PIMCO Total Return Fund
Administrative Class Shares
November 5, 1999
This profile summarizes key information about the Fund that
is included in the Fund's Prospectus. The Fund's Prospectus
includes additional information about the Fund, including a
more detailed description of the risks associated with investing
in the Fund that you may want to consider before you invest. You
may obtain the Prospectus and other information about the Fund
at no cost by calling us at 1-800-927-4648, visiting our Web site
at www.pimco.com, or by contacting your financial intermediary.
PIMCO
FUNDS
<PAGE>
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks maximum total return, consistent with
preservation of capital and prudent investment management.
WHAT IS THE FUND'S PRINCIPAL INVESTMENT
STRATEGY?
The Fund seeks to achieve its investment objective by
investing under normal circumstances at least 65% of its
assets in a diversified portfolio of fixed income
instruments of varying maturities. The average portfolio
duration of this Fund normally varies within a three- to
six-year time frame based on PIMCO's forecast for interest
rates. Duration is a measure of the expected life of a fixed
income security that is used to determine the sensitivity of
the security's price to changes in interest rates.
The Fund invests primarily in investment grade debt
securities, but may invest up to 10% of its assets in high
yield securities ("junk bonds") rated B or higher by
Moody's or S&P, or, if unrated, determined by PIMCO to be of
comparable quality. The Fund may invest up to 20% of its
assets in securities denominated in foreign currencies, and
may invest beyond this limit in U.S. dollar-denominated
securities of foreign issuers. The Fund will normally hedge
at least 75% of its exposure to foreign currency to reduce
the risk of loss due to fluctuations in currency exchange rates.
The Fund may invest all of its assets in derivative
instruments, such as options, futures contracts or swap
agreements, or in mortgage- or asset-backed securities. The
Fund typically uses derivatives as a substitute for taking a
position in the underlying asset and/or as part of a
strategy designed to reduce exposure to other risks, such as
interest rate or currency risk. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly
in the securities in which it primarily invests, the Fund
may use other investment techniques to gain exposure to
market movements related to such securities, such as
entering into a series of contracts to buy or sell such
securities. The "total return" sought by the Fund consists
of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases
in interest rates or improving credit fundamentals for a
particular sector or security.
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during its past fiscal year. You may obtain
these reports at no cost by calling us at 1-800-927-4648.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
You could lose money on an investment in the Fund. The
principal risks of investing in the Fund are:
*Interest Rate Risk: As interest rates rise, the value
of fixed income securities in the Fund's portfolio is likely
to decrease. Securities with longer durations tend to be
more sensitive to changes in interest rates.
*Credit Risk: The Fund could lose money if the issuer or
guarantor of a fixed income security, or the counterparty to
a derivative contract, is unable or unwilling to meet its
financial obligations.
*Market Risk: The value of securities owned by the Fund
may go up or down, sometimes rapidly or unpredictably.
Securities may decline in value due to factors affecting
securities markets generally or particular industries.
*Issuer Risk: The value of a security may decline for a
number of reasons which directly relate to the issuer, such
as management performance, financial leverage and reduced
demand for the issuer's goods or services.
*Derivatives Risk: When the Fund invests in a derivative
instrument, it could lose more than the principal amount
invested. Derivatives are subject to a number of risks, such
as liquidity, interest rate, market, credit and management
risk. They also involve the risk of improper valuation.
Changes in the value of a derivative may not correlate
perfectly with the underlying asset, rate or index.
*Liquidity Risk: Liquidity risk exists when particular
investments are difficult to purchase or sell. The Fund's
investments in illiquid securities may reduce the returns of
the Fund because it may be unable to sell the illiquid
securities at an advantageous time or price.
*Mortgage Risk: Rising interest rates tend to extend the
duration of mortgage-related securities, making them more
sensitive to changes in interest rates. When interest rates
decline, borrowers may pay off their mortgages sooner than
expected. This can reduce the returns of a Fund because the
Fund will have to reinvest that money at the lower
prevailing interest rates.
*Foreign Investment Risk: When the Fund invests in
foreign securities, it may experience more rapid and extreme
changes in value than if it invested exclusively in U.S.
securities. The securities markets of many foreign countries
are relatively small. Reporting, accounting and auditing
standards of foreign countries differ from U.S. standards.
Also, nationalization, expropriation, taxation, political
changes or diplomatic developments could adversely affect
the Fund's investments in a foreign country.
<PAGE>
*Currency Risk: When the Fund invests in securities
denominated in foreign currencies, it is subject to the risk
that those currencies will decline in value relative to the
U.S. Dollar, or, in the case of hedging positions, that the
U.S. Dollar will decline in value relative to the currency
being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for
reasons such as changes in interest rates, government
intervention or political developments. As a result, the
Fund's investments in foreign currency-denominated
securities may reduce the returns of the Fund.
*Leveraging Risk: The Fund may engage in transactions
that give rise to a form of leverage. Leverage may cause the
Fund to sell holdings when it may not be advantageous to do
so. Leverage, including borrowing, will cause the Fund to be
more volatile than if the Fund had not been leveraged.
*Management Risk: There is no guarantee that the
investment techniques and risk analyses applied by PIMCO
will produce the desired results.
HOW HAS THE FUND PERFORMED?
The bar chart and table below provide some indication of the
risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's
average annual returns compare with the returns of a broad-
based securities market index and an index of similar funds.
The bar chart and table show performance of the Fund's
Administrative Class shares net of fees. For periods prior
to the inception date of the Administrative Class (9/8/94),
performance information is based on the performance of the
Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual
12b-1/service fees and other expenses paid by Administrative
Class shares. Past performance is no guarantee of future
results.
