PIMCO FUNDS, 485APOS, 1999-05-26

PIMCO FUNDS
485APOS, 1999-05-26

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<PAGE>

As filed with the Securities and Exchange Commission on May 26, 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. 45 /X/

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/

Amendment No. 49 /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>

[Front cover]

PIMCO Funds Prospectus

PIMCO Funds: Pacific Investment Management Series
August 1, 1999

Share Classes
Institutional and Administrative

This Prospectus describes 25 mutual funds offered by PIMCO Funds: Pacific
Investment Management Series. The Funds provide access to the professional
investment advisory services offered by Pacific Investment Management Company.
You can call PIMCO at 1-800-927-4648 to find out more about the Funds and other
funds in the PIMCO Funds family. You can also visit our web site at
www.pimco.com.

This Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.

The Securities and Exchange Commission has not approved or disapproved these
securities, or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<PAGE>

Table of Contents

2
<PAGE>

Summary Information

PIMCO Funds offers unique access to the investment expertise of PIMCO. As of
June 30, 1999, PIMCO managed approximately $__ billion, including assets for __
of the 100 largest U.S. corporations. The firm's institutional heritage is
reflected in the PIMCO Funds offered in this Prospectus. The table below
compares certain investment characteristics of the Funds. Other important
characteristics are described under "Fund Descriptions and Performance" below.

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality(1) Foreign(2)
---------------- -------- ---------------- ----------
<S> <C> <C> <C> <C>
Short Duration Bond Funds

Money Market Money market instruments Less than or equal Min 95% Aaa or 0%
to 90 days dollar- Prime 1; less than
weighted average or equal to 5% Aa
maturity or Prime 2
Short-Term Money market instruments and short maturity fixed 0-1 year B to Aaa; max 10% 0-5%
income securities below Baa

Low Duration Short and intermediate maturity fixed income 1-3 years B to Aaa; max 10% 0-20%
securities below Baa

Low Duration II Same as Low Duration Fund, except quality and 1-3 years A to Aaa 0%
foreign issuer restrictions

Low Duration III Same as Low Duration Fund, except prohibitions on 1-3 years B to Aaa; max 10% 0-20%
firms engaged in socially sensitive practices below Baa

Low Duration Mortgage Short and intermediate maturity mortgage-related 1-3 years Baa to Aaa; max 10% 0%
fixed income securities below Aaa

Intermediate Duration Bond Funds

Moderate Duration Short and intermediate maturity fixed income 2-5 years B to Aaa; max 10% 0-20%
securities below Baa

Real Return Bond Inflation-indexed fixed income securities N/A B to Aaa; max 10% 0-35%
below Baa
Total Return Intermediate maturity fixed income securities 3-6 years B to Aaa; max 10% 0-20%
below Baa
Total Return II Same as Total Return Fund, except quality and 3-6 years Baa to Aaa 0%
foreign issuer restrictions

Total Return III Same as Total Return Fund, except prohibitions on 3-6 years B to Aaa; max 10% 0-20%
firms engaged in socially sensitive practices below Baa

Total Return Mortgage Intermediate maturity mortgage-related fixed income 2-6 years Baa to Aaa; max 10% 0%
securities below Baa

High Yield Higher yielding fixed income securities 2-6 years B to Aaa; min 65% 0%
below Baa
Long Duration Bond Funds

Long-Term U.S. Long-term maturity fixed income securities More than or equal A to Aaa 0%
Government to 8 years

Long Duration Long-term maturity fixed income securities More than or equal B to Aaa; max 10% 0-20%
to 8 years below Baa

Tax Exempt Bond Funds

Municipal Bond Investment grade municipal securities (tax-exempt 3-10 years B to Aaa; max 10% 0%
bonds) below Baa

International Bond Funds

Global Bond Intermediate maturity U.S. and foreign fixed income 3-7 years B to Aaa; max 10% 25-75%
securities below Baa

Global Bond II Intermediate maturity U.S. and hedged foreign fixed 3-7 years B to Aaa; max 10% 25-75%
income securities below Baa
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality(1) Foreign
---------------- -------- ----------------- -------
<S> <C> <C> <C> <C>
Foreign Bond Intermediate maturity hedged foreign fixed income 3-7 years B to Aaa; max 10% More
securities below Baa than or
equal
to 85%

International Bond Foreign fixed income securities (This Fund is 0-8 years Baa to Aaa More
offered only to PIMCO private account clients) than or
equal to
65%

Emerging Markets Bond Emerging market fixed income securities 0-8 years B to Aaa More
than or
equal to
80%

Emerging Markets Bond II Same as Emerging Markets Bond Fund, except 0-8 years B to Aaa; max 10% More
restrictions on quality and denomination of below BB than or
securities (This Fund is offered only to PIMCO equal to
private account clients) 80%

Stock and Bond Funds

Strategic Balanced The same types of securities as the Total Return 0-6 years B to Aaa; max 10% 0-20%
and StocksPLUS Funds below Baa

Convertible Bond Convertible securities N/A Caa to Aaa; max 0-20%
35% below Baa
and 10% below B
Stock Funds

StocksPLUS S&P 500 stock index derivatives backed by a 0-1 year B to Aaa; max 10% 0-20%
portfolio of short-term fixed-income securities 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 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 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.

Fixed Income Instruments

The "Fixed Income Funds" are 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 III, Total Return
Mortgage, High Yield, Long-Term U.S. Government, Long Duration, Municipal Bond,
Global Bond, Global Bond II, Foreign Bond, International Bond, Emerging Markets
Bond, and Emerging Markets Bond II Funds. Each Fixed Income Fund 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. Each Fixed Income
Fund invests at least 65% of its assets in "Fixed Income Instruments," which as
used in this Prospectus includes:

. 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 both by 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;

. obligations of foreign governments or their subdivisions, agencies and
instrumentalities; and

. obligations of international agencies or supranational entities.

4
<PAGE>

Ratings of Debt Securities

In this Prospectus, references are made to the ratings of securities. To aid in
your understanding of the use of these terms, the following is a brief
description of the ratings categories applicable to debt securities. For a
further description of ratings, see "Appendix A - Description of Securities
Ratings."

High Quality Debt Securities are those receiving ratings from at least one
nationally recognized statistical rating organization ("NRSRO"), such as
Standard & Poor's Rating Service ("S&P") or Moody's Investors Service, Inc.
("Moody's"), in one of the two highest rating categories (the highest category
for commercial paper) or, if unrated by any NRSRO, deemed comparable by PIMCO.

Investment Grade Debt Securities are those receiving ratings from at least one
NRSRO in one of the four highest rating categories or, if unrated by any NRSRO,
deemed comparable by PIMCO.

Below Investment Grade, High Yield Securities ("Junk Bonds") are those rated
lower than Baa by Moody's or BBB by S&P and comparable securities. They are
considered below investment grade and are deemed to be predominately speculative
with respect to the issuer's ability to repay principal in accordance with the
terms of the obligations. For more information on the risks of investing in
lower-rated securities, see "Characteristics and Risks of Securities and
Investment Techniques -- High Yield Securities."

Fund Descriptions, Performance and Fees

The Funds provide a broad range of investment choices. The following summaries
identify each Fund's investment objective, principal investments and strategies,
and principal risks. A more detailed "Summary of Principal Risks" describing
principal risks of investing in the Funds begins after the Fund Summaries. The
summaries also show the fees and expenses you may pay if you buy and hold
Institutional or Administrative Class shares of the Funds.

It is possible to lose money on investments in the Funds. An investment in a
Fund is not a deposit of a bank and is not guaranteed or insured by the Federal
Deposit Insurance Corporation or any other government agency.

5
<PAGE>

PIMCO Money Market Fund

<TABLE>
<CAPTION>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Maturity
Seeks maximum current income, Leslie Barbi less than or equal to 90 days
consistent with preservation of dollar-weighted average maturity
capital and daily liquidity Fund Inception Date
3/1/91
Fund Focus Credit Quality
Money market instruments Minimum 95% rated Aaa or Prime 1;
less than or equal to 5% Aa or Prime 2

Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests at least 95% of its total assets in a diversified portfolio of
money market securities that are in the highest rating category for short-term
obligations. The Fund also may invest up to 5% of its total assets in money
market securities that are in the second-highest rating category for short-term
obligations. The Fund may only invest in 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 may not exceed 90 days. The Fund attempts
to maintain a stable net asset value of $1.00 per share, although there is no
assurance that it will be successful in doing so.

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 Fund may invest more than 25% of its total assets in
securities or obligations issued by U.S. banks. The Fund may lend its portfolio
securities to brokers, dealers and other financial institutions in order to earn
income.

The Fund's investments will comply with applicable rules governing the quality,
maturity and diversification of securities held by money market funds.

Principal Risks

An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund. Among the principal risks of investing in the
Fund are:

. Interest Rate Risk . Market Risk
. Credit Risk . Issuer Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

*= less than

6
<PAGE>

1-800-927-4648. Past performance is no guarantee of future results.

Calendar Year Total Returns

<TABLE>
<CAPTION>
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 3.44 2.80 3.92 6.06 5.28 5.34 5.34 Highest (10/1/95 - 12/31/95) 1.72%
Lowest (4/1/93 - 6/30/93) 0.67%
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Returns (for periods ended 12/31/98)
<S> <C> <C> <C> <C>
Fund Inception
1 Year 5 Years (3/1/91) * The Lipper Money Market Index is an index of the 30
- ------------------------------------------------------------------- Largest money market funds. The index reflects fees
Institutional Class 5.34% 5.19% 4.71% charged by each fund in the index. It is not possible to
- ------------------------------------------------------------------- to invest directly in the index. The Lipper Institutional
Administrative Class 5.18% 4.95% 4.46% Money Market Fund Average is a total return performance
- ------------------------------------------------------------------- average of Funds tracked by Lipper Analytical Services, Inc.
Lipper Money Market Index* 5.07% 4.90% 4.51% that invest in high quality financial instruments (rated
- ------------------------------------------------------------------- in the top two grades) with dollar-weighed maturities of less
Lipper Institutional Money 5.30% 5.15% 4.74% than 90 days. It does not take into account sales charges.
The Market Fund Average* The Fund commenced operations on 3/1/91.
Index comparisons begin at 2/28/91.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Example: Assuming your either redeem
Admini- Distribution Total Annual or do not redeem your shares of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional 0.15% 0.20% None 0.35% $36 $113 $197 $443
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative 0.15 0.20 0.25% 0.60 61 192 335 750
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

7
<PAGE>

PIMCO Short-Term Fund

<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum current income, consistent A team led by 0-1 year
with preservation of capital and daily William H. Gross
liquidity Credit Quality
Fund Inception Date B to Aaa; maximum 10% below Baa
Fund Focus 10/7/87
Money market instruments and short Dividend Frequency
maturity fixed income securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund may invest up to 10% of its assets in high yield securities 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 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. The Fund will normally hedge
at least 75% of its exposure to foreign currency. The Fund may invest all of its
assets in derivative instruments, such as options, futures contracts and swap
agreements, or in mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial institutions to
earn income. The Fund may enter into a series of purchase and sale contracts or
use other investment techniques to obtain market exposure to the securities in
which it primarily invests. For temporary, defensive or emergency purposes, the
Fund may invest without limit in U.S. debt securities, including short-term
money market securities, when the Adviser deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk . Issuer Risk . Management Risk
. Credit Risk . Derivatives Risk
. Market Risk . Leveraging Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

8
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
9.44 8.47 6.65 3.63 4.62 2.90 9.21 7.00 6.51 5.74 Highest (10/1/95 - 12/31/95) 2.60%
Lowest (1/1/94 - 3/31/94) 0.19%
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Returns (for periods ended 12/31/98)
<S> <C> <C> <C> <C>
1 Year 5 Years 10 Years * The Lipper Money Market Index is an index of the 30
largest money market funds. The index reflects fee charged by
each fund in the index. It is not possible to invest directly
- ------------------------------------------------------------- in the index. The Lipper Ultrashort Obligation Fund is a total
Institutional Class 5.74% 6.25% 6.40% return performance average of Funds tracked by Lipper Analytical
- ------------------------------------------------------------- Services, Inc. that invest at least 65% of their assets in
Administrative Class 5.50% 5.99% 6.13% investment-grade debt issues or better, and maintain a portfolio
- --------------------------------------------------------------- dollar-weighted average maturity between 91 and 365 days. It
Lipper Money Market Index* 5.07% 4.90% 5.33% does not take into account sales charges.
- ----------------------------------------------------------------
Lipper Ultrashort Obligation 5.31% 5.38% 5.84%
Fund Average*
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -such as sales charges
(loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Admini- Distribution Total Annual Example: Assuming your either redeem or not
shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
Institutional 0.25% 0.20% None 0.45% $46 $144 $252 $567
- ----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.20 0.25% 0.70 72 224 390 871
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

9
<PAGE>

PIMCO Low Duration Fund

<TABLE>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent William H. Gross 1-3 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
5/11/87 B to Aaa; maximum 10% below Baa
Fund Focus
Short and intermediate maturity fixed Dividend Frequency
income securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund may invest all of its assets in derivative instruments, such as
options, futures contracts or swap agreements, or in mortgage- or asset-backed
securities. The Fund may lend its portfolio securities to brokers, dealers and
other financial institutions to earn income. The Fund may enter into a series of
purchase and sale contracts or use other investment techniques to obtain market
exposure to the securities in which it primarily invests. For temporary,
defensive or emergency purposes, the Fund may invest without limit in U.S. debt
securities, including short-term money market securities, when the Adviser deems
it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

10
<PAGE>

Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
11.60 9.05 13.46 7.69 7.76 0.63 11.93 6.14 8.24 7.16 Highest (4 /1/89 - 6/30/89) 5.52%
Lowest (1/1/94 -3/31/94) -0.32%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years * The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of
- -------------------------------------------------------- U.S Treasury obligations having maturities from one to 2.99 years. It
<S> <C> <C> <C> is not possible to invest directly in the index. The Lipper Short
Institutional Class 7.16% 6.75% 8.31% Investment Grade Debt Fund Average is a total return performance
- -------------------------------------------------------- average of Funds tracked by Lipper Analytical Services, Inc. that
Administrative Class 6.90% 6.49% 8.04% invest at least 65% of their assets in investment-grade debt issues
- -------------------------------------------------------- (rated in the top four grades) with dollar-weighted average maturities
Merrill Lynch 1-3 Year 7.00% 5.99% 7.37% of less than three years. It does not take into account sales charges.
Treasury Index*
- --------------------------------------------------------
Lipper Short Investment 5.78% 5.41% 7.02%
Grade Debt Fund Average*
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem your shares at the end of each period
strative and/or Service Fund Operating Year
Share Class Advisory Fees Fess (12b-1) Fees Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional 0.25% 0.18% None 0.43% $ 44 $ 138 $ 241 $ 542
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.18 0.25% 0.68 69 218 379 847
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

11
<PAGE>

PIMCO Low Duration Fund II

<TABLE>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent William H. Gross 1-3 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
11/1/91 A to Aaa
Fund Focus
Short and intermediate maturity fixed Dividend Frequency
income securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund has the same investment policies as the Low Duration Fund, except that
the Fixed Income Instruments in which it may invest are limited to those of 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.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk . Issuer Risk . Management Risk
. Credit Risk . Derivatives Risk
. Market Risk . Leveraging Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

12
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 6.23 6.58 0.32 11.78 5.22 7.62 6.60 Highest (1/1/95 - 3/31/95) 3.83%
Lowest (1/1/94 - 3/31/94) -0.61%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
Fund Inception * The Merrill Lynch 1-3 Year Treasury Index is an unmanaged
1 Year 5 Years (11/1/91) index of U.S Treasury obligations having maturities from one to
- ---------------------------------------------------------------- 2.99 years. It is not possible to invest directly in the index.
<S> <C> <C> <C> The Lipper Short Investment Grade Debt Fund Average is a total
Institutional Class 6.60% 6.24% 6.58% return performance average of Funds tracked by Lipper
- ---------------------------------------------------------------- Analytical Services, Inc. that invest at least 65% of their
Administrative Class 6.32% 5.97% 6.31% assets in investment-grade debt issues (rated in the top four
- ---------------------------------------------------------------- grades) with dollar-weighted average maturities of less than
Merrill Lynch 1-3 Year 7.00% 5.99% 6.18% three years. It does not take into account sales charges. The
Treasury Index* Fund began operations on 11/1/91. Index comparisons began on
- ---------------------------------------------------------------- 10/31/91.
Lipper Short Investment 5.78% 5.41% 5.82%
Grade Debt Fund Average*
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem yourshares at the end of each period
strative and/or Service Fund Operating Year
Share Class Advisory Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional 0.25% 0.25% None 0.50% $ 51 $ 160 $ 280 $ 628
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.25 0.25% 0.75 77 240 417 930
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

13
<PAGE>

<TABLE>
<CAPTION>
PIMCO Low Duration Fund III
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent William H. Gross 1-3 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
12/31/96 B to Aaa; maximum 10% below Baa
Fund Focus
Short and intermediate maturity fixed Dividend Frequency
income securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund has the same investment policies as the 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.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

14
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%

[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- -- -- -- -- -- 7.12 6.65 Highest (7/1/98 - 9/30/98) 2.66%
Lowest (1/1/97 - 3/31/97) 0.58%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C>
Fund Inception * The Merrill Lynch 1-3 Year Treasury Index is an unmanaged
1 Year (12/31/96) index of U.S Treasury obligations having maturities from
- ---------------------------------------------------------
Institutional Class 6.65% 6.88% one to 2.99 years. It is not possible to invest directly
- ---------------------------------------------------------
Merrill Lynch 1-3 Year 7.00% 6.83% in the index. The Lipper Short Investment Grade Debt Fund
Treasury Index* Average is a total return performance average of Funds
- ---------------------------------------------------------
Lipper Short Investment Grade 5.78% 5.99% tracked by Lipper Analytical Services, Inc. that invest at
Debt Fund Average* least 65% of their assets in investment-grade debt issues
- ---------------------------------------------------------
(rated in the top four grades) with dollar-weighted average
maturities of less than three years. It does not take into
account sales charges.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

15
<PAGE>

<TABLE>
<CAPTION>
PIMCO Low Duration Mortgage Fund
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent William C. Powers 1-3 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
7/31/97 Baa to Aaa; maximum 10% below Aaa
Fund Focus
Short and intermediate maturity Dividend Frequency
mortgage-related fixed income securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 80% of its assets in a
diversified portfolio of mortgage-related Fixed Income Instruments. The average
portfolio duration of this Fund normally varies 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 will not acquire a security if, as a
result, more than 10% of the Fund's 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 Fund may not invest in securities denominated in foreign
currencies, but may invest without limit in U.S. dollar-denominated securities
of foreign issuers.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C>
. Interest Rate Risk . Issuer Risk . Leveraging Risk
. Credit Risk . Derivatives Risk . Management Risk
. Market Risk . Foreign Investment Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

16
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- -- -- -- -- -- -- 6.10 Highest (7/1/98 - 9/30/98) 2.82%
Lowest (10/1/98 - 12/31/98) -0.13%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C>
Fund Inception * The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of U.S
1 Year (7/31/97) Treasury obligations having maturities from one to 2.99 years. It is not
- --------------------------------------------------
Institutional Class 6.10% 7.45% possible to invest directly in the index. The Lipper U.S. Mortgage Fund
- --------------------------------------------------
Merrill Lynch 1-3 Year 7.00% 6.77% Average is a total return performance average of Funds tracked by Lipper
Treasury Index* Analytical Services, Inc. that invest at least 65% of their assets in
- --------------------------------------------------
Lipper U.S. Mortgage 6.08% 6.52% mortgages/securities issued or guaranteed as to principal and interest by
Fund Average* the U.S. government and certain federal agencies. It does not take into
- --------------------------------------------------
account sales charges.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

17
<PAGE>

<TABLE>
<CAPTION>
PIMCO Moderate Duration Fund
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent A team led by 2-5 years
with preservation of capital and William H. Gross
prudent investment management Credit Quality
Fund Inception Date B to Aaa; maximum 10% below Baa
Fund Focus 12/31/96
Short and intermediate maturity fixed Dividend Frequency
income securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund may invest up to 10% of its assets in high yield securities 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 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. The Fund may invest all of its
assets in derivative instruments, such as options, futures contracts or swap
agreements, or in mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial institutions to
earn income. The Fund may enter into a series of purchase and sale contracts or
use other investment techniques to obtain market exposure to the securities in
which it primarily invests. For temporary, defensive or emergency purposes, the
Fund may invest without limit in U.S. debt securities, including short-term
money market securities, when the Adviser deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

18
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- -- -- -- -- -- 7.97 8.11 Highest (7/1/98 - 9/30/98) 4.26%
Lowest (1/1/97 - 3/31/97) -0.25%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Inception * The Lehman Brothers Intermediate Government/ Corporate
1 Year (12/31/96) Bond Index is an unmanaged index of fixed income securities
- --------------------------------------------------------------
Institutional Class 8.11% 8.04% having maturities from __ to __ years. It is not possible
- --------------------------------------------------------------
Lehman Brothers Intermediate 8.42% 8.14% to invest directly in the index. The Lipper Short
Government/Corporate Bond Index* Intermediate Investment Grade Debt Fund Average is a total
- --------------------------------------------------------------
Lipper Short Intermediate Investment 6.60% 6.65% return performance average of Funds tracked by Lipper
Grade Debt Fund Average* Analytical Services, Inc. that invest at least 65% of their
- --------------------------------------------------------------
assets in investment-grade debt issues (rated in the top
four grades) with dollar-weighted average maturities of one
to five years. It does not take into account sales charges.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

19
<PAGE>

PIMCO Real Return Bond Fund

<TABLE>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum real return, consistent John Brynjolfsson See description below
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
1/29/97 B to Aaa; maximum 10% below Baa
Fund Focus
Inflation-indexed fixed income securities
Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 65% of its assets in
inflation-indexed bonds. Inflation-indexed bonds are Fixed Income Instruments
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.

Because of the unique features of inflation-indexed bonds, the Adviser uses a
modified form of duration for the Fund ("modified real duration"). Although
there is no limit on the modified real duration of the Fund, the average
modified real duration of the Fund is expected to normally vary approximately
with the range of the average modified real duration of all inflation-indexed
bonds issued by the U.S. Treasury in the aggregate.

Portfolio securities may be issued by governments and their agencies or
instrumentalities, and corporations. The Fund may invest up to 10% of its assets
in high yield securities 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
assets not invested in inflation-indexed bonds in other types of Fixed Income
Instruments. The Fund 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.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Derivatives Risk . Currency Risk
. Credit Risk . Concentration Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
. Issuer Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

20
<PAGE>

and the information to its right show performance of the Fund's Institutional
Class Shares. The Administrative Class of the Fund has not commenced operations
as of the date of this prospectus. Past performance is no guarantee of future
results.

Calendar Year Total Returns

<TABLE>
<CAPTION>
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- -- -- -- -- -- -- 5.21 Highest (7/1/98 - 9/30/98) 3.19%
Lowest (10/1/98 - 12/31/98) -0.05%
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Returns (for periods ended 12/31/98)

<S> <C> <C> <C>
Fund Inception * The Lehman Brothers Inflation Linked Treasury Index is an
1 Year (1/29/97) unmanaged index consisting of the U.S. Treasury Inflation
- ---------------------------------------------------------- Protected Securities universe. It is not possible to
Institutional Class 5.21% 4.83% invest directly in the index. The Lipper Short U.S.
- ---------------------------------------------------------- Government Fund Average is a total return performance
Lehman Brothers Inflation 3.95% 3.32% average of Funds tracked by Lipper Analytical Services,
- ---------------------------------------------------------- Inc. that invest at least 65% of their assets in securities
Linked Treasury Index* issued or guaranteed by the U.S. government, its agencies,
- ---------------------------------------------------------- or its instrumentalities, with dollar-weighted average
Lipper Short U.S. Government 5.83% 5.78% maturities of less than three years. It does not take into
Fund Average* account sales charges. The Fund began operations on
1/29/97. Index comparisons began on 1/31/97.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

21
<PAGE>

PIMCO Total Return Fund

<TABLE>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent William H. Gross 3-6 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
5/11/87 B to Aaa; maximum 10% below Baa

Fund Focus
Intermediate maturity fixed income Dividend Frequency
securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests 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 the Adviser's forecast for interest rates. Investment
selections are made primarily in areas of the bond market (based on quality,
sector, coupon or maturity) which the Adviser believes to be relatively
undervalued.

The Fund may invest up to 10% of its assets in high yield securities rated B or
higher by Moody's or S&P or, if unrated, determined by the Adviser to be of
comparable quality. The Fund also 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.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

22
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
14.24 8.05 19.55 9.73 12.51 -3.58 19.77 4.69 10.16 9.76 Highest (4/1/89 - 6/30/89) 8.26%
Lowest (1/1/94 - 3/31/94) -2.69%
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Returns (for periods ended 12/31/98)

<S> <C> <C> <C> <C>
1 Year 5 Years 10 Years * The Lehman Brothers Aggregate Bond Index is an unmanaged
- ------------------------------------------------------- index of fixed income securities. It is not possible to
Institutional Class 9.76% 7.89% 10.29% invest directly in the index. The Lipper Intermediate
- ------------------------------------------------------- Investment Grade Debt Fund Average is a total return
Administrative Class 9.48% 7.63% 10.03% performance average of Funds tracked by Lipper Analytical
- ------------------------------------------------------- Services, Inc. that invest at least 65% of their assets in
Lehman Aggregate 8.69% 7.27% 9.26% investment-grade debt issues (rated in the top four grades)
Bond Index* with dollar-weighted average maturities of five to ten
- ------------------------------------------------------- years. It does not take into account sales charges.
Lipper Intermediate 7.25% 6.35% 8.28%
Investment Grade Debt
Fund Average*
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you either
redeem or do not redeem your
Admini- Distribution Total Annual shares at the end of each period
strative and/or Service Fund Operating Year
Share Class Advisory Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional 0.25% 0.18% None 0.43% $44 $138 $241 $542
- ----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.18 0.25% 0.68 69 218 379 847
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

23
<PAGE>

PIMCO Total Return Fund II

Principal Investments and Strategies

The Fund has the same investment policies as the Total Return Fund, except that
the Fixed Income Instruments in which it may invest are limited to those of 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.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk
. Market Risk . Leveraging Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

24
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns

More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 9.43 10.90 -2.21 18.97 3.85 9.99 9.62 Highest (7/1/92 - 9/30/92) 5.57%
Lowest (1/1/94 - 3/31/94) -2.60%
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Returns (for periods ended 12/31/98)

<S> <C> <C> <C> <C>
Fund Inception * The Lehman Brothers Aggregate Bond Index is an unmanaged
1 Year 5 Years (12/30/91) index of fixed income securities. It is not possible to
Institutional Class 9.62% 7.82% 8.49% invest directly in the index. The Lipper Intermediate
- ---------------------------------------------------------------- Investment Grade Debt Fund Average is a total return
Administrative Class 9.36% 7.54% 8.22% performance average of Funds tracked by Lipper Analytical
- ---------------------------------------------------------------- Services, Inc. that invest at least 65% of their assets in
Lehman Aggregate 8.69% 7.27% 7.64% investment-grade debt issues (rated in the top four grades)
Bond Index* with dollar-weighted average maturities of five to ten
- ---------------------------------------------------------------- years. It does not take into account sales charges. The
Lipper Intermediate 7.25% 6.35% 7.16% Fund began operations on 12/30/91. Index comparisons began
Investment Grade Debt on 12/31/91.
Fund Average*

</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you either
redeem or do not redeem your
Admini- Distribution Total Annual shares at the end of each period
Advisory Fees strative and/or Service Fund Operating Year
Share Class Fees (12b-1) Fees Expenses 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional 0.25% 0.25% None 0.50% $51 $160 $280 $628
- ----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.25 0.25% 0.75 77 240 417 930
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
PIMCO Total Return Fund III
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent William H. Gross 3-6 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
5/1/91 B to Aaa; maximum 10% below Baa
Fund Focus
Intermediate maturity fixed income Dividend Frequency
securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund has the same investment policies as the Total Return 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.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

26
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 9.02 12.64 -3.43 19.23 4.63 10.21 10.37 Highest (7/1/91 - 9/30/91) 6.90%
Lowest (1/1/94 - 3/31/94) -2.68%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C> <C>
Fund Inception * The Lehman Brothers Aggregate Bond Index is an unmanaged
1 Year 5 Years (5/1/91) index of fixed income securities. It is not possible to
- ------------------------------------------------------------ invest directly in the index. The Lipper Intermediate
Institutional Class 10.37% 7.94% 9.79% Investment Grade Debt Fund Average is a total return
- ------------------------------------------------------------ performance average of Funds tracked by Lipper Analytical
Administrative Class 10.09% 7.66% 9.52% Services, Inc. that invest at least 65% of their assets in
- ------------------------------------------------------------ investment-grade debt issues (rated in the top four grades)
Lehman Aggregate Bond 8.69% 7.27% 8.50% with dollar-weighted average maturities of five to ten
Index* years. It does not take into account sales charges. The
- ------------------------------------------------------------ Fund began operations on 5/1/91. Index comparisons began
Lipper Intermediate 7.15% 6.35% 7.98% on 4/30/91.
Investment Grade Debt
Fund Average
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

27
<PAGE>

<TABLE>
<CAPTION>
PIMCO Total Return Mortgage Fund
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent Pasi Hamalainen 2-6 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
7/31/97 Baa to Aaa; maximum 10% below Aaa
Fund Focus
Intermediate maturity fixed income Dividend Frequency
securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund has the same policies at the Low Duration Mortgage Fund, except that
its average portfolio duration normally varies 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.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Leveraging Risk
. Credit Risk . Derivatives Risk . Management Risk
. Market Risk . Foreign Investment Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

28
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- -- -- -- -- -- -- 7.23 Highest (10/1/97 - 12/31/97) 3.18%
Lowest (10/1/98 - 12/31/98) 0.36%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Inception * The Lehman Brothers Mortgage Index is an unmanaged index
1 Year (7/31/97) of mortgage-related fixed income securities. It is not
- -------------------------------------------------- possible to invest directly in the index. The Lipper U.S.
Institutional Class 7.23% 8.66% Mortgage Fund Average is a total return performance average
- -------------------------------------------------- of Funds tracked by Lipper Analytical Services, Inc. that
Lehman Mortgage Index* 6.96% 7.38% invest at least 65% of their assets in mortgages/securities
- -------------------------------------------------- issued or guaranteed as to principal and interest by the
Lipper U.S. Mortgage 6.08% 6.52% U.S. government and certain federal agencies. It does not
Fund Average* take into account sales charges.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

29
<PAGE>

<TABLE>
<CAPTION>
PIMCO High Yield Fund
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent Benjamin Trosky 2-6 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
12/16/92 B to Aaa; minimum 65% below Baa
Fund Focus
Higher yielding fixed income securities Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 65% of its assets in a
diversified portfolio of high yield securities rated below investment grade 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 Instruments. The average portfolio duration of the
Fund normally varies 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 only if
the securities are U.S. dollar-denominated. The Fund also may engage in hedging
strategies involving equity options.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Leveraging Risk
. Credit Risk . Derivatives Risk . Management Risk
. Market Risk . Foreign Investment Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

30
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- -- 18.70 2.39 20.68 11.68 13.21 6.54 Highest (1/1/93 - 3/31/93) 6.27%
Lowest (7/1/98 - 9/30/98) -1.76%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C> <C>
Fund Inception * The Lehman Brothers BB Intermediate Corporate Index is an
1 Year 5 Years (12/16/92) unmanaged index comprised of various fixed income
- ------------------------------------------------------------------ securities rated BB. It is not possible to invest directly
Institutional Class 6.54% 10.73% 11.98% in the index. The Lipper High Current Yield Fund Average
- ------------------------------------------------------------------ is a total return performance average of Funds tracked by
Administrative Class 6.29% 10.46% 11.71% Lipper Analytical Services, Inc. that aim at high
- ------------------------------------------------------------------ (relative) current yield from fixed income securities, have
Lehman Brothers BB 5.74% 9.09% 10.00% not quality or maturity restrictions, and tend to invest in
Intermediate Corporate Index* lower grade debt issues. It does not take into account
- ------------------------------------------------------------------ sales charges. The Fund began operations on 12/16/92.
Lipper High Current Yield Fund -0.44% 7.37% 9.36% Index comparisons began on 12/31/92.
Average*

</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

31
<PAGE>

<TABLE>
PIMCO Long-Term U.S. Government Fund

<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent Pasi Hamalainen greater than equal to 8 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
7/1/91 A to Aaa
Fund Focus
Long-term maturity fixed income
securities Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 65% of its assets in a
diversified portfolio of 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.
Assets not invested in U.S. Government securities may be invested in other types
of Fixed Income Instruments. The Fund will normally have a minimum portfolio
duration of eight years.

The Fund's investments in Fixed Income Instruments are limited to those of U.S.
dollar-denominated securities of 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 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 assets would be
invested in securities rated Aa by Moody's or AA by S&P.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Management Risk
. Credit Risk . Derivatives Risk
. Market Risk . Leveraging Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

32
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 11.93 18.57 -7.39 31.57 0.71 15.02 13.39 Highest (9/1/95 - 12/31/95) 10.76%
Lowest (1/1/96 - 3/31/96) -6.26%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C> <C>
Fund Inception * The index used for the Long-Term U.S. Government Fund is
1 Year 5 Years (7/1/91) a blend of the Lehman Intermediate Treasury Index and the
- --------------------------------------------------------------- Lehman 20+ Year Treasury Index, proportionately weighted to
Institutional Class 13.39% 9.86% 13.06% equal a ten year duration. It is not possible to invest
- --------------------------------------------------------------- directly in the index. The Lipper General U.S. Government
Administrative Class 13.08% 9.59% 12.79% Fund Average is a total return performance average of Funds
- --------------------------------------------------------------- tracked by Lipper Analytical Services, Inc. that invest at
Lehman Intermediate/20+ 12.75% 8.95% 11.26% least 65% of their assets in U.S. government and agency
Treasury Index Blend* issues. It does not take into account sales charges. The
Lipper General U.S. 8.07% 6.15% 7.75% Fund began operations on 7/1/91. Index comparisons began
Government Fund Average on 6/30/91.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

33
<PAGE>

PIMCO Long Duration Fund

<TABLE>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent Pasi Hamalainen greater than equal to 8 years
with preservation of capital and ---------------------
prudent investment management Fund Inception Date Credit Quality
N/A B to Aaa; maximum 10% below Baa
Fund Focus
Intermediate maturity fixed income
securities Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying maturities. The
Fund will normally have a minimum average portfolio duration of eight years.
Investment selections are made primarily in areas of the bond market (based on
quality, sector, coupon or maturity) which the Adviser believes to be relatively
undervalued.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The Fund does not yet have performance to report.

34
<PAGE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

35
<PAGE>

PIMCO Municipal Bond Fund

<TABLE>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks high current income exempt from Benjamin Ehlert 3-10 years
federal income tax, consistent with
preservation of capital. Capital Fund Inception Date Credit Quality
appreciation is a secondary objective. 12/31/97 B to Aaa; maximum 10% below Baa

Fund Focus Dividend Frequency
Investment grade municipal securities Declared daily and distributed monthly
(tax-exempt bonds)
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 80% of its 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 Fund may invest up to 20%
of net assets in U.S. Government securities, money market instruments and/or
"private activity" bonds. The average portfolio duration of the Fund normally
varies 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 investment
grade but rated at least Ba by Moody's or BB by S&P, or, if unrated, determined
by the Adviser to be of comparable quality.

The Fund may purchase and write call and put options, 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. The Fund may enter into
a series of purchase and sale contracts or use other investment techniques to
obtain market exposure to the securities in which it primarily invests. For
temporary, defensive or emergency purposes, the Fund may invest without limit in
U.S. debt securities, including short-term money market securities, when the
Adviser deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Management Risk
. Credit Risk . Derivatives Risk
. Market Risk . Leveraging Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

36
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- -- -- -- -- -- -- 6.07 Highest (7/1/98 - 9/30/98) 3.33%
Lowest (10/1/98 - 12/31/98) 0.18%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C>
1 Year (12/31/97) index of municipal bonds. It is not possible to invest
- ------------------------------------------------------------------ directly in the index. The Lipper General Municipal Debt
Institutional Class 6.07% 6.07% Fund Average is a total return performance average of Funds
- ------------------------------------------------------------------ tracked by Lipper Analytical Services, Inc. that invest at
Administrative Class 5.45% 5.45% least 65% of their assets in municipal debt issues in the
- ------------------------------------------------------------------ top four credit ratings. It does not take into account
Lehman General Municipal Bond 6.48% 6.48% sales charges.
Index*
- ------------------------------------------------------------------
Lipper General Municipal Fund 5.32% 5.32%
Average*
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem your shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------
Institutional 0.25% 0.25% None 0.50% $51 $160 $280 $628
- ------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.25 0.25% 0.75 77 240 417 930
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

37
<PAGE>

PIMCO Global Bond Fund

<TABLE>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent Lee R. Thomas, III 3-7 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
11/23/93 B to Aaa; maximum 10% below Baa
Fund Focus
Intermediate maturity U.S. and foreign Dividend Frequency
fixed income securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 65% of its assets in Fixed
Income Instruments 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. Securities may be denominated in major foreign currencies, baskets
of foreign currencies (such as the euro), or the U.S. dollar.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Interest Rate Risk . Foreign Investment Risk . Derivatives Risk
. Credit Risk . Currency Risk . Leveraging Risk
. Market Risk . Concentration Risk . Management Risk
. Issuer Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

38
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- -- -- -1.70 22.96 10.32 -0.90 12.50 Highest (1/1/95 - 3/31/95) 8.40%
Lowest (1/1/97 - 3/31/97) -4.40%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C> <C>
Fund Inception * The J.P. Morgan Global (Unhedged) Index is an unmanaged
1 Year 5 Years (11/23/93) index representative of the total return performance in
- --------------------------------------------------------------- U.S. dollars on an unhedged basis of major world bond
Institutional Class 12.50% 8.25% 8.84% markets. It is not possible to invest directly in the
- --------------------------------------------------------------- index. The Lipper Global Income Fund Average is a total
Administrative Class 12.37% 8.02% 8.61% return performance average of Funds tracked by Lipper
- --------------------------------------------------------------- Analytical Services, Inc. that invest primarily in U.S.
J.P. Morgan Global 15.30% 8.08% 8.16% dollar and non-U.S. dollar debt securities of issuers
(Unhedged) Index* located in at least three countries, one of which may be
- --------------------------------------------------------------- the United States. It does not take into account sales
Lipper Global Income Fund 6.23% 5.57% 5.88% charges. The Fund began operations on 11/23/93. Index
Average* comparisons began on 11/30/93.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

39
<PAGE>

<TABLE>
<CAPTION>
PIMCO Global Bond Fund II
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent Lee R. Thomas, III 3-7 years
with preservation of capital
Fund Inception Date Credit Quality
Fund Focus 10/2/95 B to Aaa; maximum 10% below Baa
Intermediate maturity U.S. and hedged
foreign fixed income securities Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund has the same policies as the Global Bond Fund, except that:

. the Fund will normally hedge at least 75% of its exposure to foreign
currency;

. the Fund may only engage in short sales that are "against the box;"

. the Fund may not loan its portfolio securities if their market value exceeds
25% of the Fund's assets;

. the Fund may not borrow in excess of 10% of the value of its 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; and

. the Fund is subject to different fundamental and non-fundamental investment
restrictions than the Global Bond Fund. See "Investment Restrictions" in the
Statement of Additional Information.

Principal Risks

Among the principal risks of investing in the Fund are:

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

40
<PAGE>

Calendar Year Total Returns

<TABLE>
<CAPTION> More Recent Return Information
12/31/98-06/30/99 ___%

[Plot points for bar chart:]

Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- -- -- -- -- -- -- 12.84 8.68 7.71 Highest (7/1/96 - 9/30/96) 5.39%
Lowest (1/1/97 - 3/31/97) 0.23%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception * The .P. Morgan Global (Hedged) Index is an unmanaged
1 Year (10/2/95) index representative of the total return performance in
- ---------------------------------------------------- U.S. dollars on a hedged basis of major world bond markets.
<S> <C> <C> It is not possible to invest directly in the index. The
Institutional Class 7.71% 10.82% Lipper Global Income Fund Average is a total return
- ---------------------------------------------------- performance average of Funds tracked by Lipper Analytical
J.P. Morgan Global 11.42% 10.89% Services, Inc. that invest primarily in U.S. dollar and
(Hedged) Index* non-U.S. dollar debt securities of issuers located in at
- ---------------------------------------------------- least three countries, one of which may be the United
Lipper Global Income Fund 6.23% 7.05% States. It does not take into account sales charges. The
Average* Fund began operations on 10/2/95. Index comparisons began
on 9/30/95.

</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem your shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.25% 0.30% None 0.55% $56 $176 $307 $689
- ---------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.30 0.25% 0.80 82 255 444 990
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

41
<PAGE>

<TABLE>
<CAPTION>
PIMCO Foreign Bond Fund

Investment Objective Portfolio Manager Average Portfolio Duration
<S> <C> <C>
Seeks maximum total return, consistent Lee R. Thomas, III 3-7 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
12/3/92 B to Aaa; maximum 10% below Baa
Fund Focus
Intermediate maturity hedged foreign Dividend Frequency
fixed income securities Declared daily and distributed monthly

</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 85% of its assets in Fixed
Income Instruments of issuers located outside the United States, representing at
least three foreign countries, which may be represented by futures contracts
(including related options) with respect to such securities, and options on such
securities. Such securities normally are denominated in major foreign currencies
or baskets of foreign currencies (such as the euro). The Fund will normally
hedge at least 75% of its exposure to foreign currency.

The Adviser selects the Fund's 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 factors the Adviser
believes to be relevant. The average portfolio duration of the Fund normally
varies within a three- to seven-year time frame. The Fund may invest up to 10%
of its assets in high yield securities 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 all of its assets in derivative instruments, such as options, futures
contracts or swap agreements, or in mortgage- or asset-backed securities. The
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions to earn income. The Fund may enter into a series of purchase and
sale contracts or use other investment techniques to obtain market exposure to
the securities in which it primarily invests. For temporary, defensive or
emergency purposes, the Fund may invest without limit in U.S. debt securities,
including short-term money market securities, when the Adviser deems it is
appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C> <C>
. Interest Rate Risk . Foreign Investment Risk . Derivatives Risk
. Credit Risk . Currency Risk . Leveraging Risk
. Market Risk . Concentration Risk . Management Risk
. Issuer Risk
</TABLE>
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

42
<PAGE>

by Administrative Class shares. Past results performance is no guarantee of
future

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]

Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- -- -- -- 16.40 -7.30 21.22 18.89 9.60 10.03 Highest (10/1/95 - 12/31/95) 7.84%
Lowest (1/1/94 - 3/31/94) -5.80%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception * The J.P. Morgan Non-U.S. Index (Hedged) in an unmanaged
1 Year 5 Years (12/3/92) index representative of the total return performance in
------------------------------------------------------------ U.S. dollars of major non-U.S. bond markets. It is not
<S> <C> <C> <C> possible to invest directly in the index. The Lipper
Institutional Class 10.03% 10.01% 11.18% International Income Fund Average is a total return
- ------------------------------------------------------------- performance average of Funds tracked by Lipper Analytical
Administrative Class 9.75% 9.74% 10.91% Services, Inc. that invest primarily in U.S. dollar and
- ------------------------------------------------------------- non-U.S. dollar debt securities of issuers located in at
J.P. Morgan Non-U.S. 12.09% 9.45% 10.24% least three countries, excluding the United States, except
Index (Hedged)* in periods of market weakness. It does not take into
- ------------------------------------------------------------- account sales charges. The Fund began operations on
Lipper International 11.91% 6.55% 8.01% 12/3/92. Index comparisons began on 11/30/92.
Income Fund Average*
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem your shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.25% 0.25% None 0.50% $51 $160 $280 $628
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.25 0.25% 0.75 77 240 417 930
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

43
<PAGE>

PIMCO International Bond Fund

This Fund is offered only to private account clients of PIMCO

<TABLE>
<CAPTION>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent Lee R. Thomas, III 0-8 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
12/13/89 Baa to Aaa
Fund Focus
Foreign fixed income securities Dividend Frequency
Declared and distributed quarterly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 65% of its assets in Fixed
Income Instruments 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. Such securities may be denominated in major foreign currencies,
baskets of foreign currencies (such as the euro), or the U.S. dollar. The Fund
will normally hedge at least 75% of its exposure to foreign currency.

The Adviser selects the Fund's 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 factors the Adviser
believes to be relevant. The Fund may invest only in investment grade
securities. The average portfolio duration of the Fund varies 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 Fund may invest all of its assets in
derivative instruments, such as options, futures contracts or swap agreements,
or in mortgage- or asset-backed securities. The Fund may lend its portfolio
securities to brokers, dealers and other financial institutions to earn income.
The Fund may enter into a series of purchase and sale contracts or use other
investment techniques to obtain market exposure to the securities in which it
primarily invests. For temporary, defensive or emergency purposes, the Fund may
invest without limit in U.S. debt securities, including short-term money market
securities, when the Adviser deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk . Foreign Investment Risk . Derivatives Risk
. Credit Risk . Currency Risk . Leveraging Risk
. Market Risk . Concentration Risk . Management Risk
. Issuer Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

44
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%

[Plot points for bar chart:]

Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Highest (10/1/95 - 12/31/95) 7.84%
- -- 7.05 14.29 7.00 14.31 -9.52 20.76 16.75 6.21 11.21 Lowest (4/1/94 - 6/30/94) -5.80%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
Fund Inception * The Salomon World Government Bond Index is an unmanaged
1 Year 5 Years (12/13/89) index of ___. It is not possible to invest directly
- --------------------------------------------------------------- in the index. The Lehman Brothers Aggregate Bond Index is
<S> <C> <C> <C>
Institutional Class 11.21% 8.54% 9.42% an unmanaged index of fixed income securities. The
- --------------------------------------------------------------- Lipper International Income Fund Average is a total return
Salomon World Gov't 11.42% 9.51% 9.14% performance average of Funds tracked by Lipper Analytical Services,
- --------------------------------------------------------------- Inc. that invest primarily in U.S. dollar and non-U.S. dollar
Lehman Aggregate debt securities of issuers located in at least three countries,
Bond Index* 8.69% 7.27% 8.64% excluding the United States. It does not take into account sales
- --------------------------------------------------------------- charges. The Fund began operations on 12/13/89. Index comparisons
Lipper International 11.91% 6.55% 8.01% began on 11/30/89.
Income Fund Average
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem your shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.25% 0.25% None 0.50% $51 $160 $280 $628
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.25 0.25 0.25% 0.75 77 240 417 930
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

45
<PAGE>

PIMCO Emerging Markets Bond Fund

Investment Objective Portfolio Manager Average Portfolio Duration
<S> <C> <C>
Seeks maximum total return, consistent Michael J. Rosborough 0-8 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
7/31/97 B to Aaa
Fund Focus
Emerging market fixed income securities Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 80% of its assets in Fixed
Income Instruments of issuers that economically are tied to countries with
emerging securities markets. Such securities may be denominated in foreign
currencies and the U.S. dollar. 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 varies 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 the World Bank
or its related organizations, or the United Nations or its authorities. 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. The
Fund's investments in emerging market fixed income securities may be represented
by securities on which the return 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 high yield securities 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 all of its assets in derivative instruments, such
as options, futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Fund may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The Fund may enter into
a series of purchase and sale contracts or use other investment techniques to
obtain market exposure to the securities in which it primarily invests. For
temporary, defensive or emergency purposes, the Fund may invest without limit in
U.S. debt securities, including short-term money market securities, when the
Adviser deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk . Foreign Investment Risk . Derivatives Risk
. Credit Risk . Currency Risk . Leveraging Risk
. Market Risk . Concentration Risk . Management Risk
. Issuer Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

46
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%

[Plot points for bar chart:]
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Highest (10/1/98 - 12/31/98) 12.27%
- -- -- -- -- -- -- --- -- -- -11.76 Lowest (7/1/98 - 9/30/98) -21.05%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception * The J.P. Morgan Emerging Markets Bond Index is an
1 Year (7/31/97) unmanaged index which tracks the total returns for
- ------------------------------------------------------------------------ Brady Bonds. It is not possible to invest directly
<S> <C> <C> in the index. The Lipper Emerging Market Debt Fund
Institutional Class -11.76% -10.26% Average is a total return performance average of
- ------------------------------------------------------------------------ Funds tracked by Lipper Analytical Services, Inc.
Administrative Class -12.84% -11.10% that seek either current current or total income
- ------------------------------------------------------------------------ by investing at least 65 % of total assets in
J.P. Morgan Emerging Markets Bond Index* -14.35% -11.36% emerging debt securities. It does not take
- ------------------------------------------------------------------------ account sales charges.
Lipper Emerging Market Debt Fund Average* -20.80% -15.58%
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

47
<PAGE>

PIMCO Emerging Markets Bond Fund II

This Fund is offered only to private account clients of PIMCO
<TABLE>
<CAPTION>

Investment Objective Portfolio Manager Average Portfolio Duration
<S> <C> <C>
Seeks maximum total return, consistent Michael J. Rosborough 0-8 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
4/8/98 B to Aaa; max 10% below BB
Fund Focus
Emerging market fixed income securities Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

The Fund has the same policies as the denominated in currencies of unrated, determined by the
Emerging Markets Bond Fund, except emerging market countries; an Adviser to be of comparable
that: quality.

. the Fund may only invest up to . the Fund may only invest up to
15% of its assets in securities 10% of its assets in securities
rated B by Moody's or S&P, or, if

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk . Foreign Investment Risk . Derivatives Risk
. Credit Risk . Currency Risk . Leveraging Risk
. Market Risk . Concentration Risk . Management Risk
. Issuer Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

As the Fund commenced operations in April, 1998, it does not yet have a full
calendar year of performance.

48
<PAGE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.40% None 0.85% $ 87 $271 $471 $1,049
- ---------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.40 0.25% 1.10 112 350 606 1,340
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

49
<PAGE>

PIMCO Strategic Balanced Fund

<TABLE>
<CAPTION>
Investment Objective Portfolio Manager Average Portfolio Duration
<S> <C> <C>
Seeks maximum total return, consistent A team led by 0-6 years
with preservation of capital and William H. Gross
prudent investment management Credit Quality
Fund Inception Date B to Aaa; maximum 10% below Baa
Fund Focus 6/28/96
Securities eligible for purchase by the Dividend Frequency
Total Return and StocksPLUS Funds Declared and distributed quarterly
</TABLE>

Principal Investments and Strategies

The Fund invests in the securities eligible for purchase by the Total Return and
StocksPLUS Funds. The percentage of the Fund's assets invested in equity or
fixed income exposure will vary according to 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 assets, and its fixed income
exposure will vary between 25% and 55% of its assets. There is no assurance that
the Adviser's methodology for selecting the optimal blend of equity and fixed
income exposure will be successful.

The Fund may invest all of its assets in derivative instruments, such as
options, futures contracts or swap agreements. The Fund may lend its portfolio
securities to brokers, dealers and other financial institutions to earn income.
For temporary, defensive or emergency purposes, the Fund may invest without
limit in U.S. debt securities, including short-term money market securities,
when the Adviser deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Market Risk . Credit Risk . Currency Risk
. Issuer Risk . Derivatives Risk . Leveraging Risk
. Interest Rate Risk . Foreign Investment Risk . Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

50
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]

Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- -- -- -- -- -- -- -- 24.17 19.66 Highest (4/1/97 - 6/30/97) 12.23%
Lowest (7/1/98 - 9/30/98) -4.60%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
Fund Inception * The Lipper Balanced Index is an index of the 30 largest
1 Year (6/28/96) Balanced Funds equally weighted. The index reflects
- ------------------------------------------------------------ performance which is net of fees charges by each fund in
<S> <C> <C> the index. It is not possible to invest directly in the
Institutional Class 19.66% 21.72% index. The Lipper Balanced Fund Average is a total return
- ------------------------------------------------------------ performance average of Funds tracked by Lipper Analytical
Lipper Balanced Index* 15.03% 17.46% Services, Inc., whose primary objective is to conserve
- ------------------------------------------------------------ principal by maintaining at all times a balanced portfolio
Lipper Balanced Fund Average* 13.50% 16.74% of both stocks and bonds. It does not take into account
sales charges. The Fund began operations on 6/28/96.
Index comparisons began on 6/30/96.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment
- - such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not redeem
Admini- Distribution Total Annual your shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.40% 0.25% None 0.65% $66 $208 $362 $ 810
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.40 0.25 0.25% 0.90 92 287 498 1,108
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

51
<PAGE>

PIMCO Convertible Bond Fund

<TABLE>
<CAPTION>
Investment Objective Portfolio Manager Average Portfolio Duration
<S> <C> <C>
Seeks maximum total return, consistent Sandra K. Durn N/A
with prudent investment management
Fund Inception Date Credit Quality
Fund Focus 4/1/99 Caa to Aaa; maximum 35% below Baa and
Convertible securities 10% below B

Dividend Frequency
Declared and distributed quarterly
</TABLE>

Principal Investments and Strategies

The 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 that 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 S&P 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. 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. For
temporary, defensive or emergency purposes, the Fund may invest without limit in
U.S. debt securities, including short-term money market securities, when the
Adviser deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Market Risk . Credit Risk . Currency Risk
. Issuer Risk . Derivatives Risk . Leveraging Risk
. Interest Rate Risk . Foreign Investment Risk . Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

As the Fund commenced operations in April, 1999, it does not yet have a full
calendar year of performance.

52
<PAGE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -such as sales
charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

53
<PAGE>

PIMCO StocksPLUS Fund

<TABLE>
<CAPTION>
Investment Objective Portfolio Manager Average Portfolio Duration
<S> <C> <C>
Seeks total return which exceeds that of A team led by 0-1 year
the S&P 500 William H. Gross
Credit Quality
Fund Focus Fund Inception Date B to Aaa; maximum 10% below Baa
S&P 500 stock index derivatives backed 5/13/93
by a portfolio of short-term fixed Dividend Frequency
income securities Declared and distributed uarterly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal market conditions substantially all of its assets
in S&P 500 derivatives, backed by a portfolio of Fixed Income Instruments. The
Fund may invest in common stocks, options, futures, options on futures and
swaps. The Fund 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 Adviser
actively manages the fixed income assets held by the Fund, with a view toward
enhancing the Fund's total return, subject to an overall portfolio duration
which is normally not expected to exceed one year.

The S&P 500 is composed of 500 selected common stocks that 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 seeks 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.

Assets not invested in equity securities or derivatives may be invested in
securities eligible for purchase by the Fixed Income Funds. The Fund may invest
up to 10% of its assets in high yield securities rated B or higher by Moody's or
S&P, or, if unrated, determined by the Adviser to be of comparable quality. In
addition, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions to earn income. The Fund may invest up to 20% of
its assets in securities of foreign issuers, may purchase and sell options and
futures on foreign currencies, and may enter into forward currency contracts.
The Fund will normally hedge at least 75% of its exposure to foreign currency.
For temporary, defensive or emergency purposes, the Fund may invest without
limit in U.S. debt securities, including short-term money market securities,
when the Adviser deems it is appropriate to do so.

Principal Risks

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 invested directly in a portfolio of
S&P 500 stocks. Among the principal risks of investing in the Fund are:

. Market Risk . Credit Risk . Currency Risk
. Issuer Risk . Interest Rate Risk . Leveraging Risk
. Derivatives Risk . Foreign Investment Risk . Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

54
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- -- -- -- -- 2.92 40.52 23.07 32.85 28.33 Highest (10/1/98 - 12/31/98) 21.45%
Lowest (7/1/98 - 9/30/98) -9.77%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
Fund Inception * The Standard & Poor's 500 Composite Stock Price Index is
1 Year 5 Years (5/13/93) an unmanaged index of common stocks. It is not possible to
- ------------------------------------------------------------------ invest directly in the index. The Lipper Growth & Income
<S> <C> <C> <C> Fund Average is a total return performance average of Funds
Institutional Class 28.33% 24.86% 23.62% tracked by Lipper Analytical Services, Inc. that combine a
- ------------------------------------------------------------------ growth-of-earnings orientation and an income requirement
Administrative Class 27.85 24.48% 23.26% for level and/or rising dividends. It does not take into
- ------------------------------------------------------------------ account sales charges. The Fund began operations on
S&P 500 Index* 28.58% 24.06% 22.63% 5/13/93. Index comparisons began on 4/30/93.
- ------------------------------------------------------------------
Lipper Growth & 15.61% 18.35% 17.71%
Income Fund Average*
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

55
<PAGE>

Summary of Principal Risks

The value of your investment in a Fund changes with the values of that
Fund's investments. Many factors can affect those values. The factors that are
most likely to have a material effect on a particular Fund's portfolio as a
whole are called "principal risks." The principal risks of each Fund are
identified in the Fund Summaries and are summarized in this section. The chart
at the end of this section identifies the principal risks of all of the Funds.
Each Fund may be subject to additional principal risks and risks other than
those described below because the types of investments made by a Fund can change
over time. Securities and investment techniques mentioned in this summary and
described in greater detail under "Characteristics and Risks of Securities and
Investment Techniques" appear in bold type. That section and "Investment
Objectives and Policies" in the Statement of Additional Information also include
more information about the Funds, their investments and the related risks.

. Interest Rate Risk. As interest rates rise, the value of fixed income
securities in a Fund's portfolio are likely to decrease. Securities with longer
durations tend to be more sensitive to changes in interest rates, usually making
them more volatile than securities with shorter durations.

. Credit Risk. A Fund could lose money if the issuer or guarantor of a
fixed income security, or the counterparty to a derivatives contract, repurchase
agreement or a loan of portfolio securities, is unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. Securities are subject to varying degrees of credit risk, which are
often reflected in credit ratings. Funds that invest in high yield securities
and unrated securities of similar credit quality (commonly known as "junk
bonds") may be subject to greater levels of credit risk. These fixed income
securities are considered predominately speculative with respect to the issuer's
continuing ability to make principal and interest payments.

. Market Risk. The market price of securities owned by a 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
represented in the securities markets. The value of a security may decline due
to general market conditions which are not specifically related to a particular
company, such as real or perceived adverse economic conditions, changes in the
general outlook for corporate earnings, changes in interest or currency rates or
adverse investor sentiment generally. They may also decline due to factors which
affect a particular industry or industries, such as labor shortages or increased
production costs and competitive conditions within an industry. 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.

. Liquidity Risk. Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing a Fund from selling such
illiquid securities at an advantageous time or price. Funds with principal
investment strategies that involve foreign securities, derivatives or securities
with substantial market and/or credit risk tend to have the greatest exposure to
liquidity risk.

. Derivatives Risk. Each Fund (except the Money Market Fund) may use
derivatives, which are financial contracts whose value depends on, or is derived
from, the value of an underlying asset, reference rate or index. The various
derivative instruments that the Funds may use are referenced under
"Characteristics and Risks of Securities and Investment Techniques -
Derivatives" in this Prospectus and described in more detail under "Investment
Objectives and Policies" in the Statement of Additional Information. The Funds
may sometimes use derivatives as part of a strategy designed to reduce exposure
to other risks, such as interest rate or currency risk. The Funds may also use
derivatives for leverage. A Fund's use of derivative instruments involves risks
different from, or greater than, the risks associated with investing directly in
securities and other traditional investments. Derivatives are subject to a
number of risks described elsewhere in this section, such as liquidity risk,
interest rate risk, market risk and credit risk. They also involve the risk of
mispricing or improper valuation and the risk that changes in the value of the
derivative may not correlate perfectly with the underlying asset, rate or index.
Also, suitable derivative

58
<PAGE>

transactions may not be available in all circumstances and there can be no
assurance that a Fund will engage in these transactions to reduce exposure to
other risks when that would be beneficial.

. Foreign Investment Risk. A Fund that invests in foreign securities may
experience more rapid and extreme changes in value than a Fund that invests
exclusively in securities of U.S. companies. The securities markets of many
foreign countries are relatively small, with a limited number of companies
representing a small number of industries. Additionally, issuers of foreign
securities are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of foreign countries
differ, in some cases significantly, from U.S. standards. Also, nationalization,
expropriation or confiscatory taxation, currency blockage, political changes or
diplomatic developments could adversely affect a Fund's investments in a foreign
country. In the event of nationalization, expropriation or other confiscation, a
Fund could lose its entire investment in foreign securities. Adverse conditions
in a certain region such as Southeast Asia can adversely affect securities of
other countries whose economies appear to be unrelated.

Foreign investment risk may be particularly high to the extent that a Fund
invests in emerging market securities of issuers based in countries with
developing economies. These securities may present market, credit, currency,
liquidity, legal, political and other risks different from, or greater than, the
risks of investing in developed foreign countries. To the extent that a Fund
invests a significant portion of its assets in a concentrated geographic area
like Eastern Europe or Asia, the Fund will generally have more exposure to
regional economic risks associated with foreign investments.

