PIMCO FUNDS, 497, 2000-11-17

PIMCO FUNDS
497, 2000-11-17

Previous: BRAUVIN HIGH YIELD FUND L P, 10-Q, EX-27, 2000-11-17

Next: CMS ENERGY CORP, 424B5, 2000-11-17

PIMCO Funds Prospectus

Pacific
Investment
Management
Series

November 14, 2000

Share Classes
Institutional
Administrative

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

EUROPEAN CONVERTIBLE FUND

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

This cover is not part of the Prospectus

<PAGE>

PIMCO
European Convertible Fund Prospectus

PIMCO Funds:
Pacific Investment
Management Series

November 14, 2000

Share Classes
Institutional
Administrative

This Prospectus describes the PIMCO European Convertible
Fund offered by PIMCO Funds: Pacific Investment Management
Series. The Fund provides access to the professional
investment advisory services offered by Pacific Investment
Management Company LLC ("PIMCO"). As of June 30, 2000,
PIMCO managed approximately $199.3 billion in assets.

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

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

<PAGE>

Table of Contents

Summary Information...........................................................2
PIMCO European Convertible....................................................4
How Fund Shares Are Priced...................................................15
Fund Distributions...........................................................16
Tax Consequences.............................................................16
PIMCO Funds: Pacific Investment Management Series............................30

<PAGE>

Summary Information

The table below describes certain investment characteristics of the Fund. Other
important characteristics are described in the Fund Summary beginning on page 4.
Following the table are certain key concepts which are used throughout the
Prospectus.
<TABLE>
<S> <C> <C> <C> <C>

Non-U.S.
Dollar
Denominated
Main Investments Duration Credit Quality(1) Securities
----------------------------------------------------------------------------------------------------------------------
European Convertible Fund European Convertible N/A B to Aaa; max 40% >65% (2)
Securities below Baa -
</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) The percentage limitation relates to securities of European issuers
denominated in any currency.

<PAGE>

Summary Information (continued)
Fixed Income
Instruments
"Fixed Income Instruments" as used in this Prospectus
includes:

o securities issued or guaranteed by the U.S. Government,
its agencies or government-sponsored enterprises ("U.S.
Government Securities");
o corporate debt securities of U.S. and non-U.S. issuers,
including convertible securities and corporate
commercial paper;
o mortgage-backed and other asset-backed securities;
o inflation-indexed bonds issued both by governments and
corporations;
o structured notes, including hybrid or "indexed"
securities, event-linked bonds and loan participations;
o delayed funding loans and revolving credit facilities;
o bank certificates of deposit, fixed time deposits and
bankers' acceptances;
o repurchase agreements and reverse repurchase
agreements;
o debt securities issued by states or local governments
and their agencies, authorities and other
government-sponsored enterprises;
o obligations of non-U.S. governments or their
subdivisions, agencies and government-sponsored
enterprises; and
o obligations of international agencies or supranational
entities.

Duration
Duration is a measure of the expected life of a fixed
income security that is used to determine the sensitivity
of a security's price to changes in interest rates. The
longer a security's duration, the more sensitive it will be
to changes in interest rates.

Credit Ratings
In this Prospectus, references are made to credit ratings
of debt securities which measure an issuer's expected
ability to pay principal and interest over 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:

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

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

Fund Descriptions,
Performance and
Fees
The following summaries identify the Fund's investment
objective, principal investments and strategies, principal
risks, performance information and fees and expenses. A
more detailed "Summary of Principal Risks" describing
principal risks of investing in the Fund begins after the
Fund Summary.

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

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

<PAGE>

PIMCO European Convertible
<TABLE>
<S> <C> <C> <C>

-----------------------------------------------------------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments and Seeks maximum total return, European convertible securities B to Aaa; maximum 40% below Baa
Strategies consistent with prudent investment
management Average Portfolio Duration Dividend Frequency
N/A Declared and distributed
quarterly

</TABLE>

The Fund seeks to achieve its investment objective by
investing under normal circumstances at least 65% of its
assets in a diversified portfolio of European convertible
securities. European convertible securities include any
convertible security issued by, or convertible into, an
issuer located in any European country. European
convertible securities, which are issued by companies of
all sizes and market capitalizations include, but are not
limited to: corporate bonds, debentures, notes or preferred
stocks and their hybrids that can be converted into
(exchanged for) common stock or other securities, such as
warrants or options, which provide an opportunity for
equity participation. The Fund may invest in securities of
any market capitalization, and may from time to time invest
a significant amount of its assets in securities of smaller
companies.

The Fund invests primarily in investment grade debt
securities, but may invest up to 40% of its assets in high
yield securities ("junk bonds") rated B or higher by
Moody's or S&P or, if unrated, determined by PIMCO to be of
comparable quality. The Fund may invest its assets in
securities denominated in any currency and may invest up to
35% of its assets in non-European issuers.

The Fund may invest all of its assets in derivative
instruments, such as options, futures contracts or swap
agreements. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions to earn
income. The Fund 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).
The "total return" sought by the Fund consists of income
earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases
in interest rates or improving credit fundamentals for a
particular sector or security.

--------------------------------------------------------------------------------
Principal Risks Among the principal risks of investing in the Fund, which
could adversely affect its net asset value, yield and total
return are:

o Market Risk o Derivatives Risk o Currency Risk
o Issuer Risk o Smaller Company Risk o Leveraging Risk
o Interest Rate Risk o Liquidity Risk o Management Risk
o Credit Risk o Foreign Investment Risk o European Concentration Risk
o High Yield Risk
</TABLE>

Performance The Fund does not yet have a full calendar year of
Information performance. Thus, no bar chart or annual returns table is
included for the Fund.

<PAGE>

PIMCO European Convertible Fund (continued)

--------------------------------------------------------------------------------
Fees and Expenses These tables describe the fees and expenses you may pay if you
buy and hold Institutional Class or of the Fund Administrative Class shares of
the Fund:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>

Shareholder Fees (fees paid directly from your investment) None

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

Distribution Total Annual Net Fund
Advisory and/or Service Other Fund Operating Expense Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses Reduction(2) Expenses
--------------------------------------------------------------------------------------------------------------------
Institutional 0.50% None 1.61% 2.11% (1.36)% 0.75%
--------------------------------------------------------------------------------------------------------------------
Administrative 0.50 0.25% 1.61 2.36 (1.36) 1.00
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)Other Expenses, which are based on estimated amounts for the initial
fiscal year of the class, reflect a 0.25% Administrative Fee and 1.36%
representing the Fund's organizational expenses as attributed to the class
and pro rata Trustee's fees.
(2)PIMCO has contractually agreed, for the Fund's current fiscal year, to
reduce Total Annual Fund Operating Expenses for the Institutional and
Administrative Class shares to the extent they would exceed, due to the
payment of organizational expenses and Trustees fees, 0.75% and 1.00%,
respectively. Under the Expense Limitation Agreement, PIMCO may recoup
these waivers and reimbursements in future periods, not exceeding three
years, provided total expenses, including such recoupment, do not exceed
the annual expense limit.

