<PAGE>
SUPPLEMENT DATED NOVEMBER 27, 1995
TO PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 1, 1995 OF
PIMCO ADVISORS INSTITUTIONAL FUNDS
1. Non-fundamental restriction (I) on page 20 of the Prospectus and page 21 of
the Statement of Additional Information has been amended to read as
follows:
[A Fund may not]
(I) borrow money (excluding reverse repurchase agreements which are subject
to the Fund's fundamental borrowing restriction), except for temporary
administrative purposes;
2. Price Waterhouse LLP, 1055 Broadway, Kansas City, Missouri 64015, has been
retained to serve as the accountants for the Funds for the current fiscal
year. Price Waterhouse LLP succeeds Deloitte & Touche LLP as accountants for
the Funds.
<PAGE>
[LOGO OF PIMCO]
PIMCO ADVISORS INSTITUTIONAL FUNDS
NFJ Equity Income Fund
NFJ Diversified Low P/E Fund
NFJ Small Cap Value Fund
Cadence Capital Appreciation Fund
Cadence Mid Cap Growth Fund
Cadence Micro Cap Growth Fund
Cadence Small Cap Growth Fund
Columbus Circle Investors Core Equity Fund
Columbus Circle Investors Mid Cap Equity Fund
Parametric Enhanced Equity Fund
Blairlogie Emerging Markets Fund
Blairlogie International Active Fund
Balanced Fund
PROSPECTUS
- --------------------------------------------------------------------------------
November 1, 1995
<PAGE>
PROSPECTUS
November 1, 1995
PIMCO Advisors Institutional Funds (the "Trust") is a no-load, open-end
management investment company ("mutual fund") which currently offers thirteen
separate investment portfolios (the "Funds"). Each Fund has its own investment
objective and policies. The Trust is designed to provide access to the
professional investment management services offered by PIMCO Advisors L.P.
("PIMCO Advisors") and its investment management affiliates.
The Funds described in this Prospectus are as follows:
<TABLE>
<S> <C>
NFJ Equity Income Fund Columbus Circle Investors Core Equity Fund
NFJ Diversified Low P/E Fund Columbus Circle Investors Mid Cap Equity Fund
NFJ Small Cap Value Fund Parametric Enhanced Equity Fund
Cadence Capital Appreciation Fund Blairlogie Emerging Markets Fund
Cadence Mid Cap Growth Fund Blairlogie International Active Fund
Cadence Micro Cap Growth Fund Balanced Fund
Cadence Small Cap Growth Fund*
</TABLE>
*Not currently available for investment.
Information about the investment objective of each Fund, along with a
detailed description of the types of securities in which each Fund may invest,
and of investment policies and restrictions applicable to each Fund, are set
forth in this Prospectus. There can be no assurance that the investment
objective of any Fund will be achieved. Because the market value of the Funds'
investments will change, the investment returns and net asset value per share
of each Fund also will vary.
Each Fund offers two classes of shares: the "Institutional Class" and the
"Administrative Class." Shares of the Institutional Class are offered
primarily for direct investment by investors such as pension and profit
sharing plans, employee benefit trusts, endowments, foundations, corporations,
other institutions, and high net worth individuals. They also are offered
through certain financial intermediaries that charge their customers
transaction or other fees with respect to the customers' investment in the
Funds. Shares of the Administrative Class are offered primarily through
brokers, retirement plan administrators, and other financial intermediaries.
Administrative Class shares indirectly pay service fees to such entities for
services they provide to shareholders of that class. Shares of each class of
the Funds are offered for sale at the relevant next determined net asset value
for that class with no sales charge.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. It should be read and retained for
ready reference to information about the Funds. A Statement of Additional
Information, dated November 1, 1995, as supplemented from time to time,
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission and is hereby incorporated
by reference into this Prospectus. It is available without charge and may be
obtained by writing or calling:
PIMCO Advisors Institutional Funds
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
Telephone:(800) 927-4648 (Current Shareholders)
(800) 800-0952 (New Accounts)
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PIMCO ADVISORS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................................................... 3
Expense Information..................................................... 6
Financial Highlights.................................................... 8
Investment Objectives and Policies...................................... 12
Investment Restrictions................................................. 18
Characteristics and Risks of Securities and Investment Techniques....... 20
Management of the Trust................................................. 28
Purchase of Shares...................................................... 32
Redemption of Shares.................................................... 34
Portfolio Transactions.................................................. 35
Net Asset Value......................................................... 36
Dividends, Distributions and Taxes...................................... 36
Other Information....................................................... 37
</TABLE>
<PAGE>
3
PROSPECTUS SUMMARY
PIMCO Advisors Institutional Funds (the "Trust") is a no-load, open-end
management investment company ("mutual fund"), organized as a Massachusetts
business trust on August 24, 1990. The Trust currently offers thirteen separate
investment portfolios (the "Funds").
COMPARISON OF FUNDS
The following chart provides general information about each of the Funds. It
is qualified in its entirety by the more complete descriptions of the Funds
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS
- ------------------------------------------------------------------------------
<C> <S>
NFJ Equity Income Seeks current income as a primary investment objective,
and long-term growth of capital as a secondary objective;
invests primarily in common stocks with below-average
price to earnings ratios and higher dividend yields
relative to their industry groups.
- ------------------------------------------------------------------------------
NFJ Diversified Low Seeks long-term growth of capital and income; invests
P/E primarily in common stocks with below-average price to
earnings ratios relative to their industry groups.
- ------------------------------------------------------------------------------
NFJ Small Cap Value Seeks long-term growth of capital and income; invests
primarily in common stocks of companies with market
capitalizations between $50 million and $500 million and
below-average price to earnings ratios relative to their
industry groups.
- ------------------------------------------------------------------------------
Cadence Capital Seeks growth of capital; invests primarily in common
Appreciation stocks of companies with market capitalizations of at
least $100 million that have improving fundamentals and
whose stock is reasonably valued by the market.
- ------------------------------------------------------------------------------
Cadence Mid Cap Seeks growth of capital; invests primarily in common
Growth stocks of companies with market capitalizations in excess
of $500 million that have improving fundamentals and
whose stock is reasonably valued by the market.
- ------------------------------------------------------------------------------
Cadence Micro Cap Seeks long-term growth of capital; invests primarily in
Growth common stocks of companies with market capitalizations of
less than $100 million that have improving fundamentals
and whose stock is reasonably valued by the market.
- ------------------------------------------------------------------------------
Cadence Small Cap Seeks growth of capital; invests primarily in common
Growth stocks of companies with market capitalizations between
$50 million and $500 million that have improving
fundamentals and whose stock is reasonably valued by the
market.
- ------------------------------------------------------------------------------
Columbus Circle Seeks long-term growth of capital, with income as a
Investors Core secondary objective; invests primarily in common stocks
Equity of companies with market capitalizations in excess of $3
billion.
- ------------------------------------------------------------------------------
Columbus Circle Seeks long-term growth of capital; invests primarily in
Investors Mid Cap common stocks of companies with market capitalizations
Equity between $800 million to $3 billion.
- ------------------------------------------------------------------------------
Parametric Enhanced Seeks to provide a total return which equals or exceeds
Equity total return performance of the Standard & Poor's 500
Composite Stock Price Index; invests in common stocks
represented in that Index.
- ------------------------------------------------------------------------------
Blairlogie Emerging Seeks long-term growth of capital; invests primarily in
Markets common stocks of companies located in emerging market
countries.
- ------------------------------------------------------------------------------
Blairlogie Seeks long-term growth of capital; invests primarily in a
International diversified portfolio of international equity securities.