. Currency Risk. Funds that invest directly in foreign currencies or in
securities that trade in, and receive revenues in, foreign currencies are
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 a
number of reasons, including changes in interest rates, intervention (or the
failure to intervene) by U.S. or foreign governments, central banks or
supranational entities such as the International Monetary Fund, or by the
imposition of currency controls or other political developments in the U.S. or
abroad.

. Concentration Risk. Concentration of investments in a small number of
issuers, industries or foreign currencies increases risk. The Real Return Bond,
Global Bond, Global Bond II, Foreign Bond, International Bond, Emerging Markets
Bond and Emerging Markets Bond II Funds are "non-diversified," which means that
they may invest a greater percentage of their assets in the securities of a
single issuer than the other Funds. Funds that invest in a relatively small
number of issuers are more susceptible to risks associated with a single
economic, political or regulatory occurrence than a more diversified portfolio
might be. Some of those issuers also may present substantial credit or other
risks.

. Leveraging Risk. When a Fund is borrowing money or otherwise
leveraging its portfolio, the value of an investment in that Fund will be more
volatile and all other risks will tend to be compounded. This is because
leverage tends to exaggerate the effect of any increase or decrease in the value
of a Fund's portfolio securities. Each Fund may take on leveraging risk by using
reverse repurchase agreements, dollar rolls and other borrowings, by investing
collateral from loans of portfolio securities or through the use of when-issued,
delayed-delivery or forward commitment transactions. Certain Funds may also take
on leveraging risk by using derivatives. The use of leverage may also cause a
Fund to liquidate portfolio positions when it may not be advantageous to do so
to satisfy its obligations or to meet segregation requirements.

. Management Risk. Each Fund is subject to management risk because it is
an actively managed investment portfolio. PIMCO and each individual portfolio
manager will apply investment techniques and risk analyses in making investment
decisions for the Funds, but there can be no guarantee that these will produce
the desired results.

Principal Risks by Fund

59
<PAGE>

The following chart identifies the Principal Risks associated with each Fund.
Risks not marked for a particular Fund may, however, still apply to some extent
to that Fund at various times.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Interest Foreign Concen- Manage-
Rate Credit Market Issuer Invest- Currency Deriva- Leverag- tration ment
Fund Risk Risk Risk Risk ment Risk Risk tives Risk ing Risk Risk Risk
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Short-Term . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Low Duration . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Low Duration II . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Low Duration III . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Low Duration . . . . . . . .
Mortage
- ---------------------------------------------------------------------------------------------------------------------------------
Moderate Duration . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Real Return Bond . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return II . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return III . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return
Mortgage . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
High Yield . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Long-Term U.S.
Government . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Long Duration . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Global Bond . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Global Bond II . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Foreign Bond . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
International Bond . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets
Bond . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets
Bond II . . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Municipal Bond . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Strategic Balanced . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
Convertible Bond . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
StocksPLUS . . . . . . . . .
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Management of the Funds

The business affairs of the Funds are managed under the direction of the Trust's
Board of Trustees. Information about the Trustees and the Trust's executive
officers is included in the Statement of Additional Information under the
heading "Management of the Trust."

Investment Adviser and Administrator

PIMCO serves as the investment adviser and the administrator (serving in
its capacity as administrator, the "Administrator") for the Funds. Subject to
the supervision of the Board of Trustees, PIMCO is responsible for managing the
investment activities of the Funds and the Funds' business affairs and other
administrative matters.

PIMCO is located at 840 Newport Center Drive, Newport Beach, California
92660. Organized in 1971, PIMCO provides investment management and advisory
services to private accounts of institutional and individual clients and to
mutual funds. As of _____, 1999, PIMCO had more than $_____ billion in assets
under management.

60
<PAGE>

. Advisory Fees. Each Fund pays PIMCO fees in return for providing
investment advisory services. For the fiscal year ended March 31, 1999, the
Funds paid monthly advisory fees to PIMCO at the following annual rates (stated
as a percentage of the average daily net assets of each Fund taken separately):

<TABLE>
<CAPTION>
Fund Advisory Fees
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Money Market Fund 0.15%
Short-Term, Low Duration, Low Duration II, Low Duration III, Low Duration Mortgage, 0.25%
Moderate Duration, Real Return Bond, Total Return, Total Return II, Total Return III,
Total Return Mortgage, High Yield, Long-Term U.S. Government, Global Bond, Global Bond
II, Foreign Bond, International Bond and Municipal Bond Funds
Strategic Balanced and StocksPLUS Funds 0.40%
Emerging Markets Bond and Emerging Markets Bond II Funds 0.45%
</TABLE>

The Long Duration and Convertible Bond Funds did not have operations
during the fiscal year ended March 31, 1999. The investment advisory fees for
the Long Duration and Convertible Bond Funds are at an annual rate of 0.25% and
0.40%, respectively, based upon the average daily net assets of the Fund.

. Administrative Fees. Each Fund pays for the administrative services it
requires under a fee structure which is essentially fixed. Institutional and
Administrative Class shareholders of each Fund pay an administrative fee to
PIMCO, computed as a percentage of the Fund's assets attributable in the
aggregate to that class of shares. PIMCO, in turn, provides administrative
services for Institutional and Administrative Class shareholders and also bears
the costs of various third-party services required by the Funds, including
audit, custodial, portfolio accounting, legal transfer agency and printing
costs. The result of this fee structure is an expense level for Institutional
and Administrative Class shareholders of each Fund that, with limited
exceptions, is precise and predictable under ordinary circumstances.

For the fiscal year ended March 31, 1999, the Funds paid PIMCO monthly
administrative fees at the following annual rates (stated as a percentage of the
average daily net assets attributable in the aggregate to the Fund's
Institutional and Administrative Class shares):

<TABLE>
<CAPTION>
Fund Administrative Fees
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Low Duration and Total Return Funds 0.18%
Money Market, Short-Term and Moderate Duration Funds 0.20%
Low Duration II, Low Duration III, Low Duration Mortgage, Real Return Bond, Total Return II, 0.25%
Total Return III, Total Return Mortgage, High Yield, Long-Term U.S. Government, Foreign Bond,
International Bond, Municipal Bond, Strategic Balanced and StocksPLUS Funds
Global Bond II and Global Bond II Funds 0.30%
Emerging Markets Bond and Emerging Markets Bond II Funds 0.40%
</TABLE>

The Long Duration and Convertible Bond Funds did not have operations
during the fiscal year ended March 31, 1999. The administrative fees for the
Long Duration and Convertible Bond Funds are at an annual rate of 0.25% and
0.40%, respectively, based upon the average daily net assets of the Fund.

. Individual Portfolio Managers. The following individuals have primary
responsibility for managing each of the noted Funds.

<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<S> <C> <C> <C>
Money Market Leslie Barbi 11/95 Senior Vice President, PIMCO. She joined PIMCO as a
Portfolio Manager in 1993, and has managed assets for
various institutional accounts since that time.
</TABLE>

61
<PAGE>

<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<S> <C> <C> <C>

Short-Term William H. Gross 1/98 Managing Director, Chief Investment Officer and a founding
Low Duration 5/87* partner of PIMCO. He leads a team which manages the
Low Duration II 11/91* Short-Term, Moderate Duration, Strategic Balanced and
Low Duration III 12/96* StocksPLUS Funds.
Moderate Duration 12/96*
Total Return 5/87*
Total Return II 12/91*
Total Return III 5/91*
Strategic Balanced 1/98
StocksPLUS 1/98

Low Duration Mortgage William C. Powers 7/97* Managing Director, PIMCO. He joined PIMCO as a Portfolio
Manager in 1991, and has managed assets for various
institutional accounts since that time.
Real Return Bond John Brynjolfsson 1/97* Senior Vice President, PIMCO. He joined PIMCO as a Portfolio
Manager in 1989, and has managed assets for various
institutional accounts since that time.
Total Return Mortgage Pasi Hamalainen 7/97* Executive Vice President, PIMCO. He joined PIMCO as a
Long-Term U.S. 7/97 Portfolio Manager in 1994, and has managed assets for
Government various institutional accounts since that time.
Long Duration

High Yield Benjamin Trosky 12/92 Managing Director, PIMCO. He joined PIMCO as a Portfolio
Manager in 1990, and has managed assets for various
institutional accounts since that time.
Municipal Bond Benjamin Ehlert 12/97* Executive Vice President, PIMCO. He has been a Portfolio
Manager for PIMCO since 1986, and has managed assets for
various institutional accounts since that time.
Global Bond Lee R. Thomas, III 7/95 Managing Director and Senior International Portfolio
Global Bond II 10/95* Manager, PIMCO. He joined PIMCO as a Portfolio Manager in
Foreign Bond 7/95 1995, and has managed assets for various institutional
International Bond 7/95 accounts since that time. Prior to joining PIMCO, he was
associated with Investcorp as a member of the management
committee responsible for global securities and foreign
exchange trading.

Emerging Markets Bond Michael J. Rosborough 8/97 Senior Vice President, PIMCO. He joined PIMCO as a Portfolio
Emerging Markets Bond Manager in 1995, and has managed assets for various
II 4/98 institutional accounts since that time.

Convertible Bond Sandra K. Durn 4/99* Vice President, PIMCO. She joined PIMCO as a Portfolio
Manager in 1999. Prior to joining PIMCO, she 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>

_________________
* Since inception of the Fund.

62
<PAGE>

Investment Options
(Institutional Class and Administrative Class Shares)

The Trust offers investors Institutional Class and Administrative Class
shares of the Funds in this Prospectus.

The Trust does not charge any sales charges (loads) or other fees in
connection with purchases, sales (redemptions) or exchanges of Institutional
Class or Administrative Class shares. Administrative Class shares are subject
to a higher level of operating expenses than Institutional Class shares due to
the additional service and/or distribution fees paid by Administrative Class
shares as described below. Therefore, Institutional Class shares will generally
pay higher dividends and have a more favorable investment return than
Administrative Class shares.

1Service and Distribution Fees - Administrative Class Shares. The Trust has
adopted an Administrative Services Plan for the Administrative Class shares of
each Fund. It has also adopted a Distribution Plan for the Administrative Class
shares of each Fund. Each Plan has been adopted in accordance with the
requirements of Rule 12b-1 under the Investment Company Act of 1940 and is
administered in accordance with that rule. However, shareholders do not have
the voting rights set forth in Rule 12b-1 with respect to the Administrative
Services Plan.

Each Plan allows the Funds to use its Administrative Class assets to
reimburse financial intermediaries that provide services relating to
Administrative Class shares. The Distribution Plan permits reimbursement for
expenses in connection with the distribution and marketing of Administrative
Class shares and/or the provision of shareholder services to Administrative
Class shareholders. The Administrative Services Plan permits reimbursement for
services in connection with the administration of plans or programs that use
Administrative Class shares of the Funds as their funding medium and for related
expenses.

In combination, the Plans permit a Fund to make total reimbursements at an
annual rate of up to 0.25% of the Fund's average daily net assets attributable
to its Administrative Class shares. The same entity may not receive both
distribution and administrative services fees with respect to the same
Administrative Class assets, but may receive fees under each Plan with respect
to separate assets. Because these fees are paid out of a Fund's Administrative
Class assets on an ongoing basis, over time they will increase the cost of an
investment in Administrative Class shares and may cost an investor more than
other types of sales charges.

. Arrangements with Service Agents. Institutional Class and
Administrative Class shares of the Funds may 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 and/or
distribution fees paid with respect to Administrative Class shares. Service
agents may impose additional or different conditions than the Trust on
purchases, redemptions or exchanges of Fund shares by their customers. Service
agents may also independently establish and charge their customers transaction
fees, account fees and other amounts in connection with purchases, sales and
redemptions of Fund shares in addition to any fees charged by the Trust. These
additional fees would increase the cost of the customer's investment and lower
investment returns. 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, redemptions and exchanges.
Shareholders who are customers of service agents should consult their service
agents for information regarding these fees and conditions.

63
<PAGE>

Purchases, Redemptions and Exchanges

Purchasing Shares

Investors may purchase Institutional Class and Administrative Class shares
of the Funds at the relevant net asset value ("NAV") of that class without a
sales charge or other fee.

Administrative Class shares are offered primarily through employee benefit
plan alliances, broker-dealers and other intermediaries, and each Fund pays
service and/or distribution fees to these entities for services they provide to
Administrative Class shareholders.

Pension and profit-sharing plans, employee benefit trusts and employee
benefit plan alliances and "wrap account" programs established with broker-
dealers or 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.
Shares may be offered to clients of PIMCO and its affiliates, and to the benefit
plans of PIMCO and its affiliates.

. Investment Minimums. 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. In addition, the minimum
initial investment does not apply to Institutional Class shares offered through
fee-based programs sponsored and maintained by a registered broker-dealer and
approved by PIMCO Funds Distributors LLC (the "Distributor"), the Funds'
distributor, in which each investor pays an asset based fee at an annual rate of
at least 0.50% of the assets in the account to a financial intermediary for
investment advisory and/or administrative services.

The Trust and the Distributor may waive the minimum initial investment for
other categories of investors in their discretion.

The investment minimums discussed in this section and the limitations set
forth in "Investment Limitations" below do not apply to participants in PIMCO
Advisors Portfolio Strategies, a managed product sponsored by PIMCO Advisors.

. Timing of Purchase Orders and Share Price Calculations. A purchase
order, together with payment in proper form, received by the Trust's transfer
agent, National Financial Data Services ("Transfer Agent"), prior to the close
of regular trading (normally 4:00 p.m., Eastern time) on the Exchange, on a day
the Trust is open for business, will be effected at that day's NAV. An order
received after the close of regular trading on the Exchange will be effected at
the NAV determined on the next business day. However, orders received by certain
retirement plans and other financial intermediaries on a business day prior to
the close of regular trading on the Exchange and communicated to the Transfer
Agent prior to 9:00 a.m., Eastern time, on the following business day will be
effected at the NAV 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.

64
<PAGE>

. Initial Investment. Investors may open an account by completing and
signing a Client Registration Application and mailing it to PIMCO Funds at 840
Newport Center Drive, Suite 300, Newport Beach, California 92660. A Client
Registration Application may be obtained by calling 1-800-800-0952.

Except as described below, an investor may purchase Institutional Class and
Administrative Class shares only by wiring federal funds to the Trust's Transfer
Agent, National Financial Data Services, 330 West 9th Street, 4th Floor, Kansas
City, Missouri 64105. Before wiring federal funds, the investor must telephone
the Trust at 1-800-927-4648 to receive instructions for wire transfer and must
provide the following information: name of authorized person, shareholder name,
shareholder account number, name of Fund and share class, amount being wired,
and wiring bank name.

An investor may purchase shares without first wiring federal funds if the
proceeds of the investment are derived from an advisory account the investor
maintains with PIMCO or one of its 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.

. Additional Investments. An investor may purchase additional
Institutional Class and Administrative Class shares of the Funds at any time 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, when, in the judgment of management, such
suspension or rejection is in the best interests of the Trust.

An investor should purchase and sell shares of the Funds for long-term
investment purposes only. The Trust and PIMCO 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. Investors should inquire as to
whether shares of a particular Fund are available for offer and sale in the
investor's 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.

Subject to the approval of the Trust, an investor may purchase shares of a
Fund with liquid securities that are eligible for purchase by the Fund
(consistent with the 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 PIMCO intends to retain
the security in the Fund as an investment. Assets purchased by a Fund in such a
transaction 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 and savings plans, including Keogh plans, 401(k) plans, 403(b)
custodial accounts, 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.

65
<PAGE>

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.

Redeeming Shares

. Redemptions by Mail. An investor may redeem (sell) Institutional Class
and Administrative Class shares by submitting a written request to PIMCO Funds
at 840 Newport Center Drive, Suite 300, Newport Beach, California 92660. The
redemption request should state 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.

. Redemptions by Telephone or Other Wire Communication. An investor that
elects this option on the Client Registration Application (or subsequently in
writing) may request redemptions of shares by calling the Trust at 1-800-927-
4648, by sending a facsimile to 1-949-760-4456, 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 or the Transfer
Agent to be genuine. Neither the Trust nor the Transfer Agent may 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 also 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. The
Trust or Transfer Agent may be liable for any losses due to unauthorized or
fraudulent telephone transactions if it fails to employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. 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 "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.

Defined contribution plan participants may request redemptions by
contacting the employee benefits office, the plan administrator or the
organization that provides recordkeeping services for the plan.

. Other Redemption Information. Redemption requests for Fund shares are
effected at the NAV per share next determined after receipt in good order of the
redemption request by the Trust or its designee. A
<PAGE>

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.

Redemption proceeds will ordinarily be wired to the investor's bank within
three business days 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. 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 Fund's 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. When shares are redeemed in kind, the redeeming
shareholder should expect to incur transaction costs upon the disposition of the
securities received in the distribution.

Exchange Privilege

An investor may exchange Institutional Class or Administrative Class shares
of a Fund for shares of the same class of any other Fund or other series of the
Trust that offers that class based on the respective NAVs of the shares
involved. An exchange may be made by following the redemption procedure
described above under "Redemptions by Mail" or, if the investor has elected the
telephone redemption option, by calling the Trust at 1-800-927-4648. An
investor may also exchange shares of a Fund 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 PIMCO Advisors and its
subsidiary partnerships. Shareholders interested in such an exchange may
request a prospectus for these other series by contacting PIMCO Funds at the
same address and telephone number as the Trust.

An investor may exchange shares only with respect to Funds or other
eligible series that are registered in the investor's state of residence 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 "Tax Consequences" in this Prospectus and
"Taxation" in the Statement of Additional Information.

67
<PAGE>

The Trust reserves the right to refuse exchange purchases if, in the
judgment of PIMCO, 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 PIMCO to be detrimental to the Trust or a
particular Fund. Currently, the Trust limits the number of "round trip"
exchanges investors 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 the shares of the
originally purchased Fund) more than six round trip exchanges in any twelve-
month period. The Trust reserves the right to impose additional restrictions on
exchanges at any time, although it will attempt to give shareholders prior
notice whenever it is reasonably able to do so.

How Fund Shares Are Priced

The Trust calculates the net asset value ("NAV") of a Fund's Institutional
and Administrative Class shares by taking the total value of the Fund's assets
attributable to the particular class, subtracting the Fund's liabilities
attributable to the class, and dividing by the Fund's total number shares of
that class outstanding. The net asset value per share of each Fund is
determined as of 4:00 p.m., Eastern time, or as of such other time designated by
the New York Stock Exchange (the "Exchange") as the close of public trading
("closing"), on each day the Exchange is open.

The Funds other than the Money Market Fund value their portfolio securities
and other investments for which market quotations are readily available at
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 with more
readily attainable prices and durations comparable to the securities being
valued. Short-term investments having a maturity of 60 days or less may be
valued at current market value or at amortized cost, which approximates market
value. Exchange traded options, futures, and options on futures are valued at
the settlement price as determined by the appropriate clearing corporation. All
other portfolio securities and assets are valued at their fair value as
determined in good faith by the Trustees or persons acting at their direction.

The Money Market Fund's securities are valued using the amortized cost
method of valuation, which 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.

Fund investments quoted in foreign currencies are translated into U.S.
dollars using foreign exchange quotations provided by independent dealers. As a
result, the NAV of a Fund's shares may be affected by changes in the value of
foreign currencies in relation to the U.S. dollar. Because foreign markets may
be open at different times than the Exchange, the NAV of a Fund's shares may
change on days when the Exchange is closed and an investor is not able to buy,
redeem or exchange shares.

In determining their daily net asset values, the Funds use price data
received shortly after 4:00 p.m. Eastern time believed to reflect the current
market value of securities held by the Funds as of the closing of the Exchange.
The Funds intend to use these prices regardless of the impact of any post-
closing adjustments to securities prices, as long as, in the view of the Funds,
such prices represent the current market value of the securities as of the time
selected by the Funds for the calculation of net asset value.

Under certain circumstances, the per share NAV of the Administrative Class
shares of the Funds may be lower than the per share NAV of the Institutional
Class shares as a result of the daily expense accruals of the

68
<PAGE>

service and/or distribution fees paid by 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 the
two classes.

Fund Distributions

Each Fund distributes substantially all of its net investment income to
shareholders in the form of dividends. A shareholder begins earning dividends
on Fund shares the day after the Trust receives the shareholder's purchase
payment. Dividends paid by each Fund with respect to each class of shares are
calculated in the same manner and at the same time, but dividends on
Administrative Class shares are expected to be lower than dividends on
Institutional Class shares as a result of the distribution fees applicable to
Administrative Class shares. The following shows when each Fund intends to
declare and distribute income dividends to shareholders of record.

<TABLE>
<CAPTION>
Fund Declared Daily and Paid Declared and Paid
Monthly Quarterly
<S> <C> <C>
Fixed Income Funds (except the International Bond Fund) .
- -----------------------------------------------------------------------------------------------------------------------------
International Bond, Strategic Balanced, Convertible and StocksPLUS .
Funds
</TABLE>

In addition, each Fund distributes any net capital gains it earns from the
sale of portfolio securities to shareholders no less frequently than annually.
Net short-term capital gains may be paid more frequently.

A Fund's dividend and capital gain distributions with respect to a
particular class of shares will automatically be reinvested in additional shares
of the same class of the Fund at NAV unless the shareholder elects to have the
distributions paid in cash. Shareholders do not pay any sales charges on shares
received through the reinvestment of Fund distributions.

For further information on distribution options, please contact the Trust
at 1-800-927-4648.

Tax Consequences

. Taxes on Fund distributions. A shareholder subject to U.S. federal
income tax will be subject to tax on Fund distributions whether they are paid in
cash or reinvested in additional shares of the Funds. For federal income tax
purposes, Fund distributions will be taxable to the shareholder as either
ordinary income or capital gains.

Fund dividends (i.e., distributions of investment income) are taxable to
shareholders as ordinary income. Federal taxes on Fund distributions of gains
are determined by how long the Fund owned the investments that generated the
gains, rather than how long a shareholder has owned the shares. Distributions
of gains from investments that a Fund owned for more than 12 months will
generally be taxable to shareholders as capital gains. Distributions of gains
from investments that the Fund owned for 12 months or less will generally be
taxable as ordinary income.

Fund distributions are taxable to shareholders even if they are paid from
income or gains earned by a Fund prior to the shareholder's investment and thus
were included in the price paid for the shares. For example, a shareholder who
purchases shares on or just before the record date of a Fund distribution will
pay full price for the shares and may receive a portion of your investment back
as a taxable distribution.

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. Taxes on redemption or exchanges of shares. Any gain resulting from
the sale of Fund shares will generally be subject to federal income tax. When a
shareholder exchanges shares of a Fund for shares of another series, the
transaction will be treated as a sale of the Fund shares for these purposes, and
any gain on those shares will generally be subject to federal income tax.

. A Note on the Real Return Bond Fund. Periodic adjustments for
inflation to the principal amount of an inflation-indexed bond may give rise to
original issue discount, which will be includable in the Fund's gross income.
Due to original issue discount, the Fund may be required to make annual
distributions to shareholders that exceed the cash received, which may cause the
Fund to liquidate certain investments when it is not advantageous to do so.
Also, if the principal value of an inflation-indexed bond is adjusted downward
due to deflation, amounts previously distributed in the taxable year may be
characterized in some circumstances as a return of capital.

. A Note on the Municipal Bond Fund. 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. Dividends derived from taxable interest or capital gains will be subject
to federal income tax. If the Fund invests in "private activity bonds," certain
shareholder may become subject to alternative minimum tax on the part of the
Fund's distributions derived from interest on such bonds.

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Characteristics and Risks of Securities and
Investment Techniques

This section provides additional information about some of the principal
investments and related risks of the Funds described under "Summary Information"
above. It also describes characteristics and risks of additional securities and
investment techniques that may be used by the Funds from time to time. Most of
these securities and investment techniques are discretionary, which means that
PIMCO can decide whether to use them or not. This Prospectus does not attempt
to disclose all of the various types of securities and investment techniques
that may be used by the Funds. As with any mutual fund, investors in the Funds
rely on the professional investment judgement and skill of PIMCO and the
individual portfolio managers. Please see "Investment Objectives and Policies"
in the Statement of Additional Information for more detailed information about
the securities and investment techniques described in this section and about
other strategies and techniques that may be used by the Funds.

U.S. Government Securities

U.S. Government securities are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. U.S. Government securities are
subject to market and interest rate risk, and may be subject to varying degrees
of credit risk. U.S. Government securities include zero coupon securities,
which tend to be subject to greater market risk than interest-paying securities
of similar maturities.

Corporate Debt Securities

Corporate debt securities are subject to the risk of the issuer's inability
to meet principal and interest payments on the obligation and may also be
subject to price volatility due to such factors as interest rate sensitivity,
market perception of the credit-worthiness of the issuer and general market
liquidity. When interest rates rise, the value of corporate debt securities can
be expected to decline. Debt securities with longer maturities tend to be more
sensitive to interest rate movements than those with shorter maturities.

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. Each Fixed Income Fund may invest in
floating rate debt instruments ("floaters") and (except the Money Market and
Municipal Bond Funds) engage in credit spread trades. While floaters provide a
certain degree of protection against rises in interest rates, a Fund will
participate in any declines in interest rates as well. Each Fixed Income Fund
(except the Money Market and Municipal Bond Funds) may also invest in inverse
floating rate debt instruments ("inverse floaters"). An inverse floater may
exhibit greater price volatility than a fixed rate obligation of similar credit
quality. A Fund may not invest more than 5% (10% in the case of the Low Duration
Mortgage and Total Return Mortgage Funds) of its net assets in any combination
of inverse floater, interest only, or principal only securities.

Foreign Securities

Investing in foreign securities involves special risks and considerations
not typically associated with investing in U.S. securities. Shareholders should
consider carefully the substantial risks involved for Funds that invest in
securities issued by foreign companies and governments of foreign countries.
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; and political
instability. Individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, capital reinvestment, resources, self-sufficiency and
balance of pyments position. The securities markets,

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values of securities, yields and risks associated with foreign securities
markets may change independently of each other. Also, 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. Investments in foreign
securities may also involve higher custodial costs than domestic investments and
additional transaction costs with respect to foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities
denominated or quoted in foreign currencies.

Certain Funds also may invest in sovereign debt issued by governments,
their agencies or instrumentalities, or other government-related entities.
Holders of sovereign debt may be requested to participate 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.

Emerging Market Securities. The Emerging Markets Bond and Emerging Markets
Bond II Funds invest primarily in securities of issuers based in countries with
developing (or "emerging market") economies, while the Short-Term, Low Duration
and Low Duration III Funds may invest up to 5% of their assets in such
securities and each remaining Fund that may invest in foreign securities may
invest up to 10% of its assets in such securities. Investing in emerging market
securities imposes risks different from, or greater than, risks of investing in
domestic securities or in foreign, developed countries. These risks include:
smaller market capitalization of securities markets, which may suffer periods of
relative illiquidity; significant price volatility; restrictions on foreign
investment; possible repatriation of investment income and capital. In
addition, foreign investors may be required to register the proceeds of sales;
future economic or political crises could lead to price controls, forced
mergers, expropriation or confiscatory taxation, seizure, nationalization, or
creation of government monopolies. The currencies of emerging market countries
may experience significant declines against the U.S. dollar, 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.

Additional risks of emerging markets securities may include: greater
social, economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems. 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 be delayed in disposing of a portfolio security.
Such a delay could result in possible liability to a purchaser of the security.

Each Fixed Income Fund (except the Long-Term U.S. Government and Municipal
Bond Funds) may invest in Brady Bonds, which are securities created through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with a debt restructuring. Investments in Brady Bonds
may be viewed as speculative. Brady Bonds acquired by a Fund may 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.

Foreign Currencies

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intervene) by U.S. or foreign governments or central banks, or by currency
controls or political developments. For example, significant uncertainty
surrounds the recent introduction of the euro (a common currency unit for the
European Union) in January 1999 and the effect it may have on the value of
securities denominated in local 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.

Foreign Currency Transactions. Funds that invest in securities denominated
in foreign currencies may enter into forward foreign currency exchange contracts
and invest in foreign currency futures contracts and options on foreign
currencies and futures. A forward foreign currency exchange contract, which
involves an obligation to purchase or sell a specific currency at a future date
at a price set at the time of the contract, reduces a Fund's 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 receive for the duration of the
contract. The effect on the value of a Fund is similar to selling securities
denominated in one currency and purchasing securities denominated in another
currency. A contract to sell foreign currency would limit any potential gain
which might be realized if the value of the hedged currency increases. A Fund
may enter into these contracts to hedge against foreign exchange risk, to
increase exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one currency to another. Suitable hedging transactions may
not be available in all circumstances and there can be no assurance that a Fund
will engage in such transactions at any given time or from time to time. Also,
such transactions may not be successful and may eliminate any chance for a Fund
to benefit from favorable fluctuations in relevant foreign currencies. 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. The Fund
will segregate assets determined to be liquid by PIMCO 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.

High Yield Securities

Securities rated lower than Baa by Moody's Investors Service, Inc.
("Moody's") or lower than BBB by Standard & Poor's Ratings Services ("S&P") are
sometimes referred to as "high yield" or "junk" bonds. Investing in high yield
securities involves special risks in addition to the risks associated with
investments in higher-rated fixed income securities. While offering a greater
potential opportunity for capital appreciation and higher yields, high yield
securities typically entail greater potential price volatility and may be less
liquid than higher-rated securities. High yield securities may be regarded as
predominately speculative with respect to the issuer's continuing ability to
meet principal and interest payments. They may also be more susceptible to real
or perceived adverse economic and competitive industry conditions than higher-
rated securities.

Credit Ratings and Unrated Securities. Rating agencies are private services
that provide ratings of the credit quality of fixed income securities, including
convertible securities. Appendix A to the Prospectus describes the various
ratings assigned to fixed income securities by Moody's and S&P. Ratings
assigned by a rating agency are not absolute standards of credit quality and do
not evaluate market risks. Rating agencies may fail to make timely changes in
credit ratings and an issuer's current financial condition may be better or
worse than a rating indicates. A Fund will not necessarily sell a security when
its rating is reduced below its rating at the time of purchase. The Adviser
does not rely solely on credit ratings, and develops its own analysis of issuer
credit quality.

A Fund may purchase unrated securities (which are not rated by a rating
agency) if its portfolio manager determines that the security is of comparable
quality to a rated security that the Fund may purchase. Unrated securities may
be less liquid than comparable rated securities and involve the risk that the
portfolio manager may not accurately evaluate the security's comparative credit
rating. Analysis of the creditworthiness of issuers of high yield securities
may be more complex than for issuers of higher-quality fixed income securities.
To the extent that a Fund invests in high yield and/or unrated securities, the
Fund's success in achieving its investment objective may

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depend more heavily on the portfolio manager's creditworthiness analysis than if
the Fund invested exclusively in higher-quality and rated securities.

Inflation-Indexed Bonds

Inflation-indexed bonds are fixed income securities whose principal value
is periodically adjusted according to the rate of inflation. If the index
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.
For bonds that do not provide a similar guarantee, 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 are tied to the relationship between
nominal interest rates and the rate of inflation. If nominal interest rates
increase at a faster rate than inflation, real interest rates may rise, leading
to a decrease in value of inflation-indexed bonds. Short-term increases in
inflation may lead to a decline in value. 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.

Derivatives

Each Fund (except the Money Market Fund) may, but is not required to, use
derivative instruments for risk management purposes or as part of its investment
strategies. Generally, derivatives are financial contracts whose value depends
upon, or is derived from, the value of an underlying asset, reference rate or
index, and may relate to stocks, bonds, interest rates, currencies or currency
exchange rates, commodities, and related indexes. Examples of derivative
instruments include options contracts, futures contracts, options on futures
contracts and swap agreements. The Municipal Bond Fund may not enter into swap
agreements or purchase or sell options relating to foreign currencies. Each
Fund (except the Money Market and Municipal Bond Funds) may invest all of its
assets in derivative instruments, subject to the Fund's objectives and policies.
A Fund may not employ any of these strategies and there is no assurance that any
derivatives strategy used by a Fund will succeed. A description of these and
other derivative instruments that the Funds may use are described under
"Investment Objectives and Policies" in the Statement of Additional Information.

A Fund's use of derivative instruments involves risks different from, or
greater than, the risks associated with investing directly in securities and
other more traditional investments. A description of various risks associated
with particular derivative instruments is included in "Investment Objectives and
Policies" in the Statement of Additional Information. The following provides a
more general discussion of important risk factors relating to all derivative
instruments that may be used by the Funds.

Management Risk Derivative products are highly specialized instruments
that require investment techniques and risk analyses different from those
associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument but also of the derivative
itself, without the benefit of observing the performance of the derivative under
all possible market conditions.

Credit Risk The use of a derivative instrument involves the risk that a
loss may be sustained as a result of the failure of another party to the
contract (usually referred to as a "counterparty") to make required payments or
otherwise comply with the contract's terms.

Liquidity Risk Liquidity risk exists when a particular derivative
instrument is difficult to purchase or sell. If a derivative transaction is
particularly large or if the relevant market is illiquid (as is the case with
many privately negotiated derivatives), it may not be possible to initiate a
transaction or liquidate a position at an advantageous time or price.

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Leverage Risk Because many derivatives have a leverage component, adverse
changes in the value or level of the underlying asset, reference rate or index
can result in a loss substantially greater than the amount invested in the
derivative itself. Certain derivatives have the potential for unlimited loss,
regardless of the size of the initial investment. When a Fund uses derivatives
for leverage, investments in that Fund will tend to be more volatile, resulting
in larger gains or losses in response to market changes. To limit leverage
risk, each Fund will segregate assets determined to be liquid by PIMCO 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 derivative instruments.

Lack of Availability Because the markets for certain derivative
instruments (including markets located in foreign countries) are relatively new
and still developing, suitable derivatives transactions may not be available in
all circumstances for risk management or other purposes. There is no assurance
that a Fund will engage in derivatives transactions at any time or from time to
time. A Fund's ability to use derivatives may also be limited by certain
regulatory and tax considerations.

Market and Other Risks Like most other investments, derivative instruments
are subject to the risk that the market value of the instrument will change in a
way detrimental to a Fund's interest. If a portfolio manager incorrectly
forecasts the values of securities, currencies or interest rates or other
economic factors in using derivatives for a Fund, the Fund might have been in a
better position if it had not entered into the transaction at all. 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 other Fund investments. A Fund may also have to
buy or sell a security at a disadvantageous time or price because the Fund is
legally required to maintain offsetting positions or asset coverage in
connection with certain derivatives transactions.

Other risks in using derivatives include the risk of mispricing or improper
valuation of derivatives and the inability of derivatives to correlate perfectly
with underlying assets, rates and indexes. Many derivatives, in particular
privately negotiated derivatives, are complex and often valued subjectively.
Improper valuations can result in increased cash payment requirements to
counterparties or a loss of value to a Fund. Also, the value of derivatives may
not correlate perfectly, or at all, with the value of the assets, reference
rates or indexes they are designed to closely track. In addition, a Fund's use
of derivatives may cause the Fund to realize higher amounts of short-term
capital gains (generally taxed at ordinary income tax rates) than if the Fund
had not used such instruments.

Convertible Securities

Each Fund may invest in convertible securities. Convertible securities are
generally preferred stocks and other securities, including fixed income
securities and warrants, that are convertible into or exercisable for common
stock at a stated price or rate. The price of a convertible security will
normally vary in some proportion to changes in the price of the underlying
common stock because of this conversion or exercise feature. However, the value
of a convertible security may not increase or decrease as rapidly as the
underlying common stock. A convertible security will normally also provide
income and is subject to interest rate risk. Convertible securities may be
lower-rated securities subject to greater levels of credit risk. A Fund may be
forced to convert a security before it would otherwise choose, which may have an
adverse affect on the Fund's ability to achieve its investment objective.

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, or legal or technical restrictions. In such cases, a Fund may consider
equity securities or convertible securities to gain exposure to such
investments.

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Mortgage-Related and Other Asset-Backed Securities

Each Fund (except the 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. Mortgage-related securities include mortgage pass-through
securities, collateralized mortgage obligations ("CMOs"), commercial mortgage-
backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-
backed securities ("SMBSs") and other securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property.

The value of some mortgage- or asset-backed securities may be particularly
sensitive to changes in prevailing interest rates. Early repayment of principal
on some mortgage-related securities may expose a Fund to a lower rate of return
upon reinvestment of principal. 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 shorten or extend the effective maturity of
the security beyond what was anticipated at the time of purchase. If
unanticipated rates of prepayment on underlying mortgages increase the effective
maturity of a mortgage-related security, the volatility of the security can be
expected to increase. The value of these securities may fluctuate in response
to the market's perception of the creditworthiness of the issuers. Additionally,
although mortgages and mortgage-related securities are generally supported by
some form of government or private guarantee and/or insurance, there is no
assurance that private guarantors or insurers will meet their obligations.

One type of SMBS has one class receiving all of the interest from the
mortgage assets (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 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. A Fund may not invest more than 5% of its net
assets in any combination of IO, PO, or inverse floater securities. The Funds
may invest in other asset-backed securities that have been offered to investors.

Municipal Bonds

Municipal bonds are generally issued by states and local governments and
their agencies, authorities and other instrumentalities. Municipal bonds are
subject to interest rate, credit and market risk. The ability of an issuer to
make payments could be affected by litigation, legislation or other political
events or the bankruptcy of the issuer. Lower rated municipal bonds are subject
to greater credit and market risk than higher quality municipal bonds.

Loan Participations and Assignments

Certain Funds may invest in fixed- and floating-rate loans, which
investments generally will be in the form of loan participations and assignments
of portions of such loans. Participations and assignments involve special types
of risk, including credit risk, interest rate risk, liquidity risk, and the
risks of being a lender. 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.

Delayed Funding Loans and Revolving Credit Facilities

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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 segregate assets determined to be
liquid by PIMCO in accordance with procedures established by the Board of
Trustees in an amount sufficient to meet such commitments. Delayed funding loans
and revolving credit facilities are subject to credit, interest rate and
liquidity risk and the risks of being a lender.

Loans of Portfolio Securities

For the purpose of achieving income, each Fund may lend its portfolio
securities to brokers, dealers, and other financial institutions provided a
number of conditions are satisfied, including that the loan is fully
collateralized. Please see "Investment Objectives and Policies" in the
Statement of Additional Information for details. When a Fund lends portfolio
securities, its investment performance will continue to reflect changes in the
value of the securities loaned, and the Fund will also receive a fee or interest
on the collateral. Securities lending involves the risk of loss of rights in
the collateral or delay in recovery of the collateral if the borrower fails to
return the security loaned or becomes insolvent. A Fund may pay lending fees to
a party arranging the loan.

Short Sales

Each Fund (except the Total Return III, High Yield and StocksPLUS Funds)
may make short sales as part of its overall portfolio management strategies or
to offset a potential decline in value of a security. A short sale involves the
sale of a security that is borrowed from a broker or other institution to
complete the sale. The Global Bond Fund II may only make short sales if the
security sold short is held in the Fund's portfolio or if the Fund has the right
to acquire the security without the payment of further consideration (a "short
sale against the box"). For these purposes, a Fund may also hold or have the
right to acquire securities which, without the payment of any further
consideration, are convertible into or exchangeable for the securities sold
short. Short sales expose a Fund to the risk that it will be required to
acquire, convert or exchange securities to replace the borrowed securities (also
known as "covering" the short position) at a time when the securities sold short
have appreciated in value, thus resulting in a loss to the Fund. A Fund making a
short sale (other than a "short sale against the box") must segregate assets
determined to be liquid by PIMCO in accordance with procedures established by
the Board of Trustees or otherwise cover its position in a permissible manner.

When-Issued, Delayed Delivery and Forward Commitment Transactions

Each Fund may purchase securities which it is eligible to purchase on a
when-issued basis, may purchase and sell such securities for delayed delivery
and may make contracts to purchase such securities for a fixed price at a future
date beyond normal settlement time (forward commitments). When-issued
transactions, delayed delivery purchases and forward commitments involve a risk
of loss if the value of the securities declines prior to the settlement date.
This risk is in addition to the risk that the Fund's other assets will decline
in the value. Therefore, these transactions may result in a form of leverage
and increase a Fund's overall investment exposure. 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 to cover these positions.

Repurchase Agreements

Each Fund may enter into repurchase agreements, in which the Fund purchases
a security from a bank or broker-dealer and agrees to repurchase the security at
the Fund's cost plus interest within a specified time. If the party agreeing to
repurchase should default, the Fund will seek to sell the securities which it
holds. This could involve procedural costs or delays in addition to a loss on
the securities if their value should fall below their repurchase price.
Repurchase agreements maturing in more than seven days are considered illiquid
securities.

Reverse Repurchase Agreements, Dollar Rolls And Other Borrowings

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Each Fund may enter into reverse repurchase agreements and dollar rolls,
subject to the Fund's limitations on borrowings. A reverse repurchase agreement
or dollar roll involves the sale of a security by a Fund and its agreement to
repurchase the instrument at a specified time and price, and may be considered a
form of borrowing for some purposes. A Fund will segregate assets determined to
be liquid by PIMCO in accordance with procedures established by the Board of
Trustees to cover its obligations under reverse repurchase agreements. A Fund
also may borrow money for investment purposes subject to any policies of the
Fund currently described in this Prospectus or in the Statement of Additional
Information. Reverse repurchase agreements, dollar rolls and other forms of
borrowings may create leveraging risk for a Fund.

Hybrid Instruments

A hybrid instrument can combine the characteristics of securities, futures,
and options. The interest rate or principal payable at maturity of a hybrid
security may increase or decrease, depending on changes in the value of an
underlying benchmark. 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. 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. Hybrids also
entail credit risk. A Fund may not invest more than 5% of its assets in hybrid
instruments.

Catastrophe Bonds

Each Fixed Income Fund (except the Money Market Fund) and the StocksPLUS
Fund may invest in "catastrophe bonds," which 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. If a trigger event occurs, a Fund may lose a portion or all of
its principal invested in the bond. Catastrophe bonds often provide for an
extension of maturity to process and audit loss claims where a trigger event
has, or possibly has, occurred. An extension of maturity may increase
volatility. Catastrophe bonds may also expose the Fund to certain unanticipated
risks including credit risk, adverse regulatory or jurisdictional
interpretations, and adverse tax consequences. Catastrophe bonds may also be
subject to liquidity risk.

Portfolio Turnover

The length of time a Fund has held a particular security is not generally a
consideration in investment decisions. A change in the securities held by a
Fund is known as "portfolio turnover." Each Fund may engage in frequent and
active trading of portfolio securities to achieve its investment objective,
particularly during periods of volatile market movements. High portfolio
turnover (e.g., over 100%) involves correspondingly greater expenses to a Fund,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and reinvestments in other securities. Such sales may
also result in realization of taxable capital gains, including short-term
capital gains (which are generally taxed at ordinary income tax rates).

Illiquid Securities

Each Fund may invest up to 15% (10% in the case of the Money Market Fund)
of its net assets in illiquid securities. Certain illiquid securities may
require pricing at fair value as determined in good faith under the supervision
of the Board of Trustees. A portfolio manager 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. Restricted securities, i.e., securities
subject to legal or

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contractual restrictions on resale, may be illiquid. However, some restricted
securities (such as securities issued pursuant to Rule 144A under the Securities
Act of 1933 and certain commercial paper) may be treated as liquid, although
they may be less liquid than registered securities traded on established
secondary markets.

Investment in Other Investment Companies

Each Fund may invest up to 10% of its assets in securities of other
investment companies, such as closed-end management investment companies, or in
pooled accounts or other investment vehicles which invest in foreign markets.
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.

Year 2000 Readiness Disclosure

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, this could have an adverse impact on the Funds' operations
and services provided to shareholders. PIMCO, the Distributor, the Trust's
shareholder servicing and transfer agent and 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 equity markets or economies, generally.

Changes in Investment Objectives and Policies

The investment objective of each of the Global Bond Fund II 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. Unless otherwise stated, all other investment policies of the Funds
may be changed by the Board of Trustees without shareholder approval.

Percentage Investment Limitations

Unless otherwise stated, all percentage limitations on Fund investments
listed in this Prospectus will apply at the time of investment. A Fund would
not violate these limitations unless an excess or deficiency occurs or exists
immediately after and as a result of an investment.

Other Investments and Techniques

The Funds may invest in other types of securities and use a variety of
investment techniques and strategies which are not described in this Prospectus.
These securities and techniques may subject the Funds to additional risks.
Please see the Statement of Additional Information for additional information
about the securities and investment techniques described in this Prospectus and
about additional securities and techniques that may be used by the Funds.

79
<PAGE>

Financial Highlights

The financial highlights table is intended to help a shareholder understand the
financial performance of Institutional and Administrative Class shares of each
Fund for the past 5 years or, if the class is less than 5 years old, since the
class of shares was first offered. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in a particular
class of shares of a Fund, assuming reinvestment of all dividends and
distributions. This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with each Fund's financial statements, are included in the
Trust's annual report to shareholders. The annual report is incorporated by
reference in the Statement of Additional Information and is available free of
charge upon request from the Distributor.

80
<PAGE>

<TABLE>
<CAPTION>
Net Asset Next Net Realized Total Income Dividends Dividends in Distributions Distributions
Year or Value Investment and Unrealized (Loss) from from Net Excess of Net from Net in Excess of
Period Beginning Income Gain (Loss) on Investment Investment Investment Realized Net Realized
Ended of Period Investments Operations Income Income Capital Gains Capital Gains
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund
Institutional Class
3/31/99
3/31/98
3/31/97
11/1/95-3/31/96
10/31/95
10/31/94
Administrative
Class
3/31/99
3/31/98
3/31/97
3/31/96
10/31/95(a)
Short-Term Fund
Institutional
Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative
Class
3/31/99
3/31/98
3/31/97
3/31/96(b)
</TABLE>

+ Per share amounts based on average number of shares outstanding during the
period.
(a) From commencement of operations, January 25, 1995.
(b) From commencement of operations, February 1, 1996.

81
<PAGE>

<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>

</TABLE>

+ Annualized

82
<PAGE>

Administrative Class
9/30/98
3/31/98
3/31/97
3/31/96
3/31/95(c)
Low Duration Fund II
Institutional Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95

Administrative Class
3/31/99
3/31/98(d)

Low Duration Fund III
Institutional
3/31/99
3/31/98
3/31/97(e)
Low Duration Mortgage
Institutional Class
3/31/99
3/31/98(f)

Moderate Duration Fund
Institutional Class
3/31/99
03/31/98
03/31/97(e)
Real Return Bond Fund
Institutional Class
3/31/99
3/31/98
3/31/97(g)
</TABLE>

+ Per share amounts based on average number of shares outstanding during the
period.
(c) From commencement of operations, January 25, 1995.
(d) From commencement of operations, February 2, 1998.
(e) From commencement of operations, December 31, 1996.
(f) From commencement of operations, July 31, 1997.

83
<PAGE>

</TABLE>

+ Annualized
(h)

(i)

84
<PAGE>

<TABLE>
<CAPTION>
Net Asset Net Realized Total Income Dividends Dividends in
Year or Value Met and Unrealized (Loss) from from Net Excess of Net
Period Beginning Investment Gain (Loss) on Investment Investments Investment
Ended of Period Income Investment Operations Income Income
- -------------------------------------------------------------------------------------------------------------------------
Total Return Fund
Institutional Class
<S> <C> <C> <C> <C> <C> <C>
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95(j)
Total Return Fund II
Institutional Class
3/31/99
3/31/98
3/31/97(a)
11/1/95-3/31/95
10/31/95
10/31/94
Administrative Class
3/31/99
3/31/98
3/31/97
3/31/96
10/31/95(k)
Total Return Fund III
Institutional Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative Class
3/31/99
3/31/98(l)
Total Return Mortgage Fund
Institutional Class
3/31/99
3/31/98(f)
</TABLE>

<TABLE>
<CAPTION>
Distributions Distributions
Year or from Net in Excess of
Period Realized Net Realized
Ended Capital Gains Capital Gains
- ---------------------------------------------------------------
Total Return Fund
Institutional Class
<S> <C> <C>
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95(j)
Total Return Fund II
Institutional Class
3/31/99
3/31/98
3/31/97(a)
11/1/95-3/31/95
10/31/95
10/31/94
Administrative Class
3/31/99
3/31/98
3/31/97
3/31/96
10/31/95(k)
Total Return Fund III
Institutional Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative Class
3/31/99
3/31/98(l)
Total Return Mortgage Fund
Institutional Class
3/31/99
3/31/98(f)
</TABLE>

(j) From commencement of operations, September 8, 1994.
(k) From commencement of operations, November 30, 1994.
(l) From commencement of operations, April 11, 1997.

85
<PAGE>

</TABLE>

+ Annualized

<PAGE>

<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
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95(m)
Long-Term U.S. Gov't
Fund
Institutional Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative Class
3/31/99
3/31/98(n)
Global Bond Fund
Institutional Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative Class
3/31/99
3/31/98
3/31/97(o)
Global Bond Fund II
Institutional Class
3/31/99
3/31/98(p)
Foreign Bond Fund
Institutional Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
</TABLE>

(m) From commencement of operations, January 16, 1995.
(n) From commencement of operations, September 23, 1997.
(o) From commencement of operations, July 31, 1996. Formerly the PIMCO Global
Fund.
(p) From commencement of operations, February 25, 1998.

87
<PAGE>

</TABLE>

88
<PAGE>

<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
3/31/99
3/31/98
3/31/97(q)
International Bond Fund
Institutional Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Emerging Markets Bond
Fund
Institutional Class
3/31/99
3/31/98(f)
Emerging Markets Bond
Fund II
Institutional Class
3/31/99(r)
Municipal Bond Fund
Institutional Class
3/31/99
3/31/98(s)
Administrative Class
3/31/99(t)
Strategic Balanced Fund
Institutional Class
3/31/99
3/31/98
3/31/97(u)
StocksPLUS Fund
Institutional Class
3/31/99
3/31/98
3/31/97
3/31/96
3/31/95
Administrative Class
3/31/99
3/31/98
3/31/98(v)
</TABLE>

(q) From commencement of operations, January 28, 1997.
(r) From commencement of operations, April 8, 1998.
(s) From commencement of operations, December 31, 1997.
(t) From commencement of operations, September 30, 1998.
(u) From commencement of operations, June 28, 1996.

89
<PAGE>

</TABLE>

+ Annualized.

<PAGE>

Appendix A
Description of Securities Ratings

Certain of the Funds make use of ave rage portfolio credit quality standards to
assist institutional investors whose own investment guidelines limit their
investments accordingly. In determin ing a Fund's overall dollar-weighted
average quality, unrated securities are trea ted as if rated, based on the
Adviser's view of their comparability to rated secu rities. A Fund's use of
average quality criteria is intended to be a guide f or those institutional
investors whose investment guidelines require that a ssets be invested according
to comparable criteria. Reference to an overall av erage 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 ran ge 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 Mo ody's or S&P or, if
unrated, determined by the Adviser to be of comparable qual ity). The percentage
of a Fund's assets invested in securities in a particul ar rating category will
vary. Following is a description of Moody's and S&P's rat ings applicable to
fixed income securities.

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than with Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
that suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

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.

A-1
<PAGE>

Corporate Short-Term Debt Ratings

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.

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

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.

A-2
<PAGE>

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.

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

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.

A-3
<PAGE>

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.

A-4
<PAGE>

[Back Cover Page]

PIMCO Funds: Pacific Investment Management Series

The Trust's Statement of Additional Information ("SAI") and annual and semi-
annual reports to

shareholders include additional information about the Funds. The SAI and the
financial statements included in the Funds' most recent annual report to
shareholders are incorporated by reference into this Prospectus, which means
they are part of this Prospectus for legal purposes. The Funds' annual report
discusses the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year.

You may get free copies of any of these materials, request other information
about a Fund, or make shareholder inquiries by calling the Trust at 1-800-927-
4648 or PIMCO Infolink Audio Response Network at 1-800-987-4626, or by writing
to:

PIMCO Funds: Pacific Investment Management Series
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660

You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust on the Commission's Web site at www.sec.gov. You
may get copies of this information, with payment of a duplication fee, by
writing the Public Reference Section of the Commission, Washington, D.C. 20549-
6009. You may need to refer to the Trust's file number under the Investment
Company Act, which is 811-5028.

You can also visit our Web site at www.pimcofunds.com for additional information
about the Funds.

[LOGO]
<PAGE>

[Front cover]

PIMCO Funds Prospectus

PIMCO Funds: Pacific Investment Management Series
August 1, 1999

Share Classes
A, B and C

This Prospectus describes 14 mutual funds offered by PIMCO Funds: Pacific
Investment Management Series. The Funds provide access to the professional
investment advisory services offered by Pacific Investment Management Company.
You can call PIMCO Funds Distributors LLC, the Funds' Distributor, at 1-800-426-
0107 to find out more about the Funds and other funds in the PIMCO Funds family.
You can also visit our web site at www.pimcofunds.com.

This Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.

Table of Contents

2
<PAGE>

Summary Information

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality(1) Foreign(2)
---------------- -------- -------------- -------
<S> <C> <C> <C> <C>
Short Duration Bond Funds

Money Market Money market instruments less than or equal Min 95% Aaa or 0%
to 90 days dollar- Prime 1; less
weighted average than or equal to
maturity 5% Aa or Prime 2

Short-Term Money market instruments and short maturity 0-1 year B to Aaa; max 10% 0-5%
fixed income securities below Baa

Low Duration Short and intermediate maturity fixed income 1-3 years B to Aaa; max 10% 0-20%
securities below Baa

Intermediate Duration Bond Funds

Total Return Intermediate maturity fixed income securities 3-6 years B to Aaa; max 10% 0-20%
below Baa
Long Duration Bond Funds

Long-Term U.S. Government Long-term maturity fixed income securities greater than A to Aaa 0%
or equal to
8 years

International Bond Funds

Global Bond II Intermediate maturity U.S. and hedged foreign 3-6 years B to Aaa; max 10% 25-75%
fixed income securities below Baa

Foreign Bond Intermediate maturity hedged foreign fixed 3-6 years B to Aaa; max 10% greater
income securities below Baa than or
equal to
85%

Emerging Markets Bond Emerging market fixed income securities 0-8 years B to Aaa greater
than or
equal to
80%

High Yield Bond Funds

High Yield Higher yielding fixed income securities 2-6 years B to Aaa; min 65% 0%
below Baa
Tax Exempt Bond Funds

Municipal Bond Investment grade municipal securities 3-10 years B to Aaa; max 10% 0%
(tax-exempt bonds) below Baa

Inflation-Indexed Bond Funds

Real Return Bond Inflation-indexed fixed income securities N/A B to Aaa; max 10% 0-35%
below Baa
Convertible Bond Funds

Convertible Bond Convertible securities N/A Caa to Aaa; max 35% 0-20%
below Baa and 10%
below B
Stock and Bond Funds
Strategic Balanced The same types of securities as the Total 0-6 years B to Aaa; max 10% 0-20%
Return and StocksPLUS Funds below Baa
Enhanced Index Stock Funds
StocksPLUS S&P 500 stock index derivatives backed by a 0-1 year B to Aaa; max 10% 0-20%
portfolio of short-term fixed-income below Baa
securities
</TABLE>

3
<PAGE>

_______________________
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 Global Bond II, Foreign Bond and Emerging Markets Bond
Funds. Percentage limitations for these three Funds relate to securities of
foreign issuers, denominated in any currency. Each Fund (except the Long-Term
U.S. Government and Municipal Bond Funds) may invest beyond these limits in U.S.
dollar-denominated securities of foreign issuers.

Fixed Income Instruments

The "Fixed Income Funds" are the Money Market, Short-Term, Low Duration, Total
Return, Long-Term U.S. Government, Global Bond II, Foreign Bond, Emerging
Markets Bond, High Yield, Municipal Bond and Real Return Bond Funds. Each Fixed
Income Fund 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. Each Fixed Income Fund invests at least 65% of its assets in "Fixed
Income Instruments," which as used in this Prospectus includes:

. 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 both by 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;
. obligations of foreign governments or their subdivisions, agencies and
instrumentalities; and
. obligations of international agencies or supranational entities.

Ratings of Debt Securities

Investment Grade Debt Securities are those receiving ratings from at least one
NRSRO in one of the four highest rating categories or, if unrated by any NRSRO,
deemed comparable by PIMCO.

Fund Descriptions, Performance and Fees

4
<PAGE>

PIMCO Money Market Fund Fund Category - Short Duration Bond Funds

Investment Objective
Seeks maximum current income,
consistent with preservation of
capital and daily liquidity

Fund Focus
Money market instruments

Portfolio Manager
Leslie Barbi

Fund Inception Date
3/1/91

Average Portfolio Maturity
less than or equal to 90 days
dollar-weighted average maturity

Credit Quality
Minimum 95% rated Aaa or Prime 1;
less than or equal to 5% Aa or Prime 2

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

The Fund invests at least 95% of its assets in a diversified portfolio of money
market securities that are in the highest rating category for short-term
obligations. The Fund also may invest up to 5% of its assets in money market
securities that are in the second-highest rating category for short-term
obligations. The Fund may only invest in 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 may not exceed 90 days. The Fund
attempts to maintain a stable net asset value of $1.00 per share, although there
is no assurance that it will be successful in doing so.

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 Fund may invest more than 25% of its assets in securities
or obligations issued by U.S. banks. The Fund may lend its portfolio securities
to brokers, dealers and other financial institutions in order to earn income.

The Fund's investments will comply with applicable rules governing the quality,
maturity and diversification of securities held by money market funds.

Principal Risks

An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Fund. Among the principal risks of investing in
the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

5
<PAGE>

of the Fund's Institutional Class shares, which are offered in a different
prospectus. The prior Institutional Class performance has been adjusted to
reflect the actual sales charges (in the Average Annual Total Returns table
only), distribution and/or service (12b-1) fees, administrative fees and other
expenses paid by Class A, B and C shares. To obtain the fund's current yield,
call 1-800-927-4648. Past performance is no guarantee of future results.

Calendar Year Total Returns

[Plot Points for bar chart:]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -- -- -- 3.18 2.54 3.66 5.80 5.02 5.04 4.97

More Recent Return Information

12/31/98-06/30/99 ____%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/95 - 12/31/95) 1.65%
Lowest (4/1/93 - 6/30/93) 0.61%

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception
1 Year 5 Years (3/1/91)
- ---------------------------------------------------------------------
Class A 4.97% 4.90% 4.43%
- ---------------------------------------------------------------------
Class B 4.13% 3.99% 3.51%
- ---------------------------------------------------------------------
Class C 5.06% 4.92% 4.44%
- ---------------------------------------------------------------------
Lipper Money Market Index* 5.07% 4.90% 8.95%
- ---------------------------------------------------------------------
Lipper Money Market Fund 4.84% 4.77% 7.91%
Average*

* The Lipper Money Market Index is an index of the 30
largest money market funds. The index reflects fees
charged by each fund in the index. The Lipper Money Market
Fund Average is a total return performance average of Funds
tracked by Lipper Analytical Services, Inc. that invest in
high quality financial instruments (rated in the top two
grades) with dollar-weighted average maturities of less
than 90 days. It does not take into account sales charges.
The Fund commenced operations on 3/1/91. Index comparisons
begin on 2/28/91.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
---------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) None(1) None None
</TABLE>
___________________
1. Regular sales charges apply when Class A shares of the Money Market Fund (on
which no sales charge was paid at the time of purchase) are exchanged for shares
of any other Fund.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.

<TABLE>
<CAPTION>
Distri-
bution Total Example: Assuming you redeem Example: Assuming you do
and/or Annual Waiver shares at the end of each period not redeem your shares
Advis- Admini- Service Fund of
ory strative (12b-1) Operating 12b-1 Net Year Year
Share Class Fees Fees Fees(1) Expenses Fee(2) Expenses 1 3 5 10 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.15% 0.35% 0.20% 0.70% (0.10)% 0.60% $ 61 $192 $ 335 $ 750 $ 61 $192 $335 $ 750
- ------------------------------------------------------------------------------------------------------------------------------------
B Shares 0.15 0.35 1.00 1.50 -- -- 153 474 818 1,429 153 474 818 1,429
- ------------------------------------------------------------------------------------------------------------------------------------
C Shares 0.15 0.35 0.20 0.70 (0.10) 0.60 161 192 335 750 161 192 335 750

</TABLE>

1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.
2. The Distributor has agreed to reduce the 12b-1 fee it receives with respect
to the Money Market Fund to 0.10% of the Fund's average daily net assets for
Class A and Class C shares through at least March 31, 2000. Absent such
reduction, the 12b-1 fee for Class A and Class C would be 0.20%.

