacific Investment Management Company
840 Newport Center Drive
Newport Beach, California 92660
RE: Convertible Bond Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the "Trust") and
Pacific Investment Management Company (the "Administrator") as follows:
1. This Trust is an open-end investment company organized as a Massachusetts
business trust, and consisting of such investment portfolios as have been
or may be established by the Trustees of the Trust from time to time. A
separate series of shares of beneficial interest of the Trust is offered to
investors with respect to each investment portfolio. The Convertible Bond
Fund (the "Fund") is a separate investment Fund of the Trust.
2. The Trust and the Administrator have entered into an Amended and Restated
Administration Agreement ("Agreement") dated February 24, 1998, pursuant to
which the Trust has employed the Administrator to provide management and
administrative services to the Trust as set forth in that Agreement.
3. As provided in paragraph 1 of the Agreement, the Trust hereby adopts the
Agreement with respect to the Fund and the Administrator hereby
acknowledges that the Agreement shall pertain to the Fund, the terms and
conditions of such Agreement being hereby incorporated herein by reference.
4. As provided in paragraph 5 of the Agreement and subject to further
conditions as set forth therein, the Trust shall with respect to the Fund
pay the Administrator a monthly fee calculated as a percentage (on an
annual basis) of the average daily value of net assets of the Fund during
the preceding month at a rate of 0.25% of the assets
<PAGE>
attributable to each of the Institutional Class and Administrative Class,
and at the rate of 0.40% attributable in the aggregate to the Class A,
Class B, Class C and Class D shares.
5. This Supplement and the Agreement shall become effective with respect to
the Fund on ______________, 1999 and shall continue in effect with respect
to the Fund for a period of more than two years from that date only so long
as the continuance is specifically approved at least annually (a) by the
vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund or by the Trust's Board of Trustees and (b) by the
vote, cast in person at a meeting called for the purpose, of a majority of
the Trust's trustees who are not parties to this Contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Agreement may
be terminated at any time, without the payment of any penalty, by a vote of
a majority of the entire Board of Trustees of the Trust or by a majority of
the outstanding voting securities of the Trust or, with respect to the
Fund, by a vote of a majority of the outstanding shares of the Fund, on 60
days' written notice to the Administrator or, at or after the one-year
period commencing the date of its effectiveness, by the Administrator on 60
days' written notice to the Trust. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the Trust and
the Administrator, please so indicate by signing and returning to the Trust the
enclosed copy hereof.
Very truly yours,
PIMCO FUNDS: PACIFIC INVESTMENT
MANAGEMENT SERIES
By: ____________________________
Title:
ACCEPTED:
PACIFIC INVESTMENT MANAGEMENT COMPANY
By: ________________________________
Title:
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 44 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated May 22, 1998, relating to the financial
statements and financial highlights appearing in the March 31, 1998 Annual
Reports to Shareholders of the Total Return Fund, Total Return Fund II, Total
Return Fund III, Total Return Mortgage Fund, Moderate Duration Fund, Low
Duration Fund, Low Duration Fund II, Low Duration Fund III, Low Duration
Mortgage Fund, Short-Term Fund, Long-Term U.S. Government Fund, Real Return Bond
Fund, Foreign Bond Fund, Global Bond Fund, Global Bond Fund II, Emerging Markets
Bond Fund, High Yield Fund, Money Market Fund, StocksPLUS Fund and Strategic
Balanced Fund (each a Portfolio of PIMCO Funds: Pacific Investment Management
Series) which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in the Prospectuses and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
PricewaterhouseCoopers LLP
Kansas City, Missouri
April 1, 1999
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 44 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated May
22, 1998, relating to the financial statements and financial highlights of the
Municipal Bond Fund (one of the Portfolios constituting the PIMCO Funds: Pacific
Investment Management Series) which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectuses which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Financial Highlights" and
"Independent Accountants" in the Prospectuses and under the headings
"Independent Accountants" and "Financial Statements" in the Statement of
Additional Information.
PricewaterhouseCoopers LLP
Kansas City, Missouri
April 1, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 011
<NAME> TOTAL RETURN FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 27332479
<INVESTMENTS-AT-VALUE> 27642164
<RECEIVABLES> 424166
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 38121
<TOTAL-ASSETS> 28104451
<PAYABLE-FOR-SECURITIES> 5368211
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370177
<TOTAL-LIABILITIES> 5738388
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21160678
<SHARES-COMMON-STOCK> 1768206
<SHARES-COMMON-PRIOR> 1552606
<ACCUMULATED-NII-CURRENT> 111594
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 609836
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 483955
<NET-ASSETS> 22366063
<DIVIDEND-INCOME> 1887
<INTEREST-INCOME> 664267
<OTHER-INCOME> 0
<EXPENSES-NET> 50359
<NET-INVESTMENT-INCOME> 615795
<REALIZED-GAINS-CURRENT> 569687
<APPREC-INCREASE-CURRENT> 358711
<NET-CHANGE-FROM-OPS> 1544193
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 559621
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 398605
<NUMBER-OF-SHARES-REDEEMED> 224210
<SHARES-REINVESTED> 41205
<NET-CHANGE-IN-ASSETS> 4274352
<ACCUMULATED-NII-PRIOR> 111760
<ACCUMULATED-GAINS-PRIOR> 40149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50359
<AVERAGE-NET-ASSETS> 18173176
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> 0.33
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 0.43
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> TOTAL RETURN FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 27332479
<INVESTMENTS-AT-VALUE> 27642164
<RECEIVABLES> 424166
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 38121
<TOTAL-ASSETS> 28104451
<PAYABLE-FOR-SECURITIES> 5368211
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370177
<TOTAL-LIABILITIES> 5738388
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21160678
<SHARES-COMMON-STOCK> 99831
<SHARES-COMMON-PRIOR> 45374
<ACCUMULATED-NII-CURRENT> 111594
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 609836
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 483955
<NET-ASSETS> 22366063
<DIVIDEND-INCOME> 1887
<INTEREST-INCOME> 664267
<OTHER-INCOME> 0
<EXPENSES-NET> 50359
<NET-INVESTMENT-INCOME> 615795
<REALIZED-GAINS-CURRENT> 569687
<APPREC-INCREASE-CURRENT> 358711
<NET-CHANGE-FROM-OPS> 1544193
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20852
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63758
<NUMBER-OF-SHARES-REDEEMED> 10977
<SHARES-REINVESTED> 1676
<NET-CHANGE-IN-ASSETS> 4274352
<ACCUMULATED-NII-PRIOR> 111760
<ACCUMULATED-GAINS-PRIOR> 40149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50359
<AVERAGE-NET-ASSETS> 713126
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.48
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> TOTAL RETURN FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 27332479
<INVESTMENTS-AT-VALUE> 27642164
<RECEIVABLES> 424166
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 38121
<TOTAL-ASSETS> 28104451
<PAYABLE-FOR-SECURITIES> 5368211
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370177
<TOTAL-LIABILITIES> 5738388
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21160678
<SHARES-COMMON-STOCK> 69593
<SHARES-COMMON-PRIOR> 50287
<ACCUMULATED-NII-CURRENT> 111594
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 609836
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 483955
<NET-ASSETS> 22366063
<DIVIDEND-INCOME> 1887
<INTEREST-INCOME> 664267
<OTHER-INCOME> 0
<EXPENSES-NET> 50359
<NET-INVESTMENT-INCOME> 615795
<REALIZED-GAINS-CURRENT> 569687
<APPREC-INCREASE-CURRENT> 358711
<NET-CHANGE-FROM-OPS> 1544193
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18572
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27487
<NUMBER-OF-SHARES-REDEEMED> 9688
<SHARES-REINVESTED> 1506
<NET-CHANGE-IN-ASSETS> 4274352
<ACCUMULATED-NII-PRIOR> 111760
<ACCUMULATED-GAINS-PRIOR> 40149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50359
<AVERAGE-NET-ASSETS> 657072
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> 0.31
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 0.90
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 014
<NAME> TOTAL RETURN FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 27332479
<INVESTMENTS-AT-VALUE> 27642164
<RECEIVABLES> 424166
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 38121
<TOTAL-ASSETS> 28104451
<PAYABLE-FOR-SECURITIES> 5368211
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370177
<TOTAL-LIABILITIES> 5738388
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21160678
<SHARES-COMMON-STOCK> 30545
<SHARES-COMMON-PRIOR> 17607
<ACCUMULATED-NII-CURRENT> 111594
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 609836
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 483955
<NET-ASSETS> 22366063
<DIVIDEND-INCOME> 1887
<INTEREST-INCOME> 664267
<OTHER-INCOME> 0
<EXPENSES-NET> 50359
<NET-INVESTMENT-INCOME> 615795
<REALIZED-GAINS-CURRENT> 569687
<APPREC-INCREASE-CURRENT> 358711
<NET-CHANGE-FROM-OPS> 1544193
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5835
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14382
<NUMBER-OF-SHARES-REDEEMED> 1830
<SHARES-REINVESTED> 386
<NET-CHANGE-IN-ASSETS> 4274352
<ACCUMULATED-NII-PRIOR> 111760
<ACCUMULATED-GAINS-PRIOR> 40149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50359
<AVERAGE-NET-ASSETS> 240099
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 1.65
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 015
<NAME> TOTAL RETURN FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 27332479
<INVESTMENTS-AT-VALUE> 27642164
<RECEIVABLES> 424166
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 38121
<TOTAL-ASSETS> 28104451
<PAYABLE-FOR-SECURITIES> 5368211
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370177
<TOTAL-LIABILITIES> 5738388
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21160678
<SHARES-COMMON-STOCK> 48327
<SHARES-COMMON-PRIOR> 38151
<ACCUMULATED-NII-CURRENT> 111594
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 609836
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 483955
<NET-ASSETS> 22366063
<DIVIDEND-INCOME> 1887
<INTEREST-INCOME> 664267
<OTHER-INCOME> 0
<EXPENSES-NET> 50359
<NET-INVESTMENT-INCOME> 615795
<REALIZED-GAINS-CURRENT> 569687
<APPREC-INCREASE-CURRENT> 358711
<NET-CHANGE-FROM-OPS> 1544193
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11029
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13943
<NUMBER-OF-SHARES-REDEEMED> 4524
<SHARES-REINVESTED> 758
<NET-CHANGE-IN-ASSETS> 4274352
<ACCUMULATED-NII-PRIOR> 111760
<ACCUMULATED-GAINS-PRIOR> 40149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50359
<AVERAGE-NET-ASSETS> 449148
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 0.48
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 1.65
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 016
<NAME> TOTAL RETURN FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 27332479
<INVESTMENTS-AT-VALUE> 27642164
<RECEIVABLES> 424166
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 38121
<TOTAL-ASSETS> 28104451
<PAYABLE-FOR-SECURITIES> 5368211
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 370177
<TOTAL-LIABILITIES> 5738388
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21160678
<SHARES-COMMON-STOCK> 443
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 111594
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 609836
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 483955
<NET-ASSETS> 22366063
<DIVIDEND-INCOME> 1887
<INTEREST-INCOME> 664267
<OTHER-INCOME> 0
<EXPENSES-NET> 50359
<NET-INVESTMENT-INCOME> 615795
<REALIZED-GAINS-CURRENT> 569687
<APPREC-INCREASE-CURRENT> 358711
<NET-CHANGE-FROM-OPS> 1544193
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 52
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 453
<NUMBER-OF-SHARES-REDEEMED> 15
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 4274352
<ACCUMULATED-NII-PRIOR> 111760
<ACCUMULATED-GAINS-PRIOR> 40149
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50359
<AVERAGE-NET-ASSETS> 1909
<PER-SHARE-NAV-BEGIN> 10.66
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.44