Active
- ------------------------------------------------------------------------------
Balanced Seeks total return; invests in common stocks, fixed
income securities and money market instruments.
- ------------------------------------------------------------------------------
</TABLE>
PIMCO ADVISORS
<PAGE>
4
INVESTMENT RISKS AND CONSIDERATIONS
The following are some of the primary risks relevant to an investment in the
Funds and to the securities in which the Funds invest. Investors should read
the Prospectus carefully for a more complete discussion of the risks relating
to an investment in the Funds. The value of all securities and other
instruments held by the Funds vary from time to time in response to a wide
variety of market factors. Consequently, the net asset value per share of each
Fund will vary. The net asset value per share of any Fund may be less at the
time of redemption than it was at the time of investment. It is the policy of
all of the Funds except the Balanced Fund (the "Equity Funds"), all of which
invest primarily in common stock, to be as fully invested as practicable in
such securities at all times. This policy precludes any of the Equity Funds
from investing in debt securities as a defensive investment posture (although
the Equity Funds may invest in such securities to provide for payment of
expenses to meet redemption requests). Accordingly, investors in these Funds
bear the risk of general declines in stock prices, and bear any risk that an
Equity Fund's exposure to such declines cannot be lessened by investment in
debt securities. For further information, see "Investment Objectives and
Policies--Equity Funds."
Certain Funds may invest in securities of foreign issuers, which may be
subject to additional risk factors, including foreign currency and political
risks, not applicable to securities of U.S. issuers. Certain of the Funds'
investment techniques may involve a form of borrowing, which may tend to
exaggerate the effect on net asset value of any increase or decrease in the
market value of a Fund's portfolio and may require liquidation of portfolio
positions when it is not advantageous to do so.
Certain Funds may use derivative instruments, consisting of futures, options,
options on futures, and swap agreements, for hedging purposes or as part of
their investment strategies. Use of these instruments may involve certain costs
and risks, including the risk that a Fund could not close out a position when
it would be most advantageous to do so, the risk of an imperfect correlation
between the value of the securities being hedged and the value of the
particular derivative instrument, and the risk that unexpected changes in
interest rates may adversely affect the value of a Fund's investments in
particular derivative instruments.
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
PIMCO Advisors L.P. ("PIMCO Advisors" or "Adviser") serves as investment
adviser to the Trust. Subject to the supervision of the Board of Trustees of
the Trust, the Adviser supervises the investment program for the Funds in
accordance with each Fund's investment objective, policies, and restrictions.
For all of the Funds, the Adviser has engaged its affiliates to serve as
Portfolio Managers. Under the supervision of PIMCO Advisors, the Portfolio
Managers make determinations with respect to the purchase and sale of portfolio
securities, and they place, in the names of the Funds, orders for execution of
the Funds' transactions. Pacific Investment Management Company ("PIMCO")
manages the portion of the assets of the Balanced Fund allocated for investment
in fixed income securities. Parametric Portfolio Associates ("Parametric")
manages the Parametric Enhanced Equity Fund and the portion of the assets of
the Balanced Fund allocated for investment in common stock. NFJ Investment
Group ("NFJ") manages the NFJ Equity Income Fund, the NFJ Diversified Low P/E
Fund, and the NFJ Small Cap Value Fund. Cadence Capital Management ("Cadence")
manages the Cadence Capital Appreciation Fund, the Cadence Mid Cap Growth Fund,
Cadence Micro Cap Growth Fund, and the Cadence Small Cap Growth Fund. Columbus
Circle Investors ("Columbus Circle") manages the Columbus Circle Investors Core
Equity Fund and the Columbus Circle Investors Mid Cap Equity Fund. Blairlogie
Capital Management ("Blairlogie") manages the Blairlogie Emerging Markets Fund
and the Blairlogie International Active Fund. PIMCO, Parametric, NFJ, Cadence,
Columbus Circle, and Blairlogie are each subsidiary partnerships of PIMCO
Advisors. For the Balanced Fund, PIMCO Advisors determines the allocation of
the Fund's assets among various asset classes and manages the portion of the
assets allocated for investment in money market instruments.
For its services, the Adviser receives fees based on the average daily net
assets of each Fund. The Portfolio Managers are compensated by the Adviser out
of its fees (not by the Trust). See "Management of the Trust."
<PAGE>
5
PURCHASE OF SHARES
Each Fund offers two classes of shares: the "Institutional Class" and the
"Administrative Class." Shares of the Institutional Class are offered primarily
for direct investment by institutional investors and high net worth
individuals. They are also offered through certain financial intermediaries
that charge their customers transaction or other fees with respect to the
customers' investment in the Funds. Shares of the Administrative Class are
offered primarily through brokers, retirement plan administrators and other
financial intermediaries. Administrative Class shares indirectly pay service
fees to such entities for services they provide to shareholders of that class.
Shares of each class of the Funds are offered at the relevant next determined
net asset value with no sales charge. The minimum initial investment for shares
of either class is $200,000. The Cadence Micro Cap Growth Fund limits the
purchase of shares (contributed capital) by any one investor to $10,000,000,
exclusive of shares purchased through reinvestment of dividends and
distributions. Additionally, the Trust has determined to limit the aggregate
contributed capital by all investors in the Cadence Micro Cap Growth Fund to
$100,000,000. Therefore, when the aggregate contributed capital in the Fund
reaches such amount, the Fund will no longer be available for additional
investment, until such time as an existing investor redeems a dollar amount
sufficient to allow a new investment into the Fund. In addition, shares of the
Cadence Small Cap Growth Fund are not offered as of the date of this
Prospectus; however, additional investment in the Fund may be available in the
event that an existing shareholder redeems a sufficient dollar amount. These
limitations may be changed or eliminated at any time at the discretion of the
Trust's Board of Trustees. See "Purchase of Shares."
REDEMPTIONS AND EXCHANGES
Shares of each class of each Fund may be redeemed without cost at the
relevant net asset value per share of the class of that Fund next determined
after receipt of the redemption request. The redemption price may be more or
less than the purchase price.
Shares of a class of any Fund may be exchanged for shares of the same class
of any other Fund of the Trust offered generally to the public on the basis of
relative net asset values, or for shares of the same class of a Series of the
PIMCO Funds, an affiliated no-load, open-end management investment company,
composed primarily of fixed income portfolios managed by PIMCO. See "Redemption
of Shares."
DIVIDENDS AND DISTRIBUTIONS
Each Fund will distribute dividends from net investment income at least
quarterly (except for the Columbus Circle Investors Core Equity Fund, which
will distribute semi-annually, and the Columbus Circle Mid Cap Equity,
Blairlogie Emerging Markets, and Blairlogie International Active Funds, which
will distribute annually), and any net realized capital gains at least
annually. All dividends and distributions will be reinvested automatically at
net asset value in additional shares of the same class of the same Fund, unless
cash payment is requested. Dividends from net investment income with respect to
Administrative Class shares will be lower than those paid with respect to
Institutional Class shares, reflecting the payment of service fees by that
class. See "Dividends, Distributions and Taxes."
