<PAGE>
PIMCO Funds Prospectus
-------------------------------------------------------------
Pacific SHORT DURATION BOND FUNDS
Investment Money Market Fund Low Duration Fund II
Management Short-Term Fund Low Duration Fund III
Series Low Duration Fund Low Duration Mortgage Fund
November 1, 1999
(as supplemented
February 1, 2000)
-------------------------------------------------------------
Share Classes INTERMEDIATE DURATION BOND FUNDS
Moderate Duration Fund Total Return Fund III
Ins Institutional Real Return Bond Fund Total Return Mortgage Fund
Total Return Fund High Yield Fund
Adm Administrative Total Return Fund II
-------------------------------------------------------------
LONG DURATION BOND FUNDS
Long-Term U.S. Government Fund Long Duration Fund
-------------------------------------------------------------
TAX EXEMPT BOND FUNDS
Short Duration Municipal California Intermediate
Income Fund Municipal Bond Fund
Municipal Bond Fund New York Intermediate
Municipal Bond Fund
-------------------------------------------------------------
INTERNATIONAL BOND FUNDS
Global Bond Fund International Bond Fund
Global Bond Fund II Emerging Markets Bond Fund
Foreign Bond Fund Emerging Markets Bond Fund II
-------------------------------------------------------------
STOCK AND BOND FUNDS
Strategic Balanced Fund Convertible Bond Fund
-------------------------------------------------------------
STOCK FUNDS
StocksPLUS Fund
This cover is not part of the Prospectus P I M C O
-------------
F U N D S
<PAGE>
PIMCO Funds Prospectus
PIMCO
Funds:
Pacific
Investment
Management
Series This Prospectus describes 28 mutual funds offered by PIMCO Funds:
Pacific Investment Management Series. The Funds provide access to
November the professional investment advisory services offered by Pacific
1, 1999 Investment Management Company ("PIMCO"). As of September 30, 1999,
(as PIMCO managed approximately $181 billion in assets. The firm's
supple- institutional heritage is reflected in the PIMCO Funds offered in
mented this Prospectus.
February
1, 2000) This Prospectus explains what you should know about the Funds
before you invest. Please read it carefully.
Share The Securities and Exchange Commission has not approved or
Classes disapproved these securities, or determined if this Prospectus is
Instit- truthful or complete. Any representation to the contrary is a
tional criminal offense.
and
Adminis-
trative
Pacific Investment Management Series
1
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Summary Information.............................................. 3
Fund Summaries
Money Market Fund.............................................. 5
Short-Term Fund................................................ 7
Low Duration Fund.............................................. 9
Low Duration Fund II........................................... 11
Low Duration Fund III.......................................... 13
Low Duration Mortgage Fund..................................... 15
Moderate Duration Fund......................................... 17
Real Return Bond Fund.......................................... 19
Total Return Fund.............................................. 21
Total Return Fund II........................................... 23
Total Return Fund III.......................................... 25
Total Return Mortgage Fund..................................... 27
High Yield Fund................................................ 29
Long-Term U.S. Government Fund................................. 31
Long Duration Fund............................................. 33
Short Duration Municipal Income Fund........................... 35
Municipal Bond Fund............................................ 37
California Intermediate Municipal Bond Fund.................... 39
New York Intermediate Municipal Bond Fund...................... 41
Global Bond Fund............................................... 43
Global Bond Fund II............................................ 45
Foreign Bond Fund.............................................. 47
International Bond Fund........................................ 49
Emerging Markets Bond Fund..................................... 51
Emerging Markets Bond Fund II.................................. 53
Strategic Balanced Fund........................................ 55
Convertible Bond Fund.......................................... 57
StocksPLUS Fund................................................ 59
Summary of Principal Risks....................................... 61
Management of the Funds.......................................... 64
Investment Options............................................... 67
Purchases, Redemptions and Exchanges............................. 68
How Fund Shares are Priced....................................... 72
Fund Distributions............................................... 73
Tax Consequences................................................. 74
Characteristics and Risks of Securities and Investment
Techniques...................................................... 75
Financial Highlights............................................. 85
Appendix A--Description of Securities Ratings.................... A-1
</TABLE>
Prospectus 2
<PAGE>
Summary Information
The table below compares certain investment characteristics of the Funds. Other
important characteristics are described in the individual Fund Summaries
beginning on page 5. Following the table are certain key concepts which are
used throughout the prospectus.
<TABLE>
<CAPTION>
Non-U.S. Dollar
Denominated
Main Investments Duration Credit Quality(1) Securities(2)
- ---------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
Short Duration Money Market Money market (less than or equal Min 95% Aaa or 0%
Bond Funds instruments to) 90 days dollar- Prime 1; (less
weighted average than or equal to)
maturity 5% Aa or Prime 2
-----------------------------------------------------------------------------------------------------------
Short-Term Money market 0-1 year B to Aaa; max 10% 0-5%
instruments and below Baa
short maturity
fixed income
securities
-----------------------------------------------------------------------------------------------------------
Low Duration Short maturity 1-3 years B to Aaa; max 10% 0-20%
fixed income below Baa
securities
-----------------------------------------------------------------------------------------------------------
Low Duration II Short maturity 1-3 years A to Aaa 0%
fixed income
securities with
quality and non-
U.S. issuer
restrictions
-----------------------------------------------------------------------------------------------------------
Low Duration III Short maturity 1-3 years B to Aaa; max 10% 0-20%
fixed income below Baa
securities with
prohibitions on
firms engaged in
socially
sensitive
practices
-----------------------------------------------------------------------------------------------------------
Low Duration Mortgage Short and 1-3 years Baa to Aaa; max 10% 0%
intermediate below Aaa
maturity
mortgage-related
fixed income
securities
- ---------------------------------------------------------------------------------------------------------------------------
Intermediate Moderate Duration Short and 2-5 years B to Aaa; max 10% 0-20%
Duration Bond intermediate below Baa
Funds maturity fixed
income
securities
-----------------------------------------------------------------------------------------------------------
Real Return Bond Inflation- N/A B to Aaa; max 10% 0-35%
indexed fixed below Baa
income
securities
-----------------------------------------------------------------------------------------------------------
Total Return Intermediate 3-6 years B to Aaa; max 10% 0-20%
maturity fixed below Baa
income
securities
-----------------------------------------------------------------------------------------------------------
Total Return II Intermediate 3-6 years Baa to Aaa 0%
maturity fixed
income
securities with
quality and
non-U.S. issuer
restrictions
-----------------------------------------------------------------------------------------------------------
Total Return III Intermediate 3-6 years B to Aaa; max 10% 0-20%
maturity fixed below Baa
income
securities with
prohibitions on
firms engaged in
socially
sensitive
practices
-----------------------------------------------------------------------------------------------------------
Total Return Mortgage Intermediate 2-6 years Baa to Aaa; max 10% 0%
maturity below Aaa
mortgage-related
fixed income
securities
-----------------------------------------------------------------------------------------------------------
High Yield Higher yielding 2-6 years B to Aaa; min 65% 15%(3)
fixed income below Baa
securities
- ---------------------------------------------------------------------------------------------------------------------------
Long Duration Long-Term Long-term (greater than A to Aaa 0%
Bond Funds U.S. Government maturity fixed or equal to)
income 8 years
securities
-----------------------------------------------------------------------------------------------------------
Long Duration Long-term (greater than B to Aaa; max 10% 0-20%
maturity fixed or equal to) below Baa
income 8 years
securities
- ---------------------------------------------------------------------------------------------------------------------------
Tax Exempt Short Duration Short and 0-2 years Baa to Aaa 0%
Bond Funds Municipal Income intermediate
maturity
municipal
securities
(exempt from
federal income
tax)
-----------------------------------------------------------------------------------------------------------
Municipal Bond Intermediate and 3-10 years Ba to Aaa; max 0%
long-term 10% below Baa
maturity
municipal
securities
(exempt from
federal income
tax)
-----------------------------------------------------------------------------------------------------------
California Intermediate Intermediate 3-7 years B to Aaa; max 10% 0%
Municipal Bond maturity below Baa
municipal
securities
(exempt from
federal and
California
income tax)
-----------------------------------------------------------------------------------------------------------
New York Intermediate Intermediate 3-7 years B to Aaa; max 10% 0%
Municipal Bond maturity below Baa
municipal
securities
(exempt from
federal and New
York income tax)
- ---------------------------------------------------------------------------------------------------------------------------
International Global Bond U.S. and non- 3-7 years B to Aaa; max 25-75%
Bond Funds U.S. 10% below Baa
intermediate
maturity fixed
income
securities
-----------------------------------------------------------------------------------------------------------
Global Bond II U.S. and hedged 3-7 years B to Aaa; max 25-75%
non-U.S. 10% below Baa
intermediate
maturity fixed
income
securities
-----------------------------------------------------------------------------------------------------------
Foreign Bond Intermediate 3-7 years B to Aaa; max (greater than
maturity hedged 10% below Baa or equal to)
non-U.S. fixed 85%
income
securities
-----------------------------------------------------------------------------------------------------------
International Bond Non-U.S. fixed 0-8 years Baa to Aaa (greater than
income or equal to)
securities (This 65%
Fund is offered
only to PIMCO
private account
clients)
-----------------------------------------------------------------------------------------------------------
Emerging Markets Bond Emerging market 0-8 years B to Aaa (greater than
fixed income or equal to)
securities 80%
-----------------------------------------------------------------------------------------------------------
Emerging Markets Emerging market 0-8 years B to Aaa; max 25% (greater than
Bond II fixed income below Ba or equal to)
securities with 80%
restrictions on
quality and
denomination of
securities (This
Fund is offered
only to PIMCO
private account
clients)
- ---------------------------------------------------------------------------------------------------------------------------
Stock and Strategic Balanced Intermediate 0-6 years B to Aaa; max 0-20%
Bond Funds maturity fixed- 10% below Baa
income
securities and
S&P 500 stock
index
derivatives
-----------------------------------------------------------------------------------------------------------
Convertible Bond Convertible N/A Caa to Aaa; max 0-20%
securities 35% below Baa and
10% below B
- ---------------------------------------------------------------------------------------------------------------------------
Stock Funds StocksPLUS S&P 500 stock 0-1 year B to Aaa; max 0-20%
index 10% below Baa
derivatives
backed by a
portfolio of
short-term
fixed-income
securities
- ---------------------------------------------------------------------------------------------------------------------------
</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) Percentage limitations relate to non-U.S. dollar-denominated securities for
all Funds except the Global Bond, Global Bond II, Foreign Bond,
International Bond, Emerging Markets Bond and Emerging Markets Bond II
Funds. Percentage limitations for these six Funds relate to securities of
non-U.S. issuers, denominated in any currency. Each Fund (except the Low
Duration II, Total Return II, Long-Term U.S. Government, Short-Duration
Municipal Income, Municipal Bond, California Intermediate Municipal Bond and
New York Intermediate Municipal Bond Funds) may invest beyond these limits
in U.S. dollar-denominated securities of non-U.S. issuers.
(3) The percentage limitation relates to euro-denominated securities and will be
effective March 1, 2000. See page 29 of the Prospectus.
3 Pacific Investment Management Series
<PAGE>
Summary Information (continued)
Fixed The "Fixed Income Funds" are the Money Market, Short-Term, Low
Income Duration, Low Duration II, Low Duration III, Low Duration
Instruments Mortgage, Moderate Duration, Real Return Bond, Total Return, Total
Return II, Total Return III, Total Return Mortgage, High Yield,
Long-Term U.S. Government, Long Duration, Short Duration Municipal
Income, Municipal Bond, California Intermediate Municipal Bond,
New York Intermediate Municipal Bond, Global Bond, Global Bond II,
Foreign Bond, International Bond, Emerging Markets Bond, and
Emerging Markets Bond II Funds. Each Fixed Income Fund differs
from the others primarily in the length of the Fund's duration or
the proportion of its investments in certain types of fixed income
securities. Each Fixed Income Fund invests at least 65% of its
assets in "Fixed Income Instruments," which as used in this
Prospectus includes:
. securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Securities");
. corporate debt securities of U.S. and non-U.S. issuers,
including convertible securities and corporate commercial
paper;
. mortgage-backed and other asset-backed securities;
. inflation-indexed bonds issued both by governments and
corporations;
. structured notes, including hybrid or "indexed" securities,
event-linked bonds and loan participations;
. delayed funding loans and revolving credit facilities;
. bank certificates of deposit, fixed time deposits and bankers'
acceptances;
. repurchase agreements and reverse repurchase agreements;
. debt securities issued by states or local governments and their
agencies, authorities and other instrumentalities;
. obligations of non-U.S. governments or their subdivisions,
agencies and instrumentalities; and
. obligations of international agencies or supranational
entities.
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. Similarly, a Fund with a longer average portfolio duration
will be more sensitive to changes in interest rates than a Fund
with a shorter average portfolio duration.
Credit In this Prospectus, references are made to credit ratings of debt
Ratings securities which measure an issuer's expected ability to pay
principal and interest on time. Credit ratings are determined by
rating organizations, such as Standard & Poor's Rating Service
("S&P") or Moody's Investors Service, Inc. ("Moody's"). The
following terms are generally used to describe the credit quality
of debt securities depending on the security's credit rating or,
if unrated, credit quality as determined by PIMCO:
. high quality
. investment grade
. below investment grade ("high yield securities" or "junk bonds")
For a further description of credit ratings, see "Appendix A--
Description of Securities Ratings."
Fund The Funds provide a broad range of investment choices. The
Descrip- following summaries identify each Fund's investment objective,
tions, principal investments and strategies, principal risks, performance
Performance information and fees and expenses. A more detailed "Summary of
and Fees Principal Risks" describing principal risks of investing in the
Funds begins after the Fund Summaries.
It is possible to lose money on investments in the Funds. An
investment in a Fund is not a deposit of a bank and is not
guaranteed or insured by the Federal Deposit Insurance Corporation
or any other government agency.
Prospectus 4
<PAGE>
PIMCO Money Market Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Money market Minimum 95% rated
and current income, instruments Aaa or Prime 1;
Strategies consistent with (less than or equal
preservation of Average Portfolio to) 5% Aa or Prime 2
capital and daily Maturity
liquidity (Less than or equal Dividend Frequency
to) 90 days dollar- Declared daily and
weighted average distributed monthly
maturity
The Fund seeks to achieve its investment objective by investing at
least 95% of its total assets in a diversified portfolio of money
market securities that are in the highest rating category for
short-term obligations. The Fund also may invest up to 5% of its
total assets in money market securities that are in the second-
highest rating category for short-term obligations. The Fund may
only invest in U.S. dollar-denominated securities that mature in
397 days or fewer from the date of purchase. The dollar-weighted
average portfolio maturity of the Fund may not exceed 90 days. The
Fund attempts to maintain a stable net asset value of $1.00 per
share, although there is no assurance that it will be successful
in doing so.
The Fund may invest in the following: obligations of the U.S.
Government (including its agencies and instrumentalities); short-
term corporate debt securities of domestic and foreign
corporations; obligations of domestic and foreign commercial
banks, savings banks, and savings and loan associations; and
commercial paper. The Fund may invest more than 25% of its total
assets in securities or obligations issued by U.S. banks. The Fund
may lend its portfolio securities to brokers, dealers and other
financial institutions in order to earn income.
The Fund's investments will comply with applicable rules
governing the quality, maturity and diversification of securities
held by money market funds.
- --------------------------------------------------------------------------------
Principal An investment in the Fund is not insured or guaranteed by the
Risks Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the Fund. Among the principal risks of investing in
the Fund, which could adversely affect its net asset value, yield
and total return, are:
. Interest Rate Risk . Market Risk
. Credit Risk . Issuer Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (1/25/95), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. To obtain the Fund's
current yield, call 1-800-927-4648. Past performance is no
guarantee of future results.
5 Pacific Investment Management Series
<PAGE>
PIMCO Money Market Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 2.24%
Annual Return
'92 '93 '94 Highest and Lowest Quarter Returns
3.44% 2.80% 3.92% (for periods shown in the bar chart)
------------------------------------
'95 '96 '97 '98 Highest (4th Qtr. '95) 1.72%
6.06% 5.28% 5.34% 5.34% ------------------------------------
Lowest (2nd Qtr. '93) 0.67%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (3/1/91)(3)
----------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 5.34% 5.19% 4.71%
----------------------------------------------------------------------
Administrative Class 5.18% 4.95% 4.46%
----------------------------------------------------------------------
Salomon 3-Month Treasury Bill Index(1) 5.05% 5.10% 4.70%
----------------------------------------------------------------------
Lipper Institutional Money Market Fund
Average(2) 5.30% 5.15% 4.74%
----------------------------------------------------------------------
</TABLE>
(1) The Salomon 3-Month Treasury Bill Index is an unmanaged index
representing monthly return equivalents of yield averages of the
last 3 month Treasury Bill issues. It is not possible to invest
directly in the index.
(2) The Lipper Institutional Money Market Fund Average is a total
return performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest in high quality financial instruments
(rated in the top two grades) with dollar-weighted maturities of
less than 90 days. It does not take into account sales charges.
(3) The Fund commenced operations on 3/1/91. Index comparisons
begin at 2/28/91.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.15% None 0.20% 0.35%
------------------------------------------------------------------
Administrative 0.15 0.25% 0.20 0.60
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.20% Administrative Fee paid by
the class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $36 $113 $197 $443
-------------------------------------------------------------------
Administrative 61 192 335 750
-------------------------------------------------------------------
</TABLE>
Prospectus 6
<PAGE>
PIMCO Short-Term Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Money market B to Aaa; maximum
and current income, instruments and 10% below Baa
Strategies consistent with short maturity
preservation of fixed income Dividend Frequency
capital and daily securities Declared daily and
liquidity distributed monthly
Average Portfolio
Duration
0-1 year
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Fund normally
does not exceed one year. For point of reference, the dollar-
weighted average portfolio maturity of this Fund is normally not
expected to exceed three years.
The Fund invests primarily in investment grade debt securities,
but may invest up to 10% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P, or, if
unrated, determined by PIMCO to be of comparable quality. The Fund
may invest up to 5% of its assets in securities denominated in
foreign currencies, and may invest beyond this limit in U.S.
dollar-denominated securities of foreign issuers. The Fund will
normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in currency exchange
rates.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Issuer Risk . Leveraging Risk
. Credit Risk . Derivatives Risk . Management Risk
. Market Risk . Mortgage Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (2/1/96), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
7 Pacific Investment Management Series
<PAGE>
PIMCO Short-Term Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 2.51%
Annual Return
'89 '90 '91 '92 '93 Highest and Lowest Quarter Returns
9.44% 8.74% 6.65% 3.63% 4.62% (for periods shown in the bar chart)
------------------------------------
'94 '95 '96 '97 '98 Highest(4th Qtr.'95) 2.60%
2.90% 9.21% 7.00% 6.51% 5.74% ------------------------------------
Lowest(1st Qtr.'94) 0.19%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
----------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 5.74% 6.25% 6.40%
----------------------------------------------------------------------
Administrative Class 5.50% 5.99% 6.13%
----------------------------------------------------------------------
Salomon 3-Month Treasury Bill(1) 5.05% 5.10% 4.70%
----------------------------------------------------------------------
Lipper Ultrashort Obligation Fund Avg(2) 5.41% 5.38% 5.84%
----------------------------------------------------------------------
</TABLE>
(1) The Salomon 3-Month Treasury Bill Index is an unmanaged index
representing monthly return equivalents of yield averages of
the last 3 month Treasury Bill issues. It is not possible to
invest directly in the index.
(2) The Lipper Ultrashort Obligation Fund Average is a total
return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their
assets in investment-grade debt issues or better, and
maintain a portfolio dollar-weighted average maturity between
91 and 365 days. It does not take into account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.20% 0.45%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.20 0.70
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.20% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $46 $144 $252 $567
------------------------------------------------------------------
Administrative 72 224 390 871
------------------------------------------------------------------
</TABLE>
Prospectus 8
<PAGE>
PIMCO Low Duration Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Short maturity B to Aaa; maximum 10%
and total return, fixed income below Baa
Strategies consistent with securities
preservation of Dividend Frequency
capital and Average Portfolio Declared daily and
prudent Duration distributed monthly
investment 1-3 years
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Fund normally
varies within a one- to three-year time frame based on PIMCO's
forecast for interest rates.
The Fund invests primarily in investment grade debt securities,
but may invest up to 10% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P, or, if
unrated, determined by PIMCO to be of comparable quality. The Fund
may invest up to 20% of its assets in securities denominated in
foreign currencies, and may invest beyond this limit in U.S.
dollar-denominated securities of foreign issuers. The Fund will
normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in currency exchange
rates.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Derivatives Risk . Currency Risk
. Credit Risk . Liquidity Risk . Leveraging Risk
. Market Risk . Mortgage Risk . Management Risk
. Issuer Risk . Foreign Investment Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (1/3/95), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
9 Pacific Investment Management Series
<PAGE>
PIMCO Low Duration Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
Annual Return 1/1/99-6/30/99 1.05%
'89 '90 '91 '92 '93 Highest and Lowest Quarter Returns
11.60% 9.05% 13.46% 7.69% 7.76% (for periods shown in the bar chart)
------------------------------------
'94 '95 '96 '97 '98 Highest (2nd Qtr.'89)
0.63% 11.93% 6.14% 8.24% 7.16% 6.52%
------------------------------------
Lowest (1st Qtr.'94)
-0.32%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
----------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 7.16% 6.75% 8.31%
----------------------------------------------------------------------
Administrative Class 6.90% 6.49% 8.04%
----------------------------------------------------------------------
Merrill Lynch 1-3 Year Treasury Index(1) 7.00% 5.99% 7.37%
----------------------------------------------------------------------
Lipper Short Investment Grade Debt Fund Avg(2) 5.78% 5.41% 7.02%
----------------------------------------------------------------------
</TABLE>
(1) The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of
U.S Treasury obligations having maturities from one to 2.99 years.
It is not possible to invest directly in the index.
(2) The Lipper Short Investment Grade Debt Fund Average is a total
return performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest at least 65% of their assets in
investment-grade debt issues (rated in the top four grades) with
dollar-weighted average maturities of less than three years. It
does not take into account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.18% 0.43%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.18 0.68
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.18% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $44 $138 $241 $542
-----------------------------------------------------------------------
Administrative 69 218 379 847
-----------------------------------------------------------------------
</TABLE>
Prospectus 10
<PAGE>
PIMCO Low Duration Fund II
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Short maturity A to Aaa
and total return, fixed income
Strategies consistent with securities Dividend Frequency
preservation of Declared daily and
capital and Average Portfolio distributed monthly
prudent Duration
investment 1-3 years
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Fund normally
varies within a one- to three-year time frame based on PIMCO's
forecast for interest rates. The Fund may invest only in U.S.
dollar denominated securities of U.S. issuers that are rated A or
higher by Moody's or S&P, or, if unrated, determined by PIMCO to
be of comparable quality.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Issuer Risk . Leveraging Risk
. Credit Risk . Derivatives Risk . Management Risk
. Market Risk . Mortgage Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (2/2/98), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
11 Pacific Investment Management Series
<PAGE>
PIMCO Low Duration Fund II (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 0.50%
Annual Return
Highest and Lowest Quarter Returns
'92 '93 '94 (for periods shown in the bar chart)
6.23% 6.58% 0.32% ------------------------------------
Highest (1st Qtr. '95) 3.83%
'95 '96 '97 '98 ------------------------------------
11.78% 5.22% 7.62% 6.60% Lowest (1st Qtr. '94) -0.60%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (11/1/91)(3)
-----------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 6.60% 6.24% 6.58%
-----------------------------------------------------------------------
Administrative Class 6.32% 5.97% 6.31%
-----------------------------------------------------------------------
Merrill Lynch 1-3 Year Treasury Index(1) 7.00% 5.99% 6.18%
-----------------------------------------------------------------------
Lipper Short Investment Grade Debt
Fund Avg(2) 5.78% 5.41% 5.82%
-----------------------------------------------------------------------
</TABLE>
(1) The Merrill Lynch 1-3 Year Treasury Index is an unmanaged
index of U.S Treasury obligations having maturities from one
to 2.99 years. It is not possible to invest directly in the
index.
(2) The Lipper Short Investment Grade Debt Fund Average is a
total return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their
assets in investment-grade debt issues (rated in the top four
grades) with dollar-weighted average maturities of less than
three years. It does not take into account sales charges.
(3) The Fund began operations on 11/1/91. Index comparisons began
on 10/31/91.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
--------------------------------------------------------------------
Administrative 77 240 417 930
--------------------------------------------------------------------
</TABLE>
Prospectus 12
<PAGE>
PIMCO Low Duration Fund III
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Short maturity B to Aaa; maximum 10%
and total return, fixed income below Baa
Strategies consistent with securities
preservation of Dividend Frequency
capital and Average Portfolio Declared daily and
prudent Duration distributed monthly
investment 1-3 years
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Fund normally
varies within a one- to three-year time frame based on PIMCO's
forecast for interest rates. The Fund will not invest in the
securities of any issuer determined by PIMCO to be engaged
principally in the provision of healthcare services, the
manufacture of alcoholic beverages, tobacco products,
pharmaceuticals or military equipment, or the operation of
gambling casinos. The Fund will also avoid, to the extent possible
on the basis of information available to PIMCO, the purchase of
securities of issuers engaged in the production or trade of
pornographic materials. An issuer will be deemed to be principally
engaged in an activity if it derives more than 10% of its gross
revenues from such activities.