Examples. The Examples are intended to help you compare the cost of investing
in Institutional Class or Administrative Class shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, and then
redeem all your shares at the end of those periods. The Examples also assume
that your investment has a 5% return each year, the reinvestment of all
dividends and distributions, and that the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples
show what your costs would be based on these assumptions.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>

Share Class Year 1 Year 3 Year 5 Year 10
--------------------------------------------------------------------------------------------------------------------
Institutional $77 $240 $417 $930
--------------------------------------------------------------------------------------------------------------------
Administrative 102 318 552 1,225
--------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

Summary of Principal Risks

The value of your investment in the Fund changes with the values of that Fund's
investments. Many factors can affect those values. The factors that are most
likely to have a material effect on the Fund's portfolio as a whole are called
"principal risks." The principal risks of the Fund are identified in the Fund
Summary and are described in this section. The Fund may be subject to additional
principal risks and risks other than those described below because the types of
investments made by the Fund can change over time. Securities and investment
techniques mentioned in this summary and described in greater detail under
"Characteristics and Risks of Securities and Investment Techniques" appear in
bold type. That section and "Investment Objectives and Policies" in the
Statement of Additional Information also include more information about the
Fund, its investments and the related risks. There is no guarantee that the Fund
will be able to achieve its investment objective.

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

Credit Risk
The Fund could lose money if the issuer or guarantor of a fixed income security,
or the counterparty to a derivatives contract, repurchase agreement or a loan of
portfolio securities, is unable or unwilling to make timely principal and/or
interest payments, or to otherwise honor its obligations. Securities are subject
to varying degrees of credit risk, which are often reflected in credit ratings.
Municipal bonds are subject to the risk that litigation, legislation or other
political events, local business or economic conditions, or the bankruptcy of
the issuer could have a significant effect on an issuer's ability to make
payments of principal and/or interest.

High Yield Risk
Investments in high yield securities and unrated securities of similar credit
quality (commonly known as "junk bonds") may subject the Fund to greater levels
of interest rate, credit and liquidity risk than other securities. These
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 these
securities and reduce the Fund's ability to sell these securities (liquidity
risk).

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

Issuer Risk
The value of a security may decline for a number of reasons which directly
relate to the issuer, such as management performance, financial leverage and
reduced demand for the issuer's goods or services.

Liquidity Risk
Liquidity risk exists when particular investments are difficult to purchase or
sell. The Fund's investments in illiquid securities may reduce the returns of
the Fund because it may be unable to sell the illiquid securities at an
advantageous time or price.
<PAGE>

Derivatives Risk
Derivatives 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 Fund may use are referenced under
"Characteristics and Risks of Securities and Investment Techniques--Derivatives"
in this Prospectus and described in more detail under "Investment Objectives and
Policies" in the Statement of Additional Information. The Fund typically uses
derivatives as a substitute for taking a position in the underlying asset and/or
as part of a strategy designed to reduce exposure to other risks, such as
interest rate or currency risk. The Fund may also use derivatives for leverage,
in which case their use would involve leveraging risk. The Fund's use of
derivative instruments involves risks different from, or 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. If the Fund
invests in a derivative instrument it could lose more than the principal amount
invested. Also, suitable derivative transactions may not be available in all
circumstances and there can be no assurance that the Fund will engage in these
transactions to reduce exposure to other risks when that would be beneficial.

Foreign (Non-U.S.) Investment Risk
When the Fund invests in foreign securities it may experience more rapid and
extreme changes in value than if it invested exclusively in 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 the Fund's investments in a foreign country. In the event of
nationalization, expropriation or other confiscation, the Fund 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 the Fund invests a significant portion of its
assets in a concentrated geographic area like Eastern Europe or Asia, the Fund
will generally have more exposure to regional economic risks associated with
foreign investments.

Currency Risk
When the Fund invests directly in foreign currencies or in securities that trade
in, and receive revenues in, foreign (non-U.S.) currencies it is subject to the
risk that those currencies will decline in value relative to the U.S. dollar,
or, in the case of hedging positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for 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, the Fund's
investments in foreign currency-denominated securities may reduce the returns of
the Fund.

Leveraging Risk
Certain transactions may give rise to a form of leverage. Such transactions may
include, among others, reverse repurchase agreements, loans of portfolios
securities, and the use of when-issued, delayed delivery or forward commitment
transactions. The use of derivatives may also create leveraging risk. To
mitigate leveraging risk, PIMCO will segregate liquid assets or otherwise cover
the transactions that may give rise to such risk. The use of leverage may cause
the Fund 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 the Fund to be more volatile than if the Fund had
not been leveraged. This is because leverage tends to exaggerate the effect of
any increase or decrease in the value of the Fund's portfolio securities.
<PAGE>

Smaller Company Risk
The general risks associated with fixed income securities are particularly
pronounced for securities issued by companies with smaller market
capitalizations. These companies may have limited product lines, markets or
financial resources or they may depend on a few key employees. As a result, they
may be subject to greater levels of credit, market and issuer risk. Securities
of smaller companies may trade less frequently and in lesser volumes than more
widely held securities and their values may fluctuate more sharply than other
securities. Companies with medium-sized market capitalizations may have risks
similar to those of smaller companies.

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

European Concentration Risk

When the Fund concentrates its investments in Europe, it may be affected
significantly by economic, regulatory or political developments affecting
European issuers. All countries in Europe may be significantly affected by
fiscal and monetary controls implemented by the European Economic and Monetary
Union. Eastern European markets are relatively undeveloped and may be
particularly sensitive to economic and political events affecting those
countries.

<PAGE>

Management of the Fund

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

PIMCO is located at 840 Newport Center Drive, Newport Beach, California 92660.
Organized in 1971, PIMCO provides investment management and advisory services to
private accounts of institutional and individual clients and to mutual funds
(each a "PIMCO Fund" and collectively the "PIMCO Funds"). As of June 30, 2000,
PIMCO had approximately $199.3 billion in assets under management.

Advisory Fees
The Fund pays PIMCO fees in return for providing investment advisory services.
The Fund will pay monthly advisory fees to PIMCO at the annual rate (stated as a
percentage of the average daily net assets of the Fund) of 0.50%.

Administrative Fees
The Fund pays for the administrative services it requires under a fee structure
which is essentially fixed. Institutional and Administrative Class shareholders
of the Fund pays an administrative fee to PIMCO, computed as a percentage of the
Fund's assets attributable in the aggregate to that class of shares. PIMCO, in
turn, provides or procures administrative services for Institutional and
Administrative Class shareholders and also bears the costs of various
third-party services required by the Fund, including audit, custodial, portfolio
accounting, legal, transfer agency and printing costs.

For the fiscal year ending March 31, 2001, the Fund will pay PIMCO monthly
administrative fees at the annual rate (stated as a percentage of the average
daily net assets attributable in the aggregate to the Fund's Institutional and
Administrative Class shares) of 0.25%.

<PAGE>

Individual Portfolio Managers
The following person has primary responsibility for managing the Fund.

Portfolio Manager Since Recent Professional Experience
Sandra K. Durn 11/00* Senior Vice President, PIMCO. She joined PIMCO
as a Portfolio Manager in 1999. Prior to
joining PIMCO in 1999, she was associated
with Nicholas-Applegate Capital Management
where she was a Convertible Securities Portfolio
Manager from 1995- 1999.

* Since inception of the Fund.

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.

Investment Options--
Institutional Class and Administrative Class Shares

The Trust offers investors Institutional Class and Administrative Class shares
of the Fund in this prospectus.