PIMCO ADVISORS
<PAGE>
6
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES (EACH CLASS):
<TABLE>
<S> <C>
Sales Load Imposed on Purchases.......................................... None
Sales Load Imposed on Reinvested Dividends............................... None
Redemption Fee........................................................... None
Exchange Fee............................................................. None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS):
<TABLE>
<CAPTION>
ADVISORY ADMINISTRATIVE TOTAL
INSTITUTIONAL CLASS SHARES FEE FEE EXPENSES
-------------------------- -------- -------------- --------
<S> <C> <C> <C>
NFJ Equity Income Fund...................... 0.45% 0.25% 0.70%
NFJ Diversified Low P/E Fund................ 0.45 0.25 0.70
NFJ Small Cap Value Fund.................... 0.60 0.25 0.85
Cadence Capital Appreciation Fund........... 0.45 0.25 0.70
Cadence Mid Cap Growth Fund................. 0.45 0.25 0.70
Cadence Micro Cap Growth Fund............... 1.25 0.25 1.50
Cadence Small Cap Growth Fund............... 1.00 0.25 1.25
Columbus Circle Investors Core Equity Fund.. 0.57 0.25 0.82
Columbus Circle Investors Mid Cap Equity
Fund....................................... 0.63 0.25 0.88
Parametric Enhanced Equity Fund............. 0.45 0.25 0.70
Blairlogie Emerging Markets Fund............ 0.85 0.50 1.35
Blairlogie International Active Fund........ 0.60 0.50 1.10
Balanced Fund............................... 0.45 0.25 0.70
<CAPTION>
ADVISORY ADMINISTRATIVE SERVICE TOTAL
ADMINISTRATIVE CLASS SHARES FEE FEE FEE EXPENSES
--------------------------- -------- -------------- ------- --------
<S> <C> <C> <C> <C>
NFJ Equity Income Fund.............. 0.45% 0.25% 0.25% 0.95%
NFJ Diversified Low P/E Fund........ 0.45 0.25 0.25 0.95
NFJ Small Cap Value Fund............ 0.60 0.25 0.25 1.10
Cadence Capital Appreciation Fund... 0.45 0.25 0.25 0.95
Cadence Mid Cap Growth Fund......... 0.45 0.25 0.25 0.95
Cadence Micro Cap Growth Fund....... 1.25 0.25 0.25 1.75
Cadence Small Cap Growth Fund....... 1.00 0.25 0.25 1.50
Columbus Circle Investors Core Eq-
uity Fund.......................... 0.57 0.25 0.25 1.07
Columbus Circle Investors Mid Cap
Equity Fund........................ 0.63 0.25 0.25 1.13
Parametric Enhanced Equity Fund..... 0.45 0.25 0.25 0.95
Blairlogie Emerging Markets Fund.... 0.85 0.50 0.25 1.60
Blairlogie International Active
Fund............................... 0.60 0.50 0.25 1.35
Balanced Fund....................... 0.45 0.25 0.25 0.95
</TABLE>
For a more detailed discussion of the Funds' fees and expenses, see "Fund
Administrator," "Advisory and Administrative Fees," and "Service Fees" under
the caption "Management of the Trust."
<PAGE>
7
EXAMPLE OF FUND EXPENSES:
An investor would pay the following expenses on a $1,000 investment assuming
(1) a hypothetical 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
NFJ Equity Income Fund...................... $ 7 $22 $39 $ 87
NFJ Diversified Low P/E Fund................ $ 7 $22 $39 $ 87
NFJ Small Cap Value Fund.................... $ 9 $27 $47 $105
Cadence Capital Appreciation Fund........... $ 7 $22 $39 $ 87
Cadence Mid Cap Growth Fund................. $ 7 $22 $39 $ 87
Cadence Micro Cap Growth Fund............... $15 $47 $82 $179
Cadence Small Cap Growth Fund............... $13 $40 $69 $151
Columbus Circle Investors Core Equity Fund.. $ 8 $26 $46 $101
Columbus Circle Investors Mid Cap Equity
Fund....................................... $ 9 $28 $49 $108
Parametric Enhanced Equity Fund............. $ 7 $22 $39 $ 87
Blairlogie Emerging Markets Fund............ $14 $43 $74 $162
Blairlogie International Active Fund........ $11 $35 $61 $134
Balanced Fund............................... $ 7 $22 $39 $ 87
<CAPTION>
ADMINISTRATIVE CLASS SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
NFJ Equity Income Fund...................... $10 $30 $53 $117
NFJ Diversified Low P/E Fund................ $10 $30 $53 $117
NFJ Small Cap Value Fund.................... $11 $35 $61 $134
Cadence Capital Appreciation Fund........... $10 $30 $53 $117
Cadence Mid Cap Growth Fund................. $10 $30 $53 $117
Cadence Micro Cap Growth Fund............... $18 $55 $95 $206
Cadence Small Cap Growth Fund............... $15 $47 $82 $179
Columbus Circle Investors Core Equity Fund.. $11 $34 $59 $131
Columbus Circle Investors Mid Cap Equity
Fund....................................... $12 $36 $62 $137
Parametric Enhanced Equity Fund............. $10 $30 $53 $117
Blairlogie Emerging Markets Fund............ $16 $50 $87 $190
Blairlogie International Active Fund........ $14 $43 $74 $163
Balanced Fund............................... $10 $30 $53 $117
</TABLE>
The above tables are provided to assist investors in understanding the
various expenses which may be borne directly or indirectly in connection with
an investment in the Funds. This example should not be considered a
representation of past or future expenses or performance. Actual expenses may
be higher or lower than those shown.
PIMCO ADVISORS
<PAGE>
8
FINANCIAL HIGHLIGHTS
The following information regarding selected per share data and ratios for
shares of each Fund are part of the Trust's financial statements which are
included in the Trust's Annual Report dated October 31, 1994 and Semi-Annual
Report dated April 30, 1995, and incorporated by reference in the Statement of
Additional Information. The Trust's financial statements and selected per
share data and ratios as of October 31, 1994 appearing under the heading
"Financial Highlights" have been examined by Deloitte & Touche LLP,
independent accountants, whose opinion thereon is also included in the Annual
Report. Information is presented for each Fund, and class thereof, of the
Trust which had investment operations during the reporting periods.
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED TOTAL INCOME DIVIDENDS DISTRIBUTIONS
YEAR OR VALUE INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET FROM NET DISTRIBUTIONS
PERIOD BEGINNING INCOME GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED FROM
ENDED OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS EQUALIZATION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NFJ EQUITY INCOME FUND
Institutional Class
10/31/91(a) $10.00 $.24 $ .92 $1.16 $(.24) $ (.15) $ .00
10/31/92 10.77 .45 .93 1.38 (.43) (.57) (.23)
10/31/93 10.92 .40 1.40 1.80 (.40) (.37) .00
10/31/94 11.95 .42 (.16) .26 (.42) (.04) .00
4/30/95+ 11.75 .23 .52 .75 (.23) (.33) .00
Administrative Class
4/30/95(e)+ 11.12 .17 1.19 1.36 (.21) (.33) .00
NFJ DIVERSIFIED LOW P/E FUND
Institutional Class
10/31/92(b) $10.00 $.24 $ .23 $ .47 $(.24) $ (.18) $ .00
10/31/93 10.05 .28 2.36 2.64 (.28) (.49) .00
10/31/94 11.92 .30 (.28) .02 (.29) (.10) .00
4/30/95+ 11.55 .15 .67 .82 (.15) (1.20) .00
NFJ SMALL CAP VALUE FUND
Institutional Class
10/31/91(c) $10.00 $.02 $ .10 $ .12 $(.03) $ .00 $ .00
10/31/92 10.09 .22 1.17 1.39 (.22) (.24) (.04)
10/31/93 10.98 .24 2.33 2.57 (.24) (.50) .00
10/31/94 12.81 .29 (.65) (.36) (.29) (.09) .00
4/30/95+ 12.07 .15 .76 .91 (.15) (.89) .00
CADENCE CAPITAL APPRECIATION FUND
Institutional Class
10/31/91(a) $10.00 $.09 $1.02 $1.11 $(.09) $ .00 $ .00
10/31/92 11.02 .14 1.05 1.19 (.14) (.72) (.08)
10/31/93 11.27 .11 2.73 2.84 (.11) (.50) .00
10/31/94 13.50 .14 (.12) .02 (.14) (.04) .00
4/30/95+ 13.34 .08 1.14 1.22 (.08) .00 .00
CADENCE MID CAP GROWTH FUND
Institutional Class
10/31/91(d) $10.00 $.02 $ .27 $ .29 $(.01) $ .00 $ .00
10/31/92 10.28 .10 1.03 1.13 (.10) .00 (.02)
10/31/93 11.29 .07 2.70 2.77 (.07) (.02) .00
10/31/94 13.97 .06 .01 .07 (.06) (.01) .00
4/30/95+ 13.97 .03 1.11 1.14 (.03) .00 .00
Administrative Class
4/30/95(e)+ 13.31 .01 1.77 1.78 (.01) .00 .00
</TABLE>
- --------
(a) From commencement of operations, March 8, 1991, to October 31, 1991.