The Fund invests primarily in investment grade securities, but
may invest up to 10% of its assets in high yield securities ("junk
bonds") rated B or higher by Moody's or S&P, or, if unrated,
determined by PIMCO to be of comparable quality. The Fund may
invest up to 20% of its assets in securities denominated in
foreign currencies, and may invest beyond this limit in U.S.
dollar-denominated securities of foreign issuers. The Fund will
normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in exchange rates.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Derivatives Risk . Currency Risk
. Credit Risk . Liquidity Risk . Leveraging Risk
. Market Risk . Mortgage Risk . Management Risk
. Issuer Risk . Foreign Investment
Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
The Administrative Class of the Fund has not commenced operations
as of the date of this prospectus. Past performance is no
guarantee of future results.
13 Pacific Investment Management Series
<PAGE>
PIMCO Low Duration Fund III (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 1.11%
Annual Return
Highest and Lowest Quarter Returns
'97 '98 (for periods shown in the bar chart)
7.12% 6.65% ------------------------------------
Highest (3rd Qtr. '98) 2.66%
------------------------------------
Lowest (1st Qtr. '97) 0.58%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year (12/31/96)
-----------------------------------------------------------------------
<S> <C> <C>
Institutional Class 6.65% 6.88%
-----------------------------------------------------------------------
Merrill Lynch 1-3 Year Treasury Index(1) 7.00% 6.83%
-----------------------------------------------------------------------
Lipper Short Investment Grade Debt Fund Avg(2) 5.78% 5.99%
-----------------------------------------------------------------------
</TABLE>
(1) The Merrill Lynch 1-3 Year Treasury Index is an unmanaged
index of U.S Treasury obligations having maturities from one to
2.99 years. It is not possible to invest directly in the index.
(2) The Lipper Short Investment Grade Debt Fund Average is a total
return performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest at least 65% of their assets in
investment-grade debt issues (rated in the top four grades) with
dollar-weighted average maturities of less than three years. It
does not take into account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
------------------------------------------------------------------
Administrative 77 240 417 930
------------------------------------------------------------------
</TABLE>
Prospectus 14
<PAGE>
PIMCO Low Duration Mortgage Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Short maturity Baa to Aaa; maximum
and total return, mortgage-related 10% below Aaa
Strategies consistent with fixed income
preservation of securities Dividend Frequency
capital and Declared daily and
prudent Average Portfolio distributed monthly
investment Duration
management 1-3 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 80% of its assets in a
diversified portfolio of mortgage-related Fixed Income Instruments
of varying maturities. The average portfolio duration of this Fund
normally varies within a one- to three-year time frame based on
PIMCO's forecast for interest rates. The Fund invests primarily in
securities that are in the highest rating category, but may invest
up to 10% of its assets in securities rated below Aaa by Moody's
or AAA by S&P, subject to a minimum rating of Baa by Moody's or
BBB by S&P, or, if unrated, determined by PIMCO to be of
comparable quality. The Fund may not invest in securities
denominated in foreign currencies, but may invest without limit in
U.S. dollar-denominated securities of foreign issuers.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Mortgage Risk . Foreign Investment
. Credit Risk . Derivatives Risk Risk
. Market Risk . Liquidity Risk . Leveraging Risk
. Issuer Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
The Administrative Class of the Fund had not commenced operations
as of the date of this prospectus. Past performance is no
guarantee of future results.
15 Pacific Investment Management Series
<PAGE>
PIMCO Low Duration Mortgage Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 2.11%
Annual Return
Highest and Lowest Quarter Returns
'98 (for periods shown in the bar chart)
6.10% ------------------------------------
Highest (3rd Qtr. '98) 2.82%
------------------------------------
Lowest (4th Qtr. '98) -0.13%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year (7/31/97)
------------------------------------------------------------------------
<S> <C> <C>
Institutional Class 6.10% 7.45%
------------------------------------------------------------------------
Merrill Lynch 1-3 Year Treasury Index(1) 7.00% 6.77%
------------------------------------------------------------------------
Lipper U.S. Mortgage Fund Avg(2) 6.20% 6.52%
------------------------------------------------------------------------
</TABLE>
(1) The Merrill Lynch 1-3 Year Treasury Index is an unmanaged
index of U.S Treasury obligations having maturities from one
to 2.99 years. It is not possible to invest directly in the
index.
(2) The Lipper U.S. Mortgage Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest at least 65% of their assets in
mortgages/securities issued or guaranteed as to principal and
interest by the U.S. government and certain federal agencies.
It does not take into account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.26% 0.51%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.26 0.76
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $52 $164 $285 $640
-----------------------------------------------------------------
Administrative 78 243 422 942
-----------------------------------------------------------------
</TABLE>
Prospectus 16
<PAGE>
PIMCO Moderate Duration Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Short and B to Aaa; maximum
and total return, intermediate 10% below Baa
Strategies consistent with maturity fixed
preservation of income securities Dividend Frequency
capital and Declared daily and
prudent Average Portfolio distributed monthly
investment Duration
management 2-5 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Fund normally
varies within a two- to five-year time frame based on PIMCO's
forecast for interest rates.
The Fund invests primarily in investment grade debt securities,
but may invest up to 10% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P, or, if
unrated, determined by PIMCO to be of comparable quality. The Fund
may invest up to 20% of its assets in securities denominated in
foreign currencies, and may invest beyond this limit in U.S.
dollar-denominated securities of foreign issuers. The Fund will
normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in currency exchange
rates.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Derivatives Risk . Currency Risk
. Credit Risk . Liquidity Risk . Leveraging Risk
. Market Risk . Mortgage Risk . Management Risk
. Issuer Risk . Foreign Investment
Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
The Administrative Class of the Fund has not commenced operations
as of the date of this prospectus. Past performance is no
guarantee of future results.
17 Pacific Investment Management Series
<PAGE>
PIMCO Moderate Duration Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
Annual Return ------------------------------------
1/1/99-6/30/99 -0.55%
'97 '98
7.97% 8.11% Highest and Lowest Quarter Returns
(for periods shown in the bar chart)
------------------------------------
Highest (3rd Qtr. '98) 4.26%
------------------------------------
Lowest (1st Qtr. '97) -0.25%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION> Fund Inception
1 Year (12/31/96)
----------------------------------------------------------------------
<S> <C> <C>
Institutional Class 8.11% 8.04%
----------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Corporate Bond Index(1) 8.42% 8.14%
----------------------------------------------------------------------
Lipper Short Intermediate Investment Grade Debt
Fund Avg(2) 6.63% 6.65%
----------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers Intermediate Government/Corporate Bond Index is
an unmanaged index of fixed income securities having maturities
from 1 to 9.99 years. It is not possible to invest directly in the
index.
(2) The Lipper Short Intermediate Investment Grade Debt Fund Average is
a total return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their assets
in investment-grade debt issues (rated in the top four grades) with
dollar-weighted average maturities of one to five years. It does
not take into account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.20% 0.45%
-------------------------------------------------------------------
Administrative 0.25 0.25% 0.20 0.70
-------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.20% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $46 $144 $252 $567
------------------------------------------------------------------
Administrative 72 224 390 871
------------------------------------------------------------------
</TABLE>
Prospectus 18
<PAGE>
PIMCO Real Return Bond Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Inflation-indexed B to Aaa; maximum
and real return, fixed income 10% below Baa
Strategies consistent with securities
preservation of Dividend Frequency
real capital and Average Portfolio Declared daily and
prudent Duration distributed monthly
investment See description below
management
The Fund seeks its investment objective by investing under normal
circumstances at least 65% of its assets in inflation-indexed
bonds of varying maturities issued by the U.S. and non-U.S.
governments, their agencies or instrumentalities, and
corporations. Inflation-indexed bonds are fixed income securities
that are structured to provide protection against inflation. The
value of the bond's principal or the interest income paid on the
bond is adjusted to track changes in an official inflation
measure. The U.S. Treasury uses the Consumer Price Index for Urban
Consumers as the inflation measure. Inflation-indexed bonds issued
by a foreign government are generally adjusted to reflect a
comparable inflation index, calculated by that government. "Real
return" is a measure of the change in purchasing power of money
invested in a particular instrument after adjusting for inflation.
Because of the unique features of inflation-indexed bonds, PIMCO
uses a modified form of duration for the Fund ("real duration")
which measures price changes as a result of changes in "real"
interest rates. A "real" interest rate is the market interest rate
minus expected inflation. There is no limit on the real duration
of the Fund, but it is expected that the average real duration of
this Fund will normally vary approximately within the range of the
average real duration of all inflation-indexed bonds issued by the
U.S. Treasury in the aggregate, which as of July 20, 1999 was 9.2
years. For point of reference, it is expected that the average
portfolio duration (as opposed to real duration) of the Fund will
generally vary within a one- to five-year time frame, although
this range is subject to change. The Fund may invest in fixed
income securities of any maturity.
The Fund invests primarily in investment grade securities, but
may invest up to 10% of its assets in high yield securities ("junk
bonds") rated B or higher by Moody's or S&P, or, if unrated,
determined by PIMCO to be of comparable quality. The Fund may
invest up to 35% of its assets in non-inflation indexed Fixed
Income Instruments. The Fund also may invest up to 35% of its
assets in securities denominated in foreign currencies, and may
invest beyond this limit in U.S. dollar denominated securities of
foreign issuers. The Fund will normally hedge at least 75% of its
exposure to foreign currency to reduce the risk of loss due to
fluctuations in currency exchange rates. The Fund is non-
diversified, which means that it may concentrate its assets in a
smaller number of issuers than a diversified Fund.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Derivatives Risk . Currency Risk
. Credit Risk . Liquidity Risk . Leveraging Risk
. Market Risk . Concentration Risk . Management Risk
. Issuer Risk . Foreign Investment
Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
The Administrative Class of the Fund has not commenced operations
as of the date of this prospectus. Past performance is no
guarantee of future results.
19 Pacific Investment Management Series
<PAGE>
PIMCO Real Return Bond Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 4.14%
Annual Return
Highest and Lowest Quarter Returns
'98 (for periods shown in the bar chart)
5.21% ------------------------------------
Highest (3rd Qtr. '98) 3.19%
------------------------------------
Lowest (4th Qtr. '98) -0.05%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year (1/29/97)(3)
----------------------------------------------------------------------
<S> <C> <C>
Institutional Class 5.21% 4.83%
----------------------------------------------------------------------
Lehman Brothers Inflation Linked Treasury
Index(1) 3.95% 3.32%
----------------------------------------------------------------------
Lipper Short U.S. Government Fund Avg(2) 5.83% 5.78%
----------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers Inflation Linked Treasury Index is an
unmanaged index consisting of the U.S. Treasury Inflation
Protected Securities market. It is not possible to invest
directly in the index.
(2) The Lipper Short U.S. Government Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest at least 65% of their assets in
securities issued or guaranteed by the U.S. government, its
agencies, or its instrumentalities, with dollar-weighted average
maturities of less than three years. It does not take into
account sales charges.
(3) The Fund began operations on 1/29/97. Index comparisons began
on 1/31/97.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.27% 0.52%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.27% 0.77
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $53 $167 $291 $653
------------------------------------------------------------------
Administrative 79 246 428 954
------------------------------------------------------------------
</TABLE>
Prospectus 20
<PAGE>
PIMCO Total Return Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Intermediate B to Aaa; maximum
and total return, maturity fixed 10% below Baa
Strategies consistent with income securities
preservation of Dividend Frequency
capital and Average Portfolio Declared daily and
prudent Duration distributed monthly
investment 3-6 years
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Fund normally
varies within a three- to six-year time frame based on PIMCO's
forecast for interest rates.
The Fund invests primarily in investment grade debt securities,
but may invest up to 10% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P or, if unrated,
determined by PIMCO to be of comparable quality. The Fund may
invest up to 20% of its assets in securities denominated in
foreign currencies, and may invest beyond this limit in U.S.
dollar-denominated securities of foreign issuers. The Fund will
normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in currency exchange
rates.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Derivatives Risk . Currency Risk
. Credit Risk . Liquidity Risk . Leveraging Risk
. Market Risk . Mortgage Risk . Management Risk
. Issuer Risk . Foreign Investment Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (9/8/94), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
21 Pacific Investment Management Series
<PAGE>
PIMCO Total Return Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
-------------------------------------
Annual Return 1/1/99-6/30/99 -1.15%
'89 '90 '91 '92 '93 Highest and Lowest Quarter Returns
14.24% 8.05% 19.55% 9.73% 12.51% (for periods shown in the bar chart)
-------------------------------------
'94 '95 '96 '97 '98 Highest (2nd Qtr.'89) -8.26%
- -3.58% 19.77% 4.69% 10.16% 9.76% -------------------------------------
Lowest (1st Qtr.'94) -2.69%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
1 Years 5 Years 10 Years
---------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 9.76% 7.89% 10.29%
---------------------------------------------------------------------
Administrative Class 9.48% 7.63% 10.03%
---------------------------------------------------------------------
Lehman Aggregate Bond Index(1) 8.69% 7.27% 9.26%
---------------------------------------------------------------------
Lipper Intermediate Investment
Grade Debt Fund Avg(2) 7.25% 6.35% 8.34%
---------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index
investment grade, U.S. dollar-denominated fixed income securities
of domestic issuers having a maturity greater than one year. It is
not possible to invest directly in the index.
(2) The Lipper Intermediate Investment Grade Debt Fund Average is a
total return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their assets
in investment-grade debt issues (rated in the top four grades)
with dollar-weighted average maturities of five to ten years. It
does not take into account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Advisory Distribution Total Annual
and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.18% 0.43%
----------------------------------------------------------------------------
Administrative 0.25 0.25% 0.18 0.68
----------------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.18% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $44 $138 $241 $542
--------------------------------------------------------------
Administrative 69 218 379 847
--------------------------------------------------------------
</TABLE>
Prospectus 22
<PAGE>
PIMCO Total Return Fund II
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Intermediate Baa to Aaa
and total return, maturity fixed
Strategies consistent with income securities Dividend Frequency
preservation of Declared daily and
capital and Average Portfolio distributed monthly
prudent Duration
investment 3-6 years
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Fund normally
varies within a three- to six-year time frame based on PIMCO's
forecast for interest rates. The Fund may invest only in U.S.
dollar denominated securities of U.S. issuers that are rated at
least Baa by Moody's or BBB by S&P, or, if unrated, determined by
PIMCO to be of comparable quality.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Issuer Risk . Leveraging Risk
. Credit Risk . Derivatives Risk . Management Risk
. Market Risk . Mortgage Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (11/30/94), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
23 Pacific Investment Management Series
<PAGE>
PIMCO Total Return Fund II (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
-------------------------------------
Annual Return 1/1/99-6/30/99 -1.74%
'92 '93 '94 Highest and Lowest Quarter Returns
9.34% 10.90% -2.21% (for periods shown in the bar chart)
-------------------------------------
'95 '96 '97 '98 Highest(3rd Qtr.'92) 5.57%
18.97% 3.85% 9.99% 9.62% -------------------------------------
Lowest(1st Qtr.'94) -2.60%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (12/30/91)(3)
----------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 9.62% 7.82% 8.49%
----------------------------------------------------------------------
Administrative Class 9.36% 7.54% 8.22%
----------------------------------------------------------------------
Lehman Aggregate Bond Index(1) 8.69% 7.27% 7.64%
----------------------------------------------------------------------
Lipper Intermediate Investment Grade
Debt Fund Avg(2) 7.25% 6.35% 7.16%
----------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index of
investment grade, U.S. dollar-denominated fixed income securities
of domestic issuers having a maturity greater than one year. It
is not possible to invest directly in the index.
(2) The Lipper Intermediate Investment Grade Debt Fund Average is a
total return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their
assets in investment-grade debt issues (rated in the top four
grades) with dollar-weighted average maturities of five to ten
years. It does not take into account sales charges.
(3) The Fund began operations on 12/30/91. Index comparisons began
on 12/31/91.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
--------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
--------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
------------------------------------------------------------
Administrative 77 240 417 930
------------------------------------------------------------
</TABLE>
Prospectus 24
<PAGE>
PIMCO Total Return Fund III
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Intermediate B to Aaa; maximum 10%
and total return, maturity fixed below Baa
Strategies consistent with income
preservation of securities Dividend Frequency
capital and Declared daily and
prudent Average Portfolio distributed monthly
investment Duration
management 3-6 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. The average portfolio duration of this Fund normally
varies within a three- to six-year time frame based on PIMCO's
forecast for interest rates. The Fund will not invest in the
securities of any issuer determined by PIMCO to be engaged
principally in the provision of healthcare services, the
manufacture of alcoholic beverages, tobacco products,
pharmaceuticals or military equipment, or the operation of
gambling casinos. The Fund will also avoid, to the extent possible
on the basis of information available to the Adviser, the purchase
of securities of issuers engaged in the production or trade of
pornographic materials. An issuer will be deemed to be principally
engaged in an activity if it derives more than 10% of its gross
revenues from such activities.
The Fund invests primarily in investment grade securities, but
may invest up to 10% of its assets in high yield securities ("junk
bonds") rated B or higher by Moody's or S&P, or, if unrated,
determined by PIMCO to be of comparable quality. The Fund may
invest up to 20% of its assets in securities denominated in
foreign currencies, and may invest beyond this limit in U.S.
dollar-denominated securities of foreign issuers. The Fund will
normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in exchange rates.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Derivatives Risk . Currency Risk
. Credit Risk . Liquidity Risk . Leveraging Risk
. Market Risk . Mortgage Risk . Management Risk
. Issuer Risk . Foreign Investment Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (4/11/97), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
25 Pacific Investment Management Series
<PAGE>
PIMCO Total Return Fund III (continued)
Calendar Year Total Returns -- Institutional Class
Annual Return More Recent Return Information
-------------------------------------
'92 '93 '94 1/1/99-6/30/99 -1.36%
9.02% 12.64% -3.43%
Highest and Lowest Quarter Returns
'95 '96 '97 '98 (for periods shown in the bar chart)
19.23% 4.63% 10.21% 10.37% -------------------------------------
Highest (3rd Qtr.'91) 6.90%
-------------------------------------
Calendar Year End (through 12/31) Lowest (1st Qtr.'94) -2.68%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (5/1/91)(3)
--------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 10.37% 7.94% 9.79%
--------------------------------------------------------------------
Administrative Class 10.09% 7.66% 9.52%
--------------------------------------------------------------------
Lehman Aggregate Bond Index(1) 8.69% 7.27% 8.50%
--------------------------------------------------------------------
Lipper Intermediate Investment Grade
Debt Fund Avg(2) 7.25% 6.35% 7.98%
--------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index
of investment grade, U.S. dollar-denominated fixed income
securities of domestic issuers having a maturity greater than
one year. It is not possible to invest directly in the index.
(2) The Lipper Intermediate Investment Grade Debt Fund Average is
a total return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their
assets in investment-grade debt issues (rated in the top four
grades) with dollar-weighted average maturities of five to ten
years. It does not take into account sales charges.
(3) The Fund began operations on 5/1/91. Index comparisons began
on 4/30/91.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
----------------------------------------------------------------
Administrative 77 240 417 930
----------------------------------------------------------------
</TABLE>
Prospectus 26
<PAGE>
PIMCO Total Return Mortgage Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum total Intermediate Baa to Aaa; maximum
and return, consistent maturity fixed 10% below Aaa
Strategies with preservation income securities
of capital and Dividend Frequency
prudent investment Average Portfolio Declared daily and
management Duration distributed monthly
2-6 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 80% of its assets in a
diversified portfolio of mortgage-related Fixed Income Instruments
of varying maturities. The average portfolio duration of this Fund
normally varies within a two- to six-year time frame based on
PIMCO's forecast for interest rates. The Fund invests primarily in
securities that are in the highest rating category, but may invest
up to 10% of its assets in securities rated below Aaa by Moody's
or AAA by S&P, subject to a minimum rating of Baa by Moody's or
BBB by S&P, or, if unrated, determined by PIMCO to be of
comparable quality. The Fund may not invest in securities
denominated in foreign currencies, but may invest without limit in
U.S. dollar-denominated securities of foreign issuers.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Mortgage Risk . Foreign Investment
. Credit Risk . Derivatives Risk Risk
. Market Risk . Liquidity Risk . Leveraging Risk
. Issuer Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
The Administrative Class of the Fund has not commenced operations
as of the date of this prospectus. Past performance is no
guarantee of future results.
27 Pacific Investment Management Series
<PAGE>
PIMCO Total Return Mortgage Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
-------------------------------------
1/1/99-6/30/99 0.64%
Annual Return
Highest and Lowest Quarter Returns
'98 (for periods shown in the bar chart)
7.23% -------------------------------------
Highest (4th Qtr. '97) 3.18%
-------------------------------------
Lowest (4th Qtr. '98) -0.36%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year (7/31/97)
--------------------------------------------------------------------
<S> <C> <C>
Institutional Class 7.23% 8.66%
--------------------------------------------------------------------
Lehman Mortgage Index(1) 6.96% 7.38%
--------------------------------------------------------------------
Lipper U.S. Mortgage Fund Avg(2) 6.20% 6.52%
--------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers Mortgage Index is an unmanaged index of
mortgage-related fixed income securities. It is not possible
to invest directly in the index.
(2) The Lipper U.S. Mortgage Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest at least 65% of their assets in
mortgages/securities issued or guaranteed as to principal and
interest by the U.S. government and certain federal agencies.
It does not take into account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
-------------------------------------------------------------------
Administrative 77 240 417 930
-------------------------------------------------------------------
</TABLE>
Prospectus 28
<PAGE>
PIMCO High Yield Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Higher yielding B to Aaa; minimum 65%
and total return, fixed income below Baa
Strategies consistent with securities
preservation of Dividend Frequency
capital and Average Portfolio Declared daily and
prudent Duration distributed monthly
investment 2-6 years
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of high yield securities ("junk bonds")
rated below investment grade but rated at least B by Moody's or
S&P, or, if unrated, determined by PIMCO to be of comparable
quality. The remainder of the Fund's assets may be invested in
investment grade Fixed Income Instruments. The average portfolio
duration of this Fund normally varies within a two- to six-year
time frame based on PIMCO's forecast for interest rates. The Fund
may invest without limit in U.S. dollar-denominated securities
of foreign issuers. Effective March 1, 2000, the Fund may invest up
to 15% of its assets in euro-denominated securities. The Fund
normally will hedge at least 75% of its exposure to the euro to
reduce the risk of loss due to fluctuations in currency exchange
rates.
The Fund may invest up to 15% of its assets in derivative
instruments, such as options, futures contracts or swap
agreements, or in mortgage- or asset-backed securities. The Fund
may lend its portfolio securities to brokers, dealers, and other
financial institutions to earn income. Rather than investing
directly in the securities in which it primarily invests, the Fund
may use other investment techniques to gain exposure to market
movements related to such securities, such as entering into a
series of contracts to buy or sell such securities. The "total
return" sought by the Fund consists of income earned on the Fund's
investments, plus capital appreciation, if any, which generally
arises from decreases in interest rates or improving credit
fundamentals for a particular sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Issuer Risk . Currency Risk
. Credit Risk . Liquidity Risk . Foreign Investment
. High Yield Risk . Derivatives Risk Risk
. Market Risk . Mortgage Risk . Leveraging Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (1/16/95), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
29 Pacific Investment Management Series
<PAGE>
PIMCO High Yield Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
Annual Return -----------------------------------
1/1/99-6/30/99 1.04%
'93 '94 '95
18.70% 2.39% 20.68% Highest and Lowest Quarter Returns
(for periods shown in the bar chart)
'96 '97 '98 -----------------------------------
11.68% 13.21% 6.54% Highest (1st Qtr. '93 6.27%
-----------------------------------
Lowest (3rd Qtr. '98) -1.76%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (12/16/92)(3)
--------------------------------------------------------------------
<S> <C> <C> <C>
International Class 6.54% 10.73% 11.98%
--------------------------------------------------------------------
Administrative Class 6.29% 10.46% 11.71%
--------------------------------------------------------------------
Lehman Brothers BB Intermediate
Corporate Index(1) 5.74% 9.09% 10.00%
--------------------------------------------------------------------
Lipper High Current Yield Fund Avg(2) -0.44% 7.37% 9.36%
--------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers BB Intermediate Corporate Index is an
unmanaged index comprised of various fixed income securities
rated BB. It is not possible to invest directly in the index.
(2) The Lipper High Current Yield Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that aim at high (relative) current yield from
fixed income securities, have not quality or maturity
restrictions, and tend to invest in lower grade debt issues.
It does not take into account sales charges.
(3) The Fund began operations on 12/16/92. Index comparisons began
on 12/31/92.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund Fund:
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
-----------------------------------------------------------------
Administrative 77 240 417 930
-----------------------------------------------------------------
</TABLE>
Prospectus 30
<PAGE>
PIMCO Long-Term U.S. Government Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Long-term A to Aaa
and total return, maturity fixed
Strategies consistent with income securities Dividend Frequency
preservation of Declared daily and
capital and Average Portfolio distributed monthly
prudent Duration
investment (greater than or
management equal to) 8 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of fixed income securities that are issued
or guaranteed by the U.S. Government, its agencies or government-
sponsored enterprises ("U.S. Government Securities").
