PIMCO FUNDS, POS AMI, 2000-06-01

PIMCO FUNDS
POS AMI, 2000-06-01

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<PAGE>

As filed with the Securities and Exchange Commission on June 1, 2000

File No. 811-5028

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

Registration Statement Under the Investment Company Act of 1940 [X]

Amendment No. 63 [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:
(949) 720-6533

Robert W. Helm, Esq. R. Wesley Burns
Dechert Price & Rhoads Pacific Investment Management Company
1775 Eye Street, N.W. 840 Newport Center Drive, Suite 300
Washington, D.C. 20006 Newport Beach, California 92660

(Name and Address of Agent for Service)

It is intended that this filing will become effective immediately upon
filing in accordance with Section 8 of the Investment Company Act of 1940 and
the rules thereunder.
<PAGE>

EXPLANATORY NOTE

This Amendment is filed by PIMCO Funds (the "Registrant") pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended (the "1940 Act"),
for the purpose of offering shares of the PIMCO Short-Term Emerging Markets
Portfolio, a new series of the PIMCO Funds: Private Account Portfolio Series.

The shares of beneficial interest in the Private Account Portfolio Series
are not registered under the Securities Act of 1933 (the "1933 Act") since such
shares will be issued by Registrant solely in private placement transactions
that do not involve any "public offering" within the meaning of the 1933 Act.
Shares of the Private Account Portfolio Series may be purchased only by clients
of Pacific Investment Management Company ("PIMCO") who maintain separately
managed private accounts, and who are also "accredited investors," as defined in
Regulation D under the 1933 Act, and either (i) "qualified purchasers," as
defined for purposes of Section 3(c)(7) of the 1940 Act, or (ii) "qualified
institutional buyers," as defined in Rule 144A(a)(1) under the 1933 Act. This
Amendment is not an offer to sell, or a solicitation of any offer to buy, any
security to the public within the meaning of the 1933 Act.
<PAGE>

<TABLE>
<CAPTION>
PIMCO Funds
Offering Memorandum

<S> <C>
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Private Account SHORT-TERM PORTFOLIOS
Portfolio Series Short-Term Portfolio Short-Term Portfolio II

June 1, 2000 ------------------------------------------------------------------------------
US GOVERNMENT PORTFOLIOS
U.S. Government Sector Portfolio U.S. Government Sector Portfolio II

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MORTGAGE PORTFOLIOS
Mortgage Portfolio Mortgage Portfolio II

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CORPORATE PORTFOLIOS
Investment Grade Corporate Portfolio High Yield Portfolio

------------------------------------------------------------------------------
MUNICIPAL PORTFOLIOS
International Portfolio Emerging Markets Portfolio
Short-Term Emerging Markets Portfolio

------------------------------------------------------------------------------
SPECIALTY PORTFOLIOS
Real Return Bond Portfolio

This cover is not part of the Offering Memorandum. The
Portfolios issue shares only in private placement transactions
in accordance with Regulation D or other applicable exemptions
under the Securities Act of 1933, as amended (the "Securities
Act"). The enclosed Offering Memorandum is not an offer to
sell, or a solicitation of any offer to buy, any security to
the public within the meaning of the Securities Act.

P I M C O
---------
</TABLE>
<PAGE>

PIMCO Funds Offering Memorandum

Private This Offering Memorandum describes the Private Account Portfolio
Account Series, which consists of 13 separate portfolios of the PIMCO
Portfolio Funds: Pacific Investment Management Series (the "Trust"). Each
Series Portfolio is registered under the Investment Company Act of 1940,
as amended (the "1940 Act").

June 1, Shares of the Portfolios have not been registered under the
2000 Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any state. Each Portfolio issues its shares
only in private placement transactions in accordance with
Regulation D or other applicable exemptions under the Securities
Act. This Offering Memorandum is not an offer to sell, or a
solicitation of any offer to buy, any security to the public
within the meaning of the Securities Act.

Shares of the Portfolios may be purchased only by clients of
Pacific Investment Management Company LLC ("PIMCO") who maintain
separately managed private accounts, and who are also "accredited
investors," as defined in Regulation D under the Securities Act,
and either (i) "qualified purchasers," as defined for purposes of
Section 3(c)(7) of the 1940 Act, or (ii) "qualified institutional
buyers," as defined in Rule 144A(a)(1) of the Securities Act.

Shares of the Portfolios are subject to restrictions on
transferability and resale and may not be transferred or resold
except as permitted under the Securities Act. Shares may be
redeemed in accordance with the procedures set forth in this
Offering Memorandum.

This Offering Memorandum is intended for use only by the person to
whom it has been issued. Reproduction of this Offering Memorandum
is prohibited.

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

The Portfolios provide access to the professional investment
advisory services offered by PIMCO. As of March 31, 2000, PIMCO
managed approximately $193 billion in assets. You can call PIMCO
at 1-800-927-4648 to find out more about the Portfolios.

Although the Portfolios may be similar to one or more other funds
or accounts advised by PIMCO, each Portfolio is a separate sub-
fund with its own investment objective, policies and expenses.
Other funds and accounts advised by PIMCO will have different
investment results, and information about those funds and accounts
should not be assumed to apply to the Portfolios.

This Offering Memorandum explains what you should know about the
Portfolios before you invest. Please read it carefully.

1 Private Account Portfolio Series
<PAGE>

Table of Contents

<TABLE>
<S> <C>
Summary Information.............................................. 3
Investment Objectives and Strategies............................. 5
Short-Term Portfolio........................................... 5
Short-Term Portfolio II........................................ 5
U.S. Government Sector Portfolio............................... 6
U.S. Government Sector Portfolio II............................ 6
Mortgage Portfolio............................................. 6
Mortgage Portfolio II.......................................... 7
Investment Grade Corporate Portfolio........................... 7
High Yield Portfolio .......................................... 8
Municipal Sector Portfolio..................................... 8
International Portfolio........................................ 9
Short-Term Emerging Markets Portfolio.......................... 9
Emerging Markets Portfolio..................................... 10
Real Return Bond Portfolio..................................... 10
Summary of Principal Risks....................................... 12
Management of the Portfolios..................................... 15
Purchases, Redemptions and Exchanges............................. 16
How Portfolio Shares Are Priced.................................. 18
Portfolio Distributions.......................................... 19
Tax Consequences................................................. 19
Investment Restrictions.......................................... 20
Portfolio Transactions and Brokerage............................. 21
Characteristics and Risks of Securities and Investment
Techniques...................................................... 23
Appendix A--Description of Securities Ratings.................... A-1
</TABLE>
Offering Memorandum
2
<PAGE>

Summary Information

The table below compares certain investment characteristics of the
Portfolios. Other important characteristics are described in "Investment
Objectives and Strategies" following this "Summary Information" section.
Following the table are key concepts that are used throughout this Offering
Memorandum.

<TABLE>
<CAPTION>
Non-U.S. Dollar
Denominated
Portfolio Main Investments Credit Quality(1) Securities(2)
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<C> <S> <C> <C> <C>
Short-Term Short-Term Money market instruments and short duration fixed Baa to Aaa 0%
Portfolios Portfolio income securities
-------------------------------------------------------------------------------------------------------------------
Short-Term Money market instruments and short duration fixed B to Aaa; max 15% 0-20%(3)
Portfolio II income securities below Baa
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U.S. U.S. Government U.S. Government securities Baa to Aaa 0%
Government Sector Portfolio
Portfolios ------------------------------------------------------------------------------------------------------------------
U.S. Government U.S. Government securities B to Aaa; max 15% 0-20%(3)
Sector below Baa
Portfolio II
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Mortgage Mortgage Mortgage-related fixed income securities Baa to Aaa 0%
Portfolios Portfolio
------------------------------------------------------------------------------------------------------------------
Mortgage Mortgage-related fixed income securities B to Aaa; max 15% 0-20%(3)
Portfolio II below Baa
----------------------------------------------------------------------------------------------------------------------------------
Corporate Investment Corporate fixed income securities Baa to Aaa 0%
Portfolios Grade Corporate
Portfolio
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High Yield Higher yielding fixed income securities B to Aaa; min 65% 0-15%(4)
Portfolio below Baa
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Municipal Municipal Municipal securities Baa to Aaa 0%
Portfolios Sector Portfolio
----------------------------------------------------------------------------------------------------------------------------------
International International Non-U.S. fixed income securities Baa to Aaa (greater than or =)
Portfolios Portfolio 65%(5)
------------------------------------------------------------------------------------------------------------------
Emerging Emerging market fixed income securities B to Aaa; max 25% (greater than or =)
Markets Portfolio below Ba 80%(5)
------------------------------------------------------------------------------------------------------------------
Short-Term Short duration emerging market fixed income securities B to Aaa; max 25% (greater than or =)
Emerging Markets or currencies of emerging markets below Ba 65%(5)
Portfolio
----------------------------------------------------------------------------------------------------------------------------------
Specialty Real Return Inflation-indexed fixed income securities Baa to Aaa 0-20%(3)
Portfolios Bond Portfolio
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</TABLE>
(1) As rated by Moody's Investors Service, Inc., or equivalently rated by
Standard & Poor's Rating Service, or if unrated, determined by PIMCO to
be of comparable quality.
(2) Each Portfolio (except the Municipal Sector Portfolio) may invest beyond
these limits in U.S. dollar-denominated securities of non-U.S. issuers.
(3) The percentage limitation relates to non-U.S. dollar-denominated
securities.
(4) The percentage limitation relates to euro-denominated securities.
(5) The percentage limitation relates to securities of foreign issuers
denominated in any currency.

3 Private Account Portfolio Series
<PAGE>

Summary Information (continued)

Fixed Each Portfolio will invest at least 65% of its assets in "Fixed
Income Income Instruments," which as used in this Offering Memorandum
Instruments includes:

. securities issued or guaranteed by the U.S. Government, its
agencies or government-sponsored enterprises ("U.S. Government
Securities");
. corporate debt securities of U.S. and non-U.S. issuers,
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,
event-linked bonds and loan participations;
. delayed funding loans and revolving credit facilities;
. bank certificates of deposit, fixed time deposits and bankers'
acceptances;
. repurchase agreements and reverse repurchase agreements;
. debt securities issued by states or local governments and their
agencies, authorities and other instrumentalities;
. obligations of non-U.S. governments or their subdivisions,
agencies and instrumentalities; and
. obligations of international agencies or supranational
entities.

Ratings In this Offering Memorandum, references are made to credit ratings
of Debt of debt securities that measure an issuer's expected ability to
Securities pay principal and interest on time. Credit ratings are determined
by rating organizations, such as Standard & Poor's Rating Service
("S&P") or Moody's Investors Service, Inc. ("Moody's"). The
following terms are generally used to describe the credit quality
of debt securities depending on the security's credit rating or,
if unrated, credit quality as determined by PIMCO:

. high quality
. investment grade
. below investment grade ("high yield securities" or "junk
bonds")

For a further description of credit ratings, see "Appendix A--
Description of Securities Ratings."

Offering Memorandum 4
<PAGE>

Investment Objectives and Strategies

The Portfolios provide a broad range of investment choices. The
following Portfolio descriptions identify the investment objective
and principal investments and strategies of each Portfolio. A
detailed "Summary of Principal Risks" describing principal risks
of investing in the Portfolios begins after this section.

It is possible to lose money on investments in the Portfolios.

An investment in a Portfolio is not a deposit of a bank and is
not guaranteed or insured by the Federal Deposit Insurance
Corporation or any other government agency.

Short- The Portfolio's investment objective is maximum total return,
Term consistent with preservation of capital and daily liquidity. The
Portfolio Portfolio seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities.

The average duration of the Portfolio will vary based on PIMCO's
forecast for interest rates and will normally not exceed one year.
For point of reference, the dollar-weighted average maturity of
the Portfolio is normally not expected to exceed three years.

The Portfolio may invest only in investment grade securities. The
Portfolio may invest in securities of non-U.S. issuers only if the
securities are U.S. dollar-denominated.

The Portfolio may invest in options, futures contracts, swap
agreements, or mortgage- or asset-backed securities, and purchase
instruments on an extended settlement basis. The Portfolio may
lend its portfolio securities to brokers, dealers and other
financial institutions to earn income. The Portfolio may seek to
obtain market exposure to the securities in which it primarily
invests by entering into a series of purchase and sale contracts
or by using other investment techniques (such as buy backs or
dollar rolls).

Short- The Portfolio's investment objective is maximum total return,
Term consistent with preservation of capital and daily liquidity. The
Portfolio Portfolio seeks to achieve its investment objective by investing
II under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities.

The Portfolio invests primarily in investment grade securities,
but may invest up to 15% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P, or, if
unrated, determined by PIMCO to be of comparable quality.

The Portfolio may invest up to 20% of its assets in securities
denominated in non-U.S. currencies, and may invest beyond this
limit in U.S. dollar-denominated securities of non-U.S. issuers.
The Portfolio may invest up to 10% of its assets in securities of
issuers that economically are tied to countries with emerging
securities markets. The Portfolio will normally hedge its exposure
to non-U.S. currencies to reduce the risk of loss due to
fluctuations in exchange rates.

5 Private Account Portfolio Series
<PAGE>

U.S. The Portfolio's investment objective is maximum total return,
Government consistent with prudent investment management. The Portfolio seeks
Sector to achieve its investment objective by investing under normal
Portfolio circumstances at least 65% of its assets in a portfolio of U.S.
Government Securities of varying maturities, or in securities that
provide exposure to the U.S. Government Securities sector, such as
options, futures contracts, swap agreements, or mortgage- or
asset-backed securities. Assets not invested in U.S. Government
Securities may be invested in other types of Fixed Income
Instruments. Generally, such investments will be used to cover
forward exposure and have an aggregate duration that normally will
not exceed one year.

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

The Portfolio may invest only in investment grade securities. The
Portfolio may invest in securities of non-U.S. issuers only if the
securities are U.S. dollar-denominated. The Portfolio is non-
diversified, which means that it may concentrate its assets in a
smaller number of issuers than a diversified Portfolio.

The Portfolio may purchase instruments on an extended settlement
basis. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The
Portfolio may seek to obtain market exposure to the securities in
which it primarily invests by entering into a series of purchase
and sale contracts or by using other investment techniques (such
as buy backs or dollar rolls).

U.S. The Portfolio's investment objective is maximum total return,
Government consistent with prudent investment management. The Portfolio seeks
Sector to achieve its investment objective by investing under normal
Portfolio circumstances at least 65% of its assets in a portfolio of U.S.
II Government Securities of varying maturities, or in securities that
provide exposure to the U.S. Government Securities sector, such as
options, futures contracts, swap agreements, or mortgage- or
asset-backed securities. Assets not invested in U.S. Government
Securities may be invested in other types of Fixed Income
Instruments. Generally, such instruments will be used to cover
forward exposure and have an aggregate duration that normally will
not exceed one year.

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

The Portfolio invests primarily in investment grade securities,
but may invest up to 15% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or by S&P, or, if
unrated, determined by PIMCO to be of comparable quality.

The Portfolio may invest up to 20% of its assets in securities
denominated in non-U.S. currencies, and may invest beyond this
limit in U.S. dollar-denominated securities of non-U.S. issuers.
The Portfolio will normally hedge its exposure to non-U.S.
currencies to reduce the risk of loss due to fluctuations in
exchange rates. The Portfolio is non-diversified, which means that
it may concentrate its assets in a smaller number of issuers than
a diversified Portfolio.

Mortgage The Portfolio's investment objective is maximum total return,
Portfolio consistent with prudent investment management. The Portfolio seeks
to achieve its investment objective by investing under normal
circumstances at least 65% of its assets in a diversified
portfolio of mortgage-related securities of varying maturities,
which

Offering Memorandum 6
<PAGE>

may be represented by options, futures contracts, swap agreements,
or mortgage- and asset-backed securities. Assets not invested in
mortgage-related securities may be invested in other types of
Fixed Income Instruments. Generally, such investments will be used
to cover forward exposure and have an aggregate duration that
normally will not exceed one year.

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

The Portfolio may invest only in investment grade securities. The
Portfolio may invest in securities of non-U.S. issuers only if the
securities are U.S. dollar-denominated.

The Portfolio may only invest up to 5% of its assets in each
issue of non-U.S. Government Securities and will not invest more
than 10% of its assets in any single issuer of such securities.

The Portfolio may purchase investments on an extended settlement
basis. The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The
Portfolio may seek to obtain market exposure to the securities in
which it primarily invests by entering into a series of purchase
and sale contracts or by using other investment techniques (such
as buy backs or dollar rolls).

Mortgage The Portfolio's investment objective is maximum total return,
Portfolio consistent with prudent investment management. The Portfolio seeks
II to achieve its investment objective by investing under normal
circumstances at least 65% of its assets in a diversified
portfolio of mortgage-related securities of varying maturities,
which may be represented by options, futures contracts, swap
agreements, or mortgage- or asset-backed securities. Assets not
invested in mortgage-related securities may be invested in other
types of Fixed Income Instruments. Generally, such investments
will be used to cover forward exposure and have an aggregate
duration that normally will not exceed one year.

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

The Portfolio invests primarily in investment grade securities,
but may invest up to 15% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P, or if unrated,
determined by the PIMCO to be of comparable quality.

The Portfolio may invest up to 20% of its assets in securities
denominated in non-U.S. currencies, and may invest beyond this
limit in U.S. dollar-denominated securities of non-U.S. issuers.
The Portfolio will normally hedge its exposure to non-U.S.
currencies to reduce the risk of loss due to fluctuations in
exchange rates.

The Portfolio may only invest up to 5% of its assets in each
issue of non-U.S. Government Securities and will not invest more
than 10% of its assets in any single issuer of such securities.

Investment The Portfolio's investment objective is maximum total return,
Grade consistent with prudent investment management. The Portfolio seeks
Corporate to achieve its investment objective by investing under normal
Portfolio circumstances at least 65% of its assets in a portfolio of
corporate fixed income securities of varying maturities, which may
be represented by options, futures contracts, swap agreements, or
mortgage- or asset-backed securities.

7 Private Account Portfolio Series
<PAGE>

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

The Portfolio invests primarily in investment grade debt
securities. The Portfolio may invest in securities of non-U.S.
issuers only if the securities are U.S. dollar-denominated. The
Portfolio is non-diversified, which means that it may concentrate
its assets in a smaller number of issuers than a diversified
Portfolio.

High The Portfolio's investment objective is maximum total return,
Yield consistent with prudent investment management. The Portfolio seeks
Portfolio to achieve its investment objective by investing under normal
circumstances at least 65% of its assets in a diversified
portfolio of high yield securities ("junk bonds") rated below
investment grade but rated at least B by Moody's or S&P, or, if
unrated, determined by PIMCO to be of comparable quality. The
remainder of the Portfolio's assets may be invested in investment
grade Fixed Income Instruments.

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

The Portfolio may invest without limit in U.S. dollar-denominated
securities of foreign issuers. The Fund may invest up to 15% of
its assets in euro-denominated securities. The Fund normally will
hedge at least 75% of its exposure to the euro to reduce the risk
of loss due to fluctuations in currency exchange rates.

The Portfolio may invest up to 15% of its assets in options,
futures contracts, and swap agreements, and may purchase
instruments on an extended settlement basis. The Portfolio may
invest all of its assets in mortgage- or asset-backed securities.
The Portfolio may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. The
Portfolio may seek to obtain market exposure to the securities in
which it primarily invests by entering into a series of purchase
and sale contracts or by using other investment techniques (such
as buy backs or dollar rolls).

Municipal The Portfolio's investment objective is maximum total return,
Sector consistent with prudent investment management. The Portfolio seeks
Portfolio to achieve its investment objective by investing under normal
circumstances at least 65% of its assets in debt securities issued
by or on behalf of states and local governments and their
agencies, authorities and other instrumentalities ("Municipal
Securities"), or in instruments that provide exposure to the
Municipal Securities sector, such as options, futures contracts,
and swap agreements, including options on futures contracts and
swap agreements. Assets not invested in Municipal Securities may
be invested in other types of Fixed Income Instruments.

Although the Portfolio primarily invests in Municipal Securities
or instruments providing exposure to Municipal Securities, the
Portfolio does not seek to minimize taxable income and realized
capital gains, and, consequently, the Portfolio may generate
substantial taxable income and gains. The Portfolio may invest
more than 25% of its assets in bonds of issuers in California and
New York.

The average portfolio duration of this Portfolio normally varies
based on the strategy currently being used by PIMCO in managing
the assets of the Portfolio within the overall PIMCO private
account management program. The Portfolio will seek income that is
high relative to prevailing rates from Municipal Securities.
Capital appreciation, if any, generally arises from decreases in
interest rates or improving credit fundamentals for a particular
state, municipality or issuer.

The Portfolio may invest only in investment grade securities. The
Portfolio is non-diversified, which means that it may concentrate
its assets in a smaller number of issuers than a diversified
Portfolio.

Offering Memorandum 8
<PAGE>

The Portfolio may also invest in options, futures contracts, and
swap agreements, and purchase instruments on an extended
settlement basis. The Portfolio may lend its portfolio securities
to brokers, dealers and other financial institutions to earn
income. The Portfolio may seek to obtain market exposure to the
securities in which it primarily invests by entering into a series
of purchase and sale contracts or by using other investment
techniques (such as buy backs or dollar rolls).

Interna- The Portfolio's investment objective is maximum total return,
tional consistent with prudent investment management. The Portfolio seeks
Portfolio to achieve its investment objective by investing under normal
circumstances at least 65% of its assets in a portfolio of Fixed
Income Instruments of non-U.S. issuers, representing at least
three non-U.S. countries or currencies, which may be represented
by options, futures contracts, swap agreements, or mortgage- or
asset-backed securities. These securities may be denominated in
non-U.S. currencies, baskets of non-U.S. currencies (such as the
euro), or the U.S. dollar. The Portfolio will normally hedge at
least 75% of its exposure to non-U.S. currencies to reduce the
risk of loss due to fluctuations in exchange rates. Assets not
invested in non-U.S. fixed income securities may be invested in
U.S. Fixed Income Instruments.