(b) From commencement of operations, December 30, 1991, to October 31, 1992.
(c) From commencement of operations, October 1, 1991, to October 31, 1991.
(d) From commencement of operations, August 26, 1991, to October 31, 1991.
(e) From commencement of operations, November 30, 1994, to April 30, 1995.
* Annualized.
+ Six-month period (Unaudited).
<PAGE>
9
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
DISTRIBUTIONS VALUE END EXPENSES TO INCOME TO PORTFOLIO
FROM RETURN TOTAL END TOTAL OF PERIOD AVERAGE AVERAGE TURNOVER
OF CAPITAL DISTRIBUTIONS OF PERIOD RETURN (000'S) NET ASSETS NET ASSETS RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$.00 $ (.39) $10.77 11.81% $ 15,628 0.74%* 4.18%* 61.51%
.00 (1.23) 10.92 12.89% 30,506 0.70% 3.83% 46.74%
.00 (.77) 11.95 16.65% 67,854 0.70% 3.55% 38.60%
.00 (.46) 11.75 2.25% 92,365 0.70% 3.77% 35.56%
.00 (.56) 11.94 6.90% 99,627 0.70%* 4.09%* 18.50%
.00 (.54) 11.94 12.72% 131 0.95%* 3.55%* 15.22%
$.00 $ (.42) $10.05 4.68% $ 18,083 0.70%* 2.57%* 72.77%
.00 (.77) 11.92 26.35% 22,930 0.70% 2.43% 28.19%
.00 (.39) 11.55 0.15% 15,442 0.70% 2.34% 43.70%
.00 (1.35) 11.02 8.62% 12,570 0.70%* 2.60%* 36.70%
$.00 $ (.03) $10.09 1.19% $ 5,060 1.09%* 3.06%* 0.00%
.00 (.50) 10.98 13.75% 18,261 0.85% 2.16%* 26.77%
.00 (.74) 12.81 23.60% 46,523 0.85% 2.05% 41.80%
.00 (.38) 12.07 (2.89)% 31,236 0.85% 2.23% 48.12%
.00 (1.04) 11.94 8.15% 32,797 0.85%* 2.50%* 17.31%
$.00 $ (.09) $11.02 11.19% $ 18,813 0.75%* 1.55%* 40.54%
.00 (.94) 11.27 10.75% 36,334 0.70% 1.13% 134.17%
.00 (.61) 13.50 25.30% 84,990 0.70% 0.94% 81.15%
.00 (.18) 13.34 .15% 165,441 0.70% 1.17% 76.75%
.00 (.08) 14.48 9.23% 190,105 0.70%* 1.23%* 32.27%
$.00 $ (.01) $10.28 2.98% $ 2,748 0.82%* 0.92%* 13.41%
.00 (.12) 11.29 10.91% 21,213 0.70% 0.87% 65.92%
.00 (.09) 13.97 24.57% 67,625 0.70% 0.56% 97.87%
.00 (.07) 13.97 .58% 121,791 0.70% 0.45% 60.85%
.00 (.03) 15.08 8.16% 134,177 0.70%* 0.43%* 29.91%
.00 (.01) 15.08 13.36% 109 0.95%* 0.10%* 23.68%
</TABLE>
PIMCO ADVISORS
<PAGE>
10
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED TOTAL INCOME DIVIDENDS DISTRIBUTIONS
YEAR OR VALUE INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET FROM NET DISTRIBUTIONS
PERIOD BEGINNING INCOME GAIN (LOSS) ON INVESTMENT INVESTMENT REALIZED FROM
ENDED OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS EQUALIZATION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CADENCE MICRO CAP
GROWTH FUND
Institutional Class
10/31/93(a) $10.00 $ .00 $ 1.07 $ 1.07 $ .00 $ .00 $ .00
10/31/94 11.06 (.03) .84 .81 .00 .00 .00
4/30/95+ 11.87 (.01) .89 .88 .00 .00 .00
CADENCE SMALL CAP
GROWTH FUND
Institutional Class
10/31/91(b) $10.00 $ .02 $ 5.03 $ 5.05 $(.02) $ (.16) $ .00
10/31/92 14.87 .01 1.50 1.51 (.01) (.57) .00
10/31/93 15.80 (.06) 6.19 6.13 .00 (2.78) .00
10/31/94 19.15 (.02) .89 .87 .00 (.64) .00
4/30/95+ 19.38 (.02) (.07) (.09) .00 (1.43) .00
COLUMBUS CIRCLE INVESTORS
CORE EQUITY FUND
Institutional Class
4/30/95(c)+ $10.00 $ .03 $ 1.07 $ 1.10 $(.03) $ .00 $ .00
COLUMBUS CIRCLE INVESTORS
MID CAP EQUITY FUND
Institutional Class
4/30/95(c)+ $10.00 $ .02 $ .87 $ .89 $ .00 $ .00 $ .00
PARAMETRIC ENHANCED
EQUITY FUND
Institutional Class
10/31/91(d) $10.00 $ .16 $ .80 $ .96 $(.16) $ .00 $ .00
10/31/92 10.80 .16 1.06 1.22 (.16) (.04) (.06)
10/31/93 11.76 .23 .74 .97 (.23) (.42) .00
10/31/94 12.08 .25 (.04) .21 (.25) (.05) .00
4/30/95+ 11.99 .12 .92 1.04 (.12) (.17) .00
BLAIRLOGIE EMERGING
MARKETS FUND
Institutional Class
10/31/93(e) $10.00 $ .03 $ 2.52 $ 2.55 $(.02) $ (.26) $ .00
10/31/94 12.27 (.01) 4.45 4.44 .00 (.18) .00
4/30/95+ 16.53 .07 (4.61) (4.54) .00 (.71) .00
Administrative Class
4/30/95+ 16.95 .07 (5.05) (4.98) .00 (.71) .00
BLAIRLOGIE INTERNATIONAL
ACTIVE FUND
Institutional Class
10/31/93(f) $10.00 $ .05 $ .69 $ 0.74 $(.04) $ (.01) $ .00
10/31/94 10.69 .09 1.15 1.24 (.03) (.04) .00
4/30/95+ 11.86 .12 (.01) .11 .00 (.43) .00
Administrative Class
4/30/95(g)+ 11.21 .09 .65 .74 .00 (.43) .00
BALANCED FUND
Institutional Class
10/31/92(h) $10.00 $ .12 $ .52 $ .64 $(.12) $ (.10) $ .00
10/31/93 10.42 .35 .68 1.03 (.35) (.26) .00
10/31/94 10.84 .34 (.34) .00 (.34) (.15) .00
4/30/95+ 10.35 .20 .58 .78 (.20) .00 .00
</TABLE>
- --------
(a) From commencement of operations, June 25, 1993, to October 31, 1993.