Additionally, the Fund may obtain exposure to U.S. Government
Securities through the use of futures contracts (including related
options) with respect to such securities, and options on such
securities, when PIMCO deems it appropriate to do so. While PIMCO
may invest in derivatives at any time it deems appropriate, it
will generally do so when it believes that U.S. Government
Securities are overvalued relative to derivative instruments.
Assets not invested in U.S. Government Securities may be invested
in other types of Fixed Income Instruments. This Fund will
normally have a minimum average portfolio duration of eight years.
For point of reference, the dollar-weighted average portfolio
maturity of the Fund is normally expected to be more than ten
years.
The Fund's investments in Fixed Income Instruments are limited to
those of U.S. dollar-denominated securities of U.S. issuers that
are rated at least A by Moody's or S&P, or, if unrated, determined
by PIMCO to be of comparable quality. In addition, the Fund may
only invest up to 10% of its assets in securities rated A by
Moody's or S&P, and may only invest up to 25% of its assets in
securities rated Aa by Moody's or AA by S&P.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage-backed securities. The Fund may lend its portfolio
securities to brokers, dealers and other financial institutions to
earn income. Rather than investing directly in the securities in
which it primarily invests, the Fund may use other investment
techniques to gain exposure to market movements related to such
securities, such as entering into a series of contracts to buy or
sell such securities. 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 Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
.Interest Rate Risk .Issuer Risk .Leveraging Risk
.Credit Risk .Derivatives Risk .Management Risk
.Market Risk .Mortgage Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (9/23/97), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
31 Pacific Investment Management Series
<PAGE>
PIMCO Long-Term U.S. Government Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 -5.88%
'92 '93 '94 Highest and Lowest Quarter Returns
11.93% 18.57% -7.39% (for periods shown in the bar chart)
------------------------------------
'95 '96 '97 '98 Highest (2nd Qtr. '95) 10.76%
31.57% 0.71% 15.02% 13.39% ------------------------------------
Lowest (1st Qtr. '96) -6.26%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (7/1/91)(3)
----------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 13.39% 9.86% 13.06%
----------------------------------------------------------------------
Administrative Class 13.08% 9.59% 12.79%
----------------------------------------------------------------------
Lehman Long-Term Treasury Index(1) 13.51% 9.34% 11.66%
----------------------------------------------------------------------
Lipper General U.S. Government Fund Avg* 8.07% 6.15% 7.75%
----------------------------------------------------------------------
</TABLE>
(1) The Lehman Long-Term Treasury Index is an unmanaged index of
U.S. Treasury issues with maturities greater than 10 years. It
is not possible to invest directly in the index.
(2) The Lipper General U.S. Government Fund Average is a total
return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their
assets in U.S. government and agency issues. It does not take
into account sales charges.
(3) The Fund began operations on 7/1/91. Index comparisons began
on 6/30/91.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.26 0.76
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
------------------------------------------------------------------
Administrative 78 243 422 942
------------------------------------------------------------------
</TABLE>
Prospectus 32
<PAGE>
PIMCO Long Duration Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Long-term B to Aaa; maximum
and total return, maturity fixed 10% below Baa
Strategies consistent with income securities
preservation of Dividend Frequency
capital and Average Portfolio Declared daily and
prudent Duration distributed monthly
investment (greater than or
management equal to) 8 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of Fixed Income Instruments of varying
maturities. This Fund will normally have a minimum average
portfolio duration of eight years.
The Fund invests primarily in investment grade debt securities,
but may invest up to 10% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P or, if unrated,
determined by PIMCO to be of comparable quality. The Fund may
invest up to 20% of its assets in securities denominated in
foreign currencies, and may invest beyond this limit in U.S.
dollar-denominated securities of foreign issuers. The Fund will
normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in currency exchange
rates.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Derivatives Risk . Currency Risk
. Credit Risk . Liquidity Risk . Leveraging Risk
. Market Risk . Mortgage Risk . Management Risk
. Issuer Risk . Foreign Investment Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance 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.
33 Pacific Investment Management Series
<PAGE>
PIMCO Long Duration Fund (continued)
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
------------------------------------------------------------------
Administrative 77 240 417 930
------------------------------------------------------------------
</TABLE>
Prospectus 34
<PAGE>
PIMCO Short Duration Municipal Income Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks high Short and Baa to Aaa
and current income intermediate
Strategies exempt from maturity Dividend Frequency
federal income municipal Declared daily and
tax, consistent securities distributed monthly
with preservation (exempt from
of capital. federal income
tax)
Average Portfolio
Duration
0-2 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 80% of its net assets in debt
securities whose interest is, in the opinion of bond counsel for
the issuer at the time of issuance, exempt from federal income tax
("Municipal Bonds"). Municipal Bonds generally are issued by or on
behalf of states and local governments and their agencies,
authorities and other instrumentalities.
The Fund may invest without limit in "private activity" bonds
whose interest is a tax-preference item for purposes of the
federal alternative minimum tax ("AMT"). For shareholders subject
to the AMT, a substantial portion of the Fund's distributions may
not be exempt from federal income tax. The Fund may invest up to
20% of its net assets in other types of Fixed Income Instruments.
The Fund may invest more than 25% of its assets in bonds of
issuers in the same state. The Fund may only invest in investment
grade debt securities. The average portfolio duration of this Fund
varies based on PIMCO's forecast for interest rates and under
normal market conditions is not expected to exceed two years. The
Fund will seek income that is high relative to prevailing rates
from Municipal Bonds.
The Fund may invest in derivative instruments, such as options,
futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions to earn income.
Rather than investing directly in securities in which it primarily
invests, the Fund may use other investment techniques to gain
exposure to market movements related to such securities, such as
entering into a series of contracts to buy and sell such
securities.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Issuer Risk . Leveraging Risk
. Credit Risk . Derivatives Risk . Management Risk
. Market Risk . Mortgage Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The Fund does not have a full calendar year of performance. Thus,
Information no bar chart or annual returns table is included for the Fund.
35 Pacific Investment Management Series
<PAGE>
PIMCO Short Duration Municipal Income Fund (continued)
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets):
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Fees (12b-1) Fees Expenses(1) Expenses
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.20% None 0.19% 0.39%
--------------------------------------------------------------------
Administrative 0.20% 0.25% 0.19% 0.64%
--------------------------------------------------------------------
</TABLE>
(1) Other expenses reflects a 0.19% Administrative Fee paid by the
class.
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>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $40 $125 $219 $493
--------------------------------------------------------------------
Administrative $65 $205 $357 $798
--------------------------------------------------------------------
</TABLE>
Prospectus 36
<PAGE>
PIMCO Municipal Bond Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks high Intermediate to Ba to Aaa; maximum
and current income long-term 10% below Baa
Strategies exempt from maturity
federal income municipal Dividend Frequency
tax, consistent securities Declared daily and
with preservation (exempt from distributed monthly
of capital. federal income
Capital tax)
appreciation is a
secondary Average Portfolio
objective. Duration
3-10 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 80% of its net assets in debt
securities whose interest is, in the opinion of bond counsel for
the issuer at the time of issuance, exempt from federal income tax
("Municipal Bonds"). Municipal Bonds generally are issued by or on
behalf of states and local governments and their agencies,
authorities and other instrumentalities.
The Fund may invest up to 20% of its net assets in U.S.
Government Securities, money market instruments and/or "private
activity" bonds. For shareholders subject to the federal
alternative minimum tax ("AMT"), distributions derived from
"private activity" bonds must be included in their AMT
calculations, and as such may be subject to federal income tax.
The average portfolio duration of this Fund normally varies within
a three- to ten-year time frame, based on PIMCO's forecast for
interest rates. The Fund invests primarily in investment grade
debt securities, but may invest up to 10% of its net assets in
Municipal Bonds or "private activity" bonds which are high yield
securities ("junk bonds") rated at least Ba by Moody's or BB by
S&P, or, if unrated, determined by PIMCO to be of comparable
quality.
The Fund may invest in derivative instruments, such as options
and futures and options on futures, on U.S. Government Securities
and Municipal Bonds, and invest in mortgage- or asset-backed
securities. The Fund may lend its portfolio securities to brokers,
dealers and other financial institutions to earn income. Rather
than investing directly in the securities in which it primarily
invests, the Fund may use other investment techniques to gain
exposure to market movements related to such securities, such as
entering into a series of contracts to buy or sell such
securities.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Issuer Risk . Leveraging Risk
. Credit Risk . Liquidity Risk . Management Risk
. Market Risk . Derivatives Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (9/30/98), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
37 Pacific Investment Management Series
<PAGE>
PIMCO Municipal Bond Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
--------------------------------------
1/1/99-6/30/99 -1.61%
'98 Highest and Lowest Quarter Returns
6.07% (for periods shown in the bar chart)
--------------------------------------
Highest (3rd Qtr. '98) 3.33%
--------------------------------------
Lowest (4th Qtr. '98) 0.18%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION> Fund Inception
1 Year (12/31/97)
--------------------------------------------------------------------
<S> <C> <C>
Institutional Class 6.07% 6.07%
--------------------------------------------------------------------
Administrative Class 5.45% 5.45%
--------------------------------------------------------------------
Lehman General Municipal Bond Index(1) 6.48% 6.48%
--------------------------------------------------------------------
Lipper General Municipal Fund Avg(2) 5.32% 5.32%
--------------------------------------------------------------------
</TABLE>
(1) The Lehman General Municipal Bond Index is an unmanaged index
of municipal bonds. It is not possible to invest directly in
the index.
(2) The Lipper General Municipal Debt Fund Average is a total
return performance average of Funds tracked by Lipper
Analytical Services, Inc. that invest at least 65% of their
assets in municipal debt issues in the top four credit
ratings. It does not take into account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
------------------------------------------------------------------
Administrative 77 240 417 930
------------------------------------------------------------------
</TABLE>
Prospectus 38
<PAGE>
PIMCO California Intermediate Municipal Bond Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks high Intermediate B to Aaa; maximum
and current income maturity 10% below Baa
Strategies exempt from municipal
federal and securities Dividend Frequency
California income (exempt from Declared daily and
tax. Capital federal and distributed monthly
appreciation is a California income
secondary tax)
objective.
Average Portfolio
Duration
3-7 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 80% of its net assets in
Municipal Bonds whose interest is, in the opinion of bond counsel
for the issuer at the time of issuance, exempt from federal income
tax. The Fund invests under normal circumstances at least 65% of
its net assets in debt securities whose interest is, in the
opinion of bond counsel for the issuer at the time of issuance,
exempt from regular federal income tax and California income tax
("California Municipal Bonds"). California Municipal Bonds
generally are issued by or on behalf of the State of California
and its political subdivisions, financing authorities and their
agencies.
The Fund may invest without limit in "private activity" bonds
whose interest is a tax-preference item for purposes of the
federal alternative minimum tax ("AMT"). For shareholders subject
to the AMT, a substantial portion of the Fund's distributions may
not be exempt from federal income tax. The Fund may invest up to
20% of its net assets in other types of Fixed Income Instruments.
The average portfolio duration of this Fund normally varies within
a three- to seven-year time frame based on PIMCO's forecast for
interest rates. The Fund will seek income that is high relative to
prevailing rates from Municipal Bonds. Capital appreciation, if
any, generally arises from decreases in interest rates or
improving credit fundamentals for a particular state, municipality
or issuer.
The Fund invests primarily in investment grade debt securities,
but may invest up to 10% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P, or, if
unrated, determined by PIMCO to be of comparable quality.
The Fund may invest in derivative instruments, such as options,
futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions to earn income.
Rather than investing directly in securities in which it primarily
invests, the Fund may use other investment techniques to gain
exposure to market movements related to such securities, such as
entering into a series of contracts to buy or sell such
securities.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return are:
. Interest Rate Risk . Issuer Risk . Mortgage Risk
. Credit Risk . Concentration Risk . Leveraging Risk
. California State . Liquidity Risk . Management Risk
Specific Risk . Derivatives Risk
. Market Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The Fund does not have a full calendar year of performance. Thus,
Information no bar chart or annual returns table is included for the Fund.
39 Pacific Investment Management Series
<PAGE>
PIMCO California Intermediate Municipal Bond Fund (continued)
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class and Administrative Class shares of
of the the Fund:
Fund
Shareholder fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets):
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.24% 0.49%
------------------------------------------------------------------
Administrative 0.25% 0.25% 0.24% 0.74%
------------------------------------------------------------------
</TABLE>
(1) Other expenses reflects a 0.24% Administrative Fee paid by the
class.
Examples. The Examples are intended to help you compare the cost
of investing in Institutional Class and 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>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $50 $157 $274 $616
------------------------------------------------------------------
Administrative $76 $237 $411 $918
------------------------------------------------------------------
</TABLE>
Prospectus 40
<PAGE>
PIMCO New York Intermediate Municipal Bond Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks high Intermediate B to Aaa; maximum
and current income maturity 10% below Baa
Strategies exempt from municipal
federal and New securities Dividend Frequency
York income tax. (exempt from Declared daily and
Capital federal and New distributed monthly
appreciation is a York income tax)
secondary
objective. Average Portfolio
Duration 3-7 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 80% of its net assets in
Municipal Bonds whose interest is, in the opinion of bond counsel
for the issuer at the time of issuance, exempt from federal income
tax. The Fund will invest under normal circumstances at least 65%
of its net assets in debt securities whose interest is, in the
opinion of bond counsel for the issuer at the time of issuance,
exempt from regular federal income tax and New York income tax
("New York Municipal Bonds"). New York Municipal Bonds generally
are issued by or on behalf of the State of New York and its
political subdivisions, financing authorities and their agencies.
The Fund may invest without limit in "private activity" bonds
whose interest is a tax-preference item for purposes of the
federal alternative minimum tax ("AMT"). For shareholders subject
to the AMT, a substantial portion of the Fund's distributions may
not be exempt from federal income tax. The Fund may invest up to
20% of its net assets in other types of Fixed Income Instruments.
The average portfolio duration of this Fund normally varies within
a three- to seven-year time frame based on PIMCO's forecast for
interest rates. The Fund will seek income that is high relative to
prevailing rates from municipal bonds. Capital appreciation, if
any, generally arises from decreases in interest rates or
improving credit fundamentals for a particular state, municipality
or issuer.
The Fund invests primarily in investment grade debt securities,
but may invest up to 10% of its assets in high yield securities
("junk bonds") rated B or higher by Moody's or S&P, or, if
unrated, determined by PIMCO to be of comparable quality.
The Fund may invest in derivative instruments, such as options,
futures contracts or swap agreements, or in mortgage- or asset-
backed securities. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions to earn income.
Rather than investing directly in securities in which it primarily
invests, this Fund may use other investment techniques to gain
exposure to market movements related to such securities, such as
entering into a series of contracts to buy or sell such
securities.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return are:
. Interest Rate Risk . Issuer Risk . Mortgage Risk
. Credit Risk . Concentration Risk . Leveraging Risk
. New York State . Liquidity Risk . Management Risk
Specific Risk . Derivatives Risk
. Market Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The Fund does not have a full calendar year of performance. Thus,
Information no bar chart or annual returns table is included for the Fund.
41 Pacific Investment Management Series
<PAGE>
PIMCO New York Intermediate Municipal Bond Fund (continued)
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets):
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.24% 0.49%
------------------------------------------------------------------
Administrative 0.25% 0.25% 0.24% 0.74%
------------------------------------------------------------------
</TABLE>
(1) Other expenses reflects a 0.24% Administrative Fee paid by the
class.
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>
<CAPTION>
Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $50 $157 $274 $616
------------------------------------------------------------------
Administrative $76 $237 $411 $918
------------------------------------------------------------------
</TABLE>
Prospectus 42
<PAGE>
PIMCO Global Bond Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum U.S. and foreign B to Aaa; maximum
and total return, intermediate maturity 10% below Baa
Strategies consistent with fixed income
preservation of securities Dividend Frequency
capital and Declared daily
prudent Average Portfolio and distributed
investment Duration 3-7 years monthly
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in Fixed
Income Instruments of issuers located in at least three countries
(one of which may be the United States), which may be represented
by futures contracts (including related options) with respect to
such securities, and options on such securities. The Fund invests
primarily in securities of issuers located in economically
developed countries. Securities may be denominated in major
foreign currencies, baskets of foreign currencies (such as the
euro), or the U.S. dollar.
PIMCO selects the Fund's foreign country and currency
compositions based on an evaluation of relative interest rates,
exchange rates, monetary and fiscal policies, trade and current
account balances, and any other factors PIMCO believes to be
relevant. Investments in the securities of issuers located outside
the United States will normally vary between 25% and 75% of the
Fund's assets. The average portfolio duration of this Fund
normally varies within a three- to seven-year time frame. The Fund
invests primarily in investment grade debt securities, but may
invest up to 10% of its assets in high yield securities ("junk
bonds") rated B or higher by Moody's or S&P, or, if unrated,
determined by PIMCO to be of comparable quality. The Fund is non-
diversified, which means that it may concentrate its assets in a
smaller number of issuers than a diversified Fund.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Foreign Investment . Mortgage Risk
. Credit Risk Risk . Derivatives Risk
. Market Risk . Currency Risk . Leveraging Risk
. Issuer Risk . Concentration Risk . Management Risk
. Liquidity Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (7/31/96), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
43 Pacific Investment Management Series
<PAGE>
PIMCO Global Bond Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 -6.86%
Annual Return
'94 '95 '96 '97 '98 Highest and Lowest Quarter Returns
- -1.70% 22.96% 10.32% -0.90% 12.50% (for periods shown in the bar chart)
------------------------------------
Highest (1st Qtr. '95) 8.40%
------------------------------------
Lowest (1st Qtr. '97) -4.40%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (11/23/93)(3)
--------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 12.50% 8.25% 8.84%
--------------------------------------------------------------------
Administrative Class 12.37% 8.02% 8.61%
--------------------------------------------------------------------
J.P. Morgan Global (Unhedged) Index(1) 15.30% 8.08% 8.16%
--------------------------------------------------------------------
Lipper Global Income Fund Avg(2) 6.30% 5.57% 5.88%
--------------------------------------------------------------------
</TABLE>
(1) The J.P. Morgan Global (Unhedged) Index is an unmanaged index
representative of the total return performance in U.S. dollars
on an unhedged basis of major world bond markets. It is not
possible to invest directly in the index.
(2) The Lipper Global Income Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest primarily in U.S. dollar and non-
U.S. dollar debt securities of issuers located in at least
three countries, one of which may be the United States. It
does not take into account sales charges.
(3) The Fund began operations on 11/23/93. Index comparisons began
on 11/30/93.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.30% 0.55%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.30 0.80
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.30% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $56 $176 $307 $689
------------------------------------------------------------------
Administrative 82 255 444 990
------------------------------------------------------------------
</TABLE>
Prospectus 44
<PAGE>
PIMCO Global Bond Fund II
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum U.S. and hedged B to Aaa; maximum
and total return, foreign 10% below Baa
Strategies consistent with intermediate
preservation of maturity fixed Dividend Frequency
capital income securities Declared daily and
distributed monthly
Average Portfolio
Duration 3-7 years
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in Fixed
Income Instruments of issuers located in at least three countries
(one of which may be the United States), which may be represented
by futures contracts (including related options) with respect to
such securities, and options on such securities. The Fund invests
primarily in securities of issuers located in economically
developed countries. Securities may be denominated in major
foreign currencies, baskets of foreign currencies (such as the
euro), or the U.S. dollar. The Fund will normally hedge at least
75% of its exposure to foreign currency to reduce the risk of loss
due to fluctuations in currency exchange rates.
PIMCO selects the Fund's foreign country and currency
compositions based on an evaluation of relative interest rates,
exchange rates, monetary and fiscal policies, trade and current
account balances, and any other factors PIMCO believes to be
relevant. Investments in the securities of issuers located outside
the United States will normally vary between 25% and 75% of the
Fund's assets. The average portfolio duration of this Fund
normally varies within a three- to seven-year time frame. The Fund
invests primarily in investment grade securities, but may invest
up to 10% of its assets in high yield securities ("junk bonds")
rated B or higher by Moody's or S&P, or, if unrated, determined by
PIMCO to be of comparable quality. The Fund is non-diversified,
which means that it may concentrate its assets in a smaller number
of issuers than a diversified Fund.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Foreign Investment . Mortgage Risk
. Credit Risk Risk . Derivatives Risk
. Market Risk . Currency Risk . Leveraging Risk
. Issuer Risk . Concentration Risk . Management Risk
. Liquidity Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
The Administrative Class of the Fund has not yet commenced
operations as of the date of this prospectus. Past performance is
no guarantee of future results.
45 Pacific Investment Management Series
<PAGE>
PIMCO Global Bond Fund II (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 -0.38%
Annual Return
'96 '97 '98 Highest and Lowest Quarter Returns
12.84% 8.68% 7.71% (for periods shown in the bar chart)
------------------------------------
Highest (3rd Qtr. '96) 5.39%
------------------------------------
Lowest (1st Qtr. '97) 0.23%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year (10/2/95)(3)
-----------------------------------------------------------------------
<S> <C> <C>
Institutional Class 7.71% 10.82%
-----------------------------------------------------------------------
J.P. Morgan Global (Hedged) Index(1) 11.42% 10.89%
-----------------------------------------------------------------------
Lipper Global Income Fund Avg(2) 6.30% 7.05%
-----------------------------------------------------------------------
</TABLE>
(1) The J.P. Morgan Global (Hedged) Index is an unmanaged index
representative of the total return performance in U.S.
dollars on a hedged basis of major world bond markets. It is
not possible to invest directly in the index.
(2) The Lipper Global Income Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest primarily in U.S. dollar and non-
U.S. dollar debt securities of issuers located in at least
three countries, one of which may be the United States. It
does not take into account sales charges.
(3) The Fund began operations on 10/2/95. Index comparisons began
on 9/30/95.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.30% 0.55%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.30 0.80
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.30% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $56 $176 $307 $689
------------------------------------------------------------------
Administrative 82 255 444 990
------------------------------------------------------------------
</TABLE>
Prospectus 46
<PAGE>
PIMCO Foreign Bond Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Intermediate B to Aaa; maximum
and total return, maturity hedged 10% below Baa
Strategies consistent with foreign fixed
preservation of income securities Dividend Frequency
capital and Declared daily and
prudent Average Portfolio distributed monthly
investment Duration 3-7 years
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 85% of its assets in Fixed
Income Instruments of issuers located outside the United States,
representing at least three foreign countries, which may be
represented by futures contracts (including related options) with
respect to such securities, and options on such securities. Such
securities normally are denominated in major foreign currencies or
baskets of foreign currencies (such as the euro). The Fund will
normally hedge at least 75% of its exposure to foreign currency to
reduce the risk of loss due to fluctuations in currency exchange
rates.
PIMCO selects the Fund's foreign country and currency
compositions based on an evaluation of relative interest rates,
exchange rates, monetary and fiscal policies, trade and current
account balances, and any other factors PIMCO believes to be
relevant. The average portfolio duration of this Fund normally
varies within a three- to seven-year time frame. The Fund invests
primarily in investment grade debt securities, but may invest up
to 10% of its assets in high yield securities ("junk bonds") rated
B or higher by Moody's or S&P, or, if unrated, determined by PIMCO
to be of comparable quality. The Fund is non-diversified, which
means that it may concentrate its assets in a smaller number of
issuers than a diversified Fund.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Foreign Investment . Mortgage Risk
. Credit Risk Risk . Derivatives Risk
. Market Risk . Currency Risk . Leveraging Risk
. Issuer Risk . Concentration Risk . Management Risk
. Liquidity Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (1/28/97), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
47 Pacific Investment Management Series
<PAGE>
PIMCO Foreign Bond Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
----------------------------------
1/1/99-6/30/99 0.15%
Annual Return
'93 '94 '95 Highest and Lowest Quarter Returns
16.40% -7.30% 21.22% (for periods shown in the bar chart)
------------------------------------
'96 '97 '98 Highest (4th Qtr.'95) 7.87%
18.89% 9.60% 10.03% ------------------------------------
Lowest (1st Qtr. '94) -5.80%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (12/3/92)(3)
----------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 10.03% 10.01% 11.18%
----------------------------------------------------------------------
Administrative Class 9.75% 9.74% 10.91%
----------------------------------------------------------------------
J.P. Morgan Non-U.S. Index (Hedged)(1) 12.09% 9.45% 10.24%
----------------------------------------------------------------------
Lipper International Income Fund Avg(2) 11.91% 6.55% 8.01%
----------------------------------------------------------------------
</TABLE>
(1) The J.P. Morgan Non-U.S. Index (Hedged) in an unmanaged index
representative of the total return performance in U.S. dollars
of major non-U.S. bond markets. It is not possible to invest
directly in the index.
(2) The Lipper International Income Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest primarily in U.S. dollar and non-
U.S. dollar debt securities of issuers located in at least
three countries, excluding the United States, except in
periods of market weakness. It does not take into account
sales charges.