PIMCO selects the Portfolio's non-U.S. 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 PIMCO believes to be
relevant.

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

Short- The Portfolio's investment objective is maximum total return,
Term consistent with prudent investment management. The Portfolio seeks
Emerging to achieve its investment objective by investing under normal
Markets circumstances at least 65% of its assets in a portfolio of Fixed
Portfolio Income Instruments or currencies of emerging market countries,
which may be represented by options, futures contracts, swap
agreements, currency forwards, or mortgage- or asset-backed
securities.

PIMCO has broad discretion to identify and invest in countries
that it considers to qualify as emerging markets. However, PIMCO
generally considers an emerging market to be 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. PIMCO will select the Portfolio'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 other specific
factors PIMCO believes to be relevant.

The average duration of the Portfolio will vary based on PIMCO's
forecast for interest rates and will normally not exceed one year.
For a point of reference the dollar-weighted average maturity of
the Portfolio is normally not expected to exceed three years.

The Portfolio may invest substantially all of its assets in high
yield securities ("junk bonds") rated B or higher by Moody's or
S&P, or, if unrated, determined by PIMCO to be of comparable
quality, subject to a maximum of 25% of assets in securities rated
B. The Portfolio is non-diversified, which means it may
concentrate its assets in a smaller number of issuers than a
diversified Portfolio.

9 Private Account Portfolio Series
<PAGE>

The Portfolio may purchase instruments on an extended settlement
basis. The Portfolio may lend its portfolio securities to brokers,
dealers, and other financial institutions to earn income. The
Portfolio may seek to obtain market exposure to the securities in
which it primarily invests by entering into a series of purchase
or sale contracts or by using other investment techniques (such as
buy backs or dollar rolls).

Emerging The Portfolio's investment objective is maximum total return,
Markets consistent with prudent investment management. The Portfolio seeks
Portfolio to achieve its investment objective by investing under normal
circumstances at least 80% of its assets in a portfolio of Fixed
Income Instruments of issuers that economically are tied to
countries with emerging securities markets, which may be
represented by options, futures contracts, swap agreements, or
mortgage- or asset-backed securities. A security is economically
tied to an emerging market country if it is principally traded on
the country's securities markets, or the issuer is organized or
principally operates in the country, derives a majority of its
income from its operations within the country, or has a majority
of its assets in the country. These securities may be denominated
in non-U.S. currencies or the U.S. dollar. The Portfolio may, but
is not required to, hedge its exposure to non-U.S. currencies.
Assets not invested in emerging markets securities may be invested
in other types of Fixed Income Instruments.

PIMCO has broad discretion to identify and invest in countries
that it considers to qualify as emerging securities markets.
However, PIMCO 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 Portfolio emphasizes
countries with relatively low gross national product per capita
and with the potential for rapid economic growth. PIMCO will
select the Portfolio'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 PIMCO believes to
be relevant. The Portfolio likely will concentrate its investments
in Asia, Africa, the Middle East, Latin America and the developing
countries of Europe. The Portfolio may invest in securities whose
return is based on the return of an emerging securities market,
such as a derivative instrument, rather than investing directly in
securities of issuers from emerging markets.

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

The Portfolio may invest substantially all of its assets in high
yield securities ("junk bonds") rated B or higher by Moody's or
S&P, or, if unrated, determined by PIMCO to be of comparable
quality, subject to a maximum of 25% of assets in securities rated
B. The Portfolio is non-diversified, which means that it may
concentrate its assets in a smaller number of issuers than a
diversified Portfolio.

Real The Portfolio's investment objective is maximum total return,
Return consistent with prudent investment management. The Portfolio seeks
Bond to achieve its investment objective by investing under normal
Portfolio circumstances at least 65% of its assets in inflation-indexed
bonds of varying maturities issued by the U.S. and non-U.S.
governments, their agencies or instrumentalities, and
corporations, which may be represented by options, futures
contracts, swap agreements, or mortgage- or asset-backed
securities. Assets not invested in inflation-indexed bonds may be
invested in other types of Fixed Income Instruments.

Inflation-indexed bonds are fixed income securities that are
structured to provide protection against inflation. The value of
the bond's principal or the interest rate paid on the bond is
adjusted to track changes in

Offering Memorandum 10
<PAGE>

an official inflation measure. The U.S. Treasury uses the Consumer
Price Index for Urban Consumers as the inflation measure.
Inflation-indexed bonds issued by governments other than the
United States are generally adjusted to reflect a comparable
inflation index, calculated by that government. "Real return"
equals total return less the estimated cost of inflation, which is
typically measured by the change in an official inflation measure.

The average duration of the Portfolio varies based on the
strategy currently being used by PIMCO in managing the assets of
the Portfolio within the overall PIMCO private account management
program.

The Portfolio may invest only in investment grade securities. The
Portfolio may invest up to 20% of its assets in securities
denominated in non-U.S. currencies, and may invest beyond this
limit in U.S. dollar denominated securities of non-U.S. issuers.
The Portfolio will normally hedge at least 75% of its exposure to
non-U.S. currencies to reduce the risk of loss due to fluctuations
in currency exchange rates. The Portfolio is non-diversified,
which means that it may concentrate its assets in a smaller number
of issuers than a diversified Portfolio.

11 Private Account Portfolio Series
<PAGE>

Summary of Principal Risks

The value of your investment in a Portfolio changes with the
values of that Portfolio's investments. Many factors can affect
those values. The factors that are most likely to have a material
effect on a particular Portfolio's holdings as a whole are called
"principal risks." This section describes the principal risks of
investing in each Portfolio. Each Portfolio may be subject to
additional principal risks and risks other than those described
below because the types of investments made by a Portfolio can
change over time. Securities and investment techniques mentioned
in this summary are described in greater detail under
"Characteristics and Risks of Securities and Investment
Techniques." That section and "Investment Objectives and Policies"
in the Offering Memorandum Supplement also include more
information about the Portfolios, their investments and the
related risks. There is no guarantee that a Portfolio will be able
to achieve its investment objective.

Interest As interest rates rise, the value of fixed income securities held
Rate Risk by each 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 Each Portfolio could lose money if the issuer or guarantor of a
Risk 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.

High Each Portfolio, except the Short-Term, U.S. Government Sector,
Yield Mortgage, Investment Grade Corporate, Municipal Sector,
Risk International, and Real Return Bond Portfolios, may invest in high
yield securities and unrated securities of similar credit quality
(commonly known as "junk bonds"). These Portfolios may be subject
to greater levels of interest rate, credit and liquidity risk than
Portfolios that do not invest in such securities. High yield
securities are considered predominately speculative with respect
to the issuer's continuing ability to make principal and interest
payments. An economic downturn or period of rising interest rates
could adversely affect the market for high yield securities and
reduce a Portfolio's ability to sell its high yield securities
(liquidity risk).

Market The market price of securities owned by each Portfolio may go up
Risk 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 The value of a security owned by each Portfolio may decline for a
Risk 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 Liquidity risk exists when particular investments are difficult to
Risk purchase or sell. A Portfolio's investments in illiquid securities
may reduce the returns of the Portfolio because it may be unable
to sell the illiquid securities at an advantageous time or price.
Portfolios with principal investment strategies that involve non-
U.S. securities, derivatives or securities with substantial market
and/or credit risk tend to have the greatest exposure to liquidity
risk.

Offering Memorandum 12
<PAGE>

Derivatives Each Portfolio may invest some or all of its assets in
Risk 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
Portfolios may use are referenced under "Characteristics and Risks
of Securities and Investment Techniques--Derivatives" in this
Offering Memorandum and described in more detail under "Investment
Objectives and Policies" in the Offering Memorandum Supplement.
The Portfolios typically use derivatives as a substitute for
taking a position in the underlying asset and/or as part of a
strategy designed to reduce exposure to other risks, such as
interest rate or currency risk. The Portfolios may also use
derivatives under circumstances that may have the effect of
creating leverage, although as a general matter such use would be
consistent with the duration guidelines applicable to the
investment strategy being used for a particular Portfolio, which
would be compatible with duration guidelines applied to PIMCO
private accounts overall. A Portfolio's use of derivative
instruments involves risks different from, and possibly 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, credit risk and
management 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. Under certain circumstances, a Portfolio investing
in a derivative instrument could lose more than the principal
amount invested, although PIMCO will typically cover open
derivatives positions by segregating liquid assets (or other
economically appropriate covering positions) in an attempt to
minimize this risk. Also, suitable derivative transactions may not
be available in all circumstances and there can be no assurance
that a Portfolio will engage in these transactions to reduce
exposure to other risks when that would be beneficial.

Mortgage Each Portfolio may purchase mortgage-related securities, which are
Risk subject to certain additional risks. Rising interest rates tend to
extend the duration of mortgage-related securities, making them
more sensitive to changes in interest rates. As a result, in a
period of rising interest rates, a Portfolio that holds mortgage-
related securities may exhibit additional volatility. This is
known as extension risk. In addition, mortgage-related securities
are subject to prepayment risk. When interest rates decline,
borrowers may pay off their mortgages sooner than expected. This
can reduce the returns of a Portfolio because the Portfolio will
have to reinvest that money at the lower prevailing interest
rates.

Foreign Each Portfolio (except the Municipal Sector Portfolio) may invest
(Non-U.S.) in foreign securities, and, as a result, may experience more rapid
Investment and extreme changes in value than a Portfolio that invests
Risk 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 Portfolio's investments in a
foreign country. In the event of nationalization, expropriation or
other confiscation, a Portfolio could lose its entire investment
in foreign securities. Adverse conditions in a certain region can
adversely affect securities of other countries whose economies
appear to be unrelated. To the extent that a Portfolio invests a
significant portion of its assets in a concentrated geographic
area like Eastern Europe or Asia, the Portfolio will generally
have more exposure to regional economic risks associated with
foreign investments.

Emerging Foreign investment risk may be particularly high to the extent
Markets that a Portfolio, particularly the Emerging Markets and the Short-
Risk Term Emerging Markets Portfolios invest 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.

13 Private Account Portfolio Series
<PAGE>

Currency Each Portfolio, except the Short-Term, U.S. Government, Mortgage,
Risk Investment Grade Corporate, and Municipal Sector Portfolios, may
invest directly in foreign (non-U.S.) currencies or in securities
that trade in, and receive revenues in, foreign currencies. These
Portfolios 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. As a result, a Portfolio's
investments in foreign currency-denominated securities may reduce
the returns of the Portfolio.

Concentra- Concentration of investments in a small number of issuers,
tion industries or foreign currencies increases risk. Each Portfolio,
Risk except for the Short-Term, Short-Term II, Mortgage, Mortgage II,
and High Yield Portfolios, is "non-diversified," which means that
it may invest a greater percentage of their assets in the
securities of a single issuer than the diversified Portfolios.
Portfolios 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 Certain transactions may give rise to a form of leverage. Such
Risk transactions generally involve, in essence, the "rolling forward"
of unsettled purchases of securities, using techniques such as
when-issued, delayed delivery, forward commitment transactions or
repurchase agreements. The Portfolios may also make loans of their
portfolio securities. The use of derivatives may create leverage.
To mitigate leveraging risk, PIMCO will segregate liquid assets or
otherwise cover the transactions that may give rise to such risk.
The occurrence of leverage may cause a Portfolio to liquidate
portfolio positions when it may not be advantageous to do so to
satisfy its obligations or to meet segregation requirements.
Leverage, including borrowing, may cause a Portfolio to be more
volatile than if the Portfolio had not been leveraged. This is
because leverage tends to exaggerate the effect of any increase or
decrease in the value of a Portfolio's securities. However,
PIMCO's intended exposures are generally equivalent to exposures
that could be gained using fully settled non-leveraged investment
positions. Furthermore, the occurrence of leverage would, as a
general matter, be consistent with the duration guidelines
applicable to the investment strategy being used for a particular
Portfolio, which would be compatible with duration guidelines
applied to PIMCO private accounts overall.

Management Each Portfolio is subject to management risk because it is an
Risk actively managed investment portfolio. PIMCO and its team of
portfolio managers will apply investment techniques and risk
analyses in making investment decisions for the Portfolios, but
there can be no guarantee that these will produce the desired
results.

California Because the Municipal Sector Portfolio may concentrate its
State-- investments in California Municipal Securities, the Portfolio may
Specific be affected significantly by economic, regulatory or political
Risk developments affecting the ability of California issuers to pay
interest or repay principal. Provisions of the California
Constitution and State statutes which limit the taxing and
spending authority of California governmental entities may impair
the ability of California issuers to pay principal and/or interest
on their obligations. While California's economy is broad, it does
have major concentrations in high technology, aerospace and
defense-related manufacturing, trade, entertainment, real estate
and financial services, and may be sensitive to economic problems
affecting those industries. Future California political and
economic developments, constitutional amendments, legislative
measures, executive orders, administrative regulations, litigation
and voter initiatives could have an adverse effect on the debt
obligations of California issuers.

Offering Memorandum 14
<PAGE>

New York Because the Municipal Sector Portfolio may concentrate its
State-- investments in New York Municipal Securities, the Portfolio may be
Specific affected significantly by economic, regulatory or political
Risk developments affecting the
ability of New York issuers to pay interest or repay principal.
Certain issuers of New York municipal bonds have experienced
serious financial difficulties in recent years. A reoccurrence of
these difficulties may impair the ability of certain New York
issuers to pay principal or interest on their obligations. The
financial health of New York City affects that of the State, and
when New York City experiences financial difficulty it may have an
adverse affect on New York municipal bonds held by the Fund. The
growth rate of New York has recently been somewhat slower than the
nation overall. The economic and financial condition of New York
also may be affected by various financial, social, economic and
political factors.

Management of the Portfolios

The business affairs of the Portfolios 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
Offering Memorandum Supplement under the heading "Management of
the Trust."

PIMCO serves as the investment adviser and the administrator
(serving in its capacity as administrator, the "Administrator")
for the Portfolios. Subject to the supervision of the Board of
Trustees, PIMCO is responsible for managing the investment
activities of the Portfolios and the Portfolios' business affairs
and other administrative matters. A team of PIMCO portfolio
managers are responsible for the day-to-day management of the
Portfolios.

Investment PIMCO is located at 840 Newport Center Drive, Newport Beach,
Adviser and California 92660. Organized in 1971, PIMCO provides investment
Administra- management and advisory services to private accounts of
tor institutional and individual clients and to mutual funds. As of
March 31, 2000, PIMCO had approximately $193 billion in assets
under management.

Advisory Each Portfolio pays PIMCO an advisory fee in return for providing
and investment advisory services. Each Portfolio also pays PIMCO an
Administra- administrative fee for the administrative services it requires
tive Fees under a fee structure that is essentially fixed. PIMCO, in turn,
provides administrative services for each Portfolio's shareholders
and also bears the costs of various third-party services required
by the Portfolios, including audit, custodial, portfolio
accounting, legal, transfer agency and printing costs. The result
of this fee structure is an expense level for shareholders of each
Portfolio that, with limited exceptions, is precise and
predictable under ordinary circumstances.

The tables below show the advisory and administrative fees for
each Portfolio at an annual rate based upon the average daily net
assets of the Portfolios. PIMCO has agreed to reduce its
administrative fee, subject to potential future reimbursement, to
the extent that a Portfolio's total operating expenses exceed, due
to organizational expenses and the payment by a Portfolio of its
pro rata portion of the Trustees fees of the Trust, the Total
Annual Portfolio Operating Expenses set forth in the tables below.

The following table and example describe the fees and expenses
you may pay if you buy and hold shares of the Short-Term, Short-
Term II, U.S. Government Sector, U.S. Government Sector II,
Mortgage, Mortgage II, Investment Grade Corporate, High Yield,
Municipal Sector, and Real Return Bond Portfolios:

Shareholder Fees (fees paid directly from your investment) None

Annual Portfolio Operating Expenses (expenses that are deducted
from Portfolio assets)

Total Annual
Advisory Administrative Portfolio Operating
Fee Fee Expenses
-------------------------------------------------------------------
0.02% 0.03% 0.05%
-------------------------------------------------------------------

15 Private Account Portfolio Series
<PAGE>

Example. The Example assumes that you invest $10,000 in the Short-
Term, Short-Term II, U.S. Government Sector, U.S. Government
Sector II, Mortgage, Mortgage II, Investment Grade Corporate, High
Yield, Municipal Sector, and Real Return Bond Portfolios for the
time periods indicated, and then redeem all your shares at the end
of those periods. The Example also assumes that your investment
has a 5% return each year, the reinvestment of all dividends and
distributions, and each Portfolio's operating expenses remain the
same. Although your actual costs may be higher or lower, the
Example shows what your costs would be for each Portfolio based on
these assumptions.

Year 1 Year 3
-------------------------------------------------------------------
$5 $16
-------------------------------------------------------------------

The following table and example describe the fees and expenses
you may pay if you buy and hold shares of the International,
Emerging Markets and Short-Term Emerging Markets Portfolios:

Shareholder Fees (fees paid directly from your investment) None

Annual Portfolio Operating Expenses (expenses that are deducted
from Portfolio assets)

Total Annual
Advisory Administrative Portfolio Operating
Fee Fee Expenses
--------------------------------------------------------------------
0.02% 0.10% 0.12%
--------------------------------------------------------------------

Example. The Example assumes that you invest $10,000 in the
International, Emerging Markets and Short-Term Emerging Markets
Portfolios for the time periods indicated, and then redeem all
your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year, the reinvestment
of all dividends and distributions, and each Portfolio's operating
expenses remain the same. Although your actual costs may be higher
or lower, the Example shows what your costs would be for each
Portfolio based on these assumptions.

Year 1 Year 3
-------------------------------------------------------------------
$12 $39
-------------------------------------------------------------------

Distributor The Trust's Distributor is PIMCO Funds Distributors LLC, a wholly
owned subsidiary of PIMCO Advisors L.P. The Distributor, located
at 2187 Atlantic Street, Stamford, CT 06902, is a broker-dealer
registered with the Securities and Exchange Commission.

Purchases, Redemptions and Exchanges

Purchasing Shares of the Portfolios are restricted securities and are issued
Shares only in private placement transactions in accordance with
Regulation D or other applicable exemptions under the Securities
Act. This Offering Memorandum does not constitute an offer to
sell, or the solicitation of any offer to buy, any "security" to
the public within the meaning of the Securities Act.

Shares of the Portfolios are offered only to private account
clients of PIMCO, who are "accredited investors," within the
meaning of Regulation D under the Securities Act, and either (i)
"qualified purchasers," as defined for purposes of Section 3(c)(7)
of the 1940 Act, or (ii) "qualified institutional buyers," as
defined in Rule 144A(a)(1) of the Securities Act. Shares may be
offered to PIMCO and its affiliates, and to the benefit plans of
PIMCO and its affiliates. Shares of the Portfolios may be
purchased at the relevant net asset value ("NAV") without a sales
charge or other fee.

PIMCO, acting as agent for its private account clients, will
effect all purchases of shares of the Portfolios.

. 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

Offering Memorandum 16
<PAGE>

to the close of regular trading (normally 4:00 p.m., Eastern time)
on the New York Stock 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 New York Stock Exchange
will be effected at the NAV determined on the next business day.
The Trust is "open for business" on each day the New York Stock
Exchange is open for trading, which excludes the following
holidays: New Year's Day, 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.

. Other Purchase Information. Purchases of a Portfolio's shares
will be made in full and fractional shares. In the interest of
economy and convenience, certificates for shares will not be
issued.

The Trust and the Distributor each reserves the right, in its
sole discretion, to suspend the offering of shares of the
Portfolios 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.

Shares of the Portfolios are not registered or qualified for sale
in the states. Shares of the Portfolios may not be offered or sold
in any state unless an exemption from registration or
qualification is available. Investors should inquire as to whether
shares of a particular Portfolio are available for offer and sale
in the investor's state of residence.

Subject to the approval of the Trust, shares of a Portfolio may
be purchased with liquid securities that are eligible for purchase
by the Portfolio (consistent with the Portfolio'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 Portfolio as an investment. Assets
purchased by a Portfolio in such a transaction will be valued in
generally the same manner as they would be valued for purposes of
pricing the Portfolio's shares, if such assets were included in
the Portfolio's assets at the time of purchase. The Trust reserves
the right to amend or terminate this practice at any time.

Redeeming As stated above, the Portfolios' shares are restricted securities
Shares that may not be sold to investors other than "accredited
investors" within the meaning of Regulation D under the Securities
Act, unless sold pursuant to another available exemption from the
Securities Act. Shares of the Portfolios may not be assigned,
resold or otherwise transferred without the written consent of the
Trust and, if requested, an opinion of counsel acceptable to the
Trust that an exemption from registration is available. Any
attempt at a transfer to a third party in violation of this
provision shall be void. The Trust may enforce the provisions of
this paragraph, either directly or through its agents, by entering
an appropriate stop-transfer order on its books or otherwise
refusing to register or transfer or permit the registration or
transfer on its books of any purported transfer not in accordance
with these restrictions.

PIMCO, acting as agent for its private account clients, will
effect all redemptions of shares of the Portfolios.

. Timing of Redemption Requests and Share Price Calculations. A
redemption request received by the Trust or its designee prior to
the close of regular trading on the New York Stock 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 requests for Portfolio shares are effected at the NAV
per share next determined after receipt of a redemption request by
the Trust or its designee. The request must properly identify all
relevant information such as account number, redemption amount (in
dollars or shares), and the Portfolio name.

. Other Redemption Information. Redemption proceeds will
ordinarily be wired within three business days after receipt of
the redemption request, but may take up to seven business days.
Redemptions of Portfolio shares may be suspended when trading on
the New York Stock Exchange is restricted or during an emergency

17 Private Account Portfolio Series
<PAGE>

which makes it impracticable for the Portfolios 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.