6
<PAGE>

PIMCO Short-Term Fund Fund Category - Short Duration Bond Funds

Investment Objective
Seeks maximum current income, consistent with preservation of capital and daily
liquidity

Fund Focus
Money market instruments and short maturity fixed income securities

Portfolio Manager
A team led by William H. Gross

Fund Inception Date
10/7/87

Average Portfolio Duration
0-1 year

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

The Fund may invest all of its assets in derivative instruments, such as
options, futures contracts and swap agreements, or in mortgage- or asset-backed
securities. The Fund may lend its portfolio securities to brokers, dealers and
other financial institutions to earn income. The Fund may enter into a series of
purchase and sale contracts or use other investment techniques to obtain market
exposure to the securities in which it primarily invests. For temporary,
defensive or emergency purposes, the Fund may invest without limit in U.S. debt
securities, including short-term money market securities, when the Adviser deems
it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 two indices of similar funds. The bar chart and the
information to its right show performance of the Fund's Class A shares, but do
not reflect the impact of sales charges (loads). If they did, the returns would
be lower than those shown. Unlike the bar chart, performance for Class A, B and
C shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception date of Class A, B and C shares
(1/20/97), performance information shown in the bar chart and table for those
classes is based on the performance of the Fund's Institutional Class shares,
which are offered in a different prospectus. The prior Institutional Class
performance has been adjusted to reflect the actual sales charges (in the
Average Annual Total Returns table only), distribution and/or service (12b-1)
fees, administrative fees and other expenses paid by Class A, B and C shares.
Past performance is no guarantee of future results.

7
<PAGE>

Calendar Year Total Returns

[Plot Points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.00 8.04 6.23 3.21 4.21 2.48 8.76 6.58 6.07 5.32

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/95 - 12/31/95) 2.49%
Lowest (1/1/94 - 3/31/94) 0.10%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- ----------------------------------------------------------------
<S> <C> <C> <C>
Class A 3.21% 5.40% 5.76%
- ----------------------------------------------------------------
Class B -0.45% 4.73% 5.41%
- ----------------------------------------------------------------
Class C 4.02% 5.51% 5.66%
- ----------------------------------------------------------------
Lipper Money Market Index* 5.07% 4.90% 5.33%
- ----------------------------------------------------------------
Lipper Ultrashort Obligation 5.31% 5.38% 5.84%
Fund Average*
</TABLE>

* The Lipper Money Market Index is an index of the 30 largest money market
funds. The index reflects fees charged by each fund in the index. The Lipper
Ultrashort Obligation 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 or better, and maintain a portfolio
dollar-weighted average maturity between 91 and 365 days. It does not take into
account sales charges.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."

3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.25% 0.35% 0.25% 0.85% -- -- $285 $466 $ 662 $1,228 $285 $466 $662 $1,228

- ------------------------------------------------------------------------------------------------------------------------------------

B Shares 0.25 0.35 1.00 1.60 -- -- 663 805 1,071 1,601 163 505 871 1,601

- ------------------------------------------------------------------------------------------------------------------------------------

C Shares 0.25 0.35 1.00 1.60 (0.45)% 1.15% 217 365 633 1,398 117 365 633 1,398

</TABLE>

1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.
2. The Distributor has agreed to reduce the 12b-1 fee it receives with respect
to the Short-Term Fund to 0.55% of the Fund's average daily net assets for Class
C shares through at least March 31, 2000. Absent such reduction, the 12b-1 fee
for Class C shares would be 1.00%.

8
<PAGE>

PIMCO Low Duration Fund Fund Category - Short Duration Bond Funds

Investment Objective
Seeks maximum total return, consistent
with preservation of capital and
prudent investment management

Fund Focus
Short and intermediate maturity fixed
income securities

Portfolio Manager
William H. Gross

Fund Inception Date
5/11/87

Average Portfolio Duration
1-3 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 the information to its right show
performance of the Fund's Class A shares, but do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance for Class A, B and C shares in the Average
Annual Total Returns table reflect the impact of sales charges. For periods
prior to the inception date of Class A, B and C shares (1/13/97), performance
information shown in the bar chart and table for those classes is based on the
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. The prior Institutional Class performance has been
adjusted to reflect the actual sales charges (in the Average Annual Total
Returns table only), distribution and/or service (12b-1) fees, administrative
fees and other expenses paid by Class A, B and C shares. Past performance is no
guarantee of future results.

9
<PAGE>

Calendar Year Total Returns

[Plot Points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
11.07 8.54 12.94 7.20 7.27 0.16 11.41 5.64 7.74 6.66

More Recent Return Information

12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (4/1/89 - 6/30/89) 5.40%
Lowest (1/1/94 - 3/31/94) -0.44%

Average Annual Total Returns (for periods ended 12/31/98)

1 Year 5 Years 10 Years
- -----------------------------------------------------------
Class A 3.47% 5.61% 7.48%
- -----------------------------------------------------------
Class B 0.87% 5.13% 7.24%
- -----------------------------------------------------------
Class C 5.13% 5.74% 7.28%
- -----------------------------------------------------------
Merrill Lynch 1-3 Year 7.00% 5.99% 7.37%
Treasury Index*
- -----------------------------------------------------------
Lipper Short Investment 5.78% 5.41 7.02%
Grade Debt Fund Average*

* The Merrill Lynch 1-3 Year Treasury Index is an unmanaged
index of U.S Treasury obligations having maturities from
one to 2.99 years. It is not possible to invest directly
in the index. The Lipper Short 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
(rated in the top four grades) with dollar-weighted average
maturities of less than three years. It does not take into
account sales charges.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
----------- ----------- -----------

<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 3% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/1/ 5%/2/ 1%/3/
</TABLE>
- --------------------------
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Distribution Example: Assuming you redeem Example: Assuming you do not
and/or shares at the end of each period redeem your shares
Admini- Service Total Annual
Advisory strative (12b-1) Fund Operating Year Year
Share Class Fees Fees Fees(1) Expenses 1 3 5 10 1 3 5 10
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
A Shares 0.25% 0.40% 0.25% 0.90% $389 $578 $ 784 $1,375 $389 $578 $784 $1,375
- -----------------------------------------------------------------------------------------------------------------------------
B Shares 0.25 0.40 1.00 1.65 668 820 1,097 1,657 168 520 897 1,657
- -----------------------------------------------------------------------------------------------------------------------------
C Shares 0.25 0.40 0.75 1.40 243 443 766 1,680 143 443 766 1,680
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.

10
<PAGE>

PIMCO Total Return Fund Fund Category - Intermediate Duration Bond Funds

Investment Objective
Seeks maximum total return, consistent
with preservation of capital and
prudent investment management

Fund Focus
Intermediate maturity fixed income
securities

Portfolio Manager
William H. Gross

Fund Inception Date
5/11/87

Average Portfolio Duration
3-6 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 the information to its right show
performance of the Fund's Class A shares, but do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance for Class A, B and C shares in the Average
Annual Total Returns table reflect the impact of sales charges. For periods
prior to the inception date of Class A, B and C shares (1/13/97), performance
information shown in the bar chart and table for those classes is based on the
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. The prior Institutional Class performance has been
adjusted to reflect the actual sales charges (in the Average Annual Total
Returns table only), distribution and/or service (12b-1) fees, administrative
fees and other expenses paid by Class A, B and C shares. Past

11
<PAGE>

performance is no guarantee of future results.

Calendar Year Total Returns

[Plot Points for bar chart:]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
13.71 7.54 19.02 9.26 12.05 -4.02 19.23 4.22 9.65 9.25
</TABLE>

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (4/1/89 - 6/30/89) 8.13%
Lowest (1/1/94 - 3/31/94) -2.80%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C>
1 Year 5 Years 10 Years
- -----------------------------------------------------------
Class A 4.33% 6.41% 9.29%
- -----------------------------------------------------------
Class B 3.45% 6.30% 9.23%
- -----------------------------------------------------------
Class C 7.44% 6.61% 9.00%
- -----------------------------------------------------------
Lehman Aggregate Bond 8.69% 7.27% 9.26%
Index*
- -----------------------------------------------------------
Lipper Intermediate 7.25% 6.35% 8.28%
Investment Grade Debt
Fund Average*
</TABLE>

* The Lehman Brothers Aggregate Bond Index is an unmanaged
index of fixed income securities. It is not possible to
invest directly in the index. 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 (rated in the top four grades)
with dollar-weighted average maturities of five to ten
years. It does not take into account sales charges.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
----------- ----------- -----------

</TABLE>
_____________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you redeem Example: Assuming you do not
shares at the end of each period redeem your shares
Admini- Distribution Total Annual
Advisory strative and/or Service Fund Operating Year Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.25% 0.40% 0.25% 0.90% $538 $724 $ 926 $1,508 $538 $724 $926 $1,508
- -----------------------------------------------------------------------------------------------------------------------------------
B Shares 0.25 0.40 1.00 1.65 668 820 1,097 1,657 168 520 897 1,657
- -----------------------------------------------------------------------------------------------------------------------------------
C Shares 0.25 0.40 1.00 1.65 268 520 897 1,955 168 520 897 1,955
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.

12
<PAGE>

PIMCO Long-Term U.S. Government Fund Fund Category - Long Duration Bond Funds

Investment Objective
Seeks maximum total return, consistent with preservation of capital and prudent
investment management

Fund Focus
Long-term maturity fixed income securities

Portfolio Manager
Pasi Hamalainen

Fund Inception Date
7/1/91

Average Portfolio Duration
Greater than or equal to 8 years

Credit Quality
A to Aaa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 the information to its right show
performance of the Fund's Class A shares, but do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance for Class A, B and C shares in the Average
Annual Total Returns table reflect the impact of sales charges. For periods
prior to the inception date of Class A, B and C shares (1/20/97), performance
information shown in the bar chart and table for those classes is based on the
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. The prior Institutional Class performance

13
<PAGE>

has been adjusted to reflect the actual sales charges (in the Average Annual
Total Returns table only), distribution and/or service (12b-1) fees,
administrative fees and other expenses paid by Class A, B and C shares. Past
performance is no guarantee of future results.

Calendar Year Total Returns

[Plot Points for bar chart:]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-- -- -- 11.56 18.21 -7.77 31.09 0.31 14.59 12.97

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (4/1/95 - 6/30/95) 10.66%
Lowest (1/1/96 - 3/31/96) -6.35%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (7/1/91)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Class A 7.88% 8.44% 11.95%
- -----------------------------------------------------------------
Class B 7.09% 8.31% 11.87%
- -----------------------------------------------------------------
Class C 11.09% 8.63% 11.83%
- -----------------------------------------------------------------
Lehman Intermediate/20+ 12.75% 8.95% 11.26%
Treasury Index Blend*
- -----------------------------------------------------------------
Lipper General U.S. 8.07% 6.15% 7.75%
Government Fund Average*
</TABLE>

- ------------------------
* The index used for the Long-Term U.S. Government Fund is a blend of the Lehman
Intermediate Treasury Index and the Lehman 20+ Year Treasury Index,
proportionately weighted to equal a ten year duration. It is not possible to
invest directly in the index. The Lipper General 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 U.S. government and
agency issues. It does not take into account sales charges. The Fund commenced
operations on 7/1/91. Index comparisons begin on 6/30/91.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.5% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1.0%(1) 5.0%(2) 1.0%(3)
</TABLE>
- ------------------------
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Distribution Total Example: Assuming you Example: Assuming you
and/or Annual redeem shares at the end do not redeem your shares
Admini- Service Fund of each period
Advisory strative (12b-1) Operating Year Year
Share Class Fees Fees Fees(1) Expenses 1 3 5 10 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.25% 0.40% 0.25% 0.90% $538 $724 $ 926 $1,508 $538 $724 $926 $1,508
- ----------------------------------------------------------------------------------------------------------------
B Shares 0.25 0.40 1.00 1.65 668 820 1,097 1,657 168 520 897 1,657
- ----------------------------------------------------------------------------------------------------------------
C Shares 0.25 0.40 1.00 1.65 268 520 897 1,955 168 520 897 1,955
</TABLE>

14
<PAGE>

PIMCO Global Bond Fund II Fund Category - International Bond Funds

Investment Objective
Seeks maximum total return, consistent
with preservation of capital

Fund Focus
Intermediate maturity U.S. and hedged
foreign fixed income securities

Portfolio Manager
Lee R. Thomas, III

Fund Inception Date
10/2/95

Average Portfolio Duration
3-7 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Foreign Investment Risk
. Currency Risk
. Concentration Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

15
<PAGE>

Calendar Year Total Returns

[Plot Points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -- -- -- -- -- -- -- 12.40 8.29 7.29

More Recent Return Information

12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (7/1/96 - 9/30/96) 5.29%
Lowest (1/1/97 - 3/31/97) 0.14%

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception
1 Year (10/2/95)
- ----------------------------------------------------------
Class A 2.46% 8.85%
- ----------------------------------------------------------
Class B 1.49% 8.80%
- ----------------------------------------------------------
Class C 5.45% 9.54%
- ----------------------------------------------------------
J.P. Morgan Global 11.42% 10.89%
(Hedged) Index*
- ----------------------------------------------------------
Lipper Global Income Fund 6.23% 7.05%
Average*

* The J.P. Morgan Global (Hedged) Index is an unmanaged index representative of
the total return performance in U.S. dollars on a hedged basis of major world
bond markets. It is not possible to invest directly in the index. The Lipper
Global Income Fund Average is a total return performance average of Funds
tracked by Lipper Analytical Services, Inc. that invest primarily in U.S. dollar
and non-U.S. dollar debt securities of issuers located in at least three
countries, one of which may be the United States. It does not take into account
sales charges. The Fund commenced operations on 10/2/95. Index comparisons begin
on 9/30/95.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------

<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.5% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1.0%(1) 5.0%(2) 1.0%(3)
</TABLE>
- ------------------------------------
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Distribution Total Example: Assuming you Example: Assuming you
and/or Annual redeem shares at the end do not redeem your shares
Admini- Service Fund of each period
Advisory strative (12b-1) Operating Year Year
Share Class Fees Fees Fees(1) Expenses 1 3 5 10 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.25% 0.45% 0.25% 0.95% $543 $739 $ 952 $1,564 $543 $739 $952 $1,564
- ------------------------------------------------------------------------------------------------------------------
B Shares 0.25 0.45 1.00 1.70 673 836 1,123 1,712 173 536 923 1,712
- ------------------------------------------------------------------------------------------------------------------
C Shares 0.25 0.45 1.00 1.70 273 536 923 2,009 173 536 923 2,009
</TABLE>

16
<PAGE>

PIMCO Foreign Bond Fund Fund Category - International Bond Funds

Investment Objective
Seeks maximum total return, consistent with preservation of capital and prudent
investment management

Fund Focus
Intermediate maturity hedged foreign fixed income securities

Portfolio Manager
Lee R. Thomas, III

Fund Inception Date
12/3/92

Average Portfolio Duration
3-7 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

The Fund invests under normal circumstances at least 85% of its assets in Fixed
Income Instruments of issuers located outside the United States, representing at
least three foreign countries, which may be represented by futures contracts
(including related options) with respect to such securities, and options on such
securities. Such securities normally are denominated in major foreign
currencies or baskets of foreign currencies (such as the euro). The Fund will
normally hedge at least 75% of its exposure to foreign currency.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Foreign Investment Risk
. Currency Risk
. Concentration Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 the information to its right show
performance of the Fund's Class A shares, but do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance for Class A, B and C shares in the Average
Annual Total Returns table reflect the impact of sales charges. For periods
prior to the inception date of Class A, B and C shares (1/20/97), performance
information shown in the bar chart and table for those classes is based on the
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. The prior Institutional Class performance has been
adjusted to reflect the actual sales charges (in the Average Annual Total
Returns table only), distribution and/or service (12b-1) fees, administrative
fees and other expenses paid by Class A, B and C shares. Past performance is no
guarantee of future results.

17
<PAGE>

Calendar Year Total Returns

[Plot Points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-- -- -- -- 15.92 -7.72 20.68 18.42 9.07 9.53

More Recent Return Information

12/31/98-06/30/99 ___%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/95 - 12/31/95) 7.12%
Lowest (1/1/94 - 3/31/94) -4.32%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Inception
1 Year 5 Years (12/3/92)
- ----------------------------------------------------------------
Class A 4.60% 8.51% 9.85%
- ----------------------------------------------------------------
Class B 3.77% 8.44% 9.88%
- ----------------------------------------------------------------
Class C 7.71% 8.71% 9.88%
- ----------------------------------------------------------------
J.P. Morgan Non-U.S. 12.09% 9.45% 10.24%
Index (Hedged)*
- ----------------------------------------------------------------
Lipper International 11.91% 6.55% 8.01%
Income Fund Average*
</TABLE>

* The J.P. Morgan Non-U.S. Index (Hedged) in an unmanaged index representative
of the total return performance in U.S. dollars of major non-U.S. bond markets.
It is not possible to invest directly in the index. The Lipper International
Income Fund Average is a total return performance average of Funds tracked by
Lipper Analytical Services, Inc. that invest primarily in U.S. dollar and non-
U.S dollar debt securities of issuers located in at least three countries,
excluding the United States, except in periods of market weakness. It does not
take into account sales charges. The Fund commenced operations 12/3/92. Index
comparisons begin on 11/30/92.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.5% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1.0%(1) 5.0%(2) 1.0%(3)
</TABLE>
- -----------------------
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Distribution Total Example: Assuming you Example: Assuming you
and/or Annual redeem shares at the end do not redeem your shares
Admini- Service Fund of each period
Advisory strative (12b-1) Operating Year Year
Share Class Fees Fees Fees(1) Expenses 1 3 5 10 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.25% 0.45% 0.25% 0.95% $543 $739 $ 952 $1,564 $543 $739 $952 $1,564
- ----------------------------------------------------------------------------------------------------------------
B Shares 0.25 0.45 1.00 1.70 673 836 1,123 1,712 173 536 923 1,712
- ----------------------------------------------------------------------------------------------------------------
C Shares 0.25 0.45 1.00 1.70 273 536 923 2,009 173 536 923 2,009
</TABLE>

18
<PAGE>

PIMCO Emerging Markets Bond Fund Fund Category - International Bond Funds

Investment Objective
Seeks maximum total return, consistent
with preservation of capital and
prudent investment management

Fund Focus
Emerging market fixed income securities

Portfolio Manager
Michael J. Rosborough

Fund Inception Date
7/31/97

Average Portfolio Duration
0-8 years

Credit Quality
B to Aaa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Foreign Investment Risk
. Currency Risk
. Concentration Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

19
<PAGE>

and the information to its right show performance of the Fund's Class A shares,
but do not reflect the impact of sales charges (loads). If they did, the returns
would be lower than those shown. Unlike the bar chart, performance for Class A,
B and C shares in the Average Annual Total Returns table reflect the impact of
sales charges. Past performance is no guarantee of future results.

Calendar Year Total Returns

[Plot Points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -- -- -- -- -- -- -- -- -- -12.10

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 12.17%
Lowest (7/1/98 - 9/30/98) -21.14%

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception
1 Year (7/31/97)
- -------------------------------------------------------------------------
Class A -16.05% -13.46%
- -------------------------------------------------------------------------
Class B -16.76% -13.52%
- -------------------------------------------------------------------------
Class C -13.58% -11.31%
- -------------------------------------------------------------------------
J.P. Morgan Emerging Markets Bond Index* -14.35% -11.36%
- -------------------------------------------------------------------------
Lipper Emerging Market Debt Fund Average* -20.80% -15.58%

* The J.P. Morgan Emerging Markets Bond Index is an unmanaged index which tracks
the total returns for Brady Bonds. It is not possible to invest directly in the
index. The Lipper Emerging Market Debt Fund Average is a total return
performance average of Funds tracked by Lipper Analytical Services, Inc. that
seek either current income or total return by investing at least 65% of total
assets in emerging market debt securities. It does not take into account sales
charges.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

__________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Distribution Total Example: Assuming you Example: Assuming you
and/or Annual redeem shares at the end do not redeem your shares
Admini- Service Fund of each period
Advisory strative (12b-1) Operating Year Year
Share Class Fees Fees Fees(1) Expenses 1 3 5 10 1 3 5 10
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.45% 0.55% 0.25% 1.25% $572 $829 $1,105 $1,893 $572 $829 $1,105 $1,893
- -------------------------------------------------------------------------------------------------------------------
B Shares 0.45 0.55 1.00 2.00 703 927 1,278 2,038 203 627 1,078 2,038
- -------------------------------------------------------------------------------------------------------------------
C Shares 0.45 0.55 1.00 2.00 303 627 1,078 2,327 203 627 1,078 2,327
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.

20
<PAGE>

PIMCO High Yield Fund Fund Category - High Yield Bond Funds

Investment Objective
Seeks maximum total return, consistent with preservation of capital and prudent
investment management

Fund Focus
Higher yielding fixed income securities

Portfolio Manager
Benjamin Trosky

Fund Inception Date
12/16/92

Average Portfolio Duration
2-6 years

Credit Quality
B to Aaa; minimum 65% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Foreign Investment Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 the information to its right show
performance of the Fund's Class A shares, but do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance for Class A, B and C shares in the Average
Annual Total Returns table reflect the impact of sales charges. For periods
prior to the inception date of Class A, B and C shares (1/13/97), performance
information shown in the bar chart and table for those classes is based on the
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. The prior Institutional Class performance has been
adjusted to reflect the actual sales charges (in the Average Annual Total
Returns table only), distribution and/or service (12b-1) fees, administrative
fees and other expenses paid by Class A, B and C shares. Past performance is no
guarantee of future results.

21
<PAGE>

Calendar Year Total Returns

[Plot Points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-- -- -- -- 18.26 2.01 20.23 11.28 12.78 6.12

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (1/1/93 - 3/31/93) 6.17%
Lowest (7/1/98 - 9/30/98) -1.86%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
Fund Inception
1 Year 5 Years (12/16/92)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Class A 1.34% 9.30% 10.71%
- -----------------------------------------------------------------------
Class B 0.42% 9.23% 10.75%
- -----------------------------------------------------------------------
Class C 4.34% 9.52% 10.76%
- -----------------------------------------------------------------------
Lehman Brothers BB 5.74% 9.09% 10.00%
Intermediate Corporate Index*
- -----------------------------------------------------------------------
Lipper High Current Yield Fund -0.44% 7.37% 9.36%
Average*
</TABLE>

* The Lehman Brothers BB Intermediate Corporate Index is an unmanaged index
comprised of various fixed income securities rated BB. It is not possible to
invest directly in the index. The Lipper High Current Yield Fund Average is a
total return performance average of Funds tracked by Lipper Analytical Services,
Inc. that aim at high (relative) current yield from fixed income securities,
have no quality or maturity restrictions, and tend to invest in lower grade debt
issues. It does not take into account sales charges. The Fund commenced
operations on 12/16/92. Index comparisons begin on 12/31/92.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Distribution Total Example: Assuming you Example: Assuming you
and/or Annual redeem shares at the end do not redeem your shares
Admini- Service Fund of each period
Advisory strative (12b-1) Operating Year Year
Share Class Fees Fees Fees(1) Expenses 1 3 5 10 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.25% 0.40% 0.25% 0.90% $538 $724 $ 926 $1,508 $538 $724 $926 $1,508
- ------------------------------------------------------------------------------------------------------------------
B Shares 0.25 0.40 1.00 1.65 668 820 1,097 1,657 168 520 897 1,657
- ------------------------------------------------------------------------------------------------------------------
C Shares 0.25 0.40 1.00 1.65 268 520 897 1,955 168 520 897 1,955
</TABLE>

22
<PAGE>

PIMCO Municipal Bond Fund Fund Category - Tax-Exempt Bond Funds

Investment Objective
Seeks high current income exempt from
federal income tax, consistent with
preservation of capital. Capital
appreciation is a secondary objective.

Fund Focus
Investment grade municipal securities
(tax-exempt bonds)

Portfolio Manager
Benjamin Ehlert

Fund Inception Date
12/31/97

Average Portfolio Duration
3-10 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 the information to its right show
performance of the Fund's Class A shares, but do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance for Class A, B and C shares in the Average
Annual Total Returns table reflect the impact of sales charges. For periods
prior to the inception date of Class A, B and C shares (4/1/98), performance
information shown in the bar chart and table for those classes is based on the
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. The prior Institutional Class performance has been
adjusted to reflect the actual sales charges (in the Average Annual Total
Returns table only), distribution

23
<PAGE>

and/or service (12b-1) fees, administrative
fees and other expenses paid by Class A, B and C shares. Past performance is no
guarantee of future results.

Calendar Year Total Returns

[Plot Points for bar chart:]
<TABLE>
<CAPTION>

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- -- -- -- -- -- -- -- -- 5.68

</TABLE>

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (7/1/98 - 9/30/98) 3.23%
Lowest (10/1/98 - 12/31/98) 0.09%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
Fund Inception
1 Year (12/31/97)
- -------------------------------------------------------------------
<S> <C> <C>
Class A 2.51% 2.51%
- -------------------------------------------------------------------
Class B -0.12% -0.12%
- -------------------------------------------------------------------
Class C 4.14% 4.14%
- -------------------------------------------------------------------
Lehman General Municipal Bond 6.48% 6.48%
Index*
- -------------------------------------------------------------------
Lipper General Municipal Fund 5.32% 5.32%
Average*
</TABLE>

* The Lehman General Municipal Bond Index is an unmanaged
index of municipal bonds. It is not possible to invest
directly in the index. 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.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 3% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%(1) 5%(2) 1%(3)
</TABLE>
___________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you redeem Example: Assuming you do
Distribution Total shares at the end of each not redeem your shares
and/or Annual period
Admini- Service Fund Waiver
Advisory strative (12b-1) Operating of 12b-1 Net Year Year
Share Class Fees Fees Fees(1) Expenses Fee(2) Expenses 1 3 5 10 1 3 5 10
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.25% 0.35% 0.25% 0.85% -- -- $384 $563 $ 757 $1,318 $384 $563 $757 $1,318
- --------------------------------------------------------------------------------------------------------------------------------
B Shares 0.25 0.35 1.00 1.60 -- -- 663 805 1,071 1,601 163 505 871 1,601
- --------------------------------------------------------------------------------------------------------------------------------
C Shares 0.25 0.35 1.00 1.60 (0.25)% 1.35% 237 428 739 1,624 137 428 739 1,624
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.
2. The Distributor has agreed to reduce the 12b-1 fee it receives with respect
to the Municipal Bond Fund to 0.75% of the Fund's average daily net assets for
Class C shares through at least March 31, 2000. Absent such reduction, the
12b-1 fee for Class C shares would be 1.00%.

24
<PAGE>

PIMCO Real Return Bond Fund Fund Category - Inflation-Indexed Bond Funds

Investment Objective
Seeks maximum real return, consistent with preservation of capital and prudent
investment management

Fund Focus
Inflation-indexed fixed income securities

Portfolio Manager
John Brynjolfsson

Fund Inception Date
1/29/97

Average Portfolio Duration
See description below

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Concentration Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

25
<PAGE>

Past performance is no guarantee of future results.

Calendar Year Total Returns

[Plot Points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -- -- -- -- -- -- -- -- -- 4.77

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (7/1/98 - 9/30/98) 3.09%
Lowest (9/1/98 - 12/31/98) -0.15%

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception
1 Year (1/29/97)
- ---------------------------------------------------------------
Class A 1.63% 2.76%
- ---------------------------------------------------------------
Class B -0.98% 1.66%
- ---------------------------------------------------------------
Class C 3.27% 3.87%
- ---------------------------------------------------------------
Lehman Brothers Inflation Linked 3.95% 3.32%
Treasury Index*
- ---------------------------------------------------------------
Lipper Short U.S. Government 5.83% 5.78%
Fund Average

* The Lehman Brothers Inflation Linked Treasury Index is an unmanaged index
consisting of the U.S. Treasury Inflation Protected Securities universe. It is
not possible to invest directly in the index. 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.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.

3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Distribution Total Example: Assuming you Example: Assuming you
and/or Annual redeem shares at the end do not redeem your shares
Admini- Service Fund Waiver of each period
Advisory strative (12b-1) Operating of 12b-1 Net Year Year
Share Class Fees Fees Fees(1) Expenses Fee(2) Expenses 1 3 5 10 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.25% 0.40% 0.25% 0.90% -- -- $389 $578 $ 784 $1,375 $389 $578 $784 $1,375
- ------------------------------------------------------------------------------------------------------------------------------------
B Shares 0.25 0.40 1.00 1.65 -- -- 668 820 1,097 1,657 168 520 897 1,657
- ------------------------------------------------------------------------------------------------------------------------------------
C Shares 0.25 0.40 1.00 1.65 (0.25)% 1.40% 243 443 766 1,680 143 443 766 1,680
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.
2. The Distributor has agreed to reduce the 12b-1 fee it receives with
respect to the Real Return Bond Fund to 0.75% of the Fund's average daily net
assets for Class C shares through at least March 31, 2000. Absent such
reduction, the 12b-1 fee for Class C shares would be 1.00%.

26
<PAGE>

PIMCO Convertible Bond Fund Fund Category - Convertible Bond Funds

Investment Objective Seeks maximum total return, consistent with prudent
investment management

Fund Focus
Convertible securities

Portfolio Manager
Sandra K. Durn

Fund Inception Date
4/1/99

Average Portfolio Duration
N/A

Credit Quality
Caa to Aaa; maximum 35% below Baa and 10% below B

Dividend Frequency
Declared and distributed quarterly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Market Risk
. Issuer Risk
. Interest Rate Risk
. Credit Risk
. Derivatives Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

As the Fund commenced operations in April, 1999, it does not yet have a full
calendar year of performance.

27
<PAGE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Distribution Total Example: Assuming you Example: Assuming you
and/or Annual redeem shares at the end do not redeem your shares
Admini- Service Fund of each period
Advisory strative (12b-1) Operating Year Year
Share Class Fees Fees Fees(1) Expenses 1 3 5 10 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.40% 0.40% 0.25% 1.05% $552 $769 $1,003 $1,675 $552 $769 $1,003 $1,675
- -----------------------------------------------------------------------------------------------------------------
B Shares 0.40 0.40 1.00 1.80 683 866 1,175 1,822 183 566 975 1,822
- -----------------------------------------------------------------------------------------------------------------
C Shares 0.40 0.40 1.00 1.80 283 566 975 2,116 183 566 975 2,116
</TABLE>

28
<PAGE>

PIMCO Strategic Balanced Fund Fund Category - Stock and Bond Funds

Investment Objective
Seeks maximum total return, consistent
with preservation of capital and
prudent investment management

Fund Focus
Securities eligible for purchase by the
Total Return and StocksPLUS Funds

Portfolio Manager
A team led by
William H. Gross

Fund Inception Date
6/28/96

Average Portfolio Duration
0-6 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared and distributed quarterly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Market Risk
. Issuer Risk
. Interest Rate Risk
. Credit Risk
. Derivatives Risk
. Foreign Investment Risk
. Credit Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 the information to its right show
performance of the Fund's Class A shares, but do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance for Class A, B and C shares in the Average
Annual Total Returns table reflect the impact of sales charges. Because Class
A, B and C shares of the Fund do not have any performance history, performance
information shown in the bar chart and table for those classes is based on the
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. The prior Institutional Class performance has been
adjusted to reflect the actual sales charges (in the Average Annual Total
Returns table only), distribution and/or service (12b-1) fees, administrative
fees and other expenses paid by Class A, B and C shares. Past performance is no
guarantee of future results.

29
<PAGE>

Calendar Year Total Returns

[Plot Points for bar chart:]

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (__/__/__ - __/__/__) ___%
Lowest (__/__/__ - __/__/__) ___%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
Fund Inception
1 Year (6/28/96)
- ----------------------------------------------------------
<S> <C> <C>
Class A
- ----------------------------------------------------------
Class B
- ----------------------------------------------------------
Class C
- ----------------------------------------------------------
Lipper Balanced Index* 15.03% 17.46%
- ----------------------------------------------------------
Lipper Balanced Fund Average* 13.47% 16.74%
</TABLE>

* The Lipper Balanced Index is an index of the 30 largest
Balanced Funds equally weighted. The index reflects
performance which is net of fees charges by each fund in
the index. It is not possible to invest directly in the
index. 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. The Fund commenced operations on 6/28/96.
Index comparisons begin on 6/30/96.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you redeem Example: Assuming you do
shares at the end of each period not redeem your shares

Admini- Distribution Total Annual
Advisory strative and/or Service Fund Operating Year Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10 1 3 5 10
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.40% 0.40% 0.25% 1.05% $552 $769 $1,003 $1,675 $552 $769 $1,003 $1,675
- -------------------------------------------------------------------------------------------------------------------------------
B Shares 0.40 0.40 1.00 1.80 683 866 1,175 1,822 183 566 975 1,822
- -------------------------------------------------------------------------------------------------------------------------------
C Shares 0.40 0.40 1.00 1.80 283 566 975 2,116 183 566 975 2,116
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.

30
<PAGE>

PIMCO StocksPLUS Fund Fund Category - Enhanced Index Stock Funds

Investment Objective
Seeks total return which exceeds that of the
S&P 500

Fund Focus
S&P 500 stock index derivatives backed by a
portfolio of short-term fixed income
securities

Portfolio Manager
A team led by
William H. Gross

Fund Inception Date
5/13/93

Average Portfolio Duration
0-1 year

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared and distributed quarterly

Principal Investments and Strategies

The S&P 500 is composed of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. S&P 500 stocks 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 seeks 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.

Principal Risks

. Market Risk
. Issuer Risk
. Derivatives Risk
. Credit Risk
. Interest Rate Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Return table. The information provides
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 the information to its right show
performance of the Fund's Class A shares, but do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance for Class A, B and C shares in the Average
Annual Total Returns table reflect the impact of sales charges. For periods
prior to the inception date of Class A, B and C shares (1/20/97), performance
information shown in the bar chart and table for those classes is based on the
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. The prior Institutional Class performance has been
adjusted to

31
<PAGE>

reflect the actual sales charges (in the Average Annual Total Returns table
only), distribution and/or service (12b-1) fees, administrative fees and other
expenses paid by Class A, B and C shares. Past performance is no guarantee of
future results.

Calendar Year Total Returns

[Plot Points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -- -- -- -- -- 2.51 39.97 22.59 32.35 27.70

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 21.23%
Lowest (7/1/98 - 9/30/98) -9.87%

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception
1 Year 5 Years (5/13/93)
- ---------------------------------------------------------------
Class A 23.87% 23.59% 22.46%
- ---------------------------------------------------------------
Class B 21.72% 23.23% 22.14%
- ---------------------------------------------------------------
Class C 26.07% 23.73% 22.51%
- ---------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 22.63%
- ---------------------------------------------------------------
Lipper Growth & Income 15.61% 18.35% 17.71%
Fund Average*

* The Standard & Poor's 500 Composite Stock Price Index is
an unmanaged index of common stocks. It is not possible to
invest directly in the index. The Lipper Growth & Income
Fund Average is a total return performance average of Funds
tracked by Lipper Analytical Services, Inc. that combine a
growth-of-earnings orientation and an income requirement
for level and/or rising dividends. It does not take into
account sales charges. The Fund commenced operations on
5/13/93. Index comparisons begin on 4/30/93.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Distribution Total Example: Assuming you Example: Assuming you
and/or Annual redeem shares at the end do not redeem your shares
Admini- Service Fund Waiver of each period
Advisory strative (12b-1) Operating of 12b-1 Net Year Year
Share Class Fees Fees Fees(1) Expenses Fee(2) Expenses 1 3 5 10 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares 0.40% 0.40% 0.25% 1.05% -- -- $404 $624 $ 862 $1,544 $404 $624 $862 $1,554
- ------------------------------------------------------------------------------------------------------------------------------------
B Shares 0.40 0.40 1.00 1.80 -- -- 683 866 1,175 1,822 183 566 975 1,822
- ------------------------------------------------------------------------------------------------------------------------------------
C Shares 0.40 0.40 1.00 1.80 (0.25)% 1.55% 258 490 845 1,845 158 490 845 1,845
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.
2. The Distributor has agreed to reduce the 12b-1 fee it receives with
respect to the StocksPLUS Fund to 0.75% of the Fund's average daily net assets
for Class C shares through at least March 31, 2000. Absent such reduction, the
12b-1 fee for Class C shares would be 1.00%.

32
<PAGE>

Summary of Principal Risks

. Market Risk. The market price of securities owned by a 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
represented in the securities markets. The value of a security may decline due
to general market conditions which are not specifically related to a particular
company, such as real or perceived adverse economic conditions, changes in the
general outlook for corporate earnings, changes in interest or currency rates or
adverse investor sentiment generally. They may also decline due to factors which
affect a particular industry or industries, such as labor shortages or increased
production costs and competitive conditions within an industry. 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.

. Derivatives Risk. Each Fund (except the Money Market Fund) may use
derivatives, which are financial contracts whose value depends on, or is derived
from, the value of an underlying asset, reference rate or index. The various
derivative instruments that the Funds may use are referenced under
"Characteristics and Risks of Securities and Investment Techniques -Derivatives"
in this Prospectus and described in more detail under "Investment Objectives and
Policies" in the Statement of Additional Information. The Funds may sometimes
use derivatives as part of a strategy designed to reduce exposure to other
risks, such as interest rate or currency risk. The Funds may also use
derivatives for leverage. A Fund's use of derivative instruments involves risks
different from, or greater than, the risks associated with investing directly in
securities and other traditional investments. Derivatives are subject to a
number of risks described elsewhere in this section, such as liquidity risk,
interest rate risk, market risk and credit risk. They also involve the risk of
mispricing or improper valuation and the risk that changes in the value of the
derivative may not correlate perfectly with the underlying asset, rate or index.
Also, suitable derivative

33
<PAGE>

transactions may not be available in all circumstances and there can be no
assurance that a Fund will engage in these transactions to reduce exposure to
other risks when that would be beneficial.

. Concentration Risk. Concentration of investments in a small number of
issuers, industries or foreign currencies increases risk. The Real Return Bond,
Global Bond II, Foreign Bond and Emerging Markets Bond Funds are "non-
diversified," which means that they may invest a greater percentage of their
assets in the securities of a single issuer than the other Funds. Funds that
invest in a relatively small number of issuers are more susceptible to risks
associated with a single economic, political or regulatory occurrence than a
more diversified portfolio might be. Some of those issuers also may present
substantial credit or other risks.

. Leveraging Risk. When a Fund is borrowing money or otherwise leveraging
its portfolio, the value of an investment in that Fund will be more volatile and
all other risks will tend to be compounded. This is because leverage tends to
exaggerate the effect of any increase or decrease in the value of a Fund's
portfolio securities. Each Fund may take on leveraging risk by using reverse
repurchase agreements, dollar rolls and other borrowings, by investing
collateral from loans of portfolio securities or through the use of when-issued,
delayed-delivery or forward commitment transactions. Certain Funds may also take
on leveraging risk by using derivatives. The use of leverage may also cause a
Fund to liquidate portfolio positions when it may not be advantageous to do so
to satisfy its obligations or to meet segregation requirements.

. Management Risk. Each Fund is subject to management risk because it is an
actively managed investment portfolio. PIMCO and each individual portfolio
manager will apply investment techniques and risk analyses in making investment
decisions for the Funds, but there can be no guarantee that these will produce
the desired results.

34
<PAGE>

Principal Risks by Fund

The following chart identifies the Principal Risks associated with each Fund.
Risks not marked for a particular Fund may, however, still apply to some extent
to that Fund at various times.

Interest Foreign Deriva- Concen-
Rate Credit Market Issuer Invest- Currency tives Leverag- tration Manage-
Fund Risk Risk Risk Risk ment Risk Risk Risk ing Risk Risk ment Risk
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Short-Term . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Low Duration . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Total Return . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Long-Term
U.S.
Government . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Global Bond
II . . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Foreign Bond . . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Emerging
Markets Bond . . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
High Yield . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Municipal
Bond . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Real Return
Bond . . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Convertible
Bond . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
Strategic
Balanced . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
StocksPLUS . . . . . . . . .
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Management of the Funds

Investment Adviser and Administrator

35
<PAGE>

Fund Advisory Fees
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Money Market Fund 0.15%

Short-Term, Low Duration, Total Return, Long-Term U.S. Government, Municipal Bond, Real 0.25%
Return Bond, Global Bond II, Foreign Bond and High Yield Funds

Strategic Balanced and StocksPLUS Funds 0.40%

Emerging Markets Bond Fund 0.45%
</TABLE>

The Convertible Bond Fund did not have operations during the fiscal year ended
March 31, 1999. The investment advisory fee for the Convertible Bond Fund is at
an annual rate of 0.40% based upon the average daily net assets of the Fund.

. Administrative Fees. Each Fund pays for the administrative services it
requires under a fee structure which is essentially fixed. Class A, Class B and
Class C shareholders of each Fund pay an administrative fee to PIMCO, computed
as a percentage of the Fund's assets attributable in the aggregate to that class
of shares. PIMCO, in turn, provides administrative services for Class A, Class B
and Class C shareholders and also bears the costs of various third-party
services required by the Funds, including audit, custodial, portfolio
accounting, legal transfer agency and printing costs. The result of this fee
structure is an expense level for Class A, Class B and Class C shareholders of
each Fund that, with limited exceptions, is precise and predictable under
ordinary circumstances.

Low Duration, Total Return, Long-Term U.S. Government, Real Return Bond, High Yield, 0.40%
Strategic Balanced and StocksPLUS Funds

Global Bond II and Foreign Bond Funds 0.45%

Emerging Markets Bond Fund 0.55%
</TABLE>

The Convertible Bond Fund did not have operations during the fiscal year ended
March 31, 1999. The administrative fee for the Convertible Bond Fund is at an
annual rate of 0.40% based upon the average daily net assets of the Fund.

. Individual Portfolio Managers. The following individuals have primary
responsibility for managing each of the noted Funds.

<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<S> <C> <C> <C>
Money Market Leslie Barbi 11/95 Senior Vice President, PIMCO. She joined PIMCO as a Portfolio
Manager in 1993, and has managed assets for various
institutional accounts since that time.

Short-Term William H. Gross 1/98 Managing Director, Chief Investment Officer and a founding
Low Duration 5/87* partner of PIMCO. He leads a team which manages the
Total Return 5/87* Short-Term, Strategic Balanced and StocksPLUS Funds.
Strategic Balanced 1/98
StocksPLUS 1/98

Long-Term U.S. Pasi Hamalainen 9/97 Executive Vice President, PIMCO. He joined PIMCO as a
Government Portfolio Manager in 1994, and has managed assets for various
institutional accounts since that time.
</TABLE>

36
<PAGE>

<TABLE>
Fund Portfolio Manager Since Recent Professional Experience
<S> <C> <C> <C>
Global Bond II Lee R. Thomas, III 10/95* Managing Director and Senior International Portfolio Manager,
Foreign Bond 7/95 PIMCO. He joined PIMCO as a Portfolio Manager in 1995, and
has managed assets for various institutional accounts since
that time. Prior to joining PIMCO, he was associated with
Investcorp as a member of the management committee responsible
for global securities and foreign exchange trading.

Emerging Markets Michael J. Rosborough 8/97* Senior Vice President, PIMCO. He joined PIMCO as a Portfolio
Bond Manager in 1995, and has managed assets for various
institutional accounts since that time.

High Yield Benjamin Trosky 12/92* Managing Director, PIMCO. He joined PIMCO as a Portfolio
Manager in 1990, and has managed assets for various
institutional accounts since that time.

Municipal Bond Benjamin Ehlert 12/97* Executive Vice President, PIMCO. He has been a Portfolio
Manager for PIMCO since 1986, and has managed assets for
various institutional accounts since that time.

Real Return Bond John Brynjolfsson 1/97* Senior Vice President, PIMCO. He joined PIMCO as a Portfolio
Manager in 1989, and has managed assets for various
institutional accounts since that time.

Convertible Bond Sandra K. Durn 4/99* Vice President, PIMCO. She joined PIMCO as a Portfolio
Manager in 1999. Prior to joining PIMCO in 1999, she 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>
- ------------------
* Since inception of the Fund.

Investment Options (Class A, B and C Shares)

The Trust offers investors Class A, Class B and Class C shares of each Fund in
this Prospectus. Each class of shares is subject to different types and levels
of sales charges than the other classes and bears a different level of expenses.

The class of shares that is best for you depends upon a number of factors,
including the amount and the intended length of your investment. The following
summarizes key information about each class to help you make your investment
decision, including the various expenses associated with each class. More
extensive information about the Trust's multi-class arrangements is included in
the PIMCO Funds Shareholders Guide for Class A, B and C Shares (the "Guide"),
which is included as part of the Statement of Additional Information and can be
obtained free of charge from the Distributor. See "How to Buy and Sell Shares -
PIMCO Funds Shareholders Guide" below.

Class A Shares . You pay an initial sales charge when you buy Class A
shares of any Fund except the Money Market Fund. The
maximum initial sales charge is 2.00% for the Short-Term
Fund, 3.00% for the Low Duration, Real Return Bond,
Municipal Bond and StocksPLUS Funds and 4.50% for all
other Funds. The sales charge is deducted from your
investment so that not all of your purchase payment is
invested.

. You may be eligible for a reduction or a complete waiver
of the initial sales charge under a number of
circumstances. For example, you normally pay no sales
charge if you purchase $1,000,000 or more of Class A
shares. Please see the Guide for details.

37
<PAGE>

. Class A shares are subject to lower 12b-1 fees than Class
B or Class C shares. Therefore, Class A shareholders
generally pay lower annual expenses and receive higher
dividends than Class B or Class C shareholders.

. You normally pay no contingent deferred sales charge
("CDSC") when you redeem Class A shares, although you may
pay a 1% CDSC if you purchase $1,000,000 or more of Class
A shares (and therefore pay no initial sales charge) and
then redeem the shares during the first 18 months after
your initial purchase. The Class A CDSC is waived for
certain categories of investors and does not apply if you
are otherwise eligible to purchase Class A shares without
a sales charge. Please see the Guide for details.

Class B Shares . You do not pay an initial sales charge when you buy Class
B shares. The full amount of your purchase payment is
invested initially. 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.

. You normally pay a CDSC of up to 5% if you redeem Class B
shares during the first six years after your initial
purchase. The amount of the CDSC declines the longer you
hold your Class B shares. You pay no CDSC if you redeem
during the seventh year and thereafter. The Class B CDSC
is waived for certain categories of investors. Please see
the Guide for details.

. Class B shares are subject to higher 12b-1 fees than Class
A shares for the first seven years they are held. During
this time, Class B shareholders normally pay higher annual
expenses and receive lower dividends than Class A
shareholders.

. Class B shares automatically convert into Class A shares
after they have been held for seven years. After the
conversion takes place, the shares are subject to the
lower 12b-1 fees paid by Class A shares.

Class C Shares . You do not pay an initial sales charge when you buy Class
C shares. The full amount of your purchase payment is
invested initially.

. You normally pay a CDSC of 1% if you redeem Class C shares
during the first year after your initial purchase. The
Class C CDSC is waived for certain categories of
investors. Please see the Guide for details.

. Class C shares are subject to higher 12b-1 fees than Class
A shares. Therefore, Class C shareholders normally pay
higher annual expenses and receive lower dividends than
Class A shareholders.

. Class C shares do not convert into any other class of
shares. Because Class B shares convert into Class A shares
after seven years, Class C shares will normally be subject
to higher expenses and will pay lower dividends than Class
B shares if the shares are held for more than seven years.

38
<PAGE>

The following provides additional information about the sales charges and
other expenses associated with Class A, Class B and Class C shares.

Initial Sales Charges - Class A Shares

Unless you are eligible for a waiver, the public offering price you pay when you
buy Class A shares of the Funds is the net asset value ("NAV") of the shares
plus an initial sales charge. The initial sales charge varies depending upon
the size of your purchase, as set forth below. No sales charge is imposed where
Class A shares are issued to you pursuant to the automatic reinvestment of
income dividends or capital gains distributions.

Short-Term Fund

Initial Sales Charge Initial Sales Charge
Amount of as % of Net as % of Public
Purchase Amount Invested Offering Price
- -----------------------------------------------------------------------------------------
<S> <C> <C>
$0-$49,999 2.04% 2.00%
- -----------------------------------------------------------------------------------------
$50,000-$99,999 1.78% 1.75%
- -----------------------------------------------------------------------------------------
$100,000-$249,999 1.52% 1.50%
- -----------------------------------------------------------------------------------------
$250,000 + 0.00%* 0.00%*
</TABLE>

Low Duration, Real Return Bond, Municipal Bond and StocksPLUS Funds

Initial Sales Charge Initial Sales Charge
Amount of as % of Net as % of Public
Purchase Amount Invested Offering Price
- -----------------------------------------------------------------------------------------
<S> <C> <C>
$0-$49,999 3.09% 3.00%
- -----------------------------------------------------------------------------------------
$50,000-$99,999 2.56% 2.50%
- -----------------------------------------------------------------------------------------
$100,000-$249,999 2.04% 2.00%
- -----------------------------------------------------------------------------------------
$250,000-$499,999 1.52% 1.50%
- -----------------------------------------------------------------------------------------
$500,000-$999,999 1.27% 1.25%
- -----------------------------------------------------------------------------------------
$1,000,000 + 0.00%* 0.00%*
</TABLE>

All Other Funds (except Money Market Fund)

Initial Sales Charge Initial Sales Charge
Amount of as % of Net as % of Public
Purchase Amount Invested Offering Price
- -----------------------------------------------------------------------------------------
<S> <C> <C>
$0-$49,999 4.71% 4.50%
- -----------------------------------------------------------------------------------------
$50,000-$99,999 4.17% 4.00%
- -----------------------------------------------------------------------------------------
$100,000-$249,999 3.63% 3.50%
- -----------------------------------------------------------------------------------------
$250,000-$499,999 2.56% 2.50%
- -----------------------------------------------------------------------------------------
$500,000-$999,999 2.04% 2.00%
- -----------------------------------------------------------------------------------------
$1,000,000 + 0.00%* 0.00%*
</TABLE>

* As shown, investors that purchase $1,000,000 or more 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 the purchase. However, purchasers of $1,000,000 or more of
Class A shares ($250,000 in the case of the

39
<PAGE>

Short-Term Fund) may be subject to a CDSC of 1% if the shares are redeemed
during the first 18 months after their purchase. See "CDSCs on Class A Shares"
below.

Contingent Deferred Sales Charges (CDSCs) - Class B and Class C Shares

Unless you are eligible for a waiver, if you sell (redeem) your Class B or Class
C shares within the time periods specified below, you will pay a CDSC according
to the following schedules.

Class B Shares
<TABLE>
<CAPTION>

Years 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>
* After the seventh year, Class B shares convert into Class A shares.

Class C Shares
<TABLE>
<CAPTION>

CDSCs on Class A Shares

Unless a waiver applies, investors who purchase $1,000,000 ($250,000 in the case
of the Short Term Fund) or more of Class A shares (and, thus, pay no initial
sales charge) of a Fund other than the Money Market Fund will be subject to a 1%
CDSC if the shares are redeemed within 18 months of their purchase. The Class A
CDSC does not apply if you are otherwise eligible to purchase Class A shares
without an initial sales charge or are eligible for a waiver of the CDSC. See
"Reductions and Waivers of Initial Sales Charges and CDSCs" below. The Class A
CDSC does not apply to the Money Market Fund; however, if Money Market Fund
Class A shares are purchased in an amount that for any other Fund would be
subject to a CDSC and are subsequently exchanged for shares of another Fund, a
Class A CDSC will apply for 18 months from the date of the exchange.

How CDSCs are Calculated

A CDSC is imposed on redemptions of Class B and Class C shares (and where
applicable, Class A shares) on the amount of the redemption which causes the
current value of your account for the particular class of shares of a Fund to
fall below the total dollar amount of your purchase payments subject to the
CDSC. However, no CDSC is imposed if the shares redeemed have been acquired
through the reinvestment of dividends or capital gains distributions or if the
amount redeemed is derived from increases in the value of your account above the
amount of the purchase payments subject to the CDSC. CDSCs are deducted from
the proceeds of your redemption, not from amounts remaining in your account. In
determining whether a CDSC is payable, it is assumed that the purchase

40
<PAGE>

payment from which the redemption is made is the earliest purchase payment for
the particular class of shares in your account (from which a redemption or
exchange has not already been effected).

For instance, the following example illustrates 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 and that six months later the
value of the investor's account for that Fund has grown through
investment performance and reinvestment of distributions 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 5%, the Class B CDSC would be $100.

In determining whether an amount is available for redemption without
incurring a CDSC, the purchase payments made for all shares of a particular
class of a Fund in the shareholder's account are aggregated, and the current
value of all such shares is aggregated.

Reductions and Waivers of Initial Sales Charges and CDSCs

The initial sales charges on Class A shares and the CDSCs on Class A, Class B
and Class C shares may be reduced or waived under certain purchase arrangements
and for certain categories of investors. Please see the Guide for details. The
Guide is available free of charge from the Distributor. See "How to Buy and
Sell Shares - PIMCO Funds Shareholders Guide" below.

Distribution and Servicing (12b-1) Plans

The Funds pay fees to the Distributor on an ongoing basis as compensation for
the services the Distributor renders and the expenses it bears in connection
with the sale and distribution of Fund shares ("distribution fees") and/or in
connection with personal services rendered to Fund shareholders and the
maintenance of shareholder accounts ("servicing fees"). These payments are made
pursuant to Distribution and Servicing Plans ("12b-1 Plans") adopted by each
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940.

There is a separate 12b-1 Plan for each class of shares offered in this
Prospectus. Class A shares pay only servicing fees. Class B and Class C shares
pay both distribution and servicing fees. The following lists the maximum
annual rates at which the distribution and/or servicing fees may be paid under
each 12b-1 Plan (calculated as a percentage of each Fund's average daily net
assets attributable to the particular class of shares):
<TABLE>
<CAPTION>

Servicing Distribution
Class A Fee Fee
- -------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund* 0.10% 0.00%
- -------------------------------------------------------------------------------
All other Funds 0.25% 0.00%

Class B
- -------------------------------------------------------------------------------
All Funds 0.25% 0.75%
</TABLE>

41
<PAGE>

<TABLE>
<CAPTION>
Class C
<S> <C> <C>
- -------------------------------------------------------------------------------
Money Market Fund* 0.10% 0.00%
- -------------------------------------------------------------------------------
Short-Term Fund* 0.25% 0.30%
- -------------------------------------------------------------------------------
Low Duration, Real 0.25% 0.50%
Return Bond, Municipal
Bond and StocksPLUS
Funds*
- -------------------------------------------------------------------------------
All other Funds 0.25% 0.75%
- -------------------------------------------------------------------------------
</TABLE>

* The Distributor has agreed to reduce the 12b-1 fee it receives with respect to
Class A and Class C shares of the Money Market Fund, and Class C shares of the
Short-Term, Municipal Bond, Real Return Bond and StocksPLUS Funds to the
amounts shown in the table through at least March 31, 2000. Absent such
reduction, the 12b-1 fee would be 0.20% for Class A and Class C shares of the
Money Market Fund and 1.00% for Class C shares of the Short-Term, Real Return
Bond, Municipal Bond and StocksPLUS Funds.

Because 12b-1 fees are paid out of a Fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than sales charges which are deducted at the time of investment.
Therefore, although Class B and Class C shares do not pay initial sales charges,
the distribution fees payable on Class B and Class C shares may, over time, cost
you more than the initial sales charge imposed on Class A shares. Also, because
Class B shares convert into Class A shares after they have been held for seven
years and are not subject to distribution fees after the conversion, an
investment in Class C shares may cost you more over time than an investment in
Class B shares.

How Fund Shares Are Priced

The Trust calculates the net asset value ("NAV") of a Fund's Class A, Class B
and Class C shares by taking the total value of the Fund's assets attributable
to the particular class, subtracting the Fund's liabilities attributable to the
class, and dividing by the Fund's total number shares of that class outstanding.
The net asset value per share of each Fund is determined as of 4:00 p.m.,
Eastern time, or as of such other time designated by the New York Stock Exchange
(the "Exchange") as the close of public trading ("closing"), on each day the
Exchange is open.

42
<PAGE>

in the value of foreign currencies in relation to the U.S. dollar. Because
foreign markets may be open at different times than the Exchange, the NAV of a
Fund's shares may change on days when the Exchange is closed and you are not
able to buy, redeem or exchange shares.

How to Buy and Sell Shares

The following section provides basic information about how to buy, sell (redeem)
and exchange shares of the Funds.

PIMCO Funds Shareholders Guide

More detailed information about the Trust's purchase, sale and exchange
arrangements for Fund shares is provided in the PIMCO Funds Shareholders Guide,
which is included in the Statement of Additional Information and can be obtained
free of charge from the Distributor by written request or by calling 1-800-426-
0107. The Guide provides technical information about the basic arrangements
described below and also describes special purchase, sale and exchange features
and programs offered by the Trust, including:

. Automated telephone and wire transfer procedures
. Automatic purchase, exchange and withdrawal programs
. Programs that establish a link from your Fund account to your bank
account
. Special arrangements for tax-qualified retirement plans
. Investment programs which allow you to reduce or eliminate the initial
sales charges on Class A shares
. Categories of investors that are eligible for waivers or reductions of
initial sales charges and CDSCs

Calculation of Share Price and Redemption Payments

When you buy shares of the Funds, you pay a price equal to the NAV of the
shares, plus any applicable sales charge. When you sell (redeem) shares, you
receive an amount equal to the NAV of the shares, minus any applicable CDSC.
NAVs are calculated as of the close of regular trading (normally, 4:00 p.m.
Eastern time) on the Exchange each day the Exchange is open. See "How Fund
Shares Are Priced" above for details. Generally, purchase and redemption orders
for Fund shares are processed at the NAV next calculated after your order is
received by the Distributor. There are certain exceptions where an order is
received by a broker or dealer prior to the close of regular trading on the
Exchange and then transmitted to the Distributor after the NAV has been
calculated for that day (in which case the order may be processed according to
that day's NAV). Please see the Guide for details.

The Trust does not calculate NAVs or process orders on days when the
Exchange is closed. If your purchase or redemption order is received by the
Distributor on a day when the Exchange is closed, it will be processed on the
next succeeding day when the Exchange is open (according to the succeeding day's
NAV).

Buying Shares

You can buy Class A, Class B or Class C shares of the Funds in the
following ways:

43
<PAGE>

. Through your broker, dealer or other financial intermediary. Your
broker, dealer or other intermediary may establish higher minimum
investment requirements than the Trust and may also independently charge
you transaction fees and additional amounts in return for its services,
which will reduce your return. Shares you purchase through your broker,
dealer or other intermediary will normally be held in your account with
that firm.

. Directly from the Trust. To make direct investments, you must open an
account with the Distributor and send payment for your shares either by
mail or through a variety of other purchase options and plans offered by
the Trust.

If you wish to invest directly by mail, please 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 02940-0926

The Trust accepts all purchases by mail subject to collection of checks at
full value and conversion into federal funds. You may make subsequent purchases
by mailing a check to the address above with a letter describing the investment
or with the additional investment portion of a confirmation statement. Checks
for subsequent purchases should be payable to PIMCO Funds Distributors LLC and
should clearly indicate your account number. Please call the Distributor at 1-
800-426-0107 if you have any questions regarding purchases by mail.

The Guide describes a number of additional ways you can make direct
investments, including through the PIMCO Funds Auto-Invest and PIMCO Funds Fund
Link programs. You can obtain an Guide free of charge from the Distributor by
written request or by calling 1-800-426-0107. See "PIMCO Funds Shareholders
Guide" above.

The Distributor, in its sole discretion, may accept or reject any order for
purchase of Fund shares. No share certificates will be issued unless
specifically requested in writing.

Investment Minimums. The following investment minimums apply for purchases
of Class A, Class B and Class C shares.

Initial Investment Subsequent Investments
- ---------------------------------------------------------------

$2,500 per Fund $100 per Fund

Lower minimums may apply for certain categories of investors, including
certain tax-qualified retirement plans, and for special investment programs and
plans offered by the Trust, such as the PIMCO Funds Auto-Invest and PIMCO Funds
Fund Link programs. Please see the Guide for details.

Small Account Fee

Because of the disproportionately high costs of servicing accounts with low
balances, if you have a direct account with the Distributor, you will be charged
a fee at the annual rate of $16 if your account balance falls below a minimum
level of $2,500. However, you will not be charged this fee if the aggregate
value of all of your PIMCO Funds accounts is at least $50,000. Any applicable
small account fee will be deducted automatically from your account in quarterly
installments and paid to the Administrator. Your account will normally be
valued, and any deduction taken, during the last five business days of each
calendar quarter. Lower minimum balance requirements and waivers of the small
account fee apply for certain categories of investors. Please see the Guide for
details.

44
<PAGE>

Minimum Account Size

Due to the relatively high cost to the Funds of maintaining small accounts, you
are asked to maintain an account balance of at least the minimum investment
necessary to open the particular type of account. If your balance remains below
the minimum for three months or longer, the Administrator has the right (except
in the case of employer-sponsored retirement accounts) to redeem your remaining
shares and close your account after giving you 60 days to increase your balance.
Your account will not be liquidated if the reduction in size is due solely to a
decline in market value of your Fund shares or if the aggregate value of all
your PIMCO Funds accounts exceeds $50,000.

Exchanging Shares

You may exchange your Class A, Class B or Class C shares of any Fund for the
same Class of shares of any other Fund or of a series of PIMCO Funds: Multi-
Manager Series. Shares are exchanged on the basis of their respective NAVs next
calculated after your exchange order is received by the Distributor (except if
Class A shares of the Money Market Fund are exchanged for Class A shares of any
other Fund, 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).
Currently, the Trust does not charge any exchange fees or charges. Exchanges
are subject to the $2,500 minimum initial purchase requirements for each Fund,
except with respect to tax-qualified programs and exchanges effected through the
PIMCO Funds Auto-Exchange plan. If you maintain your account with the
Distributor, you may exchange shares by completing a written exchange request
and sending it to PIMCO Funds Distributors LLC, P.O. Box 9688, Providence, RI
02940-0926. You can get an exchange form by calling the Distributor at 1-800-
426-0107.