(3) The Fund began operations on 12/3/92. Index comparisons began
on 11/30/92.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION> Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
------------------------------------------------------------------
Administrative 77 240 417 930
------------------------------------------------------------------
</TABLE>
Prospectus 48
<PAGE>
PIMCO International Bond Fund
This Fund is offered only to private account clients of PIMCO
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Foreign fixed income Baa to Aaa
and total return, securities
Strategies consistent with Dividend Frequency
preservation of Average Portfolio Declared and
capital and Duration 0-8 years distributed
prudent quarterly
investment
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in Fixed
Income Instruments of foreign issuers representing at least three
foreign countries or currencies, which may be represented by
futures contracts (including related options) with respect to such
securities, and options on such securities. Such securities may be
denominated in foreign currencies, baskets of foreign currencies
(such as the euro), or the U.S. dollar. The Fund will normally
hedge at least 75% of its exposure to foreign currency to reduce
the risk of loss due to fluctuations in currency exchange rates.
PIMCO selects the Fund's foreign country and currency
compositions based on an evaluation of relative interest rates,
exchange rates, monetary and fiscal policies, trade and current
account balances, and any other factors PIMCO believes to be
relevant. The Fund may invest only in investment grade securities.
The average portfolio duration of this Fund varies based on the
strategy currently being used by PIMCO in managing the assets of
the Fund within the overall PIMCO private account management
program, but is normally not expected to exceed eight years. The
Fund is non-diversified, which means that it may concentrate its
assets in a smaller number of issuers than a diversified Fund.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Foreign Investment . Mortgage Risk
. Credit Risk Risk . Derivatives Risk
. Market Risk . Currency Risk . Leveraging Risk
. Issuer Risk . Concentration Risk . Management Risk
. Liquidity Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of two broad-based securities market indices and
an index of similar funds. The bar chart and the information to
its right show performance of the Fund's Institutional Class
Shares. The Administrative Class of the Fund has not yet commenced
operations as of the date of this prospectus. Past performance is
no guarantee of future results.
49 Pacific Investment Management Series
<PAGE>
PIMCO International Bond Fund (continued)
Calendar Year Total Returns -- Institutional Class
Annual Return More Recent Return Information
------------------------------------
'90 '91 '92 '93 1/1/99-6/30/99 -3.07%
7.05% 14.29% 7.00% 14.31%
Highest and Lowest Quarter Returns
'94 '95 '96 '97 '98 (for periods shown in the bar chart)
-9.52% 20.76% 16.75% 6.21% 11.21% ------------------------------------
Highest (4th Qtr.'95)
7.84%
------------------------------------
Lowest (2nd Qtr.'94)
-5.80%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (12/13/89)(4)
-------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 11.21% 8.54% 9.42%
-------------------------------------------------------------------
Salomon World Gov Bond Ten-Market
Index(1) 11.42% 9.51% 9.14%
-------------------------------------------------------------------
Lehman Aggregate Bond Index(2) 8.69% 7.27% 8.64%
-------------------------------------------------------------------
Lipper International Income Fund Avg(3) 11.91% 6.55% 8.01%
-------------------------------------------------------------------
</TABLE>
(1) The Salomon World Government Bond Ten-Market Index is an
unmanaged index of local currency sovereign debt of Australia,
Canada, Denmark, France, Germany, Japan, the Netherlands,
Switzerland, the United Kingdom and the United States. It is
not possible to invest directly in the index.
(2) The Lehman Brothers Aggregate Bond Index is an unmanaged index
of fixed income securities.
(3) The Lipper International Income Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that invest primarily in U.S. dollar and non-
U.S. dollar debt securities of issuers located in at least
three countries, excluding the United States. It does not take
into account sales charges.
(4) The Fund began operations on 12/13/89. Index comparisons began
on 11/30/89.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.25% None 0.25% 0.50%
------------------------------------------------------------------
Administrative 0.25 0.25% 0.25 0.75
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $51 $160 $280 $628
------------------------------------------------------------------
Administrative 77 240 417 930
------------------------------------------------------------------
</TABLE>
Prospectus 50
<PAGE>
PIMCO Emerging Markets Bond Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Emerging market B to Aaa
and total return, fixed income
Strategies consistent with securities Dividend Frequency
preservation of Declared daily and
capital and Average Portfolio distributed monthly
prudent Duration 0-8 years
investment
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 80% of its assets in Fixed
Income Instruments of issuers that economically are tied to
countries with emerging securities markets. Such securities may be
denominated in foreign currencies and the U.S. dollar. The Fund
may invest up to 10% of its assets in shares of investment
companies that invest primarily in emerging market debt
securities. The average portfolio duration of this Fund varies
based on PIMCO's forecast for interest rates and, under normal
market conditions, is not expected to exceed eight years.
PIMCO has broad discretion to identify and invest in countries
that it considers to qualify as emerging securities markets.
However, PIMCO generally considers an emerging securities market
to be one located in any country that is defined as an emerging or
developing economy by the World Bank or its related organizations,
or the United Nations or its authorities. The Fund emphasizes
countries with relatively low gross national product per capita
and with the potential for rapid economic growth. PIMCO will
select the Fund's country and currency composition based on its
evaluation of relative interest rates, inflation rates, exchange
rates, monetary and fiscal policies, trade and current account
balances, and any other specific factors PIMCO believes to be
relevant. The Fund likely will concentrate its investments in
Asia, Africa, the Middle East, Latin America and the developing
countries of Europe. The Fund may invest in securities whose
return is based on the return of an emerging securities market,
rather than investing directly in securities of issuers from
emerging markets.
The Fund may invest substantially all of its assets in high yield
securities ("junk bonds") rated B or higher by Moody's or S&P, or,
if unrated, determined by PIMCO to be of comparable quality. The
Fund is non-diversified, which means that it may concentrate its
assets in a smaller number of issuers than a diversified Fund.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Emerging Markets . Liquidity Risk
. Credit Risk Risk . Derivatives Risk
. High Yield Risk . Foreign Investment . Leveraging Risk
. Market Risk Risk . Management Risk
. Issuer Risk . Currency Risk
. Concentration Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (9/30/98), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
51 Pacific Investment Management Series
<PAGE>
PIMCO Emerging Markets Bond Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
--------------------------------------
1/1/99-6/30/99 9.99%
'98 Highest and Lowest Quarter Returns
-11.76% (for periods shown in the bar chart)
--------------------------------------
Highest (4th Qtr. '98) 12.27%
--------------------------------------
Lowest (3rd Qtr. '98) -21.05%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund
Inception
1 Year (7/31/97)
--------------------------------------------------------------------
<S> <C> <C>
Institutional Class -11.76% -10.26%
--------------------------------------------------------------------
Administrative Class -12.84% -11.10%
--------------------------------------------------------------------
J.P. Morgan Emerging Markets Bond Index Plus(1) -14.35% -11.36%
--------------------------------------------------------------------
Lipper Emerging Market Debt Fund Avg(2) -20.26% -15.58%
--------------------------------------------------------------------
</TABLE>
(1) The J.P. Morgan Emerging Markets Bond Index Plus is an
unmanaged index which tracks the total returns for external-
currency denominated debt instruments of emerging markets. It
is not possible to invest directly in the index.
(2) The Lipper Emerging Market Debt Fund Average is a total
return performance average of Funds tracked by Lipper
Analytical Services, Inc. that seek either current income or
total return by investing at least 65% of total assets in
emerging market debt securities. It does not take into
account sales charges.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.45% None 0.40% 0.85%
------------------------------------------------------------------
Administrative 0.45 0.25% 0.40 1.10
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.40% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $87 $271 $471 $1,049
-------------------------------------------------------------------
Administrative 112 350 606 1,340
-------------------------------------------------------------------
</TABLE>
Prospectus 52
<PAGE>
PIMCO Emerging Markets Bond Fund II
This Fund is offered only to private account clients of PIMCO
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Emerging market B to Aaa; max 25%
and total return, fixed income below Ba
Strategies consistent with securities
preservation of Dividend Frequency
capital and Average Portfolio Declared daily and
prudent Duration 0-8 years distributed monthly
investment
management
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 80% of its assets in Fixed
Income Instruments of issuers that economically are tied to
countries with emerging securities markets. Such securities may be
denominated in foreign currencies and the U.S. dollar. However,
the Fund may only invest up to 15% of its assets in securities
denominated in currencies of emerging market countries. The Fund
may invest up to 10% of its assets in shares of investment
companies that invest primarily in emerging market debt
securities. The average portfolio duration of this Fund varies
based on PIMCO's forecast for interest rates and, under normal
market conditions, is not expected to exceed eight years.
PIMCO has broad discretion to identify and invest in countries
that it considers to qualify as emerging securities markets.
However, PIMCO generally considers an emerging securities market
to be one located in any country that is defined as an emerging or
developing economy by the World Bank or its related organizations,
or the United Nations or its authorities. The Fund emphasizes
countries with relatively low gross national product per capita
and with the potential for rapid economic growth. PIMCO will
select the Fund's country and currency composition based on its
evaluation of relative interest rates, inflation rates, exchange
rates, monetary and fiscal policies, trade and current account
balances, and any other specific factors PIMCO believes to be
relevant. The Fund likely will concentrate its investments in
Asia, Africa, the Middle East, Latin America and the developing
countries of Europe. The Fund may invest in securities whose
return is based on the return of an emerging securities market,
rather than investing directly in securities of issuers from
emerging markets.
The Fund may invest substantially all of its assets in high yield
securities ("junk bonds") rated B or higher by Moody's or S&P, or,
if unrated, determined by PIMCO to be of comparable quality,
subject to a maximum of 25% of assets in securities rated B by
Moody's or S&P. The Fund is non-diversified, which means that it
may concentrate its assets in a smaller number of issuers than a
diversified Fund.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements, or in
mortgage- or asset-backed securities. The Fund may lend its
portfolio securities to brokers, dealers and other financial
institutions to earn income. Rather than investing directly in the
securities in which it primarily invests, the Fund may use other
investment techniques to gain exposure to market movements related
to such securities, such as entering into a series of contracts to
buy or sell such securities. The "total return" sought by the Fund
consists of income earned on the Fund's investments, plus capital
appreciation, if any, which generally arises from decreases in
interest rates or improving credit fundamentals for a particular
sector or security.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Interest Rate Risk . Emerging Markets Risk . Liquidity Risk
. Credit Risk . Foreign Investment . Derivatives Risk
. High Yield Risk Risk . Leveraging Risk
. Market Risk . Currency Risk . Management Risk
. Issuer Risk . Concentration Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance As the Fund commenced operations in April, 1998, it does not yet
Information have a full calendar year of performance. Thus, no bar chart or
annual returns table is included for the Fund.
53 Pacific Investment Management Series
<PAGE>
PIMCO Emerging Markets Bond Fund II (continued)
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.45% None 0.40% 0.85%
------------------------------------------------------------------
Administrative 0.45 0.25% 0.40 1.10
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.40% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $87 $271 $471 $1,049
--------------------------------------------------------------------
Administrative 112 350 606 1,340
--------------------------------------------------------------------
</TABLE>
Prospectus 54
<PAGE>
PIMCO Strategic Balanced Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Intermediate B to Aaa; maximum 10%
and total return, maturity fixed below Baa
Strategies consistent with income securities
preservation of and S&P 500 stock Dividend Frequency
capital and index derivatives Declared and
prudent distributed quarterly
investment Average Portfolio
management Duration 0-6 years
The Fund seeks to achieve its investment objective by normally
investing in a combination of fixed income securities and equity
securities or derivatives on equity securities. The percentage of
the Fund's assets invested in equities and equity derivatives or
in fixed income securities will be determined based on
methodology, developed by PIMCO, that forecasts stages in the
business cycle and considers the risk and reward potential of
equity and fixed income securities within specific phases of the
business cycle. The Fund's equity exposure will vary between 45%
and 75% of assets, and its fixed income exposure will range from a
minimum of 25% to a maximum of 55%.
The Fund's equity exposure normally consists of S&P 500
derivatives, backed by a portfolio of short-term Fixed Income
Instruments. PIMCO uses S&P 500 derivatives in addition to or in
place of S&P 500 stocks to attempt to equal or exceed the
performance of the S&P 500. The value of S&P 500 derivatives
closely track changes in the value of the index. However, S&P 500
derivatives may be purchased with a fraction of the assets that
would be needed to purchase the equity securities directly, so
that the remainder of the assets may be invested in Fixed Income
Instruments. PIMCO will actively manage the fixed income assets
serving as cover for derivatives, as well as any other fixed
income assets held by the Fund, with a view toward enhancing the
Fund's total return investment performance. Though the Fund does
not normally invest directly in S&P 500 securities, when S&P 500
derivatives appear to be overvalued relative to the S&P 500, the
Fund may invest the equity portion of its assets in a "basket" of
S&P 500 stocks.
The Fund's fixed income exposure will normally consist of a
diversified portfolio of Fixed Income Instruments of varying
maturities. The securities may be of any maturity. The average
portfolio duration of the fixed income portion of this Fund's
assets will normally vary within a three- to six-year time frame.
The Fixed Income Instruments in which the Fund invests are
primarily investment grade, but the Fund may invest up to 10% of
its assets in high yield securities ("junk bonds") rated B or
higher by Moody's or S&P, or, if unrated, determined by PIMCO to
be of comparable quality. The Fund may invest up to 20% of its
assets in securities denominated in foreign currencies, and may
invest beyond this limit in U.S. dollar denominated securities of
foreign issuers. The Fund will normally hedge at least 75% of its
exposure to foreign currency to reduce the risk of loss due to
fluctuations in currency exchange rates.
The Fund may invest all of its assets in derivative instruments,
such as options, futures contracts or swap agreements. The Fund
may lend its portfolio securities to brokers, dealers and other
financial institutions to earn income. Rather than investing
directly in the securities in which it primarily invests, the Fund
may use other investment techniques to gain exposure to market
movements related to such securities, such as entering into a
series of contracts to buy or sell such securities. The "total
return" sought by the Fund consists of net income earned on the
Fund's investments, plus capital appreciation arising from
increases in the market value of the Fund's holdings.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Market Risk . Derivatives Risk . Mortgage Risk
. Issuer Risk . Liquidity Risk . Leveraging Risk
. Interest Rate Risk . Foreign Investment . Management Risk
. Credit Risk Risk
. Currency Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risks of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of broad-based securities market indices and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
The Administrative Class of the Fund has not commenced operations
as of the date of this prospectus. Past performance is no
guarantee of future results.
55 Pacific Investment Management Series
<PAGE>
PIMCO Strategic Balanced Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
-------------------------------------
1/1/99-6/30/99 6.56%
'97 '98 Highest and Lowest Quarter Returns
24.17% 19.66% (for periods shown in the bar chart)
-------------------------------------
Highest (2nd Qtr. '97) 12.23%
-------------------------------------
Lowest (3rd Qtr. '98) -4.60%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION> Fund Inception
1 Year (6/28/96)(4)
--------------------------------------------------------------------
<S> <C> <C>
Institutional Class 19.66% 21.72%
--------------------------------------------------------------------
S&P 500 Index(1) 28.58% 29.11%
--------------------------------------------------------------------
S&P 500 and Lehman Aggregate Bond Index Blend(2) 15.03% 17.46%
--------------------------------------------------------------------
Lipper Balanced Fund Avg(3) 13.50% 16.74%
--------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Composite Stock Price Index is an
unmanaged index of common stocks. It is not possible to invest
directly in the index.
(2) The index used for the Fund is a static blend consisting 60%
of the S&P 500 Composite Stock Price Index and 40% of the
Lehman Brothers Aggregate Bond Index. This blended index
reflects the Fund's investment strategy more accurately than
the S&P 500 Index. It is not possible to invest directly in
the index.
(3) The Lipper Balanced Fund Average is a total return performance
average of Funds tracked by Lipper Analytical Services, Inc.,
whose primary objective is to conserve principal by
maintaining at all times a balanced portfolio of both stocks
and bonds. It does not take into account sales charges.
(4) The Fund began operations on 6/28/96. Index comparisons began
on 6/30/96.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.40% None 0.25% 0.65%
--------------------------------------------------------------------
Administrative 0.40 0.25% 0.25 0.90
--------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $66 $208 $362 $ 810
--------------------------------------------------------------------
Administrative 92 287 498 1,108
--------------------------------------------------------------------
</TABLE>
Prospectus 56
<PAGE>
PIMCO Convertible Bond Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks maximum Convertible Caa to Aaa; maximum
and total return, securities 35% below Baa and
Strategies consistent with 10% below B
prudent
investment Average Portfolio Dividend Frequency
management Duration Declared and
N/A distributed quarterly
The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its assets in a
diversified portfolio of convertible securities. Convertible
securities include but are not limited to: corporate bonds,
debentures, notes or preferred stocks and their hybrids that can
be converted into (exchanged for) common stock or other
securities, such as warrants or options, which provide an
opportunity for equity participation.
The Fund invests primarily in investment grade debt securities,
but may invest up to 35% of its assets in high yield securities
("junk bonds") rated Caa or higher by Moody's or CCC or higher by
S&P or, if unrated, determined by PIMCO to be of comparable
quality. The Fund may only invest up to 10% of its assets in
convertible securities rated Caa or CCC or, if unrated, determined
by PIMCO to be of comparable quality. The Fund may also invest up
to 20% of its assets in securities denominated in foreign
currencies, and may invest beyond this limit in U.S. dollar-
denominated securities of foreign issuers. In addition, the Fund
may invest up to 35% of its assets in common stocks or in other
Fixed Income Instruments.
Rather than investing directly in the securities in which it
primarily invests, the Fund may use other investment techniques to
gain exposure to market movements related to such securities, such
as entering into a series of contracts to buy or sell such
securities. The "total return" sought by the Fund consists of
income earned on the Fund's investments, plus capital appreciation
arising from increases in the market value of the Fund's holdings.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Market Risk . High Yield Risk . Foreign Investment
. Issuer Risk . Derivatives Risk Risk
. Emerging Markets Risk . Liquidity Risk . Currency Risk
. Interest Rate Risk . Smaller Company Risk . Leveraging Risk
. Credit Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance As the Fund commenced operations in April, 1999, it does not yet
Information have a full calendar year of performance. Thus, no bar chart or
annual returns table is included for the Fund.
57 Pacific Investment Management Series
<PAGE>
PIMCO Convertible Bond Fund (continued)
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.40% None 0.25% 0.65%
------------------------------------------------------------------
Administrative 0.40 0.25% 0.25 0.90
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $66 $208 $362 $810
------------------------------------------------------------------
Administrative 92 287 498 1,108
------------------------------------------------------------------
</TABLE>
Prospectus 58
<PAGE>
PIMCO StocksPLUS Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Credit Quality
Investments Seeks total S&P 500 stock B to Aaa; maximum 10%
and return which index derivatives below Baa
Strategies exceeds that of backed by a
the S&P 500 portfolio of Dividend Frequency
short-term fixed Declared and
income securities distributed quarterly
Average Portfolio
Duration
0-1 year
The Fund seeks to exceed the total return of the S&P 500 by
investing under normal circumstances substantially all of its
assets in S&P 500 derivatives, backed by a portfolio of Fixed
Income Instruments. The Fund may invest in common stocks, options,
futures, options on futures and swaps. The Fund uses S&P 500
derivatives in addition to or in place of S&P 500 stocks to
attempt to equal or exceed the performance of the S&P 500. The
value of S&P 500 derivatives closely track changes in the value of
the index. However, S&P 500 derivatives may be purchased with a
fraction of the assets that would be needed to purchase the equity
securities directly, so that the remainder of the assets may be
invested in Fixed Income Instruments. PIMCO actively manages the
fixed income assets held by the Fund with a view toward enhancing
the Fund's total return, subject to an overall portfolio duration
which is normally not expected to exceed one year.
The S&P 500 is composed of 500 selected common stocks that
represent approximately two-thirds of the total market value of
all U.S. common stocks. The Fund is neither sponsored by nor
affiliated with S&P. The Fund seeks to remain invested in S&P 500
derivatives or S&P 500 stocks even when the S&P 500 is declining.
Though the Fund does not normally invest directly in S&P 500
securities, when S&P 500 derivatives appear to be overvalued
relative to the S&P 500, the Fund may invest all of its assets in
a "basket" of S&P 500 stocks. Individual stocks are selected based
on an analysis of the historical correlation between the return of
every S&P 500 stock and the return on the S&P 500 itself. PIMCO
may employ fundamental analysis of factors such as earnings and
earnings growth, price to earnings ratio, dividend growth, and
cash flows to choose among stocks that satisfy the correlation
tests. Stocks chosen for the Fund are not limited to those with
any particular weighting in the S&P 500.
Assets not invested in equity securities or derivatives may be
invested in Fixed Income Instruments. The Fund may invest up to
10% of its assets in high yield securities ("junk bonds") rated B
or higher by Moody's or S&P, or, if unrated, determined by PIMCO
to be of comparable quality. The Fund may invest up to 20% of its
assets in securities denominated in foreign currencies and may
invest beyond this limit in U.S. dollar denominated securities of
foreign issuers. The Fund will normally hedge at least 75% of its
exposure to foreign currency to reduce the risk of loss due to
fluctuations in currency exchange rates. In addition, the Fund may
lend its portfolio securities to brokers, dealers and other
financial institutions to earn income.
- --------------------------------------------------------------------------------
Principal Under certain conditions, generally in a market where the value of
Risks both S&P 500 derivatives and fixed income securities are
declining, the Fund may experience greater losses than would be
the case if it invested directly in a portfolio of S&P 500 stocks.
Among the principal risks of investing in the Fund, which could
adversely affect its net asset value, yield and total return, are:
. Market Risk . Interest Rate Risk . Mortgage Risk
. Issuer Risk . Liquidity Risk . Leveraging Risk
. Derivatives Risk . Foreign Investment . Management Risk
. Credit Risk Risk
. Currency Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The top of the next page shows summary performance information for
Information the Fund in a bar chart and an Average Annual Total Returns table.
The information provides some indication of the risk of investing
in the Fund by showing changes in its performance from year to
year and by showing how the Fund's average annual returns compare
with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its
right show performance of the Fund's Institutional Class Shares.
For periods prior to the inception date of Administrative Class
shares (1/7/97), performance information shown in the table for
that class is based on the performance of the Fund's Institutional
Class shares. The prior Institutional Class performance has been
adjusted to reflect the actual 12b-1/service fees and other
expenses paid by Administrative Class shares. Past performance is
no guarantee of future results.
59 Pacific Investment Management Series
<PAGE>
PIMCO StocksPLUS Fund (continued)
Calendar Year Total Returns -- Institutional Class
More Recent Return Information
------------------------------------
1/1/99-6/30/99 11.62%
Annual Return
'94 '95 '96 '97 '98 Highest and Lowest Quarter Returns
2.92% 40.52% 23.07% 32.85% 28.33% (for periods shown in the bar chart)
------------------------------------
Highest (4th Qtr. '98) 21.45%
------------------------------------
Lowest (3rd Qtr. '98) -9.77%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (5/13/93)(3)
----------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 28.33% 24.86% 23.62%
----------------------------------------------------------------------
Administrative Class 27.85% 24.48% 23.26%
----------------------------------------------------------------------
S&P 500 Index(1) 28.58% 24.06% 22.63%
----------------------------------------------------------------------
Lipper Growth & Income Fund Avg(2) 15.80% 18.41% 17.71%
----------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Composite Stock Price Index is an
unmanaged index of common stocks. It is not possible to invest
directly in the index.
(2) The Lipper Growth & Income Fund Average is a total return
performance average of Funds tracked by Lipper Analytical
Services, Inc. that combine a growth-of-earnings orientation
and an income requirement for level and/or rising dividends.
It does not take into account sales charges.
(3) The Fund began operations on 5/13/93. Index comparisons began
on 4/30/93.
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating
Share Class Fees (12b-1) Fees Expenses(1) Expenses
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.40% None 0.25% 0.65%
------------------------------------------------------------------
Administrative 0.40 0.25% 0.25 0.90
------------------------------------------------------------------
</TABLE>
(1) Other Expenses reflects a 0.25% Administrative Fee paid by the
class.
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>
<CAPTION>
Share Class Year 1 Year 3 Year 5 Year 10
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $66 $208 $362 $810
------------------------------------------------------------------
Administrative 92 287 498 1,108
------------------------------------------------------------------
</TABLE>
Prospectus 60
<PAGE>
PAGE>
Summary of Principal Risks
The value of your investment in a Fund changes with the values of
that Fund's investments. Many factors can affect those values. The
factors that are most likely to have a material effect on a
particular Fund's portfolio as a whole are called "principal
risks." The principal risks of each Fund are identified in the
Fund Summaries and are described in this section. Each Fund may be
subject to additional principal risks and risks other than those
described below because the types of investments made by a Fund
can change over time. Securities and investment techniques
mentioned in this summary and described in greater detail under
"Characteristics and Risks of Securities and Investment
Techniques" appear in bold type. That section and "Investment
Objectives and Policies" in the Statement of Additional
Information also include more information about the Funds, their
investments and the related risks. There is no guarantee that a
Fund will be able to achieve its investment objective.
Interest As interest rates rise, the value of fixed income securities held
Rate Risk by a 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 A Fund could lose money if the issuer or guarantor of a fixed
Risk 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 Funds that invest in high yield securities and unrated securities
Yield of similar credit quality (commonly known as "junk bonds") may be
Risk subject to greater levels of interest rate, credit and liquidity
risk than Funds that do not invest in such securities. High yield
securities are considered predominately speculative with respect
to the issuer's continuing ability to make principal and interest
payments. An economic downturn or period of rising interest rates
could adversely affect the market for high yield securities and
reduce a Fund's ability to sell its high yield securities
(liquidity risk).