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 0.75
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 161
<NAME> TOTAL RETURN FUND II-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1025824
<INVESTMENTS-AT-VALUE> 1048189
<RECEIVABLES> 13395
<ASSETS-OTHER> 699
<OTHER-ITEMS-ASSETS> 34450
<TOTAL-ASSETS> 1096733
<PAYABLE-FOR-SECURITIES> 171987
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2551
<TOTAL-LIABILITIES> 174538
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 869110
<SHARES-COMMON-STOCK> 79791
<SHARES-COMMON-PRIOR> 56008
<ACCUMULATED-NII-CURRENT> 2268
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17520
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33297
<NET-ASSETS> 922195
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22890
<OTHER-INCOME> 0
<EXPENSES-NET> 1871
<NET-INVESTMENT-INCOME> 21019
<REALIZED-GAINS-CURRENT> 15277
<APPREC-INCREASE-CURRENT> 27117
<NET-CHANGE-FROM-OPS> 63413
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20074
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26528
<NUMBER-OF-SHARES-REDEEMED> 4481
<SHARES-REINVESTED> 1736
<NET-CHANGE-IN-ASSETS> 332436
<ACCUMULATED-NII-PRIOR> 2245
<ACCUMULATED-GAINS-PRIOR> 2243
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 911
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1871
<AVERAGE-NET-ASSETS> 694136
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.54
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.80
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 091
<NAME> TOTAL RETURN FUND III-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 526002
<INVESTMENTS-AT-VALUE> 530544
<RECEIVABLES> 7436
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 537980
<PAYABLE-FOR-SECURITIES> 91179
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2591
<TOTAL-LIABILITIES> 93770
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 421411
<SHARES-COMMON-STOCK> 44388
<SHARES-COMMON-PRIOR> 38229
<ACCUMULATED-NII-CURRENT> 1691
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11321
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9787
<NET-ASSETS> 444210
<DIVIDEND-INCOME> 80
<INTEREST-INCOME> 12532
<OTHER-INCOME> 0
<EXPENSES-NET> 979
<NET-INVESTMENT-INCOME> 11633
<REALIZED-GAINS-CURRENT> 10655
<APPREC-INCREASE-CURRENT> 6729
<NET-CHANGE-FROM-OPS> 29017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11606
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5531
<NUMBER-OF-SHARES-REDEEMED> 450
<SHARES-REINVESTED> 1076
<NET-CHANGE-IN-ASSETS> 78783
<ACCUMULATED-NII-PRIOR> 1694
<ACCUMULATED-GAINS-PRIOR> 666
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 488
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 979
<AVERAGE-NET-ASSETS> 388205
<PER-SHARE-NAV-BEGIN> 9.55
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.42
<PER-SHARE-DIVIDEND> 0.29
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.97
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 092
<NAME> TOTAL RETURN FUND III-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 526002
<INVESTMENTS-AT-VALUE> 530544
<RECEIVABLES> 7436
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 537980
<PAYABLE-FOR-SECURITIES> 91179
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2591
<TOTAL-LIABILITIES> 93770
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 421411
<SHARES-COMMON-STOCK> 180
<SHARES-COMMON-PRIOR> 19
<ACCUMULATED-NII-CURRENT> 1691
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11321
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9787
<NET-ASSETS> 444210
<DIVIDEND-INCOME> 80
<INTEREST-INCOME> 12532
<OTHER-INCOME> 0
<EXPENSES-NET> 979
<NET-INVESTMENT-INCOME> 11633
<REALIZED-GAINS-CURRENT> 10655
<APPREC-INCREASE-CURRENT> 6729
<NET-CHANGE-FROM-OPS> 29017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 30
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 159
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 78783
<ACCUMULATED-NII-PRIOR> 1694
<ACCUMULATED-GAINS-PRIOR> 666
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 488
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 979
<AVERAGE-NET-ASSETS> 1062
<PER-SHARE-NAV-BEGIN> 9.55
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.42
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.97
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 211
<NAME> TOTAL RETURN MORTGAGE FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4278
<INVESTMENTS-AT-VALUE> 4400
<RECEIVABLES> 40
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 4443
<PAYABLE-FOR-SECURITIES> 567
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 569
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3713
<SHARES-COMMON-STOCK> 360
<SHARES-COMMON-PRIOR> 350
<ACCUMULATED-NII-CURRENT> 25
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 124
<NET-ASSETS> 3874
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 116
<OTHER-INCOME> 0
<EXPENSES-NET> 10
<NET-INVESTMENT-INCOME> 106
<REALIZED-GAINS-CURRENT> 17
<APPREC-INCREASE-CURRENT> 63
<NET-CHANGE-FROM-OPS> 186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 104
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 10
<NET-CHANGE-IN-ASSETS> 286
<ACCUMULATED-NII-PRIOR> 25
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 5
<GROSS-ADVISORY-FEES> 5
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10
<AVERAGE-NET-ASSETS> 3660
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.22
<PER-SHARE-DIVIDEND> 0.29
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.46
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 216
<NAME> TOTAL RETURN MORTGAGE FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4278
<INVESTMENTS-AT-VALUE> 4400
<RECEIVABLES> 40
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 4443
<PAYABLE-FOR-SECURITIES> 567
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 569
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3713
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 25
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 124
<NET-ASSETS> 3874
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 116
<OTHER-INCOME> 0
<EXPENSES-NET> 10
<NET-INVESTMENT-INCOME> 106
<REALIZED-GAINS-CURRENT> 17
<APPREC-INCREASE-CURRENT> 63
<NET-CHANGE-FROM-OPS> 186
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 286
<ACCUMULATED-NII-PRIOR> 25
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 5
<GROSS-ADVISORY-FEES> 5
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10
<AVERAGE-NET-ASSETS> 102
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.18
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.46
<EXPENSE-RATIO> 0.90
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 231
<NAME> EMERGING MARKETS BOND FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 5373
<INVESTMENTS-AT-VALUE> 4477
<RECEIVABLES> 110
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 507
<TOTAL-ASSETS> 5096
<PAYABLE-FOR-SECURITIES> 1543
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11
<TOTAL-LIABILITIES> 1554
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5067
<SHARES-COMMON-STOCK> 455
<SHARES-COMMON-PRIOR> 380
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 665
<ACCUM-APPREC-OR-DEPREC> (887)
<NET-ASSETS> 3542
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 222
<OTHER-INCOME> 0
<EXPENSES-NET> 23
<NET-INVESTMENT-INCOME> 199
<REALIZED-GAINS-CURRENT> (470)
<APPREC-INCREASE-CURRENT> (976)
<NET-CHANGE-FROM-OPS> (1247)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 169
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 58
<NUMBER-OF-SHARES-REDEEMED> 3
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> (891)
<ACCUMULATED-NII-PRIOR> 27
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 195
<GROSS-ADVISORY-FEES> 10
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23
<AVERAGE-NET-ASSETS> 3577
<PER-SHARE-NAV-BEGIN> 9.67
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> (2.85)
<PER-SHARE-DIVIDEND> 0.40
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.82
<EXPENSE-RATIO> 0.92
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 233
<NAME> EMERGING MARKETS BOND FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 5373
<INVESTMENTS-AT-VALUE> 4477
<RECEIVABLES> 110
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 507
<TOTAL-ASSETS> 5096
<PAYABLE-FOR-SECURITIES> 1543
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11
<TOTAL-LIABILITIES> 1554
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5067
<SHARES-COMMON-STOCK> 24
<SHARES-COMMON-PRIOR> 34
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 665
<ACCUM-APPREC-OR-DEPREC> (887)
<NET-ASSETS> 3542
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 222
<OTHER-INCOME> 0
<EXPENSES-NET> 23
<NET-INVESTMENT-INCOME> 199
<REALIZED-GAINS-CURRENT> (470)
<APPREC-INCREASE-CURRENT> (976)
<NET-CHANGE-FROM-OPS> (1247)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19
<NUMBER-OF-SHARES-REDEEMED> 29
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (891)
<ACCUMULATED-NII-PRIOR> 27
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 195
<GROSS-ADVISORY-FEES> 10
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23
<AVERAGE-NET-ASSETS> 244
<PER-SHARE-NAV-BEGIN> 9.67
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> (2.85)
<PER-SHARE-DIVIDEND> 0.39
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.82
<EXPENSE-RATIO> 1.31
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 234
<NAME> EMERGING MARKETS BOND FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 5373
<INVESTMENTS-AT-VALUE> 4477
<RECEIVABLES> 110
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 507
<TOTAL-ASSETS> 5096
<PAYABLE-FOR-SECURITIES> 1543
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11
<TOTAL-LIABILITIES> 1554
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5067
<SHARES-COMMON-STOCK> 18
<SHARES-COMMON-PRIOR> 31
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 665
<ACCUM-APPREC-OR-DEPREC> (887)
<NET-ASSETS> 3542
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 222
<OTHER-INCOME> 0
<EXPENSES-NET> 23
<NET-INVESTMENT-INCOME> 199
<REALIZED-GAINS-CURRENT> (470)
<APPREC-INCREASE-CURRENT> (976)
<NET-CHANGE-FROM-OPS> (1247)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29
<NUMBER-OF-SHARES-REDEEMED> 43
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (891)
<ACCUMULATED-NII-PRIOR> 27
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 195
<GROSS-ADVISORY-FEES> 10
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23
<AVERAGE-NET-ASSETS> 274
<PER-SHARE-NAV-BEGIN> 9.67
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> (2.85)
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.82
<EXPENSE-RATIO> 2.08
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 235
<NAME> EMERGING MARKETS BOND FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 5373
<INVESTMENTS-AT-VALUE> 4477
<RECEIVABLES> 110
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 507
<TOTAL-ASSETS> 5096
<PAYABLE-FOR-SECURITIES> 1543
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11
<TOTAL-LIABILITIES> 1554
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5067
<SHARES-COMMON-STOCK> 22
<SHARES-COMMON-PRIOR> 14
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 665
<ACCUM-APPREC-OR-DEPREC> (887)
<NET-ASSETS> 3542
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 222
<OTHER-INCOME> 0
<EXPENSES-NET> 23
<NET-INVESTMENT-INCOME> 199
<REALIZED-GAINS-CURRENT> (470)
<APPREC-INCREASE-CURRENT> (976)
<NET-CHANGE-FROM-OPS> (1247)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21
<NUMBER-OF-SHARES-REDEEMED> 14
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (891)
<ACCUMULATED-NII-PRIOR> 27
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 195
<GROSS-ADVISORY-FEES> 10
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23
<AVERAGE-NET-ASSETS> 206
<PER-SHARE-NAV-BEGIN> 9.67
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> (2.85)
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.82
<EXPENSE-RATIO> 2.08
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 241
<NAME> EMERGING MARKETS BOND FUND II-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 115259
<INVESTMENTS-AT-VALUE> 110374
<RECEIVABLES> 1741
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 112117
<PAYABLE-FOR-SECURITIES> 21245
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 150
<TOTAL-LIABILITIES> 21395
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102132
<SHARES-COMMON-STOCK> 10469
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 6570
<ACCUM-APPREC-OR-DEPREC> (4838)
<NET-ASSETS> 90722
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2824
<OTHER-INCOME> 0
<EXPENSES-NET> 254
<NET-INVESTMENT-INCOME> 2570
<REALIZED-GAINS-CURRENT> (6570)
<APPREC-INCREASE-CURRENT> (4838)
<NET-CHANGE-FROM-OPS> (8838)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2572
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10454
<NUMBER-OF-SHARES-REDEEMED> 256
<SHARES-REINVESTED> 271
<NET-CHANGE-IN-ASSETS> 90722
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 134