(b) From commencement of operations, January 7, 1991, to October 31, 1991.
(c) From commencement of operations, December 28, 1994, to April 30, 1995.
(d) From commencement of operations, February 11, 1991, to October 31, 1991.
(e) From commencement of operations, June 1, 1993, to October 31, 1993.
(f) From commencement of operations, June 8, 1993, to October 31, 1993.
(g) From commencement of operations, November 30, 1994, to April 30, 1995.
(h) From commencement of operations, June 25, 1992, to October 31, 1992.
* Annualized.
+ Six-month period (Unaudited).
<PAGE>
11
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
DISTRIBUTIONS VALUE END EXPENSES TO INCOME TO PORTFOLIO
FROM RETURN TOTAL END TOTAL OF PERIOD AVERAGE AVERAGE TURNOVER
OF CAPITAL DISTRIBUTIONS OF PERIOD RETURN (000'S) NET ASSETS NET ASSETS RATE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(.01) $ (.01) $11.06 10.81% $ 10,827 1.50%* (0.02)%* 15.98%
.00 .00 11.87 7.31% 32,605 1.50% (0.25)% 58.81%
.00 .00 12.75 7.35% 44,031 1.50%* (0.16)%* 37.12%
$ .00 $ (.18) $14.87 50.68% $ 33,168 1.29%* 0.11%* 47.84%
.00 (.58) 15.80 10.20% 33,734 1.25% 0.09% 66.05%
.00 (2.78) 19.15 38.80% 43,308 1.25% (0.35)% 62.15%
.00 (.64) 19.38 4.62% 50,425 1.25% (0.33)% 65.53%
.00 (1.43) 17.86 (0.25)% 53,216 1.25%* (0.21)%* 28.04%
$ .00 $ (.03) $11.07 11.01% $ 3,013 0.82%* 1.07%* 36.69%
$ .00 $ .00 $10.89 8.87% $ 3,460 0.88%* 0.67%* 32.76%
$ .00 $ (.16) $10.80 9.59% $ 4,451 0.73%* 2.14%* 0.15%
.00 (.26) 11.76 11.46% 36,515 0.70% 1.81% 16.85%
.00 (.65) 12.08 8.20% 46,724 0.70% 1.89% 15.02%
.00 (.30) 11.99 1.83% 65,915 0.70% 2.20% 43.58%
.00 (.29) 12.74 8.84% 69,312 0.70%* 2.02%* 6.29%
$ .00 $ (.28) $12.27 25.55% $ 14,625 1.34%* 0.64%* 36.51%
.00 (.18) 16.53 36.31% 79,620 1.35% (0.06)% 79.04%
.00 (.71) 11.28 (28.09)% 73,928 1.35%* 0.79%* 66.80%
.00 (.71) 11.26 (28.18)% 209 1.61%* 2.35%* 66.80%
$ .00 $ (.05) $10.69 7.39% $ 8,299 1.10%* 0.91%* 19.61%
.00 (.07) 11.86 11.68% 22,569 1.10% 1.12%* 88.55%
.00 (.43) 11.54 1.23% 52,065 1.10%* 0.96%* 42.81%
.00 (.43) 11.52 6.99% 57 1.35%* 0.45%* 28.89%
$ .00 $ (.22) $10.42 6.40% $ 99,198 0.70%* 3.36%* 38.51%
.00 (.61) 10.84 10.06% 126,410 0.70% 3.10% 19.32%
.00 (.49) 10.35 0.08% 130,694 0.70% 3.25% 46.72%
.00 (.20) 10.93 7.65% 85,626 0.70%* 3.76%* 5.17%
</TABLE>
PIMCO ADVISORS
<PAGE>
12
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of each Fund are
described below. There can be no assurance that the investment objective of
any Fund will be achieved. Because the market value of each Fund's investments
will change, the net asset value per share of each Fund also will vary.
NFJ Equity Income Fund seeks current income as a primary investment
objective, and long-term growth of capital as a secondary objective. In
pursuing these objectives, the Fund invests primarily in common stocks
characterized by having below-average price to earnings ("P/E") ratios and
higher dividend yields relative to their industry groups. In selecting
securities, the Portfolio Manager classifies a universe of approximately 2,000
stocks by industry, each of which has a minimum market capitalization of $200
million at the time of investment. The universe is then screened to find the
lowest P/E ratios in each industry, subject to application of quality and
price momentum screens. From this group, approximately 25 stocks with the
highest yields are chosen for the Fund. The universe is then rescreened to
find the highest yielding stock in each industry, subject to application of
quality and price momentum screens. From this group, approximately 25 stocks
with the lowest P/E ratios are added to the Fund. Although quarterly
rebalancing is a general rule, replacements are made whenever an alternative
stock within the same industry has a significantly lower P/E ratio or higher
dividend yield than the current Fund holding. For information on other
investment policies, see "Investment Objectives and Policies--Equity Funds."
See "Characteristics and Risks of Securities and Investment Techniques" in the
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices.
NFJ Diversified Low P/E Fund seeks long-term growth of capital and income.
In pursuing this objective, the Fund invests primarily in common stocks
characterized by having below-average P/E ratios relative to their industry
group. In selecting securities, the Portfolio Manager classifies a universe of
approximately 2,000 stocks by industry, each of which has a minimum market
capitalization of $200 million at the time of investment. The universe is then
screened to find the stocks with the lowest P/E ratios in each industry,
subject to application of quality and price momentum screens. The stocks in
each industry with the lowest P/E ratios that pass the quality and price
momentum screens are then selected for the Fund. The Fund usually invests in
approximately 50 stocks. Although quarterly rebalancing is a general rule,
replacements are made whenever an alternative stock within the same industry
has a significantly lower P/E ratio than the current Fund holdings. For
information on other investment policies, see "Investment Objectives and
Policies--Equity Funds." See "Characteristics and Risks of Securities and
Investment Techniques" in the Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices.
NFJ Small Cap Value Fund seeks long-term growth of capital and income. In
pursuing this objective, the Fund invests primarily in common stocks from
companies with market capitalizations between $50 million and $500 million at
the time of investment. In selecting securities, the Portfolio Manager divides
a universe of up to approximately 2,000 stocks into quartiles based upon P/E
ratio. The lowest quartile in P/E ratio is screened for market capitalizations
between $50 million and $500 million, subject to application of quality and
price momentum screens. Approximately 100 stocks with the lowest P/E ratios
are combined in the Fund, subject to limits on the weighting for any one
industry. Although quarterly rebalancing is a general rule, replacements are
made whenever a holding achieves a higher P/E ratio than the Standard & Poor's
500 Composite Stock Price Index ("S&P 500") P/E ratio or its industry average
P/E ratio, or when an alternative stock within the same industry has a
significantly lower P/E ratio than the current Fund holding. For information
on other investment policies, see "Investment Objectives and Policies--Equity
Funds." See "Characteristics and Risks of Securities and Investment
Techniques" in the Prospectus and "Investment Objectives and Policies" in the
Statement of Additional Information for more details on investment practices.