Market The market price of securities owned by a Fund may go up or down,
Risk sometimes rapidly or unpredictably. Securities may decline in
value due to factors affecting securities markets generally or
particular industries represented in the securities markets. The
value of a security may decline due to general market conditions
which are not specifically related to a particular company, such
as real or perceived adverse economic conditions, changes in the
general outlook for corporate earnings, changes in interest or
currency rates or adverse investor sentiment generally. They may
also decline due to factors which affect a particular industry or
industries, such as labor shortages or increased production costs
and competitive conditions within an industry. Equity securities
generally have greater price volatility than fixed income
securities.
Issuer The value of a security may decline for a number of reasons which
Risk directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer's goods or
services.
Liquidity Liquidity risk exists when particular investments are difficult to
Risk purchase or sell. A 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. Funds
with principal investment strategies that involve foreign
securities, derivatives or securities with substantial market
and/or credit risk tend to have the greatest exposure to liquidity
risk.
61 Pacific Investment Management Series
<PAGE>
Derivatives Each Fund (except the Money Market Fund) may use derivatives,
Risk which are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or
index. The various derivative instruments that the Funds may use
are referenced under "Characteristics and Risks of Securities and
Investment Techniques--Derivatives" in this Prospectus and
described in more detail under "Investment Objectives and
Policies" in the Statement of Additional Information. The Funds
typically use derivatives as a substitute for taking a position in
the underlying asset and/or part of a strategy designed to reduce
exposure to other risks, such as interest rate or currency risk.
The Funds may also use derivatives for leverage, in which case
their use would involve leveraging risk. A 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. A Fund investing in a derivative instrument
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 a Fund will engage in these
transactions to reduce exposure to other risks when that would be
beneficial.
Mortgage A Fund that purchases mortgage-related securities is subject to
Risk certain additional risks. Rising interest rates tend to extend the
duration of mortgage-related securities, making them more
sensitive to changes in interest rates. As a result, in a period
of rising interest rates, a Fund that holds mortgage-related
securities may exhibit additional volatility. This is known as
extension risk. In addition, mortgage-related securities are
subject to prepayment risk. When interest rates decline, borrowers
may pay off their mortgages sooner than expected. This can reduce
the returns of a Fund because the Fund will have to reinvest that
money at the lower prevailing interest rates.
Foreign A Fund that invests in foreign securities may experience more
(Non-U.S.) rapid and extreme changes in value than a Fund that invests
Investment exclusively in securities of U.S. companies. The securities
Risk markets of many foreign countries are relatively small, with a
limited number of companies representing a small number of
industries. Additionally, issuers of foreign securities are
usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of foreign
countries differ, in some cases significantly, from U.S.
standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, political changes or diplomatic
developments could adversely affect a Fund's investments in a
foreign country. In the event of nationalization, expropriation or
other confiscation, a Fund could lose its entire investment in
foreign securities. Adverse conditions in a certain region can
adversely affect securities of other countries whose economies
appear to be unrelated. To the extent that a Fund invests a
significant portion of its assets in a concentrated geographic
area like Eastern Europe or Asia, the Fund will generally have
more exposure to regional economic risks associated with foreign
investments.
Emerging Foreign investment risk may be particularly high to the extent
Markets that a Fund invests in emerging market securities of issuers based
Risk in countries with developing economies. These securities may
present market, credit, currency, liquidity, legal, political and
other risks different from, or greater than, the risks of
investing in developed foreign countries.
Currency Funds that invest directly in foreign currencies or in securities
Risk that trade in, and receive revenues in, foreign (non-U.S.)
currencies are subject to the risk that those currencies will
decline in value relative to the U.S. dollar, or, in the case of
hedging positions, that the U.S. dollar will decline in value
relative to the currency being hedged.
Prospectus 62
<PAGE>
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.
Concentra- Concentration of investments in a small number of issuers,
tion Risk industries or foreign currencies increases risk. The California
Intermediate Municipal Bond, New York Intermediate Municipal Bond,
Real Return Bond, Global Bond, Global Bond II, Foreign Bond,
International Bond, Emerging Markets Bond and Emerging Markets
Bond II Funds are "non-diversified," which means that they may
invest a greater percentage of their assets in the securities of a
single issuer (such as bonds issued by a particular state) than
the other Funds. Funds that invest in a relatively small number of
issuers are more susceptible to risks associated with a single
economic, political or regulatory occurrence than a more
diversified portfolio might be. Some of those issuers also may
present substantial credit or other risks. Similarly, a Fund may
be more sensitive to adverse economic, business or political
developments if it invests a substantial portion of its assets in
the bonds of similar projects or from issuers in the same state.
Leveraging Certain Funds may engage in transactions that may give rise to a
Risk 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 a 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 a 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 a Fund's portfolio securities.
Smaller The general risks associated with fixed income securities are
Company particularly pronounced for securities issued by companies with
Risk 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 Each Fund is subject to management risk because it is an actively
Risk managed investment portfolio. PIMCO and each individual portfolio
manager will apply investment techniques and risk analyses in
making investment decisions for the Funds, but there can be no
guarantee that these will produce the desired results.
California Because the California Intermediate Municipal Bond Fund
State- concentrates its investments in California municipal bonds, the
Specific Fund may be affected significantly by economic, regulatory or
Risk political developments affecting the ability of California issuers
to pay interest or repay principal. Provisions of the California
Constitution and State statutes which limit the taxing and
spending authority of California governmental entities may impair
the ability of California issuers to pay principal and/or interest
on their obligations. While California's economy is broad, its
does have major concentrations in high technology, aerospace and
defense-related manufacturing, trade, entertainment, real estate
and financial services, and may be sensitive to economic problems
affecting those industries. Future California political and
economic developments, constitutional amendments, legislative
measures, executive orders, administrative regulations, litigation
and voter initiatives could have an adverse effect on the debt
obligations of California issuers.
63 Pacific Investment Management Series
<PAGE>
New York Because the New York Intermediate Municipal Bond Fund concentrates
State- its investments in New York municipal bonds, the Fund may be
Specific affected significantly by economic, regulatory or political
Risk developments affecting the ability of New York issuers to pay
interest or repay principal. Certain issuers of New York municipal
bonds have experienced serious financial difficulties in recent
years. A reoccurrence of these difficulties may impair the ability
of certain New York issuers to pay principal or interest on their
obligations. The financial health of New York City affects that of
the State, and when New York City experiences financial difficulty
it may have an adverse affect on New York municipal bonds held by
the Fund. The growth rate of New York has recently been somewhat
slower than the nation overall. The economic and financial
condition of New York also may be affected by various financial,
social, economic and political factors.
Management of the Funds
Investment PIMCO serves as the investment adviser and the administrator
Adviser (serving in its capacity as administrator, the "Administrator")
and for the Funds. Subject to the supervision of the Board of
Adminis- Trustees, PIMCO is responsible for managing the investment
trator activities of the Funds and the Funds' business affairs and other
administrative matters.
PIMCO is located at 840 Newport Center Drive, Newport Beach,
California 92660. Organized in 1971, PIMCO provides investment
management and advisory services to private accounts of
institutional and individual clients and to mutual funds. As of
September 30, 1999, PIMCO had approximately $181 billion in assets
under management.
Advisory Each Fund pays PIMCO fees in return for providing investment
Fees advisory services. For the fiscal year ended March 31, 1999, the
Funds paid monthly advisory fees to PIMCO at the following annual
rates (stated as a percentage of the average daily net assets of
each Fund taken separately):
<TABLE>
<CAPTION>
Fund Advisory Fees
-------------------------------------------------------------------
<S> <C>
Money Market Fund 0.15%
Short-Term, Low Duration, Low Duration II, Low
Duration III, Low Duration Mortgage, Moderate
Duration, Real Return Bond, Total Return,
Total Return II, Total Return III, Total
Return Mortgage, High Yield, Long-Term U.S.
Government, Municipal Bond, Global Bond,
Global Bond II, Foreign Bond and International
Bond Funds 0.25%
Strategic Balanced and StocksPLUS Funds 0.40%
Emerging Markets Bond and Emerging Markets Bond
II Funds 0.45%
</TABLE>
The Short Duration Municipal Income, California Intermediate
Municipal Bond, New York Intermediate Municipal Bond, Long
Duration and Convertible Bond Funds were not operational during
the fiscal year ended March 31, 1999. The investment advisory fees
for the Short Duration Municipal Income, California Intermediate
Municipal Bond, New York Intermediate Municipal Bond, Long
Duration and Convertible Bond Funds are at an annual rate of
0.20%, 0.25%, 0.25%, 0.25% and 0.40%, respectively, based upon the
average daily net assets of the Fund.
Adminis- Each Fund pays for the administrative services it requires under a
trative fee structure which is essentially fixed. Institutional and
Fees Administrative Class shareholders of each Fund pay an
administrative fee to PIMCO, computed as a percentage of the
Fund's assets attributable in the aggregate to that class of
shares. PIMCO, in turn, provides or procures administrative
services for Institutional and Administrative Class shareholders
and also bears the costs of various third-party services required
by the Funds, including audit, custodial, portfolio accounting,
legal, transfer agency and printing costs. The result of this fee
structure is an expense level for Institutional and Administrative
Class shareholders of each Fund that, with limited exceptions, is
precise and predictable under ordinary circumstances.
Prospectus 64
<PAGE>
For the fiscal year ended March 31, 1999, the Funds paid PIMCO
monthly administrative fees at the following annual rates (stated
as a percentage of the average daily net assets attributable in
the aggregate to the Fund's Institutional and Administrative Class
shares):
<TABLE>
<CAPTION>
Fund Administrative Fees
-----------------------------------------------------------------
<S> <C>
Low Duration and Total Return Funds 0.18%
Money Market, Short-Term and Moderate
Duration Funds 0.20%
Low Duration II, Low Duration III, Low
Duration Mortgage, Real Return Bond,
Total Return II, Total Return III,
Total Return Mortgage, High Yield,
Long-Term U.S. Government, Municipal
Bond, Foreign Bond, International Bond,
Strategic Balanced and StocksPLUS Funds 0.25%
Global Bond and Global Bond II Funds 0.30%
Emerging Markets Bond and Emerging
Markets Bond II Funds 0.40%
</TABLE>
The Short Duration Municipal Income, California Intermediate
Municipal Bond, New York Intermediate Municipal Bond, Long
Duration and Convertible Bond Funds were not operational during
the fiscal year ended March 31, 1999. The administrative fees for
the Short Duration Municipal Income, California Intermediate
Municipal Bond, New York Intermediate Municipal Bond, Long
Duration and Convertible Bond Funds are at an annual rate of
0.19%, 0.24%, 0.24%, 0.25% and 0.25%, respectively, based upon the
average daily net assets of the Fund.
65 Pacific Investment Management Series
<PAGE>
Individual The following individuals have primary responsibility for managing
Portfolio each of the noted Funds.
Managers
<TABLE>
<CAPTION>
Recent Professional
Fund Portfolio Manager Since Experience
---------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Money Market Paul A. McCulley 11/99 Executive Vice President, PIMCO. He has managed fixed income assets
Short-Term 8/99 since joining PIMCO in April, 1999. Prior to joining PIMCO, Mr.
McCulley was associated with Warburg Dillon Read as a Managing
Director and Head of Economic and Strategy Research for the Americas,
where he managed macro research world-wide.
Low Duration William H. Gross 5/87* Managing Director, Chief Investment Officer and a founding partner of
Low Duration II 11/91* PIMCO. He leads a team which manages the Moderate Duration, Strategic
Low Duration III 12/96* Balanced and StocksPLUS Funds.
Moderate Duration 12/96*
Total Return 5/87*
Total Return II 12/91*
Total Return III 5/91*
Strategic Balanced 1/98
StocksPLUS 1/98
Low Duration Mortgage William C. Powers 7/97* Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in
1991, and has managed fixed income accounts for various institutional
clients and funds since that time.
Real Return Bond John B. Brynjolfsson 1/97* Senior Vice President, PIMCO. He joined PIMCO as a Portfolio Manager
in 1989, and has managed fixed income accounts for various
institutional clients and funds since that time.
Total Return Mortgage Pasi M. Hamalainen 7/97* Executive Vice President, PIMCO. He joined PIMCO as a Portfolio
Long-Term U.S. Government 7/97 Manager in 1994, and has managed fixed income accounts for various
Long Duration institutional clients and funds since that time.
High Yield Benjamin L. Trosky 12/92 Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in
1990, and has managed fixed income accounts for various institutional
clients and funds since that time.
Short Duration Benjamin Ehlert 9/99* Executive Vice President, PIMCO. He has been a Portfolio Manager for
Municipal Income PIMCO since 1986, and has managed fixed income accounts for various
Municipal Bond 12/97* institutional clients and funds since that time.
California Intermediate 9/99*
Municipal Bond
New York Intermediate 9/99*
Municipal Bond
Global Bond Lee R. Thomas, III 7/95 Managing Director and Senior International Portfolio Manager, PIMCO.
Global Bond II 10/95* He joined PIMCO as a Portfolio Manager in 1995, and has managed fixed
Foreign Bond 7/95 income accounts for various institutional clients and funds since
International Bond 7/95 that time. Prior to joining PIMCO, he was associated with Investcorp
as a member of the management committee responsible for global
securities and foreign exchange trading.
Emerging Markets Bond Mohamed El-Erian 8/99 Executive Vice President, PIMCO. He joined PIMCO as a Portfolio
Emerging Markets Bond II Manager in 1999. Prior to joining PIMCO, he was a Managing Director
for Salomon Smith Barney/Citibank, where he was head of emerging
markets research. Prior to that he was associated with the
International Monetary Fund as a Deputy Director and Advisor.
Convertible Bond Sandra K. Durn 4/99* Vice President, PIMCO. She joined PIMCO as a Portfolio Manager in
1999. Prior to joining PIMCO in 1999, she was associated with
Nicholas-Applegate Capital Management where she was a Convertible
Securities Portfolio Manager from 1995 to 1999, and a Quantitative
Analyst since 1994.
</TABLE>
-------
* Since inception of the Fund.
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.
Prospectus 66
<PAGE>
Investment Options--
Institutional Class and Administrative Class Shares
The Trust offers investors Institutional Class and Administrative
Class shares of the Funds in this Prospectus.
The Trust does not charge any sales charges (loads) or other fees
in connection with purchases, sales (redemptions) or exchanges of
Institutional Class or Administrative Class shares. Administrative
Class shares are subject to a higher level of operating expenses
than Institutional Class shares due to the additional service
and/or distribution fees paid by Administrative Class shares as
described below. Therefore, Institutional Class shares will
generally pay higher dividends and have a more favorable
investment return than Administrative Class shares.
. Service and Distribution (12b-1) Fees--Administrative Class
Shares. The Trust has adopted an Administrative Services Plan for
the Administrative Class shares of each Fund. It has also adopted
a Distribution Plan for the Administrative Class shares of each
Fund. Each Plan has been adopted in accordance with the
requirements of Rule 12b-1 under the Investment Company Act of
1940 and is administered in accordance with that rule. However,
shareholders do not have the voting rights set forth in Rule 12b-1
with respect to the Administrative Services Plan.
Each Plan allows the Funds to use its Administrative Class assets
to reimburse financial intermediaries that provide services
relating to Administrative Class shares. The Distribution Plan
permits reimbursement for expenses in connection with the
distribution and marketing of Administrative Class shares and/or
the provision of shareholder services to Administrative Class
shareholders. The Administrative Services Plan permits
reimbursement for services in connection with the administration
of plans or programs that use Administrative Class shares of the
Funds as their funding medium and for related expenses.
In combination, the Plans permit a Fund to make total
reimbursements at an annual rate of up to 0.25% of the Fund's
average daily net assets attributable to its Administrative Class
shares. The same entity may not receive both distribution and
administrative services fees with respect to the same
Administrative Class assets, but may receive fees under each Plan
with respect to separate assets. Because these fees are paid out
of a Fund's Administrative Class assets on an ongoing basis, over
time they will increase the cost of an investment in
Administrative Class shares and may cost an investor more than
other types of sales charges.
. Arrangements with Service Agents. Institutional Class and
Administrative Class shares of the Funds may be offered through
certain brokers and financial intermediaries ("service agents")
that have established a shareholder servicing relationship with
the Trust on behalf of their customers. The Trust pays no
compensation to such entities other than service and/or
distribution fees paid with respect to Administrative Class
shares. Service agents may impose additional or different
conditions than the Trust on purchases, redemptions or exchanges
of Fund shares by their customers. Service agents may also
independently establish and charge their customers transaction
fees, account fees and other amounts in connection with purchases,
sales and redemptions of Fund shares in addition to any fees
charged by the Trust. These additional fees 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.
67 Pacific Investment Management Series
<PAGE>
Purchases, Redemptions and Exchanges
Purchasing Investors may purchase Institutional Class and Administrative
Shares Class shares of the Funds at the relevant net asset value ("NAV")
of that class without a sales charge or other fee.
Institutional Class shares are offered primarily for direct
investment by investors such as pension and profit sharing plans,
employee benefit trusts, endowments, foundations, corporations and
high net worth individuals. Institutional Class shares may also be
offered through certain financial intermediaries that charge their
customers transaction or other fees with respect to their
customers' investments in the Funds.
Administrative Class shares are offered primarily through
employee benefit plan alliances, broker-dealers and other
intermediaries, and each Fund pays service and/or distribution
fees to these entities for services they provide to Administrative
Class shareholders.
Pension and profit-sharing plans, employee benefit trusts and
employee benefit plan alliances and "wrap account" programs
established with broker-dealers or financial intermediaries may
purchase shares of either class only if the plan or program for
which the shares are being acquired will maintain an omnibus or
pooled account for each Fund and will not require a Fund to pay
any type of administrative payment per participant account to any
third party. Shares may be offered to clients of PIMCO and its
affiliates, and to the benefit plans of PIMCO and its affiliates.
. Investment Minimums. The minimum initial investment for shares
of either class is $5 million, except that the minimum initial
investment for a registered investment adviser purchasing
Institutional Class shares for its clients through omnibus
accounts is $250,000 per Fund. In addition, the minimum initial
investment does not apply to Institutional Class shares offered
through fee-based programs sponsored and maintained by a
registered broker-dealer and approved by 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 in "Investment Limitations" below do not
apply to participants in PIMCO Advisors Portfolio Strategies, a
managed product sponsored by PIMCO Advisors.
. Timing of Purchase Orders and Share Price Calculations. A
purchase order 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.
. Initial Investment. Investors may open an account by
completing and signing a Client Registration Application and
mailing it to PIMCO Funds at 840 Newport Center Drive, Suite 300,
Newport Beach, California 92660. A Client Registration Application
may be obtained by calling 1-800-927-4648.
Prospectus 68
<PAGE>
Except as described below, an investor may purchase Institutional
Class and Administrative Class shares only by wiring federal funds
to the Trust's Transfer Agent, National Financial Data Services,
330 West 9th Street, 4th Floor, Kansas City, Missouri 64105.
Before wiring federal funds, the investor must telephone the Trust
at 1-800-927-4648 to receive instructions for wire transfer and
must provide the following information: name of authorized person,
shareholder name, shareholder account number, name of Fund and
share class, amount being wired, and wiring bank name.
An investor may purchase shares without first wiring federal
funds if the proceeds of the investment are derived from an
advisory account the investor maintains with PIMCO or one of its
affiliates, from surrender or other payment from an annuity,
insurance, or other contract held by Pacific Life Insurance
Company, or from an investment by broker-dealers, institutional
clients or other financial intermediaries which have established a
shareholder servicing relationship with the Trust on behalf of
their customers.
. Additional Investments. An investor may purchase additional
Institutional Class and Administrative Class shares of the Funds
at any time by calling the Trust and wiring federal funds to the
Transfer Agent as outlined above.
. Other Purchase Information. Purchases of a Fund's
Institutional Class and Administrative Class shares will be made
in full and fractional shares. In the interest of economy and
convenience, certificates for shares will not be issued.
The Trust and the Distributor each reserves the right, in its
sole discretion, to suspend the offering of shares of the Funds or
to reject any purchase order, in whole or in part, when, in the
judgment of management, such suspension or rejection is in the
best interests of the Trust.
An investor should invest in the Funds for long-term investment
purposes only. The Trust and PIMCO each reserves the right to
restrict purchases of Fund shares (including exchanges) when a
pattern of frequent purchases and sales made in response to short-
term fluctuations in share price appears evident. 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 a particular Fund are
available for offer and sale in the investor's state of residence.
Shares of the Trust may not be offered or sold in any state unless
registered or qualified in that jurisdiction or unless an
exemption from registration or qualification is available.
Subject to the approval of the Trust, an investor may purchase
shares of a Fund with liquid securities that are eligible for
purchase by the Fund (consistent with the Fund's investment
policies and restrictions) and that have a value that is readily
ascertainable in accordance with the Trust's valuation policies.
These transactions will be effected only if PIMCO intends to
retain the security in the Fund as an investment. Assets purchased
by a Fund in such a transaction will be valued in generally the
same manner as they would be valued for purposes of pricing the
Fund's shares, if such assets were included in the Fund's assets
at the time of purchase. The Trust reserves the right to amend or
terminate this practice at any time.
. Retirement Plans. Shares of the Funds are available for
purchase by retirement and savings plans, including Keogh plans,
401(k) plans, 403(b) custodial accounts, and Individual Retirement
Accounts. The administrator of a plan or employee benefits office
can provide participants or employees with detailed information on
how to participate in the plan and how to elect a Fund as an
investment option. Participants in a retirement or savings plan
may be permitted to elect different investment options, alter the
amounts contributed to the plan, or change how contributions are
allocated among investment options in accordance with the plan's
specific provisions. The plan administrator or employee benefits
office should be consulted for
69 Pacific Investment Management Series
<PAGE>
details. For questions about participant accounts, participants
should contact their employee benefits office, the plan
administrator, or the organization that provides recordkeeping
services for the plan. Investors who purchase shares through
retirement plans should be aware that plan administrators may
aggregate purchase and redemption orders for participants in the
plan. Therefore, there may be a delay between the time the
investor places an order with the plan administrator and the time
the order is forwarded to the Transfer Agent for execution.
Redeeming . Redemptions by Mail. An investor may redeem (sell)
Shares Institutional Class and Administrative Class shares by submitting
a written request to PIMCO Funds at 840 Newport Center Drive,
Suite 300, Newport Beach, California 92660. The redemption request
should state the Fund from which the shares are to be redeemed,
the class of shares, the number or dollar amount of the shares to
be redeemed and the account number. The request must be signed
exactly as the names of the registered owners appear on the
Trust's account records, and the request must be signed by the
minimum number of persons designated on the Client Registration
Application that are required to effect a redemption.
. Redemptions by Telephone or Other Wire Communication. An
investor that elects this option on the Client Registration
Application (or subsequently in writing) may request redemptions
of shares by calling the Trust at 1-800-927-4648, by sending a
facsimile to 1-949-725-6830, or by other means of wire
communication. Investors should state the Fund and class from
which the shares are to be redeemed, the number or dollar amount
of the shares to be redeemed and the account number. Redemption
requests of an amount of $10 million or more may be initiated by
telephone, but must be confirmed in writing by an authorized party
prior to processing.
In electing a telephone redemption, the investor authorizes PIMCO
and the Transfer Agent to act on telephone instructions from any
person representing himself to be the investor, and reasonably
believed by PIMCO or the Transfer Agent to be genuine. Neither the
Trust nor the Transfer Agent may be liable for any loss, cost or
expense for acting on instructions (whether in writing or by
telephone) believed by the party receiving such instructions to be
genuine and in accordance with the procedures described in this
Prospectus. Shareholders should realize that by electing the
telephone or wire redemption option, they may be giving up a
measure of security that they might have if they were to redeem
their shares in writing. Furthermore, interruptions in telephone
service may mean that a shareholder will be unable to effect a
redemption by telephone when desired. The Transfer Agent also
provides written confirmation of transactions initiated by
telephone as a procedure designed to confirm that telephone
instructions are genuine (written confirmation is also provided
for redemption requests received in writing). All telephone
transactions are recorded, and PIMCO or the Transfer Agent may
request certain information in order to verify that the person
giving instructions is authorized to do so. The Trust or Transfer
Agent may be liable for any losses due to unauthorized or
fraudulent telephone transactions if it fails to employ reasonable
procedures to confirm that instructions communicated by telephone
are genuine. All redemptions, whether initiated by letter or
telephone, will be processed in a timely manner, and proceeds will
be forwarded by wire in accordance with the redemption policies of
the Trust detailed below. See "Other Redemption Information."
Shareholders may decline telephone exchange or redemption
privileges after an account is opened by instructing the Transfer
Agent in writing at least seven business days prior to the date
the instruction is to be effective. Shareholders may experience
delays in exercising telephone redemption privileges during
periods of abnormal market activity. During periods of volatile
economic or market conditions, shareholders may wish to consider
transmitting redemption orders by telegram, facsimile or overnight
courier.