Calendar Year Total Returns
1989 13.96%
1990 7.77%
1991 19.29%
1992 9.49%
1993 12.27%
1994 -3.81%
1995 19.38%
1996 4.53%
1997 9.89%
1998 9.50%
During the period shown in the bar chart, the highest
quarterly return was 8.19% (2nd Quarter 1989) and the lowest
quarterly return was -2.74% (1st Quarter 1994).
As of September 30, 1999, the Fund's year-to-date return was 0.76%.
Average Annual Total Returns
for the periods ended September 30,1999
1 year 5 years 10 years
Total Return Fund,
Administrative Class -0.25% 8.34% 8.92%
Lehman Brothers
Aggregate Bond Index1 -0.37% 7.84% 8.10%
Lipper Intermediate Investment
Grade Debt Fund Avg.2 -1.02% 6.89% 7.32%
1 The Lehman Brothers Aggregate Bond Index is an unmanaged
index of investment grade, U.S. dollar-denominated fixed
income securities of domestic issuers having a maturity of
two to ten years. It is not possible to invest directly in
the index.
2 The Lipper Intermediate Investment Grade Debt Fund Average
is a total return performance average of Funds tracked by
Lipper Analytical Services, Inc. that invest at least 65% of
their assets in investment-grade debt issues with dollar-
weighted average maturities of five to ten years. It does
not take into account sales charges.
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you may pay if
you buy and hold Administrative Class shares of the Fund:
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets, shown as a
percentage of average daily net assets)
Advisory Fee 0.25%
Distribution (12b-1) and/or Service Fees 0.25%
Other Expenses1 0.18%
Total Annual Operating Expenses 0.68%
1 Other Expenses reflects a 0.18% Administrative Fee paid by
the class.
Example: The Example is intended to help you compare the
cost of investing in the Fund with the costs of investing in
other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated, and then
redeem all your shares at the end of those periods. The
Example also assumes a 5% return each year, the reinvestment
of all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual
costs may be higher or lower, the Example shows what your
costs would be based on these assumptions.
1 year 3 years 5 years 10 years
Total Return Fund,
Administrative Class $69 $218 $379 $847
<PAGE>
WHO IS THE FUND'S INVESTMENT ADVISER?
Pacific Investment Management Company ("PIMCO"), a
subsidiary of PIMCO Advisors L.P., serves as investment
adviser to the Fund. PIMCO is an investment management
company founded in 1971, and had over $181 billion in assets
under management as of September 30, 1999. PIMCO manages the
investment and reinvestment of the assets of the Fund and is
responsible for placing orders for the purchase and sale of
the Fund's investments. PIMCO is located at 840 Newport
Center Drive, Newport Beach, CA 92660.
The Fund's portfolio is managed by William H. Gross. A Fixed
Income Portfolio Manager, Mr. Gross is a Managing Director,
Chief Investment Officer and one of the founders of PIMCO.
He has managed the Total Return Fund since its inception on
May 11, 1987.
HOW DO I BUY FUND SHARES?
The minimum initial investment to open an account directly
with the Fund is $5 million. You may purchase Fund shares in
one of the following ways:
*Opening an account by completing and signing a Client
Registration Application, mailing it to us at the address
shown below, and wiring funds. Wiring instructions can be
obtained by calling us at 1-800-927-4648.
*Exchanging Administrative Class shares in any amount
from another PIMCO Funds account.
*Additional purchases in any amount can be made by
calling us at 1-800-927-4648 and wiring funds.
HOW DO I SELL (REDEEM) FUND SHARES?
You may sell (redeem) all or part of your Fund shares on any
business day. You may sell by:
*Sending a written request by mail to PIMCO Funds.
*Telephone us at 1-800-927-4648 and a Shareholder
Services associate will assist you.
*By sending a fax to our Shareholder Services department
at 1-949-725-6830.
HOW ARE FUND DISTRIBUTIONS MADE AND TAXED?
The Fund pays dividends to shareholders monthly and pays
realized capital gains, if any, annually. Dividend and
capital gain distributions will be reinvested in additional
shares of the Fund unless you elect to have them paid in
cash. A shareholder may elect to have distributions paid in
cash by calling 1-800-927-4648. Distributions may be taxable
as ordinary income, capital gains, or a combination of the two.
The rate you pay on capital gains distributions may vary depending
on how long the Fund held the securities that generated the
gains. The Fund will advise shareholders annually of the
amount and nature of the dividends paid to them.
Shareholders should also bear in mind that the sale or
exchange of shares may give rise to a taxable event.
WHAT OTHER SERVICES ARE AVAILABLE FROM THE FUND?
The Fund and PIMCO's Shareholder Services offer several
programs to investors:
*The ability to exchange shares of the Fund for the same
class of shares of any other PIMCO Fund (except PIMCO
International Bond and Emerging Markets Bond II Funds).
*Account and Fund information is available 24 hours
every day through Infolink, PIMCO Funds' audio response
system, by calling 1-800-987-4626.
*Information about PIMCO Funds can be obtained on
PIMCO's Institutional Web site at www.pimco.com.
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Phone: 1-800-927-4648
Fax: 1-949-725-6830
PIMCO Infolink Audio Response Network:
1-800-987-4626
Web Site: www.pimco.com
PIMCO TOTAL RETURN FUND . ADMINISTRATIVE CLASS SHARES
<page break>
PIMCO Municipal Bond Fund
Institutional Class Shares
November 5, 1999
This profile summarizes key information about the Fund that
is included in the Fund's Prospectus. The Fund's Prospectus
includes additional information about the Fund, including a
more detailed description of the risks associated with investing
in the Fund that you may want to consider before you invest. You
may obtain the Prospectus and other information about the Fund at
no cost by calling us at 1-800-927-4648, visiting our Web site at
www.pimco.com, or by contacting your financial intermediary.
PIMCO
FUNDS
<PAGE>
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks high current income exempt from federal
income tax, consistent with preservation of capital. Capital
appreciation is a secondary objective.