The Guide provides more detailed information about the exchange privilege,
including the procedures you must follow and additional exchange options. The
Guide also describes circumstances under which the Trust may refuse or limit
exchanges. You can obtain an Guide free of charge from the Distributor by
written request or by calling 1-800-426-0107. See "PIMCO Funds Shareholders
Guide" above. Except as otherwise permitted by the Securities and Exchange
Commission, the Trust will give you 60 days' advance notice if it exercises its
right to terminate or materially modify the exchange privilege.

Selling Shares

You can sell (redeem) Class A, Class B or Class C shares of the Funds in
the following ways:

. Through your broker, dealer or other financial intermediary. Your
broker, dealer or other intermediary may independently charge you transaction
fees and additional amounts in return for its services, which will reduce your
return.

. Directly from the Trust by Written Request. To redeem shares directly
from the Trust by written request (whether or not the shares are represented by
certificates), you must send the following items to the Trust's Transfer Agent,
First Data Investor Services Group, Inc., P.O. Box 9688, Providence, RI 02940-
0926:

(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 "Signature Guarantee" below;

(3) any share certificates issued for any of the shares to be redeemed
(see "Certificated Shares" below); and

45
<PAGE>

(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, and to
be sent to the address of record for that account. To avoid delay in redemption
or transfer, if you have any questions about these requirements you should
contact the Transfer Agent in writing or call 1-800-426-0107 before submitting a
request. Written redemption or transfer requests will not be honored until all
required documents in the proper form have been received by the Transfer Agent.
You can not redeem your shares by written request if they are held in broker
"street name" accounts.

If the proceeds of your 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 redemption request and on the certificates, if any, or stock
power must be guaranteed as described under "Signature Guarantee" below. The
Distributor may, however, waive the signature guarantee requirement for
redemptions up to $2,500 by a trustee of a qualified retirement plan, the
administrator for which has an agreement with the Distributor.

The Guide describes a number of additional ways you can redeem your shares,
including:

. Telephone requests to the Transfer Agent
. PIMCO Funds Automated Telephone System (ATS)
. Expedited wire transfers
. Automatic Withdrawal Plan
. PIMCO Funds Fund Link

Unless you specifically elect otherwise, your initial account application
permits you to redeem shares by telephone subject to certain requirements. To
be eligible for ATS, expedited wire transfer, Automatic Withdrawal Plan, and
Fund Link privileges, you must specifically elect the particular option on your
account application and satisfy certain other requirements. The Guide describes
each of these options and provides additional information about selling shares.
You can obtain an Guide free of charge from the Distributor by written request
or by calling 1-800-426-0107.

Other than an applicable CDSC, you will not pay any special fees or charges
to the Trust or the Distributor when you sell your shares. However, if you sell
your shares through your broker, dealer or other financial intermediary, that
firm may charge you a commission or other fee for processing your redemption
request.

Redemptions of Fund shares may be suspended 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
assets, or during any other period as permitted by the Securities and Exchange
Commission for the protection of investors.

Timing of Redemption Payments

Redemption proceeds will normally be mailed to the redeeming shareholder within
seven calendar 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
proceeds 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. Under unusual circumstances, the
Trust may delay your redemption payments for more than seven days, as permitted
by law.

46
<PAGE>

Redemptions In Kind

The Trust will redeem shares of each Fund solely in cash up to the lesser of
$250,000 or 1% of the Fund's net assets during any 90-day period for any one
shareholder. In consideration of the best interests of the remaining
shareholders, the Trust may 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 your shares would ever be redeemed in kind.
If your shares are redeemed in kind, you should expect to incur transaction
costs upon the disposition of the securities received in the distribution.

Certificated Shares

If you are redeeming shares for which certificates have been issued, the
certificates must be mailed to or deposited with the Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "Signature
Guarantee" below. The Trust may request further documentation from
institutions or fiduciary accounts, such as corporations, custodians (e.g.,
under the Uniform Gifts to Minors Act), executors, administrators, trustees or
guardians. Your redemption request and stock power must be signed exactly as the
account is registered, including indication of any special capacity of the
registered owner.

Signature Guarantee

When a signature guarantee is called for, you should have "Signature Guaranteed"
stamped under your signature and guaranteed by any of the following entities:
U.S. banks, foreign banks having a U.S. correspondent bank, credit unions,
savings associations, 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 guarantee pursuant to its written signature guarantee
standards or procedures, 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 requirements from time to time upon
notice to shareholders, which may be given by means of a new or supplemented
Prospectus.

Fund Distributions

Each Fund distributes substantially all of its net investment income to
shareholders in the form of dividends. You begin earning dividends on Fund
shares the day after the Trust receives your purchase payment. Dividends paid
by each Fund with 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 fees applicable to Class B and Class C shares. The following shows
when each Fund intends to declare and distribute income dividends to
shareholders of record.

<TABLE>
<CAPTION>
Fund Declared Daily Declared and Paid
and Paid Monthly Quarterly
<S> <C> <C>
Fixed Income Funds .
- ----------------------------------------------------------------------------------------------
Strategic Balanced, Convertible and StocksPLUS Funds .
</TABLE>

47
<PAGE>

You can choose from the following distribution options:

. Reinvest all distributions in additional shares of the same class of
your Fund at NAV. This will be done unless you elect another option.

. Invest all distributions in shares of the same class of any other Fund or
another series of the Trust or PIMCO Funds: Multi-Manager Series which
offers that class at NAV. You must have an account existing in the Fund
or series selected for investment with the identical registered name. You
must elect this option on your account application or by a telephone
request to the Transfer Agent at 1-800-426-0107.

. Receive all distributions in cash (either paid directly to you or
credited to your account with your broker or other financial
intermediary). You must elect this option on your account application or
by a telephone request to the Transfer Agent at 1-800-426-0107.

You do not pay any sales charges on shares you receive through the
reinvestment of Fund distributions.

If you elect to receive Fund distributions in cash and the postal or other
delivery service is unable to deliver checks to your address of record, the
distributions will automatically be invested in the Money Market Fund until you
are located.

For further information on distribution options, please contact your broker
or call the Distributor at 1-800-426-0107.

Tax Consequences

. Taxes on Fund distributions. If you are subject to U.S. federal income
tax, you will be subject to tax on Fund distributions whether you received them
in cash or reinvested them in additional shares of the Funds. For federal income
tax purposes, Fund distributions will be taxable to you as either ordinary
income or capital gains.

Fund dividends (i.e., distributions of investment income) are taxable to
you as ordinary income. Federal taxes on Fund distributions of gains are
determined by how long the Fund owned the investments that generated the gains,
rather than how long you have owned your shares. Distributions of gains from
investments that a Fund owned for more than 12 months will generally be taxable
to you as capital gains. Distributions of gains from investments that the Fund
owned for 12 months or less will generally be taxable to you as ordinary income.

Fund distributions are taxable to you even if they are paid from income or
gains earned by a Fund prior to your investment and thus were included in the
price you paid for your shares. For example, if you purchase shares on or just
before the record date of a Fund distribution, you will pay full price for the
shares and may receive a portion of your investment back as a taxable
distribution.

. Taxes when you sell (redeem) or exchange your shares. Any gain resulting
from the sale of Fund shares will generally be subject to federal income tax.
When you exchange shares of a Fund for shares of another series, the transaction
will be treated as a sale of the Fund shares for these purposes, and any gain on
those shares will generally be subject to federal income tax.

48
<PAGE>

. Consult your tax advisor about other possible tax consequences. This is
a summary of certain federal income tax consequences of investing in a Fund. You
should consult your tax advisor for more information on your own tax situation,
including possible state, local and foreign tax consequences.

. A Note on the Real Return Bond Fund. Periodic adjustments for inflation
to the principal amount of an inflation-indexed bond may give rise to original
issue discount, which will be includable in the Fund's gross income. Due to
original issue discount, the Fund may be required to make annual distributions
to shareholders that exceed the cash received, which may cause the Fund to
liquidate certain investments when it is not advantageous to do so. Also, if the
principal value of an inflation-indexed bond is adjusted downward due to
deflation, amounts previously distributed in the taxable year may be
characterized in some circumstances as a return of capital.

. A Note on the Municipal Bond Fund. 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. Dividends derived from taxable interest or capital gains will be subject
to federal income tax. If the Fund invests in "private activity bonds," certain
shareholder may become subject to alternative minimum tax on the part of the
Fund's distributions derived from interest on such bonds.

49
<PAGE>

Characteristics and Risks of Securities and
Investment Techniques

U.S. Government Securities

Corporate Debt Securities

Corporate debt securities are subject to the risk of the issuer's inability to
meet principal and interest payments on the obligation and may also be subject
to price volatility due to such factors as interest rate sensitivity, market
perception of the credit-worthiness of the issuer and general market liquidity.
When interest rates rise, the value of corporate debt securities can be expected
to decline. Debt securities with longer maturities tend to be more sensitive to
interest rate movements than those with shorter maturities.

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in the
interest rate paid on the obligations. Each Fixed Income Fund may invest in
floating rate debt instruments (``floaters'') and (except the Money Market and
Municipal Bond Funds) engage in credit spread trades. While floaters provide a
certain degree of protection against rises in interest rates, a Fund will
participate in any declines in interest rates as well. Each Fixed Income Fund
(except the Money Market and Municipal Bond Funds) may also invest in inverse
floating rate debt instruments (``inverse floaters''). An inverse floater may
exhibit greater price volatility than a fixed rate obligation of similar credit
quality. A Fund may not invest more than 5% of its net assets in any combination
of inverse floater, interest only, or principal only securities.

Foreign Securities

50
<PAGE>

frequency and volume than domestic securities and therefore may exhibit greater
price volatility. Investments in foreign securities may also involve higher
custodial costs than domestic investments and additional transaction costs with
respect to foreign currency conversions. Changes in foreign exchange rates also
will affect the value of securities denominated or quoted in foreign currencies.

Emerging Market Securities. The Emerging Markets Bond Fund invests
primarily in securities of issuers based in countries with developing (or
"emerging market") economies, while the Short-Term and Low Duration Funds may
invest up to 5% of their assets in such securities and each remaining Fund that
may invest in foreign securities may invest up to 10% of its assets in such
securities. Investing in emerging market securities imposes risks different
from, or greater than, risks of investing in domestic securities or in foreign,
developed countries. These risks include: smaller market capitalization of
securities markets, which may suffer periods of relative illiquidity;
significant price volatility; restrictions on foreign investment; possible
repatriation of investment income and capital. In addition, foreign investors
may be required to register the proceeds of sales; future economic or political
crises could lead to price controls, forced mergers, expropriation or
confiscatory taxation, seizure, nationalization, or creation of government
monopolies. The currencies of emerging market countries may experience
significant declines against the U.S. dollar, 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.

Foreign Currencies

A Fund that invests directly in foreign currencies or in securities that
trade in, or receive revenues in, foreign currencies will be subject to currency
risk. Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by 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. Currency exchange rates also can be affected unpredictably by
intervention (or the failure to intervene) by U.S. or foreign governments or
central banks, or by currency controls or political developments. For example,
significant uncertainty surrounds the recent introduction of the euro (a common
currency unit for the European Union) in January 1999 and the effect it may have
on the value of securities denominated in local 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.

51
<PAGE>

High Yield Securities

Inflation-Indexed Bonds

52
<PAGE>

adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-
indexed bonds. For bonds that do not provide a similar guarantee, 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 are tied to the
relationship between nominal interest rates and the rate of inflation. If
nominal interest rates increase at a faster rate than inflation, real interest
rates may rise, leading to a decrease in value of inflation-indexed bonds.
Short-term increases in inflation may lead to a decline in value. 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.

Derivatives

53
<PAGE>

Convertible Securities

Each Fund (except the Money Market and Municipal Bond Funds) may invest in
convertible securities. Convertible securities are generally preferred stocks
and other securities, including fixed income securities and warrants, that are
convertible into or exercisable for common stock at a stated price or rate. The
price of a convertible security will normally vary in some proportion to changes
in the price of the underlying common stock because of this conversion or
exercise feature. However, the value of a convertible security may not increase
or decrease as rapidly as the underlying common stock. A convertible security
will normally also provide income and is subject to interest rate risk.
Convertible securities may be lower-rated securities subject to greater levels
of credit risk. A Fund may be forced to convert a security before it would
otherwise choose, which may have an adverse affect on the Fund's ability to
achieve its investment objective.

Mortgage-Related and Other Asset-Backed Securities

Each Fund (except the 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. Mortgage-related securities include mortgage pass-through
securities, collateralized mortgage obligations ("CMOs"), commercial mortgage-
backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-
backed securities ("SMBSs") and other securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property.

54
<PAGE>

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 shorten or extend the effective maturity of the security beyond what was
anticipated at the time of purchase. If unanticipated rates of prepayment on
underlying mortgages increase the effective maturity of a mortgage-related
security, the volatility of the security can be expected to increase. The value
of these securities may fluctuate in response to the market's perception of the
creditworthiness of the issuers. Additionally, although mortgages and mortgage-
related securities are generally supported by some form of government or private
guarantee and/or insurance, there is no assurance that private guarantors or
insurers will meet their obligations.

One type of SMBS has one class receiving all of the interest from the mortgage
assets (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 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. A Fund may not invest more than 5% of its net
assets in any combination of IO, PO, or inverse floater securities. The Funds
may invest in other asset-backed securities that have been offered to investors.

Municipal Bonds

Municipal bonds are generally issued by states and local governments and their
agencies, authorities and other instrumentalities. Municipal bonds are subject
to interest rate, credit and market risk. The ability of an issuer to make
payments could be affected by litigation, legislation or other political events
or the bankruptcy of the issuer. Lower rated municipal bonds are subject to
greater credit and market risk than higher quality municipal bonds.

Loan Participations and Assignments

Certain Funds may invest in fixed- and floating-rate loans, which investments
generally will be in the form of loan participations and assignments of portions
of such loans. Participations and assignments involve special types of risk,
including credit risk, interest rate risk, liquidity risk, and the risks of
being a lender. 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.

Delayed Funding Loans and Revolving Credit Facilities

The Funds (except the Money Market and Municipal Bond Funds) may also enter
into, or acquire participations in, delayed funding loans and revolving credit
facilities, in which a 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 segregate assets determined to be liquid by PIMCO in accordance with
procedures established by the Board of Trustees in an amount sufficient to meet
such commitments. Delayed funding loans and revolving credit facilities are
subject to credit, interest rate and liquidity risk and the risks of being a
lender.

Loans of Portfolio Securities

For the purpose of achieving income, each Fund may lend its portfolio
securities to brokers, dealers, and other financial institutions provided a
number of conditions are satisfied, including that the loan is fully
collateralized. Please see "Investment Objectives and Policies" in the Statement
of Additional Information for details. When a Fund lends portfolio securities,
its investment performance will continue to reflect changes in the value of the
securities loaned, and the Fund will also receive a fee or interest on the
collateral. Securities lending

55
<PAGE>

involves the risk of loss of rights in the collateral or delay in recovery of
the collateral if the borrower fails to return the security loaned or becomes
insolvent. A Fund may pay lending fees to a party arranging the loan.

Short Sales

Each Fund (except the High Yield and StocksPLUS Funds) may make short sales
as part of its overall portfolio management strategies or to offset a potential
decline in value of a security. A short sale involves the sale of a security
that is borrowed from a broker or other institution to complete the sale. The
Global Bond Fund II may only make short sales if the security sold short is held
in the Fund's portfolio or if the Fund has the right to acquire the security
without the payment of further consideration (a "short sale against the box").
For these purposes, a Fund may also hold or have the right to acquire securities
which, without the payment of any further consideration, are convertible into or
exchangeable for the securities sold short. Short sales expose a Fund to the
risk that it will be required to acquire, convert or exchange securities to
replace the borrowed securities (also known as "covering" the short position) at
a time when the securities sold short have appreciated in value, thus resulting
in a loss to the Fund. A Fund making a short sale (other than a "short sale
against the box") must segregate assets determined to be liquid by PIMCO in
accordance with procedures established by the Board of Trustees or otherwise
cover its position in a permissible manner.

When-Issued, Delayed Delivery and Forward Commitment Transactions

Repurchase Agreements

Reverse Repurchase Agreements, Dollar Rolls And Other Borrowings

Hybrid Instruments

56
<PAGE>

may be leveraged and move (up or down) more steeply and rapidly than the
benchmark. 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. Hybrids also entail credit risk. A Fund may not invest more than
5% of its assets in hybrid instruments.

Catastrophe Bonds

Each Fixed Income Fund (except the Money Market Fund) and the StocksPLUS Fund
may invest in ``catastrophe bonds,'' which 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. If a trigger event occurs, a Fund may lose a portion or all of
its principal invested in the bond. Catastrophe bonds often provide for an
extension of maturity to process and audit loss claims where a trigger event
has, or possibly has, occurred. An extension of maturity may increase
volatility. Catastrophe bonds may also expose the Fund to certain unanticipated
risks including credit risk, adverse regulatory or jurisdictional
interpretations, and adverse tax consequences. Catastrophe bonds may also be
subject to liquidity risk.

Portfolio Turnover

Illiquid Securities

Investment in Other Investment Companies

Year 2000 Readiness Disclosure

57
<PAGE>

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 securities markets or
economies, generally.

Changes in Investment Objectives and Policies

Percentage Investment Limitations

Other Investments and Techniques

58
<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the financial
performance of Class A, Class B and Class C shares of each Fund for the past 5
years or, if the class is less than 5 years old, since the class of shares was
first offered. Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that an investor would
have earned or lost on an investment in a particular class of shares of a Fund,
assuming reinvestment of all dividends and distributions. This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with each Fund's
financial statements, are included in the Trust's annual report to shareholders.
The annual report is incorporated by reference in the Statement of Additional
Information and is available free of charge upon request from the Distributor.

59
<PAGE>

Net Asset Net Realized and Total Income Dividends Dividends in Distributions Distributions
Year or Value Next Unrealized Gain (Loss) from from Net Excess of Net from Net in Excess of
Period Beginning Investment (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> <C>
Money Market Fund
Class A
03/31/99
03/31/98
03/31/97(a)
Class B
03/31/99
03/31/98
03/31/97(a)
Class C
03/31/99
03/31/98
03/31/96(a)
Short-Term Fund
Class A
03/31/99
03/31/98
03/31/97(a)
Class B
03/31/99
03/31/98
03/31/97(b)
Class C
03/31/99
03/31/98
03/31/96(a)
Low Duration Fund
Class A
03/31/99
03/31/98
03/31/97(a)
Class B
03/31/99
03/31/98
03/31/97(a)
Class C
03/31/99
03/31/98
03/31/97(a)
</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.

60
<PAGE>

</TABLE>

61
<PAGE>

<TABLE>
<CAPTION>
Net Asset Net Realized and Total Income Dividends Dividends in Distributions Distributions
Year or Value Next Unrealized Gain (Loss) from from Net Excess of Net from Net in Excess of
Period Beginning Investment (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> <C>
Total Return Fund
Class A
03/31/99
03/31/98
03/31/97(a)
Class B
03/31/99
03/31/98
03/31/97(a)
Class C
03/31/99
03/31/98
03/31/97(a)
Long-Term U.S. Government Fund
Class A
03/31/99
03/31/98
03/31/97(a)
Class B
03/31/99
03/31/98
03/31/97(b)
Class C
03/31/99
03/31/98
03/31/96(a)
Global Bond Fund II
Class A
03/31/99
03/31/98
10/01/96-03/31/97
09/30/96(c)
Class B
03/31/99
03/31/98
10/01/96-03/31/97
09/30/96(c)
Class C
03/31/99
03/31/98
10/01/96-03/31/97
09/30/96(c)
Foreign Bond Fund
Class A
03/31/99
3/31/98
03/31/97(b)
Class B
03/31/99
03/31/98
03/31/97(b)
Class C
03/31/99
03/31/98
03/31/97(b)
</TABLE>
- ------------
* Unaudited
(c) From commencement of operations, October 2, 1995.
(d)

62
<PAGE>

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>

</TABLE>

- ----------
* Unaudited
(e)
(f)

63
<PAGE>

Real Return Bond Fund
Class A
03/31/99
03/31/98
03/31/97(h)
Class B
03/31/99
03/31/98
03/31/97(h)
Class C
03/31/99
03/31/98
03/31/97(h)

StocksPLUS Fund
Class A
03/31/99
03/31/98
03/31/97(b)
Class B
03/31/99
03/31/98
03/31/97(b)
Class C
03/31/99
03/31/98
03/31/97(b)
</TABLE>
____________
* Unaudited
(g) From commencement of operations, July 31, 1997.
(h) From commencement of operations, January 29, 1997.

64
<PAGE>

</TABLE>
___________________
+ Annualized.

65
<PAGE>

Appendix A
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

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.

A-1
<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.

Corporate Short-Term Debt Ratings

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

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.

A-2
<PAGE>

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is
being paid.

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.

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.

A-3
<PAGE>

Commercial Paper Rating Definitions

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.

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.

A-4
<PAGE>

[Back Cover Page]

PIMCO Funds: Pacific Investment Management Series

The Trust's Statement of Additional Information ("SAI") and annual and semi-
annual reports to shareholders include additional information about the Funds.
The SAI and the financial statements included in the Funds' most recent annual
report to shareholders are incorporated by reference into this Prospectus, which
means they are part of this Prospectus for legal purposes. The Funds' annual
report discusses the market conditions and investment strategies that
significantly affected each Fund's performance during its last fiscal year.

The SAI includes the PIMCO Funds Shareholders Guide for Class A, B and C Shares,
a separate booklet which contains more detailed information about Fund purchase,
redemption and exchange options and procedures and other information about the
Funds. You can get a free copy of the Guide together with or separately from
the rest of the SAI.

You may get free copies of any of these materials, request other information
about a Fund, or make shareholder inquiries by calling 1-800-426-0107, or by
writing to:

PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, Connecticut 06902

You can also visit our Web site at www.pimcofunds.com for additional information
about the Funds.

[LOGO]

File no. 811-5028
<PAGE>

[Front cover]

PIMCO Funds Prospectus

PIMCO Funds: Pacific Investment Management Series
August 1, 1999

Share Class
D

This Prospectus describes 10 mutual funds offered by PIMCO Funds: Pacific
Investment Management Series. The Funds provide access to the professional
investment advisory services offered by Pacific Investment Management Company.

The Funds offer Class D shares in this Prospectus. You can buy Class D shares
only through your financial service firm, such as your broker-dealer or a
registered investment adviser.

You can call PIMCO Funds Distributors LLC, the Funds' Distributor, at 1-888-87-
PIMCO to find out more about the Funds and other funds in the PIMCO Funds family
and to learn about other classes of shares that you can purchase directly from
the Trust or the Distributor. You can also visit our web site at
www.pimcofunds.com.

This Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.

Table of Contents

2
<PAGE>

Summary Information

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality(1) Foreign(2)
---------------- -------- -------------- -------
<S> <C> <C> <C> <C>
Short Duration Bond Funds

Short-Term Money market instruments and short maturity fixed 0-1 year B to Aaa; max 10% 0-5%
income securities below Baa
Low Duration Short and intermediate maturity fixed income 1-3 years B to Aaa; max 10% 0-20%
securities below Baa
Intermediate Duration Bond Funds
Total Return Intermediate maturity fixed income securities 3-6 years B to Aaa; max 10% 0-20%
below Baa
Total Return Mortgage Intermediate maturity mortgage-related fixed income 2-6 years Baa to Aaa; max 10% 0%
securities below Baa
International Bond Funds
Foreign Bond Intermediate maturity hedged foreign fixed income 3-7 years B to Aaa; max 10% greater
securities below Baa than or
equal to
85%
High Yield Bond Funds
High Yield Higher yielding fixed income securities 2-6 years B to Aaa; min 65% 0%
below Baa
Tax Exempt Bond Funds
Municipal Bond Investment grade municipal securities (tax-exempt 3-10 years B to Aaa; max 10% 0%
bonds) below Baa
Inflation-Indexed Bond Funds
Real Return Bond Inflation-indexed fixed income securities N/A B to Aaa; max 10% 0-35%
below Baa
Stock and Bond Funds
Strategic Balanced The same types of securities as the Total Return 0-6 years B to Aaa; max 10% 0-20%
and StocksPLUS Funds below Baa
Enhanced Index Stock Funds
StocksPLUS S&P 500 stock index derivatives backed by a 0-1 year B to Aaa; max 10% 0-20%
portfolio of short-term fixed-income securities 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 Foreign Bond Fund. The percentage limitation for that Fund
relates to securities of foreign issuers, denominated in any currency. Each
Fund (except the Municipal Bond Fund) may invest beyond these limits in U.S.
dollar-denominated securities of foreign issuers.

3
<PAGE>

Fixed Income Instruments

The "Fixed Income Funds" are the Short-Term, Low Duration, Real Return Bond,
Total Return, Total Return Mortgage, High Yield, Municipal Bond and Foreign Bond
Funds. Each Fixed Income Fund 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. Each Fixed Income Fund invests at least 65% of its
assets in "Fixed Income Instruments," which as used in this Prospectus includes:

Ratings of Debt Securities

Investment Grade Debt Securities are those receiving ratings from at least one
NRSRO in one of the four highest rating categories or, if unrated by any NRSRO,
deemed comparable by PIMCO.

Fund Descriptions, Performance and Fees

4
<PAGE>

PIMCO Short-Term Fund Fund Category - Short Duration Bond

Investment Objective
Seeks maximum current income, consistent
with preservation of capital and daily
liquidity

Fund Focus
Money market instruments and short
maturity fixed income securities

Portfolio Manager
A team led by
William H. Gross

Fund Inception Date
10/7/87

Average Portfolio Duration
0-1 year

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The Average Annual Total Returns table also shows estimated historical
performance for Class D shares. Prior to the inception date of Class D shares
(4/8/98), performance is based on the performance of Institutional Class shares,
adjusted to reflect the higher 12b-1/service fees and other expenses paid by
Class D shares. Past performance is no guarantee of future results.

5
<PAGE>

Calendar Year Total Returns

<TABLE>
<CAPTION>
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.44 8.47 6.65 3.63 4.62 2.90 9.21 7.00 6.51 5.74
</TABLE>

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/95 - 12/31/95) 2.60%
Lowest (1/1/94 - 3/31/94) 0.19%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- ----------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 5.74% 6.25% 6.40%
- ----------------------------------------------------------------
Class D 5.43% 5.93% 6.08%
- ----------------------------------------------------------------
Lipper Money Market Index* 5.07% 4.90% 5.33%
- ----------------------------------------------------------------
Lipper Ultrashort Obligation 5.31% 5.38% 5.84%
Fund Average*
</TABLE>

* The Lipper Money Market Index is an index of the 30 largest money market
funds. The index reflects fees charged by each fund in the index. It is not
possible to invest directly in the index. The Lipper Ultrashort Obligation 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 or better, and maintain a portfolio dollar-weighted
average maturity between 91 days and 365 days. It does not take into account
sales charges.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
the noted class of shares for the time periods indicated, your investment has a
5% return each year and the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, the Examples show what your costs
would be based on these assumptions.

<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
Distribution Total Annual redeem your shares at the end of each period
Advisory Fees Admini- and/or Service Fund Operating Year
Fees strative (12b-1) Fees(1) Expenses 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D 0.25% 0.25% 0.25% 0.75% $77 $240 $417 $930
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.50% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

6
<PAGE>

PIMCO Low Duration Fund Fund Category - Short Duration Bond

Investment Objective
Seeks maximum total return, consistent
with preservation of capital and
prudent investment management

Fund Focus
Short and intermediate maturity fixed
income securities

Portfolio Manager
William H. Gross

Fund Inception Date
5/11/87

Average Portfolio Duration
1-3 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

The Fund may invest all of its assets in derivative instruments, such as
options, futures contracts or swap agreements, or in mortgage- or asset-backed
securities. The Fund may lend its portfolio securities to brokers, dealers and
other financial institutions to earn income. The Fund may enter into a series
of purchase and sale contracts or use other investment techniques to obtain
market exposure to the securities in which it primarily invests. For temporary,
defensive or emergency purposes, the Fund may invest without limit in U.S. debt
securities, including short-term money market securities, when the Adviser
deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns
table show performance of the Fund's Institutional Class shares, which are
offered in a different prospectus. This is because the Fund has not offered
Class D shares for a full calendar year. Although Class D and Institutional
Class shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class D performance
would be lower than Institutional Class performance because of the higher
expenses paid by Class D shares. The Average Annual Total Returns table also
shows estimated historical performance for Class D shares. Prior to the
inception date of Class D shares (4/8/98), performance is based on the
performance of Institutional Class shares, adjusted to reflect the higher 12b-
1/service fees and other expenses paid by Class D shares. Past performance is no
guarantee of future results.

7
<PAGE>

Calendar Year Total Returns

<TABLE>
<CAPTION>
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
11.60 9.05 13.46 7.69 7.76 0.63 11.93 6.14 8.24 7.16
</TABLE>

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (4 /1/89 - 6/30/89) 5.52%
Lowest (1/1/94 -3/31/94) -0.32%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 Year 5 Years 10 Years
Institutional Class 7.16% 6.75% 8.31%
- ----------------------------------------------------------
Class D 6.81% 6.41% 7.97%
- ----------------------------------------------------------
Merrill Lynch 1-3 Year 7.00% 5.99% 7.37%
Treasury Index*
- ----------------------------------------------------------
Lipper Short Investment 5.78% 5.41% 7.02%
Grade Debt Fund Average*
</TABLE>

* The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of U.S
Treasury obligations having maturities from one to 2.99 years. It is not
possible to invest directly in the index. The Lipper Short 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 (rated in the top four grades) with dollar-weighted
portfolio average maturities of less than three years. It does not take into
account sales charges.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from
Fund assets):

<TABLE>
<CAPTION>
Admini- Distribution Total Annual Example: Assuming you either redeem or do not
Advisory strative and/or Service Fund Operating redeem your shares at the end of each period Year
Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D 0.25% 0.25% 0.25% 0.75% $77 $240 $417 $930
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

8
<PAGE>

PIMCO Total Return Fund Fund Category - Intermediate Duration Bond

Investment Objective
Seeks maximum total return, consistent
with preservation of capital and
prudent investment management

Fund Focus
Intermediate maturity fixed income securities

Portfolio Manager
William H. Gross

Fund Inception Date
5/11/87

Average Portfolio Duration
3-6 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

The Fund may invest up to 10% of its assets in high yield securities rated B or
higher by Moody's or S&P or, if unrated, determined by the Adviser to be of
comparable quality. The Fund also 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.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The Average Annual Total Returns table also shows estimated historical
performance for Class D shares. Prior to the inception date of Class D shares

9
<PAGE>

(4/8/98), performance is based on the performance of Institutional Class shares,
adjusted to reflect the higher 12b-1/service fees and other expenses paid by
Class D shares. Past performance is no guarantee of future results.

Calendar Year Total Returns

[Plot points for bar chart:]

<TABLE>

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
14.24 8.05 19.55 9.73 12.51 -3.58 19.77 4.69 10.16 9.76
</TABLE>

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (4/1/89 - 6/30/89) 8.26%
Lowest (1/1/94 - 3/31/94) -2.69%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 9.76% 7.89% 10.29%
- ------------------------------------------------------------------------
Class D 9.43% 7.56% 9.96%
- ------------------------------------------------------------------------
Lehman Aggregate Bond Index* 8.69% 7.27% 9.26%
- ------------------------------------------------------------------------
Lipper Intermediate Investment Grade 7.25% 6.35% 8.28%
Debt Fund Average*
</TABLE>

* The Lehman Brothers Aggregate Bond Index is an unmanaged index of fixed income
securities. It is not possible to invest directly in the index. 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 (rated in the top four
grades) with dollar-weighted portfolio average maturities of five to ten years.
It does not take into account sales charges.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

10
<PAGE>

PIMCO Total Return Mortgage Fund Fund Category - Intermediate Duration Bond

Investment Objective
Seeks maximum total return, consistent with preservation of capital and prudent
investment management

Fund Focus
Intermediate maturity fixed income securities

Portfolio Manager
Pasi Hamalainen

Fund Inception Date
7/31/97

Average Portfolio Duration
2-6 years

Credit Quality
Baa to Aaa; maximum 10% below Aaa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Foreign Investment Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

11
<PAGE>

Calendar Year Total Returns

[Plot points for bar chart:]

More Recent Return Information
12/31/98-06/30/99 ____%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/97 - 12/31/97) 3.18%
Lowest (10/1/98 - 12/31/98) 0.36%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
Fund Inception
1 Year (7/31/97)
-------- --------------
<S> <C> <C>
Institutional Class 7.23% 8.66%

Class D 6.81% 8.24%

Lehman Mortgage Index* 6.96% 7.38%

Lipper U.S. Mortgage Fund Average* 6.08% 6.52%
</TABLE>

* The Lehman Brothers Mortgage Index is an unmanaged index of mortgage-related
fixed income securities. It is not possible to invest directly in the index. The
Lipper U.S. Mortgage 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 mortgages/securities issued or guaranteed as to principal and interest
by the U.S. government and certain federal agencies. It does not take into
account sales charges.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.65% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

12
<PAGE>

PIMCO Foreign Bond Fund Fund Category - International Bond

Investment Objective
Seeks maximum total return, consistent with preservation of capital and prudent
investment management

Fund Focus
Intermediate maturity hedged foreign fixed income securities

Portfolio Manager
Lee R. Thomas, III

Fund Inception Date
12/3/92

Average Portfolio Duration
3-7 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

The Fund invests under normal circumstances at least 85% of its assets in Fixed
Income Instruments of issuers located outside the United States, representing at
least three foreign countries, which may be represented by futures contracts
(including related options) with respect to such securities, and options on such
securities. Such securities normally are denominated in major foreign
currencies or baskets of foreign currencies (such as the euro). The Fund will
normally hedge at least 75% of its exposure to foreign currency.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Foreign Investment Risk
. Currency Risk
. Concentration Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

13
<PAGE>

Class D performance would be lower than Institutional Class performance because
of the higher expenses paid by Class D shares.

Calendar Year Total Returns

[Plot points for bar chart:]

More Recent Return Information
12/31/98-06/30/99 ____%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/95 - 12/31/95) 7.84%
Lowest (1/1/94 - 3/31/94) -5.80%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
Fund Inception
1 Year 5 Years (12/3/92)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 10.03% 10.01% 11.18%
- --------------------------------------------------------------------------------
Class D 9.55% 9.53% 10.70%
- --------------------------------------------------------------------------------
J.P. Morgan Non-U.S. Index (Hedged)* 12.09% 9.45% 10.24%
- --------------------------------------------------------------------------------
Lipper International Income Fund Average* 11.91% 6.55% 8.01%
</TABLE>

* The J.P. Morgan Non-U.S. Index (Hedged) in an unmanaged index representative
of the total return performance in U.S. dollars of major non-U.S. bond markets.
It is not possible to invest directly in the index. The Lipper International
Income Fund Average is a total return performance average of Funds tracked by
Lipper Analytical Services, Inc. that invest primarily in U.S. dollar and non-
U.S. dollar debt securities of issuers located in at least three countries,
excluding the United States, except in periods of market weakness. It does not
take into account sales charges. The Fund began operations on 12/3/92. Index
comparisons being on 11/30/92.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.70% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

14
<PAGE>

PIMCO High Yield Fund Fund Category - High Yield Bond

Investment Objective
Seeks maximum total return, consistent
with preservation of capital and
prudent investment management

Fund Focus
Higher yielding fixed income securities

Portfolio Manager
Benjamin Trosky

Fund Inception Date
12/16/92

Average Portfolio Duration
2-6 years

Credit Quality
B to Aaa; minimum 65% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Foreign Investment Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

15
<PAGE>

Calendar Year Total Returns

[Plot points for bar chart:]
<TABLE>

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- -- -- -- 18.70 2.39 20.68 11.68 13.21 6.54
</TABLE>

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (1/1/93 - 3/31/93) 6.27%
Lowest (7/1/98 - 9/30/98) -1.76%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
Fund Inception
1 Year 5 Years (12/16/92)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 6.54% 10.73% 11.98%
- ---------------------------------------------------------------------------
Class D 6.15% 10.32% 11.57%
- ---------------------------------------------------------------------------
Lehman Brothers BB 5.74% 9.09% 10.00%
Intermediate Corporate Index*
- ---------------------------------------------------------------------------
Lipper High Current Yield Fund -0.44% 7.37% 9.36%
Average*
</TABLE>

* The Lehman Brothers BB Intermediate Corporate Index is an unmanaged index
comprised of various fixed income securities rated BB. It is not possible to
invest directly in the index. The Lipper High Current Yield Fund Average is a
total return performance average of Funds tracked by Lipper Analytical Services,
Inc. that aim at high (relative) current yield from fixed income securities,
have no quality or maturity restrictions, and tend to invest in lower grade debt
issues. It does not take into account sales charges. The Fund began operations
on 12/16/92. Index comparisons begin on 12/31/92.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.65% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

16
<PAGE>

PIMCO Municipal Bond Fund Fund Category - Tax Exempt Bond

Investment Objective
Seeks high current income exempt from
federal income tax, consistent with
preservation of capital. Capital
appreciation is a secondary objective.

Fund Focus
Investment grade municipal securities
(tax-exempt bonds)

Portfolio Manager
Benjamin Ehlert

Fund Inception Date
12/31/97

Average Portfolio Duration
3-10 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

The Fund may purchase and write call and put options, 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. The Fund may enter into
a series of purchase and sale contracts or use other investment techniques to
obtain market exposure to the securities in which it primarily invests. For
temporary, defensive or emergency purposes, the Fund may invest without limit in
U.S. debt securities, including short-term money market securities, when the
Adviser deems it is appropriate to do so.

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The Average Annual Total Returns table also shows estimated historical

17
<PAGE>

performance for Class D shares. Prior to the inception date of Class D shares
(4/8/98), performance is based on the performance of Institutional Class shares,
adjusted to reflect the higher 12b-1/service fees and other expenses paid by
Class D shares. Past performance is no guarantee of future results.

Calendar Year Total Returns

[Plot points for bar chart:]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-- -- -- -- -- -- -- -- -- 6.07

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (7/1/98 - 9/30/98) 3.33%
Lowest (10/1/98 - 12/31/98) 0.18%

Average Annual Total Returns (for periods ended 12/31/98)

Fund Inception
1 Year (12/31/97)
- --------------------------------------------------------------
Institutional Class 6.07% 6.07%
- --------------------------------------------------------------
Class D 5.68% 5.68%
- --------------------------------------------------------------
Lehman General Municipal Bond 6.48% 6.48%
Index*
- --------------------------------------------------------------
Lipper General Municipal Fund 5.32% 5.32%
Average*

* The Lehman General Municipal Bond Index is an unmanaged index of municipal
bonds. It is not possible to invest directly in the index. The Lipper General
Municipal 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.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from you investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
Example: Assuming you either redeem or do not
Administrative Distribution Total Annual redeem your shares at the end of each period
Advisory Fees and/or Service Fund Operating Year
Fees (12b-1) Fees(1) Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class D 0.25% 0.35% 0.25% 0.85% $87 $271 $471 $1,049
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total fees
paid under the administration agreement may be Distribution and/or Service (12b-
1) Fees. The Fund will pay a total of 0.60% per year under the administration
agreement regardless of whether a portion or none of the 0.25% authorized under
the plan is paid under the plan. Please see "Management of the Funds -
Investment Adviser and Administrator - Administrative Fees" for details. The
Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

<PAGE>

PIMCO Real Return Bond Fund Fund Category - Inflation-Indexed Bond

Investment Objective
Seeks maximum real return, consistent with preservation of capital and prudent
investment management

Fund Focus
Inflation-indexed fixed income securities

Portfolio Manager
John Brynjolfsson

Fund Inception Date
1/29/97

Average Portfolio Duration
See description below

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared daily and distributed monthly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Interest Rate Risk
. Credit Risk
. Market Risk
. Issuer Risk
. Derivatives Risk
. Concentration Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

19
<PAGE>

Although Class D and Institutional Class shares would have similar annual
returns (because all the Fund's shares represent interests in the same portfolio
of securities), Class D performance would be lower than Institutional Class
performance because of the higher expenses paid by Class D shares.

Calendar Year Total Returns

[Plot points for bar chart:]

More Recent Return Information
12/31/98-06/30/99 ____%

Quarterly Return Information
(for periods shown in the bar chart)

Highest (7/1/98 - 9/30/98) 3.19%
Lowest (10/1/98 - 12/31/98) -0.05%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<CAPTION>
Fund Inception
1 Year (1/29/97)
- ------------------------------------------------------------------------------
<S> <C> <C>
Institutional Class 5.21% 4.83%
- ------------------------------------------------------------------------------
Class D 4.80% 4.42%
- ------------------------------------------------------------------------------
Lehman Brothers Inflation Linked Treasury Index* 3.95% 3.32%
- ------------------------------------------------------------------------------
Lipper Short U.S. Government Fund Average* 5.83% 5.78%
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.65% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

20
<PAGE>

PIMCO Strategic Balanced Fund Fund Category - Stock and Bond

Investment Objective
Seeks maximum total return, consistent
with preservation of capital and
prudent investment management

Fund Focus
Securities eligible for purchase by the
Total Return and StocksPLUS Funds

Portfolio Manager
A team led by
William H. Gross

Fund Inception Date
6/28/96

Average Portfolio Duration
0-6 years

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared and distributed quarterly

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

. Market Risk
. Issuer Risk
. Interest Rate Risk
. Credit Risk
. Derivatives Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

21
<PAGE>

Calendar Year Total Returns

[Plot points for bar chart:]

<TABLE>

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- -- -- -- -- -- -- -- 24.17 19.66
</TABLE>

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (4/1/97 - 6/30/97) 12.23%
Lowest (7/1/98 - 9/30/98) -4.60%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
Fund Inception
1 Year (6/28/96)
- ----------------------------------------------------------
<S> <C> <C>
Institutional Class 19.66% 21.72%
- ----------------------------------------------------------
Class D 19.15% 21.25%
- ----------------------------------------------------------
Lipper Balanced Index* 15.03% 17.46%
- ----------------------------------------------------------
Lipper Balanced Fund Average* 13.50% 16.74%
</TABLE>

* The Lipper Balanced Index is an index of the 30 largest Balanced Funds equally
weighted. The index reflects performance which is net of fees charges by each
fund in the index. It is not possible to invest directly in the index. 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. The Fund began
operations on 6/28/96. Index comparisons begin on 6/30/96.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Funds Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem your shares at the end of each period
Advisory Fees strative and/or Service Fund Operating Year
Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D 0.40% 0.40% 0.25% 1.05% $107 $334 $579 $1,283
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.65% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

22
<PAGE>

PIMCO StocksPLUS Fund Fund Category - Enhanced Index Stock

Investment Objective
Seeks total return which exceeds that of the S&P 500

Fund Focus
S&P 500 stock index derivatives backed by a portfolio of short-term fixed income
securities

Portfolio Manager
A team led by William H. Gross

Fund Inception Date
5/13/93

Average Portfolio Duration
0-1 year

Credit Quality
B to Aaa; maximum 10% below Baa

Dividend Frequency
Declared and distributed quarterly

Principal Investments and Strategies

Principal Risks

. Market Risk
. Issuer Risk
. Derivatives Risk
. Credit Risk
. Interest Rate Risk
. Foreign Investment Risk
. Currency Risk
. Leveraging Risk
. Management Risk

Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns
table show performance of the Fund's

23
<PAGE>

Institutional Class shares, which are offered in a different prospectus. This is
because the Fund has not offered Class D shares for a full calendar year.
Although Class D and Institutional Class shares would have similar annual
returns (because all the Fund's shares represent interests in the same portfolio
of securities), Class D performance would be lower than Institutional Class
performance because of the higher expenses paid by Class D shares.

Calendar Year Total Returns

<TABLE>
<CAPTION>
[Plot points for bar chart:]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -- -- -- -- -- 2.92 40.52 23.07 32.85 28.33
</TABLE>

More Recent Return Information
12/31/98-06/30/99 ___%

Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 21.45%
Lowest (7/1/98 - 9/30/98) -9.77%

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
Fund Inception
1 Year 5 Years (5/13/93)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 28.33% 24.86% 23.62%
- -----------------------------------------------------------------
Class D 27.71% 24.35% 23.11%
- -----------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 22.63%
- -----------------------------------------------------------------
Lipper Growth & Income 15.61% 18.35% 17.71%
Fund Average*
</TABLE>

* The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index of
common stocks. It is not possible to invest directly in the index. The Lipper
Growth & Income Fund Average is a total return performance average of Funds
tracked by Lipper Analytical Services, Inc. that combine a growth-of-earnings
orientation and an income requirement for level and/or rising dividends. It does
not take into account sales charges. The Fund began operations on 5/13/93. Index
comparisons begin on 4/30/93.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Admini- Distribution Total Annual Example: Assuming you either redeem or do not redeem
Advisory strative and/or Service Fund Operating your shares at the end of each period Year
Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D 0.40% 0.40% 0.25% 1.05% $107 $334 $579 $1,283
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total fees
paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.65% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

24
<PAGE>

Summary of Principal Risks

The value of your investment in a Fund changes with the values of that
Fund's investments. Many factors can affect those values. The factors that are
most likely to have a material effect on a particular Fund's portfolio as a
whole are called "principal risks." The principal risks of each Fund are
identified in the Fund Summaries and are summarized in this section. The chart
at the end of this section identifies the principal risks of each Fund. Each
Fund may be subject to additional principal risks and risks other than those
described below because the types of investments made by a Fund can change over
time. Securities and investment techniques mentioned in this summary and
described in greater detail under "Characteristics and Risks of Securities and
Investment Techniques" appear in bold type. That section and "Investment
Objectives and Policies" in the Statement of Additional Information also include
more information about the Funds, their investments and the related risks.

25
<PAGE>

and credit risk. They also involve the risk of mispricing or improper valuation
and the risk that changes in the value of the derivative may not correlate
perfectly with the underlying asset, rate or index. Also, suitable derivative
transactions may not be available in all circumstances and there can be no
assurance that a Fund will engage in these transactions to reduce exposure to
other risks when that would be beneficial.

. Foreign Investment Risk. A Fund that invests in foreign securities may
experience more rapid and extreme changes in value than a Fund that invests
exclusively in securities of U.S. companies. The securities markets of many
foreign countries are relatively small, with a limited number of companies
representing a small number of industries. Additionally, issuers of foreign
securities are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of foreign countries
differ, in some cases significantly, from U.S. standards. Also,
nationalization, expropriation or confiscatory taxation, currency blockage,
political changes or diplomatic developments could adversely affect a Fund's
investments in a foreign country. In the event of nationalization,
expropriation or other confiscation, a Fund could lose its entire investment in
foreign securities. Adverse conditions in a certain region such as Southeast
Asia can adversely affect securities of other countries whose economies appear
to be unrelated.

. Concentration Risk. Concentration of investments in a small number of
issuers, industries or foreign currencies increases risk. The Real Return Bond
and Foreign Bond Funds are "non-diversified," which means that they may invest a
greater percentage of their assets in the securities of a single issuer than the
other Funds. Funds that invest in a relatively small number of issuers are more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a more diversified portfolio might be. Some of those issuers
also may present substantial credit or other risks.

. Leveraging Risk. When a Fund is borrowing money or otherwise leveraging
its portfolio, the value of an investment in that Fund will be more volatile and
all other risks will tend to be compounded. This is because leverage tends to
exaggerate the effect of any increase or decrease in the value of a Fund's
portfolio securities. Each Fund may take on leveraging risk by using reverse
repurchase agreements, dollar rolls and other borrowings, by investing
collateral from loans of portfolio securities or through the use of when-issued,
delayed-delivery or forward commitment transactions. Certain Funds may also take
on leveraging risk by using derivatives. The use of leverage may also cause a
Fund to liquidate portfolio positions when it may not be advantageous to do so
to satisfy its obligations or to meet segregation requirements.

26
<PAGE>

Principal Risks by Fund

The following chart identifies the Principal Risks associated with each Fund.
Risks not marked for a particular Fund may, however, still apply to some extent
to that Fund at various times.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Interest Foreign Concen- Manage-
Rate Credit Market Issuer Invest- Currency Deriva- Leverag- tration ment
Fund Risk Risk Risk Risk ment Risk Risk tives ing Risk Risk Risk
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
Low Duration * * * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
Total Return * * * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
Total Return Mortgage * * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
Foreign Bond * * * * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
High Yield * * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
Municipal Bond * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
Real Return Bond * * * * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
Strategic Balanced * * * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
StocksPLUS * * * * * * * * *
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

Management of the Funds

Investment Adviser and Administrator

PIMCO is located at 840 Newport Center Drive, Newport Beach, California
92660. Organized in 1971, PIMCO provides investment management and advisory
services to private accounts of institutional and individual clients and to
mutual funds. As of ____________, 1999, PIMCO had more than $_____ billion in
assets under management.

<TABLE>
<CAPTION>
Fund Advisory Fees
- --------------------------------------------------------------------------
<S> <C>
Fixed Income Funds 0.25%
Strategic Balanced and StocksPLUS Funds 0.40%
</TABLE>

Administrative Fees. Each Fund pays for the administrative services it
requires under a fee structure which is essentially fixed. Class D shareholders
of each Fund pay an administrative fee to PIMCO, computed as a percentage of the
Fund's assets attributable in the aggregate to that class of shares. PIMCO, in
turn, provides

27
<PAGE>

administrative services for Class D shareholders and also bears the costs of
various third-party services required by the Funds, including audit, custodial,
portfolio accounting, legal transfer agency and printing costs. The result of
this fee structure is an expense level for Class D shareholders of each Fund
that, with limited exceptions, is precise and predictable under ordinary
circumstances.

<TABLE>
<CAPTION>
Fund Administrative Fees*
- --------------------------------------------------------------------------------
<S> <C>
Short-Term Fund, Low Duration and Total Return Funds 0.25%
Municipal Bond Fund 0.35%
Total Return Mortgage, High Yield, Real Return Bond,
Strategic Balanced and StocksPLUS Funds 0.40%
Foreign Bond Fund 0.45%
</TABLE>

* As described below under "12b-1 Plan for Class D Shares," the administration
agreement includes a plan adopted in conformity with Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") which provides for the payment
of up to .25% of the .65% 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. In the "Summary Information" section above, the
"Annual Fund Operating Expenses" table provided under "Your Expenses" for each
Fund shows the .65% Administrative Fees rate under two separate columns entitled
"Administrative Fees" (.40%) and "Distribution and/or Service (12b-1) Fees"
(.25%).

. 12b-1 Plan for Class D Shares. The Funds' administration agreement
includes a plan for Class D shares that has been adopted in conformity with the
requirements set forth in Rule 12b-1 under the 1940 Act. The plan provides that
up to .25% per annum of the Class D administrative fees paid under the
administration agreement may represent 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 of Class D shares and/or
the provision of shareholder services. Because 12b-1 fees would be paid out of a
Fund's Class D share assets on an ongoing basis, over time these fees would
increase the cost of your investment in Class D shares and may cost you more
than other types of sales charges.

Individual Portfolio Managers. The following individuals have primary
responsibility for managing each of the noted Funds.

<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<C> <C> <C> <S>
Short-Term William H. Gross 1/98 Managing Director, Chief Investment Officer and a founding
Low Duration 5/87* partner of PIMCO. He leads a team which manages the
Total Return 5/87* Short-Term, Strategic Balanced and StocksPLUS Funds.
Strategic Balanced 1/98
StocksPLUS 1/98

Total Return Mortgage Pasi Hamalainen 7/97* Executive Vice President, PIMCO. He joined PIMCO as a
Portfolio Manager in 1994, and has managed assets for
various institutional accounts since that time.

High Yield Benjamin Trosky 12/92 Managing Director, PIMCO. He joined PIMCO as a Portfolio
Manager in 1990, and has managed assets for various
institutional accounts since that time.

Municipal Bond Benjamin Ehlert 12/97* Executive Vice President, PIMCO. He has been a Portfolio
Manager for PIMCO since 1986, and has managed assets for
various institutional accounts since that time.
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<C> <C> <C> <S>
Real Return Bond John Brynjolfsson 1/97* Senior Vice President, PIMCO. He joined PIMCO as a Portfolio
Manager in 1989, and has managed assets for various
institutional accounts since that time.

Foreign Bond Lee R. Thomas, III 7/95 Managing Director and Senior International Portfolio
Manager, PIMCO. He joined PIMCO as a Portfolio Manager in
1995, and has managed assets for various institutional
accounts since that time. Prior to joining PIMCO, he was
associated with Investcorp as a member of the management
committee responsible for global securities and foreign
exchange trading.
</TABLE>
_________________
* Since inception of the Fund.

How to Buy and Sell Shares

The following section provides basic information about how to buy, sell (redeem)
and exchange Class D shares of the Funds.

General Information

. Financial Service Firms. Broker-dealers, registered investment advisers
and other financial service firms provide varying investment products, programs
or accounts, pursuant to arrangements with the Distributor, through which their
clients may purchase and redeem Class D shares of the Funds. Firms will
generally provide or arrange for the provision of some or all of the shareholder
servicing and account maintenance services required by your account, including,
without limitation, transfers of registration and dividend payee changes. Firms
may also perform other functions, including generating confirmation statements
and disbursing cash dividends, and may arrange with their clients for other
investment or administrative services. Your firm may independently establish and
charge you transaction fees and/or other additional amounts for such services,
which could reduce your investment returns on Class D shares of the Funds.

Your financial service firm may have omnibus accounts and similar
arrangements with the Trust and may be paid for providing sub-transfer agency
and other services. A firm may be paid for its services directly or indirectly
by the Funds, PIMCO Advisors or an affiliate (normally not to exceed an annual
rate of 0.35% of a Fund's average daily net assets attributable to its Class D
shares and purchased through such firm for its clients). Your firm may establish
various minimum investment requirements for Class D shares of the Funds and may
also establish certain privileges with respect to purchases, redemptions and
exchanges of Class D shares or the reinvestment of dividends. Please contact
your firm for information.

This Prospectus should be read in connection with your firm's materials
regarding its fees and services.

. Calculation of Share Price and Redemption Payments. When you buy or
sell (redeem) Class D shares of the Funds, you pay or receive a price equal to
the NAV of the shares. NAVs are calculated as of the close of regular trading
(normally, 4:00 p.m. Eastern time) on the Exchange each day the Exchange is
open. See "How Fund Shares Are Priced" above for details. Generally, purchase
and redemption orders for Fund shares are processed at the NAV next calculated
after your order is received by the Distributor. In addition, orders received by
the Distributor from financial service firms after NAV is determined that day
will be processed at that day's NAV if the orders were received by the firm 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 7:00 p.m.,
Eastern time).

29
<PAGE>

Buying Shares

Class D shares of each Fund are continuously offered through financial
service firms, such as broker-dealers or registered investment advisers, with
which the Distributor has an agreement for the use of the Funds in particular
investment products, programs or accounts for which a fee may be charged. See
"Financial Service Firms" above.

You may purchase Class D shares only through your financial service firm.
In connection with purchases, your financial service firm is responsible for
forwarding all necessary documentation to the Distributor, and may charge you
for such services. If you wish to purchase shares of the Funds directly from
the Trust or the Distributor, you should inquire about the other classes of
shares offered by the Trust. Please call the Distributor at 1-888-87-PIMCO for
information about other investment options.

Class D shares of the Funds will be held in your account with your
financial service firm and, generally, your firm will hold your Class D shares
in nominee or street name as your agent. In most cases, the Trust's transfer
agent will have no information with respect to or control over accounts of
specific Class D shareholders and you may obtain information about your accounts
only through your financial service firm. In certain circumstances, your firm
may arrange to have your shares held in your own name or you may subsequently
become a holder of record for some other reason (for instance, if you terminate
your relationship with your firm). In such circumstances, please contact the
Distributor at 1-888-87-PIMCO for information about your account. In the
interest of economy and convenience, certificates for Class D shares will not be
issued.

The Distributor, in its sole discretion, 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 Commission, 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 assets, or during any other period as permitted by
the Securities and Exchange Commission for the protection of investors.

. Investment Minimums. The following investment minimums apply for
purchases of Class D shares.

<TABLE>
<CAPTION>
Initial Investment Subsequent Investments
- -----------------------------------------------------------------------------
<S> <C>
$2,500 per Fund $100 per Fund
</TABLE>

Your financial service firm may impose different investment minimums than
the Trust. For example, if your firm maintains an omnibus account with a
particular Fund, the firm may impose higher or lower investment minimums than
the Trust when you invest in Class D shares of the Fund through your firm.
Please contact your firm for information.

Exchanging Shares

You may exchange your Class D shares of any Fund for Class D shares of any
other Fund or any series of PIMCO Funds: Multi-Manager Series that offers Class
D shares. Shares are exchanged on the basis of their respective NAVs next
calculated after your exchange order is received by the Distributor. Currently,
the Trust does not charge any exchange fees or charges. Your financial service
firm may impose various fees and charges,

30
<PAGE>

investment minimums and other requirements with respect to exchanges. Please
contact your financial service firm to exchange your shares and for additional
information about the exchange privilege.

The Trust reserves the right to refuse exchange purchases if, in the
judgment of PIMCO, 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 PIMCO 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 the 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. Except as otherwise
permitted by Securities and Exchange Commission regulations, the Trust will give
60 days' advance notice to your financial service firm of any termination or
material modification of the exchange privilege.

Selling Shares

You can sell (redeem) Class D shares through your financial service firm on
any day the Exchange is open. You do not pay any fees or other charges to the
Trust or the Distributor when you sell your shares, although your financial
service firm may charge you for its services in processing your redemption
request. Please contact your firm for details. If you are the holder of record
of your Class D shares, you may contact the Distributor at 1-888-87-PIMCO for
information regarding how to sell your shares directly to the Trust.

Your financial service firm is obligated to transmit your redemption orders
to the Distributor promptly and is responsible for ensuring that your redemption
request is in proper form. Your financial service firm will be responsible for
furnishing all necessary documentation to the Distributor or the Trust's
transfer agent and may charge you for its services. Redemption proceeds will be
forwarded to your financial service firm as promptly as possible and in any
event within seven days after the redemption request is received by the
Distributor in good order. Redemptions of Fund shares may be suspended 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 assets, or during any other period as permitted by
the Securities and Exchange Commission for the protection of investors. Under
these and other unusual circumstances, the Trust may suspend redemptions or
postpone payment for more than seven days, as permitted by law.

Redemptions In Kind

The Trust had agreed to redeem shares of each Fund solely in cash up to the
lesser of $250,000 or 1% of the Fund's net assets during any 90-day period for
any one shareholder. In consideration of the best interests of the remaining
shareholders, the Trust may 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. Except for Funds with a tax-efficient management strategy, it is highly
unlikely that your shares would ever be redeemed in kind. If your shares are
redeemed in kind, you should expect to incur transaction costs upon the
disposition of the securities received in the distribution.

How Fund Shares Are Priced

The Trust calculates the net asset value ("NAV") of a Fund's Class D shares
by taking the total value of the Fund's assets attributable to Class D shares,
subtracting the Fund's liabilities attributable to the class, and dividing by
the Fund's total number of Class D shares outstanding. The net asset value per
share of each Fund is

31
<PAGE>

determined as of 4:00 p.m., Eastern time, or as of such other time designated by
the New York Stock Exchange (the "Exchange") as the close of public trading
("closing"), on each day the Exchange is open.

The Funds value their portfolio securities and other investments for which
market quotations are readily available at 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 with more readily attainable prices and
durations comparable to the securities being valued. Short-term investments
having a maturity of 60 days or less may be valued at current market value or at
amortized cost, which approximates market value. Exchange traded options,
futures, and options on futures are valued at the settlement price as determined
by the appropriate clearing corporation. All other portfolio securities and
assets are valued at their fair value as determined in good faith by the
Trustees or persons acting at their direction.

Fund Distributions

Each Fund distributes substantially all of its net investment income to
shareholders in the form of dividends. A shareholder begins earning dividends
on Fund shares the day after the Trust receives the shareholder's purchase
payment. Dividends paid by each Fund with respect to each class of shares are
calculated in the same manner and at the same time. The following shows when
each Fund intends to declare and distribute income dividends to shareholders of
record.

<TABLE>
<CAPTION>
Fund Declared Daily Declared and
and Paid Monthly Paid Quarterly
<S> <C> <C>
Fixed Income Funds *
- --------------------------------------------------------------------------------
Strategic Balanced and StocksPLUS Funds *
</TABLE>

You can choose from the following distribution options:

. Reinvest all distributions in additional Class D shares of your Fund at
NAV. This will be done unless you elect another option.

. Invest all distributions in Class D shares of any other Fund or any
series of PIMCO Funds: Multi-Manager Series which offers Class D shares
at NAV. You must have an account existing in the

<PAGE>

Fund or series selected for investment with the identical registered
name. This option must be elected when your account is set up.