Defined contribution plan participants may request redemptions by
contacting the employee benefits office, the plan administrator or
the organization that provides recordkeeping services for the
plan.
Prospectus 70
<PAGE>
. 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.
. 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.
The Trust may suspend the right of redemption or postpone the
payment date at times when the New York Stock Exchange is closed,
or during certain other periods as permitted under the federal
securities laws.
For shareholder protection, a request to change information
contained in an account registration (for example, a request to
change the bank designated to receive wire redemption proceeds)
must be received in writing, signed by the minimum number of
persons designated on the Client Registration Application that are
required to effect a redemption, and accompanied by a signature
guarantee from any eligible guarantor institution, as determined
in accordance with the Trust's procedures. Shareholders should
inquire as to whether a particular institution is an eligible
guarantor institution. A signature guarantee cannot be provided by
a notary public. In addition, corporations, trusts, and other
institutional organizations are required to furnish evidence of
the authority of the persons designated on the Client Registration
Application to effect transactions for the organization.
Due to the relatively high cost of maintaining small accounts,
the Trust reserves the right to redeem Institutional Class and
Administrative Class shares in any account for their then-current
value (which will be promptly paid to the investor) if at any
time, due to redemption by the investor, the shares in the account
do not have a value of at least $100,000. A shareholder will
receive advance notice of a mandatory redemption and will be given
at least 30 days to bring the value of its account up to at least
$100,000. This mandatory redemption policy does not apply to
participants in PIMCO Advisors Portfolio Strategies, a managed
product sponsored by PIMCO Advisors.
The Trust agrees to redeem shares of each Fund solely in cash up
to the lesser of $250,000 or 1% of the Fund's net assets during
any 90-day period for any one shareholder. In consideration of the
best interests of the remaining shareholders, the Trust reserves
the right to pay any redemption proceeds exceeding this amount in
whole or in part by a distribution in kind of securities held by a
Fund in lieu of cash. It is highly unlikely that shares would ever
be redeemed in kind. When shares are redeemed in kind, the
redeeming shareholder should expect to incur transaction costs
upon the disposition of the securities received in the
distribution.
Exchange An investor may exchange Institutional Class or Administrative
Privilege Class shares of a Fund for shares of the same class of any other
Fund or other series of the Trust that offers that class based on
the respective NAVs of the shares involved. An exchange may be
made by following the redemption procedure described above under
"Redemptions by Mail" or, if the investor has elected the
telephone redemption option, by calling the Trust at 1-800-927-
4648. An investor may also exchange shares of a Fund for shares of
the same class of a series of PIMCO Funds: Multi-Manager Series,
an affiliated mutual fund family composed primarily of equity
portfolios managed by PIMCO Advisors and its subsidiary
partnerships. Shareholders interested in such an exchange may
request a prospectus for these other series by contacting PIMCO
Funds at the same address and telephone number as the Trust.
71 Pacific Investment Management Series
<PAGE>
An investor may exchange shares only with respect to Funds or
other eligible series that are registered in the investor's state
of residence or where an exemption from registration is available.
An exchange order is treated the same for tax purposes as a
redemption followed by a purchase and may result in a capital gain
or loss, and special rules may apply in computing tax basis when
determining gain or loss. See "Tax Consequences" in this
Prospectus and "Taxation" in the Statement of Additional
Information.
The Trust reserves the right to refuse exchange purchases if, in
the judgment of PIMCO, the purchase would adversely affect a Fund
and its shareholders. In particular, a pattern of exchanges
characteristic of "market-timing" strategies may be deemed by
PIMCO to be detrimental to the Trust or a particular Fund.
Currently, the Trust limits the number of "round trip" exchanges
investors may make. An investor makes a "round trip" exchange when
the investor purchases shares of a particular Fund, subsequently
exchanges those shares for shares of a different 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.
How Fund Shares Are Priced
The net asset value ("NAV") of a Fund's Institutional and
Administrative Class shares is determined by dividing the total
value of a Fund's portfolio investments and other assets
attributable to that class, less any liabilities, by the total
number of shares outstanding of that class.
Except for the Money Market Fund, 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.
The Money Market Fund's securities are valued using the amortized
cost method of valuation, which involves valuing a security at
cost on the date of acquisition and thereafter assuming a constant
accretion of a discount or amortization of a premium to maturity,
regardless of the impact of fluctuating interest rates on the
market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than
the price the Fund would receive if it sold the instrument.
Investments initially valued in currencies other than the U.S.
dollar are converted to U.S. dollars using exchange rates obtained
from pricing services. As a result, the NAV of a 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.
Prospectus 72
<PAGE>
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 Funds normally use pricing data for domestic equity
securities received shortly after the NYSE Close and do not
normally take into account trading, clearances or settlements that
take place after the NYSE Close. Domestic fixed income and foreign
securities are normally priced using data reflecting the earlier
closing of the principal markets for those securities. Information
that becomes known to the Funds 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 Funds 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 Funds 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 Funds that pay
income dividends, those dividends are expected to differ over time
by approximately the amount of the expense accrual differential
between the two classes.
Fund Distributions
Each Fund distributes substantially all of its net investment
income to shareholders in the form of dividends. A shareholder
begins earning dividends on Fund shares the day after the Trust
receives the shareholder's purchase payment. Dividends paid by
each Fund with respect to each class of shares are calculated in
the same manner and at the same time, but dividends on
Administrative Class shares are expected to be lower than
dividends on Institutional Class shares as a result of the
distribution fees applicable to Administrative Class shares. The
following shows when each Fund intends to declare and distribute
income dividends to shareholders of record.
<TABLE>
<CAPTION>
Declared Daily
and Paid Declared and
Fund Monthly Paid Quarterly
----------------------------------------------------------------------
<S> <C> <C>
Fixed Income Funds (except the
International Bond Fund) .
----------------------------------------------------------------------
International Bond, Strategic Balanced,
Convertible and StocksPLUS Funds .
----------------------------------------------------------------------
</TABLE>
In addition, each Fund distributes any net capital gains it earns
from the sale of portfolio securities to shareholders no less
frequently than annually. Net short-term capital gains may be paid
more frequently.
A Fund's dividend and capital gain distributions with respect to
a particular class of shares will automatically be reinvested in
additional shares of the same class of the Fund at NAV unless the
shareholder elects to have the distributions paid in cash. 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.
73 Pacific Investment Management Series
<PAGE>
Tax Consequences
. Taxes on Fund Distributions. A shareholder subject to U.S.
federal income tax will be subject to tax on Fund distributions
whether they are paid in cash or reinvested in additional shares
of the Funds. For federal income tax purposes, Fund distributions
will be taxable to the shareholder as either ordinary income or
capital gains.
Fund dividends (i.e., distributions of investment income) are
taxable to shareholders as ordinary income. Federal taxes on Fund
distributions of gains are determined by how long the Fund owned
the investments that generated the gains, rather than how long a
shareholder has owned the shares. Distributions of gains from
investments that a Fund owned for more than 12 months will
generally be taxable to shareholders as capital gains.
Distributions of gains from investments that the Fund owned for 12
months or less will generally be taxable as ordinary income.
Fund distributions are taxable to shareholders even if they are
paid from income or gains earned by a Fund prior to the
shareholder's investment and thus were included in the price paid
for the shares. For example, a shareholder who purchases shares on
or just before the record date of a Fund distribution will pay
full price for the shares and may receive a portion of his or her
investment back as a taxable distribution.
. Taxes on Redemption or Exchanges of Shares. Any gain resulting
from the sale of Fund shares will generally be subject to federal
income tax. When a shareholder exchanges shares of a Fund for
shares of another series, the transaction will be treated as a
sale of the Fund shares for these purposes, and any gain on those
shares will generally be subject to federal income tax.
. A Note on the Real Return Bond Fund. Periodic adjustments for
inflation to the principal amount of an inflation-indexed bond may
give rise to original issue discount, which will be includable in
the Fund's gross income. Due to original issue discount, the Fund
may be required to make annual distributions to shareholders that
exceed the cash received, which may cause the Fund to liquidate
certain investments when it is not advantageous to do so. Also, if
the principal value of an inflation-indexed bond is adjusted
downward due to deflation, amounts previously distributed in the
taxable year may be characterized in some circumstances as a
return of capital.
. A Note on the Municipal Funds. Dividends paid to shareholders
of the Municipal Funds and derived from Municipal Bond interest
are expected to be designated by the Funds as "exempt-interest
dividends" and shareholders may generally exclude such dividends
from gross income for federal income tax purposes. The federal tax
exemption for "exempt-interest dividends" from Municipal Bonds
does not necessarily result in the exemption of such dividends
from state and local taxes although the California Intermediate
Municipal Bond Fund, and the New York Intermediate Municipal Bond
Fund intend to arrange their affairs so that a portion of such
distributions will be exempt from state taxes in the respective
state. Each Municipal Fund may invest a portion of its assets in
securities that generate income that is not exempt from federal or
state income tax. Dividends derived from taxable interest or
capital gains will be subject to federal income tax. The interest
on "private activity" bonds is a tax-preference item for purposes
of the federal alternative minimum tax. As a result, for
shareholders that are subject to the alternative minimum tax,
income derived from "private activity" bonds will not be exempt
from federal income tax. The Municipal Funds seek to produce
income that is generally exempt from federal income tax and will
not benefit investors in tax-sheltered retirement plans or
individuals not subject to federal income tax. Further, the
California and New York Intermediate Municipal Bond Funds seek to
produce income that is generally exempt from the relevant state's
income tax and will not benefit individuals that are not subject
to that state's income tax.
Prospectus 74
<PAGE>
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 Funds.
Characteristics and Risks of
Securities and Investment Techniques
This section provides additional information about some of the
principal investments and related risks of the Funds described
under "Summary Information" above. It also describes
characteristics and risks of additional securities and investment
techniques that may be used by the Funds from time to time. Most
of these securities and investment techniques are discretionary,
which means that PIMCO can decide whether to use them or not. This
Prospectus does not attempt to disclose all of the various types
of securities and investment techniques that may be used by the
Funds. As with any mutual fund, investors in the Funds rely on the
professional investment 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 Funds.
Securities Most of the Funds in this prospectus seek maximum total return.
Selection The total return sought by a Fund consists of both income earned
on a Fund's investments and capital appreciation, if any, arising
from increases in the market value of a 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 a 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 a 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 and the economies of other
countries in the world, 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 the following sectors: 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. U.S. Government Securities are obligations of, or guaranteed by,
Government the U.S. Government, its agencies or instrumentalities. U.S.
Securities Government Securities are subject to market and interest rate
risk, and may be subject to varying degrees of credit risk. U.S.
Government Securities include zero coupon securities, which tend
to be subject to greater market risk than interest-paying
securities of similar maturities.
Corporate Corporate debt securities are subject to the risk of the issuer's
Debt inability to meet principal and interest payments on the
Securities obligation and may also be subject to price volatility due to such
factors as interest rate sensitivity, market perception of the
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.
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Variable Variable and floating rate securities provide for a periodic
and adjustment in the interest rate paid on the obligations. Each
Floating Fixed Income Fund may invest in floating rate debt instruments
Rate ("floaters") and (except the Money Market and Municipal Bond
Securities Funds) engage in credit spread trades. While floaters provide a
certain degree of protection against rises in interest rates, a
Fund will participate in any declines in interest rates as well.
Each Fixed Income Fund (except the Money Market and Municipal Bond
Funds) may also invest in inverse floating rate debt instruments
("inverse floaters"). An inverse floater may exhibit greater price
volatility than a fixed rate obligation of similar credit quality.
A Fund may not invest more than 5% of its assets in any
combination of inverse floater, interest only, or principal only
securities.
Foreign Investing in foreign securities involves special risks and
(Non-U.S.) considerations not typically associated with investing in U.S.
Securities securities. Shareholders should consider carefully the substantial
risks involved for Funds that invest in securities issued by
foreign companies and governments of foreign countries. These
risks include: differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization,
expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations; and political
instability. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of
gross domestic product, rates of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. The
securities markets, values of securities, yields and risks
associated with foreign securities markets may change
independently of each other. Also, foreign securities and
dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those
securities. Foreign securities often trade with less frequency and
volume than domestic securities and therefore may exhibit greater
price volatility. Investments in foreign securities may also
involve higher custodial costs than domestic investments and
additional transaction costs with respect to foreign currency
conversions. Changes in foreign exchange rates also will affect
the value of securities denominated or quoted in foreign
currencies.
Certain Funds also may invest in sovereign debt issued by
governments, their agencies or instrumentalities, or other
government-related entities. Holders of sovereign debt may be
requested to participate in the rescheduling of such debt and to
extend further loans to governmental entities. In addition, there
is no bankruptcy proceeding by which defaulted sovereign debt may
be collected.
. Emerging Market Securities. The Emerging Markets Bond and
Emerging Markets Bond II Funds invest primarily in securities of
issuers based in countries with developing (or "emerging market")
economies, while the Short-Term, Low Duration and Low Duration III
Funds may invest up to 5% of their assets in such securities and
each remaining Fund that may invest in foreign securities may
invest up to 10% of its assets in such securities. Investing in
emerging market securities imposes risks different from, or
greater than, risks of investing in domestic securities or in
foreign, developed countries. These risks include: smaller market
capitalization of securities markets, which may suffer periods of
relative illiquidity; significant price volatility; restrictions
on foreign investment; possible repatriation of investment income
and capital. In addition, foreign investors may be required to
register the proceeds of sales; future economic or political
crises could lead to price controls, forced mergers, expropriation
or confiscatory taxation, seizure, nationalization, or creation of
government monopolies. The currencies of emerging market countries
may experience significant declines against the U.S. dollar, and
devaluation may occur subsequent to investments in these
currencies by a Fund. Inflation and rapid fluctuations in
inflation rates have had, and may continue to have, negative
effects on the economies and securities markets of certain
emerging market countries.
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Additional risks of emerging markets securities may include:
greater social, economic and political uncertainty and
instability; more substantial governmental involvement in the
economy; less governmental supervision and regulation;
unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial
reporting standards, which may result in unavailability of
material information about issuers; and less developed legal
systems. In addition, emerging securities markets may have
different clearance and settlement procedures, which may be unable
to keep pace with the volume of securities transactions or
otherwise make it difficult to engage in such transactions.
Settlement problems may cause a Fund to miss attractive investment
opportunities, hold a portion of its assets in cash pending
investment, or be delayed in disposing of a portfolio security.
Such a delay could result in possible liability to a purchaser of
the security.
Each Fixed Income Fund (except the Long-Term U.S. Government and
Municipal Bond Funds) may invest in Brady Bonds, which are
securities created through the exchange of existing commercial
bank loans to sovereign entities for new obligations in connection
with a debt restructuring. Investments in Brady Bonds may be
viewed as speculative. Brady Bonds acquired by a Fund may be
subject to restructuring arrangements or to requests for new
credit, which may cause the Fund to suffer a loss of interest or
principal on any of its holdings.
Foreign A Fund that invests directly in foreign currencies or in
(Non-U.S.) securities that trade in, or receive revenues in, foreign
Currencies currencies will be subject to currency risk. Foreign currency
exchange rates may fluctuate significantly over short periods of
time. They generally are determined by supply and demand in the
foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates
and other complex factors. Currency exchange rates also can be
affected unpredictably by intervention (or the failure to
intervene) by U.S. or foreign governments or central banks, or by
currency controls or political developments. For example,
significant uncertainty surrounds the recent introduction of the
euro (a common currency unit for the European Union) in January
1999 and the effect it may have on the value of securities
denominated in local European currencies. These and other
currencies in which the Funds' assets are denominated may be
devalued against the U.S. dollar, resulting in a loss to the
Funds.
. Foreign Currency Transactions. Funds that invest in securities
denominated in foreign currencies may enter into forward foreign
currency exchange contracts and invest in foreign currency futures
contracts and options on foreign currencies and futures. A forward
foreign currency exchange contract, which involves an obligation
to purchase or sell a specific currency at a future date at a
price set at the time of the contract, reduces a Fund's exposure
to changes in the value of the currency it will deliver and
increases its exposure to changes in the value of the currency it
will receive for the duration of the contract. The effect on the
value of a Fund is similar to selling securities denominated in
one currency and purchasing securities denominated in another
currency. A contract to sell foreign currency would limit any
potential gain which might be realized if the value of the hedged
currency increases. A Fund may enter into these contracts to hedge
against foreign exchange risk, to increase exposure to a foreign
currency or to shift exposure to foreign currency fluctuations
from one currency to another. Suitable hedging transactions may
not be available in all circumstances and there can be no
assurance that a Fund will engage in such transactions at any
given time or from time to time. Also, such transactions may not
be successful and may eliminate any chance for a Fund to benefit
from favorable fluctuations in relevant foreign currencies. A Fund
may use one currency (or a basket of currencies) to hedge against
adverse changes in the value of another currency (or a basket of
currencies) when exchange rates between the two currencies are
positively correlated. The Fund will segregate assets determined
to be liquid by PIMCO in accordance with procedures established by
the Board of Trustees to cover its obligations under forward
foreign currency exchange contracts entered into for non-hedging
purposes.
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High Securities rated lower than Baa by Moody's Investors Service, Inc.
Yield ("Moody's") or lower than BBB by Standard & Poor's Ratings
Securities Services ("S&P") are sometimes referred to as "high yield" or
"junk" bonds. Investing in high yield securities involves special
risks in addition to the risks associated with investments in
higher-rated fixed income securities. While offering a greater
potential opportunity for capital appreciation and higher yields,
high yield securities typically entail greater potential price
volatility and may be less liquid than higher-rated securities.
High yield securities may be regarded as predominately speculative
with respect to the issuer's continuing ability to meet principal
and interest payments. They may also be more susceptible to real
or perceived adverse economic and competitive industry conditions
than higher-rated securities.
. Credit Ratings and Unrated Securities. Rating agencies are
private services that provide ratings of the credit quality of
fixed income securities, including convertible securities.
Appendix A to this Prospectus describes the various ratings
assigned to fixed income securities by Moody's and S&P. Ratings
assigned by a rating agency are not absolute standards of credit
quality and do not evaluate market risks. Rating agencies may fail
to make timely changes in credit ratings and an issuer's current
financial condition may be better or worse than a rating
indicates. A Fund will not necessarily sell a security when its
rating is reduced below its rating at the time of purchase. PIMCO
does not rely solely on credit ratings, and develops its own
analysis of issuer credit quality.
A Fund may purchase unrated securities (which are not rated by a
rating agency) if its portfolio manager determines that the
security is of comparable quality to a rated security that the
Fund may purchase. Unrated securities may be less liquid than
comparable rated securities and involve the risk that the
portfolio manager may not accurately evaluate the security's
comparative credit rating. Analysis of the creditworthiness of
issuers of high yield securities may be more complex than for
issuers of higher-quality fixed income securities. To the extent
that a Fund invests in high yield and/or unrated securities, the
Fund's success in achieving its investment objective may depend
more heavily on the portfolio manager's creditworthiness analysis
than if the Fund invested exclusively in higher-quality and rated
securities.
Inflation- Inflation-indexed bonds are fixed income securities whose
Indexed principal value is periodically adjusted according to the rate of
Bonds inflation. If the index measuring inflation falls, the principal
value of inflation-indexed bonds will be adjusted downward, and
consequently the interest payable on these securities (calculated
with respect to a smaller principal amount) will be reduced.
Repayment of the original bond principal upon maturity (as
adjusted for inflation) is guaranteed in the case of U.S. Treasury
inflation-indexed bonds. For bonds that do not provide a similar
guarantee, the adjusted principal value of the bond repaid at
maturity may be less than the original principal. The value of
inflation-indexed bonds is expected to change in response to
changes in real interest rates. Real interest rates are tied to
the relationship between nominal interest rates and the rate of
inflation. If nominal interest rates increase at a faster rate
than inflation, real interest rates may rise, leading to a
decrease in value of inflation-indexed bonds. Short-term increases
in inflation may lead to a decline in value. Any increase in the
principal amount of an inflation-indexed bond will be considered
taxable ordinary income, even though investors do not receive
their principal until maturity.
Derivatives Each Fund (except the Money Market Fund) may, but is not required
to, use derivative instruments for risk management purposes or as
part of its investment strategies. Generally, derivatives are
financial contracts whose value depends upon, or is derived from,
the value of an underlying asset, reference rate or index, and may
relate to stocks, bonds, interest rates, currencies or currency
exchange rates, commodities, and related indexes. Examples of
derivative instruments include options contracts, futures
contracts, options on futures contracts and swap agreements. The
Municipal Bond Fund may not enter into swap agreements or purchase
or sell options relating to foreign currencies. Each Fund (except
the Money Market and Municipal Bond Funds) may invest some or all
of its assets in derivative instruments. A portfolio manager may
decide not to employ
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any of these strategies and there is no assurance that any
derivatives strategy used by a Fund will succeed. A description of
these and other derivative instruments that the Funds may use are
described under "Investment Objectives and Policies" in the
Statement of Additional Information.
A Fund's use of derivative instruments involves risks different
from, or 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 Funds.
Management Risk. Derivative products are highly specialized
instruments that require investment techniques and risk analyses
different from those associated with stocks and bonds. The use of
a derivative requires an understanding not only of the underlying
instrument but also of the derivative itself, without the benefit
of observing the performance of the derivative under all possible
market conditions.
Credit Risk. The use of a derivative instrument involves the risk
that a loss may be sustained as a result of the failure of another
party to the contract (usually referred to as a "counterparty") to
make required payments or otherwise comply with the contract's
terms.
Liquidity Risk. Liquidity risk exists when a particular
derivative instrument is difficult to purchase or sell. If a
derivative transaction is particularly large or if the relevant
market is illiquid (as is the case with many privately negotiated
derivatives), it may not be possible to initiate a transaction or
liquidate a position at an advantageous time or price.
Leverage Risk. Because many derivatives have a leverage
component, adverse changes in the value or level of the underlying
asset, reference rate or index can result in a loss substantially
greater than the amount invested in the derivative itself. Certain
derivatives have the potential for unlimited loss, regardless of
the size of the initial investment. When a Fund uses derivatives
for leverage, investments in that Fund will tend to be more
volatile, resulting in larger gains or losses in response to
market changes. To limit leverage risk, each Fund will segregate
assets determined to be liquid by PIMCO in accordance with
procedures established by the Board of Trustees (or, as permitted
by applicable regulation, enter into certain offsetting positions)
to cover its obligations under derivative instruments.
Lack of Availability. Because the markets for certain derivative
instruments (including markets located in foreign countries) are
relatively new and still developing, suitable derivatives
transactions may not be available in all circumstances for risk
management or other purposes. There is no assurance that a Fund
will engage in derivatives transactions at any time or from time
to time. A Fund's ability to use derivatives may also be limited
by certain regulatory and tax considerations.
Market and Other Risks. Like most other investments, derivative
instruments are subject to the risk that the market value of the
instrument will change in a way detrimental to a Fund's interest.
If a portfolio manager incorrectly forecasts the values of
securities, currencies or interest rates or other economic factors
in using derivatives for a Fund, the Fund might have been in a
better position if it had not entered into the transaction at all.
While some strategies involving derivative instruments can reduce
the risk of loss, they can also reduce the opportunity for gain or
even result in losses by offsetting favorable price movements in
other Fund investments. A Fund may also have to buy or sell a
security at a disadvantageous time or price because the Fund is
legally required to maintain offsetting positions or asset
coverage in connection with certain derivatives transactions.
Other risks in using derivatives include the risk of mispricing
or improper valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying assets, rates
and indexes. Many derivatives, in
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particular privately negotiated derivatives, are complex and often
valued subjectively. Improper valuations can result in increased
cash payment requirements to counterparties or a loss of value to
a Fund. Also, the value of derivatives may not correlate
perfectly, or at all, with the value of the assets, reference
rates or indexes they are designed to closely track. In addition,
a Fund's use of derivatives may cause the Fund to realize higher
amounts of short-term capital gains (generally taxed at ordinary
income tax rates) than if the Fund had not used such instruments.
Convertible Each Fund may invest in convertible securities. Convertible
Securities securities are generally preferred stocks and other securities,
including fixed income securities and warrants, that are
convertible into or exercisable for common stock at a stated price
or rate. The price of a convertible security will normally vary in
some proportion to changes in the price of the underlying common
stock because of this conversion or exercise feature. However, the
value of a convertible security may not increase or decrease as
rapidly as the underlying common stock. A convertible security
will normally also provide income and is subject to interest rate
risk. Convertible securities may be lower-rated securities subject
to greater levels of credit risk. A Fund may be forced to convert
a security before it would otherwise choose, which may have an
adverse effect on the Fund's ability to achieve its investment
objective.
While the Fixed Income Funds intend to invest primarily in fixed
income securities, each may invest in convertible securities or
equity securities. While some countries or companies may be
regarded as favorable investments, pure fixed income opportunities
may be unattractive or limited due to insufficient supply, or
legal or technical restrictions. In such cases, a Fund may
consider equity securities or convertible securities to gain
exposure to such investments.