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 254
<AVERAGE-NET-ASSETS> 59406
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> (1.35)
<PER-SHARE-DIVIDEND> 0.38
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.67
<EXPENSE-RATIO> 0.86
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 111
<NAME> FOREIGN BOND FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 997628
<INVESTMENTS-AT-VALUE> 1020068
<RECEIVABLES> 248795
<ASSETS-OTHER> 1226
<OTHER-ITEMS-ASSETS> 2514
<TOTAL-ASSETS> 1272603
<PAYABLE-FOR-SECURITIES> 709019
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2280
<TOTAL-LIABILITIES> 711299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 533190
<SHARES-COMMON-STOCK> 44837
<SHARES-COMMON-PRIOR> 36526
<ACCUMULATED-NII-CURRENT> 21778
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2617
<ACCUM-APPREC-OR-DEPREC> 8953
<NET-ASSETS> 561304
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16223
<OTHER-INCOME> 0
<EXPENSES-NET> 1499
<NET-INVESTMENT-INCOME> 14724
<REALIZED-GAINS-CURRENT> (2554)
<APPREC-INCREASE-CURRENT> 11921
<NET-CHANGE-FROM-OPS> 24091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12619
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12681
<NUMBER-OF-SHARES-REDEEMED> 5218
<SHARES-REINVESTED> 849
<NET-CHANGE-IN-ASSETS> 131498
<ACCUMULATED-NII-PRIOR> 20944
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 63
<GROSS-ADVISORY-FEES> 621
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1499
<AVERAGE-NET-ASSETS> 444527
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> 0.31
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.95
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 112
<NAME> FOREIGN BOND FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 997628
<INVESTMENTS-AT-VALUE> 1020068
<RECEIVABLES> 248795
<ASSETS-OTHER> 1226
<OTHER-ITEMS-ASSETS> 2514
<TOTAL-ASSETS> 1272603
<PAYABLE-FOR-SECURITIES> 709019
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2280
<TOTAL-LIABILITIES> 711299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 533190
<SHARES-COMMON-STOCK> 141
<SHARES-COMMON-PRIOR> 29
<ACCUMULATED-NII-CURRENT> 21778
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2617
<ACCUM-APPREC-OR-DEPREC> 8953
<NET-ASSETS> 561304
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16223
<OTHER-INCOME> 0
<EXPENSES-NET> 1499
<NET-INVESTMENT-INCOME> 14724
<REALIZED-GAINS-CURRENT> (2554)
<APPREC-INCREASE-CURRENT> 11921
<NET-CHANGE-FROM-OPS> 24091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 115
<NUMBER-OF-SHARES-REDEEMED> 5
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 131498
<ACCUMULATED-NII-PRIOR> 20944
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 63
<GROSS-ADVISORY-FEES> 621
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1499
<AVERAGE-NET-ASSETS> 886
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> 0.29
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 0.75
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 113
<NAME> FOREIGN BOND FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 997628
<INVESTMENTS-AT-VALUE> 1020068
<RECEIVABLES> 248795
<ASSETS-OTHER> 1226
<OTHER-ITEMS-ASSETS> 2514
<TOTAL-ASSETS> 1272603
<PAYABLE-FOR-SECURITIES> 709019
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2280
<TOTAL-LIABILITIES> 711299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 533190
<SHARES-COMMON-STOCK> 2044
<SHARES-COMMON-PRIOR> 892
<ACCUMULATED-NII-CURRENT> 21778
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2617
<ACCUM-APPREC-OR-DEPREC> 8953
<NET-ASSETS> 561304
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16223
<OTHER-INCOME> 0
<EXPENSES-NET> 1499
<NET-INVESTMENT-INCOME> 14724
<REALIZED-GAINS-CURRENT> (2554)
<APPREC-INCREASE-CURRENT> 11921
<NET-CHANGE-FROM-OPS> 24091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 424
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1392
<NUMBER-OF-SHARES-REDEEMED> 270
<SHARES-REINVESTED> 30
<NET-CHANGE-IN-ASSETS> 131498
<ACCUMULATED-NII-PRIOR> 20944
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 63
<GROSS-ADVISORY-FEES> 621
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1499
<AVERAGE-NET-ASSETS> 16242
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 0.95
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 114
<NAME> FOREIGN BOND FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 997628
<INVESTMENTS-AT-VALUE> 1020068
<RECEIVABLES> 248795
<ASSETS-OTHER> 1226
<OTHER-ITEMS-ASSETS> 2514
<TOTAL-ASSETS> 1272603
<PAYABLE-FOR-SECURITIES> 709019
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2280
<TOTAL-LIABILITIES> 711299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 533190
<SHARES-COMMON-STOCK> 1573
<SHARES-COMMON-PRIOR> 990
<ACCUMULATED-NII-CURRENT> 21778
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2617
<ACCUM-APPREC-OR-DEPREC> 8953
<NET-ASSETS> 561304
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16223
<OTHER-INCOME> 0
<EXPENSES-NET> 1499
<NET-INVESTMENT-INCOME> 14724
<REALIZED-GAINS-CURRENT> (2554)
<APPREC-INCREASE-CURRENT> 11921
<NET-CHANGE-FROM-OPS> 24091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 308
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 618
<NUMBER-OF-SHARES-REDEEMED> 58
<SHARES-REINVESTED> 23
<NET-CHANGE-IN-ASSETS> 131498
<ACCUMULATED-NII-PRIOR> 20944
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 63
<GROSS-ADVISORY-FEES> 621
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1499
<AVERAGE-NET-ASSETS> 13733
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> 0.25
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 1.70
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 115
<NAME> FOREIGN BOND FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 997628
<INVESTMENTS-AT-VALUE> 1020068
<RECEIVABLES> 248795
<ASSETS-OTHER> 1226
<OTHER-ITEMS-ASSETS> 2514
<TOTAL-ASSETS> 1272603
<PAYABLE-FOR-SECURITIES> 709019
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2280
<TOTAL-LIABILITIES> 711299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 533190
<SHARES-COMMON-STOCK> 2253
<SHARES-COMMON-PRIOR> 1591
<ACCUMULATED-NII-CURRENT> 21778
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2617
<ACCUM-APPREC-OR-DEPREC> 8953
<NET-ASSETS> 561304
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16223
<OTHER-INCOME> 0
<EXPENSES-NET> 1499
<NET-INVESTMENT-INCOME> 14724
<REALIZED-GAINS-CURRENT> (2554)
<APPREC-INCREASE-CURRENT> 11921
<NET-CHANGE-FROM-OPS> 24091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 466
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 766
<NUMBER-OF-SHARES-REDEEMED> 141
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> 131498
<ACCUMULATED-NII-PRIOR> 20944
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 63
<GROSS-ADVISORY-FEES> 621
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1499
<AVERAGE-NET-ASSETS> 20814
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.20
<PER-SHARE-DIVIDEND> 0.24
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 1.70
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 116
<NAME> FOREIGN BOND FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 997628
<INVESTMENTS-AT-VALUE> 1020068
<RECEIVABLES> 248795
<ASSETS-OTHER> 1226
<OTHER-ITEMS-ASSETS> 2514
<TOTAL-ASSETS> 1272603
<PAYABLE-FOR-SECURITIES> 709019
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2280
<TOTAL-LIABILITIES> 711299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 533190
<SHARES-COMMON-STOCK> 388
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 21778
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2617
<ACCUM-APPREC-OR-DEPREC> 8953
<NET-ASSETS> 561304
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16223
<OTHER-INCOME> 0
<EXPENSES-NET> 1499
<NET-INVESTMENT-INCOME> 14724
<REALIZED-GAINS-CURRENT> (2554)
<APPREC-INCREASE-CURRENT> 11921
<NET-CHANGE-FROM-OPS> 24091
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 48
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 398
<NUMBER-OF-SHARES-REDEEMED> 15
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 131498
<ACCUMULATED-NII-PRIOR> 20944
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 63
<GROSS-ADVISORY-FEES> 621
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1499
<AVERAGE-NET-ASSETS> 1810
<PER-SHARE-NAV-BEGIN> 10.83
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 0.94
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 121
<NAME> GLOBAL BOND FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 446009
<INVESTMENTS-AT-VALUE> 451358
<RECEIVABLES> 85976
<ASSETS-OTHER> 516
<OTHER-ITEMS-ASSETS> 1613
<TOTAL-ASSETS> 539463
<PAYABLE-FOR-SECURITIES> 262079
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 532
<TOTAL-LIABILITIES> 262611
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 275595
<SHARES-COMMON-STOCK> 27200
<SHARES-COMMON-PRIOR> 26439
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 4446
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1351
<ACCUM-APPREC-OR-DEPREC> 7054
<NET-ASSETS> 276852
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8321
<OTHER-INCOME> 0
<EXPENSES-NET> 736
<NET-INVESTMENT-INCOME> 7585
<REALIZED-GAINS-CURRENT> (1365)
<APPREC-INCREASE-CURRENT> 13186
<NET-CHANGE-FROM-OPS> 19406
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7361
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2639
<NUMBER-OF-SHARES-REDEEMED> 2427
<SHARES-REINVESTED> 548
<NET-CHANGE-IN-ASSETS> 19031
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 14
<OVERDISTRIB-NII-PRIOR> 4637
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 330
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 736
<AVERAGE-NET-ASSETS> 261891
<PER-SHARE-NAV-BEGIN> 9.70
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.45
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.15
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 122
<NAME> GLOBAL BOND FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 446009
<INVESTMENTS-AT-VALUE> 451358
<RECEIVABLES> 85976
<ASSETS-OTHER> 516
<OTHER-ITEMS-ASSETS> 1613
<TOTAL-ASSETS> 539463
<PAYABLE-FOR-SECURITIES> 262079
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 532
<TOTAL-LIABILITIES> 262611
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 275595
<SHARES-COMMON-STOCK> 92
<SHARES-COMMON-PRIOR> 160
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 4446
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1351
<ACCUM-APPREC-OR-DEPREC> 7054
<NET-ASSETS> 276852
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8321
<OTHER-INCOME> 0
<EXPENSES-NET> 736
<NET-INVESTMENT-INCOME> 7585
<REALIZED-GAINS-CURRENT> (1365)
<APPREC-INCREASE-CURRENT> 13186
<NET-CHANGE-FROM-OPS> 19406
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27
<NUMBER-OF-SHARES-REDEEMED> 98
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 19031
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 14
<OVERDISTRIB-NII-PRIOR> 4637
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 330
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 736
<AVERAGE-NET-ASSETS> 1185
<PER-SHARE-NAV-BEGIN> 9.70
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.45
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 0.83
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 191
<NAME> GLOBAL BOND FUND II-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 70816
<INVESTMENTS-AT-VALUE> 71224
<RECEIVABLES> 6593
<ASSETS-OTHER> 85
<OTHER-ITEMS-ASSETS> 240
<TOTAL-ASSETS> 78142
<PAYABLE-FOR-SECURITIES> 36051
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 134
<TOTAL-LIABILITIES> 36185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41818
<SHARES-COMMON-STOCK> 2736
<SHARES-COMMON-PRIOR> 2471
<ACCUMULATED-NII-CURRENT> 158
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (169)
<NET-ASSETS> 41957
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1369
<OTHER-INCOME> 0
<EXPENSES-NET> 194
<NET-INVESTMENT-INCOME> 1175
<REALIZED-GAINS-CURRENT> 162
<APPREC-INCREASE-CURRENT> 248
<NET-CHANGE-FROM-OPS> 1585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 744
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 192
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 72
<NET-CHANGE-IN-ASSETS> 55
<ACCUMULATED-NII-PRIOR> 141
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 12
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 194
<AVERAGE-NET-ASSETS> 26049
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.03
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 193
<NAME> GLOBAL BOND FUND II-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 70816
<INVESTMENTS-AT-VALUE> 71224
<RECEIVABLES> 6593
<ASSETS-OTHER> 85
<OTHER-ITEMS-ASSETS> 240
<TOTAL-ASSETS> 78142
<PAYABLE-FOR-SECURITIES> 36051
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 134
<TOTAL-LIABILITIES> 36185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41818
<SHARES-COMMON-STOCK> 406
<SHARES-COMMON-PRIOR> 688
<ACCUMULATED-NII-CURRENT> 158
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (169)
<NET-ASSETS> 41957
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1369