. Receive all distributions in cash (either paid directly to you or
credited to your account with your financial service firm). This option
must be elected when your account is set up.

Your financial service firm may offer additional distribution reinvestment
programs or options. Please contact your firm for details.

You do not pay any sales charges on shares you receive through the
reinvestment of Fund distributions. If you elect to receive Fund distributions
in cash and the postal or other delivery service is unable to deliver checks to
your address of record, the distributions will automatically be invested in the
Money Market Fund of PIMCO Funds: Pacific Investment Management Series until
you are located.

For further information on distribution options, please contact your
financial service firm or call the Distributor at 1-888-87-PIMCO.

Tax Consequences

. Taxes on Fund distributions. If you are subject to U.S. federal income
tax, you will be subject to tax on Fund distributions whether you received them
in cash or reinvested them in additional shares of the Funds. For federal
income tax purposes, Fund distributions will be taxable to you as either
ordinary income or capital gains.

. Taxes when you sell (redeem) or exchange your shares. Any gain
resulting from the sale of Fund shares will generally be subject to federal
income tax. When you exchange shares of a Fund for shares of another series, the
transaction will be treated as a sale of the Fund shares for these purposes, and
any gain on those shares will generally be subject to federal income tax.

. A Note on the Real Return Bond Fund. Periodic adjustments for
inflation to the principal amount of an inflation-indexed bond may give
rise to original issue discount, which will be includable in the Fund's
gross income. Due to original issue discount, the Fund may be required to
make annual distributions to shareholders that exceed the cash received,
which may cause the Fund to liquidate certain investments when it is not
advantageous to do so. Also, if the principal value of an inflation-indexed
bond is adjusted downward due to deflation, amounts previously distributed
in the taxable year may be characterized in some circumstances as a return
of capital.

33
<PAGE>

. A Note on the Municipal Bond Fund. 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. Dividends derived from taxable
interest or capital gains will be subject to federal income tax. If the
Fund invests in "private activity bonds," certain shareholder may become
subject to alternative minimum tax on the part of the Fund's distributions
derived from interest on such bonds.

34
<PAGE>

Characteristics and Risks of Securities and
Investment Techniques

U.S. Government Securities

Corporate Debt Securities

Variable and Floating Rate Securities

Foreign Securities

35
<PAGE>

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. Investments in foreign
securities may also involve higher custodial costs than domestic investments and
additional transaction costs with respect to foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities
denominated or quoted in foreign currencies.

Foreign Currencies

36
<PAGE>

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.

High Yield Securities

37
<PAGE>

Inflation-Indexed Bonds

Derivatives

38
<PAGE>

resulting in larger gains or losses in response to market changes. To limit
leverage risk, each Fund will segregate assets determined to be liquid by PIMCO
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 derivative instruments.

Market and Other Risks Like most other investments, derivative
instruments are subject to the risk that the market value of the instrument will
change in a way detrimental to a Fund's interest. If a portfolio manager
incorrectly forecasts the values of securities, currencies or interest rates or
other economic factors in using derivatives for a Fund, the Fund might have been
in a better position if it had not entered into the transaction at all. 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 other Fund investments. A Fund may also
have to buy or sell a security at a disadvantageous time or price because the
Fund is legally required to maintain offsetting positions or asset coverage in
connection with certain derivatives transactions.

Convertible Securities

Mortgage-Related and Other Asset-Backed Securities

Each Fund (except the Money Market and Municipal Bond Funds) may invest all
of its assets in mortgage- or other asset-backed securities. Mortgage-related
securities include mortgage pass-through securities, collateralized mortgage
obligations ("CMOs"), commercial mortgage-backed securities, mortgage dollar
rolls,

39
<PAGE>

CMO residuals, stripped mortgage-backed securities ("SMBSs") and other
securities that directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans on real property.

Municipal Bonds

Loan Participations and Assignments

Delayed Funding Loans and Revolving Credit Facilities

40
<PAGE>

Loans of Portfolio Securities

Short Sales

When-Issued, Delayed Delivery and Forward Commitment Transactions

Repurchase Agreements

Reverse Repurchase Agreements, Dollar Rolls And Other Borrowings

41
<PAGE>

Prospectus or in the Statement of Additional Information. Reverse repurchase
agreements, dollar rolls and other forms of borrowings may create leveraging
risk for a Fund.

Hybrid Instruments

Catastrophe Bonds

Portfolio Turnover

Illiquid Securities

Investment in Other Investment Companies

42
<PAGE>

markets. 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.

Year 2000 Readiness Disclosure

Changes in Investment Objectives and Policies

Percentage Investment Limitations

Other Investments and Techniques

43
<PAGE>

Financial Highlights

The financial highlights table is intended to help a shareholder understand the
financial performance of Class D shares of each Fund since the class of shares
was first offered. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned or lost on an investment in Class D shares of a Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with each Fund's
financial statements, are included in the Trust's annual report to shareholders.
The annual report is incorporated by reference in the Statement of Additional
Information and is available free of charge upon request from the Distributor.

[Information not available as of filing - to be provided.]

44
<PAGE>

Appendix A
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.

A-1
<PAGE>

Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
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.
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.

A-2
<PAGE>

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.
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.

A-3
<PAGE>

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.

A-4
<PAGE>

[Back Cover Page]

PIMCO Funds: Pacific Investment Management Series

You may get free copies of any of these materials, request other information
about a Fund, or make shareholder inquiries by calling the Trust at 1-888-87-
PIMCO, or by writing to:

PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902

You may also contact your financial service firm for additional information.

You can also visit our Web site at www.pimcofunds.com for additional information
about the Funds.

[LOGO]

File No. 811-5028
<PAGE>

PIMCO FUNDS: Pacific Investment Management Series
CLASS J AND CLASS K

Supplement dated August 1, 1999 to the Institutional Class
and Administrative Class Prospectus dated August 1, 1999

This Supplement describes two additional classes of shares of certain 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 August 1, 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.

The Class J and Class K shares are available for the following Funds:

Short Duration Bond Funds
Short-Term
Low Duration
Low Duration II
Intermediate Duration Bond Funds
Total Return
Total Return II
High Yield
International Bond Funds
Global Bond
Foreign Bond
Stock and Bond Funds
Strategic Balanced
Stock Funds
StocksPLUS

Fund Descriptions, Performance and Fees

The Fund Summaries for the following Funds are supplemented as follows:

1
<PAGE>

PIMCO Short-Term Fund

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

<TABLE>
<CAPTION>
Shareholder fees (fees paid directly from your investment) Class J Class K
---------------- ----------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of 3.50% 2.50%
offering price)
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of None None
original purchase price)
</TABLE>

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class J or Class K shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.25% 0.25% 0.70% 1.20% $468 $718 $987 $1,754
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.25 0.25% 1.00% 1.50% $399 $712 $1,048 $1,996
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

2
<PAGE>

PIMCO Low Duration Fund

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.25% 0.25% 0.70% 1.20%% $468 $718 $987 $1,754
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.25% 0.25% 1.00% 1.50% $399 $712 $1,048 $1,996
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

3
<PAGE>

PIMCO Low Duration Fund II

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.25% 0.25% 0.70% 1.50% $468 $718 $987 $1,754
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.25% 0.25% 1.00% 1.20% $399 $712 $1,048 $1,996
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

4
<PAGE>

PIMCO Total Return Fund

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.25% 0.25% 0.70% 1.20% $468 $718 $987 $1,754
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.25% 0.25% 1.00% 1.50% $399 $712 $1,048 $1,996
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

5
<PAGE>

PIMCO Total Return Fund II

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.25% 0.25% 0.70% 1.20% $468 $718 $987 $1,754
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.25% 0.25% 1.00% 1.50% $399 $712 $1,048 $1,996
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

6
<PAGE>

PIMCO High Yield Fund

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.25% 0.25% 0.70% 1.20% $468 $718 $987 $1,754
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.25% 0.25% 1.00% 1.50% $399 $712 $1,048 $1,996
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

7
<PAGE>

PIMCO Global Bond Fund

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.25% 0.30% 0.70% 1.25% $473 $733 $1,012 $1,808
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.25% 0.30% 1.00% 1.55% $404 $727 $1,074 $2,049
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

8
<PAGE>

PIMCO Foreign Bond Fund

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.25% 0.25% 0.70% 1.20% $468 $718 $987 $1,754
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.25% 0.25% 1.00% 1.50% $399 $712 $1,048 $1,996
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

9
<PAGE>

PIMCO Strategic Balanced Fund

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.40% 0.25% 0.70% 1.35% $483 $763 $1,063 $1,917
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.40% 0.25% 1.00% 1.65% $414 $757 $1,125 $2,156
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

10
<PAGE>

PIMCO StocksPLUS Fund

Performance Information

Performance information for Class J and Class K shares is not presented because
Class J and Class K Shares of the Fund are new and do not have a full calendar
year of performance.

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class J or Class K shares of the Fund:

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Example: Assuming you either redeem or
do not redeem your shares at the end of
Admini- Distribution Total Annual each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class J 0.40% 0.25% 0.70% 1.35% $483 $763 $1,063 $1,917
- -----------------------------------------------------------------------------------------------------------------------------------
Class K 0.40% 0.25% 1.00% 1.65% $414 $757 $1,125 $2,156
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Due to the 12b-1distribution fee imposed on Class J and Class K shares, a
shareholder 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.

11
<PAGE>

Investment Options
(Class J and Class K Shares)

The section "Investment Options" is supplemented as follows:

Class J and Class K shares are offered outside the U.S. solely to non-U.S.
investors. Class J shares are offered primarily through non-U.S. broker
dealers, and Class K shares are offered primarily through non-U.S. banks or
other non-U.S. financial institutions (together with broker dealers, "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 financial intermediaries for services provided to
shareholders.

Distribution and Servicing (12b-1) Plans. The Funds pay fees to the
Distributor on an ongoing basis as compensation for the services the Distributor
renders and the expenses it bears in connection with the sale and distribution
of Fund shares ("distribution fees") and/or in connection with personal services
rendered to Fund shareholders and the maintenance of shareholder accounts
("servicing fees"). These payments are made pursuant to Distribution and
Servicing Plans ("12b-1 Plans") adopted by each Fund pursuant to Rule 12b-1
under the Investment Company Act of 1940.

Class J and Class K shares pay both distribution and servicing fees.
Because 12b-1 fees are paid out of a Fund's assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than sales charges which are deducted at the time of investment. The following
lists the maximum annual rates at which the distribution and/or servicing fees
may be paid under each 12b-1 Plan (calculated as a percentage of each Fund's
average daily net assets attributable to the particular class of shares):

<TABLE>
<CAPTION>
Servicing Distribution
Class J Fee Fee
<S> <C> <C>
Short-Term 0.25% 0.45%
Low Duration 0.25% 0.45%
Low Duration II 0.25% 0.45%
Total Return 0.25% 0.45%
Total Return II 0.25% 0.45%
High Yield 0.25% 0.45%
Global Bond 0.25% 0.45%
Foreign Bond 0.25% 0.45%
Strategic Balanced 0.25% 0.45%
StocksPLUS 0.25% 0.45%

Class K
Short-Term 0.25% 0.75%
Low Duration 0.25% 0.75%
Low Duration II 0.25% 0.75%
Total Return 0.25% 0.75%
Total Return II 0.25% 0.75%
High Yield 0.25% 0.75%
Global Bond 0.25% 0.75%
Foreign Bond 0.25% 0.75%
Strategic Balanced 0.25% 0.75%
StocksPLUS 0.25% 0.75%
</TABLE>

12
<PAGE>

The Distributor may reallow a portion of the distribution and service fees
to financial intermediaries, which amount will depend upon the terms of the
particular agreement between the Distributor and the financial intermediary with
respect to responsibility for identified distribution and servicing activities.
The Servicing Fee may be paid to an affiliate of the Distributor that provides
personal services to Class J or Class K shareholders and/or maintains
shareholder accounts.

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.

Purchases, Redemption and Exchanges

The section "Purchases, Redemption and Exchanges" is supplemented as follows:

Purchasing Shares

Investors may purchase Class J and Class K shares of the Funds at the
relevant net asset value plus the applicable sales charge for that class.

Class J and Class K shares are offered solely outside the U.S. to non-U.S.
investors. Class J shares are offered primarily through non-U.S. broker-dealers
and Class K shares are offered primarily through non-U.S. banks and other non-
U.S. financial institutions. Each Fund pays service and/or distribution fees to
such financial intermediaries for services provided to shareholders of these
classes.

. Investment Minimums. The minimum initial investment for Class J and
Class K shares is 100 shares.

. 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 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 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 non-U.S. investors outside the U.S. 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.

Redeeming Shares

. Class J and Class K Redemptions. Redemptions of Class J and Class K
shares may only be made through your financial intermediaries, subject to
conditions established by such intermediaries.

13
<PAGE>

Fund Distributions

The section "Fund Distributions" 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.

Tax Consequences

Taxation of Non-U.S. Shareholders

. Taxes on Fund distributions. Under U.S. federal tax law, dividends
(other than those designated as capital gain dividends) paid on Class J or Class
K shares beneficially held by a person who is a "foreign person" within the
meaning of the Internal Revenue Code of 1986, as amended, are, in general,
subject to withholding of U.S. federal income tax at a rate of 30% of the gross
dividend, which may, in some cases, be reduced by an applicable tax treaty.
However, if a beneficial holder who is a foreign person has a permanent
establishment in the United States, and the Class J or Class K shares held by
such beneficial holder are effectively connected with that permanent
establishment and, in addition, the dividends are effectively connected with the
conduct by the 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 that are
properly designated by the Fund as capital gain dividends will not be subject to
withholding of U.S. federal income tax.

. Taxes on redemption or exchanges of Shares. Under U.S. federal tax
law, a beneficial holder of Class J or Class K shares who is a foreign person 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 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.

You should consult your own adviser as to the potential application of
state and local income taxes, and federal and state estate and gift taxes.

# # # #

INVESTORS SHOULD RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.

14
<PAGE>

PIMCO Funds: Pacific Investment Management Series
Institutional and Administrative Class Shares

Supplement Dated ________, 1999 to the
Institutional and Administrative Class
Prospectus dated ______, 1999

"Summary Information" is amended as follows:

The table is amended by adding the following under the caption "Intermediate
Duration Bond Funds":

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality Foreign
---------------- -------- -------------- -------
<S> <C> <C> <C> <C>
Commercial Commercial mortgage-backed securities 3-8 years B to Aaa; max 35% 0 %
Mortgage Securities below Baa
</TABLE>

The table is further amended by adding the following under the caption "Stock
Funds":

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality Foreign
---------------- -------- -------------- -------
<S> <C> <C> <C> <C>
StocksPLUS Short Inversely correlated S&P 500 derivatives 0-1 year B to Aaa; max 10% 0-20%
Strategy backed by a portfolio of short-term fixed below Baa
income securities
</TABLE>

The following Fund Summaries are added to the Prospectus:
<PAGE>

PIMCO Commercial Mortgage Securities Fund

<TABLE>
<CAPTION>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent 3-8 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
N/A Baa to Aaa; maximum 35% below Baa
Fund Focus
Commercial mortgage-backed securities Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests under normal circumstances at least 65% of its assets in
investment grade commercial mortgage-backed securities. The Fund also may invest
up to 35% of its assets in high yield bonds 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. 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 not invest in
securities denominated in foreign currencies, but may invest without limit in
U.S. dollar-denominated securities of foreign issuers.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<CAPTION>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Concentration Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries in the
Prospectus for a description of these and other risks of investing in the Fund.

Performance Information

Because the Fund has not yet commenced operations, it does not have performance
to report.
<PAGE>

Your Expenses

The tables below describe the fees and expenses you may pay if you buy and hold
Institutional Class or Administrative Class shares of the Fund.

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional .40% .25% None .65% $66 $208 $362 $ 810
- ------------------------------------------------------------------------------------------------------------------------------------

Administrative .40 .25 0.25% .90 $92 $287 $498 $1,108
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>

PIMCO StocksPLUS Short Strategy Fund

<TABLE>
<CAPTION>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks total return through the 0-1 year
implementation of short investment
positions on the S&P 500 Fund Inception Date Credit Quality
N/A B to Aaa; maximum 10% below Baa
Fund Focus
Inversely correlated S&P 500 stock index Dividend Frequency
derivatives backed by a portfolio of Declared and Paid Quarterly
short-term fixed income securities
</TABLE>

Principal Investments and Strategies

The 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. 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 actively manages the fixed income assets held by the Fund, with a
view to enhancing the Fund's total return, subject to an overall portfolio
duration which is normally not expected to exceed one year. 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.

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<S> <C> <C>
. Market Risk . Credit Risk . Currency Risk
. Issuer Risk . Interest Rate Risk . Leveraging Risk
. Derivatives Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries in the
Prospectus for a description of these and other risks of investing in the Fund.

Performance Information

Because the Fund has not yet commenced operations, it does not have performance
to report.
<PAGE>

Your Expenses

The tables below describe the fees and expenses you may pay if you buy and hold
Institutional Class or Administrative Class shares of the Fund.

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem your shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional .40% .25% None .65% $66 $208 $362 $ 810
- ------------------------------------------------------------------------------------------------------------------------------------

Administrative .40 .25 0.25% .90 $92 $287 $498 $1,108
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>

"Summary of Principal Risks" is amended as follows:

The following lines are added to the table captioned "Principal Risks by Fund":

<TABLE>
<CAPTION>
Interest Foreign Concen- Manage-
Rate Credit Market Issuer Investment Currency Deriva- Leverag- tration ment
Fund Risk Risk Risk Risk Risk Risk tives ing Risk Risk Risk
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial . . . . . . . .
Mortgage
Securities
- ----------------------------------------------------------------------------------------------------------------------------------
StocksPLUS . . . . . . . . .
Short
Strategy
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

"Management of the Funds" is amended as follows:

The table in the section captioned "Advisory Fees" is revised to add the
Commercial Mortgage Securities and StockPLUS Short Strategy Funds to the row
showing an advisory fee of 0.40%.

The table in the section captioned "Administrative Fees" is revised to add the
Commercial Mortgage Securities and StockPLUS Short Strategy Funds to the row
showing an administrative fee of 0.25%.
<PAGE>

PIMCO Funds: Pacific Investment Management Series
Class A, B and C Shares

Supplement Dated ________, 1999 to the
Class A, B and C Prospectus dated ______, 1999

"Summary Information" is amended as follows:

The table is amended by adding the following under the caption "Intermediate
Duration Bond Funds":

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality Foreign
---------------- -------- -------------- -------
<S> <C> <C> <C> <C>
Total Return II Same as Total Return Fund, except quality and 3-6 years Baa to Aaa 0%
foreign issuer restrictions

Total Return III Same as Total Return Fund, except 3-6 years B to Aaa; max 10% 0 - 20%
prohibitions on firms engaged in socially below Baa
sensitive practices
</TABLE>

The following Fund Summaries are added to the Prospectus:

1
<PAGE>

PIMCO Total Return Fund II Fund Category - Intermediate Duration Bond

<TABLE>
<CAPTION>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent William H. Gross 3-6 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
12/30/91 Baa to Aaa
Fund Focus
Intermediate maturity fixed income Dividend Frequency
securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>
<CAPTION>
<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Management Risk
. Credit Risk . Derivatives Risk
. Market Risk . Leveraging Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries in the
Prospectus for a description of these and other risks of investing in the Fund.

Performance Information

Summary performance information for the Fund is shown below in a bar chart and
an Average Annual Total Return table. The information provides 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 the information to its right show performance of the
Fund's Institutional Class shares, which are offered in a different prospectus.
This is because the Fund has not offered Class A, Class B or Class C shares for
a full calendar year. The bar chart does not reflect the impact of sales charges
(loads) that may be imposed on Class A, Class B or Class C shares. If they did,
the returns would be lower than those shown. Although Class A, Class B and
Class C shares would have similar annual returns (because all of the Fund's
shares represent interest in the same portfolio of securities), Class A, Class B
and Class C performance would be lower than Institutional Class performance
because of higher expenses paid by Class A, Class B and Class C shares. Past
performance is no guarantee of future results.

Calendar Year Total Returns

More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 9.43 10.90 -2.21 18.97 3.85 9.99 9.62 Highest (7/1/92 - 9/30/92) 5.57%
Lowest (1/1/94 - 3/31/94) -2.60%
</TABLE>

2
<PAGE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C> <C>
Fund Inception * The Lehman Brothers Aggregate Bond Index is an unmanaged
1 Year 5 Years (12/30/91) index of fixed income securities. It is not possible to
invest directly in the index. The Lipper Intermediate
- ---------------------------------------------------------------- Investment Grade Debt Fund Average is a total return
Institutional Class 9.62% 7.82% 8.49% performance average of Funds tracked by Lipper Analytical
- ---------------------------------------------------------------- Services, Inc. that invest at least 65% of their assets in
Lehman Aggregate 8.69% 7.27% 7.64% investment-grade debt issues (rated in the top four grades)
Bond Index* with dollar-weighted average maturities of five to ten
- ---------------------------------------------------------------- years. It does not take into account sales charges. The
Lipper Intermediate 7.25% 6.35% 7.16% Fund began operations on 12/30/91. Index comparisons began
Investment Grade Debt on 12/31/91.
Fund Average*
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 4.5% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1.0%/(1)/ 5.0%/(2)/ 1.0%/(3)/
</TABLE>
- -------------------------------
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<S> <C> <C> <C> <C>
Adminis Distribution Total Annual
Advisory trative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees(1) Expenses
- ----------------------------------------------------------------------------------
A Shares 0.25% 0.40% 0.25% 0.90%
- ----------------------------------------------------------------------------------
B Shares 0.25 0.40 1.00 1.65
- ----------------------------------------------------------------------------------
C Shares 0.25 0.40 1.00 1.65

Example: Assuming you redeem Example: Assuming you do not
shares at the end of each period redeem your shares
<C> <C> <C> <C> <C> <C> <C> <C>

Year Year
Share Class 1 3 5 10 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------
A Shares $538 $724 $ 926 $1,508 $538 $724 $926 $1,508
- ----------------------------------------------------------------------------------------------------------------
B Shares 668 820 1,097 1,657 168 520 897 1,657
- ----------------------------------------------------------------------------------------------------------------
C Shares 268 520 897 1,995 168 520 897 1,995
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.

3
<PAGE>

PIMCO Total Return Fund III Fund Category - Intermediate Duration Bond

<TABLE>

<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Duration
Seeks maximum total return, consistent William H. Gross 3-6 years
with preservation of capital and
prudent investment management Fund Inception Date Credit Quality
5/1/91 B to Aaa; maximum 10% below Baa
Fund Focus
Intermediate maturity fixed income Dividend Frequency
securities Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>

<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries in the
Prospectus for a description of these and other risks of investing in the Fund.

Performance Information

4
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
Quarterly Return Information
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 9.02 12.64 -3.43 19.23 4.63 10.21 10.37 Highest (7/1/91 - 9/30/91) 6.90%
Lowest (1/1/94 - 3/31/94) -2.68%
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns (for periods ended 12/31/98)

<S> <C> <C> <C> <C>
Fund Inception * The Lehman Brothers Aggregate Bond Index is an unmanaged
1 Year 5 Years (5/1/91) index of fixed income securities. It is not possible to
- --------------------------------------------------------------- invest directly in the index. The Lipper Intermediate
Institutional Class 10.37% 7.94% 9.79% Investment Grade Debt Fund Average is a total return
- --------------------------------------------------------------- performance average of Funds tracked by Lipper Analytical
Lehman Aggregate 8.69% 7.27% 8.50% Services, Inc. that invest at least 65% of their assets in
Bond Index* investment-grade debt issues (rated in the top four grades)
- --------------------------------------------------------------- with dollar-weighted average maturities of five to ten
Lipper Intermediate 7.15% 6.35% 7.98% years . It does not take into account sales charges. The
Investment Grade Debt Fund began operations on 5/1/91. Index comparisons began
Fund Average on 4/30/91.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

</TABLE>
- ------------------------------
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedule
set forth under "Investment Options (Class A, B and C Shares - Contingent
Deferred Sales Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

<TABLE>
<CAPTION>
Admini- Distribution Total Annual
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees(1) Expenses
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares 0.25% 0.40% 0.25% 0.90%
- --------------------------------------------------------------------------------
B Shares 0.25 0.40 1.00 1.65
- --------------------------------------------------------------------------------
C Shares 0.25 0.40 1.00 1.65

Example: Assuming you redeem Example: Assuming you do not
shares at the end of each period redeem your shares

Year Year
Share Class 1 3 5 10 1 3 5 10
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares $538 $724 $ 926 $1,508 $538 $724 $926 $1,508
- --------------------------------------------------------------------------------------------------------------
B Shares 668 820 1,097 1,657 168 520 897 1,657
- --------------------------------------------------------------------------------------------------------------
C Shares 268 520 897 1,995 168 520 897 1,995
</TABLE>
1. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.

5
<PAGE>

"Summary of Principal Risks" is amended as follows:

The following lines are added to the table captioned "Principal Risks by Fund":

<TABLE>
<CAPTION>
Interest Foreign Concen- Manage-
Rate Credit Market Issuer Investment Currency Deriva- Leverag- tration ment
Fund Risk Risk Risk Risk Risk Risk tives Risk ing Risk Risk Risk
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Return II . . . . . . .
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return III . . . . . . . . .
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

"Management of the Funds" is amended as follows:

The table in the section captioned "Advisory Fees" is revised to add the Total
Return II and Total Return III Funds to the row showing an advisory fee of
0.25%.

The table in the section captioned "Administrative Fees" is revised to add the
Total Return II and Total Return III Funds to the row showing an administrative
fee of 0.40%.

The table in the section captioned "Individual Portfolio Managers" is revised to
show that Total Return II and Total Return III are managed by William H. Gross,
and that he has managed the Funds since December, 1991 and May, 1991
respectively.

6
<PAGE>

PIMCO Funds: Pacific Investment Management Series
Class D Shares

Supplement Dated ________, 1999 to the
Class D Prospectus dated ______, 1999

"Summary Information" is amended as follows:

The table is amended by adding the following under the caption "Short Duration
Bond Funds":

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality Foreign
---------------- -------- -------------- -------
<S> <C> <C> <C> <C>
Money Market Fund Money market instruments (less than or Min 95% Aaa or Prime 0 %
equal to) 90 1; (less than or equal
days dollar- to) 5% Aa or Prime 2
weighted average
maturity
</TABLE>

The table is further amended by adding the following under the caption
"Intermediate Duration Bond Funds":

<TABLE>
<CAPTION>
Main Investments Duration Credit Quality Foreign
---------------- -------- -------------- -------
<S> <C> <C> <C> <C>
Total Return II Same as Total Return Fund, 3-6 years Baa to Aaa 0%
except quality and foreign issuer
restrictions

Total Return III Same as Total Return Fund, 3-6 years B to Aaa; max 10% 0 - 20%
except prohibitions on firms below Baa
engaged in socially sensitive
practices
</TABLE>

The following Fund Summaries are added to the prospectus:
<PAGE>

PIMCO Money Market Fund Fund Category - Short Duration Bond

<TABLE>
<CAPTION>
<S> <C> <C>
Investment Objective Portfolio Manager Average Portfolio Maturity
Seeks maximum current income, Leslie Barbi (less than or equal to) 90 days dollar-weighted average
consistent with preservation of maturity
capital and daily liquidity Fund Inception Date
3/1/91
Fund Focus Credit Quality
Money market instruments Minimum 95% rated Aaa or Prime 1;
(less than or equal to) 5% Aa or Prime 2

Dividend Frequency
Declared daily and distributed monthly
</TABLE>

Principal Investments and Strategies

The Fund invests at least 95% of its total assets in a diversified portfolio of
money market securities that are in the highest rating category for short-term
obligations. The Fund also may invest up to 5% of its total assets in money
market securities that are in the second-highest rating category for short-term
obligations. The Fund may only invest in 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 may not exceed 90 days. The Fund
attempts to maintain a stable net asset value of $1.00 per share, although there
is no assurance that it will be successful in doing so.

The Fund's investments will comply with applicable rules governing the quality,
maturity and diversification of securities held by money market funds.

Principal Risks

An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Fund. Among the principal risks of investing in
the Fund are:
<TABLE>
<CAPTION>
<S> <C>
. Interest Rate Risk . Market Risk
. Credit Risk . Issuer Risk
. Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries in the
Prospectus for a description of these and other risks of investing in the Fund.

Performance Information

Summary performance information for the Fund is shown below in a bar chart and
an Average Annual Total Return table. The information provides 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, the information to its right and the Average Annual Total
Returns table show performance of the Fund's Institutional Class shares, which
are offered in a different prospectus. This is because the Fund has not offered
Class D shares for a full calendar year. Although Class D and Institutional
Class shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class D performance
would be lower than Institutional Class performance because of the higher
expenses paid by Class D shares. Past performance is no guarantee of future
results.

2
<PAGE>

<TABLE>
<CAPTION>
Calendar Year Total Returns

More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]
Quarterly Return Information
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 9.02 12.64 -3.43 19.23 4.63 10.21 10.37 Highest (7/1/91 - 9/30/91) 6.90%
Lowest (1/1/94 - 3/31/94) -2.68%
</TABLE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>
<S> <C> <C> <C> <C>
Fund Inception
1 Year 5 Years (5/1/91) * The Lehman Brothers Aggregate Bond Index is an unmanaged
- --------------------------------------------------------------- index of fixed income securities. It is not possible to
Institutional Class 10.37% 7.94% 9.79% invest directly in the index. The Lipper Intermediate
- --------------------------------------------------------------- Investment Grade Debt Fund Average is a total return
Lehman Aggregate 8.69% 7.27% 8.50% performance average of Funds tracked by Lipper Analytical
Bond Index* Services, Inc. that that invest at least 65% of their
- --------------------------------------------------------------- assets in investment-grade debt issues (rated in the top
Lipper Intermediate 7.15% 6.35% 7.98% four grades) with dollar-weighted portfolio average
Investment Grade Debt maturities of less than three years. It does not take into
Fund Average account sales charges. The Fund began operations on
5/1/91. Index comparisons began on 4/30/91.
</TABLE>
Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.65% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

3
<PAGE>

PIMCO Total Return Fund II Fund Category - Intermediate Duration Bond

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>

<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Management Risk
. Credit Risk . Derivatives Risk
. Market Risk . Leveraging Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries in the
Prospectus for a description of these and other risks of investing in the Fund.

Performance Information

Summary performance information for the Fund is shown below in a bar chart and
an Average Annual Total Return table. The information provides 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, the information to its right and the Average Annual Total
Returns table show performance of the Fund's Institutional Class shares, which
are offered in a different prospectus. This is because the Fund has not offered
Class D shares for a full calendar year. Although Class D and Institutional
Class shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class D performance
would be lower than Institutional Class performance because of the higher
expenses paid by Class D shares. Past performance is no guarantee of future
results.

<TABLE>
<CAPTION>
Calendar Year Total Returns

More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 9.43 10.90 -2.21 18.97 3.85 9.99 9.62 Highest (7/1/92 - 9/30/92) 5.57%
Lowest (1/1/94 - 3/31/94) -2.60%
</TABLE>

4
<PAGE>
<TABLE>
<CAPTION>

Average Annual Total Returns (for periods ended 12/31/98)

<S> <C> <C> <C> <C>
Fund Inception * The Lehman Brothers Aggregate Bond Index is an unmanaged
1 Year 5 Years (12/30/91) index of fixed income securities. It is not possible to
- ---------------------------------------------------------------- invest directly in the index. The Lipper Intermediate
Institutional Class 9.62% 7.82% 8.49% Investment Grade Debt Fund Average is a total return
- ---------------------------------------------------------------- performance average of Funds tracked by Lipper Analytical
Lehman Aggregate 8.69% 7.27% 7.64% Services, Inc. that invest at least 65% of their assets in
Bond Index* investment-grade debt issues (rated in the top four grades)
- ---------------------------------------------------------------- with dollar-weighted portfolio average maturities of five
Lipper Intermediate 7.25% 6.35% 7.16% to ten years. It does not take into account sales charges.
Investment Grade Debt The Fund began operations on 12/30/91. Index comparisons
Fund Average* began on 12/31/91.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees None

<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
Admini- Distribution Total Annual redeem your shares at the end of each period
Advisory strative and/or Service Fund Operating Year
Fees Fees (12b-1) Fees(1) Expenses 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D 0.25% 0.25% 0.25% 0.75% $77 $240 $417 $930
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Fund's administration agreement includes a plan for Class D shares that
has been adopted in conformity with the requirements set forth in Rule 12b-1
under the Investment Company Act of 1940. Up to 0.25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of 0.65% per year under the
administration agreement regardless of whether a portion or none of the 0.25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees are deemed not to be "service
fees," Class D shareholders 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 NASD.

5
<PAGE>

PIMCO Total Return Fund III Fund Category - Intermediate Duration Bond

<TABLE>

Principal Investments and Strategies

Principal Risks

Among the principal risks of investing in the Fund are:

<TABLE>

<S> <C> <C>
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Derivatives Risk . Leveraging Risk
. Market Risk . Foreign Investment Risk . Management Risk
</TABLE>

Please see "Summary of Principal Risks" following the Fund Summaries in the
Prospectus for a description of these and other risks of investing in the Fund.

Performance Information

Summary performance information for the Fund is shown below in a bar chart and
an Average Annual Total Return table. The information provides 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, the information to its right and the Average Annual Total
Returns table show performance of the Fund's Institutional Class shares, which
are offered in a different prospectus. This is because the Fund has not offered
Class D shares for a full calendar year. Although Class D and Institutional
Class shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class D performance
would be lower than Institutional Class performance because of the higher
expenses paid by Class D shares. Past performance is no guarantee of future
results.

<TABLE>
<CAPTION>
Calendar Year Total Returns
More Recent Return Information
12/31/98-06/30/99 ___%
[Plot points for bar chart:]

Quarterly Return Information
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 (for periods shown in the bar chart)
- -- -- -- 9.02 12.64 -3.43 19.23 4.63 10.21 10.37 Highest (7/1/91 - 9/30/91) 6.90%
Lowest (1/1/94 - 3/31/94) -2.68%
</TABLE>

6
<PAGE>

Average Annual Total Returns (for periods ended 12/31/98)

<TABLE>

<S> <C> <C> <C> <C>
Fund Inception * The Lehman Brothers Aggregate Bond Index is an unmanaged
1 Year 5 Years (5/1/91) index of fixed income securities. It is not possible to
- ---------------------------------------------------------------- invest directly in the index. The Lipper Intermediate
Institutional Class 10.37% 7.94% 9.79% Investment Grade Debt Fund Average is a total return
- ----------------------------------------------------------------- performance average of Funds tracked by Lipper Analytical
Lehman Aggregate 8.69% 7.27% 8.50% Services, Inc. that invest at least 65% of their assets in
Bond Index* investment-grade debt issues (rated in the top four grades)
- ----------------------------------------------------------------- with dollar-weighted portfolio average maturities of five
Lipper Intermediate 7.15% 6.35% 7.98% to ten years. It does not take into account sales charges.
Investment Grade Debt The Fund began operations on 5/1/91. Index comparisons
Fund Average began on 4/30/91.
</TABLE>

Your Expenses

The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment -
such as sales charges (loads), redemption fees or exchange fees) None

7
<PAGE>

"Summary of Principal Risks" is amended as follows:

The following lines are added to the table captioned "Principal Risks by Fund":

<TABLE>
<CAPTION>
Interest Foreign Concen- Manage-
Rate Credit Market Issuer Invest- Currency Deriva- Leverag- tration ment
Fund Risk Risk Risk Risk ment Risk Risk tives Risk ing Risk Risk Risk
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market . . . . .
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return II . . . . . . .
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return III . . . . . . . . .
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

"MANAGEMENT OF THE FUNDS" IS AMENDED AS FOLLOWS:

THE TABLE IN THE SECTION CAPTIONED "ADVISORY FEES" IS REVISED TO ADD THE MONEY
MARKET, TOTAL RETURN II AND TOTAL RETURN III FUNDS TO THE ROW SHOWING AN
ADVISORY FEE OF 0.25%.

THE TABLE IN THE SECTION CAPTIONED "ADMINISTRATIVE FEES" IS REVISED TO ADD THE
MONEY MARKET, TOTAL RETURN II AND TOTAL RETURN III FUNDS TO THE ROW SHOWING AN
ADMINISTRATIVE FEE OF 0.25%.

THE FOLLOWING LINE IS ADDED TO THE TABLE IN THE SECTION CAPTIONED "INDIVIDUAL
PORTFOLIO MANAGERS":

<TABLE>
<CAPTION>
<S> <C> <C> <C>
FUND PORTFOLIO MANAGER SINCE RECENT PROFESSIONAL EXPERIENCE
MONEY MARKET LESLIE BARBI 11/95 SENIOR VICE PRESIDENT, PIMCO. SHE JOINED PIMCO AS A
PORTFOLIO MANAGER IN 1993, AND HAS MANAGED ASSETS
FOR VARIOUS INSTITUTIONAL ACCOUNTS SINCE THAT TIME.
</TABLE>

THE TABLE IN THE SECTION CAPTIONED "INDIVIDUAL PORTFOLIO MANAGERS" IS FURTHER
REVISED TO SHOW THAT TOTAL RETURN II AND TOTAL RETURN III ARE MANAGED BY WILLIAM
H. GROSS, AND THAT HE HAS MANAGED THE FUNDS SINCE DECEMBER, 1991 AND MAY, 1991
RESPECTIVELY.

8
<PAGE>

PIMCO Funds:
Pacific Investment Management Series

Statement of Additional Information

This Statement of Additional Information is not a prospectus, and should be
used in conjunction with the prospectuses of PIMCO Funds: Pacific Investment
Management Series, as supplemented from time to time. The Trust offers up to
eight classes of shares of each of its Funds. Class A, Class B, and Class C
shares of certain Funds are offered through the "Class A, B and C Prospectus,"
Institutional Class and Administrative Class shares of certain Funds are offered
through the "Institutional Prospectus," Class D shares of certain Funds are
offered through the "Class D Prospectus," and Class A shares of the Total Return
Fund also are offered through a separate prospectus, each dated August 1, 1999,
each as amended or supplemented from time to time (collectively, the
"Prospectuses"). Additionally, Class J and Class K shares for certain Funds are
offered solely to non-U.S. investors outside the United States. This
information does not constitute an offer of Class J shares or Class K shares to
any person who resides within the United States.

Audited financial statements for the Trust, as of March 31, 1999, including
notes thereto, and the reports of PricewaterhouseCoopers LLP thereon, are
incorporated by reference from the Trust's March 31, 1999 Annual Reports.
Copies of Prospectuses, Annual or Semi-Annual Reports, and the PIMCO Funds
Shareholders' Guide for Class A, B and C Shares (the "Guide"), which is a part
of this Statement of Additional Information, may be obtained free of charge at
the addresses and telephone number(s) listed below.

Class A, B and C and Class
Institutional Prospectus and Prospectuses, Annual and
Annual and Semi-Annual Reports: Semi-Annual Reports, and the Guide:

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)

August 1, 1999
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
<S> <C>
THE TRUST.................................................................................................... 1

INVESTMENT OBJECTIVES AND POLICIES........................................................................... 1

Borrowing............................................................................................... 1
Corporate Debt Securities............................................................................... 2
Convertible Securities.................................................................................. 3
High Yield Securities ("Junk Bonds").................................................................... 3
Variable and Floating Rate Securities................................................................... 4
Participation on Creditors Committees................................................................... 5
Mortgage-Related and Other Asset-Backed Securities...................................................... 5
Foreign Securities...................................................................................... 9
Foreign Currency Transactions........................................................................... 11
Foreign Currency Exchange-Related Securities............................................................ 12
Bank Obligations........................................................................................ 13
Loan Participations..................................................................................... 14
Delayed Funding Loans and Revolving Credit Facilities................................................... 16
Loans of Portfolio Securities........................................................................... 16
Short Sales............................................................................................. 16
When-Issued, Delayed Delivery and Forward Commitment Transactions....................................... 17
Derivative Instruments.................................................................................. 17
Inflation-Indexed Bonds................................................................................. 25
Hybrid Instruments...................................................................................... 26
Catastrophe Bonds....................................................................................... 27
Warrants to Purchase Securities......................................................................... 27
Illiquid Securities..................................................................................... 27
Municipal Bonds......................................................................................... 28
Social Investment Policies.............................................................................. 30

INVESTMENT RESTRICTIONS...................................................................................... 30

Fundamental Investment Restrictions..................................................................... 30
Non-Fundamental Investment Restrictions................................................................. 32
Non-Fundamental Operating Policies Relating to the Sale of Shares of PIMCO Total Return Fund in Japan... 35

MANAGEMENT OF THE TRUST...................................................................................... 36

Trustees and Officers................................................................................... 36
Compensation Table...................................................................................... 40
Investment Adviser...................................................................................... 41
Fund Administrator...................................................................................... 43

DISTRIBUTION OF TRUST SHARES................................................................................. 45

Distributor and Multi-Class Plan........................................................................ 45
Contingent Deferred Sales Charge and Initial Sales Charge............................................... 46
</TABLE>
<PAGE>

<TABLE>
<S> <C>
Distribution and Servicing Plans for Class A, Class B and Class C Shares................................ 47
Distribution and Administrative Services Plans for Administrative Class Shares.......................... 54
Plan for Class D Shares................................................................................. 56
Distribution and Servicing Plan for Class J and Class K Shares.......................................... 58
Purchases, Exchanges and Redemptions.................................................................... 58

PORTFOLIO TRANSACTIONS AND BROKERAGE......................................................................... 60

Investment Decisions and Portfolio Transactions......................................................... 60
Brokerage and Research Services......................................................................... 60
Portfolio Turnover...................................................................................... 61

NET ASSET VALUE.............................................................................................. 62

TAXATION..................................................................................................... 63

Distributions........................................................................................... 65
Sales of Shares......................................................................................... 65
Backup Withholding...................................................................................... 65
Options, Futures and Forward Contracts, and Swap Agreements............................................. 66
Short Sales............................................................................................. 66
Passive Foreign Investment Companies.................................................................... 66
Foreign Currency Transactions........................................................................... 67
Foreign Taxation........................................................................................ 67
Original Issue Discount and Market Discount............................................................. 68
Non-U.S. Shareholders................................................................................... 69
Other Taxation.......................................................................................... 69

OTHER INFORMATION............................................................................................ 70

Capitalization.......................................................................................... 70
Performance Information................................................................................. 70
Potential College Cost Table............................................................................ 79
Voting Rights........................................................................................... 82
The Reorganization of the PIMCO Money Market and Total Return II Funds.................................. 83
The Reorganization of the PIMCO Global Bond Fund II..................................................... 83
Code of Ethics.......................................................................................... 83
Year 2000 Readiness Disclosure.......................................................................... 83
Custodian, Transfer Agent and Dividend Disbursing Agent................................................. 84
Independent Accountants................................................................................. 85
Counsel................................................................................................. 85
Registration Statement.................................................................................. 85
Financial Statements.................................................................................... 85

SHAREHOLDER GUIDE FOR CLASS A, B AND C SHARES................................................................ SG-1
</TABLE>
<PAGE>

THE TRUST

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.

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.
<PAGE>

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 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.

Corporate income-producing securities may 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

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respect to a reference rate. 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. Debt securities may be
acquired with warrants attached.

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." For a discussion of securities rated
below investment grade, see "High Yield Securities ("Junk Bonds")" below.

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.

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.

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, which may have an adverse effect on the
Fund's ability to achieve its investment objective. 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.

High Yield Securities ("Junk Bonds")

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.

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<PAGE>

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
Adviser seeks to reduce these risks through diversification, credit analysis and
attention to current developments and trends in both the economy and financial
markets.

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.

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.

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 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 issuers, within the period.

Each Fund may invest in floating rate debt instruments ("floaters") and
(except the 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.

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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.

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 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

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pools of mortgages insured by the Federal Housing Administration (the "FHA"), or
guaranteed by the Department of Veterans Affairs (the "VA").

Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government. FHLMC was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. It is a government-sponsored corporation
formerly owned by the twelve Federal Home Loan Banks and now owned entirely by
private stockholders. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the United
States Government.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools. However, timely
payment of interest and principal of these pools may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance and letters of credit, which may be issued by governmental
entities, private insurers or the mortgage poolers. 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

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<PAGE>

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, 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, and their income streams.

CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding
the longer maturity classes receive principal only after the first class has
been retired. An investor is partially guarded against a sooner than desired
return of principal because of the sequential payments.

In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C
Bonds all bear current interest. Interest on the Series Z Bond is accrued and
added to principal and a like amount is paid as principal on the Series A, B, or
C Bond currently being paid off. When the Series A, B, and C Bonds are paid in
full, interest and principal on the Series Z Bond begins to be paid currently.
With some CMOs, the issuer serves as a conduit to allow loan originators
(primarily builders or savings and loan associations) to borrow against their
loan portfolios.

FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations
of FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are
made semi-annually, as opposed to monthly. The amount of principal payable on
each semiannual payment date is determined in accordance with FHLMC's mandatory
sinking fund schedule, which, in turn, is equal to approximately 100% of FHA
prepayment experience applied to the mortgage collateral pool. All sinking fund
payments in the CMOs are allocated to the retirement of the individual classes
of bonds in the order of their stated maturities. Payment of principal on the
mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum
sinking fund obligation for any 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

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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
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

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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 Receivables(SM)
("CARS(SM)"). CARS(SM) represent undivided fractional interests in a trust whose
assets consist of a pool of motor vehicle retail installment sales contracts and
security interests in the vehicles securing the contracts. Payments of principal
and interest on CARS(SM) are passed through monthly to certificate holders, and
are guaranteed up to certain amounts and for a certain time period by a letter
of credit issued by a financial institution unaffiliated with the trustee or
originator of the trust. An investor's return on CARS(SM) may be affected by
early prepayment of principal on the underlying vehicle sales contracts. If the
letter of credit is exhausted, the trust may be prevented from realizing the
full amount due on a sales contract because of state law requirements and
restrictions relating to foreclosure sales of vehicles and the obtaining of
deficiency judgments following such sales or because of depreciation, damage or
loss of a vehicle, the application of federal and state bankruptcy and
insolvency laws, or other factors. As a result, certificate holders may
experience delays in payments or losses if the letter of credit is exhausted.

Consistent with a Fund's investment objectives and policies, the Adviser
also may invest in other types of asset-backed securities.

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,

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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. Brady Bonds are not considered to be
U.S. Government securities. 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").

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.

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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.

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.

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.

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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.

Foreign Currency Exchange-Related Securities

Foreign currency warrants. Foreign currency warrants such as Currency
Exchange Warrants(SM) ("CEWs(SM)") are warrants which entitle the holder to
receive from their issuer an amount of cash (generally, for warrants issued in
the United States, in U.S. dollars) which is calculated pursuant to a
predetermined formula and based on the exchange rate between a specified foreign
currency and the U.S. dollar as of the exercise date of the warrant. Foreign
currency warrants generally are exercisable upon their issuance and expire as of
a specified date and time. Foreign currency warrants have been issued in
connection with U.S. dollar-denominated debt offerings by major corporate
issuers in an attempt to reduce the foreign currency exchange risk which, from
the point of view of prospective purchasers of the securities, is inherent in
the international fixed-income marketplace. Foreign currency warrants may
attempt to reduce the foreign exchange risk assumed by purchasers of a security
by, for example, providing for a supplemental payment in the event that the U.S.
dollar depreciates against the value of a major foreign currency such as the
Japanese Yen or German Deutschmark. The formula used to determine the amount
payable upon exercise of a foreign currency warrant may make the warrant
worthless unless the applicable foreign currency exchange rate moves in a
particular direction (e.g., unless the U.S. dollar appreciates or depreciates
against the particular foreign currency to which the warrant is linked or
indexed). Foreign currency warrants are severable from the debt obligations with
which they may be offered, and may be listed on exchanges. Foreign currency
warrants may be exercisable only in certain minimum amounts, and an investor
wishing to exercise warrants who possesses less than the minimum number required
for exercise may be required either to sell the warrants or to purchase
additional warrants, thereby incurring additional transaction costs. In the case
of any exercise of warrants, there may be a time delay between the time a holder
of warrants gives instructions to exercise and the time the exchange rate
relating to exercise is determined, during which time the exchange rate could
change significantly, thereby affecting both the market and cash settlement
values of the warrants being exercised. The expiration date of the warrants may
be accelerated if the warrants should be delisted from an exchange or if their
trading should be suspended permanently, which would result in the loss of any
remaining "time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case the

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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 ("PERLs(SM)") are debt obligations the principal on which is payable
at maturity in an amount that may vary based on the exchange rate between the
U.S. dollar and a particular foreign currency at or about that time. The return
on "standard" principal exchange rate linked securities is enhanced if the
foreign currency to which the security is linked appreciates against the U.S.
dollar, and is adversely affected by increases in the foreign exchange value of
the U.S. dollar; "reverse" principal exchange rate linked securities are like
the "standard" securities, except that their return is enhanced by increases in
the value of the U.S. dollar and adversely impacted by increases in the value of
foreign currency. Interest payments on the securities are generally made in U.S.
dollars at rates that reflect the degree of foreign currency risk assumed or
given up by the purchaser of the notes (i.e., at relatively higher interest
rates if the purchaser has assumed some of the foreign exchange risk, or
relatively lower interest rates if the issuer has assumed some of the foreign
exchange risk, based on the expectations of the current market). Principal
exchange rate linked securities may in limited cases be subject to acceleration
of maturity (generally, not without the consent of the holders of the
securities), which may have an adverse impact on the value of the principal
payment to be made at maturity.

Performance indexed paper. Performance indexed paper ("PIPs(SM)") is U.S.
dollar-denominated commercial paper the yield of which is linked to certain
foreign exchange rate movements. The yield to the investor on performance
indexed paper is established at maturity as a function of spot exchange rates
between the U.S. dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is below,
and a potential maximum rate of return that is above, market yields on U.S.
dollar-denominated commercial paper, with both the minimum and maximum rates of
return on the investment corresponding to the minimum and maximum values of the
spot exchange rate two business days prior to maturity.

Bank Obligations

Bank obligations in which the Funds 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.

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Each Fund limits its investments in United States bank obligations to
obligations of United States banks (including foreign branches) which have more
than $1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the Federal Deposit Insurance Corporation. A Fund
also may invest in certificates of deposit of savings and loan associations
(federally or state chartered and federally insured) having total assets in
excess of $1 billion.

Each Fund (except the PIMCO Money Market, 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 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. The Funds may participate in such
syndications, or can buy part of a loan, becoming a part lender. When
purchasing loan participations, a Fund assumes the credit risk associated with
the corporate borrower and may assume the credit risk associated with an
interposed bank or other financial intermediary. The participation interests in
which a Fund intends to invest may not be rated by any nationally recognized
rating service.

A loan is often administered by an agent bank acting as agent for all
holders. The agent bank administers the terms of the loan, as specified in the
loan agreement. In addition, the agent bank is normally responsible for the
collection of principal and interest payments from the corporate borrower and
the apportionment of these payments to the credit of all institutions which are
parties to the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the corporate borrower, the
Fund may have to rely on the agent bank or other financial intermediary to apply
appropriate credit remedies against a corporate borrower.

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A financial institution's employment as agent bank might be terminated in
the event that it fails to observe a requisite standard of care or becomes
insolvent. A successor agent bank would generally be appointed to replace the
terminated agent bank, and assets held by the agent bank under the loan
agreement should remain available to holders of such indebtedness. However, if
assets held by the agent bank for the benefit of a Fund were determined to be
subject to the claims of the agent bank's general creditors, the Fund might
incur certain costs and delays in realizing payment on a loan or loan
participation and could suffer a loss of principal and/or interest. In
situations involving other interposed financial institutions (e.g., an insurance
company or governmental agency) similar risks may arise.

Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the corporate borrower for payment of principal and
interest. If a Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer a Fund more protection than an
unsecured loan in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the corporate borrower's obligation, or that the collateral
can be liquidated.

The Funds may invest in loan participations with credit quality comparable
to that of issuers of its securities investments. Indebtedness of companies
whose creditworthiness is poor involves substantially greater risks, and may be
highly speculative. Some companies may never pay off their indebtedness, or may
pay only a small fraction of the amount owed. Consequently, when investing in
indebtedness of companies with poor credit, a Fund bears a substantial risk of
losing the entire amount invested.

Each Fund limits the amount of its total assets that it will invest in any
one issuer or in issuers within the same industry (see "Investment
Restrictions"). For purposes of these limits, a Fund generally will treat the
corporate borrower as the "issuer" of indebtedness held by the Fund. In the case
of loan participations where a bank or other lending institution serves as a
financial intermediary between a Fund and the corporate borrower, if the
participation does not shift to the Fund the direct debtor-creditor relationship
with the corporate borrower, Securities and Exchange Commission ("SEC")
interpretations require the Fund to treat both the lending bank or other lending
institution and the corporate borrower as "issuers" for the purposes of
determining whether the Fund has invested more than 5% of its total assets in a
single issuer. Treating a financial intermediary as an issuer of indebtedness
may restrict a Funds' ability to invest in indebtedness related to a single
financial intermediary, or a group of intermediaries engaged in the same
industry, even if the underlying borrowers represent many different companies
and industries.

Loans and other types of direct indebtedness may not be readily marketable
and may be subject to restrictions on resale. In some cases, negotiations
involved in disposing of indebtedness may require weeks to complete.
Consequently, some indebtedness may be difficult or impossible to dispose of
readily at what the Adviser believes to be a fair price. In addition, valuation
of illiquid indebtedness involves a greater degree of judgment in determining a
Fund's net asset value than if that value were based on available market
quotations, and could result in significant variations in the Fund's daily share
price. At the same time, some loan interests are traded among certain financial
institutions and accordingly may be deemed liquid. As the market for different
types of indebtedness develops, the liquidity of these instruments is expected
to improve. In addition, the Funds currently intend to treat indebtedness for
which there is no readily available market as illiquid for purposes of the
Funds' limitation on illiquid investments. Investments in 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

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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. 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 credit facility. Delayed funding loans and revolving credit
facilities usually provide for floating or variable rates of interest. 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.

Loans of Portfolio Securities

For the purpose of achieving income, each Fund may lend its 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 deposits,
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 Global Bond Fund II)
of the total assets of the Fund.

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.

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<PAGE>

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."

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. 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.

Derivative Instruments

In pursuing their individual objectives the Funds (except the PIMCO Money
Market Fund) may 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 or as part of
their overall investment strategies, 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

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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.

The value of some derivative instruments in which the Funds invest may be
particularly sensitive to changes in prevailing interest rates, and, like the
other investments of the Funds, the ability of a Fund to successfully utilize
these instruments may depend in part upon the ability of the Adviser to forecast
interest rates and other economic factors correctly. If the Adviser incorrectly
forecasts such factors and has taken positions in derivative instruments
contrary to prevailing market trends, the Funds could be exposed to the risk of
loss.

The Funds might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If the Adviser
incorrectly forecasts interest rates, market values or other economic factors in
utilizing a derivatives strategy for a Fund, the Fund might have been in a
better position if it had not entered into the transaction at all. 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 and Indexes. A Fund may, to the extent specified
herein or 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.

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.

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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 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. Prior to exercise or expiration, an
option may be closed out by an offsetting purchase or sale of an option of the
same series. 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 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.

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

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<PAGE>

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. 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. Funds that invest in foreign currency-denominated
securities may buy or sell put and call options on foreign currencies. A Fund
may buy or sell put and call options on foreign currencies either on exchanges
or in the over-the-counter market. A put option on a foreign currency gives the
purchaser of the option the right to sell a foreign currency at the exercise
price until the option expires. A call option on a foreign currency gives the
purchaser of the option the right to purchase the currency at the exercise price
until the option expires. Currency options traded on U.S. or other exchanges
may be subject to position limits which may limit the ability of a Fund to
reduce foreign currency risk using such options. Over-the-counter options differ
from traded options in that they are two-party contracts with price and other
terms negotiated between buyer and seller, and generally do not have as much
market liquidity as exchange-traded options.

Futures Contracts and Options on Futures Contracts. 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. The Strategic Balanced, Convertible Bond, StocksPLUS and
StocksPLUS Short Strategy Funds may invest in interest rate, stock index and
foreign currency futures contracts and options thereon.

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;

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<PAGE>

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.

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

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<PAGE>

realizes a capital loss. Conversely, if an offsetting sale price is more than
the original purchase price, the Fund realizes a capital gain, or if it is less,
the Fund realizes a capital loss. The transaction costs must also be included in
these calculations.

The Funds may write covered straddles consisting of a call and a put
written on the same underlying futures contract. A straddle will be covered
when sufficient assets are deposited to meet the Funds' immediate obligations.
A Fund may use the same liquid assets to cover both the call and put options
where the exercise price of the call and put are the same, or the exercise price
of the call is higher than that of the put. In such cases, the Funds will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."

Limitations on Use of Futures and Futures Options. In general, the Funds
intend to enter into positions in futures contracts and related options only for
"bona fide hedging" purposes. With respect to positions in futures and related
options that do not constitute bona fide hedging positions, a Fund will not
enter into a futures contract or futures option contract if, immediately
thereafter, the aggregate initial margin deposits relating to such positions
plus premiums paid by it for open futures option positions, less the amount by
which any such options are "in-the-money," would exceed 5% of the Fund's net
assets. A call option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures contract
that is the subject of the option.

When purchasing a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) 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.

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<PAGE>

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 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,

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<PAGE>

options on futures contracts, and options on currencies may be traded on foreign
exchanges. Such transactions may not be regulated as effectively as similar
transactions in the United States; may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political, legal and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in the
Trust's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of 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.

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<PAGE>

Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the CFTC
effective February 22, 1993. To qualify for this exemption, a swap agreement
must be entered into by "eligible participants," which includes the following,
provided the participants' total assets exceed established levels: a bank or
trust company, savings association or credit 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.

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 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 equaling 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

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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.

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.

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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.

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.

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).

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, others may be
illiquid, and their sale may involve substantial delays and additional costs.

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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 requestusually 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.

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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.

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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

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<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:

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(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, are
convertible into or exchangeable for securities of the same issue as, and
equal in amount to, the securities sold short;

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(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 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.

34
<PAGE>

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.

(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

35
<PAGE>

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 business of the Trust is managed under the direction of the Trust's
Board of Trustees. Subject to the provisions of the Trust's Declaration of
Trust, its By-Laws and Massachusetts law, the Trustees have all powers necessary
and convenient to carry out this responsibility, including the election and
removal of the Trust's officers.

The Trustees and Executive Officers of the Trust, their ages, their
business address and a description of their principal occupations during the
past five years are listed below. Unless otherwise indicated, the address of
all persons below is 840 Newport Center Drive, Suite 300, Newport Beach,
California 92660.

36
<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>

37
<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>

38
<PAGE>

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>

39
<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
Age 35 Reporting and Taxation, 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, 1999.
<TABLE>
<CAPTION>

Aggregate Total Compensation from
Compensation Trust and Fund Complex
Name and Position from Trust1 Paid to Trustees2
- --------------------------- ------------ -----------------------
<S> <C> <C>

Guilford C. Babcock $______ $______
Trustee

Vern O. Curtis $______ $______
Trustee

Thomas P. Kemp $______ $______
Trustee

William J. Popejoy $______ $______
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, 1999, the
unaffiliated Trustees as a group received compensation in the amount of
$________.

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
Commercial Mortgage Securities Trust, Inc., the Directors listed above
received an annual

40
<PAGE>

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 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, 1999, the unaffiliated Directors as a group
received compensation in the amount of $______.

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 $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 $500. For the one year period ended March 31, 1999, the
unaffiliated Trustees as a group received compensation in the amount of
$______.

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.

41
<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, 1999, 1998, and 1997, the aggregate
amount of the advisory fees paid by each operational Fund was as follows:

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 3/31/99 3/31/98 3/31/97
- ---- --------------------- ----------- -----------
<S> <C> <C> <C>
Money Market Fund* $ 205,384 $ 67,626
Short-Term Fund 487,226 311,485
Low Duration Fund 7,416,427 6,877,132
Low Duration Fund II 869,853 685,047
Low Duration Fund III 32,700 6,114
Low Duration Mortgage Fund 5,914 N/A
Moderate Duration Fund 294,466 6,525
Real Return Bond Fund 18,838 2,453
Total Return Fund 38,327,843 29,232,090
Total Return Fund II* 1,145,766 1,171,011
Total Return Fund III 701,110 423,216
Total Return Mortgage Fund 5,679 N/A
High Yield Fund 3,670,999 1,983,580
Long-Term U.S. Government Fund 117,242 64,058
Global Bond Fund 642,260 423,547
Global Bond Fund II** 50,123 41,683
Foreign Bond Fund 811,698 541,283
International Bond Fund 2,045,487 2,810,494
Emerging Markets Bond Fund 11,365 N/A
Strategic Balanced Fund 117,547 31,660
StocksPLUS Fund 1,919,328 779,413
</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.