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

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

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

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

o Arrangements with Service Agents. Institutional Class and Administrative Class
shares of the Fund may be offered through certain brokers and financial
intermediaries ("service agents") that have established a shareholder servicing
relationship with the Trust on behalf of their customers. The Trust pays no
compensation to such entities other than service and/or distribution fees paid
with respect to Administrative Class shares. Service agents may impose
additional or different conditions than the Trust on purchases, redemptions or
exchanges of Fund shares by their customers. Service agents may also
independently establish and charge their customers transaction fees, account
fees and other amounts in connection with purchases, sales and redemptions of
Fund shares in addition to any fees charged by the Trust. These additional fees
may vary over time and would increase the cost of the customer's investment and
lower investment returns. Each service agent is responsible for transmitting to
its customers a schedule of any such fees and information regarding any
additional or different conditions regarding purchases, redemptions and
exchanges. Shareholders who are customers of service agents should consult their
service agents for information regarding these fees and conditions.
<PAGE>

Purchases, Redemptions and Exchanges

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

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

Pension and profit-sharing plans, employee benefit trusts and employee benefit
plan alliances and "wrap account" programs established with broker-dealers or
financial intermediaries may purchase shares of either class only if the plan or
program for which the shares are being acquired will maintain an omnibus or
pooled account for the Fund and will not require the Fund to pay any type of
administrative payment per participant account to any third party. Shares may be
offered to clients of PIMCO and its affiliates, and to the benefit plans of
PIMCO and its affiliates.

o Investment Minimums. The minimum initial investment for shares of either class
is $5 million, except that the minimum initial investment for a registered
investment adviser purchasing Institutional Class shares for its clients through
omnibus accounts is $250,000 for the Fund. In addition, the minimum initial
investment does not apply to Institutional Class shares offered through
fee-based programs sponsored and maintained by a registered broker-dealer and
approved by the Distributor which each investor pays an asset based fee at an
annual rate of at least 0.50% of the assets in the account to a financial
intermediary for investment advisory and/or administrative services.

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

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

o Timing of Purchase Orders and Share Price Calculations. A purchase order
received by the Trust's transfer agent, National Financial Data Services
("Transfer Agent"), prior to the close of regular trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange, on a day the Trust is open for
business, together with payment made in one of the ways described below, 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. However, orders received by certain retirement plans and
other financial intermediaries on a business day prior to the close of regular
trading on the New York Stock Exchange and communicated to the Transfer Agent
prior to 9:00 a.m., Eastern time, on the following business day will be effected
at the NAV determined on the prior business day. The Trust is "open for
business" on each day the 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.
<PAGE>

o Initial Investment. Investors may open an account by completing and signing a
Client Registration Application and mailing it to PIMCO Fund at 840 Newport
Center Drive, Suite 300, Newport Beach, California 92660. A Client Registration
Application may be obtained by calling 1-800-927-4648.

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

An investor may purchase shares without first wiring federal funds if the
proceeds of the investment are derived from an advisory account the investor
maintains with PIMCO or one of its affiliates, from surrender or other payment
from an annuity, insurance, or other contract held by Pacific Life Insurance
Company, or from an investment by broker-dealers, institutional clients or other
financial intermediaries which have established a shareholder servicing
relationship with the Trust on behalf of their customers.

o Additional Investments. An investor may purchase additional Institutional
Class and Administrative Class shares of the Fund at any time by calling the
Trust and wiring federal funds to the Transfer Agent as outlined above.

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

The Trust and the Distributor each reserves the right, in its sole discretion,
to suspend the offering of shares of the Fund or to reject any purchase order,
in whole or in part, when, in the judgment of management, such suspension or
rejection is in the best interests of the Trust.

An investor should invest in the Fund for long-term investment purposes only.
The Trust and PIMCO each reserves the right to restrict purchases of Fund shares
(including exchanges) when a pattern of frequent purchases and sales made in
response to short-term fluctuations in share price appears evident. Notice of
any such restrictions, if any, will vary according to the particular
circumstances.

Institutional Class and Administrative Class shares of the Trust are not
qualified or registered for sale in all states. Investors should inquire as to
whether shares of the Fund are available for offer and sale in the investor's
state of residence. Shares of the Trust may not be offered or sold in any state
unless registered or qualified in that jurisdiction or unless an exemption from
registration or qualification is available.

Subject to the approval of the Trust, an investor may purchase shares of the
Fund with liquid securities that are eligible for purchase by the Fund
(consistent with the Fund's investment policies and restrictions) and that have
a value that is readily ascertainable in accordance with the Trust's valuation
policies. These transactions will be effected only if PIMCO intends to retain
the security in the Fund as an investment. Assets purchased by the Fund in such
a transaction will be valued in generally the same manner as they would be
valued for purposes of pricing the Fund's shares, if such assets were included
in the Fund's assets at the time of purchase. The Trust reserves the right to
amend or terminate this practice at any time.

o Retirement Plans. Shares of the Fund are available for purchase by retirement
and savings plans, including Keogh plans, 401(k) plans, 403(b) custodial
accounts, and Individual Retirement Accounts. The administrator of a plan or
employee benefits office can provide participants or employees with detailed
information on how to participate in the plan and how to elect the Fund as an
investment option. Participants in a retirement or savings plan may be permitted
to elect different investment options, alter the amounts contributed to the
plan, or change how contributions are allocated among investment options in
accordance with the plan's specific provisions. The plan administrator or
employee benefits office should be consulted for details. For questions about
participant accounts, participants should contact their employee benefits
office, the plan administrator, or the organization that provides recordkeeping
services for the plan. Investors who purchase shares through retirement plans
should be aware that plan administrators may aggregate purchase and redemption
orders for participants in the plan. Therefore, there may be a delay between the
time the investor places an order with the plan administrator and the time the
order is forwarded to the Transfer Agent for execution.
<PAGE>

Redeeming Shares
o Redemptions by Mail. An investor may redeem (sell) Institutional Class and
Administrative Class shares by submitting a written request to PIMCO Fund at 840
Newport Center Drive, Suite 300, Newport Beach, California 92660. The redemption
request should state the Fund from which the shares are to be redeemed, the
class of shares, the number or dollar amount of the shares to be redeemed and
the account number. The request must be signed exactly as the names of the
registered owners appear on the Trust's account records, and the request must be
signed by the minimum number of persons designated on the Client Registration
Application that are required to effect a redemption.

o Redemptions by Telephone or Other Wire Communication. An investor that elects
this option on the Client Registration Application (or subsequently in writing)
may request redemptions of shares by calling the Trust at 1-800-927-4648, by
sending a facsimile to 1-949-725-6830, or by other means of wire communication,
excluding e-mail. Investors should state the Fund and class from which the
shares are to be redeemed, the number or dollar amount of the shares to be
redeemed, the account number and the signature of an authorized signatory.
Redemption requests of an amount of $10 million or more may be initiated by
telephone, but must be confirmed in writing by an authorized party prior to
processing.

In electing a telephone redemption, the investor authorizes PIMCO and the
Transfer Agent to act on telephone instructions from any person representing
himself to be the investor, and reasonably believed by PIMCO or the Transfer
Agent to be genuine. Neither the Trust nor the Transfer Agent may be liable for
any loss, cost or expense for acting on instructions (whether in writing or by
telephone) believed by the party receiving such instructions to be genuine and
in accordance with the procedures described in this Prospectus. Shareholders
should realize that by electing the telephone or wire redemption option, they
may be giving up a measure of security that they might have if they were to
redeem their shares in writing. Furthermore, interruptions in telephone service
may mean that a shareholder will be unable to effect a redemption by telephone
when desired. The Transfer Agent also provides written confirmation of
transactions initiated by telephone as a procedure designed to confirm that
telephone instructions are genuine (written confirmation is also provided for
redemption requests received in writing). All telephone transactions are
recorded, and PIMCO or the Transfer Agent may request certain information in
order to verify that the person giving instructions is authorized to do so. The
Trust or Transfer Agent may be liable for any losses due to unauthorized or
fraudulent telephone transactions if it fails to employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. All
redemptions, whether initiated by letter or telephone, will be processed in a
timely manner, and proceeds will be forwarded by wire in accordance with the
redemption policies of the Trust detailed below. See "Other Redemption
Information."