<OTHER-INCOME> 0
<EXPENSES-NET> 194
<NET-INVESTMENT-INCOME> 1175
<REALIZED-GAINS-CURRENT> 162
<APPREC-INCREASE-CURRENT> 248
<NET-CHANGE-FROM-OPS> 1585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 170
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66
<NUMBER-OF-SHARES-REDEEMED> 361
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 55
<ACCUMULATED-NII-PRIOR> 141
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 12
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 194
<AVERAGE-NET-ASSETS> 6422
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> 0.96
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 194
<NAME> GLOBAL BOND FUND II-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 70816
<INVESTMENTS-AT-VALUE> 71224
<RECEIVABLES> 6593
<ASSETS-OTHER> 85
<OTHER-ITEMS-ASSETS> 240
<TOTAL-ASSETS> 78142
<PAYABLE-FOR-SECURITIES> 36051
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 134
<TOTAL-LIABILITIES> 36185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41818
<SHARES-COMMON-STOCK> 431
<SHARES-COMMON-PRIOR> 449
<ACCUMULATED-NII-CURRENT> 158
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (169)
<NET-ASSETS> 41957
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1369
<OTHER-INCOME> 0
<EXPENSES-NET> 194
<NET-INVESTMENT-INCOME> 1175
<REALIZED-GAINS-CURRENT> 162
<APPREC-INCREASE-CURRENT> 248
<NET-CHANGE-FROM-OPS> 1585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 105
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64
<NUMBER-OF-SHARES-REDEEMED> 90
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 55
<ACCUMULATED-NII-PRIOR> 141
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 12
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 194
<AVERAGE-NET-ASSETS> 4611
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.23
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> 1.71
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 195
<NAME> GLOBAL BOND FUND II-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 70816
<INVESTMENTS-AT-VALUE> 71224
<RECEIVABLES> 6593
<ASSETS-OTHER> 85
<OTHER-ITEMS-ASSETS> 240
<TOTAL-ASSETS> 78142
<PAYABLE-FOR-SECURITIES> 36051
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 134
<TOTAL-LIABILITIES> 36185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41818
<SHARES-COMMON-STOCK> 612
<SHARES-COMMON-PRIOR> 616
<ACCUMULATED-NII-CURRENT> 158
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (169)
<NET-ASSETS> 41957
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1369
<OTHER-INCOME> 0
<EXPENSES-NET> 194
<NET-INVESTMENT-INCOME> 1175
<REALIZED-GAINS-CURRENT> 162
<APPREC-INCREASE-CURRENT> 248
<NET-CHANGE-FROM-OPS> 1585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 139
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64
<NUMBER-OF-SHARES-REDEEMED> 81
<SHARES-REINVESTED> 13
<NET-CHANGE-IN-ASSETS> 55
<ACCUMULATED-NII-PRIOR> 141
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 12
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 194
<AVERAGE-NET-ASSETS> 6102
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.23
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> 1.71
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 171
<NAME> HIGH YIELD FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2507419
<INVESTMENTS-AT-VALUE> 2460519
<RECEIVABLES> 58295
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 661
<TOTAL-ASSETS> 2519475
<PAYABLE-FOR-SECURITIES> 43306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6036
<TOTAL-LIABILITIES> 49342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2565118
<SHARES-COMMON-STOCK> 161087
<SHARES-COMMON-PRIOR> 139702
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2527
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 45696
<ACCUM-APPREC-OR-DEPREC> (46762)
<NET-ASSETS> 2470133
<DIVIDEND-INCOME> 2634
<INTEREST-INCOME> 105276
<OTHER-INCOME> 0
<EXPENSES-NET> 9054
<NET-INVESTMENT-INCOME> 98856
<REALIZED-GAINS-CURRENT> 10386
<APPREC-INCREASE-CURRENT> (122256)
<NET-CHANGE-FROM-OPS> (13014)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 75108
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36347
<NUMBER-OF-SHARES-REDEEMED> 20945
<SHARES-REINVESTED> 5983
<NET-CHANGE-IN-ASSETS> 259473
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 2529
<OVERDIST-NET-GAINS-PRIOR> 56082
<GROSS-ADVISORY-FEES> 3040
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9054
<AVERAGE-NET-ASSETS> 1792792
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> (0.51)
<PER-SHARE-DIVIDEND> 0.48
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.15
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 172
<NAME> HIGH YIELD FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2507419
<INVESTMENTS-AT-VALUE> 2460519
<RECEIVABLES> 58295
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 661
<TOTAL-ASSETS> 2519475
<PAYABLE-FOR-SECURITIES> 43306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6036
<TOTAL-LIABILITIES> 49342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2565118
<SHARES-COMMON-STOCK> 10657
<SHARES-COMMON-PRIOR> 5998
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2527
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 45696
<ACCUM-APPREC-OR-DEPREC> (46762)
<NET-ASSETS> 2470133
<DIVIDEND-INCOME> 2634
<INTEREST-INCOME> 105276
<OTHER-INCOME> 0
<EXPENSES-NET> 9054
<NET-INVESTMENT-INCOME> 98856
<REALIZED-GAINS-CURRENT> 10386
<APPREC-INCREASE-CURRENT> (122256)
<NET-CHANGE-FROM-OPS> (13014)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3807
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5808
<NUMBER-OF-SHARES-REDEEMED> 1439
<SHARES-REINVESTED> 290
<NET-CHANGE-IN-ASSETS> 259473
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 2529
<OVERDIST-NET-GAINS-PRIOR> 56082
<GROSS-ADVISORY-FEES> 3040
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9054
<AVERAGE-NET-ASSETS> 93241
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> (0.51)
<PER-SHARE-DIVIDEND> 0.47
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.15
<EXPENSE-RATIO> 0.75
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 173
<NAME> HIGH YIELD FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2507419
<INVESTMENTS-AT-VALUE> 2460519
<RECEIVABLES> 58295
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 661
<TOTAL-ASSETS> 2519475
<PAYABLE-FOR-SECURITIES> 43306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6036
<TOTAL-LIABILITIES> 49342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2565118
<SHARES-COMMON-STOCK> 6993
<SHARES-COMMON-PRIOR> 6077
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2527
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 45696
<ACCUM-APPREC-OR-DEPREC> (46762)
<NET-ASSETS> 2470133
<DIVIDEND-INCOME> 2634
<INTEREST-INCOME> 105276
<OTHER-INCOME> 0
<EXPENSES-NET> 9054
<NET-INVESTMENT-INCOME> 98856
<REALIZED-GAINS-CURRENT> 10386
<APPREC-INCREASE-CURRENT> (122256)
<NET-CHANGE-FROM-OPS> (13014)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3027
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2999
<NUMBER-OF-SHARES-REDEEMED> 2243
<SHARES-REINVESTED> 159
<NET-CHANGE-IN-ASSETS> 259473
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 2529
<OVERDIST-NET-GAINS-PRIOR> 56082
<GROSS-ADVISORY-FEES> 3040
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9054
<AVERAGE-NET-ASSETS> 75962
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> (0.51)
<PER-SHARE-DIVIDEND> 0.46
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.15
<EXPENSE-RATIO> 0.90
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 174
<NAME> HIGH YIELD FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2507419
<INVESTMENTS-AT-VALUE> 2460519
<RECEIVABLES> 58295
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 661
<TOTAL-ASSETS> 2519475
<PAYABLE-FOR-SECURITIES> 43306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6036
<TOTAL-LIABILITIES> 49342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2565118
<SHARES-COMMON-STOCK> 17053
<SHARES-COMMON-PRIOR> 13388
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2527
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 45696
<ACCUM-APPREC-OR-DEPREC> (46762)
<NET-ASSETS> 2470133
<DIVIDEND-INCOME> 2634
<INTEREST-INCOME> 105276
<OTHER-INCOME> 0
<EXPENSES-NET> 9054
<NET-INVESTMENT-INCOME> 98856
<REALIZED-GAINS-CURRENT> 10386
<APPREC-INCREASE-CURRENT> (122256)
<NET-CHANGE-FROM-OPS> (13014)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6357
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5033
<NUMBER-OF-SHARES-REDEEMED> 1653
<SHARES-REINVESTED> 285
<NET-CHANGE-IN-ASSETS> 259473
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 2529
<OVERDIST-NET-GAINS-PRIOR> 56082
<GROSS-ADVISORY-FEES> 3040
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9054
<AVERAGE-NET-ASSETS> 176317
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> (0.50)
<PER-SHARE-DIVIDEND> 0.42
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.15
<EXPENSE-RATIO> 1.65
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 175
<NAME> HIGH YIELD FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2507419
<INVESTMENTS-AT-VALUE> 2460519
<RECEIVABLES> 58295
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 661
<TOTAL-ASSETS> 2519475
<PAYABLE-FOR-SECURITIES> 43306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6036
<TOTAL-LIABILITIES> 49342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2565118
<SHARES-COMMON-STOCK> 25724
<SHARES-COMMON-PRIOR> 24429
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2527
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 45696
<ACCUM-APPREC-OR-DEPREC> (46762)
<NET-ASSETS> 2470133
<DIVIDEND-INCOME> 2634
<INTEREST-INCOME> 105276
<OTHER-INCOME> 0
<EXPENSES-NET> 9054
<NET-INVESTMENT-INCOME> 98856
<REALIZED-GAINS-CURRENT> 10386
<APPREC-INCREASE-CURRENT> (122256)
<NET-CHANGE-FROM-OPS> (13014)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10540
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10403
<NUMBER-OF-SHARES-REDEEMED> 9690
<SHARES-REINVESTED> 582
<NET-CHANGE-IN-ASSETS> 259473
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 2529
<OVERDIST-NET-GAINS-PRIOR> 56082
<GROSS-ADVISORY-FEES> 3040
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9054
<AVERAGE-NET-ASSETS> 291279
<PER-SHARE-NAV-BEGIN> 11.66
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> (0.51)
<PER-SHARE-DIVIDEND> 0.42
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.15
<EXPENSE-RATIO> 1.65
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 176
<NAME> HIGH YIELD FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2507419
<INVESTMENTS-AT-VALUE> 2460519
<RECEIVABLES> 58295
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 661
<TOTAL-ASSETS> 2519475
<PAYABLE-FOR-SECURITIES> 43306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6036
<TOTAL-LIABILITIES> 49342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2565118
<SHARES-COMMON-STOCK> 111
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2527
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 45696
<ACCUM-APPREC-OR-DEPREC> (46762)
<NET-ASSETS> 2470133
<DIVIDEND-INCOME> 2634
<INTEREST-INCOME> 105276
<OTHER-INCOME> 0
<EXPENSES-NET> 9054
<NET-INVESTMENT-INCOME> 98856
<REALIZED-GAINS-CURRENT> 10386
<APPREC-INCREASE-CURRENT> (122256)
<NET-CHANGE-FROM-OPS> (13014)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 120
<NUMBER-OF-SHARES-REDEEMED> 10
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 259473
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 2529
<OVERDIST-NET-GAINS-PRIOR> 56082
<GROSS-ADVISORY-FEES> 3040
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9054
<AVERAGE-NET-ASSETS> 392
<PER-SHARE-NAV-BEGIN> 11.68
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> (0.53)
<PER-SHARE-DIVIDEND> 0.44
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.15
<EXPENSE-RATIO> 0.89
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 081
<NAME> INTERNATIONAL BOND FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 765932
<INVESTMENTS-AT-VALUE> 749063
<RECEIVABLES> 49078
<ASSETS-OTHER> 2687
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 800828
<PAYABLE-FOR-SECURITIES> 272604
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 220
<TOTAL-LIABILITIES> 272824
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 523797
<SHARES-COMMON-STOCK> 71758
<SHARES-COMMON-PRIOR> 101717
<ACCUMULATED-NII-CURRENT> 28880
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 11390
<ACCUM-APPREC-OR-DEPREC> (13283)
<NET-ASSETS> 528004
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13415
<OTHER-INCOME> 0
<EXPENSES-NET> 1511
<NET-INVESTMENT-INCOME> 11904
<REALIZED-GAINS-CURRENT> (8651)
<APPREC-INCREASE-CURRENT> 19739
<NET-CHANGE-FROM-OPS> 22992
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7505
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1248
<NUMBER-OF-SHARES-REDEEMED> 42037
<SHARES-REINVESTED> 1011
<NET-CHANGE-IN-ASSETS> (202618)
<ACCUMULATED-NII-PRIOR> 24481
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2739
<GROSS-ADVISORY-FEES> 730