42
<PAGE>

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):

<TABLE>
<CAPTION>
Administrative Fee Rate
-----------------------
Institutional and Class A, Class J
Fund Administrative Class B and C Class D* and K
- ---- --------------------- --------- --------- --------
<S> <C> <C> <C> <C>
Money Market 0.20% 0.35% 0.45% 0.25%
Short-Term Fund 0.20% 0.35% 0.50% 0.25%
Low Duration and Total Return 0.18% 0.40% 0.50% 0.25%
Funds
Moderate Duration Fund 0.20% 0.40% 0.65% 0.25%
Municipal Bond Fund 0.25% 0.35% 0.60% 0.25%
Global Bond and Global Bond II 0.30% 0.45% 0.70% 0.30%
Funds
Foreign Bond Fund 0.25% 0.45% 0.70% 0.25%
International Bond Fund 0.25% 0.45% 0.70% 0.30%
Emerging Markets Bond and Emerging 0.40% 0.55% 0.80% 0.30%
Markets Bond II Funds
All other Funds 0.25% 0.40% 0.65% 0.25%
</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").

43
<PAGE>

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.

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, 1999, 1998, and 1997, the aggregate
amount of the administration fees paid by each operational Fund was as follows:

Year Ended Year Ended Year Ended
Fund 3/31/99 3/31/98 3/31/97
- ---- ----------------- ----------- -----------
<S> <C> <C> <C>
Money Market Fund* $ 423,936 $ 117,570
Short-Term Fund 410,894 249,655
Low Duration Fund 5,665,996 5,005,045
Low Duration Fund II 869,853 685,047
Low Duration Fund III 32,700 6,114
Low Duration Mortgage Fund 5,914 N/A
Moderate Duration Fund 235,572 5,220
Real Return Bond Fund 21,841 2,503
Total Return Fund 29,219,721 21,266,359
Total Return Fund II* 1,145,766 1,171,011
Total Return Fund III 701,110 423,216
Total Return Mortgage Fund 5,679 N/A
High Yield Fund 4,258,485 2,071,177
Long-Term U.S. Government Fund 130,444 64,374
Global Bond Fund 770,719 508,256
Global Bond Fund II** 87,617 14,646
</TABLE>

44
<PAGE>

Year Ended Year Ended Year Ended
Fund 3/31/99 3/31/98 3/31/97
- ---- ----------------- ----------- -----------
<S> <C> <C> <C>
Foreign Bond Fund 849,691 540,519
International Bond Fund 2,045,487 2,810,494
Emerging Markets Bond Fund 10,526 N/A
Strategic Balanced Fund 73,467 19,788
StocksPLUS Fund 1,392,509 491,519
</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.

DISTRIBUTION OF TRUST SHARES

Distributor and Multi-Class Plan

PIMCO Funds Distributors LLC (the "Distributor") serves as the principal
underwriter 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 Distributor, located at 2187 Atlantic Street, Stamford,
Connecticut 06902, is a broker-dealer registered with the Securities and
Exchange Commission. 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 to non-U.S. investors outside the United
States.

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:

45
<PAGE>

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.

Class J and Class K shares are offered through foreign broker dealers,
banks and other financial institutions. Class J and Class K shares are offered
to non-U.S. investors as well as though various non-U.S. 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.

Each class of shares bears any class specific expenses allocated to such
class, such as expenses related to the distribution and/or shareholder servicing
of such class. In addition, each class may, at the Trustees' discretion, also
pay a different share of other expenses, not including advisory or custodial
fees or other expenses related to the management of the Trust's assets, if these
expenses are actually incurred in a different amount by that class, or if the
class receives services of a different kind or to a different degree than the
other classes. All other expenses are allocated to each class on the basis of
the net asset value of that class in relation to the net asset value of the
particular Fund. 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
"Investment Options (Class A, B and C Shares)," 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, 1999, 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 3/31/99 Year Ended 3/31/98 Year Ended 3/31/97
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Class A $________ $37,724 $670
</TABLE>

46
<PAGE>

<TABLE>
<S> <C> <C> <C>
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
"Investment Options (Class A, B and C Shares)," 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, 1999, March 31, 1998, 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.

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
"Management of the Trust--Distribution and Servicing (12b-1) 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 below,
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.

The Distributor makes distribution and servicing payments to participating
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 brokers, certain banks and other financial
intermediaries in connection 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 compensation in connection with sales of Class A shares
without a sales charge). In the

47
<PAGE>

case of Class B shares, participating brokers and other financial intermediaries
are compensated by an advance 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 Retail Plans were 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 predecessors in their periodic review of the Retail 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 B and Class C shares may be spent
by the Distributor on any activities or expenses primarily intended to result in
the sale of Class B or Class C 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 B or Class C shares,
printing of prospectuses and reports for other than existing 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 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 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 A, Class B or Class C shares of any Fund may
indirectly support sales and 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. The Distributor may make payments to brokers (and with respect 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:
<TABLE>
<CAPTION>

Servicing Distribution
Class A Fee(1) Fee(1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund* 0.10% N/A
- -------------------------------------------------------------------------------

All other Funds 0.25% None

Class B(2)
- -------------------------------------------------------------------------------
All Funds 0.25% None
</TABLE>

48
<PAGE>

Class C - Shares purchased on or after 7/1/91(3)
- -------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund* 0.10% 0.00%
- -------------------------------------------------------------------------------
Short-Term Fund* 0.25% 0.25%
- -------------------------------------------------------------------------------
Low Duration, Real 0.25% 0.45%
Return Bond, Municipal
Bond and StocksPLUS
Funds*
- -------------------------------------------------------------------------------
All other Funds 0.25% 0.65%
- -------------------------------------------------------------------------------

Class C - Shares purchased before 7/1/91
- -------------------------------------------------------------------------------
Money Market Fund* 0.10% 0.00%
- -------------------------------------------------------------------------------
All other Funds 0.25% None
- -------------------------------------------------------------------------------
</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 Advisors 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.

The Distributor may from time to time pay additional cash bonuses 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
together 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 administrator) may also pay participating brokers and other
intermediaries for sub-transfer agency and other services.

If in any year the Distributor's expenses incurred in connection with the
distribution of Class B and Class C shares and, for Class A, Class B and Class C
Shares, in connection with the servicing of shareholders and the maintenance of
shareholder accounts, exceed the distribution and/or servicing fees paid by the
Trust, the Distributor would recover such excess only if the Retail 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 Retail Plan terminates.

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.

49
<PAGE>

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 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 years ended March 31, 1999, March 31, 1998 and March 31, 1997,
the Trust paid the Distributor an aggregate of $________, $1,180,030 and
$108,294, respectively, pursuant to the Distribution and Servicing Plan for
Class A shares, of which the indicated amounts were attributable to the
following Funds:

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 3/31/99 3/31/98 3/31/97
- ---- --------------------- -------- --------
<S> <C> <C> <C>
Money Market Fund $ $ 38,216 $ 5,447
Short-Term Fund 23,033 530
Low Duration Fund 192,859 27,514
Real Return Fund 1,143 0
Total Return Fund 679,157 47,448
High Yield Fund 121,858 15,347
Long-Term U.S. Government Fund 8,199 396
Global Bond Fund II 20,868 9,836
Foreign Bond Fund 10,245 127
Emerging Markets Bond Fund 316 0
Municipal Bond 0 0
StocksPLUS Fund 84,136 1,609
</TABLE>

During the fiscal year ended March 31, 1999, 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, $________;
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), $________.
These totals, if allocated among (i) compensation and (ii) sales materials and
other expenses for each Fund, were as follows:

50
<PAGE>

<TABLE>
<CAPTION>
Sales Material
and Other
Fund Compensation Expenses Total
- ---- ------------ -------------- -----
<S> <C> <C> <C>
Money Market Fund $ $ $
Short-Term Fund
Low Duration Fund
Real Return Bond Fund
Total Return Fund
High Yield Fund
Long-Term U.S. Government Fund
Global Bond Fund II
Foreign Bond Fund
Emerging Markets Bond Fund
StocksPLUS Fund
</TABLE>

Payments Pursuant to Class B Plan

For the fiscal years ended March 31, 1999, March 31, 1998 and March 31, 1997,
the Trust paid the Distributor an aggregate of $__________, $2,884,164 and
$293,036, respectively, pursuant to the Distribution and Servicing Plan for
Class B shares, of which the indicated amounts were attributable to the
following Funds:

Year Ended Year Ended Year Ended
Fund 3/31/99 3/31/98 3/31/97
- ---- ------- ------- -------
<S> <C> <C> <C>

Money Market Fund $ $ 27,747 $ 4,084
Short-Term Fund 7,508 156
Low Duration Fund 95,153 9,853
Real Return Fund 9,701 256
Total Return Fund 1,153,121 140,575
High Yield Fund 1,013,423 110,003
Long-Term U.S. Government Fund 28,337 361
Global Bond Fund II 42,965 18,506
Foreign Bond Fund 58,084 1,129
Emerging Markets Bond Fund 928 0
Municipal Bond 0 0
StocksPLUS Fund 447,197 8,113
</TABLE>

During the fiscal year ended March 31, 1999, 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, $_________;
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), $_________.
These totals, if allocated among (i) compensation and (ii) sales materials and
other expenses for each Fund, were as follows:

51
<PAGE>

Sales Material
and Other
Fund Compensation Expenses Total
- ---- ------------ -------------- ------
<S> <C> <C> <C>
Money Market Fund $ $ $
Short-Term Fund
Low Duration Fund
Real Return Bond Fund
Total Return Fund
High Yield Fund
Long-Term U.S. Government Fund
Global Bond Fund II
Foreign Bond Fund
Emerging Markets Bond Fund
StocksPLUS Fund
</TABLE>

Payments Pursuant to Class C Plan

For the fiscal years ended March 31, 1999, March 31, 1998 and March 31, 1997,
the Trust paid the Distributor an aggregate of $__________, $7,026,337 and
$1,219,775, respectively, pursuant to the Distribution and Servicing Plan for
Class C shares, of which the indicated amounts were attributable to the
following Funds:

Year Ended Year Ended Year Ended
Fund 3/31/99 3/31/98 3/31/97
- ---- ------- ------- -------
<S> <C> <C> <C>
Money Market Fund $ $ 59,070 $ 12,352
Short-Term Fund 22,612 462
Low Duration Fund 461,997 92,491
Real Return Fund 4,292 79
Total Return Fund 3,510,589 666,085
High Yield Fund 2,415,721 412,589
Long-Term U.S. Government Fund 26,880 163
Global Bond Fund II 56,574 23,021
Foreign Bond Fund 91,131 1,520
Emerging Markets Bond Fund 635 0
Municipal Bond 0 0
StocksPLUS Fund 376,836 11,013
</TABLE>

During the fiscal year ended March 31, 1999, 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, $__________;
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), $__________.
These totals, if allocated among (i) compensation and (ii) sales materials and
other expenses for each Fund, were as follows:

52
<PAGE>

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, 1999, such expenses were approximately
$__________ in excess of payments under the Class A Plan, and $___________ in
excess of payments under the Class B Plan. There were no excess payments under
the Class C Plan.

The allocation of such excess (on a pro rata basis) among the Funds
listed below as of March 31, 1999 was as follows:

<TABLE>
<CAPTION>
Fund Class A Class B Class C
- ---- ------- ------- -------
<S> <C> <C> <C>
Money Market Fund $ $ $
Short-Term Fund
Low Duration Fund
Real Return Bond Fund
Total Return Fund
High Yield Fund
Long-Term U.S. Government Fund
Global Bond Fund II
Foreign Bond Fund
Emerging Markets Bond Fund
StocksPLUS Fund
</TABLE>

53
<PAGE>

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, 1999 was as follows:

<TABLE>
<CAPTION>
Fund Class A Class B Class C
- ---- ------- ------- -------
<S> <C> <C> <C>
Money Market Fund % % %
Short-Term Fund
Low Duration Fund
Total Return Fund
Real Return Fund
High Yield Fund
Long-Term U.S. Government Fund
Global Bond Fund II
Foreign Bond Fund
Emerging Markets Bond Fund
StockPLUS Fund
</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-
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. Fees paid
pursuant to either Plan may be paid for shareholder services and the maintenance
of shareholder 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 Administrative Distribution Plan.

54
<PAGE>

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 is a "reimbursement plan," which means that fees
are payable to the relevant financial intermediary only to the extent necessary
to reimburse expenses incurred pursuant to such plan. 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.

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 than the Trust on
the purchase, redemption or exchanges of Trust shares by their customers.
Service agents may also independently establish and charge their customers
transaction fees, account fees and other amounts in connection which purchases,
sales and redemption of Trust shares in addition to any fees charged by the
Trust. 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 agents for information regarding
these fees and conditions.

Payments Pursuant to the Administrative Plans

For the fiscal years ended March 31, 1999, March 31, 1998 and March 31,
1997 the Trust paid qualified service providers an aggregate amount of $______,
$______ and $_______, respectively, pursuant to the Administrative Services Plan
and the Administrative Distribution Plan. Such payments were allocated among
the Funds listed below as follows:

55
<PAGE>

<TABLE>

Year Ended Year Ended Year Ended
Fund 3/31/99 3/31/98 3/31/97
- ---- ------- ------- -------
<S> <C> <C> <C>
Money Market Fund $ $ $
Short-Term Fund
Low Duration Fund
Low Duration Fund II
Total Return Fund
Total Return Fund II
Total Return Fund III
High Yield Fund
Long-Term U.S. Government Fund
Global Bond Fund
Foreign Bond Fund
Municipal Bond
StocksPLUS Fund
</TABLE>

The remaining Funds did not make payments under either Administrative Plan.

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.

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<PAGE>

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 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.

Payments Pursuant to Class D Plan

For the fiscal year ended March 31, 1999, the Trust paid $__________ pursuant
to the Class D Plan, of which the indicated amounts were attributable to the
following operational Funds:

<TABLE>
<CAPTION>
Year Ended
Fund 3/31/99
- ---- ----------
<S> <C>

Short-Term Fund $
Low Duration Fund
Real Return Fund
Total Return Fund
Total Return Mortgage Fund
High Yield Fund
Foreign Bond Fund
Municipal Bond
Strategic Balanced
StocksPLUS Fund
</TABLE>

57
<PAGE>

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).

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.

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<PAGE>

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 "Exchanging Shares," and in the Institutional Prospectus under the
caption "Exchange Privilege," 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 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.

59
<PAGE>

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 and Portfolio Transactions

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). Some securities considered for investments by the Funds may also be
appropriate for other clients served by the Adviser. 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. 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. 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

60
<PAGE>

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.

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, as discussed below. The Adviser also may consider
sales of shares of the Trust as a factor in the selection of broker-dealers to
execute portfolio transactions for the Trust.

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.

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

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 their ability to

61
<PAGE>

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. High portfolio turnover (e.g., greater than 100%) involves
correspondingly greater expenses to a Fund, including brokerage commissions or
dealer mark-ups and other transaction costs on the sale of securities and
reinvestments in other securities. The higher the rate of portfolio turnover of
a Fund, the higher these transaction costs borne by the Fund generally will be.
Such sales may result in realization of taxable capital gains (including short-
term capital gains which are generally taxed to shareholders at ordinary income
tax rates).

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. Portfolio turnover rates for each
Fund for which financial highlights for at least the past two fiscal years are
provided in the Prospectuses are set forth under "Financial Highlights" in the
applicable Prospectus.

NET ASSET VALUE

As indicated under "How Fund Shares are Priced" in the Prospectuses, 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.

For all Funds other than PIMCO Money Market Fund, 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.

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

62
<PAGE>

between the amortized cost value per share and the net asset value per share
based upon available indications of market value. The Trustees will consider
what steps should be taken, if any, in the event of a difference of more than
1/2 of 1% between the two. The Trustees will take such steps as they consider
appropriate, (e.g., selling securities to shorten the average portfolio
maturity) to minimize any material dilution or other unfair results which might
arise from differences between the two. The Fund also is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, to limit its
investments to instruments having remaining maturities of 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.

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 specially 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 approximately the amount of the expense
accrual differential between a particular Fund's classes.

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

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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 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

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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

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.

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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 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

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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, 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

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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 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

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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.

Non-U.S. Shareholders

Withholding of Income Tax on Dividends: Under the 1972 Convention and U.S.
federal tax law, dividends paid on shares beneficially held by a person who is a
"foreign person" within the meaning of the Internal Revenue Code of 1986, as
amended, are, in general, subject to withholding of U.S. federal income tax at a
rate of 30% of the gross dividend, which may, in some cases, be reduced by an
applicable tax treaty. However, if a beneficial holder who is a foreign person
has a permanent establishment in the United States, and the shares held by such
beneficial holder are effectively connected with such permanent establishment
and, in addition, the dividends are effectively connected with the conduct by
the 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 a Fund's shares: Under U.S. federal tax law, a
beneficial holder of shares who is a foreign person 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
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 beneficial holder of shares who is a foreign person
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 beneficial
holder of shares who is a foreign person, 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 a
foreign country 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 shares
by a beneficial holder who is a foreign person.

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 foreign investor qualifies as a foreign person under U.S.
domestic tax law and the 1972 Convention.

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.

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.

Performance Information

From time to time the Trust may make available certain information about
the performance of some or all of the classes of shares of some or all of the
Funds. Information about a Fund's performance is based on that Fund's (or its
predecessor's) record to a recent date and is not intended to indicate future
performance.

The total return of classes of shares of all Funds may be included in
advertisements or other written material. When a Fund's total return is
advertised , 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 below. For periods prior to the initial
offering date of a particular class of shares, total return presentations for
the class will be based on the historical performance of an older class of the
Fund (if any) restated to reflect any different sales charges and/or 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 restated 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 periods
prior to the initial offering date of the newer class. Total return for each
class is measured by

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comparing the value of an investment in the Fund at the beginning of the
relevant period 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). Total return may be advertised 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.

The Funds may also 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 is computed separately for each class of a Fund.
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 in advertisements or information furnished to shareholders
or prospective investors. Each Fund may from time to time include in
advertisements the ranking of the Fund's performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services as
having the same investment objectives. Information provided to any newspaper or
similar listing of the Fund's net asset values and public offering prices will
separately present each class of shares. 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.

Calculation of Yield

Current yield for the PIMCO Money Market Fund will be based on the change
in the value of hypothetical investment (exclusive of capital changes) over a
particular 7-day period less a pro-rata share of Fund expenses accrued over that
period (the "base period"), and stated as a percentage of the investment at the
start of the base period (the "base period return"). The base period return is
then annualized by multiplying by 365/7, with the resulting yield figure carried
to at least the nearest hundredth of one percent. "Effective yield" for the
PIMCO Money Market Fund assumes that all dividends received during an annual
period have been reinvested. Calculation of "effective yield" begins with the
same "base period return" used in the calculation of yield, which is then
annualized to reflect weekly compounding pursuant to the following formula:

Effective Yield = [(Base Period Return +1)365/7] - 1

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

71
<PAGE>

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 March 31, 1999, the yield of the Funds was
as follows (all numbers are annualized) (Class J and Class K shares were not
offered during the period listed):

Yield for Period
Ended March 31, 1999
--------------------

<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 % % % % N/A
Short-Term Fund %
Low Duration Fund
Low Duration Fund II N/A N/A N/A N/A
Low Duration Fund III N/A N/A N/A N/A N/A
Low Duration Mortgage Fund N/A N/A N/A N/A N/A
Moderate Duration Fund N/A N/A N/A N/A N/A
Real Return Bond Fund N/A
Total Return Fund
Total Return Fund II N/A N/A N/A N/A
Total Return Fund III N/A N/A N/A N/A
Total Return Mortgage Fund N/A N/A N/A N/A N/A
High Yield Fund
Municipal Bond Fund N/A
Long-Term U.S. Govt. Fund N/A
Global Bond Fund N/A N/A N/A N/A
Global Bond Fund II N/A N/A
Foreign Bond Fund
International Bond Fund N/A N/A N/A N/A N/A
Emerging Markets Bond Fund N/A N/A
Emerging Markets Bond Fund N/A N/A N/A N/A N/A
II
Strategic Balanced Fund N/A N/A N/A N/A 5.22%
StocksPLUS Fund
</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

72
<PAGE>

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.

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.

Calculation of Total Return

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 March 31, 1999. 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

73
<PAGE>

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.

Total Return for Periods Ended March 31, 1999*

- ------------------------------------------------------------------------------------------------------------
Low Duration Institutional % N/A N/A % 07/31/97 07/31/97
Mortgage
- ------------------------------------------------------------------------------------------------------------
Moderate Institutional % N/A N/A 8.99% 12/31/96 12/31/96
Duration
- ------------------------------------------------------------------------------------------------------------
Real Return Institutional % N/A N/A % 01/29/97 01/29/97
Bond Class A 01/29/97
Class B 01/29/97
Class C 01/29/97
Class D 04/08/98
- ------------------------------------------------------------------------------------------------------------
Total Return Institutional % % % % 05/11/87 05/11/87
Administrative 09/08/94
Class A 01/13/97
Class B 01/13/97
Class C 01/13/97
Class D 04/08/98
- ------------------------------------------------------------------------------------------------------------
Total Return II Institutional % % N/A % 12/30/91 12/30/91
Administrative 11/30/94
- ------------------------------------------------------------------------------------------------------------
Total Return III Institutional % % N/A % 05/01/91 05/01/91
Administrative 04/11/97

- ------------------------------------------------------------------------------------------------------------
Total Return Institutional % N/A N/A % 07/31/97 07/31/97
Mortgage
- ------------------------------------------------------------------------------------------------------------
</TABLE>

74
<PAGE>

<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>
High Yield Institutional % % N/A % 12/16/92 12/16/92
Administrative 01/16/95
Class A 01/13/97
Class B 01/13/97
Class C 01/13/97
Class D 04/08/98
- ------------------------------------------------------------------------------------------------------------
Long-Term U.S. Institutional % % N/A % 07/01/91 07/01/91
Government Administrative 09/23/97
Class A 01/20/97
Class B 01/20/97
Class C 01/20/97
- ------------------------------------------------------------------------------------------------------------
Global Bond Institutional % N/A N/A % 11/23/93 11/23/93
Administrative 07/31/96
- ------------------------------------------------------------------------------------------------------------
Foreign Bond Institutional % % N/A % 12/03/92 12/03/92
Administrative 01/28/97
Class A 01/20/97
Class B 01/20/97
Class C 01/20/97
Class D 04/08/98
- ------------------------------------------------------------------------------------------------------------
International Institutional % % N/A % 12/13/89 12/13/89
Bond
- ------------------------------------------------------------------------------------------------------------
Emerging Institutional % N/A N/A % 07/31/97 07/31/97
Markets Bond Administrative 09/30/98
Class A 07/31/97
Class B 07/31/97
Class C 07/31/97
- ------------------------------------------------------------------------------------------------------------
Emerging Institutional N/A N/A N/A % 04/08/98 04/08/98
Markets Bond II
- ------------------------------------------------------------------------------------------------------------
Municipal Bond Institutional N/A N/A N/A % 12/31/97 12/31/97
Administrative 09/30/98
Class A 04/01/98
Class B 04/01/98
Class C 04/01/98
Class D 04/08/98
- ------------------------------------------------------------------------------------------------------------
Strategic Institutional % N/A N/A % 06/28/96 06/28/96
Balanced Class D 04/08/98
- ------------------------------------------------------------------------------------------------------------
StocksPLUS Institutional % % N/A % 05/13/93 05/13/93
Administrative 01/07/97
Class A 01/20/97
Class B 01/20/97
Class C 01/20/97
Class D 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.

75
<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 March 31, 1999. 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 March 31, 1999*

** 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

76
<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 March 31, 1999
(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 % N/A N/A %
- -----------------------------------------------------------------------------------------------------
</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 March 31, 1999, the current distribution rates
(annualized) for the Funds were as follows (Class J and Class K shares were not
offered during the period listed):

77
<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 % % % % % N/A
Short-Term Fund %
Low Duration Fund
Low Duration Fund II N/A N/A N/A N/A
Low Duration Fund III N/A N/A N/A N/A N/A
Low Duration Mortgage Fund N/A N/A N/A N/A N/A
Moderate Duration Fund N/A N/A N/A N/A N/A
Real Return Bond Fund N/A
Total Return Fund
Total Return Fund II N/A N/A N/A N/A
Total Return Fund III N/A N/A N/A N/A
Total Return Mortgage Fund N/A N/A N/A N/A N/A
High Yield Fund
Municipal Bond Fund N/A
Long-Term U.S. Govt. Fund N/A
Global Bond Fund N/A N/A N/A N/A
Global Bond Fund II N/A N/A
Foreign Bond Fund
International Bond Fund N/A N/A N/A N/A N/A N/A
Emerging Markets Bond Fund N/A N/A
Emerging Markets Bond Fund II 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

78
<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.

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
<S> <C> <C> <C> <C> <C>

Start Public Private Start Public Private
Year College College Year College College
- ------ ------- ------- ----- ------- -------
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:

79
<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>

80
<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 1999 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

81
<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 ____________, 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>
[TO BE PROVIDED]
</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.

82
<PAGE>

** 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
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 Readiness Disclosure

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

83
<PAGE>

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). Several PIMCO Advisors
subsidiaries 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 issuers, with other counterparties, with other entities, 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 shareholders or others will not
suffer from disruptions or adverse results arising as a consequence of entering
Year 2000.

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.

84
<PAGE>

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 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, 1999 for its fiscal year
then ended, including notes thereto, and the reports of PricewaterhouseCoopers
LLP thereon dated May __, 1999, are incorporated by reference from the Trust's
1999 Annual Reports. A copy of the Reports delivered with this Statement of
Additional Information should be retained for future reference.

85
<PAGE>

[Front Cover]

PIMCO Funds Shareholders' Guide for Class A, B and C Shares

__________, 1999

This Guide relates to the mutual funds (each, a "Fund") that are series of PIMCO
Funds: Multi-Manager Series (the "MMS Trust") and PIMCO Funds: Pacific
Investment Management Series (the "PIMS Trust" and, together with the MMS Trust,
the "Trusts"). Unless otherwise indicated, references to the Funds include the
PIMCO Funds Asset Allocation Series portfolios (each, a "Portfolio"). The
Portfolios are so called "funds-of-funds" which are also series of the MMS
Trust, but are offered through a separate prospectus. The MMS Trust, the PIMS
Trust and PIMCO Funds Asset Allocation Series each offer Class A, B and C shares
of their respective Funds in separate prospectuses (each, a "Retail
Prospectus").

This Guide contains detailed information about Fund purchase, redemption and
exchange options and procedures and other information about the Funds. This
Guide is not a prospectus, and should be used in conjunction with the applicable
Retail Prospectus. This Guide, and the information disclosed herein, is
incorporated by reference in, and considered part of, each Retail Prospectus.

PIMCO Funds Distributors LLC distributes the Funds' shares. You can call PIMCO
Funds Distributors LLC at 1-800-426-0107 to find out more about the Funds and
other funds in the PIMCO Funds family. You can also visit our Web site at
www.pimcofunds.com.

TABLE OF CONTENTS
How to Buy Shares....................................
Alternative Purchase Arrangements....................
Exchange Privilege...................................
How to Redeem........................................

SG-1
<PAGE>

How to Buy Shares

Class A, Class B and Class C shares of each Fund are continuously offered
through the Trusts' 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
introducing brokers for the Distributor ("introducing brokers"). The
Distributor is a wholly owned subsidiary of PIMCO Advisors L.P. ("PIMCO
Advisors"), the investment adviser to the Funds that are series of the MMS
Trust, and an affiliate of Pacific Investment Management Company ("Pacific
Investment Management"), the investment adviser to the Funds that are series of
the PIMS Trust. PIMCO Advisors and Pacific Investment Management are each
referred to herein as an "Adviser."

There are two ways to purchase Class A, Class B or Class C shares: either
(i) through your dealer or broker which has a dealer agreement with the
Distributor or (ii) directly by mailing a PIMCO Funds account application (an
"account application") with payment, 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).

Shares may be purchased at a price equal to their net asset 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 "deferred
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 circumstances, 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 payments 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 offering 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 discretion, 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 Commission, 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 assets, 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

SG-2
<PAGE>

and wrap programs referred to below under "Tax-Qualified Retirement Plans" and
"Alternative Purchase Arrangements--Sales at Net Asset Value," the minimum
initial investment in Class A, Class B or Class C shares of any Fund, and the
minimum additional investment is $100 per Fund. For information about dealer
commissions, see "Alternative Purchase Arrangements" below. Persons selling
Fund shares may receive different compensation for selling Class A, Class B or
Class C shares. Normally, Fund shares purchased through participating brokers
are held in the investor's account with that broker. No share certificates will
be issued unless specifically requested in writing by an investor or broker-
dealer.

Direct Investment

Investors who wish to invest in Class A, Class B or Class C shares of a
Fund 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
purchase, redemption, dividend reinvestment, exchange or transfer of Fund
shares, including the total number of Fund 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" in the applicable Retail Prospectus. Information regarding
direct investment or any other features or plans offered by the Trusts 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 02940-0926

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 converted 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 Purchases of Shares

Subsequent purchases of Class A, Class B or Class C shares can be made as
indicated above by mailing a check with a letter describing 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."

SG-3
<PAGE>

Tax-Qualified Retirement Plans

The Distributor makes available retirement plan services and documents 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 under 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 organizations.

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 aggregate investments in the Trust, but are not subject to the
small account fees described below that will apply to other plans. Investors
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 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 subsequent investment is $100. 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 Auto-Invest

The PIMCO Funds Auto-Invest plan provides for periodic investments into the
shareholder's account with the Trust by means of automatic 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.
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 purchased
through the plan. Further information regarding the PIMCO Funds Auto-Invest plan
is available from the Distributor or participating brokers. You may enroll by
completing the appropriate section on the account application, or you may obtain
an Auto-Invest application by calling the Distributor or your broker.

PIMCO Funds Auto-Exchange

The PIMCO Funds Auto-Exchange plan establishes regular, periodic exchanges
from one Fund to another Fund. The plan provides for regular investments into a
shareholder's account in a specific Fund by means of automatic exchanges 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 purchased through the plan.

SG-4
<PAGE>

Further information regarding the PIMCO Funds Auto-Exchange plan is
available from the Distributor at 1-800-426-0107 or participating brokers. You
may enroll by completing 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 Fund Link

PIMCO Funds Fund Link ("Fund Link") connects your Fund account with a
bank account. Fund Link may be used for subsequent purchases 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 recorded. Fund Link is normally established
within 45 days of receipt of a Fund Link application by the Funds' transfer
agent for Class A, B and C shares, 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
regular 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 application. 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 unless 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 application 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.

Signature Guarantee

When a signature guarantee is called for, the shareholder should have
"Signature Guaranteed" stamped under his signature and guaranteed by any of
the following entities: U.S. banks, foreign banks having a U.S. correspondent
bank, credit unions, savings associations, 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 guarantee pursuant to its written
signature guarantee standards or procedures, 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 Funds may change the signature guarantee requirements from time
to time upon notice to shareholders, which may be given by means of a new or
supplemented Retail Prospectus.

SG-5
<PAGE>

Account Registration Changes

Changes in registration or account privileges may be made in writing 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 02940-0926

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 the applicable Fund's
administrator; will automatically 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 business 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 Minors, IRA, Roth IRA and Auto-
Invest accounts, for which the limit is $1,000. Except for prototype plans
described above, the fee also applies to employer-sponsored retirement plan
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 account of a shareholder if the aggregate value of all of the
shareholder's accounts is at least $50,000. No small account fee will be charged
to employee and employee-related accounts of PIMCO Advisors and/or its
affiliates.

Minimum Account Size

Due to the relatively high cost to the Funds of maintaining small 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 applicable Fund's administrator shall have the right
(except in the case of employer-sponsored retirement accounts) to close your
account after giving you 60 days in which to increase your balance. Your account
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

Each Fund offers investors Class A, Class B and Class C in the applicable
Retail Prospectus. Class A, B and C shares bear sales charges in different
forms and amounts and bear different levels of expenses, as described below.
Through separate prospectuses, certain of the Funds currently offer up to three
additional classes of shares in the United States: Class D, Institutional Class
and Administrative Class shares. Class D shares are offered through financial
intermediaries. Institutional Class and Administrative Class shares are offered
to pension and profit sharing plans, employee benefit trusts, endowments,
foundations, corporations and other high net worth individuals. Class D,
Institutional Class and Administrative Class shares are sold without a sales
charge and have different expenses than Class A, Class B and Class C shares. As
a result of lower sales charges and/or operating expenses, Class D,
Institutional Class and

SG-6
<PAGE>

Administrative Class shares are generally expected to achieve higher investment
returns than Class A, Class B or Class C shares. Certain Funds also offer up to
two additional classes of shares that are offered only to non-U.S. investors
outside the United States: Class J and Class K shares. To obtain more
information about the other classes of shares, please call the applicable Trust
at 1-800-927-4648 (for Institutional and Administrative Class shares) or the
Distributor at 1-888-87-PIMCO (for Class D shares).

The alternative purchase arrangements described in this Guide 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,
including 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, investors should consider the
anticipated life of an intended investment 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 anticipated 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 applicable to such shares. Similar
reductions are not available on the contingent deferred sales charge alternative
(Class B) or the asset 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 correspondingly higher dividends on
a per share basis. However, because initial 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 initial 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 distribution 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

SG-7
<PAGE>

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 maintain 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.

The maximum single purchase of Class B shares of a Fund is $249,999. The
maximum single purchase of Class C shares of a Fund 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 Distribution 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 retirement plan in connection with termination of
employment or termination of the employer's plan and the transfer to another
employer's plan or to an IRA (with the exception of a Roth IRA); (iv) any
partial or complete redemption following death or disability (as defined in the
Internal Revenue 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 initial 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 either Trust, and by directors, officers and
employees of the Distributor, PIMCO Advisors or Pacific Investment Management;
(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
company, 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 effected by trustees or other fiduciaries who have purchased shares
for employer sponsored plans, the trustee, administrator, fiduciary, broker,
trust company or registered investment adviser for which has an agreement with
the Distributor with respect to such purchases; (xiii) redemptions in connection
with IRA

SG-8
<PAGE>

accounts established with Form 5305-SIMPLE under the Code for which the Trust is
the designated financial institution; or (xiv) a redemption by a holder of Class
A shares who purchased $1,000,000 or more of Class A shares (and therefore did
not pay a sales charge) where the participating broker or dealer involved in the
sale of such shares waived the commission it would normally receive from the
Distributor pursuant to an agreement with the Distributor.

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 account 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 requested 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, certification by plan administrators,
applicable tax forms, death certificates, physicians' certificates, etc.

Initial Sales Charge Alternative--Class A Shares

Class A shares are sold at a public offering price equal to their net asset
value per share plus a sales charge, as set forth below. As indicated below
under "Class A Deferred Sales Charge," certain investors that purchase
$1,000,000 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 purchase.

Initial Sales Charge -- Class A Shares

PIMCO Growth, Target, Opportunity, Capital Appreciation, Mid-Cap Growth, Small-
Cap Growth, Equity Income, Renaissance, Value, Value 25, Small-Cap Value, Tax-
Efficient Equity, International, Innovation, Precious Metals and Balanced Funds,
and PIMCO Funds Asset Allocation Series -- 90/10 and 40/60 Portfolios

Amount of Purchase Sales Charge as % of Net Sales Charge as % of Discount or Commission
Amount Invested Public Offering Price to dealers as % of
Public Offering Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 5.82% 5.50% 4.75%
- --------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.71% 4.50% 4.00%
- --------------------------------------------------------------------------------------------------------
$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)/ 0.75%/(2)/
- --------------------------------------------------------------------------------------------------------
</TABLE>

SG-9
<PAGE>

30/70 Portfolio

- -------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Sales Charge as % of Discount or Commission
Net Amount Invested Public Offering Price to dealers as % of
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>

PIMCO Total Return, High Yield, Long-Term U.S. Government, Global Bond II,
Foreign Bond, Emerging Markets Bond, Strategic Balanced and Convertible Bond
Funds

- -------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Sales Charge as % of Discount or Commission
Net Amount Invested Public Offering Price to dealers as % of
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%/(3)/
- -------------------------------------------------------------------------------------------------------
</TABLE>

PIMCO Low Duration, Real Return Bond, Municipal Bond and StocksPlus Funds

- -------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Sales Charge as % of Discount or Commission
Net Amount Invested Public Offering Price to dealers as % of
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%/(3)/
- -------------------------------------------------------------------------------------------------------
</TABLE>

SG-10
<PAGE>

PIMCO Short-Term Fund

- -------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Sales Charge as % of Discount or Commission
Net Amount Invested Public Offering Price to dealers as % of
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%/(3)/
- -------------------------------------------------------------------------------------------------------
</TABLE>

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 PIMCO Short-Term Fund) will not pay
any initial sales charge on such purchase. However, except with regard to
purchases of Class A shares of the PIMCO Money Market Fund, purchasers of
$1,000,000 or more ($250,00 in the case of the PIMCO Short-Term Fund) 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 Deferred 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 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" below) of each of these Funds and the Portfolios (except
for the 30/70 Portfolio) according to the following schedule: 0.75% of the
first $2,000,000, 0.50% of amounts from $2,000,001 to $5,000,000, and 0.25%
of amounts over $5,000,000; and of the 30/70 Portfolio according to the
following schedule: 0.50% of the first $2,000,000, and 0.25% of amounts
over $2,000,000.

3. The Distributor will pay a commission to dealers who sell amounts of
$1,000,000 ($250,000 in the case of the PIMCO 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 these Funds except for the PIMCO Money Market Fund (for which no payment
is made) and the PIMCO 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 PIMCO Short-Term
Fund in excess of $250,000.

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 periods as may from time
to time be designated by the Distributor, the Distributor will pay an additional
amount of up to 0.50% of the purchase price on sales of Class A shares of all or
selected Funds purchased to each participating broker which obtains purchase
orders 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.

SG-11
<PAGE>

Under the circumstances described below, investors may be entitled 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 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) 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 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 PIMCO Equity Income Fund
worth $25,000 at the current maximum offering price and wished to purchase
Class A shares of the PIMCO Growth Fund worth an additional $30,000, the
sales charge for the $30,000 purchase would be at the 4.50% rate applicable
to a single $55,000 purchase of shares of the PIMCO Growth Fund, rather
than the 5.50% 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 PIMCO
Fund(s) other than the PIMCO Money Market Fund. Each purchase of shares under a
Letter of Intent will be made at the public offering 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
PIMCO Money Market Fund) made not more than 90 days prior to the date the Letter
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.

SG-12
<PAGE>

Investors qualifying for the Combined Purchase Privilege described above
may purchase shares of the eligible PIMCO Funds under 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 PIMCO Money Market Fund),
you and your spouse each purchase Class A shares of the PIMCO Growth Fund worth
$30,000 (for a total of $60,000), it will only be necessary to invest a total of
$40,000 during the following 13 months in Class A shares of any of the Funds
(other than the PIMCO 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 PIMCO 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 Letter 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 indicated 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 escrow. When the full
amount indicated has been purchased, the escrow 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 may obtain a form of Letter of Intent by
contacting the Distributor at 1-800-426-0107 or any broker participating in this
program.

Reinstatement Privilege A Class A shareholder who has caused any or all of his
shares (other than PIMCO 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 proceeds 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 asset value next
determined. See "How Net Asset Value is Determined" in the applicable Retail
Prospectus. 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 reinvested in shares of the same Fund within 30
days. The reinstatement privilege may be utilized by a shareholder only once,
irrespective of the number of shares redeemed, except that the privilege 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 retirement plan account. An investor may exercise the
reinstatement privilege by written request sent to the Distributor or to the
investor'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 either Trust, the Adviser of either Trust, the
Distributor, affiliates of the Fund's Adviser 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

SG-13
<PAGE>

other person if the Distributor anticipates that there will be minimal sales
expenses associated with the sale, (b) current or retired trustees of both
Trusts, (c) current registered representatives and other full-time employees of
participating brokers or such persons' 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, administrator, fiduciary,
broker, trust company or registered investment 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 account(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 dealers are paid a single, inclusive
fee for brokerage and investment management services, (f) client accounts of
broker-dealers or registered investment advisers affiliated with such broker-
dealers with which the Distributor has an agreement for the use of a Fund in
particular investment products or programs and (g) accounts for which a trust
company affiliated with the Trust or the Fund's 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 reduced sales charge is applicable
to a purchase and must provide the Distributor with sufficient information at
the time of purchase 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 PIMCO Money Market Fund,
investors who purchase $1,000,000 ($250,000 in the case of the PIMCO Short-Term
Fund) or more of Class A shares (and, thus, purchase 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 apply to investors purchasing $1,000,000 ($250,000 in the case of the PIMCO
Short-Term Fund) or more of any Fund's Class A shares if such investors 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 derived 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 redeemed 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 PIMCO Money Market
Fund but, if PIMCO 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 PIMCO 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.

SG-14
<PAGE>

The Class A CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements--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 intermediaries
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 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 information with respect to or control
over accounts of specific shareholders. Such shareholders may obtain access to
their accounts and information about their accounts only from their broker. In
addition, certain privileges with respect to the purchase and redemption of
shares or the reinvestment of dividends may not be available through such firms.
Some firms may participate in a program allowing them access to their clients'
accounts for servicing including, without limitation, transfers of registration
and dividend payee changes; and may perform functions such as generation of
confirmation statements and disbursement of cash dividends. This Guide and the
Retail Prospectuses should be read in connection with such firms' material
regarding their fees and services.

Deferred Sales Charge Alternative--Class B Shares

Class B shares are sold at their current net asset value without any
initial sales charge. The full amount of an investor's purchase payment will be
invested in shares of the Fund(s) selected. A CDSC will be imposed on Class B
shares if an investor redeems an amount which causes the current value of the
investor'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 reinvestment of dividends or capital
gains distributions 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.

Class B shares of the PIMCO Short-Term Fund and the PIMCO Money Market Fund
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 sponsored retirement plans.

Whether a CDSC is imposed and the amount of the CDSC will depend on the
number of years since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the CDSC according to the following
schedule:

SG-15
<PAGE>

Years 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>

* 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 earliest 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 and that six months later the value of the
investor's account for that Fund has grown through investment performance and
reinvestment of distributions 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 5%, the Class B CDSC
would be $100.

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 aggregated. 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 participating brokers,
at the time a shareholder purchases Class B shares, of 4.00% of the purchase
amount for each of the Funds. During such periods as may from time to time be
designated by the Distributor, 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 participating broker
which obtains purchase orders in amounts exceeding 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 Arrangements--Waiver of
Contingent Deferred

SG-16
<PAGE>

Sales Charges." For more information about the Class B CDSC, call the
Distributor at 1-800-426-0107.

Asset Based Sales Charge Alternative--Class C Shares

Class C shares are sold at their current net asset value without any
initial sales charge. A CDSC is imposed on Class C shares if an investor redeems
an amount which causes the current value of the investor'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 reinvestment of dividends or capital gains distributions 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.

<TABLE>
<CAPTION>
Years Since Purchase Percentage Contingent
Payment was Made Deferred Sales Charge
---------------- ---------------------
<S> <C>
First 1
Thereafter 0
</TABLE>

In determining whether a CDSC is payable, it is assumed that the purchase
payment from which the redemption is made is the earliest 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 distributions 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 aggregated. Any CDSC imposed on a redemption of
Class C shares is paid to the Distributor. Unlike Class B shares, Class C shares
do not automatically convert to any other class of shares of the Funds.

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 shareholder purchases Class C shares, of
1.00% (representing .75% distribution fees and .25% servicing fees) of the
purchase amount for all Funds, except the Money Market, Short-Term Duration,
Real Return Bond, Municipal Bond and StocksPlus Funds. For the PIMCO Low
Duration, Real Return Bond, Municipal Bond and StocksPlus Funds, the Distributor
expects to

SG-17
<PAGE>

make payments of .75% (representing .50% distribution fees and .25% service
fees); for the PIMCO Short-Term Fund, the Distributor expects to make payments
of .55% (representing .30% distribution fees and .25% service fees); and for the
PIMCO Money Market Fund, the Distributor expects to make no payment. For sales
of Class C shares made to participants making periodic purchases 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 Distributor will pay
an additional amount of up to .50% of the purchase price on sales of Class C
shares of all or selected Funds purchased to each participating broker which
obtains purchase orders 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 Arrangements--Waiver of
Contingent Deferred Sales Charges." For more information about the Class C
CDSC, contact the Distributor at 1-800-426-0107.

Exchange Privilege

Except with respect to exchanges for shares of Funds for which sales may be
suspended to new investors, 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
account with identical registration on the basis of their respective net asset
values (except that a sales charge will apply on exchanges of Class A shares of
the PIMCO Money Market Fund on which no sales charge was paid at the time of
purchase.) Class A shares of the PIMCO Money Market Fund may be exchanged 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 charge was
paid at the time of purchase. There are currently no exchange fees or charges.
All exchanges 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-Exchange plan. An exchange will constitute a
taxable sale for federal 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 02940-0926 or, unless 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
Distributor at 1-800-426-0107. Each 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. Each Trust will require a form of personal
identification prior to acting on a caller's telephone instructions, will
provide written confirmations of such transactions and will record telephone
instructions. 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 registration 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 02940-0926, or by use of
forms which are available from the Distributor. A 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 Trusts

SG-18
<PAGE>

reserve the right to refuse exchange purchases if, in the judgment of the Fund's
Adviser, the purchase would adversely affect the Fund and its shareholders. In
particular, a pattern of exchanges characteristic of "market-timing" strategies
may be deemed by an Adviser to be detrimental to a Trust or a particular Fund.

Currently, each 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 Trusts have the right to refuse any exchange for any
investor who completes (by making the exchange back into the shares of the
originally purchased Fund) more than six round trip exchanges in any twelve-
month period. Although the Trusts have no current intention of terminating or
modifying the exchange privilege other than as set forth in the preceding
sentence, each reserves the right to do so at any time. Except as otherwise
permitted by Securities and Exchange Commission regulations, each Trust will
give 60 days' advance notice 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 Distributor 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 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. Shareholders should take into account the
effect of any exchange on the applicability of any CDSC that may be imposed upon
any subsequent redemption.

Investors may also select the PIMCO Funds Auto-Exchange plan which
establishes automatic periodic exchanges. For further information 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 participating
broker, by telephone, by submitting a written redemption request directly to the
Transfer Agent (for non-broker accounts), 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 broker
who processes a redemption for an investor may charge customary 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 confirmed at the net
asset value effective as of the closing of the Exchange on that day, less any
applicable CDSC.

SG-19
<PAGE>

Direct Redemption

A shareholder's original account application permits the shareholder to
redeem by written request and by telephone (unless the shareholder specifically
elects not to utilize telephone redemptions) and to elect one or more of the
additional redemption procedures described below. A shareholder may change the
instructions indicated on his original account application, or may request
additional redemption options, only by transmitting a written direction 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
proceeds 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 certificates), a
shareholder must send the following items to the Transfer Agent, First Data
Investor Services Group, Inc., P.O. Box 9688, Providence, RI 02940-0926.

(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.

SG-20
<PAGE>

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 redemption 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 administrator for which has an
agreement with the Distributor.

Telephone Redemptions

Each Trust accepts telephone requests for redemption of uncertificated
shares for 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 redemption will be sent to the record shareholder at
his record address. Changes in account information must be made in a written
authorization with a signature guarantee. See "How to Buy Shares--Signature
Guarantee." Telephone redemptions will not be accepted during the 30-day period
following any change in an account's record address. This redemption option does
not apply to shares held in broker "street name" accounts.

By completing an account application, an investor agrees that the
applicable Trust, the Distributor and the Transfer Agent shall not be liable for
any loss incurred by the investor by reason of the Trust accepting unauthorized
telephone redemption 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. Each 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 utilize this service. Each 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. Each Trust will require a form of personal
identification prior to acting on a caller's telephone instructions, will
provide written confirmations 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 shareholder as it appears on the
Transfer Agent's records, (ii) his account 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 redemption 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. Each 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.

SG-21
<PAGE>

Fund Link Redemptions

If a shareholder has established Fund Link, the shareholder may 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 application 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, a
Trust and the Transfer Agent may rely on instructions by any registered owner
believed to be genuine and will not be responsible 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 business 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 redeemed
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 redeem shares held in certificated
form.

Changes in bank account information 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 establishing the Fund
Link privilege. Either Trust may terminate the Fund Link program at any time
without notice to its shareholders. This redemption option does not apply to
shares held in broker "street name" accounts.

PIMCO Funds Automated Telephone System

PIMCO Funds Automated Telephone System ("ATS") is an automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone telephone. ATS may be used on already-
established Fund accounts after you obtain 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 established 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 established by calling 1-800-223-2413. Please
refer to "Exchange Privilege" for details.

Redemptions. You may redeem shares by telephone automatically by calling 1-
800-223-2413 and the Fund will send the proceeds directly to your Fund bank
account. Please refer to "How to Redeem" for details.

Expedited Wire Transfer Redemptions

SG-22
<PAGE>

If a shareholder has given authorization for expedited wire redemption,
shares can be redeemed and the proceeds sent by federal wire transfer to a
single previously designated bank account. Requests received by a Trust prior to
the close of the Exchange will result in shares being redeemed that day at the
next determined net asset value (less any CDSC). Normally the proceeds will be
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 delayed by the applicable Trust for up to 7 days if
the Distributor deems it appropriate under then current market conditions. Once
authorization is on file with a Trust, such Trust will honor requests by any
person identifying himself as the owner of an account or the owner's broker by
telephone at 1-800-426-0107 or by written instructions. A Trust cannot be
responsible for the efficiency of the Federal Reserve wire system or the
shareholder's bank. Neither Trust currently charges for wire transfers. The
shareholder is responsible for any charges imposed by the shareholder's bank.
The minimum amount that may be wired is $2,500. Each Trust reserves the right
to change this minimum or to terminate the wire redemption privilege. Shares
purchased by check may not be redeemed by wire transfer until such shares have
been owned (i.e., paid for) for at least 15 days. Expedited wire transfer
redemptions may be authorized 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 receive 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-
0926. See "How to Buy Shares--Signature Guarantee." This redemption option
does not apply to shares held in broker "street name" accounts.

Certificated Shares

To redeem shares for which certificates have been issued, the certificates
must be mailed to or deposited with the applicable Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "How to Buy
Shares--Signature Guarantee." Further documentation may be requested from
institutions or fiduciary accounts, 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 registered, including indication
of any special capacity of the registered owner.

Automatic Withdrawal Plan

An investor who owns or buys shares of a Fund having a net asset 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 by obtaining an Automatic
Withdrawal Plan application from the Distributor or your broker. If an Automatic
Withdrawal Plan is set up after the account is established providing for payment
to a person other than the record shareholder or to an address other than the
address of record, a signature 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 the particular 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 Automatic Withdrawal Plan. See "Alternative Purchase
Arrangements--Waiver of Contingent Deferred Sales Charges."

SG-23
<PAGE>

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 payment selected by the shareholder. The
Transfer Agent may accelerate 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 fiduciary, except in the case
of a profit-sharing or pension plan where payment will be made to the designee.
As withdrawal payments may include a return of principal, they cannot be
considered a guaranteed annuity or actual yield of income to the investor. The
redemption of shares in connection with an Automatic Withdrawal Plan may result
in a gain or loss for tax purposes. Continued withdrawals in excess of income
will reduce and possibly exhaust invested principal, especially in the event of
a market decline. The maintenance of an Automatic Withdrawal Plan concurrently
with purchases 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 accumulation 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 financial 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.

Redemptions In Kind

Each Trust agrees to redeem shares of its Funds solely in cash up to the
lesser of $250,000 or 1% of the Fund's net assets during any 90-day period for
any one shareholder. In consideration of the best interests of the remaining
shareholders, each 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. Except for Funds with a tax-efficient
management strategy, it is highly unlikely that shares would ever be redeemed in
kind. When shares are redeemed in kind, the redeeming shareholder should expect
to incur transaction costs upon the disposition of the securities received in
the distribution.

SG-24
<PAGE>

PART C. OTHER INFORMATION

Item 23. Exhibits
--------

(a) (1) Declaration of Trust of Registrant/7/

(2) Form of Amended and Restated Establishment and Designation of
Series of Shares of Beneficial Interest/8/

(3) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Long Duration Fund/11/

(4) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Convertible Bond Fund/12/

(b) Form of By-laws of Registrant/7/

(d) (1) Form of Investment Advisory Contract/7/

(2) Form of Amendment to Investment Advisory Contract/7/

(3) Form of Supplement to Investment Advisory Contract Relating to
StocksPLUS Short Strategy Fund/2/

(4) Form of Supplement to Investment Advisory Contract Relating to
Balanced Fund/3/

(5) Form of Supplement to Investment Advisory Contract Relating to
Global Bond Fund II/5/

(6) Form of Supplement to Investment Advisory Contract Relating to
Real Return Bond Fund/5/

(7) 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/6/

(8) Form of Supplement to Investment Advisory Contract Relating to
Municipal Bond Fund /9/

(9) Form of Supplement to Investment Advisory Contract Relating to
Long Duration Fund/11/

-1-
<PAGE>

(10) Form of Supplement to Investment Advisory Contract Relating to
Convertible Bond Fund/13/

(e) (1) Form of Amended and Restated Distribution Contract

(2) Form of Japan Dealer Sales Contract

(f) Not applicable

(g) Form of Custody and Investment Accounting Agreement

(h) (1) Form of Amended and Restated Administration Agreement /9/

(2) Form of Supplement to Amended and Restated Administration
Agreement relating to Long Duration Fund/11/

(3) Form of Supplement to Amended and Restated Administration
Agreement Relating to Convertible Bond Fund/13/

(4) Form of Supplement to Amended and Restated Administration
Agreement Relating to Class J and Class K Shares

(5) Form of Shareholder Servicing Agreement /9/

(6) Form of Transfer Agency Agreement/7/

(7) Form of Transfer Agency Agreement with Shareholder Services,
Inc./1/

(i) (1) Opinion of Counsel/10/

(2) Consent of Counsel/7/

(j) Consents of Price Waterhouse LLP*

(k) Not applicable

(l) Not applicable

(m) (1) Form of Distribution and Servicing Plan for Class A Shares/4/

(2) Form of Distribution and Servicing Plan for Class B Shares/4/

(3) Form of Distribution and Servicing Plan for Class C Shares/4/

(4) Form of Amended and Restated Distribution Plan for Administrative
Class Shares/7/

-2-
<PAGE>

(5) Form of Amended and Restated Administrative Services Plan for
Administrative Class Shares/7/

(6) Form of Distribution and Servicing Plan for Class J Shares

(7) Form of Distribution and Servicing Plan for Class K Shares

(n) Financial Data Schedules*

(o) Form of Amended and Restated Multi-Class Plan adopted pursuant to Rule
18f-3
_____________________

* To be filed by amendment.

/1/ Filed with Post Effective Amendment No. 33 to the Registration
Statement of PIMCO Advisors Funds (File No. 2-87203) on November 30,
1995.

/2/ Filed with Post-Effective Amendment No. 27 on January 16, 1996.

/3/ Filed with Post-Effective Amendment No. 28 on April 1, 1996.

/4/ Filed with Registration Statement on Form N-14 (File No. 333-12871) on
September 27, 1996.

/5/ Filed with Post Effective Amendment No. 33 on January 13, 1997.

/6/ Filed with Post-Effective Amendment No. 36 on July 11, 1997.

/7/ Filed with Post-Effective Amendment No. 37 on November 17, 1997.

/8/ Filed with Post-Effective Amendment No. 39 on January 15, 1998.

/9/ Filed with Post-Effective Amendment No. 40 on March 13, 1998.

/10/ Filed with Post-Effective Amendment No. 41 on July 31, 1998.

/11/ Filed with Post-Effective Amendment No. 42 on September 11, 1998.

/12/ Filed with Post-Effective Amendment No. 43 on January 15, 1999.

/13/ Filed with Post-Effective Amendment No. 44 on April 2, 1999.

Item 24. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------

No person is controlled by or under common control with the Registrant.

-3-
<PAGE>

Item 25. 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,
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 26. 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.
</TABLE>

-4-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>
Brynjolfsson, John B. Senior Vice President, PIMCO and PIMCO Management, Inc.

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>

-5-
<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>

-6-
<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.

Kiesel, Mark R. Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>

-7-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>

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.

Nakamura, Doris S. Vice President, PIMCO and PIMCO Management, Inc.

Nellemann, Mark D. Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>

-8-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>

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

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.
</TABLE>

-9-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>

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.

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.
</TABLE>

-10-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
- ---- ------------------------------
<S> <C>

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.

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 27. 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.

-11-
<PAGE>

(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 Chairmant 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

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
</TABLE>

-12-
<PAGE>

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- --------------- ---------------
<S> <C> <C>

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

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 28. 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.

-13-
<PAGE>

Item 29. Management Services
-------------------

Not applicable

Item 30. Undertakings
------------

Not applicable.

-14-
<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. 45 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 26th day of May, 1999.

PIMCO FUNDS
(Registrant)

By:
---------------------------
R. Wesley Burns*
President

*By: /s/ Robert W. Helm
---------------------------
Robert W. Helm, as attorney-in-fact

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>

____________________________ Trustee May 26, 1999
Guilford C. Babcock*

____________________________ Trustee May 26, 1999
Thomas P. Kemp*

____________________________ Trustee May 26, 1999
Brent R. Harris*

____________________________ Trustee May 26, 1999
William J. Popejoy*

____________________________ Trustee May 26, 1999
Vern O. Curtis*

____________________________ President May 26, 1999
R. Wesley Burns* (Principal
Executive
Officer)
</TABLE>
<PAGE>

____________________________ Treasurer May 26, 1999
John P. Hardaway* (Principal Financial
and Accounting
Officer)

*By: /s/ Robert W. Helm
--------------------
Robert W. Helm,
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. 45

Exhibit (e)(1) Form of Amended and Restated Distribution Contract

Exhibit (e)(2) Form of Japan Dealer Sales Contract

Exhibit (g) Form of Custody and Investment Accounting Agreement.

Exhibit (h)(4) Form of Supplement to Amended and Restated Administration
Agreement Relating to Class J and Class K Shares

Exhibit (m)(6) Form of Distribution and Servicing Plan for Class J Shares

Exhibit (m)(7) Form of Distribution and Servicing Plan for Class K Shares

Exhibit (o) Form of Amended and Restated Multi-Class Plan adopted
pursuant to Rule 18f-3

<PAGE>

EXHIBIT (E)(1)

AMENDED AND RESTATED
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, Connecticut 06902

Dear Sirs:

This will confirm the agreement between the undersigned (the "Trust") and
you (the "Distributor") as follows:

1. Description of Trust and Classes of Shares. The Trust is an open-end
investment company which presently has the following twenty-seven investment
portfolios: Money Market Fund; Short-Term Fund; Low Duration Fund; Low Duration
Fund II; Low Duration Fund III; Low Duration Mortgage Fund; Moderate Duration
Fund; Real Return Bond Fund; Total Return Fund; Total Return Fund II; Total
Return Fund III; Total Return Mortgage Fund; Commercial Mortgage Securities
Fund; High Yield Fund; Long-Term U.S. Government Fund; Long Duration Fund;
Global Bond Fund; Global Bond Fund II; Foreign Bond Fund; International Bond
Fund; Emerging Markets Bond Fund; Emerging Markets Bond Fund II; Municipal Bond
Fund; Strategic Balanced Fund; Convertible Bond Fund; StocksPLUS Fund and
StocksPLUS Short Strategy Fund (each a "Fund," and collectively, the "Funds").
Additional investment portfolios may be established in the future. This
Contract shall pertain to the Funds and to such additional investment portfolios
as shall be designated in Supplements to this Contract, as further agreed
between the Trust and the Distributor. A separate series of shares of
beneficial interest in the Trust is offered to investors with respect to each
Fund, and each Fund currently offers its shares with respect to up to eight
classes: Class A shares, Class B shares, and Class C shares (together, the
"Retail Classes"), and Class D shares, Class J shares, Class K shares,
Institutional Class shares, and Administrative Class shares. The Trust engages
in the business of investing and reinvesting the assets of the Funds in the
manner and in accordance with the investment objective and restrictions
specified in the Trust's currently effective Prospectus or Prospectuses and
Statement(s) of Additional Information (together, the "Prospectus") relating to
the Retail Classes, Class D, Class J, Class K, Institutional Class and
Administrative Class shares of the Funds included in the Trust's Registration
Statement, as amended from time to time (the "Registration Statement"), as filed
by the Trust under the Investment Company Act of 1940, as amended (together with
the rules and regulations thereunder, the "1940 Act") and the Securities Act of
1933, as amended (together with the rules and regulations thereunder, the "1933
Act"). Copies of the documents referred to in the preceding sentence have been
furnished to the Distributor. Any amendments to those documents shall be
furnished to the Distributor promptly. The Trust
<PAGE>

has adopted separate Distribution and Servicing Plans pursuant to Rule 12b-1
under the 1940 Act with respect to each of the Retail Classes (the "Retail Class
Plans"), Class J shares (the "Class J Plan") and Class K shares (the "Class K
Plan"), has adopted a distribution plan, also pursuant to Rule 12b-1, with
respect to Class D shares (the "Defensive Plan") as part of an Amended and
Restated Administration Agreement (the "Administration Agreement") between the
Trust and Pacific Investment Management Company (the "Administrator"), and has
adopted a Distribution Plan, also pursuant to Rule 12b-1, with respect to the
Administrative Class shares of the Funds (the "Administrative Distribution
Plan"). The Trust has also adopted an Administrative Services Plan with respect
to the Administrative Class shares of the Funds, in conformity with Rule 12b-1,
as if the expenditures made thereunder were subject to Rule 12b-1, excepting the
shareholder voting rights under Rule 12b-1 (the "Administrative Services Plan,"
and together with the Retail Class Plans, the Administrative Distribution Plan
and the Defensive Plan, the "Plans").