Shareholders may decline telephone exchange or redemption privileges after an
account is opened by instructing the Transfer Agent in writing at least seven
business days prior to the date the instruction is to be effective. Shareholders
may experience delays in exercising telephone redemption privileges during
periods of abnormal market activity. During periods of volatile economic or
market conditions, shareholders may wish to consider transmitting redemption
orders by telegram, facsimile or overnight courier.

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

o 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 Fund 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), the Fund name, and must be
executed or initiated by the appropriate signatories.
<PAGE>

o Other Redemption Information. Redemption proceeds will ordinarily be wired to
the investor's bank within three business days after the redemption request, but
may take up to seven business days. Redemption proceeds will be sent by wire
only to the bank name designated on the Client Registration Application.
Redemptions of Fund shares may be suspended when trading on the New York Stock
Exchange is restricted or during an emergency which makes it impracticable for
the Fund 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.

For shareholder protection, a request to change information contained in an
account registration (for example, a request to change the bank designated to
receive wire redemption proceeds) must be received in writing, signed by the
minimum number of persons designated on the Client Registration Application that
are required to effect a redemption, and accompanied by a signature guarantee
from any eligible guarantor institution, as determined in accordance with the
Trust's procedures. Shareholders should inquire as to whether a particular
institution is an eligible guarantor institution. A signature guarantee cannot
be provided by a notary public. In addition, corporations, trusts, and other
institutional organizations are required to furnish evidence of the authority of
the persons designated on the Client Registration Application to effect
transactions for the organization.

Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem Institutional Class and Administrative Class shares
in any account for their then-current value (which will be promptly paid to the
investor) if at any time, due to redemption by the investor, the shares in the
account do not have a value of at least $100,000. A shareholder will receive
advance notice of a mandatory redemption and will be given at least 30 days to
bring the value of its account up to at least $100,000. This mandatory
redemption policy does not apply to participants in PIMCO Advisors Portfolio
Strategies, a managed product sponsored by PIMCO Advisors.

The Trust agrees to redeem shares of the Fund solely in cash up to the lesser of
$250,000 or 1% of the Fund's net assets during any 90-day period for any one
shareholder. In consideration of the best interests of the remaining
shareholders, the Trust reserves the right to pay any redemption proceeds
exceeding this amount in whole or in part by a distribution in kind of
securities held by a Fund in lieu of cash. It is highly unlikely that shares
would ever be redeemed in kind. When shares are redeemed in kind, the redeeming
shareholder should expect to incur transaction costs upon the disposition of the
securities received in the distribution.

Exchange Privilege
An investor may exchange Institutional Class or Administrative Class shares of
the Fund for shares of the same class of any other Fund or other series of the
Trust that offers that class based on the respective NAVs of the shares
involved. An exchange may be made by following the redemption procedure
described above under "Redemptions by Mail" or, if the investor has elected the
telephone redemption option, by calling the Trust at 1-800-927-4648. An investor
may also exchange shares of the Fund for shares of the same class of a series of
PIMCO Fund: Multi-Manager Series, an affiliated mutual fund family composed
primarily of equity portfolios managed by PIMCO Advisors and its subsidiaries.
Shareholders interested in such an exchange may request a prospectus for these
other series by contacting PIMCO Fund at the same address and telephone number
as the Trust.

An investor may exchange shares only with respect to the Fund or other eligible
series that are registered in the investor's state of residence or where an
exemption from registration is available. An exchange order is treated the same
for tax purposes as a redemption followed by a purchase and may result in a
capital gain or loss, and special rules may apply in computing tax basis when
determining gain or loss. See "Tax Consequences" in this Prospectus and
"Taxation" in the Statement of Additional Information.

The Trust reserves the right to refuse exchange purchases if, in the judgment of
PIMCO, the purchase would adversely affect the Fund and its shareholders. In
particular, a pattern of exchanges characteristic of "market-timing" strategies
may be deemed by PIMCO to be detrimental to the Trust or a particular Fund.
Currently, the Trust limits the number of "round trip" exchanges investors may
make. An investor makes a "round trip" exchange when the investor purchases
shares of a particular Fund, subsequently exchanges those shares for shares of a
different PIMCO Fund, and then exchanges back into the originally purchased
Fund. The Trust has the right to refuse any exchange for any investor who
completes (by making the exchange back into the shares of the originally
purchased Fund) more than six round trip exchanges in any twelve-month period.
The Trust reserves the right to impose additional restrictions on exchanges at
any time, although it will attempt to give shareholders 30 days' prior notice
whenever it is reasonably able to do so.
<PAGE>

How Fund Shares Are Priced

The net asset value ("NAV") of the Fund's Institutional and Administrative Class
shares is determined by dividing the total value of the Fund's portfolio
investments and other assets attributable to that class, less any liabilities,
by the total number of shares outstanding of that class.

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 the Fund'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.

Fund 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 Fund normally uses 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 principal markets for
those securities. Information that becomes known to the Fund 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
Fund 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.

Under certain circumstances, the per share NAV of the Administrative Class
shares of the Fund may be lower than the per share NAV of the Institutional
Class shares as a result of the daily expense accruals of the service and/or
distribution fees paid by Administrative Class shares. Generally, for income
dividends paid by the Fund, those dividends are expected to differ over time by
approximately the amount of the expense accrual differential between the two
classes.
<PAGE>

Fund Distributions

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

The Fund's dividend and capital gain distributions with respect to a particular
class of shares will automatically be reinvested in additional shares of the
same class of the Fund at NAV unless the shareholder elects to have the
distributions paid in cash. A shareholder may elect to have distributions paid
in cash on the Client Registration Application or by submitting a written
request, signed by the appropriate signatories, indicating the account number,
Fund name(s) and wiring instructions. Shareholders do not pay any sales charges
on shares received through the reinvestment of Fund distributions.

Tax Consequences

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

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

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

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

This section relates only to federal income tax; the consequences under other
tax laws may differ. Shareholders should consult their tax advisors as to the
possible application of foreign, state and local income tax laws to Fund
dividends and capital distributions. Please see the Statement of Additional
Information for additional information regarding the tax aspects of investing in
the Fund.

Characteristics and Risks of Securities and Investment Techniques

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

Securities Selection
The Fund seeks maximum total return. The total return sought by the Fund
consists of both income earned on the Fund's investments and capital
appreciation, if any, arising from increases in the market value of the Fund'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 the Fund, 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 the Fund'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, the financial markets and other factors.

PIMCO attempts to identify areas of the bond market that are undervalued
relative to the rest of the market. PIMCO identifies these areas by grouping
bonds into sectors such as money markets, governments, corporates, mortgages,
asset-backed and international. Sophisticated proprietary software then assists
in evaluating sectors and pricing specific securities. Once investment
opportunities are identified, PIMCO will shift assets among sectors depending
upon changes in relative valuations and credit spreads. There is no guarantee
that PIMCO's security selection techniques will produce the desired results.

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

Mortgage-Related and Other Asset-Backed Securities
The Fund may invest in mortgage-or other asset-backed securities.
Mortgage-related securities include mortgage pass-through securities,
collateralized mortgage obligations ("CMOs"), commercial mortgage-backed
securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed
securities ("SMBSs") and other securities that directly or indirectly represent
a participation in, or are secured by and payable from, mortgage loans on real
property.