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1511
<AVERAGE-NET-ASSETS> 582352
<PER-SHARE-NAV-BEGIN> 7.18
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> 0.13
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.36
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> LONG-TERM U.S. GOVERNMENT FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 294760
<INVESTMENTS-AT-VALUE> 306246
<RECEIVABLES> 65016
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2970
<TOTAL-ASSETS> 374232
<PAYABLE-FOR-SECURITIES> 179196
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 696
<TOTAL-LIABILITIES> 179892
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179041
<SHARES-COMMON-STOCK> 10623
<SHARES-COMMON-PRIOR> 4591
<ACCUMULATED-NII-CURRENT> 613
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3160
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11526
<NET-ASSETS> 194340
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3925
<OTHER-INCOME> 0
<EXPENSES-NET> 467
<NET-INVESTMENT-INCOME> 3458
<REALIZED-GAINS-CURRENT> 2699
<APPREC-INCREASE-CURRENT> 10074
<NET-CHANGE-FROM-OPS> 16231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2305
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7645
<NUMBER-OF-SHARES-REDEEMED> 1774
<SHARES-REINVESTED> 160
<NET-CHANGE-IN-ASSETS> 119901
<ACCUMULATED-NII-PRIOR> 488
<ACCUMULATED-GAINS-PRIOR> 461
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 467
<AVERAGE-NET-ASSETS> 72511
<PER-SHARE-NAV-BEGIN> 10.57
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 1.06
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 0.54
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> LONG-TERM U.S. GOVERNMENT FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 294760
<INVESTMENTS-AT-VALUE> 306246
<RECEIVABLES> 65016
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2970
<TOTAL-ASSETS> 374232
<PAYABLE-FOR-SECURITIES> 179196
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 696
<TOTAL-LIABILITIES> 179892
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179041
<SHARES-COMMON-STOCK> 456
<SHARES-COMMON-PRIOR> 469
<ACCUMULATED-NII-CURRENT> 613
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3160
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11526
<NET-ASSETS> 194340
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3925
<OTHER-INCOME> 0
<EXPENSES-NET> 467
<NET-INVESTMENT-INCOME> 3458
<REALIZED-GAINS-CURRENT> 2699
<APPREC-INCREASE-CURRENT> 10074
<NET-CHANGE-FROM-OPS> 16231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 127
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 154
<NUMBER-OF-SHARES-REDEEMED> 177
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 119901
<ACCUMULATED-NII-PRIOR> 488
<ACCUMULATED-GAINS-PRIOR> 461
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 467
<AVERAGE-NET-ASSETS> 4224
<PER-SHARE-NAV-BEGIN> 10.57
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 1.06
<PER-SHARE-DIVIDEND> 0.33
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 0.81
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> LONG-TERM U.S. GOVERNMENT FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 294760
<INVESTMENTS-AT-VALUE> 306246
<RECEIVABLES> 65016
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2970
<TOTAL-ASSETS> 374232
<PAYABLE-FOR-SECURITIES> 179196
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 696
<TOTAL-LIABILITIES> 179892
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179041
<SHARES-COMMON-STOCK> 1295
<SHARES-COMMON-PRIOR> 583
<ACCUMULATED-NII-CURRENT> 613
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3160
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11526
<NET-ASSETS> 194340
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3925
<OTHER-INCOME> 0
<EXPENSES-NET> 467
<NET-INVESTMENT-INCOME> 3458
<REALIZED-GAINS-CURRENT> 2699
<APPREC-INCREASE-CURRENT> 10074
<NET-CHANGE-FROM-OPS> 16231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 275
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1177
<NUMBER-OF-SHARES-REDEEMED> 481
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 119901
<ACCUMULATED-NII-PRIOR> 488
<ACCUMULATED-GAINS-PRIOR> 461
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 467
<AVERAGE-NET-ASSETS> 9353
<PER-SHARE-NAV-BEGIN> 10.57
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 1.07
<PER-SHARE-DIVIDEND> 0.33
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 0.94
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 024
<NAME> LONG-TERM U.S. GOVERNMENT FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 294760
<INVESTMENTS-AT-VALUE> 306246
<RECEIVABLES> 65016
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2970
<TOTAL-ASSETS> 374232
<PAYABLE-FOR-SECURITIES> 179196
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 696
<TOTAL-LIABILITIES> 179892
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179041
<SHARES-COMMON-STOCK> 2198
<SHARES-COMMON-PRIOR> 711
<ACCUMULATED-NII-CURRENT> 613
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3160
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11526
<NET-ASSETS> 194340
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3925
<OTHER-INCOME> 0
<EXPENSES-NET> 467
<NET-INVESTMENT-INCOME> 3458
<REALIZED-GAINS-CURRENT> 2699
<APPREC-INCREASE-CURRENT> 10074
<NET-CHANGE-FROM-OPS> 16231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 350
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1595
<NUMBER-OF-SHARES-REDEEMED> 131
<SHARES-REINVESTED> 24
<NET-CHANGE-IN-ASSETS> 119901
<ACCUMULATED-NII-PRIOR> 488
<ACCUMULATED-GAINS-PRIOR> 461
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 467
<AVERAGE-NET-ASSETS> 13892
<PER-SHARE-NAV-BEGIN> 10.57
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 1.06
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 1.68
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 025
<NAME> LONG-TERM U.S. GOVERNMENT FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 294760
<INVESTMENTS-AT-VALUE> 306246
<RECEIVABLES> 65016
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2970
<TOTAL-ASSETS> 374232
<PAYABLE-FOR-SECURITIES> 179196
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 696
<TOTAL-LIABILITIES> 179892
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179041
<SHARES-COMMON-STOCK> 2124
<SHARES-COMMON-PRIOR> 686
<ACCUMULATED-NII-CURRENT> 613
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3160
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11526
<NET-ASSETS> 194340
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3925
<OTHER-INCOME> 0
<EXPENSES-NET> 467
<NET-INVESTMENT-INCOME> 3458
<REALIZED-GAINS-CURRENT> 2699
<APPREC-INCREASE-CURRENT> 10074
<NET-CHANGE-FROM-OPS> 16231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 276
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1883
<NUMBER-OF-SHARES-REDEEMED> 465
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 119901
<ACCUMULATED-NII-PRIOR> 488
<ACCUMULATED-GAINS-PRIOR> 461
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 467
<AVERAGE-NET-ASSETS> 11170
<PER-SHARE-NAV-BEGIN> 10.57
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 1.06
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 1.68
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 031
<NAME> LOW DURATION FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4054100
<INVESTMENTS-AT-VALUE> 4095023
<RECEIVABLES> 98930
<ASSETS-OTHER> 4259
<OTHER-ITEMS-ASSETS> 16995
<TOTAL-ASSETS> 4215207
<PAYABLE-FOR-SECURITIES> 683192
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39812
<TOTAL-LIABILITIES> 723004
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3430476
<SHARES-COMMON-STOCK> 296507
<SHARES-COMMON-PRIOR> 271121
<ACCUMULATED-NII-CURRENT> 802
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 535
<ACCUM-APPREC-OR-DEPREC> 61460
<NET-ASSETS> 3492203
<DIVIDEND-INCOME> 1546
<INTEREST-INCOME> 111564
<OTHER-INCOME> 0
<EXPENSES-NET> 7991
<NET-INVESTMENT-INCOME> 105119
<REALIZED-GAINS-CURRENT> (519)
<APPREC-INCREASE-CURRENT> 36519
<NET-CHANGE-FROM-OPS> 141119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 95034
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 97060
<NUMBER-OF-SHARES-REDEEMED> 79470
<SHARES-REINVESTED> 7796
<NET-CHANGE-IN-ASSETS> 490565
<ACCUMULATED-NII-PRIOR> 736
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 16
<GROSS-ADVISORY-FEES> 4069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7991
<AVERAGE-NET-ASSETS> 2908034
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> 0.33
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 0.43
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 032
<NAME> LOW DURATION FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4054100
<INVESTMENTS-AT-VALUE> 4095023
<RECEIVABLES> 98930
<ASSETS-OTHER> 4259
<OTHER-ITEMS-ASSETS> 16995
<TOTAL-ASSETS> 4215207
<PAYABLE-FOR-SECURITIES> 683192
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39812
<TOTAL-LIABILITIES> 723004
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3430476
<SHARES-COMMON-STOCK> 14255
<SHARES-COMMON-PRIOR> 4538
<ACCUMULATED-NII-CURRENT> 802
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 535
<ACCUM-APPREC-OR-DEPREC> 61460
<NET-ASSETS> 3492203
<DIVIDEND-INCOME> 1546
<INTEREST-INCOME> 111564
<OTHER-INCOME> 0
<EXPENSES-NET> 7991
<NET-INVESTMENT-INCOME> 105119
<REALIZED-GAINS-CURRENT> (519)
<APPREC-INCREASE-CURRENT> 36519
<NET-CHANGE-FROM-OPS> 141119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3096
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10993
<NUMBER-OF-SHARES-REDEEMED> 1580
<SHARES-REINVESTED> 304
<NET-CHANGE-IN-ASSETS> 490565
<ACCUMULATED-NII-PRIOR> 736
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 16
<GROSS-ADVISORY-FEES> 4069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7991
<AVERAGE-NET-ASSETS> 98697
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> 0.32
<PER-SHARE-DISTRIBUTIONS> 0.00
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 033
<NAME> LOW DURATION FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4054100
<INVESTMENTS-AT-VALUE> 4095023
<RECEIVABLES> 98930
<ASSETS-OTHER> 4259
<OTHER-ITEMS-ASSETS> 16995
<TOTAL-ASSETS> 4215207
<PAYABLE-FOR-SECURITIES> 683192
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39812
<TOTAL-LIABILITIES> 723004
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3430476
<SHARES-COMMON-STOCK> 15949
<SHARES-COMMON-PRIOR> 10761
<ACCUMULATED-NII-CURRENT> 802
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 535
<ACCUM-APPREC-OR-DEPREC> 61460
<NET-ASSETS> 3492203
<DIVIDEND-INCOME> 1546
<INTEREST-INCOME> 111564
<OTHER-INCOME> 0
<EXPENSES-NET> 7991
<NET-INVESTMENT-INCOME> 105119
<REALIZED-GAINS-CURRENT> (519)
<APPREC-INCREASE-CURRENT> 36519
<NET-CHANGE-FROM-OPS> 141119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4124
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31075
<NUMBER-OF-SHARES-REDEEMED> 26243
<SHARES-REINVESTED> 356
<NET-CHANGE-IN-ASSETS> 490565
<ACCUMULATED-NII-PRIOR> 736
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 16
<GROSS-ADVISORY-FEES> 4069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7991
<AVERAGE-NET-ASSETS> 137225
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> 0.31
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 0.90
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 034
<NAME> LOW DURATION FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4054100
<INVESTMENTS-AT-VALUE> 4095023
<RECEIVABLES> 98930
<ASSETS-OTHER> 4259
<OTHER-ITEMS-ASSETS> 16995
<TOTAL-ASSETS> 4215207
<PAYABLE-FOR-SECURITIES> 683192
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39812
<TOTAL-LIABILITIES> 723004
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3430476
<SHARES-COMMON-STOCK> 4464
<SHARES-COMMON-PRIOR> 1732
<ACCUMULATED-NII-CURRENT> 802
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 535
<ACCUM-APPREC-OR-DEPREC> 61460
<NET-ASSETS> 3492203
<DIVIDEND-INCOME> 1546
<INTEREST-INCOME> 111564
<OTHER-INCOME> 0
<EXPENSES-NET> 7991
<NET-INVESTMENT-INCOME> 105119
<REALIZED-GAINS-CURRENT> (519)
<APPREC-INCREASE-CURRENT> 36519
<NET-CHANGE-FROM-OPS> 141119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 713
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3319
<NUMBER-OF-SHARES-REDEEMED> 640
<SHARES-REINVESTED> 53
<NET-CHANGE-IN-ASSETS> 490565
<ACCUMULATED-NII-PRIOR> 736
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 16
<GROSS-ADVISORY-FEES> 4069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7991
<AVERAGE-NET-ASSETS> 27191
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 1.65
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 035
<NAME> LOW DURATION FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4054100
<INVESTMENTS-AT-VALUE> 4095023
<RECEIVABLES> 98930
<ASSETS-OTHER> 4259
<OTHER-ITEMS-ASSETS> 16995
<TOTAL-ASSETS> 4215207
<PAYABLE-FOR-SECURITIES> 683192
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39812
<TOTAL-LIABILITIES> 723004
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3430476
<SHARES-COMMON-STOCK> 8150
<SHARES-COMMON-PRIOR> 6756