What is the Fund's principal investment strategy?
The Fund seeks to achieve its investment objective by
investing under normal circumstances at least 80% of its net
assets in debt securities whose interest is, in the opinion
of bond counsel for the issuer at the time of issuance,
exempt from federal income tax (`Municipal Bonds').
Municipal Bonds generally are issued by states and local
governments and their agencies, authorities and other
instrumentalities. The average portfolio duration of the
Fund normally varies within a three- to ten-year time frame,
based on PIMCO's forecast for interest rates. Duration is a
measure of the expected life of a fixed income security that
is used to determine the sensitivity of the security's price
to changes in interest rates.
The Fund may invest up to 20% of its net assets in U.S.
Government securities, money market instruments and/or
`private activity' bonds. For shareholders subject to the
federal alternative minimum tax ("AMT"), distributions
derived from `private activity' bonds must be included in
their AMT calculations, and as such may be subject to
federal income tax. The Fund invests primarily in investment
grade debt securities, but may invest up to 10% of its net
assets in Municipal Bonds or `private activity' bonds which
are high yield securities (`junk bonds') rated at least Ba
by Moody's or BB by S&P, or, if unrated, determined by PIMCO
to be of comparable quality.
The Fund may purchase and write call and put options,
futures and options on futures on U.S. Government securities
and municipal bonds, and invest in mortgage- or asset-backed
securities. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions to earn
income. Rather than investing directly in the securities in
which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements
related to such securities, such as entering into a series
of contracts to buy or sell such securities. Capital
appreciation, if any, generally arises from decreases in
interest rates or improving credit fundamentals for a
particular state, municipality or issuer.
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during its past fiscal year. You may obtain
these reports at no cost by calling us at 1-800-927-4648.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
You could lose money on an investment in the Fund. The
principal risks of investing in the Fund are:
*Interest Rate Risk: As interest rates rise, the value
of fixed income securities in the Fund's portfolio is likely
to decrease. Securities with longer durations tend to be
more sensitive to changes in interest rates.
*Credit Risk: The Fund could lose money if the issuer or
guarantor of a fixed income security, or the counterparty to
a derivative contract, is unable or unwilling to meet its
financial obligations.
*Market Risk: The value of securities owned by the Fund
may go up or down, sometimes rapidly or unpredictably.
Securities may decline in value due to factors affecting
securities markets generally or particular industries.
*Issuer Risk: The value of a security may decline for a
number of reasons which directly relate to the issuer, such
as management performance, financial leverage and reduced
demand for the issuer's goods or services.
*Derivatives Risk: When the Fund invests in a derivative
instrument, it could lose more than the principal amount
invested. Derivatives are subject to a number of risks, such
as liquidity, interest rate, market, credit and management
risk. They also involve the risk of improper valuation.
Changes in the value of a derivative may not correlate
perfectly with the underlying asset, rate or index.
*Liquidity Risk: Liquidity risk exists when particular
investments are difficult to purchase or sell. The Fund's
investments in illiquid securities may reduce the returns of
the Fund because it may be unable to sell illiquid
securities at an advantageous time or price.
*Leveraging Risk: The Fund may engage in transactions
that give rise to a form of leverage. Leverage may cause the
Fund to sell holdings when it may not be advantageous to do
so. Leverage, including borrowing, will cause the Fund to be
more volatile than if the Fund had not been leveraged.
*Management Risk: There is no guarantee that the
investment techniques and risk analyses applied by PIMCO
will produce the desired results.
<PAGE>
HOW HAS THE FUND PERFORMED?
The bar chart and table below provide some indication of the
risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's
average annual returns compare with the returns of a broad-
based securities market index and an index of similar funds.
The bar chart and table show performance of the Fund's
Institutional Class shares net of fees. Past performance is
no guarantee of future results.
Calendar Year Total Returns
1998 6.07%
During the period shown in the bar chart, the highest
quarterly return was 3.33% (3rd Quarter 1998) and the lowest
quarterly return was 0.18% (4th Quarter 1998).
As of September 30, 1999, the Fund's year-to-date return was -0.98%.
Average Annual Total Returns
for the periods ended September 30,1999
Since
1 year Inception3
Municipal Bond Fund,
Institutional Class -2.39% 1.89%
Lehman General Municipal
Bond Index1 -0.70% 2.89%
Lipper General Municipal
Fund Avg.2 -3.07% 1.14%
1 The Lehman General Municipal Bond Index is an unmanaged
index of municipal bonds. It is not possible to invest
directly in the index.
2 The Lipper General Municipal Debt Fund Average is a total
return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their
assets in municipal debt issues in the top four credit
ratings. It does not take into account sales charges.
3 The Fund began operations on 12/31/97.
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you may pay if
you buy and hold Institutional Class shares of the Fund:
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets, shown as a
percentage of average daily net assets)
Advisory Fee 0.25%
Distribution (12b-1) and/or Service Fees None
Other Expenses1 0.25%
Total Annual Operating Expenses 0.50%
1 Other Expenses reflects a 0.25% Administrative Fee paid by
the class.
Example: The Example is intended to help you compare the
cost of investing in the Fund with the costs of investing in
other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated, and then
redeem all your shares at the end of those periods. The
Example also assumes a 5% return each year, the reinvestment
of all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual
costs may be higher or lower, the Example shows what your
costs would be based on these assumptions.
1 year 3 years 5 years 10 years
Municipal Bond Fund,
Institutional Class $51 $160 $280 $628
WHO IS THE FUND'S INVESTMENT ADVISER?
Pacific Investment Management Company (`PIMCO'), a
subsidiary of PIMCO Advisors L.P., serves as investment
adviser to the Fund. PIMCO is an investment management
company founded in 1971, and had over $181 billion in assets
under management as of September 30, 1999. PIMCO manages the
investment and reinvestment of the assets of the Fund and is
responsible for placing orders for the purchase and sale of
the Fund's investments. PIMCO is located at 840 Newport
Center Drive, Newport Beach, CA 92660.