The value of some mortgage- or asset-backed securities may be particularly
sensitive to changes in prevailing interest rates. Early repayment of principal
on some mortgage-related securities may expose the Fund to a lower rate of
return upon reinvestment of principal. When interest rates rise, the value of a
mortgage-related security generally will decline; however, when interest rates
are declining, the value of mortgage-related securities with prepayment features
may not increase as much as other fixed income securities. The rate of
prepayments on underlying mortgages will affect the price and volatility of a
mortgage-related security, and may shorten or extend the effective maturity of
the security beyond what was anticipated at the time of purchase. If
unanticipated rates of prepayment on underlying mortgages increase the effective
maturity of a mortgage-related security, the volatility of the security can be
expected to increase. The value of these securities may fluctuate in response to
the market's perception of the creditworthiness of the issuers. Additionally,
although mortgages and mortgage-related securities are generally supported by
some form of government or private guarantee and/or insurance, there is no
assurance that private guarantors or insurers will meet their obligations.

One type of SMBS has one class receiving all of the interest from the mortgage
assets (the interest-only, or "IO" class), while the other class will receive
all of the principal (the principal-only, or "PO" class). The yield to maturity
on an IO class is extremely sensitive to the rate of principal payments
(including prepayments) on the underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Fund's yield to
maturity from these securities. The Fund may not invest more than 5% of its
assets in any combination of IO, PO, or inverse floater securities. The Fund may
invest in other asset-backed securities that have been offered to investors.
<PAGE>

Loan Participations and Assignments
The Fund may invest in fixed- and floating-rate loans, which investments
generally will be in the form of loan participations and assignments of portions
of such loans. Participations and assignments involve special types of risk,
including credit risk, interest rate risk, liquidity risk, and the risks of
being a lender. If the Fund purchases a participation, it may only be able to
enforce its rights through the lender, and may assume the credit risk of the
lender in addition to the borrower.

Corporate Debt Securities
Corporate debt securities are subject to the risk of the issuer's inability to
meet principal and interest payments on the obligation and may also be subject
to price volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness 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.

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

o 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 Prospectus describes the various
ratings assigned to fixed income securities by Moody's and S&P. Ratings assigned
by a rating agency are not absolute standards of credit quality and do not
evaluate market risks. Rating agencies may fail to make timely changes in credit
ratings and an issuer's current financial condition may be better or worse than
a rating indicates. The Fund 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.

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

Variable and Floating Rate Securities
Variable and floating rate securities provide for a periodic adjustment in the
interest rate paid on the obligations. The Fund may invest in floating rate debt
instruments ("floaters") and engage in credit spread trades. While floaters
provide a certain degree of protection against rises in interest rates, the Fund
will participate in any declines in interest rates as well. The Fund may also
invest in inverse floating rate debt instruments ("inverse floaters"). An
inverse floater may exhibit greater price volatility than a fixed rate
obligation of similar credit quality. The Fund may not invest more than 5% of
its assets in any combination of inverse floater, interest only, or principal
only securities.
<PAGE>

Inflation-Indexed Bonds
Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted according to the rate of inflation. If the index measuring
inflation falls, the principal value of inflation-indexed bonds will be adjusted
downward, and consequently the interest payable on these securities (calculated
with respect to a smaller principal amount) will be reduced. Repayment of the
original bond principal upon maturity (as adjusted for inflation) is guaranteed
in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not
provide a similar guarantee, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.

The value of inflation-indexed bonds is expected to change in response to
changes in real interest rates. Real interest rates are tied to the relationship
between nominal interest rates and the rate of inflation. If nominal interest
rates increase at a faster rate than inflation, real interest rates may rise,
leading to a decrease in value of inflation-indexed bonds. Short-term increases
in inflation may lead to a decline in value. Any increase in the principal
amount of an inflation-indexed bond will be considered taxable ordinary income,
even though investors do not receive their principal until maturity.

Event-Linked Bonds
The Fund may invest in "event-linked bonds," which are fixed income securities
for which the return of principal and payment of interest is contingent on the
non-occurrence of a specific "trigger" 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, the Fund
may lose a portion or all of its principal invested in the bond. Even-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 Fund 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 and Equity Securities
The Fund invests in convertible securities. Convertible securities are generally
preferred stocks and other securities, including fixed income securities and
warrants, that are convertible into or exercisable for common stock at a stated
price or rate. The price of a convertible security will normally vary in some
proportion to changes in the price of the underlying common stock because of
this conversion or exercise feature. However, the value of a convertible
security may not increase or decrease as rapidly as the underlying common stock.
A convertible security will normally also provide income and is subject to
interest rate risk. Convertible securities may be lower-rated securities subject
to greater levels of credit risk.. The Fund may be forced to convert a security
before it would otherwise choose, which may have an adverse effect on the Fund's
ability to achieve its investment objective.

Equity securities generally have greater price volatility than fixed income
securities. The market price of equity securities owned by the Fund 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 (Non-U.S.) Securities
The Fund will invest a minimum of 65% of its net assets in convertible
securities issued by European companies. Investing in foreign securities
involves special risks and considerations not typically associated with
investing in U.S. securities. Shareholders should consider carefully the
substantial risks associated with investing 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.
<PAGE>

The Fund also may invest in sovereign debt issued by governments, their agencies
or instrumentalities, or other government-related entities. Holders of sovereign
debt may be requested to participate in the rescheduling of such debt and to
extend further loans to governmental entities. In addition, there is no
bankruptcy proceeding by which defaulted sovereign debt may be collected.

Emerging Market Securities
The Fund may invest up to 10% of its assets in emerging market securities.
Investing in emerging market securities imposes risks different from, or greater
than, risks of investing in domestic securities or in foreign, developed
countries. These risks include: smaller market capitalization of securities
markets, which may suffer periods of relative illiquidity; significant price
volatility; restrictions on foreign investment; possible repatriation of
investment income and capital. In addition, foreign investors may be required to
register the proceeds of sales; future economic or political crises could lead
to price controls, forced mergers, expropriation or confiscatory taxation,
seizure, nationalization, or creation of government monopolies. The currencies
of emerging market countries may experience significant declines against the
U.S. dollar, and devaluation may occur subsequent to investments in these
currencies by the Fund. Inflation and rapid fluctuations in inflation rates have
had, and may continue to have, negative effects on the economies and securities
markets of certain emerging market countries.

Additional risks of emerging markets securities may include: greater social,
economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems. In addition, emerging securities
markets may have different clearance and settlement procedures, which may be
unable to keep pace with the volume of securities transactions or otherwise make
it difficult to engage in such transactions. Settlement problems may cause the
Fund to miss attractive investment opportunities, hold a portion of its assets
in cash pending investment, or be delayed in disposing of a portfolio security.
Such a delay could result in possible liability to a purchaser of the security.

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

Foreign (Non-U.S.) Currencies
The Fund may invest directly in foreign currencies or in securities that trade
in, or receive revenues in, foreign currencies will be subject to currency risk.
Foreign currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by supply and demand in the foreign
exchange markets and the relative merits of investments in different countries,
actual or perceived changes in interest rates and other complex factors.
Currency exchange rates also can be affected unpredictably by intervention (or
the failure to intervene) by U.S. or foreign governments or central banks, or by
currency controls or political developments. For example, 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 Fund's assets are denominated may be devalued against the U.S. dollar,
resulting in a loss to the Fund.