Cadence Capital Appreciation Fund seeks growth of capital. In pursuing this
objective, the Fund invests primarily in common stocks of companies that have
improving fundamentals (such as growth of earnings and dividends) and whose
stock is reasonably valued by the market. Stocks for the Fund are chosen from
companies with market capitalizations of at least $100 million at the time of
investment. The Fund usually invests in approximately 60 to 100 common stocks
selected from a universe of the approximately 1,000 largest market
capitalization stocks. Each issue is screened and ranked using five distinct
computerized models, including: (i) a dividend growth screen, (ii) an equity
growth screen, (iii) an earnings growth screen, (iv) an earnings momentum
<PAGE>
13
screen, and (v) an earnings surprise screen. The Portfolio Manager believes
that the models identify the stocks in the universe exhibiting growth
characteristics with reasonable valuations. Stocks are replaced when they
score worse-than-median screen ranks, have negative earnings surprises, or
show poor relative price performance. The universe is rescreened frequently to
obtain a favorable composition of growth and value characteristics for the
entire Fund. For information on other investment policies, see "Investment
Objectives and Policies--Equity Funds." See "Characteristics and Risks of
Securities and Investment Techniques" in the Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices.
Cadence Mid Cap Growth Fund seeks growth of capital. In pursuing this
objective, the Fund invests primarily in common stocks of middle
capitalization companies that have improving fundamentals (such as growth of
earnings and dividends) and whose stock is reasonably valued by the market.
Stocks for the Fund are selected from a universe of companies with market
capitalizations in excess of $500 million at the time of investment, excluding
the 200 companies with the highest market capitalization. The Fund usually
invests in approximately 60 to 100 common stocks. Each issue is screened and
ranked using five distinct computerized models, including: (i) a dividend
growth screen, (ii) an equity growth screen, (iii) an earnings growth screen,
(iv) an earnings momentum screen, and (v) an earnings surprise screen. The
Portfolio Manager believes that the models identify the stocks in the universe
exhibiting growth characteristics with reasonable valuations. Stocks are
replaced when they score worse-than-median screen ranks, have negative
earnings surprises, or show poor relative price performance. The universe is
rescreened frequently to obtain a favorable composition of growth and value
characteristics for the entire Fund. For information on other investment
policies, see "Investment Objectives and Policies--Equity Funds." See
"Characteristics and Risks of Securities and Investment Techniques" in the
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices.
Cadence Micro Cap Growth Fund seeks long-term growth of capital. In pursuing
this objective, the Fund invests primarily in common stocks of companies that
have improving fundamentals (such as growth of earnings and dividends) and
whose stock is reasonably valued by the market. The Fund usually invests in
approximately 60 to 100 common stocks selected from a universe of stocks with
publicly available market capitalizations of less than $100 million at the
time of investment. Each issue is screened and ranked using five distinct
computerized models, including: (i) a dividend growth screen, (ii) an equity
growth screen, (iii) an earnings growth screen, (iv) an earnings momentum
screen, and (v) an earnings surprise screen. The Portfolio Manager believes
that the models identify the stocks in the universe exhibiting growth
characteristics with reasonable valuations. Stocks are replaced when they
score worse-than-median screen ranks, have negative earnings surprises, or
show poor relative price performance. The universe is rescreened frequently to
obtain a favorable composition of growth and value characteristics for the
entire Fund. For information on other investment policies, see "Investment
Objectives and Policies--Equity Funds." See "Characteristics and Risks of
Securities and Investment Techniques" in the Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices.
Cadence Small Cap Growth Fund seeks growth of capital. In pursuing this
objective, the Fund invests primarily in common stocks of companies that have
improving fundamentals (such as growth of earnings and dividends) and whose
stock is reasonably valued by the market. The Fund usually invests in
approximately 60 to 100 common stocks selected from a universe of stocks with
market capitalizations of $50 million to $500 million at the time of
investment. Each issue is screened and ranked using five distinct computerized
models, including: (i) a dividend growth screen, (ii) an equity growth screen,
(iii) an earnings growth screen, (iv) an earnings momentum screen, and (v) an
earnings surprise screen. The Portfolio Manager believes that the models
identify the stocks in the universe exhibiting growth characteristics with
reasonable valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor relative price
performance. The universe is rescreened frequently to obtain a favorable
composition of growth and value characteristics for the entire Fund. For
information on other investment policies, see "Investment Objectives and
Policies--Equity Funds." See "Characteristics and Risks of Securities and
Investment Techniques" in the Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices.
PIMCO ADVISORS
<PAGE>
14
Columbus Circle Investors Core Equity Fund seeks long-term growth of
capital, with income as a secondary objective. In pursuing these objectives,
the Fund attempts to exceed the total return performance of the S&P 500 over a
reasonable measurement period. The Fund usually invests in approximately 40 to
50 common stocks from companies with market capitalizations in excess of $3
billion at the time of investment. In selecting securities, the Portfolio
Manager uses an investment discipline called "Positive Momentum & Positive
Surprise." It is based on the premise that companies performing better than
expected will have rising securities prices, while companies producing less
than expected results will not. Through thorough analysis of company
fundamentals in the context of the prevailing economic environment, the
companies selected for purchase remain in the Fund only if they continue to
achieve or exceed expectations, and are sold when business or earnings results
are disappointing. Stock selection may include a significant portion of middle
capitalization companies combined with the large capitalization stocks.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets, which will not exceed 15% of the Fund's
net assets at the time of investment. Investing in the securities of foreign
issuers involves special risks and considerations not typically associated
with investing in U.S. companies. The Fund may also purchase and write call
and put options on securities, securities indexes and on foreign currencies;
enter into futures contracts and use options on futures contracts; and engage
in forward foreign currency contracts. For information on other investment
policies, see "Investment Objectives and Policies--Equity Funds." See
"Characteristics and Risks of Securities and Investment Techniques" in the
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices.
Columbus Circle Investors Mid Cap Equity Fund seeks long-term growth of
capital. In pursuing this objective, the Fund usually invests in approximately
40 to 60 common stocks from companies with market capitalizations of $800
million to $3 billion at the time of investment. In selecting securities, the
Portfolio Manager uses an investment discipline called "Positive Momentum &
Positive Surprise." It is based on the premise that companies performing
better than expected will have rising securities prices, while companies
producing less than expected results will not. Through thorough analysis of
company fundamentals in the context of the prevailing economic environment,
the companies selected for purchase remain in the Fund only if they continue
to achieve or exceed expectations, and are sold when business or earnings
results are disappointing. Stock selection may include companies that have
grown rapidly from small capitalization status.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets, which will not exceed 15% of the Fund's
net assets at the time of investment. Investing in the securities of foreign
issuers involves special risks and considerations not typically associated
with investing in U.S. companies. The Fund may also purchase and write call
and put options on securities, securities indexes and on foreign currencies;
enter into futures contracts and use options on futures contracts; and engage
in forward foreign currency contracts. For information on other investment
policies, see "Investment Objectives and Policies--Equity Funds." See
"Characteristics and Risks of Securities and Investment Techniques" in the
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices.
Parametric Enhanced Equity Fund seeks to provide a total return which equals
or exceeds the total return performance of an index that represents the
performance of a reasonably broad spectrum of common stocks that are publicly
traded in the United States. In pursuing this objective, the Fund attempts to
equal or exceed the total return performance of the S&P 500. The Portfolio
Manager uses quantitative techniques to construct a portfolio that consists of
some, but not all, of the common stocks that are represented in the S&P 500.
The Fund may invest in common stock of foreign issuers if included in the
index. The Fund is designed to simultaneously meet all of the following
criteria: (i) higher returns than the S&P 500 in both up and down markets,
(ii) no greater volatility than the S&P 500, and (iii) consistent performance
on a period-to-period basis. A computer optimization model analyzes the return
pattern of thousands of portfolios that could be constructed from the
securities in the S&P 500. The Portfolio Manager's optimization process
reweights or eliminates stocks that have not historically improved the
performance or lowered the volatility of the Fund. The Fund is rebalanced
quarterly. The Trust reserves the right to change the index whose total return
the Fund will attempt to equal or exceed without shareholder approval,
although it is not anticipated that such a change would be made in the
ordinary course of the Fund's operations.