The Fund's portfolio is managed by Benjamin Ehlert. Mr.
Ehlert is an Executive Vice President of PIMCO.
He has been a Portfolio Manager for PIMCO since 1986, and
has managed fixed income accounts for various institutional
clients and funds since that time.
He has managed the Municipal Bond Fund since its inception
in December 1997.
<PAGE>
HOW DO I BUY FUND SHARES?
The minimum initial investment to open an account directly
with the Fund is $5 million. The minimum initial investment
for a registered investment adviser purchasing Institutional
Class shares for its clients through omnibus accounts is
$250,000. You may purchase Fund shares in one of the
following ways:
*Opening an account by completing and signing a Client
Registration Application, mailing it to us at the address
shown below, and wiring funds. Wiring instructions can be
obtained by calling us at 1-800-927-4648.
*Exchanging Institutional Class shares in any amount
from another PIMCO Funds account.
*Additional purchases in any amount can be made by
calling us at 1-800-927-4648 and wiring funds.
HOW DO I SELL (REDEEM) FUND SHARES?
You may sell (redeem) all or part of your Fund shares on any
business day. You may sell by:
*Sending a written request by mail to PIMCO Funds.
*Telephone us at 1-800-927-4648 and a Shareholder
Services associate will assist you.
*By sending a fax to our Shareholder Services department
at 1-949-725-6830.
HOW ARE FUND DISTRIBUTIONS MADE AND TAXED?
The Fund pays dividends to shareholders monthly and pays
realized capital gains, if any, annually. Dividend and
capital gain distributions will be reinvested in additional
shares of the Fund unless you elect to have them paid in
cash. A shareholder may elect to have distributions paid in
cash by calling 1-800-927-4648.
Dividends paid to shareholders of the Fund and derived from
Municipal Bond interest are expected to be designated by the
Fund as `exempt-interest dividends' and shareholders may
generally exclude such dividends from gross income for
federal income tax purposes. The federal tax exemption for
`exempt-interest dividends' from Municipal Bonds does not
necessarily result in the exemption of such dividends from
state and local taxes. The interest on `private activity'
bonds is a tax-preference item for purposes of the federal
alternative minimum tax. As a result, for shareholders that
are subject to the alternative minimum tax, income derived
from `private activity' bonds will not be exempt from
federal income tax.
Dividends derived from taxable interest or capital gains
will be subject to federal income tax. Distributions may be
taxable as ordinary income, capital gains, or a combination
of the two. The rate you pay on capital gains distributions
may vary depending on how long the Fund held the securities
that generated the gains. The Fund will advise shareholders
annually of the amount and nature of the dividends paid to
them.
Shareholders should also bear in mind that the sale or
exchange of shares may give rise to a taxable event.
WHAT OTHER SERVICES ARE AVAILABLE
FROM THE FUND?
The Fund and PIMCO's Shareholder Services offer several
programs to investors:
*The ability to exchange shares of the Fund for the same
class of shares of any other PIMCO Fund (except PIMCO
International Bond and Emerging Markets Bond II Funds).
*Account and Fund information is available 24 hours
every day through Infolink, PIMCO Funds' audio response
system, by calling 1-800-987-4626.
*Information about PIMCO Funds can be obtained on
PIMCO's Institutional Web site at www.pimco.com.
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Phone: 1-800-927-4648
Fax: 1-949-725-6830
PIMCO Infolink Audio Response Network:
1-800-987-4626
Web Site: www.pimco.com
PIMCO MUNICIPAL BOND FUND . INSTITUTIONAL CLASS SHARES
<page break>
PIMCO Real Return Bond Fund
Institutional Class Shares
November 5, 1999
This profile summarizes key information about the Fund that
is included in the Fund's Prospectus. The Fund's Prospectus
includes additional information about the Fund, including a
more detailed description of the risks associated with investing
in the Fund that you may want to consider before you invest. You
may obtain the Prospectus and other information about the Fund at
no cost by calling us at 1-800-927-4648, visiting our Web site at
www.pimco.com, or by contacting your financial intermediary.
PIMCO
FUNDS
<PAGE>
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks maximum real return, consistent with
preservation of real capital and prudent investment
management.
WHAT IS THE FUND'S PRINCIPAL INVESTMENT
STRATEGY?
The Fund seeks its investment objective by investing under
normal circumstances at least 65% of its assets in
inflation-indexed bonds of varying maturities issued by the
U.S. and non-U.S. governments, their agencies or
instrumentalities, and corporations. Inflation-indexed bonds
are fixed income securities that are structured to provide
protection against inflation. The value of the bond's
principal or the interest income paid on the bond is
adjusted to track changes in an official inflation measure.
The U.S. Treasury uses the Consumer Price Index for Urban
Consumers as the inflation measure. Inflation-indexed bonds
issued by a foreign government are generally adjusted to
reflect a comparable inflation index, calculated by that
government. `Real return' is a measure of the change in
purchasing power of money invested in a particular
instrument after adjusting for inflation.
Duration is a measure of the expected life of a fixed income
security that is used to determine the sensitivity of the
security's price to changes in interest rates. Because of
the unique features of inflation-indexed bonds, PIMCO uses a
modified form of duration for the Fund (`real duration')
which measures price changes as a result of changes in
`real' interest rates. A `real' interest rate is the market
interest rate minus expected inflation. There is no limit on
the real duration of the Fund, but it is expected that the
average real duration of the Fund will normally vary
approximately within the range of the average real duration
of all inflation-indexed bonds issued by the U.S. Treasury
in the aggregate, which as of July 20, 1999 was 9.2 years.