Foreign Currency Transactions
If the Fund invests in securities denominated in foreign currencies it 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 the Fund's exposure to changes in the value of the currency it
will deliver and increases its exposure to changes in the value of the currency
it will receive for the duration of the contract. The effect on the value of the
Fund is similar to selling securities denominated in one currency and purchasing
securities denominated in another currency. A contract to sell foreign currency
would limit any potential gain which might be realized if the value of the
hedged currency increases. The Fund may enter into these contracts to hedge
against foreign exchange risk, to increase exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one currency to another.
Suitable hedging transactions may not be available in all circumstances and
there can be no assurance that the Fund will engage in such transactions at any
given time or from time to time. Also, such transactions may not be successful
and may eliminate any chance for the Fund to benefit from favorable fluctuations
in relevant foreign currencies. The Fund may use one currency (or a basket of
currencies) to hedge against adverse changes in the value of another currency
(or a basket of currencies) when exchange rates between the two currencies are
positively correlated. The Fund will segregate assets determined to be liquid by
PIMCO in accordance with procedures established by the Board of Trustees to
cover its obligations under forward foreign currency exchange contracts entered
into for non-hedging purposes.
<PAGE>

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

Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings
The Fund may enter into reverse repurchase agreements and dollar rolls, subject
to the Fund's limitations on borrowings. A reverse repurchase agreement or
dollar roll involves the sale of a security by the Fund and its agreement to
repurchase the instrument at a specified time and price, and may be considered a
form of borrowing for some purposes. The Fund will segregate assets determined
to be liquid by PIMCO in accordance with procedures established by the Board of
Trustees or otherwise to 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 the
Fund.

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

Derivatives
The Fund may, but is not required to, use derivative instruments for risk
management purposes or as part of its investment strategies. Generally,
derivatives are financial contracts whose value depends upon, or is derived
from, the value of an underlying asset, reference rate or index, and may relate
to stocks, bonds, interest rates, currencies or currency exchange rates,
commodities, and related indexes. Examples of derivative instruments include
options contracts, futures contracts, options on futures contracts and swap
agreements. The Fund may invest some or all of its assets in derivative
instruments. A portfolio manager may decide not to employ any of these
strategies and there is no assurance that any derivatives strategy used by the
Fund will succeed. A description of these and other derivative instruments that
the Fund may use are described under "Investment Objectives and Policies" in the
Statement of Additional Information.

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

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.
<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 the Fund uses derivatives
for leverage, investments in the Fund will tend to be more volatile, resulting
in larger gains or losses in response to market changes. To limit leverage risk,
the Fund will segregate assets determined to be liquid by PIMCO in accordance
with procedures established by the Board of Trustees (or, as permitted by
applicable regulation, enter into certain offsetting positions) to cover its
obligations under derivative instruments.

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

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

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

Delayed Funding Loans and Revolving Credit Facilities
The Fund may also enter into, or acquire participations in, delayed funding
loans and revolving credit facilities, in which a lender agrees to make loans up
to a maximum amount upon demand by the borrower during a specified term. These
commitments may have the effect of requiring the Fund to increase its investment
in a company at a time when it might not otherwise decide to do so (including at
a time when the company's financial condition makes it unlikely that such
amounts will be repaid). To the extent that the Fund is committed to advance
additional funds, it will segregate assets determined to be liquid by PIMCO in
accordance with procedures established by the Board of Trustees in an amount
sufficient to meet such commitments. Delayed funding loans and revolving credit
facilities are subject to credit, interest rate and liquidity risk and the risks
of being a lender.

<PAGE>

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

Investment in Other Investment Companies
The Fund may invest up to 10% of its assets in securities of other investment
companies, such as closed-end management investment companies, or in pooled
accounts or other investment vehicles which invest in foreign markets. As a
shareholder of an investment company, the Fund may indirectly bear service and
other fees which are in addition to the fees the Fund pays its service
providers.

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

Short Sales
The Fund may make short sales as part of its overall portfolio management
strategies or to offset a potential decline in value of a security. A short sale
involves the sale of a security that is borrowed from a broker or other
institution to complete the sale. Short sales expose the Fund to the risk that
it will be required to acquire, convert or exchange securities to replace the
borrowed securities (also known as "covering" the short position) at a time when
the securities sold short have appreciated in value, thus resulting in a loss to
the Fund. The Fund making a short sale it 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 Securities
The Fund may invest up to 15% of its net assets in illiquid securities. Certain
illiquid securities may require pricing at fair value as determined in good
faith under the supervision of the Board of Trustees. The 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 the Fund 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 Portfolio Securities
For the purpose of achieving income, the Fund may lend its portfolio securities
to brokers, dealers, and other financial institutions provided a number of
conditions are satisfied, including that the loan is fully collateralized.
Please see "Investment Objectives and Policies" in the Statement of Additional
Information for details. When the Fund lends portfolio securities, its
investment performance will continue to reflect changes in the value of the
securities loaned, and the Fund will also receive a fee or interest on the
collateral. Securities lending involves the risk of loss of rights in the
collateral or delay in recovery of the collateral if the borrower fails to
return the security loaned or becomes insolvent. The Fund may pay lending fees
to a party arranging the loan.

<PAGE>

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

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

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

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

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

<PAGE>

Appendix A
Description of Securities Ratings

The Fund's investments may range in quality from securities rated in the lowest
category in which the Fund is permitted to invest to securities rated in the
highest category (as rated by Moody's or S&P or, if unrated, determined by PIMCO
to be of comparable quality). The percentage of the Fund'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
considered predominantly 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 Investors Service, Inc.
Corporate and Municipal Bond Ratings

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

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

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

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

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

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

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

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

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

Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classified from Aa through B in its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Corporate Short-Term Debt Ratings

Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations which have an original maturity not exceeding
one year. Obligations relying upon support mechanisms such as letters of credit
and bonds of indemnity are excluded unless explicitly rated.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.

PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.

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

Investment Grade
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
<PAGE>

BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or
BB-rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.

C: The rating C is typically applied to debt subordinated to senior debt that is
assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

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.
<PAGE>

The absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.

Commercial Paper Rating Definitions
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from A for the highest
quality obligations to D for the lowest. These categories are as follows:

A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

B: Issues rated B are regarded as having only speculative capacity for timely
payment.

C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.

A commercial paper rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in or unavailability of such information.

<PAGE>

PIMCO Funds: Pacific Investment Management Series

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

You may get free copies of any of these materials, request other information
about the Fund, or make shareholder inquiries by calling 1-800-426-0107, or by
writing to:

PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, Connecticut 06902

You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-202-942-8090 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
get 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].

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

LOGO

Investment Company Act File no. 811-5028

<PAGE>

PIMCO Funds:
Pacific Investment
Management Series

INVESTMENT ADVISER AND ADMINISTRATOR
PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660

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. 20006-2401

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

www.pimco.com

Investment Company Act file no. 811-5028

<PAGE>

PIMCO Funds Prospectus

Pacific
Investment
Management
Series

November 14, 2000

Share Class
D

EUROPEAN CONVERTIBLE FUND

This cover is not part of the Prospectus

<PAGE>
PIMCO
European Convertible Fund Prospectus

PIMCO Funds:
Pacific Investment
Management Series

November 14, 2000

Share Class D

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

<PAGE>

Table of Contents

Summary Information.....................................................2
Summary of Principal Risks..............................................6
Management of the Fund..................................................9
How Fund Shares Are Priced.............................................12
Tax Consequences.......................................................13
Characteristics and Risks of Securities and Investment Techniques......14
Appendix A.............................................................23

<PAGE>

Summary Information

<TABLE>
<S> <C> <C> <C> <C>
Non-U.S. Dollar
Denominated
Main Investments Duration Credit Quality(1) Securities
----------------------------------------------------------------------------------------------------------------------------
European Convertible Fund European Convertible N/A B to Aaa; max 40% >65% (2)
Securities below Baa -
</TABLE>

<PAGE>

Summary Information (continued)
Fixed Income
Instruments
"Fixed Income Instruments" as used in this Prospectus
includes:

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

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

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

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

<PAGE>

PIMCO European Convertible Fund
<TABLE>
<S> <C> <C> <C>

Please see "Summary of Principal Risks" following the Fund
Summary for a description of these and other risks of
investing in the Fund.
--------------------------------------------------------------------------------
Performance The Fund does not yet have a full calendar year of performance.
Information Thus, no bar chart or annual returns table is included for the Fund.