2. Appointment and Acceptance. The Trust hereby appoints the Distributor
as a distributor of shares of beneficial interest in the Trust (the "shares")
which may from time to time be registered under the 1933 Act and as servicing
agent of shareholders and shareholder accounts of the Trust, and the Distributor
hereby accepts such appointment in accordance with the terms and conditions set
forth herein. As the Trust's agent, the Distributor shall, except to the extent
provided in Section 4 hereof, be the exclusive distributor for the unsold
portion of the shares.

3. Sale of Shares to Distributor and Sales by Distributor. The Distributor
will have the right, as principal, to sell shares of each Class of each Fund
directly to the public against orders therefor at the applicable public offering
price as described below in the case of Class A shares, Class J shares and Class
K shares, and at net asset value in the case of Class B shares, Class C shares,
Class D shares, Institutional Class shares and Administrative Class shares. For
such purposes, the Distributor will have the right to purchase shares at net
asset value. The Distributor will also have the right, as agent, to sell shares
of a Fund indirectly to the public through broker-dealers who are members of the
National Association of Securities Dealers, Inc. and who are acting as
introducing brokers pursuant to clearing agreements with the Distributor
("introducing brokers"), to broker-dealers which are members of the National
Association of Securities Dealers, Inc. and who have entered into selling
agreements with the Distributor ("participating brokers") or through other
financial intermediaries, in each case against orders therefor. The price for
introducing brokers, participating brokers and other financial intermediaries
shall be, in the case of Class A shares, Class J shares and Class K shares, the
applicable public offering price less a concession to be determined by the
Distributor, which concession will not exceed the amount of the sales charge or
underwriting discount, if any, described below and, in the case of Class B
shares, Class C shares, Class D shares, Institutional Class shares and
Administrative Class shares, net asset value.

The Trust shall sell through the Distributor, as the Trust's agent, shares
to eligible investors as described in the Prospectus. All orders through the
Distributor shall be subject to acceptance and confirmation by the Trust. The
Trust shall have the right, at its election, to deliver either shares issued
upon original issue or treasury shares.

-2-
<PAGE>

Prior to the time of transfer of any shares by the Trust to, or on the
order of, the Distributor or any introducing broker, participating broker or
other financial intermediary, the Distributor shall pay or cause to be paid to
the Trust or to its order an amount in New York clearing house funds equal to
the applicable net asset value of the shares. Upon receipt of registration
instructions in proper form, the Distributor will transmit or cause to be
transmitted such instructions to the Trust or its agent for registration of the
shares purchased.

The public offering price of Class A shares, Class J shares and Class K
shares shall be the net asset value of such shares, plus any applicable sales
charge as set forth in the Prospectus. In no event will any applicable sales
charge or underwriting discount exceed the limitations on permissible sales
loads imposed by Section 22(b) of the 1940 Act and Rule 2830(d) of the Conduct
Rules of the National Association of Securities Dealers, Inc., as either or both
may be amended from time to time.

On every sale, the Trust shall receive the net asset value of the shares.
The net asset value of shares shall be determined in the manner provided in the
Declaration of Trust and By-laws of the Trust as then amended. In the case of
Class A shares, Class J shares and Class K shares, the Distributor may retain so
much of any sales charge or underwriting discount as is not allowed by the
Distributor as a concession to dealers, and such sales charge or underwriting
discount shall be in addition to the fee paid to the Distributor in respect of
Class A shares, Class J shares and Class K shares as described in Section 5
hereof.

4. Sales of Shares by the Trust. In addition to sales by the Distributor,
the Trust reserves the right to issue shares at any time directly to its
shareholders as a stock dividend or stock split or to sell shares to its
shareholders or other persons at not less than net asset value to the extent
that the Trust, its officers, or other persons associated with the Trust
participate in the sale, or to the extent that the Trust or the transfer agent
for its shares receive purchase requests for shares.

5. Fees. For its services as servicing agent of a Fund's Class A
shareholders and Class A shareholder accounts, the Trust shall pay the
Distributor on behalf of the Fund a servicing fee at the annual rate of 0.25% of
the Fund's average daily net assets attributable to its Class A shares upon the
terms and conditions set forth in the Distribution and Servicing Plan attached
as Exhibit A hereto, and as amended from time to time, and may retain so much of
any sales charge or underwriting discount as is not allowed by the Distributor
as a concession to dealers, and shall receive any contingent deferred sales
charge as provided in Section 8 hereof.

For its services as distributor of a Fund's Class B and Class C shares and
as servicing agent of Class B and Class C shareholders and Class B and Class C
shareholder accounts, the Trust shall pay the Distributor on behalf of the Fund
a distribution fee at the annual rate of 0.75% of the Fund's average daily net
assets, and a servicing fee at the annual rate of 0.25% of the Fund's average
daily net assets, attributable to the Fund's Class B shares and Class C shares,
respectively, upon the terms and conditions set forth in the relevant
Distribution and Servicing Plans attached as Exhibits B and C hereto, as amended
from time to time, and shall receive any contingent deferred sales charge as
provided in Section 8 hereof. The respective distribution and

-3-
<PAGE>

servicing fees shall be accrued daily and paid monthly to the Distributor as
soon as practicable after the end of the calendar month in which they accrue,
but in any event within 5 business days following the last calendar day of each
month.

For its services as distributor of a Fund's Class J shares and as servicing
agent of Class J shareholders and Class J shareholder accounts, the Trust shall
pay the Distributor on behalf of the Fund a distribution fee at the annual rate
of 0.45% of the Fund's average daily net assets, and a servicing fee at the
annual rate of 0.25% of the Fund's average daily net assets, attributable to the
Fund's Class J shares, respectively, upon the terms and conditions set forth in
the Distribution and Servicing Plan attached as Exhibit D hereto, as amended
from time to time, and may retain so much of any sales charge or underwriting
discount as is not allowed by the Distributor as a concession to dealers. The
respective distribution and servicing fees shall be accrued daily and paid
monthly to the Distributor as soon as practicable after the end of the calendar
month in which they accrue, but in any event within 5 business days following
the last calendar day of each month.

For its services as distributor of a Fund's Class K shares and as servicing
agent of Class K shareholders and Class K shareholder accounts, the Trust shall
pay the Distributor on behalf of the Fund a distribution fee at the annual rate
of 0.75% of the Fund's average daily net assets, and a servicing fee at the
annual rate of 0.25% of the Fund's average daily net assets, attributable to the
Fund's Class K shares, respectively, upon the terms and conditions set forth in
the Distribution and Servicing Plan attached as Exhibit E hereto, as amended
from time to time, and may retain so much of any sales charge or underwriting
discount as is not allowed by the Distributor as a concession to dealers. The
respective distribution and servicing fees shall be accrued daily and paid
monthly to the Distributor as soon as practicable after the end of the calendar
month in which they accrue, but in any event within 5 business days following
the last calendar day of each month.

The Trust shall reimburse the Distributor at an annual rate not to exceed
0.25% of the Fund's average daily net assets attributable to its Administrative
Class shares for payments made by the Distributor to various financial
intermediaries in connection with the distribution of Administrative Class
shares upon the terms and conditions set forth in the Administrative
Distribution Plan set forth as Exhibit F hereto.

The Distributor shall receive no compensation from the Trust for services
as distributor of the Institutional Class or Class D shares, although the
Administrator may choose, in respect of Class D shares, to make payments to the
Distributor pursuant to the Defensive Plan or otherwise.

6. Reservation of Right Not to Sell. The Trust reserves the right to
refuse at any time or times to sell any of its shares for any reason deemed
adequate by it.

7. Use of Sub-Agents; Non-exclusivity. The Distributor may employ such
sub-agents, including one or more participating brokers or introducing brokers,
for the purposes of selling shares of the Trust as the Distributor, in its sole
discretion, shall deem advisable or desirable. The Distributor may enter into
similar arrangements with other issuers and, except to the extent necessary to
perform its obligations hereunder, nothing herein shall be deemed to limit

-4-
<PAGE>

or restrict the right of the Distributor, or any affiliate of the Distributor,
or any employee of the Distributor, to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or to render services of any kind to
any other corporation, firm, individual or association.

8. Repurchase of Shares. The Distributor will act as agent for the Trust
in connection with the repurchase and redemption of shares by the Trust upon the
terms and conditions set forth in the Prospectus or as the Trust acting through
its Trustees may otherwise direct. The Distributor may employ such sub-agents,
including one or more participating brokers or introducing brokers, for such
purposes as the Distributor, in its sole discretion, shall deem to be advisable
or desirable. Any contingent deferred sales charge imposed on repurchases and
redemptions of Class A, Class B and Class C shares upon the terms and conditions
set forth in the Prospectus shall be paid to the Distributor in addition to the
fees with respect to Class A, Class B and Class C shares set forth in Section 5
hereof. The Trust will take such steps as are commercially reasonable to track
on a share-by-share basis the aging of its shares for purposes of calculating
any contingent deferred sales charges and/or distribution fees.

9. Basis of Purchases and Sales of Shares. The Distributor's obligation
to sell shares hereunder shall be on a best efforts basis only and the
Distributor shall not be obligated to sell any specific number of shares. Shares
will be sold by the Distributor only against orders therefor. The Distributor
will not purchase shares from anyone other than the Trust except in accordance
with Section 8 hereof, and will not take "long" or "short" positions in shares
contrary to any applicable provisions of the Declaration of Trust of the Trust,
as amended.

10. Rules of Securities Associations, etc. As the Trust's agent, the
Distributor may sell and distribute shares in such manner not inconsistent with
the provisions hereof and the Trust's Prospectus as the Distributor may
determine from time to time. In this connection, the Distributor shall comply
with all laws, rules and regulations applicable to it, including, without
limiting the generality of the foregoing, all applicable rules or regulations
under the 1940 Act and of any securities association registered under the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "1934 Act"). The Distributor will conform to the
Conduct Rules of the National Association of Securities Dealers, Inc. and the
securities laws of any jurisdiction in which it sells, directly or indirectly,
any shares. The Distributor also agrees to furnish to the Trust sufficient
copies of any agreement or plans it intends to use in connection with any sales
of shares in adequate time for the Trust to file and clear them with the proper
authorities before they are put in use, and not to use them until so filed and
cleared.

11. Independent Contractor. The Distributor shall be an independent
contractor and neither the Distributor nor any of its officers or employees as
such, is or shall be an employee of the Trust. The Distributor is responsible
for its own conduct and the employment, control and conduct of its agents and
employees and for injury to such agents or employees or to others through its
agents or employees. The Distributor assumes full responsibility for its agents
and employees under applicable statutes and agrees to pay all employer taxes
thereunder.

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<PAGE>

12. Registration and Qualification of Shares. The Trust agrees to execute
such papers and to do such acts and things as shall from time to time be
reasonably requested by the Distributor for the purpose of qualifying and
maintaining qualification of the shares for sale under the so-called Blue Sky
Laws of any state or for maintaining the registration of each Fund of the Trust
and the Trust under the 1933 Act and the 1940 Act, to the end that there will be
available for sale from time to time such number of shares as the Distributor
may reasonably be expected to sell. The Trust shall advise the Distributor
promptly of (a) any action of the Securities and Exchange Commission or any
authorities of any state or territory, of which it may be advised, affecting
registration or qualification of the Trust, a Fund or the shares thereof, or
rights to offer such shares for sale and (b) the happening of any event which
makes untrue any statement or which requires the making of any change in the
Registration Statement or Prospectus in order to make the statements therein not
misleading.

13. Securities Transactions. The Trust agrees that the Distributor may
effect a transaction on any national securities exchange of which it is a member
for the account of the Trust and any Fund of the Trust which is permitted by
Section 11(a) of the 1934 Act.

14. Expenses.

(a) The Distributor shall from time to time employ or associate with
it such persons as it believes necessary to assist it in carrying out its
obligations under this Contract. The compensation of such persons shall be paid
by the Distributor.

(b) The Distributor shall pay all expenses incurred in connection
with its qualification as a dealer or broker under Federal or state law.

(c) The Distributor will pay all expenses of preparing, printing and
distributing advertising and sales literature as such expenses relate to Retail
Class shares (apart from expenses of registering shares under the 1933 Act and
the 1940 Act and the preparation and printing of prospectuses and reports for
shareholders as required by said Acts and the direct expenses of the issue of
shares, except that the Distributor will pay the cost of the preparation and
printing of prospectuses and shareholders' reports used by it in the sale of
Trust shares). The Trust may enter into arrangements with affiliates of the
Distributor providing for the payment by such affiliates of some or all of these
expenses as they relate to Class D, Class J, Class K, Institutional Class and/or
Administrative Class shares.

(d) The Trust shall pay or cause to be paid all expenses incurred in
connection with (i) the preparation, printing and distribution to shareholders
of the Prospectus and reports and other communications to existing shareholders,
(ii) future registrations of shares under the 1933 Act and the 1940 Act, (iii)
amendments of the Registration Statement subsequent to the initial public
offering of shares, (iv) qualification of shares for sale in jurisdictions
designated by the Distributor, including under the securities or so-called "Blue
Sky" laws of any State, (v) qualification of the Trust as a dealer or broker
under the laws of jurisdictions designated by the Distributor, (vi)
qualification of the Trust as a foreign corporation authorized to do business in
any jurisdiction if the Distributor determines that such qualification is
necessary or desirable for the purpose of facilitating sales of shares, (vii)
maintaining facilities for the issue and transfer

-6-
<PAGE>

of shares, (viii) supplying information, prices and other data to be furnished
by the Trust under this Contract, (ix) any expenses assumed by the Trust with
regard to shares of each Retail Class of each Fund pursuant to the Retail Class
Plan applicable to that class; (x) any expenses assumed by the Trust with regard
to Class J shares of each Fund pursuant to the Class J Plan; (xi) any expenses
assumed by the Trust with regard to Class K shares of each Fund pursuant to the
Class K Plan; (xii) any expenses assumed by the Trust with regard to the
Administrative Class shares of each Fund pursuant to the Administrative
Distribution Plan; (xiii) any expenses assumed by the Trust with regard to the
Administrative Class shares of each Fund pursuant to the Administrative Services
Plan; and (xiv) any expenses assumed by the Trust with regard to the Class D
shares pursuant to the Administration Agreement and the Defensive Plan.

(e) The Trust shall pay any original issue taxes or transfer taxes
applicable to the sale or delivery of shares or certificates therefor.

15. Indemnification of Distributor. The Trust shall prepare and furnish to
the Distributor from time to time such number of copies of the most recent form
of the Prospectus filed with the Securities and Exchange Commission as the
Distributor may reasonably request. The Trust authorizes the Distributor to use
the Prospectus, in the form furnished to the Distributor from time to time, in
connection with the sale of shares. The Trust shall indemnify, defend and hold
harmless the Distributor, its officers and trustees and any person who controls
the Distributor within the meaning of the 1933 Act, from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Distributor, its officers and trustees or any
such controlling person may incur under the 1933 Act, the 1940 Act, the common
law or otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either or necessary to make the statements in either
not misleading. This Contract shall not be construed to protect the Distributor
against any liability to the Trust or its shareholders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Contract. This indemnity
agreement is expressly conditioned upon the Trust being notified of any action
brought against the Distributor, its officers or directors or any such
controlling person, which notification shall be given by letter or by telegram
addressed to the Trust at its principal office in Newport Beach, California, and
sent to the Trust by the person against whom such action is brought within 10
days after the summons or other first legal process shall have been served. The
failure to notify the Trust of any such action shall not relieve the Trust from
any liability which it may have to the person against whom such action is
brought by reason of any such alleged untrue statement or omission otherwise
than on account of the indemnity agreement contained in this Section 15. The
Trust shall be entitled to assume the defense of any suit brought to enforce any
such claim, demand or liability, but, in such case, the defense shall be
conducted by counsel chosen by the Trust and approved by the Distributor. If the
Trust elects to assume the defense of any such suit and retain counsel approved
by the Distributor, the defendant or defendants in such suit shall bear the fees
and expenses of any additional counsel retained by any of them, but in the case
the Trust does not elect to assume the

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<PAGE>

defense of any such suit, or in the case the Distributor does not approve of
counsel chosen by the Trust, the Trust will reimburse the Distributor, its
officers and directors or the controlling person or persons named as defendant
or defendants in such suit, for the fees and expenses of any counsel retained by
the Distributor or them. In addition, the Distributor shall have the right to
employ counsel to represent it, its officers and directors and any such
controlling person who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Distributor against the Trust
hereunder if in the reasonable judgment of the Distributor it is advisable for
the Distributor, its officers and directors or such controlling person to be
represented by separate counsel, in which event the fees and expenses of such
separate counsel shall be borne by the Trust. This indemnity agreement and the
Trust's representations and warranties in this Contract shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Distributor, its officers and directors or any such controlling
person. This indemnity agreement shall inure exclusively to the benefit of the
Distributor and its successors, the Distributor's officers and directors and
their respective estates and any such controlling persons and their successors
and estates. The Trust shall promptly notify the Distributor of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any shares.

16. Indemnification of Trust. The Distributor agrees to indemnify, defend
and hold harmless the Trust, its officers and Trustees and any person who
controls the Trust within the meaning of the 1933 Act, from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the 1933 Act, the 1940 Act, the
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or Trustees or such controlling person
resulting from such claims or demands shall arise out of or be based upon (a)
any alleged untrue statement of a material fact contained in information
furnished in writing by the Distributor to the Trust specifically for use in the
Registration Statement or the Prospectus or shall arise out of or be based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or the
Prospectus or necessary to make such information not misleading, (b) any alleged
act or omission on the Distributor's part as the Trust's agent that has not been
expressly authorized by the Trust in writing, and (c) any claim, action, suit or
proceeding which arises out of or is alleged to arise out of the Distributor's
failure to exercise reasonable care and diligence with respect to its services
rendered in connection with investment, reinvestment, employee benefit and other
plans for shares. The foregoing rights of indemnification shall be in addition
to any other rights to which the Trust or a Trustee may be entitled as a matter
of law. This indemnity agreement is expressly conditioned upon the Distributor
being notified of any action brought against the Trust, its officers or Trustees
or any such controlling person, which notification shall be given by letter or
telegram addressed to the Distributor at its principal office in Stamford,
Connecticut, and sent to the Distributor by the person against whom such action
is brought, within 10 days after the summons or other first legal process shall
have been served. The failure to notify the Distributor of any such action shall
not relieve the Distributor from any liability which it may have to the Trust,
its officers or Trustees or such controlling person by reason of any alleged
misstatement, omission, act or failure on the Distributor's part otherwise

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<PAGE>

than on account of the indemnity agreement contained in this Section 16. The
Distributor shall have a right to control the defense of such action with
counsel of its own choosing and approved by the Trust if such action is based
solely upon such alleged misstatement, omission, act or failure on the
Distributor's part, and in any other event the Trust, its officers and Trustees
or such controlling person shall each have the right to participate in the
defense or preparation of the defense of any such action at their own expense.
If the Distributor elects to assume the defense of any such suit and retain
counsel approved by the Trust, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them,
but in case the Distributor does not elect to assume the defense of any such
suit, or in the case the Trust does not approve of counsel chosen by the
Distributor, the Distributor will reimburse the Trust, its officers and Trustees
or the controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by the Trust or them. In
addition, the Trust shall have the right to employ counsel to represent it, its
officers and Trustees and any such controlling person who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Trust against the Distributor hereunder if in the reasonable judgment of
the Trust it is advisable for the Trust, its officers and Trustees or such
controlling person to be represented by separate counsel, in which event the
fees and expense of such separate counsel shall be borne by the Distributor.
This indemnity agreement and the Distributor's representations and warranties in
this Contract shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Trust, its officers and Trustees
or any such controlling person. This indemnity agreement shall inure exclusively
to the benefit of the Trust and its successors, the Trust's officers and
Trustees and their respective estates and any such controlling persons and their
successors and estates. The Distributor shall promptly notify the Trust of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any shares.

17. Assignment Terminates this Contract; Amendments of this Contract. This
Contract shall automatically terminate, without the payment of any penalty, in
the event of its assignment. This Contract may be amended only if such amendment
be approved either by action of the Trustees of the Trust or at a meeting of the
shareholders of the Trust by the affirmative vote of a majority of the
outstanding shares of the Trust, and by a majority of the Trustees of the Trust
who are not interested persons of the Trust and who have no direct or indirect
financial interest in the operation of the Plans or this Contract by vote cast
in person at a meeting called for the purpose of voting on such approval.

18. Effective Period and Termination of this Contract. This Contract
shall take effect upon the date first above written and shall remain in full
force and effect continuously as to a Fund and a class of shares thereof (unless
terminated automatically as set forth in Section 17 hereof) until terminated:

(a) Either by such Fund or such class or the Distributor by not more
than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the other
party; or

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<PAGE>

(b) Automatically as to any Fund or class thereof at the close of
business one year from the date hereof, or upon the expiration of one
year from the effective date of the last continuance of this Contract,
whichever is later, if the continuance of this Contract is not
specifically approved at least annually by the Trustees of the Trust
or the shareholders of such Fund or such class by the affirmative vote
of a majority of the outstanding shares of such Fund or such class;
and by a majority of the Trustees of the Trust who are not interested
persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plans or this Contract by vote cast
in person at a meeting called for the purpose of voting on such
approval.

Action by a Fund or a class thereof under (a) above may be taken either (i)
by vote of the Trustees of the Trust, or (ii) by the affirmative vote of a
majority of the outstanding shares of such Fund or such class. The requirement
under (b) above that the continuance of this Contract be "specifically approved
at least annually" shall be construed in a manner consistent with the 1940 Act
and the rules and regulations thereunder.

Termination of this Contract pursuant to this Section 18 shall be without
the payment of any penalty.

If this 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 Fund or
any class thereof as to which it has not been terminated (or has been renewed).

19. Limited Recourse. The Distributor hereby acknowledges that the
Trust's obligations hereunder with respect to the distribution fee or servicing
fee or contingent deferred sales charges payable with respect to the shares of
any Fund of the Trust or a particular class of shares of a Fund are binding only
on the assets and property belonging to such Fund or allocated to such class.

20. Certain Definitions. For the purposes of this Contract, the
"affirmative vote of a majority of the outstanding shares" means the affirmative
vote, at a duly called and held meeting of shareholders, (a) of the holders of
67% or more of the shares of the Trust, Fund or class, as the case may be,
present (in person or by proxy) and entitled to vote at such meeting, if the
holders of more than 50% of the outstanding shares of the Trust, Fund or class,
as the case may be, entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Trust, Fund or class, as the case may be, entitled to vote at such meeting,
whichever is less.

For the purposes of this Contract, the terms "interested persons" and
"assignment" shall have the meanings defined in the 1940 Act, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. Certain other items used herein that are not otherwise defined
have the meaning given in the Trust's Prospectus or constituent agreements or
documents of the Trust.

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<PAGE>

The Declaration of Trust establishing the Trust, dated February 19, 1987, a
copy of which, together with all amendments thereto (the "Declaration"), is on
file in the Office of the Secretary of State of the Commonwealth of
Massachusetts, provides that the name "PIMCO Funds" refers to the Trustees under
the Declaration collectively as Trustees and not as individuals or personally,
and that no shareholder, trustee, officer, employee or agent of the Trust shall
be subject to claims against or obligations of the Trust (or a particular Fund
or class of shares) to any extent whatsoever, but that the Trust (or a
particular Fund or class of shares) shall only be liable.

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:

-11-

<PAGE>

EXHIBIT (E)(2)

PIMCO FUNDS
PIMCO TOTAL RETURN FUND
JAPAN DEALER SALES CONTRACT

July 14,1998

This Contract (this "Contract) is entered into:

Between: PIMCO Funds Distributors LLC ("PFD")
at 2187 Atlantic Street, Stamford, CT 06902

and THE NIKKO SECURITIES CO., LTD. ("NIKKO")
at 3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo

1. Appointment of Distributor in Japan

As general distributor of PIMCO FUNDS (the "Trust") and PIMCO Total Return
Fund (the "Fund"), PFD hereby appoints NIKKO as Distributor in Japan of
Administrative Class Shares issued and to be issued by the Fund (the "Shared"),
and NIKKO hereby accepts such appointment, subject to the terms and conditions
set forth herein.

2. Distribution of Shares in Japan

PFD hereby agrees to sell and deliver to NIKKO the Shares, pursuant to
NIKKO's instruction therefor, which are required to fill the subscription orders
which may be placed by investors in Japan for the purpose of the public offering
of the Shares in Japan (the "Public Offering") as contemplated under the
Japanese Securities Registration Statement of the Fund, filed with the relevant
authority in Japan and from time to time up-dated ("Securities Registration
Statement").

NIKKO hereby agrees to distribute in Japan any Shares so delivered to it,
by itself or through any handling securities company/companies in Japan (the
"Handling Securities Companies") which shall act as such, in any manner as PFD
and NIKKO may agree and determine from time to time, which manner is not
inconsistent with the provisions of this Contract, applicable Japanese law, the
rules of the Japan Securities Dealers Association ("JSDA") and the information
contained in the most recent Securities Registration Statement and prospectus
prepared by and on behalf of the Fund (the "Japanese Prospectus"), both of which
are for the purpose of the Public Offering.

It is agreed and understood that the Shares shall be offered for
subscription by NIKKO to investors in Japan only but not outside Japan, unless
otherwise permitted by PFD.

No Shares shall be distributed by NIKKO in Japan pursuant to any of the
provisions hereunder and no orders for the purchase of such Shares hereunder
shall. be accepted in the U.S. by the Trust or PFD from the investors in Japan
(i) if and so long as the effectiveness of the Securities Registration Statement
or any, necessary amendments thereto shall be suspended
<PAGE>

pursuant to any of the provisions of the Securities and Exchange Law of Japan
(Law No. 25, 1948, as amended) or (ii) if and so long as the Shares and/or the
Fund are determined not to meet the requirements of the Standards of Selection
of JSDA with respect to the qualification of foreign investment fund securities
for distribution in Japan; provided, however, that nothing contained in this
sub-paragraph shall. in any way restrict or be applied to or alter the
obligation of the Trust or PFD to repurchase Shares from any shareholder in
Japan through NIKKO or any Handling Securities Company in accordance with the
provisions of the most recent Securities Registration Statement.

PFD agrees to notify NIKKO immediately of the non-acceptance or delay,
together with the reasons therefor, if the Trust or PFD, as appropriate, cannot
(i) accept orders for the issue or repurchase of Shares after receipt of such
order, (ii) deliver Shares or the confirmation of acceptance by PFD of the order
in writing in accordance with the provisions of the most recent Securities
Registration Statement or (iii) make payment for repurchase of Shares in
accordance with the provisions of the most recent Securities Registration
Statement.

3. Public Offering

The Public Offering shall be made by NIKKO in Japan in accordance with the
most recent Securities Registration Statement and pursuant to the following
particulars:

(i) Number of Shares to be publicly offered:

To be agreed from lame to tame between PFD and NIKKO, consistent with
the most recent Securities Registration Statement.

(ii) Scheduled period of the Public Offering:

The Shares may be publicly offered for subscription in Japan so long
as the Securities Registration Statement is from time to time filed and
updated by or on behalf of the Fund in every 6 months or in such other
period to be agreed between PFD and NIKKO in accordance with applicable
Japanese law.

4. Offering Price and Fees

The issue price at which NIKKO may publicly offer and sell the Shares in
Japan is an amount equal to the net asset value per Share, as computed from time
to tune by the Fund in accordance with the provisions of the most recent
Securities Registration Statement, subject to any sales charge or account charge
imposed by NIKKO which will be borne by the investors in Japan in accordance
with the provisions of the most recent Securities Registration Statement.

PFD or the Trust will furnish NIKKO with information on a daily bade
regarding the not asset value per Share, and NIKKO agrees to quote such net
asset value in connection with any Shares offered for subscription by NIKKO and
to report it to (i) JSDA in accordance with the rules of JSDA and (ii) any
relevant press in accordance with the then applicable market practice in Japan.
NIKKO shall ensure that each sale is made subject to confirmation by PFD or the
Trust

2
<PAGE>

of the net a t value per Share computed upon receipt of such order in accordance
with the most recent Securities Registration Statement.

There is no sales charge or dealer discount to NIKKO or any other person on
the reinvestment of dividends and distributions.

PFD may not provide additional promotional incentives or payments to NIKKO
or the Handling Securities Company, unless otherwise agreed between any of them.

5. Manner of Offering, Selling, Purchasing and Redeeming Shares

NIKKO shall be furnished with the Fund's latest Securities Registration
Statement, Japanese Securities Report, Japanese Semi-Annual Securities Report,
Japanese Extraordinary Report and Japanese Prospectus, from time to time updated
or filed pursuant to applicable Japanese laws, and such other supplementary
sales materials prepared in compliance with Japanese laws and regulations, as
NIKKO may reasonably request. NIKKO will offer and distribute as well as accept
an order of redemption from the investor in Japan with respect of the Shares
only in accordance with the terms and conditions of the latest Securities
Registration Statement and Japanese Prospectus of the Fund, from time to time
up-dated pursuant to applicable Japanese laws. Neither NIKKO nor any other
person is authorized to give any information or to make any representations
other than those contained in such Securities Registration Statement and
Japanese Prospectus or in such supplementary ages materials. NIKKO agrees that
it will neither (i) use any other offering materials for the Fund without PFD's
prior written consent nor (ii) distribute Shares of the Fund in Japan with
special services such as life insurance and pension and for commodities.

NIKKO hereby agrees:

(i) to exercise its beat efforts to find purchasers for the Shares of the
Fund,

(ii) to furnish to each person to whom any sale is made a copy of the
latest Japanese Prospectus of the Fund at the time of such sale pursuant to
applicable Japanese laws,

(iii) to transmit to the Trust promptly upon receipt any and all orders
received by NIKKO, and

(iv) to pay to the Trust the issue price or to receive from the Trust the
redemption price, as the case may be, by telegraphic transfer in accordance with
the provisions of the most recent Securities Registration Statement,

If such payment of issue price is not received on such date, the Trust
reserves the right, without prior notice, to cancel the sales. In such case,
the Trust shall have the right to hold NIKKO responsible for any loss incurred
by the Trust or the Fund. If such payment of the redemption price is not
received on such date, NIKKO shall have the right to hold PFD responsible for
any loss incurred by NIKKO. NIKKO agrees to make an appropriate report to

3
<PAGE>

shareholders in Japan with respect to any purchase orders and redemption orders
received by NIKKO

NIKKO shall make all distributions in Japan when the distribution of
dividend is made by PFD.

All orders are subject to acceptance or rejection by PFD in its sole
discretion, or by the Fund in its sole discretion. PFD agrees to notify NIKKO
of any failure to comply with agreed procedures or delay of orders for
distribution of Shares, The procedure stated herein relating to the pricing and
handling of orders shall be subject to instructions which PFD may forward to
NIKKO from time to time.

6. Preparation of Documents To Be Used in Japan

PFD and NIKKO shall from time to time separately agree to the matters of
the preparation of documents to be used in Japan in accordance with the
applicable laws and regulations.

7. Costs and Expenses

PFD and NIKKO shall from time to time separately agree as to the allocation
of costs and expenses incurred under this Contract.

8. Compliance With Law

NIKKO hereby represents that it with offer and sell the Shares in Japan and
that it is licensed and qualified as a securities company authorized to offer
and sell the Shares under the laws of Japan and the rules of JSDA.

NIKKO agrees that in selling Shares it will comply with all applicable
laws, rules and -regulations, including those of the United States, and the
applicable rules and regulations of any jurisdiction in which NIKKO sells,
directly or indirectly, any Shares. NIKKO agrees not to offer for sale or sell
the Shares in any jurisdiction other than Japan.

9. Relationship with Dealers

In offering and selling Shares under this Contract, NIKKO shall be acting
as principal and nothing herein shall be construed to constitute NIKKO or any of
its agents, employees or representatives as PFD's agent or employee, or as an
agent or employee of the Fund. As general distributor of the Fund, PFD shall
have full authority to take such action as PFD may deem advisable in respect of
all matters pertaining to the distribution of the Shares. PFD shall not be
under any obligation to NIKKO except for obligations expressly assumed by PFD in
this Contract.

4
<PAGE>

10. Termination

Either party hereto may terminate this Contract, without cause, upon 60
days `written notice to the other party and, either party may terminate this
Contract for cause upon the violation by the other party of any material
provision hereof, such termination to become effective on the date such notice
of termination is mailed to the other party.

Unless sooner terminated, this Contract; will continue in effect until one
year from the date hereof and thereafter for successive annual periods, provided
that such continuance is specifically approved at least annual by votes of a
majority of both (i) the Board. of Trustees of the Trust and (ii) those
Trustees of the Trust who are not "interested person" of the Trust (as defined
in the U.S. Investment Company Act of 1940) and have no direct or indirect
financial interest in the operation of the distribution plan or administrative
services plan (each a "Plan") with respect to the Shares or any agreements
related to either Plan ("Independent Trustees"), cast in person at a meeting
called for the purpose of voting on a Plan and such related agreements.

This Contract may be terminated and/or sales of Shares of the Fund may be
suspended at any time without the payment of any Penalty, by vote Of a majority
of the Independent Trustees or by vote of a majority of the voting securities
(within the meaning of the U.S. Investment Company Act of 1940) of the
Administrative Class shares of the Fund, on 60 days' written notice. Notice of
termination (or non-renewal of a Plan by the Trustees shall constitute a notice
of termination of this Contract with respect to services provided under such
Plan.

11. Distribution and Shareholder Services

NIKKO is hereby authorized and may from time to time undertake to perform
services for its customers in connection with investments in the Shares of the
Fund, which services may include, but are not limited to: (i) providing
facilities to answer questions from prospective investors about the Fund; (ii)
receiving and answering correspondence, including requests for Japanese
Prospectus; (iii) preparing, printing and delivering Japanese Prospectus and
shareholder reports to prospective shareholders; (iv) assisting investors in
applying to purchase Shares and selecting account options; and (v) shareholder
services 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;
providing and maintaining pre-authorized investment plants; 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;
performing similar account administrative services; and providing such other as
PFD may reasonably request to the extent NIKKO is permitted to do so under
applicable statutes, rules, or regulations.

NIKKO and its employees will, upon request, be available to consult with PFD or
its designees concerning the performance of NMO's responsibilities under this
Contract Any person authorized to direct the disposition of monies paid or
payable by PFD pursuant to this Contract will provide to PFD and the Trust's
Board of Trustees, and the Trustees will, review at least quarterly, a

5
<PAGE>

written report of the amounts so expended and. the purposes for which such
expenditures were made.

In addition, NIKKO will furnish to PFD, the Fund and their designees such
information as PFD, the Fund or their designees may reasonably request
(including without limitation, periodic certifications confirming the rendering
of services with respect to Shares described herein), and' will otherwise
cooperate with PFD, the Fund and their designees (including, without limitation,
any auditors designated by the Fund), in the preparation of reports to the
Trusts Board of Trustees concerning this Contract and the monies paid or payable
by PFD pursuant hereto, as well as any other reports or filings that may be
required by law.

In consideration of the costs and expenses of furnishing the services and
facilities provided by NIKKO hereunder, and subject to the limitations of
applicable law and regulations, NIKKO will be paid monthly for such costs,
expenses or payments at an annual rate of 0-25%, of the average daily net assets
of the Fund attributable to the Shares which are owned of record by NIKKO as
nominee for its customers.

Under no circumstances shall PFD or the Trust be liable to NIKKO or any other
person under this Contract as a result of any action by the 11S. Securities and
Exchange Commission or National Association of Securities Dealers, Inc. (the
"NASD") affecting the operation or of a Plan.

The fee rate with respect to the Fund may be prospectively decreased by PFD, in
its sole discretion, at any time upon notice to NIKKO.

12. Indemnification

NIKKO agrees to indemnify and hold harmless PFD, the Trust and the Fund for any
lose, liability, claim, damage. or expense arising out of or resulting from any
failure an the part of NIKKO to comply with any provision or representation in
this Contract, or from any sale of the Shares or use of the Securities
Registration Statement, the Japanese Prospectus, the Japanese Securities Report,
the Japanese Semi-Annual Securities Report, the Japanese Extraordinary Report or
supplementary sales materials except as otherwise provided herein.

PFD agrees to indemnify and hold harmless NIKKO for any loss, liability claim,
damage, or expense arising out of or resulting from any failure on the part of
PFD to comply with any provision or representation in this Contract, or from any
materially misleading information or omission of information in the Securities
Registration Statement, the Japanese Prospectus, the Japanese Securities Report,
the Japanese Semi-Annual Securities Report, the Japanese Extraordinary Report or
supplementary sales materials (except information for which NBRO is responsible,
if any) or other information furnished in written form by or on behalf of PFD or
the Fund.

6
<PAGE>

13. Assignment

This Contract will automatically terminate in the event of its assignment (as
such term is defined in the U.S. Investment Company Act of 1940).

14. Governing Law

This Contract and the rights and obligations of the parties hereunder shall be
governed by and construed under the laws of Japan.

If the foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between us.

IN WITNESS WHEREOF, PFD AND NIKKO have caused their duly authorized
representatives to execute this Agreement on the date stated at the beginning
hereof.

PIMCO Funds Distributors LLC

By:__________________________
Name:
Title:

THE NIKKO SECURITIES CO., LTD.

By:__________________________
Name:
Title:

<PAGE>

Exhibit(G)

CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT

THIS AGREEMENT is made effective the 2nd day of January, 1998, by and
between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the
laws of the State of Missouri, having its principal office and place of business
at 801 Pennsylvania Avenue, Kansas City, Missouri 64105 ("IFTC"), EACH
REGISTERED INVESTMENT COMPANY LISTED ON SCHEDULE A hereto, as it may be amended
from time to time, incorporated herein by this reference, each having its
principal office and place of business at 840 Newport Center Drive, Newport
Beach, CA 92660 (each sometimes referred to as a "Fund" and, collectively, the
"Funds"), and PACIFIC INVESTMENT MANAGEMENT COMPANY, a Delaware partnership
having its principal office and place of business at 840 Newport Center Drive,
Newport Beach, CA 92660 ("PIMCO"), acting as administrator for each Fund.

WITNESSETH:

WHEREAS, PIMCO administers all of the operations of PIMCO Funds: Pacific
Investment Management Series ("PIMS"), a Massachusetts business, trust that is
registered with the Securities and Exchange Commission ("SEC") as an open-end
management investment company, pursuant to an Administration Agreement between
PIMS and PIMCO, and procures or provides for the procurement on behalf of PIMS
at PIMCO's expense certain services, including custody services; and

WHEREAS, PIMCO Advisors L.P. ("PALP") administers all of the operations of
the PIMCO Funds: Multi-Manager Series ("MMS"), a Massachusetts business trust
that is registered with the SEC as an open-end management investment company,
pursuant to an Administration Agreement between MMS and PALP, and procures or
provides for procurement on behalf of MMS at PALP's expense certain services,
including custody services; and

WHEREAS, PIMCO pursuant to an Administration Agreement with PALP has been
appointed as sub-administrator to provide or procure certain services, including
custody services, for or on behalf of MMS; and

WHEREAS, PIMCO desires to appoint IFTC as custodian of the assets of each
Fund's investment portfolio or portfolios (each a "Portfolio", and collectively
the "Portfolios") and as each Fund's agent to perform certain investment
accounting and recordkeeping functions; and

WHEREAS, IFTC is willing to accept such appointment on the terms and
conditions hereinafter set forth;

NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:

1. APPOINTMENT OF CUSTODIAN AND AGENT. PIMCO hereby constitutes and appoints
----------------------------------
IFTC as:
<PAGE>

A. Custodian of the investment securities, interests in loans and other
non-cash investment property, and monies at any time owned by each of
the Portfolios and delivered to IFTC as custodian hereunder
("Assets"); and

B. Agent to perform certain accounting and recordkeeping functions
relating to portfolio transactions required of a duly registered
investment company under Rule 3 1 a of the Investment Company Act of
1940, as amended (the " 1940 Act") and to calculate the net asset
value of the Portfolios.

2. REPRESENTATIONS AND WARRANTIES.
-------------------------------

A. Each Fund hereby represents, wan-ants and acknowledges to IFTC:

1. That it is a corporation or trust duly organized and existing and
in good standing under the laws of its state of organization, and
that it is registered under the 1940 Act; and

2. That it has the requisite power and authority under applicable
law and its articles of incorporation and its bylaws or its trust
instrument, as the case may be, to enter into this Agreement;
that it has taken all requisite action necessary to appoint IFTC
as custodian and investment accounting and recordkeeping agent,
that this Agreement has been duly executed and delivered by Fund;
and that this Agreement constitutes a legal, valid and binding
obligation of Fund, enforceable in accordance with its terms,
except that such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally, and general principles of equity.

B. IFTC hereby represents, warrants and acknowledges to each Fund and to
PIMCO:

1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and

2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by IFTC; and that this Agreement constitutes a legal,
valid and binding obligation of IFTC, enforceable in accordance
with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, and general principles of
equity.

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<PAGE>

C. PIMCO hereby represents, warrants and acknowledges to IFTC:

1. That it is a partnership duly organized and existing and in good
standing under the laws of the State of Delaware; and

2. That it has the requisite power and authority under applicable
law and its partnership agreement to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by PIMCO; and that this Agreement constitutes a legal,
valid and binding obligation of PIMCO, enforceable in accordance
with its terms, except that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, and general principles of
equity.

3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
-------------------------------------------

A. Delivery of Assets. Except as permitted by the 1940 Act, PIMCO will
------------------
deliver or cause to be delivered to IFTC on the effective date hereof,
or as soon thereafter as practicable, and from time to time
thereafter, all Assets acquired by, owned by or from time to time
coming into the possession of each of the Portfolios during the term
hereof. IFTC has no responsibility or liability whatsoever for or on
account of assets not so delivered.

B. Delivery of Accounts and Records. PIMCO will turn over or cause to be
--------------------------------
turned over to IFTC all accounts and records needed by IFTC to fully
and properly perform its duties and responsibilities hereunder. IFTC
may rely conclusively on the completeness and correctness of such -
accounts and records.

C. Delivery of Assets to Third Parties. IFTC will receive delivery of and
----------------------------
keep safely the Assets of each Portfolio segregated in a separate
account. IFTC will not deliver, assign, pledge or hypothecate any such
Assets to any person except as permitted by the provisions hereof or
any agreement executed according to the terms of Section 3.P hereof.
Upon delivery of any such Assets to a subcustodian appointed pursuant
hereto (hereinafter referred to as "Subcustodian"), IFTC will create
and maintain records identifying such Assets as belonging to the
applicable Portfolio. IFTC is responsible for the safekeeping of the
Assets only until they have been transmitted to and received by other
persons as permitted under the terms hereof, except for Assets
transmitted to Subcustodians, for which IFTC remains responsible to
the extent provided herein. IFTC may participate directly or
indirectly through a subcustodian in the Depository Trust Company
(DTC), Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved by a Fund
(as such entities are defined at 17 CFR Section 270.17f-4(b)) (each a
"Depository" and collectively the "Depositories"). IFTC will be
responsible to each Fund for any loss, damage or expense suffered or
incurred by such Fund resulting from the actions or

-3-
<PAGE>

omissions of any Depository only to the same extent such Depository is
responsible to IFTC. IFTC shall be liable to the Funds for any loss or
damage resulting from the use of a Depository arising by reason of any
negligence, willful misconduct or bad faith on the part of IFTC or any
of its officers, employees or agents.

D. Registration. IFTC will at all times hold registered Assets in the
------------
name of IFTC as custodian, the applicable Portfolio, or a nominee of
either of them, unless specifically directed by Instructions, as
hereinafter defined, to hold such registered Assets in so-called
"street name;" provided that, in any event, IFTC will hold all such
Assets in an account of IFTC as custodian containing only Assets of
the applicable Portfolio, or only assets held by IFTC as a fiduciary
or custodian for customers; and provided further, IFTC's records will
at all times indicate the Portfolio or other customer for which such
Assets are held and the respective interests therein. If, however,
PIMCO directs IFTC to maintain Assets in "street name",
notwithstanding anything contained herein to the contrary, IFTC will
be obligated only to utilize its best efforts to timely collect income
due the Portfolio on such Assets and to notify the Portfolio of
relevant information, such as maturities and pendency of calls, and
corporate actions including, without limitation, calls for redemption,
tender or exchange offers, declaration, record and payment dates and
amounts of any dividends or income, reorganization, recapitalization,
merger, consolidation, split-up of shares, change of par value, or
conversion ("Corporate Actions"). All Assets and the ownership thereof
by a Portfolio will at all times be identifiable on the records of
EFTC. PIMCO agrees to hold IFTC and its nominee harmless for any
liability as a shareholder of record of securities held in custody.

E. Exchange. Upon receipt of Instructions, IFTC will exchange, or cause
--------
to be exchanged, Assets held for the account of a Portfolio for other
Assets issued or paid in connection with any Corporate Action, or
otherwise, and will deposit any such Assets in accordance with the
terms of any such Corporate Action. Without Instructions, IFTC is
authorized to exchange Assets in temporary form for Assets in
definitive form, to effect an exchange of shares when the par value of
stock is changed, and, upon receiving payment therefor, to surrender
bonds or other Assets at maturity or when advised of earlier call for
redemption, except that IFTC will receive Instruction prior to
surrendering any convertible security.

F. Purchases of Investments - Other Than Options and Futures. On each
---------------------------------------------------------
business day on which a Portfolio makes a purchase of Assets other
than options and futures, PIMCO will deliver to IFTC Instructions
specifying with respect to each such purchase:

1. If applicable, the name of the Portfolio making such purchase;

2. The name of the issuer and description of the Asset;

-4-
<PAGE>

3. The number of shares and the principal amount purchased, and
accrued interest, if any;

4. The trade date;

5. The settlement date;

6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;

7. The total amount payable upon such purchase;

8. The name of the person from whom or the broker or dealer through
whom the purchase was made; and

9. Whether the Asset is to be received in certificated form or via a
specified Depository.

In accordance with such Instructions, IFTC will pay for out of monies
held for the purchasing Portfolio, but only insofar as such monies are
available for such purpose, and receive the Assets so purchased by or
for the account of such Portfolio, except that IFTC, or a
Subcustodian, may in its sole discretion advance funds to such
Portfolio which may result in an overdraft because the monies held on
behalf of such Portfolio are insufficient to pay the total amount
payable upon such purchase. Except as otherwise instructed by PIMCO,
IFTC will make such payment only upon receipt of Assets: (a) by IFTC;
(b) by a clearing corporation of a national exchange of which IFTC is
a member; or (c) by a Depository. Notwithstanding the foregoing, (i)
IFTC may release funds to a Depository prior to the receipt of advice
from the Depository that the Assets underlying a repurchase agreement
have been transferred by book-entry into the account maintained with
such Depository by IFTC on behalf of its customers; provided that
IFTC's instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the Assets
underlying the repurchase agreement in such account; (ii) IFTC may
make payment for time deposits, call account deposits, currency
deposits and other deposits, foreign exchange transactions, futures
contracts or options, before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; and (iii) IFTC
may make, or cause a Subcustodian to make, payment for the purchase of
Assets the settlement of which occurs outside of the United States of
America in accordance with generally accepted local custom and market
practice.

G. Sales and Deliveries of Investments -- Other Than Options and Futures.
--------------------------------------------------------
On each business day on which a Portfolio makes a sale of Assets other
than options and futures, PIMCO will deliver to IFTC Instructions
specifying with respect to each such sale:

-5-
<PAGE>

1. If applicable, the name of the Portfolio making such sale;

2. The name of the issuer and description of the Asset;

3. The number of shares and principal amount sold, and accrued
interest, if any;

4. The date on which the Assets sold were purchased or other
information identifying the Assets sold and to be delivered;

5. The trade date;

6. The settlement date;

7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;

8. The total amount to be received by the Portfolio upon such sale;
and

9. The name and address of the broker or dealer through whom or
person to whom the sale was made.

IFTC will deliver or cause to be delivered the Assets thus designated
as sold for the account of the selling Portfolio as specified in the
Instructions. Except as otherwise instructed by PIMCO, IFTC will make
such delivery upon receipt of- (a) payment therefor in such form as is
satisfactory to IFTC; (b) credit to the account of IFTC with a
clearing corporation of a national securities exchange of which IFTC
is a member; or (c) credit to the account maintained by IFTC on behalf
of its customers with a Depository. Notwithstanding the foregoing: (i)
IFTC will deliver Assets held in physical form in accordance with
"street delivery custom" to a broker or its clearing agent; or (ii)
IFTC may make, or cause a Subcustodian to make, delivery of Assets the
settlement of which occurs outside of the United States of America
upon payment therefor in accordance with generally accepted local
custom and market practice.

H. Purchases or Sales of Options and Futures. On each business day on
-----------------------------------------
which a Portfolio makes a purchase or sale of the options and/or
futures listed below, PIMCO will deliver to IFTC Instructions
specifying with respect to each such purchase or sale:

1. If applicable, the name of the Portfolio making such purchase or
sale;

2. In the case of security options:

a. The underlying security;
b. The price at which purchased or sold;

-6-
<PAGE>

c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring
or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom the
sale or purchase was made.

3. In the case of options on indices:

a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring
or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.

4. In the case of security index futures contracts:

a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
Instructions, and if not already in the possession of IFTC,
PIMCO will deliver a substantially complete and executed
custodial safekeeping account and procedural agreement,
incorporated herein by this reference); and

f The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.

-7-
<PAGE>

5. In the case of options on index future contracts:

a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.

I. Assets Pledged or Loaned. If specifically allowed for in the
------------------------
prospectus or registration statement of a Portfolio, and subject to
such additional terms and conditions as IFTC may require:

1. Upon receipt of Instructions, IFTC will release or cause to be
released Assets to the designated pledgee by way of pledge or
hypothecation to secure any loan incurred by a Portfolio;
provided, however, that IFTC will release Assets only upon
payment to IFTC of the monies borrowed, except that in cases
where additional collateral is required to secure a borrowing
already made, further Assets may be released or caused to be
released for that purpose. Upon receipt of Instructions, IFTC
will pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the Assets pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.

2. Upon receipt of Instructions, IFTC win release Assets to the
designated borrower; provided, however, that the Assets will be
released only upon deposit with IFTC of full cash collateral as
specified in such Instructions, and that the lending Portfolio
will retain the right to any dividends, interest or distribution
on such loaned Assets. Upon receipt of Instructions and the
loaned Assets, IFTC will release the cash collateral to the
borrower.

J. Routine Matters. IFTC will, in general, attend to all routine and
---------------
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with the Assets
except as may be otherwise provided herein or upon Instruction from
PIMCO.

K. Deposit Accounts. IFTC will open and maintain one or more special
----------------
purpose deposit accounts for each Portfolio in the name of IFTC in
such banks or trust companies (including, without limitation,
affiliates of IFTC) as may be designated by it or PIMCO in writing
("Accounts"), subject only to draft or order by IFTC upon receipt of
Instructions. IFTC will deposit all monies received by IFTC from

-8-
<PAGE>

or for the account of a Portfolio in an Account maintained for such
Portfolio. Subject to Section 5.K hereof, IFTC agrees:

1. To make Fed Funds available to the applicable Portfolio at 9:00
a.m., Kansas City time, on the second business day after deposit
of any check into an Account, in the amount of the check;

2. To make funds available immediately upon a deposit made by
Federal Reserve wire; and

3. To make funds available on the next business day after deposit of
ACH wires.

L. Income and Other Payments. IFTC will:
-------------------------

1. Collect, claim and receive and deposit for the account of the
applicable Portfolio all income (including income from the
Accounts) and other payments which become due and payable on or
after the effective date hereof with respect to the Assets, and
credit the account of such Portfolio in accordance with the
schedule attached hereto as Exhibit A. If, for any reason, a
Portfolio is credited with income that is not subsequently
collected, IFTC may reverse that credited amount. If monies are
collected after such reversal, IFTC will credit the Portfolio in
that amount;

2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and

3. Take such other action as may be necessary or proper in
connection with (a) the collection, receipt and deposit of such
income and other payments, including but not limited to the
presentation for payment of all coupons and other income items
requiring presentation; and all other Assets which may mature or
be called, redeemed, retired or otherwise become payable and
regarding which IFTC has Actual knowledge, or should reasonably
be expected to have knowledge; and (b) the endorsement for
collection, in the name of Fund or a Portfolio, of all checks,
drafts or other negotiable instruments.

IFTC, however, will not be required to institute suit or take other
extraordinary action to enforce collection except upon receipt of
Instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other actions. IFTC will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to Instructions.

-9-
<PAGE>

M. Proxies and Notices. IFTC will promptly deliver or mail or have
-------------------
delivered or mailed to PIMCO all proxies property signed, all notices
of meetings, all proxy statements and other notices, requests or
announcements affecting or relating to Assets and will, upon receipt
of Instructions, execute and deliver or mail (or cause its nominee to
execute and deliver or mail) such proxies or other authorizations as
may be required. Except as provided herein or pursuant to Instructions
hereafter received by IFTC, neither it nor its nominee will exercise
any power inherent in any such Assets, including any power to vote the
same, or execute any proxy, power of attorney, or other similar
instrument voting any of such Assets, or give any consent, approval or
waiver with respect thereto, or take any other similar action.

N. Disbursements. IFTC will pay or cause to be paid, insofar as funds are
-------------
available for the purpose, bills, statements and other obligations of
each Portfolio (including but not limited to obligations in connection
with the conversion, exchange or surrender of Assets, interest
charges, dividend disbursements, taxes, management fees, custodian
fees, legal fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating expenses
of such Portfolio) pursuant to Instructions setting forth the name of
the person to whom payment is to be made, and the amount and purpose
of the payment.

O. Daily Statement of Accounts. IFTC will, within a reasonable time,
---------------------------
render to PEMCO a detailed statement of the amounts received or paid
and of Assets received or delivered for the account of each Portfolio
during each business day. IFTC will maintain such books and records as
are necessary to enable it to render, from time to time upon request
by PIMCO, a detailed statement of the Assets. IFTC will permit, and
upon Instruction will cause any Subcustodian to permit, such persons
as are authorized by the applicable Fund, including such Fund's
independent public accountants, reasonable access to such records or
will provide reasonable confirmation of the contents of such records,
and if demanded, IFTC will permit, and will cause any Subcustodian to
permit, federal and state regulatory agencies to examine the Assets,
books and records of any Portfolio.

P. Appointment of Subcustodians. Notwithstanding any other provisions
----------------------------
hereof:

1. All or any of the Assets may be held in IFTC's own custody or in
the custody of one or more other banks or trust companies
(including, without limitation, affiliates of IFTC) acting as
Subcustodians as may be selected by IFTC. Any such Subcustodian
selected by IFTC must have the qualifications required for a
custodian under the 1940 Act. IFTC will be responsible to the
applicable Portfolio for any loss, damage or expense suffered or
incurred by such Portfolio resulting from the actions or
omissions of any Subcustodians selected and appointed by IFTC
(except Subcustodians appointed at the request of PIMCO and as
provided in

-10-
<PAGE>

Subsection 2 below) to the same extent IFTC would be responsible
to Fund hereunder if it committed the act or omission itself.

2. Upon request of PIMCO, IFTC will contract with other
Subcustodians reasonably acceptable to IFTC for purposes of (a)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a common
custodian or subcustodian, or (b) providing depository and
clearing agency services with respect to certain variable rate
demand note securities, or (c) for other reasonable purposes
specified by PIMCO; provided, however, that IFTC will be
responsible to PIMCO for any loss, damage or expense suffered or
incurred by a Fund resulting from the actions or omissions of any
such Subcustodian only to the same extent such Subcustodian is
responsible to IFTC. PIMCO may review IFTC's contracts with such
Subcustodians.

Q. Foreign Custody Manager.
-----------------------

1. Definitions. Capitalized terms in this Section Q have the
following meanings:

"Country Risk" means all factors reasonably related to the
systemic risk of holding Foreign Assets in a particular country
including, but not limited to, such country's political
environment; financial infrastructure (including financial
institutions such as any Mandatory Securities Depositories (but
not Eligible Foreign Custodians) operating in the country);
prevailing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign
Assets held in custody in that country.

"Eligible Foreign Custodian" has the meaning set forth in Section
(a)(1) of Rule 17f-5, except that the term does not include
Mandatory Securities Depositories.

"Foreign Assets" means any of the Portfolios' investments
(including foreign currencies) for which the primary market is
outside the United States and such cash and cash equivalents in
amounts deemed by PIMCO to be reasonably necessary to effect the
Portfolios' transactions in such investments.

"Foreign Custody Manager" or TCM" has the meaning set forth in
Section (a)(2) of Rule 17f-5.

"Mandatory Securities Depository" means a foreign securities
depository or clearing agency that, either as a legal or
practical matter, must be used if the manager of a Portfolio
determines to place Foreign Assets in a

-11-
<PAGE>

country outside the United States (i) because required by law or
regulation; (ii) because securities cannot be withdrawn from.
such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the
foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market
practices.

2. Delegation to IFTC as FCM. Each Fund, pursuant to resolution
-------------------------
adopted by its Board of Trustees or Directors (each a "Board"),
hereby delegates to IFTC, subject to Section (b) of Rule 17f-5,
the responsibilities set forth in this Section Q with respect to
Foreign Assets held outside the United States, and IFTC hereby
accepts such delegation, as FCM of each Portfolio. It is
understood and agreed that IFTC will sub-contract the performance
of its responsibilities hereunder with State Street Bank & Trust
Company. IFTC will be responsible to the applicable Portfolio for
any loss, damage or expense suffered or incurred by such
Portfolio resulting from the actions or omissions of State Street
Bank & Trust Company to the same extent IFTC would be responsible
to the Funds hereunder if it committed the act or omission
itself. References herein to "FCM" shall include IFTC and State
Street Bank & Trust Company.

3. Countries Covered. The FCM is responsible for performing the
-----------------
delegated responsibilities defined below only with respect to the
countries and custody arrangements for each such country listed
on Exhibit D hereto , which may be amended from time to time by
the FCM. `Me FCM will list on Exhibit D the Eligible Foreign
Custodians selected by the FCM to maintain the assets of each
Portfolio. Mandatory Securities Depositories are listed on
Exhibit E hereto, which Exhibit E may be amended from time to
time by the FCM. The FCM will provide amended versions of
Exhibits D and E in accordance with subsection 7 of this
Section Q.

Upon the receipt by the FCM of Instructions to open an account,
or to place or maintain Foreign Assets, in a country listed on
Exhibit D, and the fulfillment by PIMCO of the applicable account
opening requirements for such country, the FCM is deemed to have
been delegated by the applicable Board responsibility as FCM with
respect to that country and to have accepted such delegation.
Following the receipt of Instructions directing the FCM to close
the account of a Portfolio with the Eligible Foreign Custodian
selected by the FCM in a designated country, the delegation by
the applicable Board to IFTC as FCM for that country is deemed to
have been withdrawn and IFTC will immediately cease to be the FCM
of the Portfolio with respect to that country unless a substitute
Eligible Foreign Custodian is identified and added to Exhibit D.

-12-
<PAGE>

The FCM may withdraw its acceptance of delegated responsibilities
with respect to a designated country upon written notice to
PIMCO. Commencing sixty (60) days (or such longer period as to
which the parties agree in writing) after receipt of any. such
notice by PIMCO, IFTC will have no further responsibility as FCM
to a Portfolio with respect to the country as to which IFTC's
acceptance of delegation is withdrawn.

4. Scope of Delegated Responsibilities.
-----------------------------------

a. Selection of Eligible Foreign Custodians. Subject to the
----------------------------------------
provisions of this Section Q, the FCM may place and maintain
the Foreign Assets in the care of the Eligible Foreign
Custodian selected by the FCM in each country listed on
Exhibit D, as amended from time to time.

In performing its delegated responsibilities as FCM to place
or maintain Foreign Assets with an Eligible Foreign
Custodian, the FCM will determine that the Foreign Assets
will be subject to reasonable care, based on the standards
applicable to custodians in the country in which the Foreign
Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of
such assets, including,. without limitation, those set forth
in Rule 17f-5(c)(1)(i) through (iv).

b. Contracts With Eligible Foreign Custodians. The FCM will
------------------------------------------
determine that the contract (or the rules or established
practices or procedures in the case of an Eligible Foreign
Custodian that is a foreign securities depository or
clearing agency) governing the foreign custody arrangements
with each Eligible Foreign Custodian selected by the FCM
will provide reasonable care for the Foreign Assets held by
that Eligible Foreign Custodian based on the standards
applicable to custodians in the particular country and
referred to in the second paragraph of Section 4.a. Each
such contract will include the provisions set forth in Rule
17&5(c)(2)(i)(A) through (F), or, in lieu of any or all of
the provisions set forth in said (A) through (F), such other
provisions that the FCM determines will provide, in their
entirety, the same or greater level of care and protection
for the Foreign Assets as the provisions set forth in said
(A) through (F) in their entirety.

c. Monitoring. In each case in which the FCM maintains Foreign
----------
Assets with an Eligible Foreign Custodian selected by the
FCM, the FCM will establish a system to monitor (a) the
appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian as provided in Section 4.a. and
(b) the contract

-13-
<PAGE>

governing the custody arrangements established by the FCM
with the Eligible Foreign Custodian as provided in Section
4.b. In the event the FCM determines that the custody
arrangements with an Eligible Foreign Custodian it has
selected are no longer appropriate, the FCM will notify the
applicable Board in accordance with subsection 7 of this
Section Q.