<ACCUMULATED-NII-CURRENT> 802
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 535
<ACCUM-APPREC-OR-DEPREC> 61460
<NET-ASSETS> 3492203
<DIVIDEND-INCOME> 1546
<INTEREST-INCOME> 111564
<OTHER-INCOME> 0
<EXPENSES-NET> 7991
<NET-INVESTMENT-INCOME> 105119
<REALIZED-GAINS-CURRENT> (519)
<APPREC-INCREASE-CURRENT> 36519
<NET-CHANGE-FROM-OPS> 141119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2064
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2796
<NUMBER-OF-SHARES-REDEEMED> 1563
<SHARES-REINVESTED> 161
<NET-CHANGE-IN-ASSETS> 490565
<ACCUMULATED-NII-PRIOR> 736
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 16
<GROSS-ADVISORY-FEES> 4069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7991
<AVERAGE-NET-ASSETS> 74572
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 1.40
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 036
<NAME> LOW DURATION FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 4054100
<INVESTMENTS-AT-VALUE> 4095023
<RECEIVABLES> 98930
<ASSETS-OTHER> 4259
<OTHER-ITEMS-ASSETS> 16995
<TOTAL-ASSETS> 4215207
<PAYABLE-FOR-SECURITIES> 683192
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39812
<TOTAL-LIABILITIES> 723004
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3430476
<SHARES-COMMON-STOCK> 167
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 802
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 535
<ACCUM-APPREC-OR-DEPREC> 61460
<NET-ASSETS> 3492203
<DIVIDEND-INCOME> 1546
<INTEREST-INCOME> 111564
<OTHER-INCOME> 0
<EXPENSES-NET> 7991
<NET-INVESTMENT-INCOME> 105119
<REALIZED-GAINS-CURRENT> (519)
<APPREC-INCREASE-CURRENT> 36519
<NET-CHANGE-FROM-OPS> 141119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 22
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 184
<NUMBER-OF-SHARES-REDEEMED> 19
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 490565
<ACCUMULATED-NII-PRIOR> 736
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 16
<GROSS-ADVISORY-FEES> 4069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7991
<AVERAGE-NET-ASSETS> 735
<PER-SHARE-NAV-BEGIN> 10.19
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.29
<EXPENSE-RATIO> 0.75
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 141
<NAME> LOW DURATION FUND II-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 485932
<INVESTMENTS-AT-VALUE> 491842
<RECEIVABLES> 9473
<ASSETS-OTHER> 498
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 501813
<PAYABLE-FOR-SECURITIES> 74655
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6901
<TOTAL-LIABILITIES> 81556
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 411874
<SHARES-COMMON-STOCK> 40588
<SHARES-COMMON-PRIOR> 40122
<ACCUMULATED-NII-CURRENT> 48
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 73
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8262
<NET-ASSETS> 420257
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13170
<OTHER-INCOME> 0
<EXPENSES-NET> 1130
<NET-INVESTMENT-INCOME> 12040
<REALIZED-GAINS-CURRENT> 371
<APPREC-INCREASE-CURRENT> 6421
<NET-CHANGE-FROM-OPS> 18832
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11969
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1816
<NUMBER-OF-SHARES-REDEEMED> 2452
<SHARES-REINVESTED> 1102
<NET-CHANGE-IN-ASSETS> 18997
<ACCUMULATED-NII-PRIOR> 48
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 298
<GROSS-ADVISORY-FEES> 509
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1130
<AVERAGE-NET-ASSETS> 406037
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.16
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 142
<NAME> LOW DURATION FUND II-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 485932
<INVESTMENTS-AT-VALUE> 491842
<RECEIVABLES> 9473
<ASSETS-OTHER> 498
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 501813
<PAYABLE-FOR-SECURITIES> 74655
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6901
<TOTAL-LIABILITIES> 81556
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 411874
<SHARES-COMMON-STOCK> 759
<SHARES-COMMON-PRIOR> 6
<ACCUMULATED-NII-CURRENT> 48
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 73
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8262
<NET-ASSETS> 420257
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13170
<OTHER-INCOME> 0
<EXPENSES-NET> 1130
<NET-INVESTMENT-INCOME> 12040
<REALIZED-GAINS-CURRENT> 371
<APPREC-INCREASE-CURRENT> 6421
<NET-CHANGE-FROM-OPS> 18832
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 71
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 753
<NUMBER-OF-SHARES-REDEEMED> 7
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 18997
<ACCUMULATED-NII-PRIOR> 48
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 298
<GROSS-ADVISORY-FEES> 509
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1130
<AVERAGE-NET-ASSETS> 2500
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> 0.29
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.16
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> LOW DURATION FUND III-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 26671
<INVESTMENTS-AT-VALUE> 26874
<RECEIVABLES> 441
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 27316
<PAYABLE-FOR-SECURITIES> 2727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10
<TOTAL-LIABILITIES> 2737
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24284
<SHARES-COMMON-STOCK> 2422
<SHARES-COMMON-PRIOR> 2377
<ACCUMULATED-NII-CURRENT> 22
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 133
<ACCUM-APPREC-OR-DEPREC> 406
<NET-ASSETS> 24579
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 783
<OTHER-INCOME> 0
<EXPENSES-NET> 61
<NET-INVESTMENT-INCOME> 722
<REALIZED-GAINS-CURRENT> (120)
<APPREC-INCREASE-CURRENT> 353
<NET-CHANGE-FROM-OPS> 955
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 722
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 107
<NUMBER-OF-SHARES-REDEEMED> 134
<SHARES-REINVESTED> 72
<NET-CHANGE-IN-ASSETS> 683
<ACCUMULATED-NII-PRIOR> 22
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 13
<GROSS-ADVISORY-FEES> 30
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 61
<AVERAGE-NET-ASSETS> 24115
<PER-SHARE-NAV-BEGIN> 10.05
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.15
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 221
<NAME> LOW DURATION MORTGAGE FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 5239
<INVESTMENTS-AT-VALUE> 5331
<RECEIVABLES> 29
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5361
<PAYABLE-FOR-SECURITIES> 201
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1246
<TOTAL-LIABILITIES> 1447
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3820
<SHARES-COMMON-STOCK> 381
<SHARES-COMMON-PRIOR> 370
<ACCUMULATED-NII-CURRENT> 15
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 13
<ACCUM-APPREC-OR-DEPREC> 92
<NET-ASSETS> 3914
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 177
<OTHER-INCOME> 0
<EXPENSES-NET> 53
<NET-INVESTMENT-INCOME> 124
<REALIZED-GAINS-CURRENT> (13)
<APPREC-INCREASE-CURRENT> 64
<NET-CHANGE-FROM-OPS> 175
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 124
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 1
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 166
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53
<AVERAGE-NET-ASSETS> 3804
<PER-SHARE-NAV-BEGIN> 10.13
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> 0.33
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> 2.76
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 181
<NAME> MODERATE DURATION FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 304619
<INVESTMENTS-AT-VALUE> 307065
<RECEIVABLES> 3537
<ASSETS-OTHER> 26
<OTHER-ITEMS-ASSETS> 1321
<TOTAL-ASSETS> 311949
<PAYABLE-FOR-SECURITIES> 54617
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 103
<TOTAL-LIABILITIES> 54720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 248199
<SHARES-COMMON-STOCK> 24610
<SHARES-COMMON-PRIOR> 23580
<ACCUMULATED-NII-CURRENT> 560
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3300
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5170
<NET-ASSETS> 257229
<DIVIDEND-INCOME> 68
<INTEREST-INCOME> 8583
<OTHER-INCOME> 0
<EXPENSES-NET> 614
<NET-INVESTMENT-INCOME> 8037
<REALIZED-GAINS-CURRENT> 3498
<APPREC-INCREASE-CURRENT> 4203
<NET-CHANGE-FROM-OPS> 15738
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8037
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9485
<NUMBER-OF-SHARES-REDEEMED> 9074
<SHARES-REINVESTED> 619
<NET-CHANGE-IN-ASSETS> 18077
<ACCUMULATED-NII-PRIOR> 560
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 198
<GROSS-ADVISORY-FEES> 341
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 614
<AVERAGE-NET-ASSETS> 276567
<PER-SHARE-NAV-BEGIN> 10.14
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.31
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> 0.44
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 151
<NAME> MONEY MARKET FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 268728
<INVESTMENTS-AT-VALUE> 268728
<RECEIVABLES> 18817
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 216
<TOTAL-ASSETS> 287761
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13336
<TOTAL-LIABILITIES> 13336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 274406
<SHARES-COMMON-STOCK> 47902
<SHARES-COMMON-PRIOR> 55336
<ACCUMULATED-NII-CURRENT> 19
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 274425
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5913
<OTHER-INCOME> 0
<EXPENSES-NET> 588
<NET-INVESTMENT-INCOME> 5325
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5325
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1255
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 72781
<NUMBER-OF-SHARES-REDEEMED> 80970
<SHARES-REINVESTED> 756
<NET-CHANGE-IN-ASSETS> 118333
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 155
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 588
<AVERAGE-NET-ASSETS> 47532
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 152
<NAME> MONEY MARKET FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 268728
<INVESTMENTS-AT-VALUE> 268728
<RECEIVABLES> 18817
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 216
<TOTAL-ASSETS> 287761
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13336
<TOTAL-LIABILITIES> 13336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 274406
<SHARES-COMMON-STOCK> 2428
<SHARES-COMMON-PRIOR> 749
<ACCUMULATED-NII-CURRENT> 19
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 274425
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5913
<OTHER-INCOME> 0
<EXPENSES-NET> 588
<NET-INVESTMENT-INCOME> 5325
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5325
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 38
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9841
<NUMBER-OF-SHARES-REDEEMED> 8198
<SHARES-REINVESTED> 36
<NET-CHANGE-IN-ASSETS> 118333
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 155
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 588
<AVERAGE-NET-ASSETS> 1544
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 153
<NAME> MONEY MARKET FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 268728
<INVESTMENTS-AT-VALUE> 268728
<RECEIVABLES> 18817
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 216
<TOTAL-ASSETS> 287761
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13336
<TOTAL-LIABILITIES> 13336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 274406
<SHARES-COMMON-STOCK> 116156
<SHARES-COMMON-PRIOR> 41376
<ACCUMULATED-NII-CURRENT> 19
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 274425
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5913
<OTHER-INCOME> 0
<EXPENSES-NET> 588
<NET-INVESTMENT-INCOME> 5325
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5325
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2045
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1986674
<NUMBER-OF-SHARES-REDEEMED> 1913045
<SHARES-REINVESTED> 1150
<NET-CHANGE-IN-ASSETS> 118333
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 155
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 588
<AVERAGE-NET-ASSETS> 81065
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 154
<NAME> MONEY MARKET FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 268728
<INVESTMENTS-AT-VALUE> 268728
<RECEIVABLES> 18817
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 216
<TOTAL-ASSETS> 287761
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13336
<TOTAL-LIABILITIES> 13336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 274406
<SHARES-COMMON-STOCK> 11698
<SHARES-COMMON-PRIOR> 2937
<ACCUMULATED-NII-CURRENT> 19
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 274425
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5913
<OTHER-INCOME> 0
<EXPENSES-NET> 588
<NET-INVESTMENT-INCOME> 5325
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5325
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 116
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18553
<NUMBER-OF-SHARES-REDEEMED> 9892
<SHARES-REINVESTED> 99
<NET-CHANGE-IN-ASSETS> 118333
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 155