<PAGE>

PIMCO European Convertible Fund (continued)

------------------------------------------------------------------------------------------------------------------------------------
Fees and Expenses These tables describe the fees and expenses you may pay if you
of the Fund buy and hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment) None

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

Distribution Total Annual Net Fund
Advisory and/or Service Other Fund Operating Expense Operating
Fees (12b-1) Fees(1) Expenses(2) Expenses Reduction(3) Expenses
---------------------------------------------------------------------------------------------------------------
Class D 0.50% 0.25% 1.76% 2.51% (1.36)% 1.15%
---------------------------------------------------------------------------------------------------------------

(1)The Fund's administration agreement includes a plan for
Class D shares that has been adopted in conformity with
the requirements set forth in Rule 12b-1 under the
Investment Company Act of 1940. Up to 0.25% per year of
the total fees paid under the administration agreement
may be distribution and/or service (12b-1) fees. The
Fund will pay a total of 0.65% per year under the
administration agreement regardless of whether a portion
or none of the 0.25% authorized under the plan is paid
under the plan. Please see "Management of the
Fund--Investment Adviser and Administrator--
Administrative Fees" for details. The Fund intends to
treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association
of Securities Dealers, Inc. (the "NASD"). To the extent
that such fees are deemed not to be "service fees,"
Class D shareholders may, depending on the length of
time the shares are held, pay more than the economic
equivalent of the maximum front-end sales charges
permitted by relevant rules of the NASD.
(2)Other Expenses, which are based on estimated amounts
for the initial fiscal year of the class, reflect the
portion of Administrative Fee paid by the class that is
not reflected under Distribution and/or Service (12b-1)
Fees and 1.36% organizational expense paid by the class.
(3)PIMCO has contractually agreed, for the Fund's current
fiscal year, to reduce Total Annual Fund Operating
Expenses for Class D shares to the extent they would
exceed, due to the payment of organizational expenses
and Trustees' fees, 1.15% of average daily net assets.
Under the Expense Limitation Agreement, PIMCO may recoup
these waivers and reimbursements in future periods, not
exceeding three years, provided total expenses,
including such recoupment, do not exceed the annual
expense limit.

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

Year 1 Year 3 Year 5 Year 10
---------------------------------------------------------------------------------------------------------------
Class D $117 $365 $633 $1,398
---------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

Summary of Principal Risks

European Concentration Risk
When the Fund concentrates its investments in Europe, it may be affected
significantly by economic, regulatory or political developments affecting
European issuers. All countries in Europe may be significantly affected by
fiscal and monetary controls implemented by the European Economic and Monetary
Union. Eastern European markets are relatively undeveloped and may be
particularly sensitive to economic and political events affecting those
countries.

<PAGE>

Management of the Fund

Administrative Fees
The Fund pays for the administrative services it requires under a fee structure
which is essentially fixed. Class D shareholders of the Fund pay an
administrative fee to PIMCO, computed as a percentage of the Fund's assets
attributable in the aggregate to that class of shares. PIMCO, in turn, provides
or procures administrative services for Class D shareholders and also bears the
costs of various third-party services required by the Fund, including audit,
custodial, portfolio accounting, legal, transfer agency and printing costs.

The Fund will pay PIMCO monthly administrative fees at the annual rate (stated
as a percentage of the average daily net assets attributable in the aggregate to
the Fund's Class D shares) of 0.40%.

12-1 Plan for
Class D Shares

The Funds' Administration agreement includes a plan for Class D shares that has
been adopted in conformity with the requirements set forth in Rule 12b-1 under
the 1940 Act. The plan provides that up to 0.25% per annum of the Class D
administrative fees paid under the administration agreement may represent
reimbursement for expenses in respect of activities that may be deemed to be
primarily intended to result in the sale of Class D shares. The principal types
of activities for which such payments may be made are services in connection
with the distribution of Class D shares and/or the provision of shareholder
services. Because 12b-1 fees would be paid out of a Fund's Class D share assets
on an ongoing basis, over time these fees would increase the cost of your
investment in Class D shares and may cost you more than other types of sales
charges.

<PAGE>

Individual Portfolio Managers
The following person has primary responsibility for managing the Fund.

Portfolio Manager Since Recent Professional Experience
Sandra K. Durn 11/00* Senior Vice President, PIMCO. She joined PIMCO
as a Portfolio Manager in 1999. Prior to joining
PIMCO in 1999, she was associated with
Nicholas-Applegate Capital Management where she
was a Convertible Securities Portfolio Manager
from 1995-1999.

* Since inception of the Fund.

How to Buy and Sell Shares

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

General Information
o Financial Service Firms. Broker-dealers, registered investment advisers and
other financial service firms provide varying investment products, programs or
accounts, pursuant to arrangements with the Distributor, through which their
clients may purchase and redeem Class D shares of the Fund. Firms will generally
provide or arrange for the provision of some or all of the shareholder servicing
and account maintenance services required by your account, including, without
limitation, transfers of registration and dividend payee changes. Firms may also
perform other functions, including generating confirmation statements and
disbursing cash dividends, and may arrange with their clients for other
investment or administrative services. Your firm may independently establish and
charge you transaction fees and/or other additional amounts for such services,
which may change over time. These fees and additional amounts could reduce your
investment returns on Class D shares of the Fund.

Your financial service firm may have omnibus accounts and similar arrangements
with the Trust and may be paid for providing sub-transfer agency and other
services. A firm may be paid for its services directly or indirectly by the
Fund, PIMCO Advisors or an affiliate (normally not to exceed an annual rate of
0.35% of the Fund's average daily net assets attributable to its Class D shares
and purchased through such firm for its clients). Your firm may establish
various minimum investment requirements for Class D shares of the Fund and may
also establish certain privileges with respect to purchases, redemptions and
exchanges of Class D shares or the reinvestment of dividends. Please contact
your firm for information.

This Prospectus should be read in connection with your firm's materials
regarding its fees and services.

o Calculation of Share Price and Redemption Payments. When you buy or sell
(redeem) Class D shares of the Fund, you pay or receive a price equal to the NAV
of the shares. NAVs are determined at the close of regular trading (normally
4:00 p.m. Eastern time) on each day the New York Stock Exchange is open. See
"How Fund Shares Are Priced" below for details. Generally, purchase and
redemption orders for Fund shares are processed at the NAV next calculated after
your order is received by the Distributor. In addition, orders received by the
Distributor from financial service firms after NAV is determined that day will
be processed at that day's NAV if the orders were received by the firm from its
customer prior to such determination and were transmitted to and received by the
Distributor prior to its close of business that day (normally 7:00 p.m., Eastern
time).

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

Buying Shares
Class D shares of the Fund are continuously offered through financial service
firms, such as broker-dealers or registered investment advisers, with which the
Distributor has an agreement for the use of the Funds in particular investment
products, programs or accounts for which a fee may be charged. See "Financial
Service Firms" above.

You may purchase Class D shares only through your financial service firm. In
connection with purchases, your financial service firm is responsible for
forwarding all necessary documentation to the Distributor, and may charge you
for such services. If you wish to purchase shares of the Fund directly from the
Trust or the Distributor, you should inquire about the other classes of shares
offered by the Trust. Please call the Distributor at 1-888-87-PIMCO for
information about other investment options.