The Trust agrees to redeem shares of each Portfolio solely in
cash up to the lesser of $250,000 or 1% of the Portfolio'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 Portfolio 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 Exchanges of shares of a Portfolio for shares of any other
Privilege Portfolio will be based on the respective NAVs of the shares
involved. Subject to compliance with applicable private placement
restrictions and the investment restrictions of the Portfolios,
shares of the Portfolios may be purchased by exchanging
Institutional Class shares of another series of the Trust for
shares of the Portfolios.

Shares may only be exchanged with respect to Portfolios that are
registered in an 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 Offering Memorandum and
"Taxation" in the Offering Memorandum Supplement.

How Portfolio Shares Are Priced

The net asset value ("NAV") of a Portfolio's shares is determined
by dividing the total value of a Portfolio's investments and other
assets, less any liabilities, by the total number of shares
outstanding.

For purposes of calculating NAV, portfolio securities and other
assets for which market quotes are available are stated at market
value. Market value is generally determined on the basis of last
reported sales prices, or if no sales are reported, based on
quotes obtained from a quotation reporting system, established
market makers, or pricing services. Certain securities or
investments for which daily market quotations are not readily
available may be valued, pursuant to guidelines established by the
Board of Trustees, with reference to other securities or indices.
Short-term investments having a maturity of 60 days or less are
generally valued at amortized cost. Exchange traded options,
futures and options on futures are valued at the settlement price
determined by the exchange. Other securities for which market
quotes are not readily available are valued at fair value as
determined in good faith by the Board of Trustees or persons
acting at their direction.

Investments initially valued in currencies other than the U.S.
dollar are converted to U.S. dollars using exchange rates obtained
from pricing services. As a result, the NAV of a Portfolio's
shares may be affected by changes in the value of currencies in
relation to the U.S. dollar. The value of securities traded in
markets outside the United States or denominated in currencies
other than the U.S. dollar may be affected significantly on a day
that the New York Stock Exchange is closed and an investor is not
able to purchase, redeem or exchange shares.

Portfolio shares are valued at the close of regular trading
(normally 4:00 p.m., Eastern time) (the "NYSE Close") on each day
that the New York Stock Exchange is open. For purposes of
calculating the NAV, the Portfolios normally use pricing data for
domestic equity securities received shortly after the NYSE Close
and do not normally take into account trading, clearances or
settlements that take place after the NYSE Close. Domestic fixed
income and foreign securities are normally priced using data
reflecting the earlier closing of the

Offering Memorandum 18
<PAGE>

principal markets for those securities. Information that becomes
known to the Portfolios or its agents after the NAV has been
calculated on a particular day will not generally be used to
retroactively adjust the price of a security or the NAV determined
earlier that day.

In unusual circumstances, instead of valuing securities in the
usual manner, the Portfolios may value securities at fair value or
estimate their value as determined in good faith by the Board of
Trustees, generally based upon recommendations provided by PIMCO.
Fair valuation may also be used if extraordinary events occur
after the close of the relevant market but prior to the NYSE
Close.

Portfolio Distributions

Each Portfolio distributes substantially all of its net investment
income to shareholders in the form of dividends. A shareholder
begins earning dividends on Portfolio shares the day after the
Trust receives the purchase payment. Each Portfolio intends to
declare and pay income dividends quarterly.

In addition, each Portfolio distributes any net capital gains it
earns from the sale of portfolio securities to shareholders no
less frequently than annually.

A Portfolio's dividend and capital gain distributions will
automatically be reinvested in additional shares of the Portfolio
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 Portfolio distributions.

Tax Consequences

The following information is meant as a general summary for U.S.
taxpayers. Please see the Offering Memorandum Supplement for
additional information. You should rely on your own tax adviser
for advice about the particular federal, state and local tax
consequences to you of investing in a Portfolio. Non-U.S.
shareholders should also consider the tax consequences imposed by
their domicile's tax revenue authority.

. Portfolio Distributions. Each Portfolio will distribute
substantially all of its income and gains to its shareholders
every year, and shareholders will be taxed on distributions they
receive, regardless of whether they are paid in cash or are
reinvested in additional shares of the Portfolio. If a Portfolio
declares a dividend in October, November or December but pays it
in January, you may be taxed on the dividend as if you received it
in the previous year.

You will receive a tax report each year, before February 1. The
report will tell you which dividends and redemptions must be
treated as taxable ordinary income, and which, if any, are short-
term or long-term capital gains. If a Portfolio designates a
dividend as a capital gains distribution (typically from gains
from investments that a Portfolio owned for more than 12 months),
you will be liable for tax on that dividend at the long-term
capital gains tax rate, no matter how long you have held your
shares of that Portfolio.

Portfolio distributions are taxable to shareholders even if they
are paid from income or gains earned by a Portfolio prior to a
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 Portfolio distribution will
pay full price for the shares and may receive a portion of the
investment back as a taxable distribution.

. Sales, Exchanges, and Redemptions of Portfolio Shares. You
will generally have a capital gain or loss if you dispose of your
Portfolio shares by redemption, exchange or sale. The amount of
the gain or loss and the rate of tax will depend primarily upon
how much you paid for the shares, how much you sell them for, and
how long you hold them. When a shareholder exchanges shares of a
Portfolio for shares of another Portfolio,

19 Private Account Portfolio Series
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the transaction will be treated as a sale of the exchanged
Portfolio shares, and any gain on those shares will generally be
subject to federal income tax.

. Backup Withholding. Each Portfolio may be required to withhold
U.S. federal income tax at the rate of 31% of all taxable
distributions payable to you if you fail to provide the Portfolio
with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS
that you are subject to backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited
against your U.S. federal income tax liability.

Investment Restrictions

Fundamental Each Portfolio's investment objective as set forth in the
Investment "Investment Objectives and Strategies" section, together with the
Restrict- investment restrictions set forth below, are fundamental policies
ions of the Portfolios and may not be changed with respect to a
Portfolio without shareholder approval by vote of a majority of
the outstanding shares of that Portfolio.

(1) A Portfolio may not concentrate its investments in a
particular industry, as that term is used in the Investment
Company Act of 1940, as amended, and as interpreted, modified,
or otherwise permitted by regulatory authority having
jurisdiction, from time to time.

(2) The Short-Term, Short-Term II, Mortgage, Mortgage II, and High
Yield Portfolios, may not, with respect to 75% of its assets,
purchase the securities of any issuer, except securities
issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities, if, as a result, (i) more than
5% of the Portfolio's assets would be invested in the
securities of that issuer, or (ii) the Portfolio would hold
more than 10% of the outstanding voting securities of that
issuer;

(3) A Portfolio may not 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;

(4) A Portfolio may not purchase or sell commodities or
commodities contracts or oil, gas or mineral programs. This
restriction shall not prohibit a Portfolio, subject to
restrictions described in this Offering Memorandum and
elsewhere in the Offering Memorandum Supplement, 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 and commodities laws;

(5) A Portfolio may not borrow money or issue any senior security,
except as permitted under the 1940 Act, and as interpreted,
modified, or otherwise permitted by regulatory authority
having jurisdiction, from time to time;

(6) A Portfolio may not make loans except as permitted under the
1940 Act, and as interpreted, modified, or otherwise permitted
by regulatory authority having jurisdiction, from time to
time; and

(7) A Portfolio may not 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.

Notwithstanding the foregoing, it is a fundamental policy of each
Portfolio that it may elect, in the future, to pursue its
investment objective by investing in one or more underlying
investment companies or vehicles that in turn invest in the
securities described in the "Investment Objectives and Strategies"
section and whose shares may be offered to other parties as well
as the Portfolio.

Offering Memorandum 20
<PAGE>

Non- Each Portfolio is also subject to the following non-fundamental
Fundamental investment restrictions and policies (which may be changed without
Investment shareholder approval) relating to the investment of its assets and
Restrict- activities.
iond
(1) A Portfolio may not invest more than 15% of its net assets
(taken at market value at the time of the investment) in
illiquid securities; and

(2) A Portfolio may not invest in any combination of interest
only, principal only or inverse floating rate securities,
except that the Mortgage and Mortgage II Portfolios may invest
up to 5% of their assets in such securities.

Portfolio Transactions and Brokerage

Investment Investment decisions for the Trust and for the other investment
Decisions advisory clients of PIMCO are made with a view to achieve the
and investment objectives of each Portfolio. Investment decisions are
Portfolio the product of many factors, including the suitability of the
Trans- investment for the particular client involved (as well as the
actions Trust). Some securities considered for investments by the
Portfolios may also be appropriate for other clients served by
PIMCO. 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 Portfolio
and one or more of these clients served by PIMCO is considered at
or about the same time, transactions in such securities will be
allocated among the Portfolio and clients in a manner deemed fair
and reasonable by PIMCO.

PIMCO may aggregate orders for the Portfolios with simultaneous
transactions entered into on behalf of other clients of PIMCO 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 such cases, each day's transactions in the security
are, insofar as possible, averaged as to price and allocated
between PIMCO's clients in an equitable manner and in accordance
with the amount being purchased or sold by each client. 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 There is generally no stated commission in the case of fixed
and income securities, which are traded in the over-the-counter
Research markets, but the price paid by a Portfolio usually includes an
Services undisclosed dealer commission or mark-up. In underwritten
offerings, the price paid by a Portfolio 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 a Portfolio 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 non-U.S. securities generally
involve the payment of fixed brokerage commissions, which are
generally higher than those in the United States.

PIMCO places all orders for the purchase and sale of portfolio
securities, options and futures contracts for the relevant
Portfolio and buys and sells such securities, options and futures
for the Trust through a substantial number of brokers and dealers.
In so doing, PIMCO 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, PIMCO, having in mind the Trust's best interests,
considers all factors it deems relevant, including 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.

21 Private Account Portfolio Series
<PAGE>

PIMCO places orders for the purchase and sale of portfolio
investments for the Portfolios' accounts with brokers or dealers
selected by it in its discretion. When purchasing or selling
securities for the Portfolios, PIMCO will seek the best price and
execution of the Portfolios' orders. In doing so, a Portfolio may
pay higher commission rates than the lowest available when PIMCO
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. PIMCO 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.

PIMCO may receive research services from broker-dealers with
which PIMCO places the Trust's portfolio transactions. PIMCO 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 Portfolio. These
services 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 PIMCO 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 PIMCO and its affiliates receive such services.

As permitted by the Securities Exchange Act of 1934, the Trust
may pay a broker-dealer that provides brokerage and research
services to PIMCO a commission for effecting a securities
transaction for the Trust in excess of the commission that another
broker-dealer would have charged for effecting the same
transaction.

Subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine,
PIMCO 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 The length of time a Portfolio has held a particular security is
Turnover not generally a consideration in investment decisions. A change in
the securities held by a Portfolio is known as "portfolio
turnover." PIMCO manages the Portfolios without regard generally
to restrictions on portfolio turnover. Each Portfolio may engage
in frequent and active trading of portfolio securities to achieve
its investment objective, particularly during periods of volatile
market movements. The use of certain derivative instruments with
relatively short maturities may tend to exaggerate the portfolio
turnover rate for some of the Portfolios. 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
Portfolio, 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 Portfolio, the higher these transaction
costs borne by the Portfolio 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 trading costs and tax effects
associated with portfolio turnover may adversely effect the
Portfolio's performance.

The portfolio turnover rate of a Portfolio 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
Portfolio 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.

Offering Memorandum 22
<PAGE>

Characteristics and Risks of Securities and Investment Techniques

This section provides additional information about some of the
principal investments and related risks of the Portfolios
described under "Summary Information" above. It also describes
characteristics and risks of additional securities and investment
techniques that may be used by the Portfolios 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 Offering Memorandum does not attempt to disclose
all of the various types of securities and investment techniques
that may be used by the Portfolios. As with any mutual fund,
investors in the Portfolios rely on the professional investment
judgement and skill of PIMCO and the portfolio managers. Please
see "Investment Objectives and Policies" in the Offering
Memorandum Supplement 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
Portfolios.

Securities The Portfolios in this Offering Memorandum seek maximum total
Selection return. The total return sought by a Portfolio consists of both
income earned on a Portfolio's investments and capital
appreciation, if any, arising from increases in the market value
of a Portfolio's holdings. Capital appreciation of fixed income
securities generally results from decreases in market interest
rates or improving credit fundamentals for a particular market
sector or security.

In selecting securities for a Portfolio, PIMCO develops an
outlook for interest rates, currency exchange rates and the
economy; analyzes credit and call risks, and uses other security
selection techniques. The proportion of a Portfolio's assets
committed to investment in securities with particular
characteristics (such as quality, sector, interest rate or
maturity) varies based on PIMCO's outlook for the U.S. economy and
the economies of other countries in the world, the financial
markets and other factors.

U.S. U.S. Government Securities are obligations of, or guaranteed by,
Government the U.S. Government, its agencies or government-sponsored
Securities enterprises. 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.

Municipal Municipal bonds are generally issued by states and local
Bonds 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. The types of municipal bonds in which the
Portfolios may invest include municipal lease obligations. The
Portfolios may also invest in securities issued by entities whose
underlying assets are municipal bonds.

Mortgage- Each Portfolio may invest in mortgage- or other asset-backed
Related securities. Mortgage-related securities include mortgage pass-
and Other through securities, collateralized mortgage obligations ("CMOs"),
Asset- commercial mortgage-backed securities, mortgage dollar rolls, CMO
Backed residuals, stripped mortgage-backed securities ("SMBSs") and other
Securities 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 Portfolio 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

23 Private Account Portfolio Series
<PAGE>

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
Portfolio's yield to maturity from these securities. A Portfolio
may not invest in any combination of IO, PO, or inverse floater
securities, except that the Mortgage and Mortgage II Portfolios
may invest up to 5% of their assets in such securities. The
Portfolios may invest in other asset-backed securities that have
been offered to investors.

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

Corporate Corporate debt securities are subject to the risk of the issuer's
Debt inability to meet principal and interest payments on the
Securities 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. Corporate debt securities may include forms of
preferred stock, including dividend received deduction preferred
stocks or other tax-advantaged securities.

High Securities rated lower than Baa by Moody's Investors Service, Inc.
Yield ("Moody's") or lower than BBB by Standard & Poor's Ratings
Securities 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 this Offering Memorandum 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 Portfolio will not necessarily sell a security when
its rating is reduced below its rating at the time of purchase.
PIMCO does not rely solely on credit ratings, and develops its own
analysis of issuer credit quality.

Offering Memorandum 24
<PAGE>

A Portfolio may purchase unrated securities (which are not rated
by a rating agency) if PIMCO determines that the security is of
comparable quality to a rated security that the Portfolio 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 Portfolio invests in
high yield and/or unrated securities, the Portfolio's success in
achieving its investment objective may depend more heavily on the
portfolio manager's creditworthiness analysis than if the
Portfolio invested exclusively in higher-quality and rated
securities.

Variable Variable and floating rate securities provide for a periodic
and adjustment in the interest rate paid on the obligations. Each
Floating Portfolio may invest in floating rate debt instruments
Rate ("floaters") and engage in credit spread trades. While floaters
Securities provide a certain degree of protection against rises in interest
rates, a Portfolio will participate in any declines in interest
rates as well. The Mortgage and Mortgage II Portfolios may 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. The Mortgage and
Mortgage II Portfolios may not invest more than 5% of its assets
in any combination of inverse floater, interest only, or principal
only securities.

Inflation- Inflation-indexed bonds are fixed income securities whose
Indexed principal value is periodically adjusted according to the rate of
Bonds 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.

Event- Each Portfolio may invest in "event-linked bonds," which are fixed
Linked income securities for which the return of principal and payment of
Bonds interest is contingent on the non-occurrence of a specific
"trigger" event, such as a hurricane, earthquake, or other
physical or weather-related phenomenon. Some event-linked bonds
are commonly referred to as "catastrophe bonds." If a trigger
event occurs, a Portfolio may lose a portion or all of its
principal invested in the bond. Event-linked 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. Event-linked bonds may also
expose the Portfolio to certain unanticipated risks including
credit risk, adverse regulatory or jurisdictional interpretations,
and adverse tax consequences. Event-linked bonds may also be
subject to liquidity risk.

Convertible Each Portfolio may invest in convertible securities. Convertible
and securities are generally preferred stocks and other securities,
Equity including fixed income securities and warrants, that are
Securities 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.

25 Private Account Portfolio Series
<PAGE>

Convertible securities may be lower-rated securities subject to
greater levels of credit risk. A Portfolio may be forced to
convert a security before it would otherwise choose, which may
have an adverse effect on the Portfolio's ability to achieve its
investment objective.

While the Portfolios 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 Portfolio may consider
equity securities or convertible securities to gain exposure to
such investments.

Equity securities generally have greater price volatility than
fixed income securities. The market price of equity securities
owned by a Portfolio may go up or down, sometimes rapidly or
unpredictably. Equity securities may decline in value due to
factors affecting equity securities markets generally or
particular industries represented in those markets. The value of
an equity security may also 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.

Foreign Investing in foreign securities involves special risks and
(Non-U.S.) considerations not typically associated with investing in U.S.
Securities securities. Shareholders should consider carefully the substantial
risks involved for Portfolios 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 payments position. The
securities markets, 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 Portfolios 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. Certain of the Portfolios may
invest primarily in securities of issuers based in countries with
developing (or "emerging market") economies. 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 Portfolio. 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.

Offering Memorandum 26
<PAGE>

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 Portfolio 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 Portfolio 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 Portfolio may be subject to
restructuring arrangements or to requests for new credit, which
may cause the Portfolio to suffer a loss of interest or principal
on any of its holdings.

Foreign A Portfolio that invests directly in foreign currencies or in
(Non- securities that trade in, or receive revenues in, foreign
U.S.) currencies will be subject to currency risk. Foreign currency
Currencies 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,
uncertainty surrounds the introduction of the euro (a common
currency unit for the European Union) and the effect it may have
on the value of European currencies as well as securities
denominated in local European currencies. These and other
currencies in which the Portfolios' assets are denominated may be
devalued against the U.S. dollar, resulting in a loss to the
Portfolios.

. Foreign Currency Transactions. Portfolios 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 Portfolio'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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio to benefit from favorable
fluctuations in relevant foreign currencies. A Portfolio 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 Portfolio 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.

27 Private Account Portfolio Series
<PAGE>

Repurchase Each Portfolio may enter into repurchase agreements, in which the
Agreements Portfolio purchases a security from a bank or broker-dealer and
agrees to repurchase the security at the Portfolio's cost plus
interest within a specified time. If the party agreeing to
repurchase should default, the Portfolio 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 Each Portfolio may enter into reverse repurchase agreements and
Repurchase dollar rolls, subject to a Portfolio's limitations on borrowings.
Agreements, A reverse repurchase agreement or dollar roll involves the sale of
Dollar a security by a Portfolio and its agreement to repurchase the
Rolls And instrument at a specified time and price, and may be considered a
Other form of borrowing for some purposes. A Portfolio will segregate
Borrowings assets determined to be liquid by PIMCO in accordance with
procedures established by the Board of Trustees or otherwise cover
its obligations under reverse repurchase agreements, dollar rolls,
and other borrowings. Reverse repurchase agreements, dollar rolls
and other forms of borrowings may create leveraging risk for a
Portfolio.

Each Portfolio may borrow money to the extent permitted under the
Investment Company Act of 1940 ("1940 Act"), as amended. This
means that, in general, a Portfolio may borrow money from banks
for any purpose on a secured basis in an amount up to 1/3 of the
Portfolio's total assets. A Portfolio may also borrow money for
temporary administrative purposes on an unsecured basis in an
amount not to exceed 5% of the Portfolio's total assets.

Derivatives Each Portfolio 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 in which the Portfolios may invest include, but are
not limited to, options contracts, futures contracts, options on
futures contracts and swap agreements. Each Portfolio may invest
some or all of its assets in derivative instruments. The
Portfolios may sometimes use derivatives as part of a strategy
designed to reduce exposure to other risks, such as interest rate
or currency risk, or as a substitute for taking a position in the
underlying asset. A portfolio manager may decide not to employ any
of these strategies and there is no assurance that any derivatives
strategy used by a Portfolio will succeed. A description of these
and other derivative instruments that the Portfolios may use are
described under "Investment Objectives and Policies" in the
Offering Memorandum Supplement.

A Portfolio's use of derivative instruments involves risks
different from, and possibly greater than, the risks associated
with investing directly in securities and other more traditional
investments. Some of the important risk factors relating to
derivative instruments that may be used by the Portfolios include
liquidity risk, interest rate risk, market risk, credit risk,
management risk and leverage risk, each of which is discussed in
"Summary of Principal Risks." A further description of various
risks associated with particular derivative instruments is
included in "Investment Objectives and Policies" in the Offering
Memorandum Supplement. The following provides a more general
discussion of important risk factors relating to all derivative
instruments that may be used by the Portfolios.

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.

Offering Memorandum 28
<PAGE>

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.

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 Portfolio uses
derivatives for leverage, investments in that Portfolio will tend
to be more volatile, resulting in larger gains or losses in
response to market changes. To limit leverage risk, each Portfolio
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
Portfolio will engage in derivatives transactions at any time or
from time to time. A Portfolio'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 Portfolio'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 Portfolio, the Portfolio 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 Portfolio investments. A
Portfolio may also have to buy or sell a security at a
disadvantageous time or price because the Portfolio 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 Portfolio. 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 Portfolio's use of derivatives
may cause the Portfolio to realize higher amounts of short-term
capital gains (generally taxed at ordinary income tax rates) than
if the Portfolio had not used such instruments.

Delayed The Portfolios may also enter into, or acquire participations in,
Funding delayed funding loans and revolving credit facilities, in which a
Loans and lender agrees to make loans up to a maximum amount upon demand by
Revolving the borrower during a specified term. These commitments may have
Credit the effect of requiring a Portfolio to increase its investment in
Facilities 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 Portfolio 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.