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 588
<AVERAGE-NET-ASSETS> 5609
<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> 1.50
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 155
<NAME> MONEY MARKET FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 268728
<INVESTMENTS-AT-VALUE> 268728
<RECEIVABLES> 18817
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 216
<TOTAL-ASSETS> 287761
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13336
<TOTAL-LIABILITIES> 13336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 274406
<SHARES-COMMON-STOCK> 96246
<SHARES-COMMON-PRIOR> 55697
<ACCUMULATED-NII-CURRENT> 19
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 274425
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5913
<OTHER-INCOME> 0
<EXPENSES-NET> 588
<NET-INVESTMENT-INCOME> 5325
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5325
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1872
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 863054
<NUMBER-OF-SHARES-REDEEMED> 823936
<SHARES-REINVESTED> 1431
<NET-CHANGE-IN-ASSETS> 118333
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 155
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 588
<AVERAGE-NET-ASSETS> 74153
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.59
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 251
<NAME> MUNICIPAL BOND FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 52652
<INVESTMENTS-AT-VALUE> 56148
<RECEIVABLES> 1202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 58
<TOTAL-ASSETS> 57408
<PAYABLE-FOR-SECURITIES> 105
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53651
<SHARES-COMMON-STOCK> 622
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 14
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3496
<NET-ASSETS> 57160
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 722
<OTHER-INCOME> 0
<EXPENSES-NET> 175
<NET-INVESTMENT-INCOME> 547
<REALIZED-GAINS-CURRENT> 14
<APPREC-INCREASE-CURRENT> 1170
<NET-CHANGE-FROM-OPS> 1731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 83
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 318
<NUMBER-OF-SHARES-REDEEMED> 8
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 54137
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175
<AVERAGE-NET-ASSETS> 3824
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 0.28
<PER-SHARE-DIVIDEND> 0.22
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.25
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 252
<NAME> MUNICIPAL BOND FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 52652
<INVESTMENTS-AT-VALUE> 56148
<RECEIVABLES> 1202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 58
<TOTAL-ASSETS> 57408
<PAYABLE-FOR-SECURITIES> 105
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53651
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 14
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3496
<NET-ASSETS> 57160
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 722
<OTHER-INCOME> 0
<EXPENSES-NET> 175
<NET-INVESTMENT-INCOME> 547
<REALIZED-GAINS-CURRENT> 14
<APPREC-INCREASE-CURRENT> 1170
<NET-CHANGE-FROM-OPS> 1731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 54137
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175
<AVERAGE-NET-ASSETS> 100
<PER-SHARE-NAV-BEGIN> 10.25
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 0.75
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 253
<NAME> MUNICIPAL BOND FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 52652
<INVESTMENTS-AT-VALUE> 56148
<RECEIVABLES> 1202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 58
<TOTAL-ASSETS> 57408
<PAYABLE-FOR-SECURITIES> 105
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53651
<SHARES-COMMON-STOCK> 768
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 14
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3496
<NET-ASSETS> 57160
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 722
<OTHER-INCOME> 0
<EXPENSES-NET> 175
<NET-INVESTMENT-INCOME> 547
<REALIZED-GAINS-CURRENT> 14
<APPREC-INCREASE-CURRENT> 1170
<NET-CHANGE-FROM-OPS> 1731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 81
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 809
<NUMBER-OF-SHARES-REDEEMED> 46
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 54137
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175
<AVERAGE-NET-ASSETS> 4038
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 0.28
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 0.88
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 254
<NAME> MUNICIPAL BOND FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 52652
<INVESTMENTS-AT-VALUE> 56148
<RECEIVABLES> 1202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 58
<TOTAL-ASSETS> 57408
<PAYABLE-FOR-SECURITIES> 105
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53651
<SHARES-COMMON-STOCK> 496
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 14
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3496
<NET-ASSETS> 57160
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 722
<OTHER-INCOME> 0
<EXPENSES-NET> 175
<NET-INVESTMENT-INCOME> 547
<REALIZED-GAINS-CURRENT> 14
<APPREC-INCREASE-CURRENT> 1170
<NET-CHANGE-FROM-OPS> 1731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 522
<NUMBER-OF-SHARES-REDEEMED> 28
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 54137
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175
<AVERAGE-NET-ASSETS> 2442
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 0.27
<PER-SHARE-DIVIDEND> 0.16
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 1.60
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 255
<NAME> MUNICIPAL BOND FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 52652
<INVESTMENTS-AT-VALUE> 56148
<RECEIVABLES> 1202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 58
<TOTAL-ASSETS> 57408
<PAYABLE-FOR-SECURITIES> 105
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53651
<SHARES-COMMON-STOCK> 3673
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 14
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3496
<NET-ASSETS> 57160
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 722
<OTHER-INCOME> 0
<EXPENSES-NET> 175
<NET-INVESTMENT-INCOME> 547
<REALIZED-GAINS-CURRENT> 14
<APPREC-INCREASE-CURRENT> 1170
<NET-CHANGE-FROM-OPS> 1731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 341
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3907
<NUMBER-OF-SHARES-REDEEMED> 258
<SHARES-REINVESTED> 24
<NET-CHANGE-IN-ASSETS> 54137
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175
<AVERAGE-NET-ASSETS> 19012
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 0.27
<PER-SHARE-DIVIDEND> 0.17
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 1.35
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 256
<NAME> MUNICIPAL BOND FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 52652
<INVESTMENTS-AT-VALUE> 56148
<RECEIVABLES> 1202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 58
<TOTAL-ASSETS> 57408
<PAYABLE-FOR-SECURITIES> 105
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53651
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 14
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3496
<NET-ASSETS> 57160
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 722
<OTHER-INCOME> 0
<EXPENSES-NET> 175
<NET-INVESTMENT-INCOME> 547
<REALIZED-GAINS-CURRENT> 14
<APPREC-INCREASE-CURRENT> 1170
<NET-CHANGE-FROM-OPS> 1731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 54137
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175
<AVERAGE-NET-ASSETS> 101
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 0.27
<PER-SHARE-DIVIDEND> 0.19
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> 0.84
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 071
<NAME> REAL RETURN BOND FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 18821
<INVESTMENTS-AT-VALUE> 18908
<RECEIVABLES> 1501
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 20441
<PAYABLE-FOR-SECURITIES> 9386
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28
<TOTAL-LIABILITIES> 9414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10998
<SHARES-COMMON-STOCK> 584
<SHARES-COMMON-PRIOR> 566
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 129
<ACCUM-APPREC-OR-DEPREC> 158
<NET-ASSETS> 11027
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 345
<OTHER-INCOME> 0
<EXPENSES-NET> 53
<NET-INVESTMENT-INCOME> 292
<REALIZED-GAINS-CURRENT> (63)
<APPREC-INCREASE-CURRENT> 232
<NET-CHANGE-FROM-OPS> 461
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 169
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63
<NUMBER-OF-SHARES-REDEEMED> 62
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 3145
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6
<OVERDISTRIB-NII-PRIOR> 25
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53
<AVERAGE-NET-ASSETS> 5800
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.29
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 0.54
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 073
<NAME> REAL RETURN BOND FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 18821
<INVESTMENTS-AT-VALUE> 18908
<RECEIVABLES> 1501
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 20441
<PAYABLE-FOR-SECURITIES> 9386
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28
<TOTAL-LIABILITIES> 9414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10998
<SHARES-COMMON-STOCK> 47
<SHARES-COMMON-PRIOR> 38
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 129
<ACCUM-APPREC-OR-DEPREC> 158
<NET-ASSETS> 11027
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 345
<OTHER-INCOME> 0
<EXPENSES-NET> 53
<NET-INVESTMENT-INCOME> 292
<REALIZED-GAINS-CURRENT> (63)
<APPREC-INCREASE-CURRENT> 232
<NET-CHANGE-FROM-OPS> 461
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26
<NUMBER-OF-SHARES-REDEEMED> 18
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 3145
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6
<OVERDISTRIB-NII-PRIOR> 25
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53
<AVERAGE-NET-ASSETS> 352
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 0.93
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 074
<NAME> REAL RETURN BOND FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 18821
<INVESTMENTS-AT-VALUE> 18908
<RECEIVABLES> 1501
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 20441
<PAYABLE-FOR-SECURITIES> 9386
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28
<TOTAL-LIABILITIES> 9414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10998
<SHARES-COMMON-STOCK> 274
<SHARES-COMMON-PRIOR> 153
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 129
<ACCUM-APPREC-OR-DEPREC> 158
<NET-ASSETS> 11027
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 345
<OTHER-INCOME> 0
<EXPENSES-NET> 53
<NET-INVESTMENT-INCOME> 292
<REALIZED-GAINS-CURRENT> (63)
<APPREC-INCREASE-CURRENT> 232
<NET-CHANGE-FROM-OPS> 461
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 54
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 163
<NUMBER-OF-SHARES-REDEEMED> 46
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 3145
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6
<OVERDISTRIB-NII-PRIOR> 25
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53
<AVERAGE-NET-ASSETS> 2332
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.23
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 1.68
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 075
<NAME> REAL RETURN BOND FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 18821
<INVESTMENTS-AT-VALUE> 18908
<RECEIVABLES> 1501
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 20441
<PAYABLE-FOR-SECURITIES> 9386
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28
<TOTAL-LIABILITIES> 9414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10998
<SHARES-COMMON-STOCK> 197
<SHARES-COMMON-PRIOR> 50
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 129
<ACCUM-APPREC-OR-DEPREC> 158
<NET-ASSETS> 11027
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 345
<OTHER-INCOME> 0
<EXPENSES-NET> 53
<NET-INVESTMENT-INCOME> 292
<REALIZED-GAINS-CURRENT> (63)
<APPREC-INCREASE-CURRENT> 232
<NET-CHANGE-FROM-OPS> 461
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 56
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 248
<NUMBER-OF-SHARES-REDEEMED> 103
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 3145
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6
<OVERDISTRIB-NII-PRIOR> 25
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53
<AVERAGE-NET-ASSETS> 2259
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.24
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 1.43
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 076
<NAME> REAL RETURN BOND FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 18821
<INVESTMENTS-AT-VALUE> 18908
<RECEIVABLES> 1501
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 20441
<PAYABLE-FOR-SECURITIES> 9386
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28