For point of reference, it is expected that the average
portfolio duration (as opposed to real duration) of the Fund
will generally vary within a one- to five-year time frame,
although this range is subject to change. The Fund may
invest in fixed income securities of any maturity.
The Fund invests primarily in investment grade securities,
but may invest up to 10% of its assets in high yield
securities (`junk bonds') rated B or higher by Moody's or
S&P, or, if unrated, determined by PIMCO to be of comparable
quality. The Fund may invest up to 35% of its assets in non-
inflation indexed fixed income instruments. The Fund also
may invest up to 35% of its assets in securities denominated
in foreign currencies, and may invest beyond this limit in
U.S. dollar denominated securities of foreign issuers. The
Fund will normally hedge at least 75% of its exposure to
foreign currency to reduce the risk of loss due to
fluctuations in currency exchange rates. The Fund is non-
diversified, which means that it may concentrate its assets
in a smaller number of issuers than a diversified Fund.
The Fund may invest all of its assets in derivative
instruments, such as options, futures contracts or swap
agreements, or in mortgage- or asset-backed securities. The
Fund typically uses derivatives as a substitute for taking a
position in the underlying asset and/or as part of a
strategy designed to reduce exposure to other risks, such as
interest rate or currency risk. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly
in the securities in which it primarily invests, the Fund
may use other investment techniques to gain exposure to
market movements related to such securities, such as
entering into a series of contracts to buy or sell such
securities.
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during its past fiscal year. You may obtain
these reports at no cost by calling us at
1-800-927-4648.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
You could lose money on an investment in the Fund. The
principal risks of investing in the Fund are:
*Interest Rate Risk: As interest rates rise, the value
of fixed income securities in the Fund's portfolio is likely
to decrease. Securities with longer durations tend to be
more sensitive to changes in interest rates.
*Credit Risk: The Fund could lose money if the issuer or
guarantor of a fixed income security, or the counterparty to
a derivative contract, is unable or unwilling to meet its
financial obligations.
*Market Risk: The value of securities owned by the Fund
may go up or down, sometimes rapidly or unpredictably.
Securities may decline in value due to factors affecting
securities markets generally or particular industries.
*Issuer Risk: The value of a security may decline for a
number of reasons which directly relate to the issuer, such
as management performance, financial leverage and reduced
demand for the issuer's goods or services.
*Derivatives Risk: When the Fund invests in a derivative
instrument, it could lose more than the principal amount
invested. Derivatives are subject to a number of risks, such
as liquidity, interest rate, market, credit and management
risk. They also involve the risk of improper valuation.
Changes in the value of a derivative may not correlate
perfectly with the underlying asset, rate or index.
*Liquidity Risk: Liquidity risk exists when particular
investments are difficult to purchase or sell. The Fund's
investments in illiquid securities may reduce the returns of
the Fund because it may be unable to sell the illiquid
securities at an advantageous time or price.
*Concentration Risk: Concentration of investments in a
small number of issuers, industries or foreign currencies
increases risk.
<PAGE>
Because the Fund is non-diversified, it may
be more susceptible to risks associated with a single
economic, political or regulatory occurrence than a more
diversified portfolio might be.
*Foreign Investment Risk: When the Fund invests in
foreign securities, it may experience more rapid and extreme
changes in value than if it invested exclusively in U.S.
securities. The securities markets of many foreign countries
are relatively small. Reporting, accounting and auditing
standards of foreign countries differ from U.S. standards.
Also, nationalization, expropriation, taxation, political
changes or diplomatic developments could adversely affect
the Fund's investments in a foreign country.
*Currency Risk: When the Fund invests in securities
denominated in foreign currencies, it is subject to the risk
that those currencies will decline in value relative to the
U.S. Dollar, or, in the case of hedging positions, that the
U.S. Dollar will decline in value relative to the currency
being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for
reasons such as changes in interest rates, government
intervention or political developments. As a result, the
Fund's investments in foreign currency-denominated
securities may reduce the returns of the Fund.
*Leveraging Risk: The Fund may engage in transactions
that give rise to a form of leverage. Leverage may cause the
Fund to sell holdings when it may not be advantageous to do
so. Leverage, including borrowing, will cause the Fund to be
more volatile than if the Fund had not been leveraged.
*Management Risk: There is no guarantee that the
investment techniques and risk analyses applied by PIMCO
will produce the desired results.
HOW HAS THE FUND PERFORMED?
The bar chart and table below provide some indication of the
risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's
average annual returns compare with the returns of a broad-
based securities market index and an index of similar funds.
The bar chart and table show performance of the Fund's
Institutional Class shares net of fees. Past performance is
no guarantee of future results.
Calendar Year Total Returns
1998 5.21%
During the period shown in the bar chart, the highest
quarterly return was 3.19% (3rd Quarter 1998) and the lowest
quarterly return was -0.05% (4th Quarter 1998). As of
September 30, 1999, the Fund's year-to-date return was
1.12%.
Average Annual Total Returns
for the periods ended September 30,1999
Since
1 year Inception3
Real Return Bond Fund,
Institutional Class 5.26% 5.48%
Lehman Brothers Inflation
Linked Treasury Index1 1.86% 3.28%
Lipper Short U.S.
Government Fund Avg.2 2.44% 4.83%
1 The Lehman Brothers Inflation Linked Treasury Index is an
unmanaged index consisting of the U.S. Treasury Inflation
Protected Securities market. It is not possible to invest
directly in the index.
2 The Lipper Short U.S. Government Fund Average is a total
return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their
assets in securities issued or guaranteed by the U.S.
government, its agencies, or its instrumentalities, with
dollar-weighted average maturities of less than three years.
It does not take into account sales charges.
3 The Fund began operations on 1/29/97. Index comparisons
began on 1/31/97.