29 Private Account Portfolio Series
<PAGE>

When- Each Portfolio may purchase securities which it is eligible to
Issued, purchase on a when-issued basis, may purchase and sell such
Delayed securities for delayed delivery and may make contracts to purchase
Delivery such securities for a fixed price at a future date beyond normal
and settlement time (forward commitments). When-issued transactions,
Forward delayed delivery purchases and forward commitments involve a risk
Commitment of loss if the value of the securities declines prior to the
Trans- settlement date. This risk is in addition to the risk that the
actions Portfolio's other assets will decline in the value. Therefore,
these transactions may result in a form of leverage and increase a
Portfolio's overall investment exposure. Typically, no income
accrues on securities a Portfolio has committed to purchase prior
to the time delivery of the securities is made, although a
Portfolio may earn income on securities it has segregated to cover
these positions.

Investment Each Portfolio may invest up to 10% of its assets in securities of
in Other other investment companies, such as closed-end management
Investment investment companies, or in pooled accounts or other investment
Companies vehicles which invest in foreign markets; provided, however, that
each Portfolio may invest in money market funds advised by PIMCO
or its affiliates to the extent permitted by any regulatory
authority having jurisdiction.

Subject to the restrictions and limitations of the 1940 Act, each
Portfolio may, in the future, elect to pursue its investment
objective by investing in one or more underlying investment
vehicles or companies that have substantially similar investment
objectives, policies and limitations as the Portfolio.

Short Each Portfolio may make short sales as part of its overall
Sales 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. For these purposes, a Portfolio 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 Portfolio 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
Portfolio. A Portfolio 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.

Illiquid Each Portfolio may invest up to 15% of its net assets in illiquid
Securities 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 Portfolio has valued the
securities. Restricted securities, i.e., securities subject to
legal or 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.

Loans of For the purpose of achieving income, each Portfolio may lend its
Portfolio portfolio securities to brokers, dealers, and other financial
Securities institutions provided a number of conditions are satisfied,
including that the loan is fully collateralized. Please see
"Investment Objectives and Policies" in the Offering Memorandum
Supplement for details. When a Portfolio lends portfolio
securities, its investment performance will continue to reflect
changes in the value of the securities loaned, and the Portfolio
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 Portfolio may
pay lending fees to a party arranging the loan.

Offering Memorandum 30
<PAGE>

Temporary For temporary or defensive purposes, each Portfolio may invest
Defensive without limit in U.S. debt securities, including taxable
Strategies securities and short-term money market securities, when PIMCO
deems it appropriate to do so. When a Portfolio engages in such
strategies, it may not achieve its investment objective.

Changes The investment objective of each Portfolio is fundamental and may
in not be changed without shareholder approval. Unless otherwise
Investment stated, all other investment policies of the Portfolios may be
Objectives changed by the Board of Trustees without shareholder approval.
and
Policies

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

Other The Portfolios may invest in other types of securities and use a
Investments variety of investment techniques and strategies which are not
and described in this Offering Memorandum. These securities and
Techniques techniques may subject the Portfolios to additional risks. Please
see the Offering Memorandum Supplement for additional information
about the securities and investment techniques described in this
Offering Memorandum and about additional securities and techniques
that may be used by the Portfolios.

31 Private Account Portfolio Series
<PAGE>

Appendix A
Description of Securities Ratings

A Portfolio's investments may range in quality from securities
rated in the lowest category in which the Portfolio is permitted
to invest to securities rated in the highest category (as rated by
Moody's or S&P or, if unrated, determined by PIMCO to be of
comparable quality). The percentage of a Portfolio's assets
invested in securities in a particular rating category will vary.
The following terms are generally used to describe the credit
quality of fixed income securities:

High Quality Debt Securities are those rated in one of the two
highest rating categories (the highest category for commercial
paper) or, if unrated, deemed comparable by PIMCO.

Investment Grade Debt Securities are those rated in one of the
four highest rating categories or, if unrated, 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 deemed predominately speculative with respect
to the issuer's ability to repay principal and interest.

Following is a description of Moody's and S&P's rating categories
applicable to fixed income securities.

Moody's Corporate and Municipal Bond Ratings
Investors
Service, Aaa: Bonds which are rated Aaa are judged to be of the best
Inc. 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.

Offering Memorandum 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.

Short- There are four rating categories for short-term municipal bonds
Term that define an investment grade situation, which are listed below.
Municipal In the case of variable rate demand obligations (VRDOs), a two-
Bond component rating is assigned. The first element represents an
Ratings evaluation of the degree of risk associated with scheduled
principal and interest payments, and the other represents an
evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of
VRDOs is designated as VMIG. When either the long- or short-term
aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1. MIG ratings terminate at the retirement of
the obligation while VMIG rating expiration will be a function of
each issue's specific structural or credit features.

MIG 1/VMIG 1: This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market
for refinancing.

MIG 2/VMIG 2: This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.

A-2 Private Account Portfolio Series
<PAGE>

MIG 3/VMIG 3: This designation denotes favorable quality. All
security elements are accounted for but there is lacking the
undeniable strength of the preceding grades. Liquidity and cash
flow protection may be narrow and market access for refinancing is
likely to be less well established.

MIG 4/VMIG 4: This designation denotes adequate quality.
Protection commonly regarded as required of an investment security
is present and although not distinctly or predominantly
speculative, there is specific risk.

SG: This designation denotes speculative quality. Debt
instruments in this category lack margins of protection.

Standard Corporate and Municipal Bond Ratings
& Poor's
Ratings Investment Grade
Services
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

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.

Offering Memorandum A-3
<PAGE>

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 An S&P commercial paper rating is a current assessment of the
Paper likelihood of timely payment of debt having an original maturity
Rating of no more than 365 days. Ratings are graded into several
Definitions 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-4 Private Account Portfolio Series
<PAGE>

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.

Offering Memorandum A-5
<PAGE>

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Private INVESTMENT ADVISER AND ADMINISTRATOR
Account PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA
Portfolio 92660
Series

-------------------------------------------------------------------
CUSTODIAN
State Street Bank & Trust Co., 801 Pennsylvania, Kansas City, MO
64105

-------------------------------------------------------------------
TRANSFER AGENT
National Financial Data Services, 330 W. 9th Street, 4th Floor,
Kansas City, MO 64105

-------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105

-------------------------------------------------------------------
LEGAL COUNSEL
Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C.
20006

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The Trust's Offering Memorandum Supplement to shareholders includes
additional information about the Portfolios. The Offering Memorandum Supplement
is incorporated by reference into this Offering Memorandum, which means it is
part of this Offering Memorandum for legal purposes. Additional information
about the Portfolios' investments will be available in each Portfolio's annual
report and semi-annual report to shareholders. Each Portfolio's annual report
will discuss the market conditions and investment strategies that significantly
affected each Portfolio's performance during its fiscal year.

You may obtain free copies of any of these materials, request other
information about a Portfolio, or make inquiries by writing to:

PIMCO Funds
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660

You may review and copy information about the Trust, including the Offering
Memorandum Supplement, at the Securities and Exchange Commission's public
reference room in Washington, D.C. You may call the Commission at 1-202-942-
8090 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 obtain copies of this information, with
payment of a duplication fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-0102, or by electronic request at
[email protected].
<PAGE>

The Portfolios issue shares only in accordance with Regulation D or other
applicable exemptions under the Securities Act. This Offering Memorandum is not
an offer to sell, or a solicitation of any offer to buy, any security to the
public within the meaning of the Securities Act.

P I M C O
FUNDS

PIMCO Funds

840 Newport Center Drive
Suite 300
Newport Beach, CA 92660

Investment Company Act file no. 811-5028
<PAGE>

PIMCO Funds:
Pacific Investment Management Series

Offering Memorandum Supplement:
PIMCO Funds: Private Account Portfolio Series

This Offering Memorandum Supplement (the "Supplement") should be read in
conjunction with the Offering Memorandum of the Private Account Portfolios
Series of PIMCO Funds: Pacific Investment Management Series (the "Trust"), dated
June 1, 2000, as supplemented from time to time. Each Portfolio issues its
shares only in private placement transactions in accordance with Regulation D or
other applicable exemptions under the Securities Act of 1933, as amended (the
"Securities Act"). This Supplement is not an offer to sell, or a solicitation
of any offer to buy, any security to the public within the meaning of the
Securities Act.

Shares of the Portfolios may be purchased only by clients of Pacific Investment
Management Company ("PIMCO") who maintain separately managed private accounts,
and who are also "accredited investors," as defined in Regulation D under the
Securities Act, and either (i) "qualified purchasers," as defined for purposes
of Section 3(c)(7), or (ii) "qualified institutional buyers," as defined in Rule
144A(a)(1) of the Securities Act.

Shares of the Portfolios are subject to restrictions on transferability and
resale and may not be transferred or resold except as permitted under the
Securities Act. Shares may be redeemed in accordance with the procedures set
forth in the Offering Memorandum.

This Supplement is intended for use only by the person to whom it has been
issued. Reproduction of this Supplement is prohibited.

June 1, 2000
<PAGE>

TABLE OF CONTENTS
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INVESTMENT OBJECTIVES AND POLICIES....................................... 3

Municipal Bonds..................................................... 3
Mortgage-Related and Other Asset-Backed Securities.................. 8
Bank Obligations.................................................... 12
Loan Participations................................................. 13
Corporate Debt Securities........................................... 15
Borrowing........................................................... 15
Convertible Securities.............................................. 16
High Yield Securities ("Junk Bonds")................................ 17
Variable and Floating Rate Securities............................... 18
Participation on Creditors Committees............................... 18
Foreign Securities.................................................. 18
Foreign Currency Transactions....................................... 20
Foreign Currency Exchange-Related Securities........................ 21
Delayed Funding Loans and Revolving Credit Facilities............... 23
Loans of Portfolio Securities....................................... 23
Short Sales......................................................... 23
When-Issued, Delayed Delivery and Forward Commitment Transactions... 24
Derivative Instruments.............................................. 24
Inflation-Indexed Bonds............................................. 32
Hybrid Instruments.................................................. 33
Event-Linked Bonds.................................................. 33
Warrants to Purchase Securities..................................... 34
Illiquid Securities................................................. 34

INVESTMENT RESTRICTIONS.................................................. 34

MANAGEMENT OF THE TRUST.................................................. 36

Trustees and Officers............................................... 36
Compensation Table.................................................. 40
Investment Adviser.................................................. 41
Portfolio Administrator............................................. 42

DISTRIBUTION OF TRUST SHARES............................................. 43

Distributor......................................................... 43
Purchases, Redemptions and Exchanges................................ 44

NET ASSET VALUE.......................................................... 45

TAXATION................................................................. 45

Distributions....................................................... 47
Sales of Shares..................................................... 47
Backup Withholding.................................................. 47
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Options, Futures and Forward Contracts, and Swap Agreements......... 48
Short Sales......................................................... 48
Passive Foreign Investment Companies................................ 49
Foreign Currency Transactions....................................... 49
Foreign Taxation.................................................... 49
Original Issue Discount and Market Discount......................... 50
Constructive Sales.................................................. 51
Non-U.S. Shareholders............................................... 51
Other Taxation...................................................... 52

OTHER INFORMATION........................................................ 52

Capitalization...................................................... 52
Performance Information............................................. 52
Calculation of Yield................................................ 53
Calculation of Total Return......................................... 54
Voting Rights....................................................... 57
Code of Ethics...................................................... 59
Custodian, Transfer Agent and Dividend Disbursing Agent............. 59
Independent Accountants............................................. 60
Counsel............................................................. 60
Financial Statements................................................ 60

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THE TRUST

PIMCO Funds ("the Trust") is an open-end management investment company
("mutual fund") currently consisting of forty-two separate investment
portfolios, thirteen of which are described in this Supplement (the
"Portfolios"): the PIMCO Short-Term Portfolio; the PIMCO Short-Term Portfolio
II; the PIMCO U.S. Government Sector Portfolio; the PIMCO U.S. Government Sector
Portfolio II; the PIMCO Mortgage Portfolio; the PIMCO Mortgage Portfolio II; the
PIMCO Investment Grade Corporate Portfolio; the PIMCO High Yield Portfolio; the
PIMCO Municipal Sector Portfolio; the PIMCO International Portfolio; the PIMCO
Emerging Markets Portfolio; the PIMCO Short-Term Emerging Markets Portfolio; and
the PIMCO Real Return Bond Portfolio. Each Portfolio is registered under the
Investment Company Act of 1940, as amended (the "1940 Act").

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and general investment policies of each Portfolio
are described in the Offering Memorandum. Additional information concerning the
characteristics of certain of the Portfolios' investments is set forth below.

Municipal Bonds

Each Portfolio, particularly the PIMCO Municipal Sector Portfolio, may
invest in securities issued by states, municipalities and other political
subdivisions, agencies, authorities and instrumentalities of states and multi-
state agencies or authorities.

The PIMCO Municipal Sector Portfolio may, from time to time, invest more
than 25% of its assets in Bonds of issuers in California and New York, and, if
so, will be subject to the California and New York State specific risk discussed
in the "Summary of Risks" section of the Offering Memorandum and in this
"Municipal Bonds" section of this Offering Memorandum Supplement, but the
Portfolio does not have any present intention to invest more than that amount in
any other state.

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. Specifically, California and New York Municipal
Bonds generally are issued by or on behalf of the State of California and New
York, respectively, and their political subdivisions and financing authorities,
and local governments. The Municipal Bonds that the PIMCO Municipal Sector
Portfolio 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.

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The PIMCO Municipal Sector Portfolio 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 Sector Portfolio will 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 Sector
Portfolio may also purchase unrated lease obligations if determined by the
Adviser to be of comparable quality to rated securities in which the Portfolio
is permitted to invest.

The PIMCO Municipal Sector Portfolio 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
Sector Portfolio may not invest more than 15% of its net assets in illiquid
securities, including unmarketable private placements.

Some longer-term Municipal Bonds give the investor the right to "put" or
sell the security at par (face value) within a specified number of days
following the investor's request-usually one to seven days. This demand feature
enhances a security's liquidity by shortening its effective maturity and enables
it to trade at a price equal to or very close to par. If a demand feature
terminates prior to being exercised, the PIMCO Municipal Sector Portfolio would
hold the longer-term security, which could experience substantially more
volatility.

The PIMCO Municipal Sector Portfolio 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 Sector Portfolio 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 Sector
Portfolio will not invest more than 5% of its net assets in municipal warrants.

The PIMCO Municipal Sector Portfolio 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.

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The PIMCO Municipal Sector Portfolio 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 Sector Portfolio will not invest more than 10% of its total assets in
Residual Interest Bonds.

The PIMCO Municipal Sector Portfolio 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 PIMCO Municipal Sector Portfolio 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 Sector Portfolio may purchase and sell portfolio
investments to take advantage of changes or anticipated changes in yield
relationships, markets or economic conditions. The PIMCO Municipal Sector
Portfolio may also sell Municipal Bonds due to changes in the Adviser's
evaluation of the issuer or cash needs resulting from redemption requests for
Portfolio 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 Portfolio'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.

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 Portfolio's Municipal Bonds in the same manner. In
particular, the PIMCO Municipal Sector Portfolio are subject to the risks
inherent in concentrating investment in a particular state or region. The
following summarizes information drawn from official statements, and other
public documents available relating to issues potentially affecting securities
offerings of the states of California and New York. PIMCO has not independently
verified the information, but has no reason to believe that it is not correct.

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California. The PIMCO Municipal Sector Portfolio Fund may concentrate its
investments in California municipal bonds, the Portfolio may be particularly
affected by political, economic or regulatory developments affecting the ability
of California issuers to pay interest or repay principal. Provisions of the
California Constitution and State statutes which limit the taxing and spending
authority of California governmental entities may impair the ability of
California issuers to maintain debt service on their obligations. Future
California political and economic developments, constitutional amendments,
legislative measures, executive orders, administrative regulations, litigation
and voter initiatives could have an adverse effect on the debt obligations of
California issuers.

Certain debt obligations held by the PIMCO Municipal Sector Portfolio may
be obligations of issuers which rely in whole or in substantial part on
California state revenues for the continuance of their operations and payment of
their obligations. Whether and to what extent the California Legislature will
continue to appropriate a portion of the State's General Fund to counties,
cities and their various entities, is not entirely certain. To the extent local
entities do not receive money from the State to pay for their operations and
services, their ability to pay debt service on obligations held by the PIMCO
Municipal Sector Portfolio Fund may be impaired.

Certain tax-exempt securities in which the PIMCO Municipal Sector Portfolio
may invest may be obligations payable solely from the revenues of specific
institutions, or may be secured by specific properties, which are subject to
provisions of California law which could adversely affect the holders of such
obligations. For example, the revenues of California health care institutions
may be subject to state laws, and California law limits the remedies of a
creditor secured by a mortgage or deed of trust on real property.

California is the most populous state in the nation with a total population
estimated at 32.9 million. The State now comprises 12.3% of the nation's
population and 12.5% of its total personal income. Its economy is broad and
diversified with major concentrations in high technology research and
manufacturing, aerospace and defense-related manufacturing, trade,
entertainment, real estate, and financial services. After experiencing strong
growth throughout much of the 1980s, from 1990-1993 the State suffered through a
severe recession, the worst since the 1930's, heavily influenced by large
cutbacks in defense/aerospace industries and military base closures and a major
drop in real estate construction. California's economy has been recovering and
growing steadily stronger since the start of 1994, to the point where the
State's economic growth is outpacing the rest of the nation. The unemployment
rate, while still higher than the national average, fell to an average of 5.9%
in 1998, compared to over 10% at the worst of the recession. California's
economic recovery from the recession is continuing at a strong pace. Recent
economic reports indicate that, while the rate of economic growth in California
is expected to moderate over the next year, the increases in employment and
income may exceed those of the nation as a whole. The unsettled financial
situation occurring in certain Asian economies, and its spillover effect
elsewhere, may adversely affect the State's export-related industries and,
therefore, the State's rate of economic growth.

Revenue bonds represent both obligations payable from State revenue-
producing enterprises and projects, which are not payable from the General Fund,
and conduit obligations payable only from revenues paid by private users of
facilities financed by such revenue bonds. Such enterprises and projects
include transportation projects, various public works and exposition projects,
educational facilities (including the California State University and University
of California systems), housing, health facilities, and pollution control
facilities.

In years past, because of the State's budget problems, the State's General
Obligation bonds were downgraded. In 1996, however, citing California's
improving economy and budget situation, Fitch and S&P raised their ratings from
A to A+. In October, 1997, Fitch raised its rating from A+ to AA-referring to
the State's fundamental strengths, the extent of its economic recovery and the
return of financial stability. In October 1998, Moody's raised its rating from
A1 to Aa3 citing the State's continuing economic recovery and a number of
actions taken to improve the State's credit condition, including the

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rebuilding of cash and budget reserves. There is no assurance that a particular
rating will continue for any given period of time or that any such rating will
not be revised downward or withdrawn entirely if, in the judgment of the agency
originally establishing the rating, circumstances so warrant. A downward
revision or withdrawal of such ratings, or either of them, may have an effect on
the market price of the State Municipal Obligations in which the California
Intermediate Municipal Bond Fund invests.

The State is party to numerous legal proceedings, many of which normally
occur in governmental operations and which, if decided against the State, might
require the State to make significant future expenditures or impair future
revenue sources.

Constitutional and statutory amendments as well as budget developments may
affect the ability of California issuers to pay interest and principal on their
obligations. The overall effect may depend upon whether a particular California
tax-exempt security is a general or limited obligation bond and on the type of
security provided for the bond. It is possible that other measures affecting
the taxing or spending authority of California or its political subdivisions may
be approved or enacted in the future.

New York. Because the PIMCO Municipal Sector Portfolio may concentrate its
investments in New York tax-exempt bonds, the Fund may be affected significantly
by economic or regulatory developments affecting the ability of New York tax-
exempt issuers to pay interest or repay principal. Investors should be aware
that certain issuers of New York tax-exempt securities have experienced serious
financial difficulties in recent years. A reoccurrence of these difficulties
may impair the ability of certain New York issuers to maintain debt service on
their obligations.

The economic and financial condition of the State also may be affected by
various financial, social, economic and political factors. Such factors can be
very complex, may vary from year to year and are frequently the result of
actions taken not only by the State and its agencies and instrumentalities, but
also by entities, such as the Federal government, that are not under the control
of the State.

The fiscal stability of New York State is related to the fiscal stability
of the State's municipalities, its agencies and authorities (which generally
finance, construct and operate revenue-producing public benefit facilities).
This is due in part to the fact that agencies, authorities and local governments
in financial trouble often seek State financial assistance. The experience has
been that if New York City or any of the agencies or authorities suffers serious
financial difficulty, both the ability of the State, the City, the State's
political subdivisions, the agencies and the authorities to obtain financing in
the public credit markets and the market price of outstanding New York tax-
exempt securities are adversely affected.

The New York state economy has continued to expand, but growth remains
somewhat slower than in the nation overall. Although the State has added
approximately 400,000 jobs since late 1992, employment growth in the State has
been hindered during recent years by significant cutbacks in the computer and
instrument manufacturing, utility, defense and banking industries.

In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy and
actions of the federal government have helped to create projected budget gaps
for the State. These gaps result from a significant disparity between recurring
revenues and the costs of maintaining or increasing the level of support for
State programs. To address a potential imbalance in any given fiscal year, the
State would be required to take actions to increase receipts and/or reduce
disbursements as it enacts the budget for that year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
There can be no assurance, however, that the Legislature will enact the
Governor's proposals or that the State's actions will be sufficient to preserve
budgetary balance in a given fiscal year or to align recurring receipts and
disbursements in future fiscal years.

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The fiscal stability of the State is related to the fiscal stability of its
public authorities. Authorities have various responsibilities, including those
which finance, construct and/or operate revenue-producing public facilities.
Authorities are not subject to the constitutional restrictions on the incurrence
of debt which apply to the State itself, and may issue bonds and notes within
the amounts and restrictions set forth in their legislative authorization.