Class D shares of the Fund will be held in your account with your financial
service firm and, generally, your firm will hold your Class D shares in nominee
or street name as your agent. In most cases, the Trust's transfer agent will
have no information with respect to or control over accounts of specific Class D
shareholders and you may obtain information about your accounts only through
your financial service firm. In certain circumstances, your firm may arrange to
have your shares held in your own name or you may subsequently become a holder
of record for some other reason (for instance, if you terminate your
relationship with your firm). In such circumstances, please contact the
Distributor at 1-888-87-PIMCO for information about your account. In the
interest of economy and convenience, certificates for Class D shares will not be
issued.

The Distributor, in its sole discretion, may accept or reject any order for
purchase of Fund shares. The sale of shares will be suspended during any period
in which the Exchange is closed for other than weekends or holidays, or if
permitted by the rules of the Securities and Exchange Commission, when trading
on the New York Stock Exchange is restricted or during an emergency which makes
it impracticable for the Fund to dispose of its securities or to determine
fairly the value of its net assets, or during any other period as permitted by
the Securities and Exchange Commission for the protection of investors.

o Investment Minimums. The following investment minimums apply for purchases of
Class D shares.

Initial Investment Subsequent Investments
--------------------------------------------------------
$2,500 $100

Your financial service firm may impose different investment minimums than the
Trust. For example, if your firm maintains an omnibus account with a particular
Fund, the firm may impose higher or lower investment minimums than the Trust
when you invest in Class D shares of the Fund through your firm. Please contact
your firm for information.

Exchanging Shares
You may exchange your Class D shares of the Fund for Class D shares of any other
Fund or any series of PIMCO Funds: Multi-Manager Series that offers Class D
shares. Shares are exchanged on the basis of their respective NAVs next
calculated after your exchange order is received by the Distributor. Currently,
the Trust does not charge any exchange fees or charges. Your financial service
firm may impose various fees and charges, investment minimums and other
requirements with respect to exchanges. Please contact your financial service
firm to exchange your shares and for additional information about the exchange
privilege.

The Trust reserves the right to refuse exchange purchases if, in the judgment of
PIMCO, the purchase would adversely affect the Fund and its shareholders. In
particular, a pattern of exchanges characteristic of "market-timing" strategies
may be deemed by PIMCO to be detrimental to the Trust or a particular Fund.
Currently, the Trust limits the number of "round trip" exchanges an investor may
make. An investor makes a "round trip" exchange when the investor purchases
shares of a particular Fund, subsequently exchanges those shares for shares of a
different Fund and then exchanges back into the originally purchased Fund. The
Trust has the right to refuse any exchange for any investor who completes (by
making the exchange back into the shares of the originally purchased Fund) more
than six round trip exchanges in any twelve-month period. Although the Trust has
no current intention of terminating or modifying the exchange privilege other
than as set forth in the preceding sentence, it reserves the right to do so at
any time. Except as otherwise permitted by Securities and Exchange Commission
regulations, the Trust will give 60 days' advance notice to your financial
service firm of any termination or material modification of the exchange
privilege.
<PAGE>

Selling Shares
You can sell (redeem) Class D shares through your financial service firm on any
day the New York Stock Exchange is open. You do not pay any fees or other
charges to the Trust or the Distributor when you sell your shares, although your
financial service firm may charge you for its services in processing your
redemption request. Please contact your firm for details. If you are the holder
of record of your Class D shares, you may contact the Distributor at
1-888-87-PIMCO for information regarding how to sell your shares directly to the
Trust.

Your financial service firm is obligated to transmit your redemption orders to
the Distributor promptly and is responsible for ensuring that your redemption
request is in proper form. Your financial service firm will be responsible for
furnishing all necessary documentation to the Distributor or the Trust's
transfer agent and may charge you for its services. Redemption proceeds will be
forwarded to your financial service firm as promptly as possible and in any
event within seven days after the redemption request is received by the
Distributor in good order. Redemptions of Fund shares may be suspended when
trading on the New York Stock Exchange is restricted or during an emergency
which makes it impracticable for the Funds to dispose of their securities or to
determine fairly the value of their net assets, or during any other period as
permitted by the Securities and Exchange Commission for the protection of
investors. Under these and other unusual circumstances, the Trust may suspend
redemptions or postpone payment for more than seven days, as permitted by law.

Redemptions In Kind
The Trust had agreed to redeem shares of the Fund solely in cash up to the
lesser of $250,000 or 1% of the Fund's net assets during any 90-day period for
any one shareholder. In consideration of the best interests of the remaining
shareholders, the Trust may pay any redemption proceeds exceeding this amount in
whole or in part by a distribution in kind of securities held by the Fund in
lieu of cash. Except for Funds with a tax-efficient management strategy, it is
highly unlikely that your shares would ever be redeemed in kind. If your shares
are redeemed in kind, you should expect to incur transaction costs upon the
disposition of the securities received in the distribution.

How Fund Shares Are Priced

The net asset value ("NAV") of the Fund's Class D shares is determined by
dividing the total value of the Fund's portfolio investments and other assets
attributable to that class, less any liabilities, by the total number of shares
outstanding of that class.

Fund Distributions

You can choose from the following distribution options:

o Reinvest all distributions in additional Class D shares of your Fund at NAV.
This will be done unless you elect another option.

o Invest all distributions in Class D shares of any other Fund or any series of
PIMCO Funds: Multi-Manager Series which offers Class D shares at NAV. You must
have an account existing in the Fund or series selected for investment with the
identical registered name. This option must be elected when your account is set
up.

o Receive all distributions in cash (either paid directly to you or credited to
your account with your financial service firm). This option must be elected when
your account is set up.

Your financial service firm may offer additional distribution reinvestment
programs or options. Please contact your firm for details.

You do not pay any sales charges on shares you receive through the reinvestment
of Fund distributions. If you elect to receive Fund distributions in cash and
the postal or other delivery service is unable to deliver checks to your address
of record, the Trust's Transfer Agent will hold the returned checks for your
benefit in a non-interest bearing account.

Tax Consequences

o Taxes on Fund distributions. If you are subject to U.S. federal income tax,
you will be subject to tax on Fund distributions whether you received them in
cash or reinvested them in additional shares of the Fund. For federal income tax
purposes, Fund distributions will be taxable to you as either ordinary income or
capital gains.

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

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

o Taxes when you sell (redeem) or exchange your shares. Any gain resulting from
the sale of Fund shares will generally be subject to federal income tax. When
you exchange shares of a Fund for shares of another series, the transaction will
be treated as a sale of the Fund shares for these purposes, and any gain on
those shares will generally be subject to federal income tax.

o Consult your tax advisor about other possible tax consequences. This is a
summary of certain federal income tax consequences of investing in the Fund. You
should consult your tax advisor for more information on your own tax situation,
including possible state, local and foreign tax consequences.

Characteristics and Risks of Securities and Investment Techniques

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 Prospectus describes the various
ratings assigned to fixed income securities by Moody's and S&P. Ratings assigned
by a rating agency are not absolute standards of credit quality and do not
evaluate market risks. Rating agencies may fail to make timely changes in credit
ratings and an issuer's current financial condition may be better or worse than
a rating indicates. The Fund 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.
<PAGE>

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

Short Sales
The Fund may make short sales as part of its overall portfolio management
strategies or to offset a potential decline in value of a security. A short sale
involves the sale of a security that is borrowed from a broker or other
institution to complete the sale. Short sales expose the Fund to the risk that
it will be required to acquire, convert or exchange securities to replace the
borrowed securities (also known as "covering" the short position) at a time when
the securities sold short have appreciated in value, thus resulting in a loss to
the Fund. If the Fund makes a short sale it 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.

<PAGE>

Appendix A
Description of Securities Ratings

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.

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

Moody's Investors Service, Inc.
Corporate and Municipal Bond Ratings

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