<PAGE>
15
The Fund may engage in the purchase and writing of options on securities
indexes, and may also invest in stock index futures contracts and options
thereon. For information on other investment policies, see "Investment
Objectives and Policies--Equity Funds." See "Characteristics and Risks of
Securities and Investment Techniques" in the Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices.
Blairlogie Emerging Markets Fund seeks long-term growth of capital. In
pursuing this objective, the Fund invests primarily in common stocks of
companies located in countries identified as "emerging market" countries. The
Morgan Stanley Capital International Emerging Markets Free Index ("MSCI Free
Index") and the International Finance Corporation Emerging Markets Index ("IFC
Index") are used as the bases for choosing the countries in which the Fund
invests. However, the Fund is not limited to the countries and weightings of
these indexes. The Portfolio Manager applies two levels of screening in
selecting investments for the Fund. First, an active country selection model
analyzes world markets and assigns a relative value ranking, or "favorability
weighting," to each country in the relevant country universe to determine
markets which are relatively undervalued. Second, at the stock selection
level, quality analysis and value analysis are applied to each security,
assessing variables such as balance sheet strength and earnings growth
(quality factors) and performance relative to the industry, price to earnings
ratios, and price to book ratios (value factors). This two-level screening
method identifies undervalued securities for purchase as well as provides a
sell discipline for fully valued securities. In selecting securities, the
Portfolio Manager considers, to the extent practicable and on the basis of
information available to it for research, a company's environmental business
practices.
For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries.
Argentina Greece Jordan Poland Thailand
Brazil Hong Kong Malaysia Portugal Turkey
Chile Hungary Mexico South Africa Venezuela
China India Pakistan South Korea Zimbabwe
Colombia Indonesia Peru Sri Lanka
Czech Israel Philippines Taiwan
Republic
For purposes of allocating the Fund's investments, a company is considered
to be located in the country in which it is domiciled, in which it is
primarily traded, from which it derives a significant portion of its revenues,
or in which a significant portion of its goods or services are produced.
Most of the foreign securities in which the Fund invests will be denominated
in foreign currencies. The Fund may engage in foreign currency transactions to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar or to the weighting of a particular foreign currency on the
MSCI Free Index or the IFC Index. Such foreign currency transactions may
include forward foreign currency contracts, currency exchange transactions on
a spot (i.e., cash) basis, put and call options on foreign currencies, and
foreign exchange futures contracts. The Fund may invest in stock index futures
contracts, foreign exchange futures contracts, and options thereon, and may
sell (write) call and put options. The Fund may also engage in equity index
swap transactions.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies.
Investment in emerging market countries presents risks in greater degree than,
and in addition to, those presented by investment in foreign issuers in
general. A number of emerging market countries restrict, to varying degrees,
foreign investment in stocks. Repatriation of investment income, capital, and
the proceeds of sales by foreign investors may require governmental
registration and/or approval in some emerging market countries. A number of
the currencies of developing countries have experienced significant declines
against the U.S. dollar in recent years, and devaluation may occur subsequent
to investments in these currencies by the Fund. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative
effects on the economies and securities markets of certain emerging market
countries. Many of the emerging securities markets are relatively small, have
low trading volumes, suffer periods of relative
PIMCO ADVISORS
<PAGE>
16
illiquidity, and are characterized by significant price volatility. There is a
risk in emerging market countries that a future economic or political crisis
could lead to price controls, forced mergers of companies, expropriation or
confiscatory taxation, seizure, nationalization, or creation of government
monopolies, any of which may have a detrimental effect on the Fund's
investment.
For information on other investment policies, see "Investment Objectives and
Policies--Equity Funds." See "Characteristics and Risks of Securities and
Investment Techniques" in the Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices.
Blairlogie International Active Fund seeks long-term growth of capital. In
pursuing this objective, the Fund invests primarily in a diversified portfolio
of international equity securities. The Morgan Stanley Capital International
EAFE (Europe, Australasia, Far East) Index ("EAFE Index") is used as a basis
for choosing the countries in which the Fund invests, however, the Fund is not
limited to the countries and weightings of the EAFE Index. The Portfolio
Manager applies two levels of screening in selecting investments for the Fund.
First, an active country selection model analyzes world markets and assigns a
relative value ranking, or "favorability weighting," to each country in the
relevant country universe to determine markets which are relatively
undervalued. Second, at the stock selection level, quality analysis and value
analysis are applied to each security, assessing variables such as balance
sheet strength and earnings growth (quality factors) and performance relative
to the industry, price to earnings ratios and price to book ratios (value
factors). This two-level screening method identifies undervalued securities
for purchase as well as provides a sell discipline for fully valued
securities. In selecting securities, the Portfolio Manager considers, to the
extent practicable and on the basis of information available to it for
research, a company's environmental business practices.
For purposes of allocating the Fund's investments, a company is considered
to be located in the country in which it is domiciled, in which it is
primarily traded, from which it derives a significant portion of its revenues,
or in which a significant portion of its goods or services are produced.
Most of the foreign securities in which the Fund invests will be denominated
in foreign currencies. The Fund may engage in foreign currency transactions to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar or to the weighting of a particular foreign currency on the
EAFE Index. Such foreign currency transactions may include forward foreign
currency contracts, currency exchange transactions on a spot (i.e., cash)
basis, put and call options on foreign currencies, and foreign exchange
futures contracts. The Fund may invest in stock index futures contracts,
foreign exchange futures contracts, and options thereon, and may sell (write)
call and put options. The Fund also may engage in equity index swap
transactions.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. For
information on other investment policies, see "Investment Objectives and
Policies--Equity Funds." See "Characteristics and Risks of Securities and
Investment Techniques" in the Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices.
Balanced Fund seeks total return consistent with prudent investment
management. The Fund attempts to achieve this objective through a management
policy of investing in the following asset classes: common stock, fixed income
securities, and money market instruments. The proportion of the Fund's total
assets allocated among common stocks, fixed income securities, and money
market instruments will vary from time to time and will be determined by the
Adviser. In determining the allocation of the Fund's assets among the three
asset classes, the Adviser will employ a computerized asset allocation program
which will take into account certain economic factors, market conditions, and
the expected relative total return and risk of the various asset classes.
Under normal circumstances, it is anticipated that the Fund will generally
maintain a balance among the types of securities in which it invests. Thus,
normally the Fund will maintain 40% to 65% of its assets in common stock, at
least 25% of its assets in fixed income securities, and less than 10% of its
assets in money market instruments. However, in no event would the Fund invest
in any common stock if, at the time of investment, more than 80% of the Fund's
assets would be invested in common stock; in no event would the Fund invest in
a fixed income security (other than a short term instrument) if, at the time
of investment, more than 80% of the Fund's assets would be invested in fixed
income securities; nor would the Fund invest in a money market instrument if,
at the time of investment, more than 60% of its assets would be invested in
money market instruments.
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In managing the Fund, the Adviser uses a specialist approach and has engaged
two of the Trust's Portfolio Managers to manage certain portions of the Fund's
assets. The portion of the assets of the Fund allocated by the Adviser for
investment in common stock (the "Common Stock Segment") will be managed in
accordance with the investment policies of the Parametric Enhanced Equity Fund
by the same Portfolio Manager, Parametric. The portion of the assets of the
Fund allocated by the Adviser for investment in fixed income debt securities
(the "Fixed Income Securities Segment") will be managed by PIMCO. PIMCO
Advisors will manage directly the assets of the Fund allocated for investment
in money market instruments (the "Money Market Segment"). Because of the
Fund's flexible investment policy, portfolio turnover may be greater than for
a fund that does not allocate assets among various types of securities.