Authorities are generally supported by revenues generated by the projects
financed or operated, such as tolls charged for use of highways, bridges or
tunnels, charges for electric power, electric and gas utility services, rentals
charged for housing units and charges for occupancy at medical care facilities.
In addition, State legislation authorizes several financing techniques for
authorities. Also, there are statutory arrangements providing for State local
assistance payments otherwise payable to localities to be made under certain
circumstances to authorities. Although the State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to authorities under these arrangements, if local assistance payments are
diverted the affected localities could seek additional State assistance. Some
authorities also receive moneys from State appropriations to pay for the
operating costs of certain of their programs.

S&P rates the State's general obligation bonds A, and Moody's rates the
State's general obligation bonds A2. There is no assurance that a particular
rating will continue for any given period of time or that any such rating will
not be revised downward or withdrawn entirely if, in the judgment of the agency
originally establishing the rating, circumstances so warrant. A downward
revision or withdrawal of such ratings, or either of them, may have an effect on
the market price of the State Municipal Obligations in which the Portfolio
invests.

Over the long term, the State and New York City face potential economic
problems. New York City accounts for a large portion of the State's population
and personal income, and New York City's financial health affects the State in
numerous ways. New York City continues to require significant financial
assistance from the State. New York City depends on State aid both to enable
it to balance its budget and to meet its cash requirements. The State could
also be affected by the ability of the City to market its securities
successfully in the public credit markets.

The Portfolio may purchase custodial receipts representing the right to
receive either the principal amount or the periodic interest payments or both
with respect to specific underlying Municipal Bonds. In a typical custodial
receipt arrangement, an issuer or third party owner of Municipal Bonds deposits
the bonds with a custodian in exchange for two classes of custodial receipts.
The two classes have different characteristics, but, in each case, payments on
the two classes are based on payments received on the underlying Municipal
Bonds. In no event will the aggregate interest paid with respect to the two
classes exceed the interest paid by the underlying Municipal Bond. Custodial
receipts are sold in private placements. The value of a custodial receipt may
fluctuate more than the value of a Municipal Bond of comparable quality and
maturity.

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 Portfolios 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-

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through" of the monthly payments made by the individual borrowers on their
residential or commercial mortgage loans, net of any fees paid to the issuer or
guarantor of such securities. Additional payments are caused by repayments of
principal resulting from the sale of the underlying property, refinancing or
foreclosure, net of fees or costs which may be incurred. Some mortgage-related
securities (such as securities issued by GNMA) are described as "modified pass-
through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.

The rate of prepayments on underlying mortgages will affect the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment
on underlying mortgages increase in the effective maturity of a mortgage-related
security, the volatility of such security can be expected to increase.

The principal governmental guarantor of mortgage-related securities is
GNMA. GNMA is a wholly owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of mortgages insured by the Federal Housing
Administration (the "FHA"), or guaranteed by the Department of Veterans Affairs
(the "VA").

Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government. FHLMC was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. It is a government-sponsored corporation
formerly owned by the twelve Federal Home Loan Banks and now owned entirely by
private stockholders. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the United
States Government.

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 Portfolios 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, PIMCO determines that the securities meet the Trust's quality
standards. Although the market for such securities is

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becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable. No Portfolio will purchase mortgage-related
securities or any other assets which in PIMCO's opinion are illiquid if, as a
result, more than 15% of the value of the Portfolio's net assets will be
illiquid.

Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the
Portfolios' industry concentration restrictions, set forth below under
"Investment Restrictions" in the Offering Memorandum, by virtue of the exclusion
from that test available to all securities that are issued or guaranteed by the
U.S. Government, its agencies, or instrumentalities ("U.S. Government
Securities"). In the case of privately issued mortgage-related securities, the
Portfolios take the position that mortgage-related securities do not represent
interests in any particular "industry" or group of industries. The assets
underlying such securities may be represented by a portfolio of first lien
residential mortgages (including both whole mortgage loans and mortgage
participation interests) or portfolios of mortgage pass-through securities
issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a
mortgage-related security may in turn be insured or guaranteed by the FHA or the
VA. In the case of private issue mortgage-related securities whose underlying
assets are neither U.S. Government Securities nor U.S. Government-insured
mortgages, to the extent that real properties securing such assets may be
located in the same geographical region, the security may be subject to a
greater risk of default than other comparable securities in the event of adverse
economic, political or business developments that may affect such region and,
ultimately, the ability of residential homeowners to make payments of principal
and interest on the underlying mortgages.

Collateralized Mortgage Obligations (CMOs). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, 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

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loans in the collateral pool in excess of the amount of FHLMC's minimum sinking
fund obligation for any payment date are paid to the holders of the CMOs as
additional sinking fund payments. Because of the "pass-through" nature of all
principal payments received on the collateral pool in excess of FHLMC's minimum
sinking fund requirement, the rate at which principal of the CMOs is actually
repaid is likely to be such that each class of bonds will be retired in advance
of its scheduled maturity date.

If collection of principal (including prepayments) on the mortgage loans
during any semi-annual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds.

Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute collateral
in the event of delinquencies and/or defaults.

Commercial Mortgage-Backed Securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property.
The market for commercial mortgage-backed securities developed more recently and
in terms of total outstanding principal amount of issues is relatively small
compared to the market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial mortgage-backed securities reflect
the risks of investing in the real estate securing the underlying mortgage
loans. These risks reflect the effects of local and other economic conditions
on real estate markets, the ability of tenants to make loan payments, and the
ability of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility than other
types of mortgage- or asset-backed securities.

Other Mortgage-Related Securities. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including mortgage dollar rolls, CMO residuals or stripped
mortgage-backed securities ("SMBS"). Other mortgage-related securities may be
equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.

CMO Residuals. CMO residuals are mortgage securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.

The cash flow generated by the mortgage assets underlying a series of CMOs
is applied first to make required payments of principal and interest on the CMOs
and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
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 the Mortgage and Mortgage II
Portfolios 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

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<PAGE>

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 Portfolio's limitations on
investment in illiquid securities.

Stripped Mortgage-Backed Securities. SMBS are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
U.S. Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose entities of the foregoing.

SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the
interest and most of the principal from the mortgage assets, while the other
class will receive most of the interest and the remainder of the principal. In
the most extreme case, one class will receive all of the interest (the "IO"
class), while the other class will receive all of the principal (the principal-
only or "PO" class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on a Portfolio's yield to maturity from these
securities. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, a Portfolio 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 Portfolio's limitations on investment in illiquid securities.

Other Asset-Backed Securities. Similarly, PIMCO 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 Portfolio's investment objectives and policies, PIMCO
also may invest in other types of asset-backed securities.

Bank Obligations

Bank obligations in which the Portfolios 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

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<PAGE>

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 Portfolio 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 would be invested in such deposits, repurchase agreements
maturing in more than seven days and other illiquid assets.

The PIMCO Short-Term, U.S. Government Sector, Mortgage, Investment Grade
Corporate, and High Yield Portfolios may invest in the same types of bank
obligations as the other Portfolios, 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 Portfolio's assets that may be invested in
obligations of foreign banks that 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 Portfolio (except the PIMCO Municipal Sector Portfolio) 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 Portfolios may participate in
such syndications, or can buy part of a loan, becoming a part lender. When
purchasing loan participations, a Portfolio 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 Portfolio 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 Portfolio has direct recourse against the corporate borrower,
the Portfolio may have to rely on the agent bank or other financial intermediary
to apply appropriate credit remedies against a corporate borrower.

A financial institution's employment as agent bank might be terminated in
the event that it fails to observe a requisite standard of care or becomes
insolvent. A successor agent bank would generally be appointed to replace the
terminated agent bank, and assets held by the agent bank under the loan
agreement should remain available to holders of such indebtedness. However, if
assets held by the agent bank for the benefit of a Portfolio were determined to
be subject to the claims of the agent bank's general creditors, the Portfolio
might incur certain costs and delays in realizing payment on a loan or loan
participation and could

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<PAGE>

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 Portfolio does not receive scheduled interest or principal
payments on such indebtedness, the Portfolio's share price and yield could be
adversely affected. Loans that are fully secured offer a Portfolio 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 Portfolios 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
Portfolio bears a substantial risk of losing the entire amount invested.

Each Portfolio 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" in the Offering Memorandum). For purposes of these limits, a
Portfolio generally will treat the corporate borrower as the "issuer" of
indebtedness held by the Portfolio. In the case of loan participations where a
bank or other lending institution serves as a financial intermediary between a
Portfolio and the corporate borrower, if the participation does not shift to the
Portfolio the direct debtor-creditor relationship with the corporate borrower,
Securities and Exchange Commission ("SEC") interpretations require the Portfolio
to treat both the lending bank or other lending institution and the corporate
borrower as "issuers" for the purposes of determining the percentage of total
assets a Portfolio have invested in a single issuer. Treating a financial
intermediary as an issuer of indebtedness may restrict a Portfolios' 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 PIMCO believes to be a fair price. In addition, valuation of
illiquid indebtedness involves a greater degree of judgment in determining a
Portfolio's net asset value than if that value were based on available market
quotations, and could result in significant variations in the Portfolio'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 Portfolios currently intend to treat
indebtedness for which there is no readily available market as illiquid for
purposes of the Portfolios' 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 Portfolios. For example, if a loan is foreclosed, a Portfolio 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 Portfolio
could be held liable as co-lender. It is unclear whether loans and other forms
of direct indebtedness offer securities law protections against fraud and
misrepresentation. In the absence of definitive regulatory guidance, the
Portfolios rely on PIMCO's research in an attempt to avoid situations where
fraud or misrepresentation could adversely affect the Portfolios.

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<PAGE>

Corporate Debt Securities

A Portfolio'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 Portfolio, or, if unrated, are in
PIMCO's opinion comparable in quality to corporate debt securities in which the
Portfolio 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 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.

Borrowing

A Portfolio may borrow money to the extent permitted under the Investment
Company Act of 1940 ("1940 Act"), as amended, and as interpreted, modified or
otherwise permitted by regulatory authority having jurisdiction, from time to
time. This means that, in general, a Portfolio may borrow money from banks for
any purpose on a secured basis in an amount up to 1/3 of a Portfolio's total
assets. A Portfolio may also borrow money for temporary administrative purposes
on an unsecured basis in an amount not to exceed 5% of the Portfolio's total
assets.

Specifically, provisions of the 1940 Act require a Portfolio 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 a Portfolio's total assets made
for temporary administrative purposes. Any borrowings for temporary
administrative purposes in excess of 5% of a Portfolio'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 Portfolio 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 Portfolio 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 a Portfolio. To the extent a Portfolio 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 a Portfolio's commitment to
repurchase, such an agreement will not be considered a "senior security" by a
Portfolio and therefore will not be subject to the 300% asset coverage
requirement otherwise applicable to borrowings by a Portfolio. Borrowing will
tend to exaggerate the effect on net asset value of any increase or decrease in
the market value of a Portfolio's portfolio. Money borrowed will be subject to
interest costs which may or may not be recovered by appreciation of the
securities purchased. A Portfolio also may be required to

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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.

A Portfolio 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 Portfolio, coupled with
its agreement to repurchase the instrument at a specified time and price. Under
a reverse repurchase agreement, a Portfolio continues to receive any principal
and interest payments on the underlying security during the term of the
agreement. A Portfolio typically will segregate assets determined to be liquid
by PIMCO 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 a Portfolio may decline below
the repurchase price of the securities sold by a Portfolio 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
a Portfolio's limitations on borrowings, which would, among other things,
restrict the aggregate of such transactions (plus any other borrowings) to 1/3
of a Portfolio's total assets.

A "mortgage dollar roll" is similar to a reverse repurchase agreement in
certain respects. In a "dollar roll" transaction a Portfolio 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 Portfolio pledges a mortgage-related
security to a dealer to obtain cash. Unlike in the case of reverse repurchase
agreements, the dealer with which a Portfolio enters into a dollar roll
transaction is not obligated to return the same securities as those originally
sold by a Portfolio, but only securities which are "substantially identical." To
be considered "substantially identical," the securities returned to a Portfolio
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 Portfolio'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 Portfolio. 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 a Portfolio's restrictions 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 Portfolio's overall limitations on investments in illiquid
securities.

A Portfolio 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 a Portfolio's repurchase
of the underlying security. A Portfolio's obligations under a sale-buyback
typically would be offset by liquid assets equal in value to the amount of a
Portfolio's forward commitment to repurchase the subject security.

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

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<PAGE>

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 Portfolio
is called for redemption, the Portfolio 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 Portfolio's ability to achieve its investment objective. A Portfolio
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 Portfolios, and in particular, by the PIMCO High
Yield Portfolio, are described as "speculative" by both Moody's and S&P.
Investment in lower rated corporate debt securities ("high yield securities" or
"junk bonds") generally provides greater income and increased opportunity for
capital appreciation than investments in higher quality securities, but they
also typically entail greater price volatility and principal and income risk.
These high yield securities are regarded as predominantly speculative with
respect to the issuer's continuing ability to meet principal and interest
payments. Analysis of the creditworthiness of issuers of debt securities that
are high yield may be more complex than for issuers of higher quality debt
securities.

High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of high yield securities have been found to be less sensitive to
interest-rate changes than higher-rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection
of an economic downturn or of a period of rising interest rates, for example,
could cause a decline in high yield security prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If an issuer of high
yield securities defaults, in addition to risking payment of all or a portion of
interest and principal, the Portfolios 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.
PIMCO 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
Portfolios 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

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judgment may play a greater role in the valuation because there is less
reliable, objective data available. PIMCO 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.
PIMCO does not rely solely on credit ratings when selecting securities for the
Portfolios, 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
Portfolio, the Portfolio may retain the portfolio security if PIMCO 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.

Each Portfolio may invest in floating rate debt instruments ("floaters")
and 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 Portfolio with a certain degree of protection
against rises in interest rates, a Portfolio will participate in any declines in
interest rates as well. A credit spread trade is an investment position
relating to a difference in the prices or interest rates of two securities or
currencies, where the value of the investment position is determined by
movements in the difference between the prices or interest rates, as the case
may be, of the respective securities or currencies.

Each Portfolio 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.

Participation on Creditors Committees

A Portfolio (in particular, the PIMCO High Yield Portfolio) 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 Portfolio.
Such participation may subject a Portfolio to expenses such as legal fees and
may make a Portfolio an "insider" of the issuer for purposes of the federal
securities laws, and therefore may restrict such Portfolio's ability to trade in
or acquire additional positions in a particular security when it might otherwise
desire to do so. Participation by a Portfolio on such committees also may expose
the Portfolio to potential liabilities under the federal bankruptcy laws or
other laws governing the rights of creditors and debtors. A Portfolio will
participate on such committees only when PIMCO believes that such participation
is necessary or desirable to enforce the Portfolio's rights as a creditor or to
protect the value of securities held by the Portfolio.

Foreign Securities

All Portfolios (except the PIMCO Municipal Sector Portfolio) 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 High Yield Portfolio may invest only up to
15% of its assets in euro-denominated securities. The

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PIMCO Short-Term, U.S. Government Sector, Mortgage, and Investment Grade
Corporate Portfolios 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 Portfolio's investments in
Eastern Europe will not also be expropriated, nationalized or otherwise
confiscated.

Each of the Portfolios (except the PIMCO Municipal Sector Portfolio) may
invest in Brady Bonds. Brady Bonds are securities created through the exchange
of existing commercial bank loans to sovereign entities for new obligations in
connection with debt restructurings under a debt restructuring plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Plan debt restructurings have been implemented in a number of countries,
including: Argentina, Bolivia, Bulgaria, Costa Rica, the Dominican Republic,
Ecuador, Jordan, Mexico, Niger, Nigeria, the Philippines, Poland, Uruguay, and
Venezuela.

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 Portfolios may invest will not be subject to restructuring
arrangements or to requests for new credit, which may cause the Portfolios 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

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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 Portfolios) 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.

A Portfolio'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 Portfolio's
income distributions to constitute returns of capital for tax purposes or
require the Portfolio to make distributions exceeding book income to qualify as
a regulated investment company for federal tax purposes.

A Portfolio 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 Portfolios 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.
Portfolios 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 Portfolios 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 Portfolio 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 PIMCO 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 Portfolio with a view
to protecting the outlook, and the Portfolios might be expected to enter into
such contracts under the following circumstances:

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Lock In. When PIMCO 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 Portfolio 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 Portfolio's portfolio
holdings denominated in the currency sold.

Direct Hedge. If PIMCO wants to a eliminate substantially all of the risk
of owning a particular currency, and/or if PIMCO thinks that a Portfolio 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 Portfolio 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 Portfolio would hope to benefit
from an increase (if any) in value of the bond.

Proxy Hedge. PIMCO might choose to use a proxy hedge, which may be less
costly than a direct hedge. In this case, a Portfolio, 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 Portfolio 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 Portfolio 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 Portfolio's dividend
distribution and are not reflected in its yield. Instead such costs will, over
time, be reflected in a Portfolio's net asset value per share.

Tax Consequences of Hedging. Under applicable tax law, the Portfolios may
be required to limit their gains from hedging in foreign currency forwards,
futures, and options. Although the Portfolios 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 Portfolios and could affect whether dividends paid by the Portfolios
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

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supplemental payment in the event that the U.S. dollar depreciates against the
value of a major foreign currency such as the Japanese Yen or German
Deutschmark. The formula used to determine the amount payable upon exercise of a
foreign currency warrant may make the warrant worthless unless the applicable
foreign currency exchange rate moves in a particular direction (e.g., unless the
U.S. dollar appreciates or depreciates against the particular foreign currency
to which the warrant is linked or indexed). Foreign currency warrants are
severable from the debt obligations with which they may be offered, and may be
listed on exchanges. Foreign currency warrants may be exercisable only in
certain minimum amounts, and an investor wishing to exercise warrants who
possesses less than the minimum number required for exercise may be required
either to sell the warrants or to purchase additional warrants, thereby
incurring additional transaction costs. In the case of any exercise of warrants,
there may be a time delay between the time a holder of warrants gives
instructions to exercise and the time the exchange rate relating to exercise is
determined, during which time the exchange rate could change significantly,
thereby affecting both the market and cash settlement values of the warrants
being exercised. The expiration date of the warrants may be accelerated if the
warrants should be delisted from an exchange or if their trading should be
suspended permanently, which would result in the loss of any remaining "time
value" of the warrants (i.e., the difference between the current market value
and the exercise value of the warrants), and, in the case the warrants were
"out-of-the-money," in a total loss of the purchase price of the warrants.
Warrants are generally unsecured obligations of their issuers and are not
standardized foreign currency options issued by the Options Clearing
Corporation ("OCC"). Unlike foreign currency options issued by OCC, the terms
of foreign exchange warrants generally will not be amended in the event of
governmental or regulatory actions affecting exchange rates or in the event of
the imposition of other regulatory controls affecting the international
currency markets. The initial public offering price of foreign currency
warrants is generally considerably in excess of the price that a commercial
user of foreign currencies might pay in the interbank market for a comparable
option involving significantly larger amounts of foreign currencies. Foreign
currency warrants are subject to significant foreign exchange risk, including
risks arising from complex political or economic factors.

Principal exchange rate linked securities. Principal exchange rate linked
securities ("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.

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Delayed Funding Loans and Revolving Credit Facilities

The Portfolios (except the PIMCO Municipal Sector Portfolio) 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 Portfolio 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 Portfolio is committed
to advance additional funds, it will at all times 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. The Portfolios 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 Portfolio may be unable to sell such investments at an opportune
time or may have to resell them at less than fair market value. The Portfolios
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
Portfolios' 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 Portfolio 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 Portfolio may at any time call the loan and obtain the return
of the securities loaned; (iii) the Portfolio will receive any interest or
dividends paid on the loaned securities; and (iv) the aggregate market value of
securities loaned will not at any time exceed 33 1/3% of the total assets of the
Portfolio.

Short Sales

Certain of the Portfolios 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 Portfolio sells a security
it does not own in anticipation that the market price of that security will
decline.

When a Portfolio 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 Portfolio may have to pay a fee to borrow particular securities and
is often obligated to pay over any accrued interest and dividends on such
borrowed securities.

If the price of the security sold short increases between the time of the
short sale and the time and the Portfolio replaces the borrowed security, the
Portfolio will incur a loss; conversely, if the price declines, the Portfolio
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

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imperfect correlation between movements in the price of the security sold short
and the securities being hedged.

To the extent that a Portfolio 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 PIMCO in accordance with procedures
established by the Board of Trustees. Each Portfolio 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 Portfolio'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 Portfolio contemporaneously owns, or
has the right to obtain at no added cost, securities identical to those sold
short. The Portfolios will engage in short selling to the extent permitted by
the 1940 Act and rules and interpretations thereunder.

When-Issued, Delayed Delivery and Forward Commitment Transactions

Each of the Portfolios may purchase or sell securities on a when-issued,
delayed delivery, or forward commitment basis. When such purchases are
outstanding, the Portfolio will segregate until the settlement date assets
determined to be liquid by PIMCO 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 Portfolio has committed to purchase
prior to the time delivery of the securities is made, although a Portfolio may
earn income on securities it has segregated.

When purchasing a security on a when-issued, delayed delivery, or forward
commitment basis, the Portfolio 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
Portfolio is not required to pay for the security until the delivery date, these
risks are in addition to the risks associated with the Portfolio's other
investments. If the Portfolio 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 Portfolio has sold a security on a when-issued, delayed delivery,
or forward commitment basis, the Portfolio 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 Portfolio could miss a favorable
price or yield opportunity or could suffer a loss. A Portfolio 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 Portfolios may purchase or sell securities on a when-
issued, delayed delivery, or forward commitment basis.