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you may pay if
you buy and hold Institutional Class shares of the Fund:
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets, shown as a
percentage of average daily net assets)
Advisory Fee 0.25%
Distribution (12b-1) and/or Service Fees None
Other Expenses1 0.27%
Total Annual Operating Expenses 0.52%
1 Other Expenses reflects a 0.25% Administrative Fee paid by
the class.
Example: The Example is intended to help you compare the
cost of investing in the Fund with the costs of investing in
other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated, and then
redeem all your shares at the end of those periods. The
Example also assumes a 5% return each year, the reinvestment
of all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual
costs may be higher or lower, the Example shows what your
costs would be based on these assumptions.
1 year 3 years 5 years 10 years
Real Return Bond Fund,
Institutional Class $53 $167 $291 $653
<PAGE>
WHO IS THE FUND'S INVESTMENT ADVISER?
Pacific Investment Management Company ("PIMCO"), a
subsidiary of PIMCO Advisors L.P., serves as investment
adviser to the Fund. PIMCO is an investment management
company founded in 1971, and had over $181 billion in assets
under management as of September 30, 1999. PIMCO manages the
investment and reinvestment of the assets of the Fund and is
responsible for placing orders for the purchase and sale of
the Fund's investments. PIMCO is located at 840 Newport
Center Drive, Newport Beach, CA 92660.
The Fund's portfolio is managed by John Brynjolfsson. Mr.
Brynjolfsson is a Senior Vice President of PIMCO. He joined
PIMCO as a Portfolio Manager in 1989, and has managed fixed
income accounts for various institutional clients and funds
since that time. He has managed the Real Return Bond Fund
since its inception in January 1997.
HOW DO I BUY FUND SHARES?
The minimum initial investment to open an account directly
with the Fund is $5 million. The minimum initial investment
for a registered investment adviser purchasing Institutional
Class shares for its clients through omnibus accounts is
$250,000. You may purchase Fund shares in one of the
following ways:
*Opening an account by completing and signing a Client
Registration Application, mailing it to us at the address
shown below, and wiring funds. Wiring instructions can be
obtained by calling us at 1-800-927-4648.
*Exchanging Institutional Class shares in any amount
from another PIMCO Funds account.
*Additional purchases in any amount can be made by
calling us at 1-800-927-4648 and wiring funds.
HOW DO I SELL (REDEEM) FUND SHARES?
You may sell (redeem) all or part of your Fund shares on any
business day. You may sell by:
*Sending a written request by mail to PIMCO Funds.
*Telephone us at 1-800-927-4648 and a Shareholder
Services associate will assist you.
*By sending a fax to our Shareholder Services department
at 1-949-725-6830.
HOW ARE FUND DISTRIBUTIONS
MADE AND TAXED?
The Fund pays dividends to shareholders monthly and pays
realized capital gains, if any, annually. Dividend and
capital gain distributions will be reinvested in additional
shares of the Fund unless you elect to have them paid in
cash. A shareholder may elect to have distributions paid in
cash by calling 1-800-927-4648. Distributions may be taxable
as ordinary income, capital gains, or a combination of the two. The rate
you pay on capital gains distributions may vary depending
on how long the Fund held the securities that generated the
gains. The Fund will advise shareholders annually of the
amount and nature of the dividends paid to them.
Investors should carefully consider the possible tax
consequences from investing in the Fund. Periodic
adjustments for inflation to the principal value of
inflation-indexed bonds held by the Fund may give rise to
original issue discount, which would be included in the
Fund's gross income. Accordingly, the Fund may be required
to make annual distributions to shareholders in excess of
the cash received by the Fund. Also, if the principal value
of an inflation-indexed bond is adjusted downward, amounts
previously distributed in the taxable year may be
characterized in some circumstances as a return of capital.
Shareholders should also bear in mind that the sale or
exchange of shares may give rise to a taxable event.
WHAT OTHER SERVICES ARE AVAILABLE
FROM THE FUND?
The Fund and PIMCO's Shareholder Services offer several
programs to investors:
*The ability to exchange shares of the Fund for the same
class of shares of any other PIMCO Fund (except PIMCO
International Bond and Emerging Markets Bond II Funds).
*Account and Fund information is available 24 hours
every day through Infolink, PIMCO Funds' audio response
system, by calling 1-800-987-4626.
*Information about PIMCO Funds can be obtained on
PIMCO's Institutional Web site at www.pimco.com.
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Phone: 1-800-927-4648
Fax: 1-949-725-6830
PIMCO Infolink Audio Response Network:
1-800-987-4626
Web Site: www.pimco.com
PIMCO REAL RETURN BOND FUND . INSTITUTIONAL CLASS SHARES
<page break>
PIMCO Strategic Balanced Fund
Institutional Class Shares
November 5, 1999
This profile summarizes key information about the Fund that
is included in the Fund's Prospectus. The Fund's Prospectus
includes additional information about the Fund, including a
more detailed description of the risks associated with investing
in the Fund that you may want to consider before you invest. You
may obtain the Prospectus and other information about the Fund at
no cost by calling us at 1-800-927-4648, visiting our Web site at
www.pimco.com, or by contacting your financial intermediary.
PIMCO
FUNDS
<PAGE>
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks maximum total return, consistent with
preservation of capital and prudent investment management.
WHAT IS THE FUND'S PRINCIPAL INVESTMENT
STRATEGY?
The Fund seeks to achieve its investment objective by
normally investing in a combination of fixed income
securities and equity securities or derivatives on equity
securities. The percentage of the Fund's assets invested in
equities and equity derivatives or in fixed income
securities will be determined based on methodology,
developed by PIMCO, that forecasts stages in the business
cycle and considers the risk and reward potential of equity
and fixed income securities within specific phases of the
business cycle. The Fund's equity exposure will vary between
45% and 75% of assets, and its fixed income exposure will
range from a minimum of 25% to a maximum of 55%.