Mortgage- Each Fund may invest in mortgage- or other asset-backed
Related securities. Except for the Money Market, Short Duration Municipal
and Other Income, Municipal Bond, California Intermediate Municipal Bond,
Asset- New York Intermediate Municipal Bond, and Convertible Bond Funds,
Backed each Fund may invest all of its assets in such securities. The
Securities Convertible Bond Fund may invest up to 35% of its assets in such
securities. Mortgage-related securities include mortgage pass-
through securities, collateralized mortgage obligations ("CMOs"),
commercial mortgage-backed securities, mortgage dollar rolls, CMO
residuals, stripped mortgage-backed securities ("SMBSs") and other
securities that directly or indirectly represent a participation
in, or are secured by and payable from, mortgage loans on real
property.
The value of some mortgage- or asset-backed securities may be
particularly sensitive to changes in prevailing interest rates.
Early repayment of principal on some mortgage-related securities
may expose a Fund to a lower rate of return upon reinvestment of
principal. When interest rates rise, the value of a mortgage-
related security generally will decline; however, when interest
rates are declining, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed income
securities. The rate of prepayments on underlying mortgages will
affect the price and volatility of a mortgage-related security,
and may shorten or extend the effective maturity of the security
beyond what was anticipated at the time of purchase. If
unanticipated rates of prepayment on underlying mortgages increase
the effective maturity of a mortgage-related security, the
volatility of the security can be expected to increase. The value
of these securities may fluctuate in response to the market's
perception of the creditworthiness of the issuers. Additionally,
although mortgages and mortgage-related securities are generally
supported by some form of government or private guarantee and/or
insurance, there is no assurance that private guarantors or
insurers will meet their obligations.
One type of SMBS has one class receiving all of the interest from
the mortgage assets (the interest-only, or "IO" class), while the
other class will receive all of the principal (the principal-only,
or "PO" class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including
prepayments) on the underlying mortgage assets, and a rapid rate
of principal payments may have a material adverse effect on a
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Fund's yield to maturity from these securities. A Fund may not
invest more than 5% of its assets in any combination of IO, PO, or
inverse floater securities. The Funds may invest in other asset-
backed securities that have been offered to investors.
Municipal Municipal bonds are generally issued by states and local
Bonds governments and their agencies, authorities and other
instrumentalities. Municipal bonds are subject to interest rate,
credit and market risk. The ability of an issuer to make payments
could be affected by litigation, legislation or other political
events or the bankruptcy of the issuer. Lower rated municipal
bonds are subject to greater credit and market risk than higher
quality municipal bonds. The types of municipal bonds in which the
Funds may invest include municipal lease obligations. The Funds
may also invest in securities issued by entities whose underlying
assets are municipal bonds.
Loan Certain Funds may invest in fixed- and floating-rate loans, which
Participa- investments generally will be in the form of loan participations
tions and and assignments of portions of such loans. Participations and
Assignments assignments involve special types of risk, including credit risk,
interest rate risk, liquidity risk, and the risks of being a
lender. If a Fund purchases a participation, it may only be able
to enforce its rights through the lender, and may assume the
credit risk of the lender in addition to the borrower.
Delayed The Funds (except the Money Market and Municipal Bond Funds) may
Funding also enter into, or acquire participations in, delayed funding
Loans and loans and revolving credit facilities, in which a lender agrees to
Revolving make loans up to a maximum amount upon demand by the borrower
Credit during a specified term. These commitments may have the effect of
Facilities requiring a Fund to increase its investment in a company at a time
when it might not otherwise decide to do so (including at a time
when the company's financial condition makes it unlikely that such
amounts will be repaid). To the extent that a Fund is committed to
advance additional funds, it will segregate assets determined to
be liquid by PIMCO in accordance with procedures established by
the Board of Trustees in an amount sufficient to meet such
commitments. Delayed funding loans and revolving credit facilities
are subject to credit, interest rate and liquidity risk and the
risks of being a lender.
Loans of For the purpose of achieving income, each Fund may lend its
Portfolio portfolio securities to brokers, dealers, and other financial
Securities institutions provided a number of conditions are satisfied,
including that the loan is fully collateralized. Please see
"Investment Objectives and Policies" in the Statement of
Additional Information for details. When a Fund lends portfolio
securities, its investment performance will continue to reflect
changes in the value of the securities loaned, and the Fund will
also receive a fee or interest on the collateral. Securities
lending involves the risk of loss of rights in the collateral or
delay in recovery of the collateral if the borrower fails to
return the security loaned or becomes insolvent. A Fund may pay
lending fees to a party arranging the loan.
Short Each Fund (except the Total Return III, High Yield and StocksPLUS
Sales Funds) may make short sales as part of its overall portfolio
management strategies or to offset a potential decline in value of
a security. A short sale involves the sale of a security that is
borrowed from a broker or other institution to complete the sale.
The Global Bond Fund II may only make short sales if the security
sold short is held in the Fund's portfolio or if the Fund has the
right to acquire the security without the payment of further
consideration (a "short sale against the box"). For these
purposes, a Fund may also hold or have the right to acquire
securities which, without the payment of any further
consideration, are convertible into or exchangeable for the
securities sold short. Short sales expose a Fund to the risk that
it will be required to acquire, convert or exchange securities to
replace the borrowed securities (also known as "covering" the
short position) at a time when the securities sold short have
appreciated in value, thus resulting in a loss to the Fund. A Fund
making a short sale (other than a "short sale against the box")
must segregate assets determined to be liquid by PIMCO in
accordance with procedures established by the Board of Trustees or
otherwise cover its position in a permissible manner.
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When- Each Fund may purchase securities which it is eligible to purchase
Issued, on a when-issued basis, may purchase and sell such securities for
Delayed delayed delivery and may make contracts to purchase such
Delivery securities for a fixed price at a future date beyond normal
and Forward settlement time (forward commitments). When-issued transactions,
Commitment delayed delivery purchases and forward commitments involve a risk
Transac- of loss if the value of the securities declines prior to the
tions settlement date. This risk is in addition to the risk that the
Fund's other assets will decline in the value. Therefore, these
transactions may result in a form of leverage and increase a
Fund's overall investment exposure. Typically, no income accrues
on securities a Fund has committed to purchase prior to the time
delivery of the securities is made, although a Fund may earn
income on securities it has segregated to cover these positions.
Repurchase Each Fund may enter into repurchase agreements, in which the Fund
Agreements 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 Each Fund may enter into reverse repurchase agreements and dollar
Repurchase rolls, subject to a Fund's limitations on borrowings. A reverse
Agreements, repurchase agreement or dollar roll involves the sale of a
Dollar security by a Fund and its agreement to repurchase the instrument
Rolls And at a specified time and price, and may be considered a form of
Other borrowing for some purposes. A Fund will segregate assets
Borrowings determined to be liquid by PIMCO in accordance with procedures
established by the Board of Trustees or otherwise cover its
obligations under reverse repurchase agreements, dollar rolls, and
other borrowings. A Fund also may borrow money for investment
purposes subject to any policies of the Fund currently described
in this Prospectus or in the Statement of Additional Information.
Reverse repurchase agreements, dollar rolls and other forms of
borrowings may create leveraging risk for a Fund.
Event- Each Fixed Income Fund (except the Money Market Fund) and the
Linked Strategic Balanced and StocksPLUS Fund may invest in "event-linked
Bonds 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. If a
trigger event occurs, a Fund may lose a portion or all of its
principal invested in the bond. Event-linked bonds often provide
for an extension of maturity to process and audit loss claims
where a trigger event has, or possibly has, occurred. An extension
of maturity may increase volatility. Event-linked bonds may also
expose the 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.
Portfolio The length of time a Fund has held a particular security is not
Turnover generally a consideration in investment decisions. A change in the
securities held by a Fund is known as "portfolio turnover." Each
Fund may engage in frequent and active trading of portfolio
securities to achieve its investment objective, particularly
during periods of volatile market movements. High portfolio
turnover (e.g., over 100%) involves correspondingly greater
expenses to a Fund, including brokerage commissions or dealer
mark-ups and other transaction costs on the sale of securities and
reinvestments in other securities. Such sales may also result in
realization of taxable capital gains, including short-term capital
gains (which are generally taxed at ordinary income tax rates).
The trading costs and tax effects associated with portfolio
turnover may adversely affect a Fund's performance.
Illiquid Each Fund may invest up to 15% (10% in the case of the Money
Securities Market Fund) of its net assets in illiquid securities. Certain
illiquid securities may require pricing at fair value as
determined in good faith under the supervision of the Board of
Trustees. A portfolio manager may be subject to significant delays
in disposing of
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illiquid securities, and transactions in illiquid securities may
entail registration expenses and other transaction costs that are
higher than those for transactions in liquid securities. The term
"illiquid securities" for this purpose means securities that
cannot be disposed of within seven days in the ordinary course of
business at approximately the amount at which a Fund has valued
the securities. Restricted securities, i.e., securities subject to
legal or contractual restrictions on resale, may be illiquid.
However, some restricted securities (such as securities issued
pursuant to Rule 144A under the Securities Act of 1933 and certain
commercial paper) may be treated as liquid, although they may be
less liquid than registered securities traded on established
secondary markets.
Investment Each Fund may invest up to 10% of its assets in securities of
in Other other investment companies, such as closed-end management
Investment investment companies, or in pooled accounts or other investment
Companies vehicles which invest in foreign markets. As a shareholder of an
investment company, a Fund may indirectly bear service and other
fees which are in addition to the fees the Fund pays its service
providers.
Year 2000 Many of the services provided to the Funds depend on the smooth
Readiness functioning of computer systems. Many systems in use today cannot
Disclosure distinguish between the year 1900 and the year 2000. Should any of
the service systems fail to process information properly, this
could have an adverse impact on the Funds' operations and services
provided to shareholders. PIMCO has surveyed the Funds' material
service providers and believes that, on the basis of the
information supplied, that the service providers will not be
materially adversely affected by the so-called "year 2000
problem." However, there can be no assurance that the problem will
be corrected in all respects and that the Funds' operations and
services provided to shareholders will not be adversely affected,
nor can there be any assurance that the year 2000 problem will not
have an adverse effect on the entities whose securities are held
by the Funds or on domestic or global equity markets or economies,
generally. Accordingly, PIMCO reserves the right to vary, during
the fourth quarter of 1999 and/or the first quarter of 2000, the
investments of any Fund to maintain sufficient liquidity to
satisfy actual or anticipated redemption activity.
Temporary For temporary or defensive purposes, each Fund may invest without
Defensive limit in U.S. debt securities, including taxable securities and
Strategies short-term money market securities, when PIMCO deems it
appropriate to do so. When a Fund engages in such strategies, it
may not achieve its investment objective.
Changes The investment objective of the Global Bond Fund II may be changed
in by the Board of Trustees without shareholder approval. The
Investment investment objective of each other Fund is fundamental and may not
Objectives be changed without shareholder approval. Unless otherwise stated,
and all other investment policies of the Funds may be changed by the
Policies Board of Trustees without shareholder approval.
Percentage Unless otherwise stated, all percentage limitations on Fund
Investment investments listed in this Prospectus will apply at the time of
Limitations investment. A Fund would not violate these limitations unless an
excess or deficiency occurs or exists immediately after and as a
result of an investment.
Other The Funds may invest in other types of securities and use a
Investments variety of investment techniques and strategies which are not
and described in this Prospectus. These securities and techniques may
Techniques subject the Funds to additional risks. Please see the Statement of
Additional Information for additional information about the
securities and investment techniques described in this Prospectus
and about additional securities and techniques that may be used by
the Funds.
83 Pacific Investment Management Series
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
Prospectus 84
<PAGE>
Financial Highlights
The financial highlights table is intended to help a shareholder
understand the financial performance of Institutional and
Administrative Class shares of each Fund for the past 5 years or,
if the class is less than 5 years old, since the class of shares
was first offered. Certain information reflects financial results
for a single Fund share. The total returns in the table represent
the rate that an investor would have earned or lost on an
investment in a particular class of shares of a Fund, assuming
reinvestment of all dividends and distributions. This information
has been audited by PricewaterhouseCoopers LLP, whose report,
along with each Fund's financial statements, are included in the
Trust's annual report to shareholders. The annual report is
incorporated by reference in the Statement of Additional
Information and is available free of charge upon request from the
Distributor.
<TABLE>
<CAPTION>
Net Asset Net Realized Total Income Dividends Dividends in Distributions Distributions
Year or Value Net and Unrealized (Loss) from from Net Excess of Net from Net in Excess of
Period Beginning Investment Gain (Loss) on Investment Investment Investment Realized Net Realized
Ended of Period Income Investments Operations Income Income Capital Gains Capital Gains
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market
Institutional Class
03/31/1999 $ 1.00 $0.05(a) $ 0.00 (a) $0.05 $(0.05) $0.00 $ 0.00 $ 0.00
03/31/1998 1.00 0.05(a) 0.00 (a) 0.05 (0.05) 0.00 0.00 0.00
03/31/1997 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 0.00
11/01/1995 - 03/31/1996 1.00 0.02 0.00 0.02 (0.02) 0.00 0.00 0.00
10/31/1995(a) 1.00 0.06 0.00 0.06 (0.06) 0.00 0.00 0.00
Administrative Class
03/31/1999 1.00 0.05(a) 0.00 (a) 0.05 (0.05) 0.00 0.00 0.00
03/31/1998 1.00 0.05(a) 0.00 (a) 0.05 (0.05) 0.00 0.00 0.00
03/31/1997 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 0.00
11/01/1995 - 03/31/1996 1.00 0.02 0.00 0.02 (0.02) 0.00 0.00 0.00
01/24/1995 -
10/31/1995(a) 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 0.00
Short-Term
Institutional Class
03/31/1999 $10.06 $0.57(a) $(0.02)(a) $0.55 $(0.57) $0.00 $ 0.00 $(0.01)
03/31/1998 10.00 0.62(a) 0.06 (a) 0.68 (0.60) (0.01) (0.01) 0.00
03/31/1997 9.92 0.61 0.08 0.69 (0.59) (0.02) 0.00 0.00
03/31/1996 9.79 0.69 0.12 0.81 (0.65) (0.03) 0.00 0.00
03/31/1995 9.92 0.56 (0.13) 0.43 (0.55) (0.01) 0.00 0.00
Administrative Class
03/31/1999 10.06 0.54(a) (0.02)(a) 0.52 (0.54) 0.00 0.00 (0.01)
03/31/1998 10.00 0.59(a) 0.07 (a) 0.66 (0.58) (0.01) (0.01) 0.00
03/31/1997 9.92 0.58 0.08 0.66 (0.57) (0.01) 0.00 0.00
02/01/1996 - 03/31/1996 9.98 0.11 (0.07) 0.04 (0.10) 0.00 0.00 0.00
Low Duration
Institutional Class
03/31/1999 $10.18 $0.65(a) $(0.02)(a) $0.63 $(0.65) $0.00 $(0.01) $(0.05)
03/31/1998 9.98 0.65(a) 0.23 (a) 0.88 (0.63) (0.02) (0.03) 0.00
03/31/1997 9.95 0.64 0.03 0.67 (0.63) (0.01) 0.00 0.00
03/31/1996 9.76 0.66 0.21 0.87 (0.68) 0.00 0.00 0.00
03/31/1995 10.04 0.65 (0.30) 0.35 (0.54) 0.00 0.00 0.00
Administrative Class
03/31/1999 10.18 0.62(a) (0.02)(a) 0.60 (0.62) 0.00 (0.01) (0.05)
03/31/1998 9.98 0.63(a) 0.22 (a) 0.85 (0.60) (0.02) (0.03) 0.00
03/31/1997 9.95 0.62 0.03 0.65 (0.60) (0.02) 0.00 0.00
03/31/1996 9.76 0.63 0.21 0.84 (0.65) 0.00 0.00 0.00
12/31/1994 - 03/31/1995 9.67 0.18 0.07 0.25 (0.14) 0.00 0.00 0.00
Low Duration II
Institutional Class
03/31/1999 $10.00 $0.58(a) $ 0.00 (a) $0.58 $(0.58) $0.00 $ 0.00 $(0.05)
03/31/1998 9.81 0.22(a) 0.59 (a) 0.81 (0.56) (0.04) (0.02) 0.00
03/31/1997 9.82 0.62 (0.03) 0.59 (0.58) (0.02) 0.00 0.00
03/31/1996 9.77 0.66 0.04 0.70 (0.60) (0.03) 0.00 0.00
03/31/1995 9.94 0.62 (0.16) 0.46 (0.58) (0.03) 0.00 0.00
Administrative Class
03/31/1999 10.00 0.56(a) 0.00 (a) 0.56 (0.56) 0.00 0.00 (0.05)
02/02/1998 - 03/31/1998 10.03 0.14(a) (0.08)(a) 0.06 (0.08) (0.01) 0.00 0.00
</TABLE>
- -------
(a) Per share amounts based on average number of shares outstanding during the
period.
85 Pacific Investment Management Series
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Tax Basis Net Asset Net Assets Ratio of Investment
Return Value End Expenses to Income to Portfolio
of Total End Total of Period Average Average Turnover
Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.05) $ 1.00 5.14% $ 322,290 0.35% 4.85% N/A
0.00 (0.05) 1.00 5.40 55,335 0.35 5.29 N/A
0.00 (0.05) 1.00 5.19 23,497 0.40 5.08 N/A
0.00 (0.02) 1.00 2.58 25,935 0.33+ 5.44+ N/A
0.00 (0.06) 1.00 5.67 7,741 0.40 5.53 N/A
0.00 (0.05) 1.00 4.93 9,273 0.60 4.44 N/A
0.00 (0.05) 1.00 5.12 749 0.60 5.04 N/A
0.00 (0.05) 1.00 4.94 12 0.66 4.83 N/A
0.00 (0.02) 1.00 2.47 10 0.61+ 5.95+ N/A
0.00 (0.05) 1.00 4.21 10 0.68+ 5.94+ N/A
$0.00 $(0.58) $10.03 5.63% $ 495,752 0.45% 5.66% 47%
0.00 (0.62) 10.06 7.06 172,846 0.45 6.12 48
0.00 (0.61) 10.00 7.12 156,515 0.47 6.12 77
0.00 (0.68) 9.92 8.49 101,797 0.58 6.86 215
0.00 (0.56) 9.79 4.46 90,114 0.50 5.67 79
0.00 (0.55) 10.03 5.39 3,769 0.70 5.37 47
0.00 (0.60) 10.06 6.80 5,147 0.70 5.86 48
0.00 (0.58) 10.00 6.86 4,513 0.72 5.87 77
0.00 (0.10) 9.92 0.41 3,999 0.52+ 4.44+ 215
$0.00 $(0.71) $10.10 6.35% $3,367,438 0.43% 6.36% 245%
0.00 (0.68) 10.18 9.00 2,759,531 0.43 6.39 309
0.00 (0.64) 9.98 6.97 2,797,001 0.43 6.46 240
0.00 (0.68) 9.95 9.13 2,677,574 0.42 6.88 209
(0.09) (0.63) 9.76 3.60 2,332,032 0.41 6.46 77
0.00 (0.68) 10.10 6.09 128,212 0.68 6.09 245
0.00 (0.65) 10.18 8.73 46,186 0.68 6.16 309
0.00 (0.62) 9.98 6.71 23,564 0.68 6.21 240
0.00 (0.65) 9.95 8.83 2,536 0.69 6.73 209
(0.02) (0.16) 9.76 2.53 771 0.66+ 6.93+ 77
$0.00 $(0.63) $ 9.95 5.89% $ 414,463 0.57%(b) 5.79% 322
0.00 (0.62) 10.00 8.29 401,204 0.50 5.98 335
0.00 (0.60) 9.81 6.33 339,375 0.51 6.31 237
(0.02) (0.65) 9.82 7.30 253,299 0.48 6.61 225
(0.02) (0.63) 9.77 4.80 170,866 0.47 6.35 102
0.00 (0.61) 9.95 5.63 22,594 0.85(c) 5.47 322
0.00 (0.09) 10.00 0.58 56 0.75+ 8.53+ 335
</TABLE>
- -------
+ Annualized.
(b) Ratio of expenses to average net assets excluding interest expense on
reverse repurchase agreement is 0.50%.
(c) Ratio of expenses to average net assets excluding interest expense on
reverse repurchase agreement is 0.75%.
Prospectus 86
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Net Asset Net Realized Total Income Dividends Dividends in Distributions Distributions
Year or Value Net and Unrealized (Loss) from from Net Excess of Net from Net in Excess of
Period Beginning Investment Gain (Loss) on Investment Investment Investment Realized Net Realized
Ended of Period Income Investments Operations Income Income Capital Gains Capital Gains
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Low Duration III
Institutional Class
03/31/1999 $10.05 $0.60(a) $ 0.00 (a) $0.60 $(0.60) $ 0.00 $ 0.00 $(0.07)
03/31/1998 9.91 0.53(a) 0.24 (a) 0.77 (0.60) 0.00 (0.03) 0.00
12/31/1996 - 03/31/1997 10.00 0.15 (0.09) 0.06 (0.15) 0.00 0.00 0.00
Administrative Class
03/19/1999 - 03/31/1999 9.97 0.02 0.01 0.03 (0.02) 0.00 0.00 0.00
Low Duration Mortgage
Institutional Class
03/31/1999 $10.13 $0.64(a) $(0.08)(a) $0.56 $(0.64) $ 0.00 $ 0.00 $(0.04)
07/31/1997 - 03/31/1998 10.00 0.43(a) 0.14 (a) 0.57 (0.42) 0.00 (0.02) 0.00
Moderate Duration
Institutional Class
03/31/1999 $10.14 $0.60(a) $ 0.07 (a) $0.67 $(0.60) $ 0.00 $(0.11) $(0.16)
03/31/1998 9.83 0.38(a) 0.56 (a) 0.94 (0.60) 0.00 (0.03) 0.00
12/31/1996 - 03/31/1997 10.00 0.15 (0.17) (0.02) (0.15) 0.00 0.00 0.00
Real Return Bond
Institutional Class
03/31/1999 $ 9.77 $0.51(a) $ 0.10 (a) $0.61 $(0.48) $(0.07) $ 0.00 $ 0.00
03/31/1998 9.93 0.44(a) 0.05 (a) 0.49 (0.48) (0.03) (0.14) 0.00
01/29/1997 - 03/31/1997 9.92 0.11 (0.02) 0.09 (0.08) 0.00 0.00 0.00
Total Return
Institutional Class
03/31/1999 $10.62 $0.63(a) $ 0.16 (a) $0.79 $(0.63) $ 0.00 $(0.24) $(0.18)
03/31/1998 10.27 0.64(a) 0.62 (a) 1.26 (0.62) (0.02) (0.27) 0.00
03/31/1997 10.29 0.68 (0.02) 0.66 (0.66) (0.02) 0.00 0.00
03/31/1996 10.02 0.81 0.29 1.10 (0.61) (0.10) (0.12) 0.00
03/31/1995 10.25 0.64 (0.24) 0.40 (0.56) (0.05) 0.00 0.00
Administrative Class
03/31/1999 10.62 0.61(a) 0.16 (a) 0.77 (0.61) 0.00 (0.24) (0.18)
03/31/1998 10.27 0.61(a) 0.63 (a) 1.24 (0.60) (0.02) (0.27) 0.00
03/31/1997 10.29 0.66(a) (0.02)(a) 0.64 (0.64) (0.02) 0.00 0.00
03/31/1996 10.01 0.80 0.29 1.09 (0.60) (0.09) (0.12) 0.00
09/07/1994 - 03/31/1995 10.00 0.31 0.06 0.37 (0.32) (0.03) 0.00 0.00
Total Return II
Institutional Class
03/31/1999 $10.26 $0.59(a) $ 0.17 (a) $0.76 $(0.59) $ 0.00 $(0.18) $(0.14)
03/31/1998 9.85 0.63(a) 0.52 (a) 1.15 (0.60) (0.03) (0.11) 0.00
03/31/1997 9.89 0.61 (0.02) 0.59 (0.62) (0.01) 0.00 0.00
11/01/1995 - 03/31/1996 10.21 0.25 (0.17) 0.08 (0.26) 0.00 (0.09) (0.05)
10/31/1995(a) 9.39 0.69 0.76 1.45 (0.62) 0.00 (0.01) 0.00
Administrative Class
03/31/1999 10.26 0.56(a) 0.17 (a) 0.73 (0.56) 0.00 (0.18) (0.14)
03/31/1998 9.85 0.60(a) 0.52 (a) 1.12 (0.57) (0.03) (0.11) 0.00
03/31/1997 9.89 0.59 (0.02) 0.57 (0.60) (0.01) 0.00 0.00
11/01/1995 - 03/31/1996 10.22 0.24 (0.17) 0.07 (0.26) 0.00 (0.09) (0.05)
11/30/1994 -
10/31/1995(a) 9.34 0.56 0.88 1.44 (0.55) 0.00 (0.01) 0.00
Total Return III
Institutional Class
03/31/1999 $ 9.55 $0.57(a) $ 0.20 (a) $0.77 $(0.56) $ 0.00 $(0.24) $(0.25)
03/31/1998 9.15 0.57(a) 0.56 (a) 1.13 (0.54) (0.03) (0.16) 0.00
03/31/1997 9.13 0.55 0.05 0.60 (0.55) (0.02) 0.00 (0.01)
03/31/1996 8.99 0.72 0.17 0.89 (0.54) (0.09) (0.12) 0.00
03/31/1995 9.18 0.59 (0.16) 0.43 (0.52) (0.02) 0.00 0.00
Administrative Class
03/31/1999 9.55 0.55(a) 0.20 (a) 0.75 (0.54) 0.00 (0.24) (0.25)
04/11/1997 - 03/31/1998 9.12 0.54(a) 0.58 (a) 1.12 (0.50) (0.03) (0.16) 0.00
</TABLE>
- -------
(a) Per share amounts based on average number of shares outstanding during the
period.