Derivative Instruments

In pursuing their individual objectives the Portfolios 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 Portfolios that may not invest in
foreign currency-denominated securities may not enter into transactions
involving currency futures or options. The Portfolios (except the PIMCO
Municipal Sector Portfolio) also may purchase and sell foreign currency options
for purposes of increasing exposure to a foreign currency or to shift exposure
to foreign currency fluctuations from one country to another. The Portfolios
also may enter into swap agreements with respect to foreign currencies, interest
rates and indexes of securities. The Portfolios 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 Portfolio may
also use those

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instruments, provided that the Trustees determine that their use is consistent
with the Portfolio's investment objective.

The value of some derivative instruments in which the Portfolios invest may
be particularly sensitive to changes in prevailing interest rates, and, like the
other investments of the Portfolios, the ability of a Portfolio to successfully
utilize these instruments may depend in part upon the ability of PIMCO to
forecast interest rates and other economic factors correctly. If PIMCO
incorrectly forecasts such factors and has taken positions in derivative
instruments contrary to prevailing market trends, the Portfolios could be
exposed to the risk of loss.

The Portfolios might not employ any of the strategies described below, and
no assurance can be given that any strategy used will succeed. If PIMCO
incorrectly forecasts interest rates, market values or other economic factors in
utilizing a derivatives strategy for a Portfolio, the Portfolio 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 Portfolio 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 Portfolio is required to maintain
asset coverage or offsetting positions in connection with transactions in
derivative instruments, and the possible inability of a Portfolio to close out
or to liquidate its derivatives positions. In addition, a Portfolio's use of
such instruments may cause the Portfolio to realize higher amounts of short-term
capital gains (generally taxed at ordinary income tax rates) than if it had not
used such instruments. Under certain extreme circumstances, a Portfolio
investing in a derivative instrument could lose more than the principal amount
invested, although PIMCO will typically cover open derivatives positions by
segregating liquid assets (or other economically appropriate covering positions)
in an attempt to minimize this risk.

Options on Securities and Indexes. A Portfolio may, to the extent
specified herein or in the Offering Memorandum, 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 Portfolio 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 Portfolio 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 PIMCO 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 Portfolio. For a call
option on an index, the option is covered if the Portfolio maintains with its
custodian assets determined to be liquid by PIMCO in accordance with procedures
established by the Board of Trustees, in an amount equal to the contract value
of the index. A call option is also covered if the Portfolio holds a call on
the same security or index as the call written

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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 Portfolio in
segregated assets determined to be liquid by PIMCO in accordance with procedures
established by the Board of Trustees. A put option on a security or an index is
"covered" if the Portfolio segregates assets determined to be liquid by PIMCO in
accordance with procedures established by the Board of Trustees equal to the
exercise price. A put option is also covered if the Portfolio 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 Portfolio in segregated assets determined to be liquid by
PIMCO in accordance with procedures established by the Board of Trustees.

If an option written by a Portfolio expires unexercised, the Portfolio
realizes a capital gain equal to the premium received at the time the option was
written. If an option purchased by a Portfolio expires unexercised, the
Portfolio 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 Portfolio desires.

A Portfolio 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 Portfolio 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 Portfolio 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 Portfolio will realize a capital gain
or, if it is less, the Portfolio 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 Portfolio is an
asset of the Portfolio. The premium received for an option written by a
Portfolio 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 Portfolios 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 Portfolios' immediate
obligations. The Portfolios 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 Portfolios 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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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 Portfolio 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 Portfolio 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 Portfolio
seeks to close out an option position. If a Portfolio 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
Portfolio 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
Portfolio 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 Portfolio, the
Portfolio would not be able to close out the option. If restrictions on
exercise were imposed, the Portfolio might be unable to exercise an option it
has purchased. Except to the extent that a call option on an index written by
the Portfolio is covered by an option on the same index purchased by the
Portfolio, movements in the index may result in a loss to the Portfolio;
however, such losses may be mitigated by changes in the value of the Portfolio's
securities during the period the option was outstanding.

Foreign Currency Options. Portfolios that invest in foreign currency-
denominated securities may buy or sell put and call options on foreign
currencies. A Portfolio 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 Portfolio 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 Portfolios
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.

An interest rate, foreign currency or index futures contract provides for
the future sale by one party and purchase by another party of a specified
quantity of a financial instrument, foreign currency or the cash value of an
index at a specified price and time. A futures contract on an index is an
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. Although the value of an index might be a
function of the value of certain specified securities, no physical delivery of
these securities is made. A public market exists in futures contracts covering
a number of indexes as well as financial instruments and foreign currencies,
including: the S&P 500; the S&P Midcap 400; the Nikkei 225; the NYSE composite;
U.S. Treasury bonds; U.S. Treasury notes; GNMA Certificates; three-month U.S.
Treasury bills; 90-day commercial paper; bank certificates of deposit;
Eurodollar certificates of deposit; the Australian dollar; the Canadian dollar;
the British pound; the German mark; the Japanese yen; the French franc; the
Swiss franc; the Mexican peso; and certain

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<PAGE>

multinational currencies, such as the euro. It is expected that other futures
contracts will be developed and traded in the future.

A Portfolio may purchase and write call and put futures options, as
specified for that Portfolio in the Offering Memorandum. 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 Portfolios avoid being deemed a
"commodity pool" or a "commodity pool operator," each Portfolio 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 Portfolio might use futures
contracts to hedge against anticipated changes in interest rates that might
adversely affect either the value of the Portfolio's securities or the price of
the securities which the Portfolio intends to purchase. A Portfolio'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 Portfolio's
exposure to interest rate fluctuations, the Portfolio may be able to hedge its
exposure more effectively and perhaps at a lower cost by using futures contracts
and futures options.

A Portfolio 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 Portfolio, the
Portfolio is required to deposit with its custodian (or broker, if legally
permitted) a specified amount of assets determined to be liquid by PIMCO 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 Portfolio upon
termination of the contract, assuming all contractual obligations have been
satisfied. Each Portfolio expects to earn interest income on its initial margin
deposits. A futures contract held by a Portfolio is valued daily at the
official settlement price of the exchange on which it is traded. Each day the
Portfolio 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 Portfolio
but is instead a settlement between the Portfolio and the broker of the amount
one would owe the other if the futures contract expired. In computing daily net
asset value, each Portfolio will mark to market its open futures positions.

A Portfolio 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 Portfolio.

Although some futures contracts call for making or taking delivery of the
underlying securities, frequently 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 Portfolio realizes a
capital gain, or if it is more, the Portfolio realizes a capital loss.
Conversely, if an offsetting sale price is more than the original purchase
price, the Portfolio realizes a capital gain, or if it is less, the Portfolio
realizes a capital loss. The transaction costs must also be included in these
calculations.

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The Portfolios 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 Portfolios' immediate
obligations. A Portfolio 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 Portfolios 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. When purchasing a
futures contract, a Portfolio will maintain with its custodian (and mark-to-
market on a daily basis) assets determined to be liquid by PIMCO 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 Portfolio 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
Portfolio.

When selling a futures contract, a Portfolio will maintain with its
custodian (and mark-to-market on a daily basis) assets determined to be liquid
by PIMCO 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 Portfolio 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
Portfolio to purchase the same futures contract at a price no higher than the
price of the contract written by the Portfolio (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 Portfolio will maintain
with its custodian (and mark-to-market on a daily basis) assets determined to be
liquid by PIMCO 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 Portfolio 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 Portfolio to purchase the same futures contract at a price not higher than
the strike price of the call option sold by the Portfolio.

When selling a put option on a futures contract, a Portfolio will maintain
with its custodian (and mark-to-market on a daily basis) assets determined to be
liquid by PIMCO 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 Portfolio 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 Portfolio.

To the extent that securities with maturities greater than one year are
used to segregate assets to cover a Portfolio'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 Portfolio'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 Portfolio's portfolio securities. Thus, the use of a longer-term
security may require a Portfolio to hold offsetting short-term securities to
balance the Portfolio's portfolio such that the Portfolio's duration does not
exceed the maximum permitted for the Portfolio in the Offering Memorandum.

The requirements for qualification as a regulated investment company also
may limit the extent to which a Portfolio may enter into futures, futures
options or forward contracts. See "Taxation."

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Risks Associated with Futures and Futures Options. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. Under extreme circumstances, purchase or sale of a futures contract
may result in losses in excess of the amount invested in the futures contract,
even though PIMCO will typically cover open futures positions in an attempt to
minimize this risk. There can be no guarantee that there will be a correlation
between price movements in the hedging vehicle and in the Portfolio securities
being hedged. 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 Sector Portfolio 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. 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
Portfolio seeks to close out a futures or a futures option position, and that
Portfolio would remain obligated to meet margin requirements until the position
is closed. In addition, many of the contracts discussed above are relatively
new instruments without a significant trading history. As a result, there can
be no assurance that an active secondary market will develop or continue to
exist.

Additional Risks of Options on Securities, Futures Contracts, Options on
Futures Contracts, and Forward Currency Exchange Contracts and Options Thereon.
Options on securities, futures contracts, options on futures contracts, and
options on currencies may be traded on foreign exchanges. Such transactions may
not be regulated as effectively as similar transactions in the United States;
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities. The value of such positions also could be adversely affected by (i)
other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Trust's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (v) lesser trading
volume.

Swap Agreements. The Portfolios 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

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considered desirable to do so, possibly at a lower cost to the Portfolio than if
the Portfolio 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 Portfolios would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Portfolio'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 Portfolio's current obligations under a
swap agreement will be accrued daily (offset against any amounts owed to the
Portfolio) 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 PIMCO in
accordance with procedures established by the Board of Trustees, to avoid any
potential leveraging of the Portfolio's portfolio. Obligations under swap
agreements so covered will not be construed to be "senior securities" for
purposes of the Portfolio's investment restriction concerning senior securities.

Whether a Portfolio's use of swap agreements will be successful in
furthering its investment objective of total return will depend on PIMCO'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 Portfolio 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
Portfolios 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 Portfolios' repurchase
agreement guidelines). Certain restrictions imposed on the Portfolios by the
Internal Revenue Code may limit the Portfolios' 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 Portfolio's ability to terminate existing
swap agreements or to realize amounts to be received under such agreements.

Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the CFTC
effective February 22, 1993. To qualify for this exemption, a swap agreement
must be entered into by "eligible participants," which includes the following,
provided the participants' total assets exceed established levels: a bank or
trust company, savings association or credit 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

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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 Portfolio invests in
these securities, however, PIMCO analyzes these securities in its overall
assessment of the effective duration of the Portfolio's portfolio in an effort
to monitor the Portfolio'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 Portfolio 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 fluctuate.
The Portfolios 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.

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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 Portfolio to the credit risk of the issuer of the hybrids. These
risks may cause significant fluctuations in the net asset value of the
Portfolio.

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
Portfolios' 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.

Event-Linked Bonds

Event-linked 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" event, such as a hurricane, earthquake, or other physical or
weather-related phenomenon. 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 Portfolio
investing in the bond may lose a portion or all of its principal invested in the
bond. If no trigger event occurs, the Portfolio will recover its principal plus
interest. For some event-linked bonds, the trigger event or losses may be based
on company-wide losses, index-portfolio losses, industry indices, or readings

33
<PAGE>

of scientific instruments rather than specified actual losses. Often the event-
linked 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, event-linked bonds may also expose the Portfolio
to certain unanticipated risks including but not limited to issuer (credit)
default, adverse regulatory or jurisdictional interpretations, and adverse tax
consequences.

Event-linked 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 Portfolio may be forced to
liquidate positions when it would not be advantageous to do so. Event-linked
bonds are typically rated, and a Portfolio will only invest in catastrophe bonds
that meet the credit quality requirements for the Portfolio.

Warrants to Purchase Securities

The Portfolios 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 Portfolio
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. Warrants acquired in units or attached to securities will be deemed
without value for purposes of this restriction.

Illiquid Securities

The Portfolios may invest up to 15% of their net assets in illiquid
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 Portfolio 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 PIMCO has determined to be
liquid under procedures approved by the Board of Trustees).

Illiquid securities may include privately placed securities, which are sold
directly to a small number of investors, usually institutions. Unlike public
offerings, such securities are not registered under the federal securities laws.
Although certain of these securities may be readily sold, others may be
illiquid, and their sale may involve substantial delays and additional costs.

INVESTMENT RESTRICTIONS

In addition to the investment restrictions set forth in the Offering
Memorandum, the Portfolios have adopted a non-fundamental policy pursuant to
which each Portfolio that may invest in securities denominated in foreign
currencies, except the PIMCO High-Yield International, Emerging Markets, Short-
Term Emerging Markets and Real Return Bond Portfolios, will normally hedge its
exposure to foreign currency using the techniques described in the Offering
Memorandum. The PIMCO High-Yield International and Real Return Bond Portfolios
will normally hedge at least 75% of their exposure to foreign currency using the
techniques described in the Offering Memorandum. The PIMCO Emerging Markets
Portfolio and the Short-Term Emerging Markets Portfolios may, but are not
required to, hedge against exposure to foreign currency. There can be no
assurance that currency hedging techniques will be successful.

34
<PAGE>

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. In addition
to borrowing money to the extent permitted under the 1940 Act, a Portfolio may
borrow money for temporary administrative purposes. To the extent that
borrowings for temporary administrative purposes exceed 5% of the total assets
of a Portfolio, such excess shall be subject to the 300% asset coverage
requirement of that restriction.

To the extent a Portfolio 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 Portfolio's commitment to repurchase, such
an agreement will not be considered a "senior security" by the Portfolio and
therefore will not be subject to the 300% asset coverage requirement otherwise
applicable to borrowings by the Portfolio.

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 Portfolios have adopted an investment
policy pursuant to which a Portfolio will not purchase or sell OTC options if,
as a result of such transactions, the sum of: (1) the market value of OTC
options currently outstanding which are held by the Portfolio, (2) the market
value of the underlying securities covered by OTC call options currently
outstanding which were sold by the Portfolio and (3) margin deposits on the
Portfolio's existing OTC options on futures contracts, exceeds 15% of the net
assets of the Portfolio, taken at market value, together with all other assets
of the Portfolio which are illiquid or are otherwise not readily marketable.
However, if an OTC option is sold by the Portfolio to a primary U.S. Government
Securities dealer recognized by the Federal Reserve Bank of New York and if the
Portfolio has the unconditional contractual right to repurchase such OTC option
from the dealer at a predetermined price, then the Portfolio 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 Portfolios and may be amended by the Trustees without the approval
of shareholders. However, the Portfolios will not change or modify this policy
prior to the change or modification by the SEC staff of its position.

Unless otherwise indicated, all limitations applicable to Portfolio
investments (as stated above and elsewhere in this Supplement) 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 Portfolio assets invested in certain
securities or other instruments, or change in the average duration of a
Portfolio's investment portfolio, resulting from market fluctuations or other
changes in a Portfolio's total assets will not require a Portfolio to dispose of
an investment until PIMCO determines that it is practicable to sell or close out
the investment without undue market or tax consequences to the Portfolio. In
the event that ratings services assign different ratings to the same security,
PIMCO 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 Portfolios interpret their policies with respect to borrowing and
lending to permit such activities as may be lawful for the Portfolios, to the
full extent permitted by the 1940 Act or by exemption from the provisions
therefrom pursuant to exemptive order of the SEC. The Portfolios have filed an
application seeking an order from the SEC to permit the Portfolios to enter into
transactions among themselves with respect to the investment of daily cash
balances of the Portfolios in shares of the PIMCO Money Market Fund, a series of
the Trust, as well as the use of daily excess cash balances of the PIMCO Money
Market Fund in interfund lending transactions with the other Portfolios for
temporary cash management purposes. The interest paid by a Portfolio in such an
arrangement will be less than that

35
<PAGE>

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.

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.

R. Wesley Burns* President and Trustee Managing Director, PIMCO; President and
Age 40 Director, PIMCO Commercial Mortgage
Securities Trust, Inc.; President and
Trustee, PIMCO Variable Insurance Trust;
Executive Vice President, PIMCO Funds:
Multi-Manager Series.

Guilford C. Babcock Trustee Associate Professor of Finance, University of
1500 Park Place Southern California; Director, PIMCO
San Marino, California 91108 Commercial Mortgage Securities Trust, Inc.;
Age 68 Trustee, PIMCO Variable Insurance Trust;
Director, Growth Fund of America and
Fundamental Investors Fund of the Capital
Group; Director, Good Hope Medical Foundation.
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
Position with Principal Occupation(s)
Name, Address and Age the Trust During the Past Five Years
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
E. Philip Cannon Trustee Proprietor, Cannon & Company, an affiliate of
3838 Olympia Inverness Management LLC, a private equity
Houston, Texas 77019 investment firm; Trustee of PIMCO Funds:
Age 59 Multi-Manager Series. Formerly, Headmaster,
St. John's School, Houston, Texas; Trustee of
PIMCO Advisors Funds ("PAF") and Cash
Accumulation Trust ("CAT"); General Partner,
J.B. Poindexter & Co., Houston, Texas, a
private equity investment firm; and Partner,
Iberia Petroleum Company, an oil and gas
production company.

Vern O. Curtis Trustee Private Investor; Director, PIMCO Commercial
14158 N.W. Bronson Creek Drive Mortgage Securities Trust, Inc.; Trustee,
Portland, Oregon 97229 PIMCO Variable Insurance Trust; Director,
Age 65 Public Storage Business Parks Inc., a Real
Estate Investment Trust; Director, Fresh
Choice, Inc. (restaurant company) Formerly
charitable work, The Church of Jesus Christ
of Latter-day Saints.

J. Michael Hagan Trustee Retired from Furon Company (manufacturing)
6 Merced where he served as Chairman and CEO from June
San Clemente, California 92673 1991 to November 1999, and in other
Age 60 capacities since 1967. He was previously
associated with Ross Laboratories and
Standard Oil of California. Mr. Hagan serves
on the Boards of Directors for Ameron
International (manufacturing), Freedom
Communications, Remedy Temp (staffing) and
Saint-Gobain Company. He is also a member of
the Board of Regents at Santa Clara
University, the Board of Taller San Jose, and
the Board of Trustees of the South Coast
Repertory Theater.
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
Position with Principal Occupation(s)
Name, Address and Age the Trust During the Past Five Years
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas P. Kemp Trustee Private Investor; Director, PIMCO Commercial
1141 Marine Drive Mortgage Securities Trust, Inc.; Trustee,
Laguna Beach, California 92651 PIMCO Variable Insurance Trust. Formerly
Age 69 Chairman and CEO, Coca-Cola Bottling Co. of
Los Angeles; Co-Chairman, U.S. Committee to
Assist Russian Reform; Director, Union
Financial Corp. (savings & loan).

William J. Popejoy Trustee President, Pacific Capital Investors;
29 Chatham Court Chairman, PacPro (vinyl assembly products;
Newport Beach, California 92660 formerly Western Printing); Director, PIMCO
Age 61 Commercial Mortgage Securities Trust, Inc.;
Trustee, PIMCO Variable Insurance Trust.
Formerly Director, California State Lottery;
Chief Executive Officer, Orange County,
California.

Michael G. Dow Senior Vice President Senior Vice President, PIMCO. Formerly Fixed
Age 36 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 55 President, PIMCO Variable Insurance Trust.

Margaret Isberg Senior Vice President Managing Director, PIMCO.
Age 43

Jeffrey M. Sargent Senior Vice President Senior Vice President and Manager of
Age 37 Investment Operations Shareholder Services,
PIMCO; Senior Vice President, PIMCO
Commercial Mortgage Securities Trust, Inc.,
and PIMCO Variable Insurance Trust; Vice
President, PIMCO Funds: Multi-Manager Series;
Formerly, Vice President, PIMCO.

Leland T. Scholey Senior Vice President Senior Vice President, PIMCO. Formerly Vice
Age 47 President, PIMCO.

Raymond C. Hayes Vice President Vice President, PIMCO. Formerly Marketing
Age 55 Director, Pacific Financial Asset Management
Corporation.
</TABLE>

38
<PAGE>

Henrik P. Larsen Vice President Vice President and Manager, Fund
Age 30 Administration, PIMCO; Vice 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 41 President, Fidelity Investments;
Institutional Sales Representative, CS First
Boston.

Andre Mallegol Vice President Vice President, PIMCO. Formerly associated
Age 33 with Fidelity Investments Institutional
Services Company.

Scott Millimet Vice President Vice President, PIMCO. Formerly Executive
Age 42 Vice President with Back Bay Advisors.

James F. Muzzy Vice President Managing Director, PIMCO; Senior Vice
Age 60 President, PIMCO Variable Insurance Trust.

Douglas J. Ongaro Vice President Vice President, PIMCO. Formerly Regional
Age 39 Marketing Manager, Charles Schwab & Co., Inc.

David J. Pittman Vice President Vice President, PIMCO. Formerly a senior
Age 52 executive with Bank of America, the Northern
Trust Co. and NationsBank.

Mark A. Romano Vice President Vice President, PIMCO. Previously associated
Age 41 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 54 Director, PIMCO; Senior Vice President, PIMCO
Variable Insurance Trust; Vice President,
PIMCO Commercial Mortgage Securities Trust,
Inc.
</TABLE>

39
<PAGE>

Garlin G. Flynn Secretary Specialist, PIMCO; Secretary, PIMCO
Age 53 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.

Joseph D. Hattesohl Assistant Treasurer Vice President and Manager of Financial
Age 36 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.

Michael J. Willemsen Assistant Secretary Manager, PIMCO; Assistant Secretary, PIMCO
Age 40 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.

40
<PAGE>

<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation Trust and Fund Complex
Name and Position from Trust/1/ Paid to Trustees/2/
----------------- ------------- -------------------
<S> <C> <C>
Guilford C. Babcock $58,000 $78,750
Trustee

E. Philip Cannon 0 $57,000/3/
Trustee

Vern O. Curtis $60,297 $82,619
Trustee

J. Michael Hagan 0 0
Trustee

Thomas P. Kemp $58,000 $78,750
Trustee

William J. Popejoy $58,000 $78,750
Trustee
</TABLE>

1 Each Trustee, other than those affiliated with PIMCO 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
PIMCO 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 $234,297.