The Fund's equity exposure normally consists of S&P 500
derivatives, backed by a portfolio of short-term fixed
income instruments. PIMCO uses S&P 500 derivatives in
addition to or in place of S&P 500 stocks to attempt to
equal or exceed the performance of the S&P 500. The value of
S&P 500 derivatives closely track changes in the value of
the index. However, S&P 500 derivatives may be purchased
with a fraction of the assets that would be needed to
purchase the equity securities directly, so that the
remainder of the assets may be invested in fixed income
instruments. PIMCO will actively manage the fixed income
assets serving as cover for derivatives, as well as any
other fixed income assets held by the Fund, with a view
toward enhancing the Fund's total return investment
performance. Though the Fund does not normally invest
directly in S&P 500 securities, when S&P 500 derivatives
appear to be overvalued relative to the S&P 500, the Fund
may invest the equity portion of its assets in a `basket' of
S&P 500 stocks.
The Fund's fixed income exposure will normally consist of a
diversified portfolio of fixed income instruments of varying
maturities. The securities may be of any maturity. The
average portfolio duration of the fixed income portion of
the Fund's assets will normally vary within a three- to six-
year time frame. Duration is a measure of the expected life
of a fixed income security that is used to determine the
sensitivity of the security's price to changes in interest
rates.
The fixed income instruments in which the Fund invests are
primarily investment grade, but the Fund may invest up to
10% of its assets in high yield securities (`junk bonds')
rated B or higher by Moody's or S&P, or, if unrated,
determined by PIMCO to be of comparable quality. The Fund
may invest up to 20% of its assets in securities denominated
in foreign currencies, and may invest beyond this limit in
U.S. dollar denominated securities of foreign issuers. The
Fund will normally hedge at least 75% of its exposure to
foreign currency to reduce the risk of loss due to
fluctuations in currency exchange rates.
The Fund may invest all of its assets in derivative
instruments, such as options, futures contracts or swap
agreements. The Fund typically uses derivatives as a
substitute for taking a position in the underlying asset
and/or as part of a strategy designed to reduce exposure to
other risks, such as interest rate or currency risk. The
Fund may lend its portfolio securities to brokers, dealers
and other financial institutions to earn income. Rather than
investing directly in the securities in which it primarily
invests, the Fund may use other investment techniques to
gain exposure to market movements related to such
securities, such as entering into a series of contracts to
buy or sell such securities. The `total return' sought by
the Fund consists of net income earned on the Fund's
investments, plus capital appreciation, if any, which
generally arises from decreases in interest rates or
improving credit fundamentals for a particular sector or
security.
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during its past fiscal year. You may obtain
these reports at no cost by calling us at 1-800-927-4648.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
You could lose money on an investment in the Fund. The
principal risks of investing in the Fund are:
*Market Risk: The value of securities owned by the Fund
may go up or down, sometimes rapidly or unpredictably.
Securities may decline in value due to factors affecting
securities markets generally or particular industries.
Equity securities generally have greater price volatility
than fixed income securities.
*Issuer Risk: The value of a security may decline for a
number of reasons which directly relate to the issuer, such
as management performance, financial leverage and reduced
demand for the issuer's goods or services.
*Interest Rate Risk: As interest rates rise, the value
of fixed income securities in the Fund's portfolio is likely
to decrease. Securities with longer durations tend to be
more sensitive to changes in interest rates.
*Credit Risk: The Fund could lose money if the issuer or
guarantor of a fixed income security, or the counterparty to
a derivative contract, is unable or unwilling to meet its
financial obligations.
*Derivatives Risk: When the Fund invests in a derivative
instrument, it could lose more than the principal amount
invested. Derivatives are subject to a number of risks, such
as liquidity, interest rate, market, credit and management
risk. They also involve the risk of improper valuation.
Changes in the value of a derivative may not correlate
perfectly with the underlying asset, rate or index.
*Liquidity Risk: Liquidity risk exists when particular
investments are difficult to purchase or sell. The Fund's
investments in illiquid securities may reduce the returns of
the Fund because it may be unable to sell the illiquid
securities at an advantageous time or price.
*Foreign Investment Risk: When the Fund invests in
foreign securities, it may experience more rapid and extreme
changes in
<PAGE>
value than if it invested exclusively in U.S.
securities. The securities markets of many foreign countries
are relatively small. Reporting, accounting and auditing
standards of foreign countries differ from U.S. standards.
Also, nationalization, expropriation, taxation, political
changes or diplomatic developments could adversely affect
the Fund's investments in a foreign country.
*Currency Risk: When the Fund invests in securities
denominated in foreign currencies, it is subject to the risk
that those currencies will decline in value relative to the
U.S. Dollar, or, in the case of hedging positions, that the
U.S. Dollar will decline in value relative to the currency
being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for
reasons such as changes in interest rates, government
intervention or political developments. As a result, the
Fund's investments in foreign currency-denominated
securities may reduce the returns of the Fund.
*Mortgage Risk: Rising interest rates tend to extend the
duration of mortgage-related securities, making them more
sensitive to changes in interest rates. When interest rates
decline, borrowers may pay off their mortgages sooner than
expected. This can reduce the returns of a Fund because the
Fund will have to reinvest that money at the lower
prevailing interest rates.
*Leveraging Risk: The Fund may engage in transactions
that give rise to a form of leverage. Leverage may cause the
Fund to sell holdings when it may not be advantageous to do
so. Leverage, including borrowing, will cause the Fund to be
more volatile than if the Fund had not been leveraged.
*Management Risk: There is no guarantee that the
investment techniques and risk analyses applied by PIMCO
will produce the desired results.
HOW HAS THE FUND PERFORMED?
The bar chart and table below provide some indication of the
risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's
average annual returns compare with the returns of a broad-
based securities market index and an index of similar funds.