87 Pacific Investment Management Series
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Tax Basis Net Asset Net Assets Ratio of Investment
Return Value End Expenses to Income to Portfolio
of Total End Total of Period Average Average Turnover
Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.67) $ 9.98 6.10% $ 26,549 0.50% 5.94% 167%
0.00 (0.63) 10.05 7.93 23,896 0.50 5.98 307
0.00 (0.15) 9.91 0.58 10,056 0.49+ 6.00+ 155
0.00 (0.02) 9.98 0.15 6 0.75 6.42 167
$ 0.00 $(0.68) $10.01 5.71% $ 4,119 2.37%(d) 6.35% 198%
0.00 (0.44) 10.13 5.86 3,748 1.81+(e) 6.30+ 486
$ 0.00 $(0.87) $ 9.94 6.70% $ 317,400 0.45% 5.94% 169%
0.00 (0.63) 10.14 9.80 239,152 0.45 3.75 96
0.00 (0.15) 9.83 (0.25) 13,458 0.44+ 6.01+ 49
$ 0.00 $(0.55) $ 9.83 6.41% $ 15,588 0.52% 5.18% 438%
0.00 (0.65) 9.77 4.70 5,526 0.52 4.46 967
0.00 (0.08) 9.93 0.09 5,638 0.51+ 6.54+ 160
$ 0.00 $(1.05) $10.36 7.60% $21,711,396 0.43% 5.91% 154%
0.00 (0.91) 10.62 12.63 16,484,119 0.43 6.06 206
0.00 (0.68) 10.27 6.60 12,528,536 0.43 6.60 173
0.00 (0.83) 10.29 11.14 10,247,605 0.42 6.85 221
(0.02) (0.63) 10.02 4.22 7,239,735 0.41 6.72 98
0.00 (1.03) 10.36 7.33 1,972,984 0.68 5.52 154
0.00 (0.89) 10.62 12.36 481,730 0.68 5.74 206
0.00 (0.66) 10.27 6.34 151,194 0.68 6.35 173
0.00 (0.81) 10.29 10.99 104,618 0.68 6.64 221
(0.01) (0.36) 10.01 3.76 9,037 0.66+ 6.54+ 98
$ 0.00 $(0.91) $10.11 7.46% $ 986,690 0.50% 5.65% 213%
0.00 (0.74) 10.26 11.99 574,587 0.50 6.15 361
0.00 (0.63) 9.85 6.15 478,451 0.50 6.38 293
0.00 (0.40) 9.89 0.78 455,583 0.51+ 6.36+ 73
0.00 (0.63) 10.21 15.96 442,091 0.50 6.47 41
0.00 (0.88) 10.11 7.19 54,736 0.75 5.33 213
0.00 (0.71) 10.26 11.71 15,172 0.75 5.86 361
0.00 (0.61) 9.85 5.88 5,304 0.75 6.13 293
0.00 (0.40) 9.89 0.57 3,320 0.76+ 6.06+ 73
0.00 (0.56) 10.22 15.92 3,163 0.76+ 6.22+ 41
$ 0.00 $(1.05) $ 9.27 8.20% $ 488,243 0.50% 5.85% 216%
0.00 (0.73) 9.55 12.62 365,249 0.51 5.99 183
0.00 (0.58) 9.15 6.76 193,297 0.51 6.21 90
0.00 (0.75) 9.13 10.06 142,223 0.50 6.82 177
(0.08) (0.62) 8.99 4.92 99,497 0.50 6.95 146
0.00 (1.03) 9.27 7.93 1,867 0.75 5.59 216
0.00 (0.69) 9.55 12.46 178 0.76+ 5.85+ 183
</TABLE>
- -------
+ Annualized.
(d) Ratio of expenses to average net assets excluding interest expense on
reverse repurchase agreement is 0.51%.
(e) Ratio of expenses to average net assets excluding interest expense on
reverse repurchase agreement is 0.50%.
Prospectus 88
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Net Asset Net Realized Total Income Dividends Dividends in Distributions Distributions
Year or Value Net and Unrealized (Loss) from from Net Excess of Net from Net in Excess of
Period Beginning Investment Gain (Loss) on Investment Investment Investment Realized Net Realized
Ended of Period Income Investments Operations Income Income Capital Gains Capital Gains
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Return Mortgage
Institutional Class
03/31/1999 $10.24 $0.58(a) $ 0.05 (a) $ 0.63 $(0.58) $ 0.00 $(0.03) $(0.07)
07/31/1997 - 03/31/1998 10.00 0.41(a) 0.30 (a) 0.71 (0.46) 0.00 (0.01) 0.00
High Yield
Institutional Class
03/31/1999 $11.66 $0.95(a) $(0.43)(a) $ 0.52 $(0.94) $(0.01) $ 0.00 $ 0.00
03/31/1998 11.10 0.98(a) 0.65 (a) 1.63 (0.98) 0.00 0.00 (0.09)
03/31/1997 10.94 0.92 0.34 1.26 (0.97) 0.00 (0.13) 0.00
03/31/1996 10.42 1.04 0.54 1.58 (1.01) 0.00 (0.05) 0.00
03/31/1995 10.52 0.99 (0.12) 0.87 (0.93) (0.02) 0.00 (0.02)
Administrative Class
03/31/1999 $11.66 0.93(a) (0.43)(a) $ 0.50 $(0.92) (0.01) 0.00 0.00
03/31/1998 11.10 0.95(a) 0.65 (a) 1.60 (0.95) 0.00 0.00 (0.09)
03/31/1997 10.94 0.85(a) 0.38 (a) 1.23 (0.94) 0.00 (0.13) 0.00
03/31/1996 10.41 1.02(a) 0.54 (a) 1.56 (0.98) 0.00 (0.05) 0.00
01/16/1995 - 03/31/1995 10.14 0.23 0.25 0.48 (0.21) 0.00 0.00 0.00
Long-Term U.S. Gov't
Institutional Class
03/31/1999 $10.57 $0.63(a) $ 0.20 (a) $ 0.83 $(0.64) $ 0.00 $ 0.00 $(0.46)
03/31/1998 9.39 0.52(a) 1.34 (a) 1.86 (0.62) 0.00 (0.06) 0.00
03/31/1997 9.96 0.79 (0.35) 0.44 (0.68) 0.00 0.00 (0.33)
03/31/1996 9.85 0.83 0.66 1.49 (0.68) (0.04) (0.50) (0.16)
03/31/1995 9.96 0.60 (0.09) 0.51 (0.60) (0.02) 0.00 0.00
Administrative Class
03/31/1999 10.57 0.60(a) 0.20 (a) 0.80 (0.61) 0.00 0.00 (0.46)
09/23/1997 - 03/31/1998 10.17 0.26(a) 0.51 (a) 0.77 (0.31) 0.00 (0.06) 0.00
Global Bond
Institutional Class
03/31/1999 $ 9.70 $0.52(a) $ 0.14 (a) $ 0.66 $(0.36) $(0.16) $(0.08) $ 0.00
03/31/1998 9.86 0.66(a) (0.10)(a) 0.56 (0.53) 0.00 0.00 (0.19)
03/31/1997 10.05 0.70 (0.01) 0.69 (0.44) 0.00 (0.44) 0.00
03/31/1996 9.87 0.45 0.72 1.17 (0.61) 0.00 (0.21) (0.17)
03/31/1995 9.85 0.69 (0.14) 0.55 (0.29) (0.24) 0.00 0.00
Administrative Class
03/31/1999 9.70 0.51(a) 0.14 (a) 0.65 (0.35) (0.16) (0.08) 0.00
03/31/1998 9.86 0.59(a) (0.05)(a) 0.54 (0.51) 0.00 0.00 (0.19)
08/01/1996 - 03/31/1997 10.28 0.51 (0.23) 0.28 (0.26) 0.00 (0.44) 0.00
Global Bond II
Institutional Class
03/31/1999 $ 9.92 $0.52(a) $ 0.06 (a) $ 0.58 $(0.52) $ 0.00 $(0.01) $(0.08)
02/25/1998 - 03/31/1998 9.82 0.06(a) 0.09 (a) 0.15 0.00 (0.05) 0.00 0.00
Foreign Bond
Institutional Class
03/31/1999 $10.74 $0.58(a) $ 0.24 (a) $ 0.82 $(0.58) $ 0.00 $(0.10) $(0.25)
03/31/1998 10.41 0.66(a) 0.61 (a) 1.27 (0.63) 0.00 (0.31) 0.00
03/31/1997 10.50 0.80 1.00 1.80 (0.40) 0.00 (1.49) 0.00
03/31/1996 9.38 0.96 1.03 1.99 (0.34) (0.25) (0.25) (0.03)
03/31/1995 10.18 0.38 (0.57) (0.19) 0.00 0.00 0.00 0.00
Administrative Class
03/31/1999 $10.74 $0.56(a) $ 0.24 (a) $ 0.80 $(0.56) $ 0.00 $(0.10) $(0.25)
03/31/1998 10.41 0.63(a) 0.61 (a) 1.24 (0.60) 0.00 (0.31) 0.00
01/28/1997 - 03/31/1997 10.54 0.59 (0.67) (0.08) (0.05) 0.00 0.00 0.00
</TABLE>
- -------
(a) Per share amounts based on average number of shares outstanding during the
period.
89 Pacific Investment Management Series
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Tax Basis Net Asset Net Assets Ratio of Investment
Return Value End Expenses to Income to Portfolio
of Total End Total of Period Average Average Turnover
Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.68) $10.19 6.27% $ 4,128 0.50% 5.66% 158%
0.00 (0.47) 10.24 6.69 3,588 0.52+ 6.07+ 593
0.00 $(0.95) $11.23 4.73% $2,162,868 0.50% 8.41% 39%
0.00 (1.07) 11.66 15.26 1,628,930 0.50 8.52 37
0.00 (1.10) 11.10 12.04 744,498 0.50 8.77 67
0.00 (1.06) 10.94 15.70 536,983 0.47 9.28 66
0.00 (0.97) 10.42 8.81 336,310 0.48 9.37 78
0.00 (0.93) 11.23 4.49 238,792 0.75 8.17 39
0.00 (1.04) 11.66 14.98 69,937 0.75 8.21 37
0.00 (1.07) 11.10 11.76 10,428 0.76 8.48 67
0.00 (1.03) 10.94 15.54 1,007 0.80 9.16 66
0.00 (0.21) 10.41 4.66 41 0.73+ 10.12+ 78
$ 0.00 $(1.10) $10.30 7.76% $ 170,847 0.89%(f) 5.83% 364%
0.00 (0.68) 10.57 20.23 48,547 0.51 4.88 177
0.00 (1.01) 9.39 4.48 19,995 0.63 7.63 402
0.00 (1.38) 9.96 14.83 32,511 0.56 6.80 238
0.00 (0.62) 9.85 5.50 32,349 0.50 6.62 89
0.00 (1.07) 10.30 7.46 11,383 1.15(g) 5.58 364
0.00 (0.37) 10.57 7.60 4,957 .76+ 4.87+ 177
$ 0.00 $(0.60) $ 9.76 6.90% $ 266,984 0.55% 5.35% 143%
0.00 (0.72) 9.70 5.85 256,274 0.55 6.64 389
0.00 (0.88) 9.86 6.78 215,631 0.56 7.51 911
0.00 (0.99) 10.05 12.04 133,833 0.58 5.88 1083
0.00 (0.53) 9.87 10.35 76,476 0.64 5.59 461
0.00 (0.59) 9.76 6.78 1,326 0.80 5.21 143
0.00 (0.70) 9.70 5.57 1,548 0.80 6.39 389
0.00 (0.70) 9.86 2.97 346 0.78+ 5.66+ 911
$ 0.00 $(0.61) $ 9.89 6.06% $ 29,044 0.55% 5.29% 236%
0.00 (0.05) 9.92 1.02 24,517 0.55+ 6.24+ 369
$ 0.00 $(0.93) $10.63 7.92% $ 530,325 0.50% 5.39% 376%
0.00 (0.94) 10.74 12.64 392,198 0.50 6.32 280
0.00 (1.89) 10.41 17.69 234,880 0.50 7.88 984
0.00 (0.87) 10.50 21.80 258,493 0.52 5.83 1234
(0.61) (0.61) 9.38 (1.85) 232,700 0.47 6.44 299
$ 0.00 $(0.91) $10.63 7.65% $ 2,096 0.75% 5.13% 376%
0.00 (0.91) 10.74 12.34 315 0.75 6.07 280
0.00 (0.05) 10.41 (0.72) 30 0.79+ 7.63+ 984
</TABLE>
- -------
+ Annualized.
(f) Ratio of expenses to average net assets excluding interest expense on
reverse repurchase agreement is 0.50%.
(g) Ratio of expenses to average net assets excluding interest expense on
reverse repurchase agreement is 0.76%.
Prospectus 90
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Net Asset Net Realized Total Income Dividends Dividends in Distributions Distributions
Year or Value Net and Unrealized (Loss) from from Net Excess of Net from Net in Excess of
Period Beginning Investment Gain (Loss) on Investment Investment Investment Realized Net Realized
Ended of Period Income Investments Operations Income Income Capital Gains Capital Gains
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Bond
Institutional Class
03/31/99 $ 7.18 $0.29(a) $ 0.11 (a) $ 0.40 $(0.30) $0.00 $ 0.00 $(0.20)
03/31/98 7.79 0.64(a) 0.19 (a) 0.83 (0.25) 0.00 (0.24) (0.95)
03/31/97 8.04 0.84 0.42 1.26 (0.50) 0.00 (1.01) 0.00
03/31/96 7.44 0.63 0.49 1.12 (0.39) (0.13) 0.00 0.00
03/31/95 9.93 2.18 (2.41) (0.23) (2.26) 0.00 0.00 0.00
Emerging Markets Bond
Institutional Class
03/31/1999 $ 9.67 $0.87(a) $(2.11)(a) $(1.24) $(0.87) $0.00 $ 0.00 $(0.05)
07/31/1997 - 03/31/1998 10.00 0.46(a) (0.18)(a) 0.28 (0.46) 0.00 (0.15) 0.00
Administrative Class
09/30/98 - 03/31/1999 6.82 0.45 0.74 1.19 (0.45) 0.00 0.00 (0.05)
Emerging Markets Bond II
Institutional Class
04/03/1998-03/31/1999 $10.00 $0.87(a) $(0.39)(a) $ 0.48 $(0.85) $0.00 $ 0.00 $ 0.00
Municipal Bond
Institutional Class
03/31/1999 $ 9.97 $0.45(a) $ 0.14 (a) $ 0.59 $(0.44) $0.00 $ 0.00 $ 0.00
12/31/1997 - 03/31/1998 10.00 0.11(a) (0.03)(a) 0.08 (0.11) 0.00 0.00 0.00
Administrative Class
09/30/98 - 03/31/1999 10.25 0.21 (0.13) 0.08 (0.21) 0.00 0.00 0.00
Strategic Balanced
Institutional Class
03/31/1999 $12.60 $0.89(a) $ 0.60 (a) $ 1.49 $(0.66) $0.00 $(0.67) $ 0.00
03/31/1998 10.32 1.30(a) 2.05 (a) 3.35 (0.84) 0.00 (0.23) 0.00
06/28/1996 - 03/31/1997 10.00 0.85 0.31 1.16 (0.63) 0.00 (0.21) 0.00
StocksPLUS
Institutional Class
03/31/1999 $14.09 $0.97(a) $ 1.32 (a) $ 2.29 $(0.82) $0.00 $(1.24) $ 0.00
03/31/1998 11.46 1.90(a) 3.23 (a) 5.13 (1.41) 0.00 (1.09) 0.00
03/31/1997 11.16 1.27 0.82 2.09 (1.27) 0.00 (0.52) 0.00
03/31/1996 10.48 0.91 2.48 3.39 (1.05) 0.00 (1.62) (0.04)
03/31/1995 9.52 1.03 0.69 1.72 (0.76) 0.00 0.00 0.00
Administrative Class
03/31/1999 14.06 1.10(a) 1.13 (a) 2.23 (0.80) 0.00 (1.24) 0.00
03/31/1998 11.46 1.89(a) 3.19 (a) 5.08 (1.39) 0.00 (1.09) 0.00
01/07/1997 - 03/31/1997 11.56 0.14 (0.09) 0.05 (0.15) 0.00 0.00 0.00
</TABLE>
- -------
(a) Per share amounts based on average number of shares outstanding during the
period.
91 Pacific Investment Management Series
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Tax Basis Net Asset Net Assets Ratio of Investment
Return Value End Expenses to Income to Portfolio
of Total End Total of Period Average Average Turnover
Capital Distributions of Period Return (000's) Net Assets Net Assets Rate
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.50) $ 7.08 5.71 % $ 720,025 0.50% 4.04% 406%
0.00 (1.44) 7.18 11.49 730,622 0.51 8.17 255
0.00 (1.51) 7.79 15.86 957,950 0.50 7.17 875
0.00 (0.52) 8.04 15.08 2,271,940 0.50 6.09 1046
0.00 (2.26) 7.44 (1.27) 45,950 0.43 5.90 674
$0.00 $(0.92) $ 7.51 (12.55)% $ 3,641 0.85% 11.08% 315%
0.00 (0.61) 9.67 3.10 3,676 0.86+ 7.21+ 695
0.00 (0.50) 7.51 17.88 118 1.10 6.24 315
$0.00 $(0.85) $ 9.63 5.49% $ 145,530 0.85% 9.43% 199%
$0.00 $(0.44) $10.12 6.04% $ 5,894 0.50% 4.41% 70%
0.00 (0.11) 9.97 0.78 3,023 0.50+ 4.46+ 60
0.00 (0.21) 10.12 0.83 1,419 0.75+ 2.11 70
$0.00 $(1.33) $12.76 12.36% $ 97,945 0.65% 7.00% 82%
0.00 (1.07) 12.60 33.40 38,806 0.65 10.84 56
0.00 (0.84) 10.32 11.83 10,360 0.90+ 9.72+ 95
$0.00 $(2.06) $14.32 17.65% $ 512,953 0.65% 6.92% 81%
0.00 (2.50) 14.09 47.75 416,600 0.65 13.74 30
0.00 (1.79) 11.46 19.44 235,829 0.65 11.78 47
0.00 (2.71) 11.16 34.07 151,869 0.70 15.23 102
0.00 (0.76) 10.48 18.64 46,498 0.50 11.89 177
0.00 (2.04) 14.25 17.21 11,302 0.90 7.83 81
0.00 (2.48) 14.06 47.19 2,143 0.90 13.49 30
0.00 (0.15) 11.46 0.34 682 0.95+ 4.83+ 47
</TABLE>
- -------
+ Annualized.
Prospectus 92
<PAGE>
Appendix A
Description of Securities Ratings
A Fund's investments may range in quality from securities rated in
the lowest category in which the Fund is permitted to invest to
securities rated in the highest category (as rated by Moody's or
S&P or, if unrated, determined by PIMCO to be of comparable
quality). The percentage of a 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 deemed predominately speculative with respect
to the issuer's ability to repay principal and interest.
Following is a description of Moody's and S&P's rating categories
applicable to fixed income securities.
Moody's Corporate and Municipal Bond Ratings
Investors
Service, Aaa: Bonds which are rated Aaa are judged to be of the best
Inc. quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present that make
the long-term risks appear somewhat larger than with Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds
in this class.
B: Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
A-1 Pacific Investment Management Series
<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 Moody's short-term debt ratings are opinions of the ability of
Short- issuers to repay punctually senior debt obligations which have an
Term Debt original maturity not exceeding one year. Obligations relying upon
Ratings support mechanisms such as letters of credit and bonds of
indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to
be investment grade, to indicate the relative repayment ability of
rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have
a superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced by
many of the following characteristics: leading market positions in
well-established industries; high rates of return on funds
employed; conservative capitalization structure with moderate
reliance on debt and ample asset protection; broad margins in
earnings coverage of fixed financial charges and high internal
cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have
a strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have
an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the
Prime rating categories.
Short- There are four rating categories for short-term municipal bonds
Term that define an investment grade situation, which are listed below.
Municipal In the case of variable rate demand obligations (VRDOs), a two-
Bond component rating is assigned. The first element represents an
Ratings evaluation of the degree of risk associated with scheduled
principal and interest payments, and the other represents an
evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of
VRDOs is designated as VMIG. When either the long- or short-term
aspect of a VRDO is not rated, that piece is designated NR, e.g.,
Aaa/NR or NR/VMIG 1. MIG ratings terminate at the retirement of
the obligation while VMIG rating expiration will be a function of
each issue's specific structural or credit features.
MIG 1/VMIG 1: This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market
for refinancing.
Prospectus A-2
<PAGE>
MIG 2/VMIG 2: This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
MIG 3/VMIG 3: This designation denotes favorable quality. All
security elements are accounted for but there is lacking the
undeniable strength of the preceding grades. Liquidity and cash
flow protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality.
Protection commonly regarded as required of an investment security
is present and although not distinctly or predominantly
speculative, there is specific risk.
SG: This designation denotes speculative quality. Debt
instruments in this category lack margins of protection.
Standard Corporate and Municipal Bond Ratings
& Poor's
Ratings Investment Grade
Services AAA: Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions, or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher-rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having
predominantly speculative characteristics with respect to capacity
to pay interest and repay principal. BB indicates the least degree
of speculation and C the highest. While such debt will likely have
some quality and protective characteristics, these are outweighed
by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The BB rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B: Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions
will likely impair capacity or willingness to pay interest and
repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BB or BB-rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B-rating.
A-3 Pacific Investment Management Series
<PAGE>
CC: The rating CC is typically applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to
senior debt that is assigned an actual or implied CCC- debt
rating. The C rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are
continued.
CI: The rating CI is reserved for income bonds on which no
interest is being paid.
D: Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The D rating will also be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment with
respect to such likelihood and risk.
r: The "r" is attached to highlight derivative, hybrid, and
certain other obligations that S&P believes may experience high
volatility or high variability in expected returns due to non-
credit risks. Examples of such obligations are: securities whose
principal or interest return is indexed to equities, commodities,
or currencies; certain swaps and options; and interest only and
principal only mortgage securities.
The absence of an "r" symbol should not be taken as an indication
that an obligation will exhibit no volatility or variability in
total return.
N.R.: Not rated.
Debt obligations of issuers outside the United States and its
territories are rated on the same basis as domestic corporate and
municipal issues. The ratings measure the creditworthiness of the
obligor but do not take into account currency exchange and related
uncertainties.
Commercial An S&P commercial paper rating is a current assessment of the
Paper likelihood of timely payment of debt having an original maturity
Rating of no more than 365 days. Ratings are graded into several
Definitions categories, ranging from A for the highest quality obligations to
D for the lowest. These categories are as follows:
A-1: This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with a
plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is not as
high as for issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B: Issues rated B are regarded as having only speculative
capacity for timely payment.
Prospectus A-4
<PAGE>
C: This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D: Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period.
A commercial paper rating is not a recommendation to purchase,
sell or hold a security inasmuch as it does not comment as to
market price or suitability for a particular investor. The ratings
are based on current information furnished to S&P by the issuer or
obtained from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may
be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.
A-5 Pacific Investment Management Series
<PAGE>
-------------------------------------------------------------------
PIMCO INVESTMENT ADVISER AND ADMINISTRATOR
Funds: PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA
Pacific 92660
Investment
Management -------------------------------------------------------------------
Series CUSTODIAN
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
MO 64105
-------------------------------------------------------------------
TRANSFER AGENT
National Financial Data Services, 330 W. 9th Street, 4th Floor,
Kansas City, MO 64105
-------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105
-------------------------------------------------------------------
LEGAL COUNSEL
Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C.
20006
-------------------------------------------------------------------
<PAGE>
The Trust's Statement of Additional Information ("SAI") and annual and
semi-annual reports to shareholders include additional information about the
Funds. The SAI and the financial statements included in the Funds' most recent
annual report to shareholders are incorporated by reference into this
Prospectus, which means they are part of this Prospectus for legal purposes. The
Funds' annual report discusses the market conditions and investment strategies
that significantly affected each Funds' performance during its last fiscal year.
You may get free copies of any of these materials, request other information
about a Fund, or make shareholder inquiries by calling the Trust at
1-800-927-4648 or PIMCO Infolink Audio Response Network at 1-800-987-4626, or by
writing to:
PIMCO Funds: Pacific Investment
Management Series
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660
You can also visit our Web site at www.pimco.com for additional information
about the Funds.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the trust on the Commission's Web site at www.sec.gov. You may
get copies of this information, with payment of a duplication fee, by writing
the Public Reference Section of the Commission. Washington, D.C. 20549-6009. You
may need to refer to the Trust's file number under the Investment Company Act,
which is 811-5028.
P I M C O
- -------------
F U N D S
PIMCO Funds
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660
www.pimco.com
PY000.02/00