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 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
PIMCO or its affiliates, receives an additional annual retainer of $500.
For the fiscal year ended December 31, 1999, the unaffiliated Directors as
a group received compensation in the amount of $42,786.

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 PIMCO or its affiliates, receives an additional annual
retainer of $500. For the fiscal year ended December 31, 1999, the
unaffiliated Trustees as a group received compensation in the amount of
$41,786.

3 Mr. Cannon also serves as a Trustee of PIMCO Funds: Multi-Manager Series
which has adopted a deferred compensation plan. Mr. Cannon elected to have
$57,000 in compensation deferred from that Trust.

41
<PAGE>

Investment Adviser

PIMCO serves as investment adviser to the Portfolios pursuant to an
investment advisory contract ("Advisory Contract") between PIMCO and the Trust.
PIMCO is a subsidiary of PIMCO Advisors L.P. ("PIMCO Advisors").

On May 5, 2000, Allianz of America, Inc., a subsidiary of Allianz AG,
completed the acquisition of approximately 70% of the outstanding partnership
interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of which PIMCO is a
subsidiary. In connection with the acquisition, Allianz of America,
Inc. entered into a put/call arrangement with Pacific Life Insurance Company,
which holds the remainder of the partnership interests in PIMCO Advisors, for
the possible disposition of Pacific Life Insurance Company's stake in PIMCO
Advisors.

As a result of this transaction, PIMCO Advisors and its subsidiaries,
including PIMCO, are now controlled by Allianz AG, a leading provider of
financial services, particularly in Europe. However, PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income investment efforts of Allianz AG. With the
addition of PIMCO Advisors, the Allianz group manages assets of approximately
$650 billion, including more than 300 mutual funds for retail and institutional
clients.

Significant institutional shareholders of Allianz AG currently include
Dresdner Bank AG, Deutsche Bank AG, Munich Reinsurance and HypoVereinsbank. BNP
Paribas, Credit Lyonnais, Munich Reinsurance, HypoVereinsbank, Dresdner Bank AG
and Deutsche Bank AG, as well as certain broker-dealers that might be controlled
by or affiliated with these entities, such as DB Alex. Brown LLC, Deutsche Bank
Securities, Inc. and Dresdner Klienwort Benson North America LLC (collectively,
the "Affiliated Brokers"), may be considered to be affiliated persons of PIMCO.
Absent an SEC exemption or other relief, the Portfolios generally are precluded
from effecting principal transactions with the Affiliated Brokers, and its
ability to purchase securities being underwritten by an Affiliated Broker or to
utilize the Affiliated Brokers for agency transactions is subject to
restrictions. PIMCO does not believe that the restrictions on transactions with
the Affiliated Brokers described above materially adversely affect its ability
to provide services to the Portfolios, the Portfolios' ability to take advantage
of market opportunities, or the Portfolios' overall performance.

Under the terms of the Advisory Contract, PIMCO is obligated to manage the
Portfolios 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 December 1, 1999, as supplemented at a meeting
------------
held on May 16, 2000, and was approved by shareholders of all then-operational
Portfolios on March 16, 2000.

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 PIMCO, on 60 days' written notice by either party to the contract
and will terminate automatically if assigned.

42
<PAGE>

For the services it provides to the Portfolios, PIMCO receives a monthly
investment advisory fee from each Portfolio equal to 0.02%, at an annual rate,
of the average daily net assets of the Portfolio.

Portfolio Administrator

PIMCO also serves as Administrator to the Portfolios pursuant to an
administration agreement (the "Administration Agreement") with the Trust. PIMCO
provides the Portfolios with certain administrative and shareholder services
necessary for Portfolio operations and is responsible for the supervision of
other Portfolio 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 Portfolios, including coordination of the
services performed by the Portfolios' transfer agent, custodian, legal counsel,
independent accountants, and others. PIMCO (or an affiliate of PIMCO) also
furnishes the Portfolios with office space facilities required for conducting
the business of the Portfolios, 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 Portfolios, and is responsible for
the costs of registration of the Trust's shares and the printing of Offering
Memorandum and shareholder reports for current shareholders. For the services
it provides to the PIMCO Short-Term, Short-Term II, U.S. Government Sector, U.S.
Government Sector II, Mortgage, Mortgage II, Investment Grade Corporate, High
Yield, Municipal Sector and Real Return Bond Portfolios, PIMCO receives a
monthly administration fee from each Portfolio equal to 0.03%, at an annual
rate, of the average daily net assets of the Portfolio. For the services it
provides to the PIMCO International, Emerging Markets and Short-Term Emerging
Markets Portfolios, PIMCO receives a monthly administration fee from each
Portfolio equal to 0.10%, at an annual rate, of the average daily net assets of
the Portfolio.

Except for the expenses paid by PIMCO, the Trust bears all costs of its
operations. The Portfolios 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.

The Administration Agreement may be terminated by the Trustees, or by a
vote of a majority of the outstanding voting securities of the Trust or
Portfolio 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 December 1, 1999, as supplemented on May 16, 2000. In approving the
Administration Agreement, the Trustees determined that: (1) the Administration
Agreement is in the best interests of the Portfolios and their shareholders; (2)
the services to be performed under the Agreement are services required for the
operation of the Portfolios; (3) PIMCO is able to provide, or to procure,
services for the Portfolios 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

43
<PAGE>

and reasonable in light of the usual and customary charges made by others for
services of the same nature and quality.

DISTRIBUTION OF TRUST SHARES

Distributor

PIMCO Funds Distributors LLC (the "Distributor") serves as the principal
underwriter of the Portfolios 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 Portfolio without penalty,
at any time, by the Portfolio 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
Portfolio 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 or the
Administration Agreement 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 Portfolios, it may continue in effect with respect to any
Portfolio as to which it has not been terminated (or has been renewed).

Shares of the Portfolios are offered only to clients of PIMCO who maintain
separately managed private accounts, and who are also "accredited investors," as
defined in Regulation D under the Securities Act, and either (i) "qualified
purchasers," as defined for purposes of Section 3(c)(7) of the 1940 Act, or (ii)
"qualified institutional buyers," as defined in Rule 144A(a)(1) of the
Securities Act.

Purchases, Redemptions and Exchanges

Purchases, redemptions and exchanges of shares of the Portfolios are
discussed in the Offering Memorandum under the headings "Purchasing Shares,"
"Redeeming Shares," and "Exchange Privilege." Each Portfolio issues its shares
only in private placement transactions in accordance with Regulation D or other
applicable exemptions under the Securities Act. This Supplement is not an offer
to sell, or a solicitation of any offer to buy, any security to the public
within the meaning of the Securities Act.

Certain clients of PIMCO whose assets would be eligible for purchase by one
or more of the Portfolios may purchase shares of the Trust with such assets.
Assets so purchased by a Portfolio will be valued in accordance with procedures
adopted by the Board of Trustees.

Certain of the Portfolios are not qualified or registered for sale in all
states. Prospective investors should inquire as to whether shares of a
particular Portfolio are available for offer and sale in their state of domicile
or residence. Shares of a Portfolio 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.

As described in the Offering Memorandum under the caption "Exchange
Privilege," shares of any Portfolio may be exchanged for shares of any other
Portfolio on the basis of their respective net asset values. In addition,
subject to compliance with applicable private placement restrictions and the
investment restrictions of the Portfolios, shares of the Portfolios may be
purchased by exchanging Institutional Class shares of another series of the
Trust for shares of the Portfolios.

44
<PAGE>

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. The Trust
reserves the right to modify or discontinue the exchange privilege at any time.

The Trust reserves the right to suspend or postpone redemptions during any
period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the SEC, or that Exchange is closed for other than customary
weekend and holiday closings; (b) the SEC has by order permitted such
suspension; or (c) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of the Portfolio not
reasonably practicable.

The Trust is committed to paying in cash all requests for redemptions by
any shareholder of record of the Portfolios, 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 Portfolios' portfolios.

The Trust has adopted procedures under which it may make redemptions-in-
kind to shareholders who are affiliated persons of a Portfolio. Under these
procedures, the Trust generally may satisfy a redemption request from an
affiliated person in-kind, provided that: (1) the redemption in-kind is
effected at approximately the affiliated shareholder's proportionate share of
the distributing Portfolio's current net assets, and thus does not result in the
dilution of the interests of the remaining shareholders; (2) the distributed
securities are valued in the same manner as they are valued for purposes of
computing the distributing Portfolio's net asset value; (3) the redemption in-
kind is consistent with the Portfolio's offering memorandum and offering
memorandum supplement; and (4) neither the affiliated shareholder nor any other
party with the ability and the pecuniary incentive to influence the redemption-
in-kind selects, or influences the selection of, the distributed securities.

NET ASSET VALUE

Net Asset Value is determined as indicated under "How Portfolio Shares are
Priced" in the Offering Memorandum. 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 Portfolios 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.

TAXATION

The following summarizes certain additional federal income tax
considerations generally affecting the Portfolios 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 Portfolios. 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

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interpretations thereof, all of which are subject to change, which change could
be retroactive. The discussion applies only to beneficial owners of Portfolio
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 Portfolio 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 Offering
Memorandum is not intended as a substitute for careful tax planning.

Each Portfolio 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 Portfolio 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 Portfolio'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 Portfolio's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
Securities or the securities of other regulated investment companies); and (c)
distribute each taxable year the sum of (i) at least 90% of its investment
company taxable income (which includes dividends, interest and net short-term
capital gains in excess of any net long-term capital losses) and (ii) 90% of its
tax exempt interest, net of expenses allocable thereto. The Treasury Department
is authorized to promulgate regulations under which gains from foreign
currencies (and options, futures, and forward contracts on foreign currency)
would constitute qualifying income for purposes of the Qualifying Income Test
only if such gains are directly related to investing in securities. To date,
such regulations have not been issued.

As a regulated investment company, a Portfolio 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 Portfolio as capital gain dividends, if any, that it
distributes to shareholders on a timely basis. Each Portfolio intends to
declare and pay income dividends quarterly. In addition, each Portfolio
distributes any net capital gains it earns from the sale of portfolio securities
to shareholders no less frequently than annually. Amounts not distributed by a
Portfolio 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
Portfolio 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 Portfolio in October, November, or December of that year to
shareholders of record on a date in such a month and paid by the Portfolio
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 Portfolio intends to make its distributions in accordance with
the calendar year distribution requirement.

The PIMCO Municipal Sector Portfolio 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 Portfolio will be "exempt-interest dividends," which are

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generally exempt from federal income tax when received by an investor. Certain
exempt-interest dividends 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
Portfolio 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 Portfolio 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 Sector
Portfolio 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 Portfolio'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 Sector Portfolio 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 Portfolio). The tax may be imposed on up to 50% of
a recipient's benefits in cases where the sum of the recipient's adjusted gross
income (with certain adjustments, including tax-exempt interest) and 50% of the
recipient's benefits, exceeds a base amount. In addition, up to 85% of a
recipient's benefits may be subject to tax if the sum of the recipient's
adjusted gross income (with certain adjustments, including tax-exempt interest)
and 50% of the recipient's benefits exceeds a higher base amount. Shareholders
receiving social security or railroad retirement benefits should consult with
their tax advisors.

In years when a Portfolio 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
Sector Portfolio's expenses attributable to earning tax-exempt income do not
reduce such Portfolio's current earnings and profits, it is possible that
distributions, if any, in excess of such Portfolio net tax-exempt and taxable
income will be treated as taxable dividends to the extent of such Portfolio's
remaining earnings and profits (i.e., the amount of such expenses).

Distributions

Except for exempt interest dividends paid by the PIMCO Municipal Sector
Portfolio, all dividends and distributions of a Portfolio, 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 Portfolio'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.

Dividends paid by the Portfolios generally are not expected to qualify for
the deduction for dividends received by corporations. 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
Portfolio's shares and are not eligible for the dividends received deduction.
Any distributions that are not from a Portfolio's investment company taxable
income or net realized capital gains may be characterized as

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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 Portfolio (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 Portfolio may be required to withhold 31% of all taxable distributions
payable to shareholders who fail to provide the Portfolio with their correct
taxpayer identification number or to make required certifications, or who have
been notified by the Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code generally are exempt from such backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal tax liability.

Options, Futures and Forward Contracts, and Swap Agreements

Some of the options, futures contracts, forward contracts, and swap
agreements used by the Portfolios 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 Portfolio 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 Portfolio, 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 Portfolio. In
addition, losses realized by a Portfolio 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 Portfolio are not entirely
clear. The transactions may increase the amount of short-term capital gain
realized by a Portfolio which is taxed as ordinary income when distributed to
shareholders.

A Portfolio may make one or more of the elections available under the Code
which are applicable to straddles. If a Portfolio 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.

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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
Portfolios 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 Portfolio 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 Portfolio to qualify
as a regulated investment company may limit the extent to which a Portfolio will
be able to engage in swap agreements.

The qualifying income and diversification requirements applicable to a
Portfolio's assets may limit the extent to which a Portfolio will be able to
engage in transactions in options, futures contracts, forward contracts, and
swap agreements.

Short Sales

Certain Portfolios may make short sales of securities. Short sales may increase
the amount of short-term capital gain realized by a Portfolio, which is taxed as
ordinary income when distributed to shareholders.

Passive Foreign Investment Companies

Certain Portfolios may invest in the stock of foreign corporations which
may be classified under the Code as passive foreign investment companies
("PFICs"). In general, a foreign corporation is classified as a PFIC for a
taxable year if at least one-half of its assets constitute investment-type
assets or 75% or more of its gross income is investment-type income. If a
Portfolio receives a so-called "excess distribution" with respect to PFIC stock,
the Portfolio itself may be subject to tax on a portion of the excess
distribution, whether or not the corresponding income is distributed by the
Portfolio to stockholders. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which the Portfolio held the PFIC stock. A Portfolio 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 Portfolio may be eligible to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently is available in some
circumstances, a Portfolio 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 Portfolio'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 Portfolio level under the PFIC rules
would generally be eliminated, but the Portfolio could, in limited
circumstances, incur

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nondeductible interest charges. A Portfolio'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 Portfolio
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 Portfolio accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Portfolio 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
Portfolio's investment company taxable income to be distributed to its
shareholders as ordinary income.

Foreign Taxation

Income received by the Portfolios 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, PIMCO intends to manage the Portfolios 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 International, Emerging Markets or
Short-Term Emerging Markets Portfolios' total assets at the close of their
taxable year consists of securities of foreign corporations, such Portfolio will
be eligible to elect to "pass-through" to the Portfolio's shareholders the
amount of foreign income and similar taxes paid by the Portfolio. If this
election is made, a shareholder generally subject to tax will be required to
include in gross income (in addition to taxable dividends actually received) his
pro rata share of the foreign taxes paid by the Portfolio, 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 Portfolio's taxable year whether the foreign taxes paid by the Portfolio
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 International, Emerging Markets or Short-Term
Emerging Markets Portfolios' income will flow through to shareholders of the
Trust. With respect to such Portfolios, 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 Portfolio. 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.

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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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio. Cash to pay such dividends may be obtained from
sales proceeds of securities held by the Portfolio.

Constructive Sales

Recently enacted rules may affect the timing and character of gain if a
Portfolio engages in transactions that reduce or eliminate its risk of loss with
respect to appreciated financial positions. If a Portfolio enters into certain
transactions in property while holding substantially identical property, the
Portfolio 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
Portfolio'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 Portfolio'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 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

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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 Portfolio'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 an applicable estate
tax treaty 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 relevant
treaty.

Other Taxation

Distributions also may be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Under the laws of
various states, distributions of investment company taxable income generally are
taxable to shareholders even though all or a substantial portion of such
distributions may be derived from interest on certain federal obligations which,
if the interest were received directly by a resident of such state, would be
exempt from such state's income tax ("qualifying federal obligations").
However, some states may exempt all or a portion of such distributions from
income tax to 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 Portfolio will provide
information annually to shareholders indicating the amount and percentage of a
Portfolio'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 Portfolio.

OTHER INFORMATION

Capitalization

The Trust is a Massachusetts business trust established under a Declaration
of Trust dated February 19, 1987, as amended and restated March 31, 2000. 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

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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 Portfolio, each shareholder is entitled to receive his pro rata
share of the net assets of that Portfolio.

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 Portfolios. Information about a
Portfolio's performance is based on that Portfolio's (or its predecessor's)
record to a recent date and is not intended to indicate future performance.

The total return of shares of all Portfolios may be included in sales
literature or other written materials provided to investors. When a Portfolio'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 Portfolio has been offered for a
period shorter than one, five or ten years, that period will be substituted)
since the establishment of the Portfolio, as more fully described below. Total
return is measured by comparing the value of an investment in the Portfolio at
the beginning of the relevant period to the redemption value of the investment
in the Portfolio 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 Portfolios 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 Portfolio 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 Portfolio has declared and paid to shareholders as of the end of a
specified period rather than the Portfolio's actual net investment income for
that period.

Each Portfolio may from time to time include in sales literature or other
written materials provided to investors, the ranking of the Portfolio's
performance figures relative to such figures for groups of mutual funds
categorized by Lipper Analytical Services as having the same investment
objectives. The Portfolios also may compute current distribution rates and use
this information in the Offering Memorandum and Supplement, in reports to
current shareholders, or in certain types of sales literature provided to
prospective investors.

Calculation of Yield

Quotations of yield for the Portfolios 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

53
<PAGE>

expenses accrued during the period ("net investment income"), and are computed
by dividing net investment income by the maximum offering price per share on the
last day of the period, according to the following formula:

YIELD = 2[(a - b + 1)/6/ - 1]
-----
cd

where a = dividends and interest earned during the period,

b = expenses accrued for the period (net of reimbursements),

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends, and

d = the maximum offering price per share on the last day of the
period.

The yield of each such Portfolio will vary from time to time depending upon
market conditions, the composition of the Portfolio's portfolio and operating
expenses of the Trust allocated to the Portfolio. These factors and possible
differences in the methods used in calculating yield should be considered when
comparing a Portfolio'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 Portfolio's shares. These yields do not take into
account any applicable contingent deferred sales charges.

The Trust, in its sales literature or other written materials provided to
investors, 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 Portfolio will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in the Portfolio over periods of one, five and ten years (up to the
life of the Portfolio), 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 Portfolio expenses on an annual basis, and assume that all
dividends and distributions are reinvested when paid. The Portfolios 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.

Current distribution information for a Portfolio will be based on
distributions for a specified period (i.e., total dividends from net investment
income), divided by Portfolio 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.

54
<PAGE>

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 Portfolio has
declared and paid to shareholders as of the end of a specified period rather
than the Portfolio'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 Portfolio should be evaluated in light of these
differences and in light of the Portfolio's total return figures, which will
always accompany any calculation of the rate of current distributions.

Performance information for a Portfolio may also be compared to various
unmanaged indexes, such as the Lehman BB Intermediate Corporate Index and the
Salomon Brothers 3-Month Treasury Bill Index. Unmanaged indexes 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
Portfolios, performance information for the Portfolios 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 Portfolios or to PIMCO, should be considered in light of the Portfolios'
investment objectives and policies, characteristics and quality of the
Portfolios, 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.

In the sales literature or other written materials provided to investors,
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:

*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 Portfolios of PIMCO Funds: Pacific Investment Management Series.
Stocks are represented by Ibbotson's Large Company 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 20 years
from 1979-1998, the average annual return of stocks comprising the Ibbotson's
Large Company Stock Total Return Index ranged from -4.9% 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 Ibbotson's Treasury Bill Index (a "mixed
portfolio") would have ranged from -1.0% to 28.2% over the same period. The
average annual returns of each investment for each of the years from 1979
through 1998 is set forth in the following table.

55
<PAGE>

<TABLE>
<CAPTION>
MIXED
YEAR STOCKS BONDS T-BILLS INFLATION PORTFOLIO
---------------- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
1979 18.44% -4.18% 10.38% 13.31% 7.78%
1980 32.42% 2.61% 11.24% 12.40% 14.17%
1981 -4.91% -0.96% 14.71% 8.94% 0.59%
1982 21.41% 43.79% 10.54% 3.87% 28.19%
1983 22.51% 4.70% 8.80% 3.80% 12.64%
1984 6.27% 16.39% 9.85% 3.95% 11.03%
1985 32.16% 30.90% 7.72% 3.77% 26.77%
1986 18.47% 19.85% 6.16% 1.13% 16.56%
1987 5.23% -0.27% 5.46% 4.41% 3.08%
1988 16.81% 10.70% 6.35% 4.42% 12.28%
1989 31.49% 16.23% 8.37% 4.65% 20.76%
1990 -3.17% 6.87% 7.52% 6.11% 2.98%
1991 30.55% 19.79% 5.88% 3.06% 21.31%
1992 7.67% 9.39% 3.51% 2.90% 7.53%
1993 10.06% 13.17% 2.89% 2.75% 9.84%
1994 1.31% -5.76% 3.90% 2.67% -1.00%
1995 37.40% 27.20% 5.60% 2.70% 26.90%
1996 23.10% 1.40% 5.20% 3.30% 10.84%
1997 33.40% 12.90% 7.10% 1.70% 19.94%
1998 28.58% 10.76% 4.86% 1.61% 16.70%
</TABLE>

*Returns of unmanaged indices do not reflect past or future performance of any
of the Portfolios of PIMCO Funds: Pacific Investment Management Series. Stocks
are represented by Ibbotson's Large Company 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.

Articles or reports that include information relating to performance,
rankings and other characteristics of the Portfolios 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
Portfolio Magazine, The New York Times, Kiplinger's Personal Finance, Fortune,
Money Magazine, Morningstar's Mutual Portfolio 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 Portfolios, and may provide information relating to PIMCO,
including descriptions of assets under management and client base, and opinions
of the author(s) regarding the skills of personnel and employees of PIMCO who
have portfolio management responsibility. From time to time, the Trust may
include references to or reprints of such publications or reports in its sales
literature or other written materials provided to investors.