5. Guidelines for the Exercise of Delegated Authority. For purposes
--------------------------------------------------
of this Section Q, the applicable Board will be solely
responsible for considering and determining to accept such
Country Risk as is incurred by placing and maintaining the
Foreign Assets in each country for which IFTC is serving as FCM
of a Portfolio, and the Board will be solely responsible for
monitoring on a continuing basis such Country Risk to the extent
that such Board considers necessary or appropriate. PIMCO, on
behalf of the Funds, and IFTC each expressly acknowledge that the
FCM will not be delegated any responsibilities under this Section
Q with respect to Mandatory Securities Depositories.

6. Standard of Care as FCM of a Portfolio. In performing the
--------------------------------------
responsibilities delegated to it, the FCM agrees to exercise
reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would
exercise.

7. Reporting Requirements. The FCM will report the withdrawal of the
----------------------
Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign
Custodian by providing to the applicable Board amended Exhibits D
and E at the end of the calendar quarter in which an amendment to
either Exhibit has occurred. The FCM will make written reports
notifying the applicable Board of any other material change in
the foreign custody arrangements of a Portfolio described in this
Section Q promptly following after the occurrence of the material
change.

8. Representations with Respect to Rule 17f-5. The FCM represents to
------------------------------------------
PIMCO that it is a U.S. Bank as defined in Section (a)(7) of Rule
17f-5.

PIMCO, on behalf of each Fund, represents to IFTC that the
applicable Board has determined that it is reasonable for such
Board to rely on IFTC and State Street Bank & Trust Company to
perform the responsibilities delegated pursuant to this Agreement
to IFTC and State Street Bank & Trust Company as the FCM of each
Portfolio and that IFTC has been granted the authority by each
Fund to delegate to State Street Bank & Trust Company the FCM
functions to which IFTC has been appointed by such Fund.

-14-
<PAGE>

Each party represents that it will in good faith negotiate
revised terms for this Agreement to reflect future guidance from
the SEC staff or regulatory amendments affecting Rule 17f-5.

9. Effective Date and Termination of IFTC as FCM. Each Board's
---------------------------------------------
delegation to IFTC as FCM of a Portfolio will be effective as of
the effective date of the 1997 Amendments to Rule 17f-5 and will
remain in effect until terminated at any time, without penalty,
by written notice from the terminating party to the non-
terminating party. Termination will become effective thirty days
after receipt by the non-terminating party of such notice. The
provisions of subsection 3 of this Section Q govern. the
delegation to and termination of IFTC as FCM of each Fund with
respect to designated countries.

R. Accounts and Records. IFTC will prepare and maintain, with the
--------------------
direction and as interpreted by PIMCO, a Fund's or a Portfolio's
accountants and/or other advisors, in complete, accurate and current
form all accounts and records: (1) required to be maintained by a Fund
with respect to portfolio transactions under Section 3 1 (a) of the
1940 Act and the rules and regulations from time to time adopted
thereunder, (2) required to be maintained as a basis for calculation
of each Portfolio's net asset value; and (3) as otherwise agreed upon
by the parties. PIMCO will advise IFTC in writing of all applicable
record retention requirements, other than those set forth in the 1940
Act or the regulations thereunder. IFTC will preserve such accounts
and records in the manner and for the periods prescribed in the 1940
Act or the regulations thereunder or for such longer period as is
agreed upon by the parties. PIMCO will furnish, in writing or its
electronic or digital equivalent, accurate and timely information
needed by IFTC to complete such accounts and records, including
Corporate Actions, when such information is not readily available from
generally accepted securities industry services or publications.

S. Accounts and Records Property of Fund. IFTC acknowledges that all of
-------------------------------------
the accounts and records maintained by IFTC pursuant hereto are the
property of the applicable Fund, and will be made available to the
applicable Fund and PIMCO on behalf of such Fund for inspection or
reproduction within a reasonable period of time, upon demand. IFTC
will assist any Fund's independent auditors, or upon approval of
PIMCO, or upon demand, any regulatory body, in any requested review of
such Fund's accounts and records but PIMCO will reimburse IFTC for all
expenses and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from PIMCO of the
necessary information or instructions, IFTC will supply information
from the books and records it maintains for each Fund that such Fund
needs for tax returns, questionnaires, periodic reports to
shareholders and such other reports and information requests as PIMCO
and IFTC agree upon from time to time.

-15-
<PAGE>

T. Adoption of Procedures. IFTC and PIMCO, on behalf of each Fund, hereby
----------------------
adopt the Funds Transfer Operating Guidelines attached hereto as
Exhibit B. IFTC and PIMCO may from time to time adopt such additional
procedures as they agree upon, and IFTC may conclusively assume that
no procedure approved or directed by PIMCO, any Fund's or any
Portfolio's accountants or other advisors conflicts with or violates
any requirements of the prospectus or registration statement, articles
of incorporation and bylaws or trust instrument, any applicable law,
rule or regulation, or any order, decree or agreement by which the
applicable Fund may be bound. PIMCO will be responsible for notifying
IFTC of any changes in statutes, regulations, rules, requirements or
policies which may impact IFTC's performance of its responsibilities
hereunder or its related operational policies and procedures as they
relate to the Funds in a manner different from or in addition to
requirements applicable to investment companies registered under the
1940 Act in general.

U. Calculation of Net Asset Value. PIMCO, on behalf of each Fund, will
------------------------------
give Instructions to IFTC specifying the outside pricing sources to be
utilized as sources of Asset prices ("Pricing Sources"). In the event
that PIMCO specifies Reuters America, Inc., it will enter into the
Agreement attached hereto as Exhibit C. IFTC will calculate each
Portfolio's net asset value, in accordance with the Portfolio's
prospectus or registration statement. IFTC will price the Assets,
including foreign currency holdings, of each Portfolio for which
market quotations are available from the Pricing Sources; all other
Assets will be priced in accordance with PIMCO's Instructions.

V. Advances. The applicable Fund will cause each Portfolio to pay on
demand any advance of cash or securities made by IFTC or any
Subcustodian, in its sole discretion, for any purpose (including but
not limited to securities settlements, purchase or sale of foreign
exchange or foreign exchange contracts and assumed settlement) for the
benefit of any Portfolio. Any such cash advance will be subject to an
overdraft charge at the rate set forth in the then-current fee
schedule from the date advanced until the date repaid. As security for
each such advance, each Fund hereby separately grants IFTC and such
Subcustodian, a lien on and security interest in all of such Fund's
Portfolio's Assets at any time held for the account of the applicable
Portfolio, including without limitation all Assets acquired with the
amount advanced. Should the applicable Portfolio fail to promptly
repay the advance, the applicable Fund agrees that IFTC and such
Subcustodian may utilize available cash and dispose of such
Portfolio's Assets pursuant to applicable law to the extent necessary
to obtain reimbursement of the amount advanced and any related
overdraft charges; provided, however, that prior to such utilization
and disposition, (i) IFTC or Subcustodian has given PIMCO 2 days'
notice of the amount due and of its intent to so utilize and dispose
of custodied Assets; and (ii) the applicable Portfolio shall not have
satisfied the obligation. During such 2 day notice period, PIMCO shall
have the option to direct IFTC or such Subcustodian

-16-
<PAGE>

by written notice regarding which and in what priority order custodied
Assets are to be utilized and disposed of.

W. Exercise of Rights; Tender Offers. Upon receipt of Instructions, IFTC
---------------------------------
will: (1) deliver wan-ants, puts, calls, rights or similar securities
to the issuer or trustee thereof, or to the agent of such issuer or
trustee, for the purpose of exercise or sale, provided that the new
Assets, if any, are to be delivered to IFTC; and (2) deposit
securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to IFTC
or the tendered securities are to be returned to IFTC.

X. Fund Shares.
-----------

1. PIMCO will deliver to IFTC Instructions with respect to the
declaration and payment of any dividend or other distribution on
the shares of capital stock or beneficial interest, as the case
may be, of a Portfolio ("Fund Shares") by a Portfolio. On the
date specified in such Instruction, IFTC will pay out of the
monies held for the account of the Portfolio, insofar as it is
available for such purposes, and credit to the account of the
Dividend Disbursing Agent for the Portfolio, the amount specified
in such Instructions.

2. Whenever Fund Shares are repurchased or redeemed by a Portfolio,
PIMCO on behalf of such Portfolio or its agent will give IFTC
Instructions regarding the aggregate dollar amount to be paid for
such shares. Upon receipt of such Instruction, IFTC will charge
such aggregate dollar amount to the account of the Portfolio and
either deposit the same in the account maintained for the purpose
of paying for the repurchase or redemption of Fund Shares or
deliver the same in accordance with such Instruction. IFTC has no
duty or responsibility to determine that Fund Shares have been
removed from the proper shareholder accounts or that the proper
number of Fund Shares have been canceled and removed from the
shareholder records.

3. Whenever Fund Shares are purchased from a Portfolio, PIMCO will
deposit or cause to be deposited with IFTC the amount received
for such shares. IFTC has no duty or responsibility to determine
that Fund Shares purchased from a Portfolio have been added to
the proper shareholder account or that the proper number of such
shares have been added to the shareholder records.

4. INSTRUCTIONS.
------------

A. The term "Instructions", as used herein, means written (including
telecopied, telexed, or electronically transmitted) or oral
instructions which IFTC reasonably

-17-
<PAGE>

believes were given by a designated representative of PIMCO. PIMCO
Will deliver to IFTC, prior to delivery of any Assets to IFTC and
thereafter from time to time as changes therein are necessary, written
Instructions naming one or more designated representatives to give
Instructions in the name and on behalf of each Fund, which
Instructions may be received and accepted by IFTC as conclusive
evidence of the authority of any designated representative to act for
the applicable Fund and may be considered to be in full force and
effect until receipt by IFTC of notice to the contrary. Unless such
written Instructions delegating authority to any person to give
Instructions specifically limit such authority to specific matters or
require that the approval of anyone else will first have been
obtained, IFTC will be under no obligation to inquire into the right
of such person, acting alone, to give any Instructions whatsoever. If
PIMCO fails to provide IFTC any such Instructions among designated
representatives, any Instructions received by IFTC from a person
reasonably believed to be an appropriate representative of PIMCO will
constitute valid and proper Instructions hereunder. "Designated
representatives" may include a Fund's or a Portfolio's employees and
agents, including investment managers and their employees.

B. No later than the next business day immediately following each oral
Instruction, PIMCO will send IFTC written confirmation of such oral
Instruction. At IFTC's sole discretion, IFTC may record on tape, or
otherwise, any oral Instruction whether given in person or via
telephone, each such recording identifying the date and the time of
the beginning and ending of such oral Instruction.

C. PIMCO will provide, upon IFTC's request, a certificate signed by an
officer or designated representative of PIMCO, as conclusive proof of
any fact or matter required to be ascertained from PIMCO hereunder.
PIMCO will also provide IFTC Instructions with respect to any matter
concerning this Agreement requested by IFTC. If IFTC reasonably
believes that it could not prudently act according to the
Instructions, or the instruction or advice of a Fund's or a
Portfolio's accountants or counsel, it may in its discretion, with
notice to PIMCO and such Fund, not act according to such Instructions.

5. LIMITATION OF LUBILITY OF EFTC.
------------------------------

A. IFTC shall at all times use reasonable care and due diligence and act
in good faith in performing its duties under this Agreement. PIMCO and
each Fund is not responsible or liable for, and IFTC will indemnify
and hold PIMCO and each Fund harmless from and against, any and all
costs, expenses, losses, damages, charges, counsel fees, payments and
liabilities which may be asserted against or incurred by PIMCO or any
Fund or for which PIMCO or any Fund may be held to be liable, arising
out of or attributable to IFTC's failure to comply with the terms of
this Agreement or arising out of IFTC's (or its agents' or delegees')
negligence, willful misconduct, or bad faith.

-18-
<PAGE>

B. IFTC is not responsible or liable for, and PIMCO will indemnify and
hold IFTC harmless from and against, any and all costs, expenses,
losses, damages, charges, counsel fees, payments and liabilities which
may be asserted against or incurred by IFTC or for which IFTC may be
held to be liable, arising out of or attributable to:

1. IFTC's action or omission to act pursuant hereto; provided that
IFTC has acted or failed to act in good faith and with due
diligence and reasonable care; and provided further, that neither
party is liable to the other for consequential, special, or
punitive damages in any event.

2. IFTC's payment of money as requested by PIMCO, or the taking of
any action which might make it or its nominee liable for payment
of monies or in any other way; provided, however, that nothing
herein obligates IFTC to take any such action or expend its own
monies in its sole discretion.

3. IFTC's action or omission to act hereunder in reasonable reliance
upon any Instructions, advice, notice, request, consent,
certificate or other instrument or paper appearing to it to be
genuine and to have been properly executed, including any
Instructions, communications, data or other information received
by IFTC by means of the Systems, as hereinafter defined, or any
electronic system of communication.

4. IFTC's action or omission to act in good faith reliance on the
advice or opinion of counsel for PIMCO or of its own counsel with
respect to questions or matters of law, which advice or opinion
may be obtained by IFTC from counsel for PIMCO at the expense of
PIMCO or from IFTC's counsel at its own expense, or on the
Instructions, advice or statements of any officer or employee of
PIMCO, or the applicable Fund's accountants or other authorized
individuals, and other persons believed by it in good faith to be
expert in matters upon which they are consulted.

5. The purchase or sale of any securities or foreign currency
positions. Without limiting the generality of the foregoing, IFTC
is under no duty or obligation to inquire into:

a. The validity of the issue of any securities purchased by or
for any Portfolio, or the legality of the purchase thereof
or of foreign currency positions, or evidence of ownership
required by PIMCO to be received by IFTC, or the propriety
of the decision to purchase or the amount paid therefor;

b. The legality of the sale of any securities or foreign
currency positions by or for any Portfolio, or the propriety
of the amount for which the same are sold; or

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<PAGE>

c. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor, the
legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor, or the
legality of the declaration of any dividend by either Fund,
or the legality of the issue of any Fund Shares in payment
of any stock dividend.

6. Any error, omission, inaccuracy or other deficiency in any
Portfolio's accounts and records or other information provided by
or on behalf of a Portfolio to IFTC, including the accuracy of
the prices quoted by the Pricing Sources or for the information
supplied by PIMCO to price the Assets, or the failure of PIMCO to
provide, or provide in a timely manner, any accounts, records, or
information needed by IFTC to perform hereunder.

7. PIMCO's or any Fund's refusal or failure to comply with the terms
hereof (including without limitation PIMCO's or any Fund's
failure to pay or reimburse IFTC under Section 5 or 6 hereof),
PIMCO's or any Fund's negligence or willful misconduct, or the
failure of any representation or warranty of PIMCO or any Fund
hereunder to be and remain true and correct in all respects at
all times.

8. The use or misuse, whether authorized or unauthorized, of the
Systems or any electronic system of communication used hereunder,
by PIMCO or by any person who acquires access to the Systems or
such other systems through the terminal device, passwords, access
instructions or other means of access to such Systems or such
other system which are utilized by, assigned to or otherwise made
exclusively available to PIMCO, except to the extent attributable
to any negligence or willful misconduct by IFTC.

9. Any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the
payment of money to be received by IFTC on behalf of a Portfolio
until actually received; provided, however, that IFTC will advise
PIMCO promptly if it fails to receive any such money in the
ordinary course of business and will cooperate with PIMCO toward
the end that such money is received.

10. Except as provided in Section 3.P hereof, and subject to Section
5.B. I hereof, loss occasioned by the acts, neglects, defaults or
insolvency of any broker, bank, trust company, or any other
person with whom IFTC may deal.

11. The failure or delay in performance of its obligations hereunder,
or those of any entity for which it is responsible hereunder,
arising out of or caused, directly or indirectly, by
circumstances beyond the affected

-20-
<PAGE>

entity's reasonable control or ability to take preemptive
measures against, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service;
inability to obtain labor, material, equipment or transportation,
or a delay in mails; governmental or exchange action, statute,
ordinance, rulings, regulations or direction; war, strike, riot,
emergency, civil disturbance, terrorism, vandalism, explosions,
labor disputes, freezes, floods, fires, tornadoes, acts of God or
public enemy, revolutions, or insurrection.

6. COMPENSATION. In consideration for its services hereunder, IFTC will be
------------
paid the compensation set forth in a separate fee schedule, incorporated
herein by this reference, to be agreed to by each Fund, PIMCO and IFTC from
time to time, and reimbursement for IFTC's cash disbursements and
reasonable out-of-pocket costs and expenses, including attorney's fees,
incurred by IFTC in connection with the performance of services hereunder,
on demand. IFTC, subject to Section 10 hereof, may charge such compensation
against monies held by it for the accounts of the Portfolios following
notice to PIMCO. IFTC will, subject to Section 10 hereof, be entitled to
charge against any monies held by it for the accounts of the Portfolios the
amount of any loss, damage, liability, advance, overdraft or expense for
which it is entitled to reimbursement from PIMCO. IFTC will be entitled to
reimbursement by the applicable Fund or PIMCO for the losses, damages,
liabilities, advances, overdrafts and expenses of Subcustodians only to the
extent that (a) IFTC would have been entitled to reimbursement hereunder if
it had incurred the same itself directly, and (b) IFTC is obligated to
reimburse the Subcustodian therefor. As between the Funds and PIMCO, it is
agreed that the compensation due IFTC hereunder shall be paid by PIMCO.

7. TERM AND TERMINATION. The initial term of this Agreement is for a period of
--------------------
one (1) year. Thereafter, PIMCO or IFTC may terminate the same by notice in
writing, delivered or mailed, postage prepaid, to the other party and
received not less than sixty (60) days prior to the date upon which such
termination will take effect. Upon termination hereof:

A. PIMCO will pay IFTC its fees and compensation due hereunder and its
reimbursable disbursements, costs and expenses paid or incurred to
such date;

B. PIMCO will designate a successor investment accounting and
recordkeeping agent (which may be PIMCO or any Fund) by Instruction to
IFTC;

C. PIMCO will designate a successor custodian by Instruction to IFTC. In
the event no such Instruction has been delivered to IFTC on OE before
the date when such termination becomes effective, then IFTC may, at
its option, (i) choose as successor custodian a bank or trust company
meeting the qualifications for custodian set forth in the 1940 Act and
having not less than Two Million Dollars ($2,000,000) aggregate
capital, surplus and undivided profits, as shown by its last

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<PAGE>

published report, or (ii) apply to a court of competent jurisdiction
for the appointment of a successor or other proper relief, or take any
other lawful action under the circumstances; provided, however, that
PIMCO will reimburse IFTC for its costs and expenses, including
reasonable attorney's fees, incurred in connection therewith; and

D. IFTC will, upon payment of all sums due to IFTC from PIMCO hereunder,
deliver at IFTC's office (i) all accounts and records to the successor
investment accounting and recordkeeping agent or, if none, to PIMCO;
and (ii) all Assets, duly endorsed and in form for transfer, to the
successor custodian, or as specified by the court. IFTC will cooperate
in effecting changes in book-entries at all Depositories. Upon
delivery to a successor or as specified by the court, IFTC will have
no further obligations or liabilities hereunder. Thereafter such
successor will be the successor hereunder and will be entitled to
reasonable compensation for its services.

In the event that accounts, records or Assets remain in the possession of
IFTC after the date of termination hereof for any reason other than IFTC's
failure to deliver the same, IFTC is entitled to compensation as provided
in the then-current fee schedule for its services during such period, and
the provisions hereof relating to the duties and obligations of IFTC will
remain in full force and effect.

8. NOTICES. Notices, requests, instructions and other writings addressed to
-------
PIMCO or either Fund at the address set forth above, or at such other
address as PIMCO or such Fund may have designated to IFTC in writing, will
be deemed to have been properly given to PIMCO or Fund hereunder. Notices,
requests, Instructions and other writings addressed to IFTC at the address
set forth above, Attention: Custody Department, or to such other address as
it may have designated to PIMCO and the Funds in writing, will be deemed to
have been properly given to IFTC hereunder.

9. THE SYSTEMS; CONFIDENTIALITY.
----------------------------

A. If IFTC provides PIMCO direct access to the computerized investment
portfolio custody, recordkeeping and accounting systems used by IFTC
("Systems") or if IFTC and PIMCO agree to utilize any electronic
system of communication, PIMCO agrees to implement and enforce
appropriate security policies and procedures to prevent unauthorized
or improper access to or use of the Systems or such other system.

B. PIMCO will preserve the confidentiality of the Systems and the tapes,
books, reference manuals, instructions, records, programs,
documentation and information of, and other materials relevant to, the
Systems and the business of IFTC ("Confidential Information"). PIMCO
agrees that it will not voluntarily disclose any such Confidential
Information to any other-person other than its own employees who
reasonably have a need to know such information pursuant

-22-
<PAGE>

hereto. PIMCO will return all such Confidential Information to IFTC
upon termination or expiration hereof.

C. PIMCO has been informed that the Systems are licensed for use by IFTC
from one or more third parties ("Licensors"), and PIMCO acknowledges
that IFTC and Licensors have proprietary rights in and to the Systems
and all other IFTC or Licensor programs, code, techniques, know-how,
data bases, supporting documentation, data formats, and procedures,
including without limitation any changes or modifications made at the
request or expense or both of PIMCO (collectively, the "Protected
Information"). PIMCO acknowledges that the Protected Information
constitutes confidential material and trade secrets of IFTC and
Licensors. PIMCO will preserve the confidentiality of the Protected
Information, and PIMCO hereby acknowledges that any unauthorized use,
misuse, disclosure or taking of Protected Information, residing or
existing internal or external to a computer, computer system, or
computer network, or the knowing and unauthorized accessing or causing
to be accessed of any computer, computer system, or computer network,
may be subject to civil liabilities and criminal penalties under
applicable law. PIMCO will so inform employees and agents who have
access to the Protected Information or to any computer equipment
capable of accessing the same. Licensors are intended to be and are
third party beneficiaries of PIMCO's obligations and undertakings
contained in this Section.

D. PIMCO hereby represents and wan-ants to IFTC that it has determined to
its satisfaction that the Systems are appropriate and suitable for its
use. THE SYSTEMS ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. IFTC
EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE E32RESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

E. IFTC agrees to defend any claim or action brought against PIMCO or any
Fund on the issue of infringement of any United States patent,
copyright, trade secret or trademark by the Systems as used within the
scope of this Agreement, and to indemnify PIMCO and each Fund against
all damages and costs, subject to the provisions of Section 5 hereof,
which may be assessed against them under any such claim or action.

10. MULTIPLE PORTFOLIOS. If a Fund is comprised of more than one Portfolio:
-------------------

A. Each Portfolio will be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered hereby,
every reference herein to a Portfolio is deemed to relate solely to
the particular Portfolio to which such transaction relates. Under no
circumstances will the rights, obligations or remedies with respect to
a particular Portfolio constitute a right, obligation or remedy
applicable

-23-
<PAGE>

to any other Portfolio. The use of this single document to memorialize
the separate agreement of each Portfolio is understood to be for
clerical convenience only and will not constitute any basis for
joining the Portfolios for any reason.

B. PIMCO may appoint IFTC as its custodian and investment accounting and
recordkeeping agent for additional Portfolios from time to time by
written notice, provided that IFTC consents to such addition. Rates or
charges for each additional Portfolio will be as agreed upon by IFTC
and PIMCO in writing.

11. MISCELLANEOUS.
-------------

A. This Agreement will be construed according to, and the rights and
liabilities of the parties hereto will be governed by, the laws of the
State of Missouri without reference to the choice of laws principles
thereof.

B. All terms and provisions hereof will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.

C. The representations and warranties, the indemnifications extended
hereunder, and the provisions of Section 9 hereof are intended to and
will continue after and survive the expiration, termination or
cancellation hereof.

D. No provisions hereof may be amended or modified in any manner except
by a written agreement properly authorized and executed by each party
hereto.

E. The failure of any party to insist upon the performance of any terms
or conditions hereof or to enforce any rights resulting from any
breach of any of the terms or conditions hereof, including the payment
of damages, will not be construed as a continuing or permanent waiver
of any such terms, conditions, rights or privileges, but the same will
continue and remain in full force and effect as if no such forbearance
or waiver had occurred. No waiver, release or discharge of any party's
rights hereunder will be effective unless contained in a written
instrument signed by the party sought to be charged.

F. The captions herein are included for convenience of reference only,
and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.

G. This Agreement may be executed in two or more counterparts, each of
which is deemed an original but all of which together constitute one
and the same instrument.

H. If any provision hereof is determined to be invalid, illegal, in
conflict with any law or otherwise unenforceable, the remaining
provisions hereof will be

-24-
<PAGE>

considered severable and will not be affected thereby, and every
remaining provision hereof will remain in full force and effect and
will remain enforceable to the fullest extent permitted by applicable
law.

I. This Agreement may not be assigned by either party hereto without
the prior written consent of the other party.

J. Neither the execution nor performance hereof will be deemed to
create a partnership or joint venture by and between IFTC, PIMCO
and/or any Fund or any Portfolio.

K. This Agreement supersedes the agreements previously entered into
by the parties hereto and the agreements affecting the Funds more
specifically described on Schedule A hereto. Except as
specifically provided herein, this Agreement does not in any way
affect any other agreements entered into among the parties hereto
and any actions taken or omitted by any party hereunder will not
affect any rights or obligations of the other parties hereunder.

L. If a Fund is a Trust, notice is hereby given that this Agreement
has been executed on behalf of such Fund by the undersigned duly
authorized representative of such Fund in his/her capacity as
such and not individually; and that the obligations of this
Agreement are binding only upon the assets and property of such
Fund and not upon any trustee, officer of shareholder of such
Fund individually.

-25-
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.

INVESTORS FIDUCIARY TRUST PACIFIC INVESTMENT
COMPANY MANAGEMENT COMPANY a Delaware
partnership

By: By:
------------------------ ------------------------------

Title: Title: Senior Vice President
--------------------- ---------------------------

PIMCO FUNDS:
MULTI-MANAGER SERIES

By:
------------------------------
Title: Executive Vice President
----------------------------

PIMCO FUNDS
PACIFIC INVESTMENT
MANAGEMENT COMPANY

Title: Senior Vice President
---------------------------

-26-
<PAGE>

SCHEDULE A

FUND PREVIOUS AGREEMENTS

PIMCO Funds: Multi-Manager Series, a Custody Agreement dated 12/17/90, as
Massachusetts business trust amended 4/2/91; 6/1/91; 2/13/93;
11/14/94; 8/11/95; 8/20/96; 1/17/97;
1/17/97

PIMCO Funds: Pacific Investment Management Custody Agreement dated 4/1/89, as
Series. a Massachusetts business trust amended 6/1/90; 5/94; 5/28/96

115275.1.

-27-

<PAGE>

EXHIBIT (H)(4)

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: Class J and Class K Shares

Dear Sirs:

This will confirm the agreement between the undersigned (the "Trust") and
Pacific Investment Management Company (the "Administrator") as follows:

1. The 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 (the
"Funds").

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. The Trust hereby adopts the Agreement with respect to two new classes of the
Trust, Class J and Class K, and the Administrator hereby accepts the terms
of this Supplement with respect to Class J and Class K shares of the Trust,
the terms and conditions of the 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 Funds
pay the Administrator a monthly fee calculated as a percentage (on an annual
basis) of the value of net assets of the Funds during the preceding month,
as determined on the last business day of the preceding month, at the
following rates with respect to Class J and Class K shares of each Fund:
<PAGE>

<TABLE>
<CAPTION>
Class J and Class K
-------------------------------------
Custody and
Portfolio Other
Fund Accounting Expenses Total
- ---- ---------- -------- -----
<S> <C> <C> <C>
Money Market Fund 0.10% 0.15% 0.25%
Short-Term Fund 0.10% 0.15% 0.25%
Low Duration Fund 0.10% 0.15% 0.25%
Low Duration Fund II 0.10% 0.15% 0.25%
Low Duration Fund III 0.10% 0.15% 0.25%
Low Duration Mortgage Fund 0.10% 0.15% 0.25%
Moderate Duration Fund 0.10% 0.15% 0.25%
Real Return Bond Fund 0.10% 0.15% 0.25%
Total Return Fund 0.10% 0.15% 0.25%
Total Return Fund II 0.10% 0.15% 0.25%
Total Return Fund III 0.10% 0.15% 0.25%
Total Return Mortgage Fund 0.10% 0.15% 0.25%
Commercial Mortgage Securities Fund 0.10% 0.15% 0.25%
High Yield Fund 0.10% 0.15% 0.25%
Long-Term U.S. Government Fund 0.10% 0.15% 0.25%
Long Duration Fund 0.10% 0.15% 0.25%
Global Bond Fund 0.10% 0.20% 0.30%
Global Bond Fund II 0.10% 0.20% 0.30%
Foreign Bond Fund 0.10% 0.15% 0.25%
International Bond Fund 0.10% 0.20% 0.30%
Emerging Markets Bond Fund 0.10% 0.20% 0.30%
Emerging Markets Bond Fund II 0.10% 0.20% 0.30%
Municipal Bond Fund 0.10% 0.15% 0.25%
Low Duration Municipal Fund 0.10% 0.15% 0.25%
California Intermediate Municipal Fund 0.10% 0.15% 0.25%
New York Intermediate Municipal Fund 0.10% 0.15% 0.25%
Strategic Balanced Fund 0.10% 0.15% 0.25%
Convertible Bond Fund 0.10% 0.15% 0.25%
StocksPLUS Fund 0.10% 0.15% 0.25%
StocksPLUS Short Strategy Fund 0.10% 0.15% 0.25%
</TABLE>

5. This Supplement shall become effective with respect to the Funds on May 25,
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 Funds 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 Funds by a vote of a majority of the
outstanding shares of the Funds, 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).

<PAGE>

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>

EXHIBIT (M)(6)

PIMCO FUNDS: PACIFIC INVESTMENT MANAGEMENT SERIES
------------------------------------------------------

Distribution and Servicing Plan (Class J)

This Plan (the "Plan"), dated as of ____________, 1999, and amended
thereafter, constitutes the Distribution and Servicing Plan with respect to the
Class J shares of PIMCO FUNDS: PACIFIC INVESTMENT MANAGEMENT SERIES, a
Massachusetts business trust (the "Trust").

Section 1. The Trust will pay to the principal distributor of the Trust's
shares (the "Distributor") a fee (the "Distribution Fee") for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class J shares of the Trust and another fee (the "Servicing Fee") in connection
with personal services rendered to Class J shareholders of the Trust and/or
maintenance of Class J shareholder accounts. The Distribution Fee shall be paid
at an annual rate with respect to each Fund (series) of the Trust (a "Fund") not
to exceed 0.45 of 1% of the Fund's average daily net assets attributable to its
Class J shares, and the Servicing Fee shall be paid at an annual rate not to
exceed 0.25 of 1% of the Fund's average daily net assets attributable to Class J
shares. Subject to such limits and subject to the provisions of Section 9
hereof, the Distribution and Servicing Fees shall be as approved from time to
time by (a) the Trustees of the Trust and (b) the Independent Trustees of the
Trust. If at any time this Plan shall not be in effect with respect to all
Funds of the Trust, the Distribution and Servicing Fees shall be computed on the
basis of sales of Class J shares or net assets attributable to Class J shares
(as applicable) of those Funds for which the Plan is in effect. The
Distribution and Servicing Fees shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.

Section 2. The Distribution Fee may be spent by the Distributor on any
activities or expenses primarily intended to result in the sale of Class J
shares of the Trust, including, but not limited to compensation to, and expenses
(including overhead and telephone expenses) of, financial consultants or other
employees of the Distributor or of participating or introducing brokers, certain
non-U.S. banks and other financial intermediaries who engage in distribution of
Class J shares, preparing, translating, printing and delivering prospectuses and
reports for other than existing Class J shareholders, providing facilities to
answer questions from other than existing Class J shareholders, advertising and
preparation, translation, printing and distribution of sales literature,
receiving and answering correspondence, including requests for prospectuses and
statements of additional information, complying with federal, state and any non-
U.S. securities or other laws pertaining to the sale of Class J shares and
assisting investors in completing application forms and selecting dividend and
other account options for Class J shares. The Servicing Fee may be spent by the
Distributor on personal services rendered to Class J shareholders of the Trust
and/or maintenance of Class J shareholder accounts (but will generally not be
spent on recordkeeping charges, accounting expenses, transfer costs, or
custodian fees). The Distributor's Servicing Fee expenditures may include, but
shall not be limited to, compensation to, and expenses (including telephone and
overhead expenses) of, financial consultants or other employees of the
Distributor or of participating or introducing brokers, certain U.S. and non-
U.S. banks and other financial intermediaries who aid in the processing of
purchase or redemption requests for Class J shares or the processing of dividend
payments with
<PAGE>

respect to Class J shares, who provide information periodically to Class J
shareholders showing their positions in a Fund's Class J shares, who issue
confirmations for transactions by Class J shareholders, who forward
communications from the Trust to Class J shareholders, who render ongoing advice
concerning the suitability of particular investment opportunities offered by the
Trust in light of Class J shareholders' needs, who provide and maintain elective
Class J shareholder services such as check writing and wire transfer services,
who provide and maintain pre-authorized investment plans for Class J
shareholders, who act as sole shareholder of record and nominee for Class J
shareholders, who respond to inquiries from Class J shareholders relating to
such services, who train personnel in the provision of such services or who
provide such similar services as permitted under applicable statutes, rules or
regulations. The Servicing Fee may be paid to an affiliate of the Distributor
that provides personal services to Class J shareholders and/or maintains
shareholder accounts.

Section 3. Unless otherwise permitted under applicable law, this Plan
shall not take effect with respect to any Fund of the Trust until it has been
approved by a vote of at least a majority of the outstanding Class J voting
securities of that Fund. This Plan shall be deemed to have been effectively
approved with respect to any Fund if a majority of the outstanding Class J
voting securities of that Fund votes for the approval of this Plan,
notwithstanding that this Plan has not been approved by a majority of the
outstanding Class J voting securities of any other Fund or that this Plan has
not been approved by a majority of the outstanding Class J voting securities of
the Trust.

Section 4. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.

Section 5. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 4. It is acknowledged that the Distributor may expend or impute
interest expense in respect of its activities or expenses under this Plan and
the Trustees and the Independent Trustees may give such weight to such interest
expense as they determine in their discretion.

Section 6. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.

Section 7. This Plan may be terminated at any time with respect to the
Class J shares of any Fund by vote of a majority of the Independent Trustees, or
by vote of a majority of the outstanding Class J voting securities of that Fund.
<PAGE>

Section 8. All agreements with any person relating to implementation of
this Plan with respect to any Fund shall be in writing, and any agreement
related to this Plan with respect to any Fund shall provide:

A. That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Independent Trustees or
by vote of a majority of the outstanding Class J voting securities
of such Fund, on not more than 60 days' written notice to any other
party to the agreement; and

B. That such agreement shall terminate automatically in the event of
its assignment.

Section 9. This Plan may not be amended to increase materially the
aggregate amount of Distribution and Servicing Fees permitted pursuant to
Section 1 hereof without approval in the manner provided in Section 3 hereof,
and all material amendments to this Plan shall be approved in the manner
provided for approval of this Plan in Section 4 hereof.

Section 10. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission, (c) the term "introducing broker" shall mean any broker or
dealer who is a member of the National Association of Securities Dealers, Inc.
and who is acting as an introducing broker pursuant to clearing agreements with
the Distributor; and (d) the term "participating broker" shall mean any broker
or dealer which is a member of the National Association of Securities Dealers,
Inc. and who has entered into a selling or dealer agreement with the
Distributor.

Section 11. This Plan has been adopted pursuant to Rule 12b-1 under the
Act and is designed to comply with all applicable requirements imposed under
such Rule. All Distribution Fees and, to the extent that any or all of the
Servicing Fees may be deemed to have financed any activity which is primarily
intended to result in the sale of the Trust's shares (within the meaning of Rule
12b-1), those Servicing Fees shall be deemed to have been paid under this Plan
and pursuant to clause (b) of such Rule.

Dated: _________________, 1999.

<PAGE>

EXHIBIT (M)(7)

PIMCO FUNDS: PACIFIC INVESTMENT MANAGEMENT SERIES
-------------------------------------------------

Distribution and Servicing Plan (Class K)

This Plan (the "Plan"), dated as of ____________, 1999, and amended
thereafter, constitutes the Distribution and Servicing Plan with respect to the
Class K shares of PIMCO FUNDS: PACIFIC INVESTMENT MANAGEMENT SERIES, a
Massachusetts business trust (the "Trust").

Section 1. The Trust will pay to the principal distributor of the Trust's
shares (the "Distributor") a fee (the "Distribution Fee") for services rendered
and expenses borne by the Distributor in connection with the distribution of
Class K shares of the Trust and another fee (the "Servicing Fee") in connection
with personal services rendered to Class K shareholders of the Trust and/or
maintenance of Class K shareholder accounts. The Distribution Fee shall be paid
at an annual rate with respect to each Fund (series) of the Trust (a "Fund") not
to exceed 0.75 of 1% of the Fund's average daily net assets attributable to its
Class K shares, and the Servicing Fee shall be paid at an annual rate not to
exceed 0.25 of 1% of the Fund's average daily net assets attributable to Class K
shares. Subject to such limits and subject to the provisions of Section 9
hereof, the Distribution and Servicing Fees shall be as approved from time to
time by (a) the Trustees of the Trust and (b) the Independent Trustees of the
Trust. If at any time this Plan shall not be in effect with respect to all
Funds of the Trust, the Distribution and Servicing Fees shall be computed on the
basis of sales of Class K shares or net assets attributable to Class K shares
(as applicable) of those Funds for which the Plan is in effect. The
Distribution and Servicing Fees shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.

Section 2. The Distribution Fee may be spent by the Distributor on any
activities or expenses primarily intended to result in the sale of Class K
shares of the Trust, including, but not limited to compensation to, and expenses
(including overhead and telephone expenses) of, financial consultants or other
employees of the Distributor or of participating or introducing brokers, certain
non-U.S. banks and other financial intermediaries who engage in distribution of
Class K shares, preparing, translating, printing and delivering prospectuses and
reports for other than existing Class K shareholders, providing facilities to
answer questions from other than existing Class K shareholders, advertising and
preparation, translation, printing and distribution of sales literature,
receiving and answering correspondence, including requests for prospectuses and
statements of additional information, complying with federal, state and any non-
U.S. securities or other laws pertaining to the sale of Class K shares and
assisting investors in completing application forms and selecting dividend and
other account options for Class K shares. The Servicing Fee may be spent by the
Distributor on personal services rendered to Class K shareholders of the Trust
and/or maintenance of Class K shareholder accounts (but will generally not be
spent on recordkeeping charges, accounting expenses, transfer costs, or
custodian fees). The Distributor's Servicing Fee expenditures may include, but
shall not be limited to, compensation to, and expenses (including telephone and
overhead expenses) of, financial consultants or other employees of the
Distributor or of participating or introducing brokers, certain U.S. and non-
U.S. banks and other financial intermediaries who aid in the
<PAGE>

processing of purchase or redemption requests for Class K shares or the
processing of dividend payments with respect to Class K shares, who provide
information periodically to Class K shareholders showing their positions in a
Fund's Class K shares, who issue confirmations for transactions by Class K
shareholders, who forward communications from the Trust to Class K shareholders,
who render ongoing advice concerning the suitability of particular investment
opportunities offered by the Trust in light of Class K shareholders' needs, who
provide and maintain elective Class K shareholder services such as check writing
and wire transfer services, who provide and maintain pre-authorized investment
plans for Class K shareholders, who act as sole shareholder of record and
nominee for Class K shareholders, who respond to inquiries from Class K
shareholders relating to such services, who train personnel in the provision of
such services or who provide such similar services as permitted under applicable
statutes, rules or regulations. The Servicing Fee may be paid to an affiliate of
the Distributor that provides personal services to Class K shareholders and/or
maintains shareholder accounts.

Section 3. Unless otherwise permitted under applicable law, this Plan
shall not take effect with respect to any Fund of the Trust until it has been
approved by a vote of at least a majority of the outstanding Class K voting
securities of that Fund. This Plan shall be deemed to have been effectively
approved with respect to any Fund if a majority of the outstanding Class K
voting securities of that Fund votes for the approval of this Plan,
notwithstanding that this Plan has not been approved by a majority of the
outstanding Class K voting securities of any other Fund or that this Plan has
not been approved by a majority of the outstanding Class K voting securities of
the Trust.

Section 7. This Plan may be terminated at any time with respect to the
Class K shares of any Fund by vote of a majority of the Independent Trustees, or
by vote of a majority of the outstanding Class K voting securities of that Fund.
<PAGE>

A. That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Independent Trustees or
by vote of a majority of the outstanding Class K voting securities
of such Fund, on not more than 60 days' written notice to any other
party to the agreement; and

B. That such agreement shall terminate automatically in the event of
its assignment.

Dated: _________________, 1999.

<PAGE>

EXHIBIT (O)

PIMCO FUNDS: PACIFIC INVESTMENT MANAGEMENT SERIES

AMENDED AND RESTATED MULTI-CLASS PLAN

Pursuant to Rule 18f-3 under the Investment Company Act of 1940
---------------------------------------------------------------

Effective Date (May 25, 1999)

WHEREAS, the Board of Trustees of the PIMCO Funds: Pacific Investment
Management Series (the "Trust") have considered the following Amended and
Restated Multi-Class Plan (the "Plan") under which the Trust may offer multiple
classes of shares of its now existing and hereafter created series pursuant to
Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"); and

WHEREAS, a majority of the Trustees of the Trust and majority of the
Trustees who are not interested persons of the Trust ("Independent Trustees")
have found the Plan, as proposed, to be in the best interests of each class of
shares of the Trust individually and the Trust as a whole;

NOW, THEREFORE, the Trust hereby approves and adopts the following Plan
pursuant to Rule 18f-3 under the 1940 Act.

1. FEATURES OF THE CLASSES

Each now existing and hereafter created series (each a "Fund") of the Trust
is authorized to issue from time to time its shares of beneficial interest in
eight classes: Class A shares, Class B shares, Class C shares, Class D shares,
Class J, Class K Institutional Class shares and Administrative Class shares.
Each class is subject to such investment minimums and other conditions of
eligibility as are set forth in the Trust's prospectus(es) as from time to time
in effect (together with the Trust's statement(s) of additional information as
from time to time in effect, the "Prospectus"). Each Fund may offer such
classes of shares to such classes of persons as are set forth in the Prospectus.

Shares of each class of a Fund shall represent an equal pro rata interest
in such Fund, and, generally, shall have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (a) each class shall have a different
designation; (b) each class shall bear any Class Expenses, as defined in Section
4 below; and (c) each class shall have separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of any other class, and shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to that class.

In addition, the Class A, Class B, Class C, Class D, Class J, Class K,
Institutional Class and Administrative Class shares shall have the features
described in Sections 2, 3, 4 and 5 below. These features are subject to
change, to the extent permitted by law and by the Declaration of Trust and By-
Laws of the Trust, by action of the Board of Trustees of the Trust.
<PAGE>

2. SALES CHARGE STRUCTURE

(a) Initial Sales Charge. Class A shares of the Funds are offered at a
--------------------
public offering price that is equal to their net asset value ("NAV") plus a
sales charge of up to 4.50% of the public offering price (which maximum may be
less for certain Funds, as described in the Prospectus). For example, as of the
date of this Plan, each Fund may waive the Class A sales charge for certain
categories of investors, including current or retired officers, trustees,
directors or employees of the Trust, and for current registered representatives
and other full-time employees of participating brokers. The sales charges on
Class A shares are subject to reduction or waiver as permitted by Rule 22d-1
under the 1940 Act, as described in the Prospectus.

Class J shares of the Funds are offered at a public offering price that is
equal to their NAV plus a sales charge of up to 3.50% of the public offering
price (which maximum may be less for certain Funds, as described in the
Prospectus). The sales charges on Class J shares are subject to reduction or
waiver as permitted by Rule 22d-1 under the 1940 Act, as described in the
Prospectus.

Class K shares of the Funds are offered at a public offering price that is
equal to their NAV plus a sales charge of up to 2.50% of the public offering
price (which maximum may be less for certain Funds, as described in the
Prospectus). The sales charges on Class K shares are subject to reduction or
waiver as permitted by Rule 22d-1 under the 1940 Act, as described in the
Prospectus.

Class B, Class C, Class D, Institutional Class and Administrative Class
shares of the Funds are offered at their NAV, without an initial sales charge.

(b) Contingent Deferred Sales Charge. A contingent deferred sales charge
--------------------------------
(a "CDSC") may be imposed on Class A, Class B or Class C shares under certain
circumstances. The Trust imposes a CDSC on redemptions of a particular class of
shares of a Fund if the investor redeems an amount which causes the current
value of the investor's account for the 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 reinvestment of dividends
or capital gains distributions or if the amount redeemed is derived from
increases in the value of the account above the amount of purchase payments
subject to a CDSC. In determining whether a CDSC is payable, it is assumed that
the purchase payment from which the redemption is made is the earliest purchase
payment from which a redemption or exchange has not already been effected. In
determining whether an amount is available for redemption of a certain class
without incurring a CDSC, the purchase payments made for all shares of that
class in the investor's account with the particular Fund are aggregated, and the
current value of all such shares is aggregated.

Purchases of Class A shares of each Fund (with the exception of the Trust's
Money Market Fund) of $1 million or more that are redeemed within eighteen
months of their purchase are subject to a CDSC of 1%. A CDSC on Class A shares
does not apply to an investor purchasing $1 million or more of a Fund's Class A
shares if such investor is otherwise eligible (i.e., without regard to the
amount of the purchase) to purchase Class A shares without any sales

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<PAGE>

charge. The conditions for such eligibility, which may be revised from time to
time, are set forth in the Prospectus. A CDSC does not apply to Class A shares
of the Trust's 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 a CDSC
and the Money Market Fund Class A shares are subsequently exchanged for Class A
shares of any other Fund, a CDSC will apply to the shares of the Fund acquired
by exchange for a period of eighteen months from the date of exchange.

Class B shares that are redeemed within 6 years from purchase are subject
to a CDSC of up to 5% of the redemption amount to which the CDSC applies; such
percentage declines, eventually to 0%, the longer the shares are held, as
described in the Prospectus. As of the date of this Plan, purchases of Class B
shares are subject to a CDSC according to the following schedule:

<TABLE>
<CAPTION>
Years Since Purchase Percentage
Payment was Made CDSC
---------------- ----
<S> <C>
First............................5
Second...........................4
Third............................3
Fourth...........................3
Fifth............................2
Sixth............................1
Seventh..........................0*
</TABLE>

* After the seventh year, Class B shares convert into Class A
shares as described below.

Class C shares are subject to a CDSC of 1% if redeemed within 1 year after
purchase.

As permitted by Rule 6c-10 under the 1940 Act and as described in the
Prospectus, the CDSC otherwise applicable to Class A, Class B and Class C shares
is subject to reduction or waiver in connection with the particular classes of
transactions provided the conditions in Rule 22d-1 under the 1940 Act are
satisfied. As of the date of this Plan, examples of redemptions for which the
CDSC is not applicable include any partial or complete redemption following
death or disability of a shareholder from an account in which the deceased or
disabled is named, provided the redemption is requested within one year of the
death or initial determination of disability (which applies to all classes), and
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), which
applies only to Class A and Class C shares.

Class D, Class J, Class K, Institutional Class and Administrative Class
shares are not subject to a CDSC.

3. SERVICE, DISTRIBUTION AND ADMINISTRATIVE FEES

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<PAGE>

(a) Service and Distribution Fees. Class A, Class B, Class C, Class
-----------------------------
J and Class K shares each pay PIMCO Funds Distributors LLC (the "Distributor")
fees for services rendered and expenses borne in connection with personal
services rendered to shareholders of the particular class and the maintenance of
shareholder accounts ("Service Fees"). Class A, Class B, Class C, Class J and
Class K shares of each Fund pay a Service Fee of up to 0.25% per annum of the
average daily net assets of such Fund attributable to such class, as described
in the Prospectus. In addition, Class B, Class C, Class J and Class K shares pay
the Distributor fees in connection with the distribution of shares of that class
("Distribution Fees"). Class B, Class C and Class K shares of each Fund pay a
Distribution Fee of up to 0.75% per annum of the average daily net assets of
such Fund attributable to the particular class, as described in the Prospectus.
Class J shares of each Fund pay a Distribution Fee of up to 0.45% per annum of
the average daily net assets of such Fund attributable to that class, as
described in the Prospectus. Class A Service Fees and Class B, Class C, Class J
and Class K Distribution and Service Fees ("12b-1 Fees") are paid pursuant to
separate plans adopted for each class pursuant to Rule 12b-1 under the 1940 Act
("12b-1 Plans").

The Trust has not adopted an administrative services plan or a
distribution plan with respect to Class D shares of the Funds. However, the
Trust's Administration Agreement (see below), as it applies to Class D shares,
has been adopted in conformity with the requirements of Rule 12b-1 to allow for
payment of up to 0.25% per annum of the Class D administrative fees for
activities that may be deemed to be primarily intended to result in the sale of
Class D shares.

The Trust has not adopted an administrative services plan or a
distribution plan with respect to Institutional Class shares of the Funds.
However, Institutional Class shares may be offered through certain brokers and
financial intermediaries ("service agents") that have established a shareholder
servicing relationship with the Trust on behalf of their customers. The Trust
pays no compensation to such entities. Service agents may impose additional or
different conditions on the purchase or redemption of Institutional Class shares
of the Funds and may charge transaction or account fees. Service agents are
responsible for transmitting to their customers a schedule of any such fees and
conditions.

The Trust has adopted an administrative services plan (the
"Administrative Services Plan") and a distribution plan (the "Administrative
Distribution Plan") with respect to the Administrative Class shares of each
Fund. Each plan has been adopted in accordance with the requirements of Rule
12b-1 and will be administered accordingly, except that shareholders do not have
the voting rights set forth in Rule 12b-1 with respect to the Administrative
Services Plan. Under the terms of each plan, the Trust is permitted to
reimburse, out of the Administrative Class assets of each Fund, in an amount up
to 0.25% on an annual basis of the average daily net assets of that class
("Administrative Class Fees"), financial intermediaries that provide services in
connection with the distribution of Administrative Class shares of the Funds (in
the case of the Administrative Distribution Plan) or the administration of
plans or programs that use Administrative Class shares of the Funds as their
funding medium (in the case of the Administrative Services Plan), as described
in the Prospectus. The same entity may not receive both distribution and
administrative services fees with respect to the same Administrative Class

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<PAGE>

assets but, with respect to separate assets, may receive fees under both the
Administrative Services Plan and the Administrative Distribution Plan.

(b) Administrative Fees. Each class of shares of each Fund pays Pacific
-------------------
Investment Management Company (the "Administrator") fees for administrative
services ("Administrative Fees") pursuant to an Administration Agreement with
the Trust. Under the Administration Agreement, the Administrator provides or
procures such services as custody, transfer agency, accounting, legal and
printing services. Each class of shares of each Fund currently pays
Administrative Fees at the following annual rates based on the average daily net
asset value of the Fund attributable to the particular class (except in the case
of the PIMCO Loan Obligation Fund, which calculates the Administrative Fee based
upon the value of the net assets of the Fund during the preceding month, as
calculated on the last business day of the preceding month):

<TABLE>
<CAPTION>
Fees for Inst'l. Class Fees for Class Fees for Fees for
Fund and Admin. Class A, B and C Class D Class J and K
- --------------------------------- ------------------------ ----------------- ------------ ------------------
<S> <C> <C> <C> <C>
StocksPLUS Short Strategy 0.25% 0.40% 0.65% 0.25%
StocksPLUS 0.25% 0.40% 0.65% 0.25%
Strategic Balanced 0.25% 0.40% 0.65% 0.25%
Emerging Markets Bond 0.40% 0.55% 0.80% 0.30%
Emerging Markets Bond II 0.40% 0.55% 0.80% 0.30%
International Bond 0.25% 0.45% 0.70% 0.30%
Foreign Bond 0.25% 0.45% 0.70% 0.25%
Global Bond 0.30% 0.45% 0.70% 0.30%
Global Bond II 0.30% 0.45% 0.70% 0.30%
Long-Term U.S. Government 0.25% 0.40% 0.65% 0.25%
Commercial Mortgage Securities 0.25% 0.40% 0.65% 0.25%
Low Duration Mortgage 0.25% 0.40% 0.65% 0.25%
Total Return Mortgage 0.25% 0.40% 0.65% 0.25%
High Yield 0.25% 0.40% 0.65% 0.25%
Total Return III 0.25% 0.40% 0.65% 0.25%
Total Return II 0.25% 0.40% 0.65% 0.25%
Total Return 0.18% 0.40% 0.50% 0.25%
Moderate Duration 0.20% 0.40% 0.65% 0.25%
Low Duration III 0.25% 0.40% 0.65% 0.25%
Low Duration II 0.25% 0.40% 0.65% 0.25%
Low Duration 0.18% 0.40% 0.50% 0.25%
Short-Term 0.20% 0.35% 0.50% 0.25%
Money Market 0.20% 0.35% 0.45% 0.25%
Real Return Bond 0.25% 0.40% 0.65% 0.25%
Municipal Bond 0.25% 0.35% 0.60% 0.25%
Loan Obligation 0.25%
</TABLE>

The Administrator or an affiliate may pay financial service firms,
including broker-dealers and registered investment advisers, a portion of the
Class D Administrative Fees in return for the firms' services (normally not to
exceed an annual rate of 0.35% of a Fund's average daily

-5-
<PAGE>

net assets attributable to Class D shares purchased through such firms). With
respect to Class D shares, the Administration Agreement has been adopted in
conformity with the requirements set forth under Rule 12b-1 to allow for the
payment of up to 0.25% per annum of the Class D Administrative Fees for
activities that may be deemed to be distribution-related services.

4. ALLOCATION OF INCOME AND EXPENSES

(a) Class A, Class B, Class C, Class J, Class K and Administrative Class
shares pay the expenses associated with their different distribution and
shareholder servicing arrangements. All classes pay their respective
Administrative Fees. Each class of shares may, at the Trustees' discretion,
also pay a different share of other expenses (together with 12b-1 Fees,
Administrative Class Fees and Administrative Fees, "Class Expenses"), not
including advisory fees or other expenses related to the management of the
Trust's assets, if these expenses are actually incurred in a different amount by
that class, or if the class received services of a different kind or to a
different degree than other classes.

(b) The net asset value of all outstanding shares representing interests
in a Fund shall be computed on the same days and at the same time. For purposes
of computing net asset value, the gross investment income of each Fund shall be
allocated to each class on the basis of the relative net assets of each class at
the beginning of the day adjusted for capital share activity for each class as
of the prior day as reported by the Fund's transfer agent, for non-daily
dividend Funds; and on the basis of the relative value of settled shares at the
beginning of the day adjusted for receipt of settled AM wires (if applicable),
for daily-dividend Funds. Realized and unrealized gains and losses for each
class will be allocated based on relative net assets at the beginning of the
day, adjusted for capital share activity for each class of the prior day, as
reported by the Fund's transfer agent. To the extent practicable, certain
expenses, (other than Class Expenses as defined above, which shall be allocated
more specifically), shall be allocated to each class based on the relative net
assets of each class at the beginning of the day, adjusted for capital share
activity for each class as of the prior day, as reported by the Fund's transfer
agent, for non-daily dividend Funds; and on the basis of the relative value of
settled shares at the beginning of the day adjusted for receipt of settled AM
wires (if applicable), for daily-dividend Funds. Allocated expenses to each
class shall be subtracted from allocated gross income. These expenses include:

(1) Expenses incurred by the Trust (including, but not limited to, fees
of Trustees, insurance and legal counsel) not attributable to a
particular Fund or to a particular class of shares of a Fund ("Corporate
Level Expenses"); and

(2) Expenses incurred by a particular Fund but not attributable to any
particular class of such Fund's shares ("Fund Expenses").

Expenses of a Fund shall be apportioned to each class of shares depending
upon the nature of the expense item. Corporate Level Expenses and Fund Expenses
shall be allocated between the classes of shares based on the relative net
assets of each class at the beginning of the day, adjusted for capital share
activity for each class as of the prior day, as reported by the Fund's transfer
agent, for non-daily dividend Funds; and based on the relative value of settled

-6-
<PAGE>

shares adjusted for receipt of settled AM wires (if applicable) at the beginning
of the day for daily-dividend Funds. Approved Class Expenses shall be allocated
to the particular class to which they are attributable. In addition, certain
expenses may be allocated differently if their method of imposition changes.
Thus, if a Class Expense can no longer be attributed to a class, it will be
charged to a Fund for allocation among classes, as determined by the Board of
Trustees. Any additional Class Expenses not specifically identified above which
are subsequently identified and determined to be properly allocated to one class
of shares shall not be so allocated until approved by the Board of Trustees of
the Trust in light of the requirements of the 1940 Act and the Internal Revenue
Code of 1986, as amended (the "Code").

The Trust reserves the right to utilize any other appropriate method to
allocate income and expenses among the classes, including those specified in
Rule 18f-3(c)(1), provided that a majority of the Trustees and a majority of the
Independent Trustees determine that the method is fair to the shareholders of
each class and that the annualized rate of return of each class will generally
differ from that of the other classes only by the expense differentials among
the classes.

5. EXCHANGE PRIVILEGES

Shareholders may exchange shares of one class of a Fund for shares of an
identical class of any other Fund of the Trust, or an identical class of any
series of PIMCO Funds: Multi-Manager Series, an affiliated registered
investment company advised by PIMCO Advisors, L.P., based upon each Fund's net
asset per share, except (i) only private account clients of Pacific Investment
Management Company may purchase shares of the International Bond Fund, Emerging
Markets Bond Fund II or Loan Obligation Fund, and (ii) shareholders of Funds
other than the Opportunity Fund are not permitted to exchange any of their
shares for Opportunity Fund shares unless the shareholders are independently
eligible to purchase Opportunity Fund shares.

Class A shares of the Trust's Money Market Fund may be exchanged for shares
of any other Fund, but the usual sales charges applicable to investments in such
other Fund apply on exchanged Money Market Fund shares for which no sales charge
was paid at the time of purchase.

With respect to Class A, Class B and Class C 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 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.

Although a CDSC does not apply to Class A shares of the Trust's Money
Market Fund, as indicated above, if Money Market Fund Class A shares purchased
in a transaction that would otherwise be subject to a CDSC are subsequently
exchanged for Class A shares of any other Fund, 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.

-7-
<PAGE>

6. CONVERSION FEATURES

Class B shares of each Fund automatically convert to Class A shares of the
same Fund after they have been held for 7 years, and thereafter are subject to
the lower fees charged to Class A shares. In this regard, if the Class A
shareholders approve any material increase in expenses allocated to that class
(including 12b-1 Fees) without the approval of the Class B shareholders, the
Trust will establish a new class of shares, into which Class B shares would
convert, on the same terms as those that applied to Class A shares before such
increase. There are currently no other conversion features among the classes.

7. DIVIDENDS/DISTRIBUTIONS

Each Fund pays out as dividends substantially all of its net investment
income (which comes from dividends and interest it receives from its
investments) and net realized short-term capital gains as described in the
Prospectus.

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 or
a series of PIMCO Funds: Multi-Manager Series, at net asset value of such Fund
or series, unless the shareholder elects to receive cash. Dividends paid by
each Fund are calculated in the same manner and at the same time with respect to
each class.

8. WAIVER OR REIMBURSEMENT OF EXPENSES

Expenses may be waived or reimbursed by any adviser, sub-adviser, principal
underwriter, or other provider of services to the Trust without the prior
approval of the Trust's Trustees.

9. EFFECTIVENESS OF PLAN

This Plan shall not take effect until it has been approved by votes of a
majority of both (a) the Trustees of the Trust and (b) the Independent Trustees.
When this Plan takes effect, it shall supersede all previous plans of the Trust
adopted pursuant to Rule 18f-3 under the 1940 Act.

10. MATERIAL MODIFICATIONS

This Plan may not be amended to modify materially its terms unless such
amendment is approved in the manner provided for initial approval hereof in
section 9 above.

11. LIMITATION OF LIABILITY

The Trustees of the Trust and the shareholders of each Fund shall not be
liable for any obligations of the Trust or any Fund under this Plan, and the
Administrator or any other person, in asserting any rights or claims under this
Plan, shall look only to the assets and property of the Trust or such Funds in
settlement of such rights or claims, and not to any Trustee or shareholder.

-8-