The bar chart and table show performance of the Fund's
Institutional Class shares net of fees. Past performance is
no guarantee of future results.
Calendar Year Total Returns
1997 24.17%
1998 19.66%
During the period shown in the bar chart, the highest
quarterly return was 12.23% (2nd Quarter 1997) and the
lowest quarterly return was -4.60% (3rd Quarter 1998). As of
September 30, 1999, the end of the most recent calendar
quarter, the Fund's year-to-date return was -3.46%.
Average Annual Total Returns
for the periods ended September 30,1999
Since
1 year Inception4
Strategic Balanced Fund,
Institutional Class 5.24% 17.40%
S&P 500 Index1 27.81% 24.11%
S&P 500 and Lehman Aggregate
Bond Index Blend2 16.00% 17.30%
Lipper Balanced Fund Avg3 13.49% 13.80%
1 The Standard & PoorOs 500 Composite Stock Price Index is
an unmanaged index of common stocks. It is not possible to
invest directly in the index.
2 This index is a static self-blended index consisting 60%
of the S&P 500 Composite Stock Price Index and 40% of the
Lehman Brothers Aggregate Bond Index. The Fund believes this
self- blended index reflects the Fund's investment strategy
more accurately than the S&P 500 Index. It is not possible
to invest directly in the index.
3 The Lipper Balanced Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc., whose primary objective is to conserve
principal by maintaining at all times a balanced portfolio
of both stocks and bonds. It does not take into account
sales charges.
4 The Fund began operations on 6/28/96. Index comparisons
began on 6/30/96.
WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you may pay if
you buy and hold Institutional Class shares of the Fund:
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets, shown as a
percentage of average daily net assets)
Advisory Fee 0.40%
Distribution (12b-1) and/or Service Fees None
Other Expenses1 0.25%
Total Annual Operating Expenses 0.65%
1 Other Expenses reflects a 0.25% Administrative Fee paid by
the class.
Example: The Example is intended to help you compare the
cost of investing in the Fund with the costs of investing in
other mutual funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated, and then
redeem all your shares at the end of those periods. The
Example also assumes a 5% return each year, the reinvestment
of all dividends and distributions, and that the Fund's
operating expenses remain the same. Although your actual
costs may be higher or lower, the Example shows what your
costs would be based on these assumptions.
1 year 3 years 5 years 10 years
Strategic Balanced Fund,
Institutional Class $66 $208 $362 $810
<PAGE>
WHO IS THE FUND'S INVESTMENT ADVISER?
Pacific Investment Management Company ("PIMCO"), a
subsidiary of PIMCO Advisors L.P., serves as investment
adviser to the Fund. PIMCO is an investment management
company founded in 1971, and had over $181 billion in assets
under management as of September 30, 1999. PIMCO manages the
investment and reinvestment of the assets of the Fund and is
responsible for placing orders for the purchase and sale of
the Fund's investments. PIMCO is located at 840 Newport
Center Drive, Newport Beach, CA 92660.
The Fund's portfolio is managed by a team led by William H.
Gross. Mr. Gross is a Managing Director, Chief Investment
Officer and one of the founders of PIMCO and he has managed
fixed income accounts for various institutional clients and
funds for over 25 years. He has led the team managing the
Strategic Balanced Fund since January 1998.
HOW DO I BUY FUND SHARES?
The minimum initial investment to open an account directly
with the Fund is $5 million. The minimum initial investment
for a registered investment adviser purchasing Institutional
Class shares for its clients through omnibus accounts is
$250,000. You may purchase Fund shares in one of the
following ways:
*Opening an account by completing and signing a Client
Registration Application, mailing it to us at the address
shown below, and wiring funds. Wiring instructions can be
obtained by calling us at 1-800-927-4648.
*Exchanging Institutional Class shares in any amount
from another PIMCO Funds account.
*Additional purchases in any amount can be made by
calling us at 1-800-927-4648 and wiring funds.
HOW DO I SELL (REDEEM) FUND SHARES?
You may sell (redeem) all or part of your Fund shares on any
business day. You may sell by:
*Sending a written request by mail to PIMCO Funds.
*Telephone us at 1-800-927-4648 and a Shareholder
Services associate will assist you.
*By sending a fax to our Shareholder Services department
at 1-949-725-6830.
HOW ARE FUND DISTRIBUTIONS
MADE AND TAXED?
The Fund pays dividends to shareholders quarterly and pays
realized capital gains, if any, annually. Dividend and
capital gain distributions will be reinvested in additional
shares of the Fund unless you elect to have them paid in
cash. A shareholder may elect to have distributions paid in
cash by calling 1-800-927-4648. Distributions may be taxable
as ordinary income, capital gains, or a combination of the two. The rate
you pay on capital gains distributions may vary depending on
how long the Fund held the securities that generated the
gains. The Fund will advise shareholders annually of the
amount and nature of the dividends paid to them.
Shareholders should also bear in mind that the sale or
exchange of shares may give rise to a taxable event.
WHAT OTHER SERVICES ARE AVAILABLE
FROM THE FUND?
The Fund and PIMCO's Shareholder Services offer several
programs to investors:
*The ability to exchange shares of the Fund for the same
class of shares of any other PIMCO Fund (except PIMCO
International Bond and Emerging Markets Bond II Funds).
*Account and Fund information is available 24 hours
every day through Infolink, PIMCO Funds' audio response
system, by calling 1-800-987-4626.
*Information about PIMCO Funds can be obtained on
PIMCO's Institutional Web site at www.pimco.com.
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Phone: 1-800-927-4648
Fax: 1-949-725-6830
PIMCO Infolink Audio Response Network:
1-800-987-4626
Web Site: www.pimco.com
PIMCO STRATEGIC BALANCED FUND . INSTITUTIONAL CLASS SHARES