From time to time, the Trust may set forth in its sales literature or other
written materials information about the growth of a certain dollar-amount
invested in one or more of the Portfolios 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 PIMCO who assist with portfolio

56
<PAGE>

management and research activities on behalf of the Portfolios. The following
lists various analysts associated with PIMCO: Mark Hudoff, Doris Nakamura and
Ray Kennedy.

Voting Rights

Under the Declaration of Trust, the Trust is not required to hold annual
meetings of Trust shareholders to elect Trustees or for other purposes. It is
not anticipated that the Trust will hold shareholders' meetings unless required
by law or the Declaration of Trust. In this regard, the Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on the Board
if, at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. In addition, the Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares of the Trust
may remove a person serving as Trustee either by declaration in writing or at a
meeting called for such purpose. The Trustees are required to call a meeting
for the purpose of considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than ten percent of the
outstanding shares of the Trust. In the event that such a request was made, the
Trust has represented that it would assist with any necessary shareholder
communications. Shareholders of a class of shares have different voting rights
with respect to matters that affect only that class.

The Trust's shares do not have cumulative voting rights, so that the holder
of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees. As of March 9, 2000, the following persons owned of record
or beneficially 5% or more of shares of the noted Portfolios.

<TABLE>
<CAPTION>
Shares Percentage
Beneficially Owned of Portfolio
------------------------ ---------------
<S> <C> <C>
U.S. Government Sector Portfolio
Atwell & Co. 8,090,000.000 40.99%
Pacific Mutual Enhanced Bond Index Fund
c/o Chase Manhattan Bank
770 Broadway, 10th Floor
New York, NY 10003-9522

Commonwealth EBIF 3,661,617.459 18.55%
c/o US Trust Co. of New York
770 Broadway, 10th Floor
New York, NY 10003-9522

Mead Corporation 2,870,000.000 14.54%
c/o Mac & Co.
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198

Carpenters of Western Washington 1,644,102.406 8.33%
c/o Bank of New York
1 Wall Street, 8th Floor
New York, NY 10005-2500
</TABLE>

57
<PAGE>

<TABLE>
<CAPTION>
Shares Percentage
Beneficially Owned of Portfolio
------------------------ ---------------
<S> <C> <C>
Northern States Power Pension Plan 1,340,000.000 6.79%
c/o Norwest Bank Minnesota, NA
P.O. Box 1533
Minneapolis, MN 55480-1533

Sisters of Mercy 1,150,000.000 5.83%
c/o State Street Bank & Trust
P.O. Box 1992
Boston, MA 02105-1992

Mortgage Portfolio
Atwell & Co. 30,392,792.859 58.08%
Pacific Mutual Enhanced Bond Index Fund
c/o Chase Manhattan Bank
770 Broadway, 10th Floor
New York, NY 10003-9522

Commonwealth EBIF 8,072,107.557 15.42%
c/o US Trust Co. of New York
770 Broadway, 10th Floor
New York, NY 10003-9522

Northern States Power Pension Plan 6,338,339.333 12.11%
c/o Norwest Bank Minnesota, NA
P.O. Box 1533
Minneapolis, MN 55480-1533

Investment Grade Corporate Portfolio
Atwell & Co. 8,116,232.47 44.22%
Pacific Mutual Enhanced Bond Index Fund
c/o Chase Manhattan Bank
770 Broadway, 10th Floor
New York, NY 10003-9522

Commonwealth EBIF 2,565,130.26 13.98%
c/o US Trust Co. of New York
770 Broadway, 10th Floor
New York, NY 10003-9522

PIMCO Advisors L.P. 2,000,000.00 10.90%
800 Newport Center Drive
Newport Beach, CA 92660

Northern States Power Pension Plan 1,713,426.85 9.34%
c/o Norwest Bank Minnesota, NA
P.O. Box 1533
Minneapolis, MN 55480-1533
</TABLE>

58
<PAGE>

<TABLE>
<CAPTION>
Shares Percentage
Beneficially Owned of Portfolio
------------------------ ---------------
<S> <C> <C>
Carpenters of Western Washington 1,242,484.97 6.77%
c/o Bank of New York
1 Wall Street, 8th Floor
New York, NY 10005-2500

Sisters of Mercy 1,202,404.81 6.55%
c/o State Street Bank & Trust
P.O. Box 1992
Boston, MA 02105-1992

Pacific Life Insurance Co 971,943.89 5.30%
c/o Chase Manhattan Bank
4 New York Plaza, 4th Floor
New York, NY 10004-2413
</TABLE>

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.

Custodian, Transfer Agent and Dividend Disbursing Agent

State Street Bank and Trust Company ("State Street") 801 Pennsylvania,
Kansas City, Missouri 64105 serves as custodian for assets of all Portfolios.
Under the custody 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 Portfolios will not occur, and shareholders bear the risk of losses arising
from these or other events.

59
<PAGE>

National Financial Data Services, 330 W. 9th Street, 4th Floor, Kansas
City, Missouri serves as transfer agent and dividend disbursing agent for the
Portfolios.

Independent Accountants

PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105, serves
as independent public accountants for all Portfolios. PricewaterhouseCoopers
LLP provides audit services, tax return preparation and assistance and
consultation in connection with review of SEC filings.

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.

Financial Statements

As the Portfolios commenced operations in January 2000, financial
information for the Portfolios is not available.

60
<PAGE>

PART C. OTHER INFORMATION

Item 23. Exhibits
--------

(a) (1) Declaration of Trust of Registrant/7/

(2) Form of Amendment to Declaration of Trust/16/

(3) Form of Amended and Restated Declaration of Trust/21/

(4) Form of Amended and Restated Establishment and Designation of
Series of Shares of Beneficial Interest/8/

(5) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Long Duration Fund/11/

(6) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Convertible Bond Fund/12/

(7) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Low Duration Municipal Bond,
California Intermediate Municipal Bond and New York Intermediate
Municipal Bond Funds/15/

(8) Form of Establishment and Designation of Classes J and Class
K/16/

(9) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Loan Obligation Fund/16/

(10) Form of Amended Designation of Series Relating to Short Duration
Municipal Income Fund/16/

(11) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to the PIMCO Private Account
Portfolios/17/

(12) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to the Real Return Bond
Portfolio/17/

(13) Form of Amended Designation of Series Relating to the U.S.
Government Sector, U.S. Government Sector II, Mortgage, Mortgage
II, Investment Grade Corporate, Select Investment, High Yield,
International and Emerging Markets Portfolios/17/

(14) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to Investment Grade Corporate Bond
Fund/19/

(15) Form of Establishment and Designation of Series of Shares of
Beneficial Interest Relating to PIMCO California Municipal Bond
Fund and PIMCO Short-Term Emerging Markets Portfolio/20/

<PAGE>

(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/

(10) Form of Supplement to Investment Advisory Contract Relating to
Convertible Bond Fund/13/

(11) Form of Supplement to Investment Advisory Contract Relating to
Low Duration Municipal Bond, California Intermediate Municipal
Bond and New York Intermediate Municipal Bond Funds/15/

(12) Form of Supplement to Investment Advisory Contract Relating to
PIMCO Private Account Portfolios/17/

(13) Form of Investment Advisory Contract/20/

(14) Form of Supplement to Investment Advisory Contract Relating to
PIMCO California Municipal Bond Fund and PIMCO Short-Term
Emerging Markets Portfolio/20/

(15) Form of Supplement to Investment Advisory Contract Relating to
Loan Obligation Fund/21/

-2-
<PAGE>

(e) (1) Form of Amended and Restated Distribution Contract/14/

(2) Form of Supplement to Amended and Restated Distribution Contract
Relating to Low Duration Municipal Bond, California Intermediate
Municipal Bond and New York Intermediate Municipal Bond Funds/15/

(3) Form of Japan Dealer Sales Contract/14/

(4) Form of Supplement to Amended and Restated Distribution Contract
Relating to PIMCO Private Account Portfolios/17/

(5) Form of Distribution Contract/21/

(6) Form of Supplement to Distribution Contract Relating to PIMCO
California Municipal Bond Fund and PIMCO Short-Term Emerging
Markets Portfolio/21/

(f) Not applicable

(g) Form of Custody and Investment Accounting Agreement/14/

(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/14/

(5) Form of Supplement to Amended and Restated Administration
Agreement Relating to Low Duration Municipal Bond, California
Intermediate Municipal Bond and New York Intermediate Municipal
Bond Funds/15/

(6) Form of Supplement to Amended and Restated Administration
Agreement Relating to PIMCO Private Account Portfolios/17/

(7) Form of Second Amended and Restated Administration Agreement/21/

(8) Form of Supplement to Second Amended and Restated Administration
Agreement Relating to PIMCO California Municipal Bond Fund and
PIMCO Short-Term Emerging Markets Portfolio/21/

(9) Form of Supplement to Second Amended and Restated Administration
Agreement Relating to Loan Obligation Fund/21/

-3-
<PAGE>

(10) Form of Shareholder Servicing Agreement/9/

(11) Form of Transfer Agency Agreement/7/

(12) Form of Transfer Agency Agreement with Shareholder Services,
Inc./1/

(i) Opinion and Consent of Counsel/22/

(j) Not Applicable

(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/

(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/14/

(7) Form of Distribution and Servicing Plan for Class K Shares/14/

(n) Form of Amended and Restated Multi-Class Plan adopted pursuant
to Rule 18f-3/14/

(p)(1) Form of Code of Ethics for the Registrant/21/

(p)(2) Form of Code of Ethics for PIMCO/21/

(p)(3) Form of Code of Ethics for PIMCO Funds Distributors LLC/22/

* Form of Power of Attorney/21/

_____________________

/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-
<PAGE>

/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.

/14/ Filed with Post-Effective Amendment No. 45 on May 26, 1999.

/15/ Filed with Post-Effective Amendment No. 46 on June 17, 1999.

/16/ Filed with Post-Effective Amendment No. 50 on October 1, 1999.

/17/ Filed with Amendment No. 55 to the Registration Statement under the
Investment Company Act of 1940 on October 8, 1999.

/18/ Filed with Post-Effective Amendment No. 51 on October 22, 1999.

/19/ Filed with Post-Effective Amendment No. 52 on December 15, 1999.

/20/ Filed with Amendment No. 61 to the Registration Statement under the
Investment Company Act of 1940 on May 16, 2000.

/21/ Filed with Post-Effective Amendment No. 54 on May 18, 2000.

/22/ To be filed by Amendment.

Item 24. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------

No person is controlled by or under common control with the Registrant.

-5-
<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>

-6-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
---- ------------------------------
<S> <C>
Brick, Andrew Senior Vice President, PIMCO, and PIMCO Management, Inc.

Brynjolfsson, John B. Executive Vice President, PIMCO and PIMCO Management, Inc.

Burns, R. Wesley Managing Director and Executive Committee Member, PIMCO.
Director and Managing Director, PIMCO Management, Inc.; Member
of PIMCO Partners LLC. President and Trustee of the Trust and
PIMCO Variable Insurance Trust; President and Director of PIMCO
Commercial Mortgage Securities Trust, Inc.; Director, PIMCO
Funds: Global Investors Series plc and PIMCO Global Advisors
(Ireland) Limited.

Callin, Sabrina C. Vice President, PIMCO and PIMCO Management, Inc.

Clark, Marcia K. Vice President, PIMCO and PIMCO Management, Inc.

Coleman, Jerry Vice President, PIMCO and PIMCO Management, Inc.

Conseil, Cyrille 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; Director and Managing Director,
PIMCO Management, Inc.; Member of PIMCO Partners LLC.

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 Senior Vice President, PIMCO and PIMCO Management, Inc.

Ehlert, A. Benjamin Executive Vice President, PIMCO and PIMCO Management, Inc.

El-Erian, Mohamed A. Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.

Esquibel, Albert Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>

-7-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
---- ------------------------------
<S> <C>
Ettl, Robert A. Executive Senior Vice President, PIMCO and PIMCO Management,
Inc.

Evans, Stephanie D. Vice President, PIMCO and PIMCO Management, Inc.

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; Director,
Senior Vice President and Chief Financial Officer, Oppenheimer
Group, Inc.; Chief Financial Officer and Senior Vice President,
PIMCO Advisors; Chief Financial Officer, PIMCO Global Advisors
LLC.

Foulke, Steve A. Vice President, PIMCO and PIMCO Management, Inc.

Frisch, Ursula T. 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 and Executive Committee Member, 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. Managing Director, PIMCO; Director and Managing Director,
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>

-8-
<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
Variable Insurance Trust; Director and Chairman, PIMCO
Commercial Mortgage Securities Trust, Inc.; Member of
Management Board and Executive Committee, PIMCO Advisors;
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.

Hinman, David C. Senior Vice President, PIMCO and PIMCO Management, Inc.

Hocson, Liza M. Vice President, PIMCO and PIMCO Management, Inc.

Hodge, Douglas M. Executive Vice President, PIMCO and PIMCO Management, Inc.

Holden, Brent L. Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.

Holloway, Dwight F., Jr. Senior Vice President, PIMCO and PIMCO Management, Inc.

Hudoff, Mark Senior Vice President, PIMCO and PIMCO Management, Inc.

Isberg, Margaret E. Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.; Senior Vice President of the Trust.

Kelleher, Thomas J. Vice President, PIMCO, PIMCO Management, Inc. and the Trust

Keller, James M. Executive Vice President, PIMCO and PIMCO Management, Inc.

Kennedy, Raymond G. Senior Vice President, PIMCO and PIMCO Management, Inc.

Kiesel, Mark R. Vice President, PIMCO and PIMCO Management, Inc.

Kilmer, Sharon Executive Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>

-9-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
---- ------------------------------
<S> <C>
Kirkbaumer, Steven P. Vice President, PIMCO, PIMCO Management, Inc. and PIMCO
Variable Insurance Trust.

Loftus, John S. Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.; Vice President and Assistant Secretary,
StocksPLUS Management, Inc.

Lown, David Vice President, PIMCO and PIMCO Management, Inc.

Lyon, Laura, M. Vice President, PIMCO and PIMCO Management, Inc.

Mallegol, Andre J. Vice President, PIMCO, PIMCO Management, Inc. and the Trust.

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 and PIMCO Management, Inc.

Mayer, Benjamin L. Vice President, PIMCO and PIMCO Management, Inc.

McCray, Mark V. Senior Vice President, PIMCO and PIMCO Management, Inc.

McCulley, Paul A. Executive 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.

Meiling, Dean S. Managing Director, PIMCO; Director and Managing Director, PIMCO
Management, Inc.; Vice President, PIMCO Commercial Mortgage
Securities Trust, Inc.; Director, PIMCO Funds: Global Investors
Series plc and PIMCO Global Advisors (Ireland) Limited; Member,
PIMCO Partners LLC.

Metsch, Mark E. Vice President, PIMCO and PIMCO Management, Inc.

Mewbourne, Curtis Vice President, PIMCO and PIMCO Management, Inc.

Millimet, Scott Vice President, PIMCO and PIMCO Management, Inc.

Moll, Jonathan D. Vice President, PIMCO and PIMCO Management, Inc.

Monson, Kirsten S. Senior Vice President, PIMCO and PIMCO Management, Inc.

</TABLE>

-10-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
---- ------------------------------
<S> <C>
Muzzy, James F. Managing Director and Executive Committee Member, PIMCO;
Director and Managing Director, PIMCO Management, Inc.;
Director and Vice President, StocksPLUS Management, Inc.;
Senior Vice President, PIMCO Variable Insurance Trust; Vice
President of the Trust; Member of PIMCO Partners LLC.

Nakamura, Doris S. Vice President, PIMCO and PIMCO Management, Inc.

Nellemann, Mark D. Vice President, PIMCO and PIMCO Management, Inc.

Nguyen, Vinh T. Controller, PIMCO; Vice President and Controller, PIMCO
Advisors, 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.

Perez, Keith Vice President, PIMCO and PIMCO Management, Inc.

Phansalker, Mohan V. Senior Vice President, Senior Legal Officer and Assistant
Secretary, PIMCO and PIMCO Management, Inc.; Vice President and
Assistant Secretary, StocksPLUS 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.
</TABLE>

-11-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
---- ------------------------------
<S> <C>
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.

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, and PIMCO Commercial Mortgage
Securities Trust, Inc.

Schmider, Ernest L. Managing Director and Secretary, PIMCO; Director, Managing
Director and Secretary, PIMCO Management, Inc.; Secretary,
PIMCO Partners LLC; Director and Assistant Secretary,
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.

Seliga, Denise C. Vice President, PIMCO and PIMCO Management, Inc.

Seymour, Rita J. Vice President, PIMCO and PIMCO Management, Inc.

Simon, Scott Executive Vice President, PIMCO and PIMCO Management, Inc.

Sullivan, Christopher Vice President, PIMCO and PIMCO Management, Inc.

Theodore, Kyle, J. Vice President, PIMCO and PIMCO Management, Inc.

Thomas, Lee R. Managing Director, PIMCO; Director and Managing Director,
PIMCO Management, Inc.; Member PIMCO Partners LLC.
</TABLE>

-12-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
---- ------------------------------
<S> <C>
Thompson, William S. Jr. Chief Executive Officer, Managing Director and Executive
Committee Member, 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 and Executive Committee Member, PIMCO
Advisors; Member, President and Chief Executive Officer of
PIMCO Partners LLC.

Trinidad, Ronaele K. Vice President, PIMCO and PIMCO Management, Inc.

Trosky, Benjamin L. Managing Director, 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.

Wantanabe, Koichi Vice President, PIMCO and PIMCO Management, Inc.; Executive
Vice President and Director, PIMCO Global Advisors (Japan)
Limited.

Wegener, Marilyn Vice President, PIMCO and PIMCO Management, Inc.

Weil, Richard M. Assistant Secretary, PIMCO, PIMCO Management, Inc., Cadence
Capital Management, and PIMCO Funds Distributors LLC; General
Counsel and Senior Vice President, 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, General Counsel and Assistant Secretary, PIMCO
Global Advisors LLC; Senior Vice President and Assistant
Secretary, PIMCO Global Advisors (Japan) Limited.

Westhead, Paul C. Vice President, PIMCO and PIMCO Management, Inc.

Wilson, Susan Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>

-13-
<PAGE>

<TABLE>
<CAPTION>
Name Business and Other Connections
---- ------------------------------
<S> <C>
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, PIMCO Management, Inc. and PIMCO Global
Advisors (Europe) Limited.

Zhu, Changhong Vice President, PIMCO and PIMCO Management, Inc.
</TABLE>

The address of PIMCO is 840 Newport Center Drive, Newport Beach, CA 92260.

The address of PIMCO Advisors L.P. is 800 Newport Center Drive, Newport Beach,
CA 92660.

The address of PIMCO Funds Distributors LLC is 2187 Atlantic Street, Stamford,
CT 06902.

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.

(b)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
------------------------------------ -------------------------------- -----------------------------
<S> <C> <C>
Aarts, Erik M. Vice President None

Bosch, James D. Regional Vice President None

Brennan, Deborah P. Vice President, Compliance None
Officer

Clark, Timothy R. Executive Vice President None

Crean, Kelly Regional Vice President None

DeNicolo, Paul Regional Vice President None

Fessel, Jonathan P. Regional Vice President None

Fitzgerald, Robert M. Chief Financial Officer and None
Treasurer
</TABLE>

-14-
<PAGE>

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
------------------------------------ -------------------------------- -----------------------------
<S> <C> <C>
Gallagher, Michael J. Regional Vice President None

Gengo, Joseph Regional Vice President None

Goldsmith, David S. Regional Vice President None

Gray, Ronald H. Regional Vice President None

Hally, Dan Regional Vice President None

Hammond, Ned Regional Vice President None

Hans, Charles Regional Vice President None

Hayes, Derek B. Vice President None

Horan, Christopher Regional Vice President None

Hooper, Kristina Vice President None

Hussey, John B. Regional Vice President None

Jobe, Stephen R. Senior Vice President None

Lynch, William E. Senior Vice President None

Maginn, Stephen Executive Vice President None

Meyer, Wayne Regional Vice President None

Meyers, Andrew J. Executive Vice President None

Murphy, George Regional Vice President None

Murphy, Kerry A. Vice President None

Moyer, Fiora N. Regional Vice President None

Neugebauer, Phil J. Senior Vice President None

Nguyen, Vinh T. Vice President, Controller None

Pearlman, Joffrey H. Regional Vice President None

Pisapia, Glynne Regional Vice President None
</TABLE>

-15-
<PAGE>

Russo, Anne Marie Vice President None

Seymour, Christopher Regional Vice President None

Schlingheyde, Keith Regional Vice President None

Schott, Newton B., Jr. Executive Vice President/ None
Secretary, Chief
Administrative/ Legal Officer

Short, Elizabeth Vice President None

Smith Jr., Eugene M. Vice President None

Smith, Robert M. Regional Vice President None

Spear, Ellen Z. Vice President None

Spezakis, Zinovia Vice President None

Thomas, William H., Jr. Senior Vice President None

Treadway, Stephen J. Chairman, President and Chief None
Executive Officer

Troyer, Paul H. Senior Vice President None

Vlachos, Teresa 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, State

-16-
<PAGE>

Street Bank & Trust Co., 801 Pennsylvania, Kansas City, Missouri
64105, and Shareholder Services, Inc., P.O. Box 5866, Denver, Colorado
80217.

Item 29. Management Services
-------------------

Not applicable

Item 30. Undertakings
------------

Not applicable.

-17-
<PAGE>

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this 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 1st day of June, 2000.

PIMCO FUNDS
(Registrant)

By: ___________________________________
R. Wesley Burns*
President

/s/ Robert W. Helm
*By: ------------------------------------
Robert W. Helm, as attorney-in-fact

----------------
* Pursuant to power of attorney filed with Post-Effective Amendment No. 54 to
the Registration Statement No. 33-12113 on May 18, 2000.

-18-