<TOTAL-LIABILITIES> 9414
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10998
<SHARES-COMMON-STOCK> 11
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 129
<ACCUM-APPREC-OR-DEPREC> 158
<NET-ASSETS> 11027
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 345
<OTHER-INCOME> 0
<EXPENSES-NET> 53
<NET-INVESTMENT-INCOME> 292
<REALIZED-GAINS-CURRENT> (63)
<APPREC-INCREASE-CURRENT> 232
<NET-CHANGE-FROM-OPS> 461
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3145
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6
<OVERDISTRIB-NII-PRIOR> 25
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53
<AVERAGE-NET-ASSETS> 101
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 0.92
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 051
<NAME> SHORT-TERM FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 414568
<INVESTMENTS-AT-VALUE> 414245
<RECEIVABLES> 10999
<ASSETS-OTHER> 251
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425495
<PAYABLE-FOR-SECURITIES> 22739
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 977
<TOTAL-LIABILITIES> 23716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 401406
<SHARES-COMMON-STOCK> 33260
<SHARES-COMMON-PRIOR> 17177
<ACCUMULATED-NII-CURRENT> 696
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 325
<ACCUM-APPREC-OR-DEPREC> 2
<NET-ASSETS> 401779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13399
<OTHER-INCOME> 0
<EXPENSES-NET> 1087
<NET-INVESTMENT-INCOME> 12312
<REALIZED-GAINS-CURRENT> (240)
<APPREC-INCREASE-CURRENT> (560)
<NET-CHANGE-FROM-OPS> 11512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11022
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52225
<NUMBER-OF-SHARES-REDEEMED> 36818
<SHARES-REINVESTED> 629
<NET-CHANGE-IN-ASSETS> 191583
<ACCUMULATED-NII-PRIOR> 741
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 85
<GROSS-ADVISORY-FEES> 538
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1087
<AVERAGE-NET-ASSETS> 378342
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.29
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.04
<EXPENSE-RATIO> 0.45
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 052
<NAME> SHORT-TERM FUND-ADMINISTRATIVE CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 414568
<INVESTMENTS-AT-VALUE> 414245
<RECEIVABLES> 10999
<ASSETS-OTHER> 251
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425495
<PAYABLE-FOR-SECURITIES> 22739
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 977
<TOTAL-LIABILITIES> 23716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 401406
<SHARES-COMMON-STOCK> 176
<SHARES-COMMON-PRIOR> 512
<ACCUMULATED-NII-CURRENT> 696
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 325
<ACCUM-APPREC-OR-DEPREC> 2
<NET-ASSETS> 401779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13399
<OTHER-INCOME> 0
<EXPENSES-NET> 1087
<NET-INVESTMENT-INCOME> 12312
<REALIZED-GAINS-CURRENT> (240)
<APPREC-INCREASE-CURRENT> (560)
<NET-CHANGE-FROM-OPS> 11512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 86
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 87
<NUMBER-OF-SHARES-REDEEMED> 441
<SHARES-REINVESTED> 67
<NET-CHANGE-IN-ASSETS> 191583
<ACCUMULATED-NII-PRIOR> 741
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 85
<GROSS-ADVISORY-FEES> 538
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1087
<AVERAGE-NET-ASSETS> 3096
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.28
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.04
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 053
<NAME> SHORT-TERM FUND-CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 414568
<INVESTMENTS-AT-VALUE> 414245
<RECEIVABLES> 10999
<ASSETS-OTHER> 251
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425495
<PAYABLE-FOR-SECURITIES> 22739
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 977
<TOTAL-LIABILITIES> 23716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 401406
<SHARES-COMMON-STOCK> 5124
<SHARES-COMMON-PRIOR> 2403
<ACCUMULATED-NII-CURRENT> 696
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 325
<ACCUM-APPREC-OR-DEPREC> 2
<NET-ASSETS> 401779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13399
<OTHER-INCOME> 0
<EXPENSES-NET> 1087
<NET-INVESTMENT-INCOME> 12312
<REALIZED-GAINS-CURRENT> (240)
<APPREC-INCREASE-CURRENT> (560)
<NET-CHANGE-FROM-OPS> 11512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 986
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4153
<NUMBER-OF-SHARES-REDEEMED> 1519
<SHARES-REINVESTED> 87
<NET-CHANGE-IN-ASSETS> 191583
<ACCUMULATED-NII-PRIOR> 741
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 85
<GROSS-ADVISORY-FEES> 538
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1087
<AVERAGE-NET-ASSETS> 37029
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.04
<EXPENSE-RATIO> 0.84
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 054
<NAME> SHORT-TERM FUND-CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 414568
<INVESTMENTS-AT-VALUE> 414245
<RECEIVABLES> 10999
<ASSETS-OTHER> 251
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425495
<PAYABLE-FOR-SECURITIES> 22739
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 977
<TOTAL-LIABILITIES> 23716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 401406
<SHARES-COMMON-STOCK> 157
<SHARES-COMMON-PRIOR> 125
<ACCUMULATED-NII-CURRENT> 696
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 325
<ACCUM-APPREC-OR-DEPREC> 2
<NET-ASSETS> 401779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13399
<OTHER-INCOME> 0
<EXPENSES-NET> 1087
<NET-INVESTMENT-INCOME> 12312
<REALIZED-GAINS-CURRENT> (240)
<APPREC-INCREASE-CURRENT> (560)
<NET-CHANGE-FROM-OPS> 11512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 35
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 270
<NUMBER-OF-SHARES-REDEEMED> 240
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 191583
<ACCUMULATED-NII-PRIOR> 741
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 85
<GROSS-ADVISORY-FEES> 538
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1087
<AVERAGE-NET-ASSETS> 1528
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.23
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.04
<EXPENSE-RATIO> 1.60
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 055
<NAME> SHORT-TERM FUND-CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 414568
<INVESTMENTS-AT-VALUE> 414245
<RECEIVABLES> 10999
<ASSETS-OTHER> 251
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425495
<PAYABLE-FOR-SECURITIES> 22739
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 977
<TOTAL-LIABILITIES> 23716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 401406
<SHARES-COMMON-STOCK> 1241
<SHARES-COMMON-PRIOR> 672
<ACCUMULATED-NII-CURRENT> 696
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 325
<ACCUM-APPREC-OR-DEPREC> 2
<NET-ASSETS> 401779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13399
<OTHER-INCOME> 0
<EXPENSES-NET> 1087
<NET-INVESTMENT-INCOME> 12312
<REALIZED-GAINS-CURRENT> (240)
<APPREC-INCREASE-CURRENT> (560)
<NET-CHANGE-FROM-OPS> 11512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 223
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2268
<NUMBER-OF-SHARES-REDEEMED> 1717
<SHARES-REINVESTED> 18
<NET-CHANGE-IN-ASSETS> 191583
<ACCUMULATED-NII-PRIOR> 741
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 85
<GROSS-ADVISORY-FEES> 538
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1087
<AVERAGE-NET-ASSETS> 8739
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.04
<EXPENSE-RATIO> 1.15
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 056
<NAME> SHORT-TERM FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 414568
<INVESTMENTS-AT-VALUE> 414245
<RECEIVABLES> 10999
<ASSETS-OTHER> 251
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 425495
<PAYABLE-FOR-SECURITIES> 22739
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 977
<TOTAL-LIABILITIES> 23716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 401406
<SHARES-COMMON-STOCK> 41
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 696
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 325
<ACCUM-APPREC-OR-DEPREC> 2
<NET-ASSETS> 401779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13399
<OTHER-INCOME> 0
<EXPENSES-NET> 1087
<NET-INVESTMENT-INCOME> 12312
<REALIZED-GAINS-CURRENT> (240)
<APPREC-INCREASE-CURRENT> (560)
<NET-CHANGE-FROM-OPS> 11512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 191583
<ACCUMULATED-NII-PRIOR> 741
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 85
<GROSS-ADVISORY-FEES> 538
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1087
<AVERAGE-NET-ASSETS> 193
<PER-SHARE-NAV-BEGIN> 10.07
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.04
<EXPENSE-RATIO> 0.74
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 061
<NAME> STOCKSPLUS FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 882845
<INVESTMENTS-AT-VALUE> 879983
<RECEIVABLES> 16736
<ASSETS-OTHER> 553
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 897272
<PAYABLE-FOR-SECURITIES> 94613
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22203
<TOTAL-LIABILITIES> 116816
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 763123
<SHARES-COMMON-STOCK> 32654
<SHARES-COMMON-PRIOR> 29564
<ACCUMULATED-NII-CURRENT> 43968
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 29410
<ACCUM-APPREC-OR-DEPREC> 2775
<NET-ASSETS> 780456
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13025
<OTHER-INCOME> 0
<EXPENSES-NET> 3827
<NET-INVESTMENT-INCOME> 9198
<REALIZED-GAINS-CURRENT> (60993)
<APPREC-INCREASE-CURRENT> (8081)
<NET-CHANGE-FROM-OPS> (59876)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5802
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7524
<NUMBER-OF-SHARES-REDEEMED> 4800
<SHARES-REINVESTED> 365
<NET-CHANGE-IN-ASSETS> 102744
<ACCUMULATED-NII-PRIOR> 43808
<ACCUMULATED-GAINS-PRIOR> 31583
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1492
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3827
<AVERAGE-NET-ASSETS> 425298
<PER-SHARE-NAV-BEGIN> 14.09
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> (1.18)
<PER-SHARE-DIVIDEND> 0.19
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.93
<EXPENSE-RATIO> 0.65
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 201
<NAME> STRATEGIC BALANCED FUND-INSTITUTIONAL CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 40914
<INVESTMENTS-AT-VALUE> 41219
<RECEIVABLES> 708
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 26
<TOTAL-ASSETS> 41954
<PAYABLE-FOR-SECURITIES> 3618
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 491
<TOTAL-LIABILITIES> 4109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35038
<SHARES-COMMON-STOCK> 3093
<SHARES-COMMON-PRIOR> 3080
<ACCUMULATED-NII-CURRENT> 2037
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 37
<ACCUM-APPREC-OR-DEPREC> 807
<NET-ASSETS> 37845
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 621
<OTHER-INCOME> 0
<EXPENSES-NET> 128
<NET-INVESTMENT-INCOME> 493
<REALIZED-GAINS-CURRENT> (1630)
<APPREC-INCREASE-CURRENT> 382
<NET-CHANGE-FROM-OPS> (755)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 474
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14
<NUMBER-OF-SHARES-REDEEMED> 1
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (961)
<ACCUMULATED-NII-PRIOR> 2019
<ACCUMULATED-GAINS-PRIOR> 1593
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 78
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 128
<AVERAGE-NET-ASSETS> 38970
<PER-SHARE-NAV-BEGIN> 12.60
<PER-SHARE-NII> 0.16
<PER-SHARE-GAIN-APPREC> (0.41)
<PER-SHARE-DIVIDEND> 0.15
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.20
<EXPENSE-RATIO> 0.65
<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
semi-annual report dated September 30, 1998 (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 206
<NAME> STRATEGIC BALANCED FUND-CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 40914
<INVESTMENTS-AT-VALUE> 41219
<RECEIVABLES> 708
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 26
<TOTAL-ASSETS> 41954
<PAYABLE-FOR-SECURITIES> 3618
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 491
<TOTAL-LIABILITIES> 4109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 35038
<SHARES-COMMON-STOCK> 8
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2037
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 37
<ACCUM-APPREC-OR-DEPREC> 807
<NET-ASSETS> 37845
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 621
<OTHER-INCOME> 0
<EXPENSES-NET> 128
<NET-INVESTMENT-INCOME> 493
<REALIZED-GAINS-CURRENT> (1630)
<APPREC-INCREASE-CURRENT> 382
<NET-CHANGE-FROM-OPS> (755)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (961)
<ACCUMULATED-NII-PRIOR> 2019
<ACCUMULATED-GAINS-PRIOR> 1593
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 78
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 128
<AVERAGE-NET-ASSETS> 100
<PER-SHARE-NAV-BEGIN> 12.72
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> (0.52)
<PER-SHARE-DIVIDEND> 0.13
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.21
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