Corporate fixed income securities in which the Fund may invest will, at the
time of investment, be rated Baa or better by Moody's Investors Service, Inc.
("Moody's"), BBB or better by Standard & Poor's Corporation ("S&P") or, if not
rated by Moody's or S&P, will be of comparable quality as determined by the
Portfolio Manager. Investments in corporate debt securities that are rated Baa
by Moody's or BBB by S&P have certain "speculative characteristics." Such
securities may be subject to greater market fluctuations, less liquidity and
greater risk of loss of income or principal, including a greater possibility
of default or bankruptcy of the issuer of such securities, than more highly
rated debt securities. In the event that an existing holding is downgraded to
below investment grade, the Fund may nonetheless retain the security.
The Fund may engage in the purchase and writing of put and call options on
debt securities and securities indexes and may also purchase or sell interest
rate futures contracts, stock index futures contracts, and options thereon.
See "Characteristics and Risks of Securities and Investment Techniques" in the
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices.
EQUITY FUNDS
The NFJ Equity Income, NFJ Diversified Low P/E, NFJ Small Cap Value, Cadence
Capital Appreciation, Cadence Mid Cap Growth, Cadence Micro Cap Growth,
Cadence Small Cap Growth, Columbus Circle Investors Core Equity, Columbus
Circle Investors Mid Cap Equity, Parametric Enhanced Equity, Blairlogie
Emerging Markets, and Blairlogie International Active Funds will each invest
primarily (normally at least 65% of its assets) in common stock. Each Equity
Fund may maintain a portion of its assets, which will usually not exceed 10%,
in U.S. Government securities, high-quality debt securities (whose maturity or
remaining maturity will not exceed five years), money market obligations, and
in cash to provide for payment of the Fund's expenses and to meet redemption
requests. The Equity Funds that invest primarily in securities of foreign
issuers may invest in debt securities and money market obligations issued by
U.S. and foreign issuers and that are either U.S. dollar-denominated or
denominated in foreign currency.
Any of the Equity Funds may temporarily not be invested primarily in equity
securities after the commencement of operations or after receipt of
significant new monies. Any of the Equity Funds may temporarily not contain
the number of stocks in which the Fund normally invests if the Fund does not
have sufficient assets to be fully invested, or pending the Portfolio
Manager's ability to prudently invest new monies. It is the policy of all of
the Equity Funds to be as fully invested in common stock as practicable at all
times. This policy precludes the Equity Funds from investing in debt
securities as a defensive investment posture (although the Funds may invest in
such securities to provide for payment of expenses and to meet redemption
requests). Accordingly, investors in these Funds bear the risk of general
declines in stock prices and the risk that a Fund's exposure to such declines
cannot be lessened by investment in debt securities.
The Equity Funds may also invest in convertible securities, preferred stock,
warrants subject to certain limitations, and American Depository Receipts
("ADRs"). The Columbus Circle Investors Core Equity, Columbus Circle Investors
Mid Cap Equity, Blairlogie Emerging Markets, and Blairlogie International
Active Funds may also invest in European Depository Receipts ("EDRs") or
Global Depository Receipts ("GDRs"). For more information on these investment
practices, see "Characteristics and Risks of Securities and Investment
Techniques" in the Prospectus and "Investment Objectives and Policies" in the
Statement of Additional Information.
PIMCO ADVISORS
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18
DURATION
Duration is a measure of the expected life of a fixed income security that
was developed as a more precise alternative to the concept of "term to
maturity." Duration incorporates a bond's yield, coupon interest payments,
final maturity and call features into one measure. Duration is one of the
fundamental tools used by the Portfolio Manager in security selection for the
Fixed Income Securities Segment of the Balanced Fund.
Traditionally, a fixed income security's "term to maturity" has been used as
proxy for the sensitivity of the security's price to changes in interest rates
(which is the "interest rate risk" or "volatility" of the security). However,
"term to maturity" measures only the time until a fixed income security
provides its final payment, taking no account of the pattern of the security's
payments prior to maturity. Duration is a measure of the expected life of a
fixed income security on a present value basis.
INVESTMENT RESTRICTIONS
Each Fund's investment objective, as set forth under "Investment Objectives
and Policies," and the investment restrictions set forth below are fundamental
policies of the Fund and may not be changed with respect to a Fund without the
approval of a majority of the outstanding voting shares of that Fund. Under
these restrictions, a Fund may not:
(1) invest in a security if, as a result of such investment, more than
25% of its total assets (taken at market value at the time of such
investment) would be invested in the securities of issuers in any
particular industry, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (or repurchase agreements with respect thereto);
(2) with respect to 75% of its assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at
market value at the time of such investment) would be invested in the
securities of any one issuer, except that this restriction does not apply
to securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities;
(3) with respect to 75% of its assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the time
of such investment) of the outstanding voting securities of any one issuer,
except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities;
(4) purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies in the real estate industry or which invest in real estate or
interests therein;
(5) purchase or sell commodities or commodities contracts (which, for the
purpose of this restriction, shall not include foreign currency or forward
foreign currency contracts), except that any Fund may engage in interest
rate futures contracts, stock index futures contracts, futures contracts
based on other financial instruments or one or more groups of instruments,
and on options on such futures contracts;
(6) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but
it may make margin deposits in connection with transactions in options,
futures, and options on futures, and except that effecting short sales will
be deemed not to constitute a margin purchase for purposes of this
restriction;
(7) borrow money, or pledge, mortgage or hypothecate its assets, except
that a Fund may (i) borrow from banks or enter into reverse repurchase
agreements, or employ similar investment techniques, and pledge its assets
in connection therewith, but only if immediately after each borrowing and
continuing thereafter, there is asset coverage of 300% and (ii) enter into
reverse repurchase agreements and transactions in options, futures, options
on futures, and forward foreign currency contracts as described in this
Prospectus and in the Statement of Additional Information (the deposit of
assets in escrow in connection with the writing of covered put and call
options and the purchase of securities on a when-issued or delayed delivery
basis, and collateral arrangements with respect to initial or variation
margin deposits for futures contracts, options on futures contracts, and
forward foreign currency contracts will not be deemed to be pledges of a
Fund's assets);
<PAGE>
19
(8) issue senior securities, except insofar as a Fund may be deemed to
have issued a senior security by reason of borrowing money in accordance
with the Fund's borrowing policies, and except for purposes of this
investment restriction, collateral, escrow, or margin or other deposits
with respect to the making of short sales, the purchase or sale of futures
contracts or related options, purchase or sale of forward foreign currency
contracts, and the writing of options on securities are not deemed to be an
issuance of a senior security;
(9) lend any funds or other assets, except that a Fund may, consistent
with its investment objective and policies: (a) invest in debt obligations,
including bonds, debentures, or other debt securities, bankers' acceptances
and commercial paper, even though the purchase of such obligations may be
deemed to be the making of loans, (b) enter into repurchase agreements and
reverse repurchase agreements, and (c) lend its portfolio securities in an
amount not to exceed one-third of the value of its total assets, provided
such loans are made in accordance with applicable guidelines established by
the Securities and Exchange Commission ("SEC") and the Trustees of the
Trust; or
(10) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities, it
may be deemed to be an underwriter under the federal securities laws.
Each Fund is also subject to the following non-fundamental restrictions and
policies (which may be changed without shareholder approval) relating to the
investment of its assets and activities. Unless otherwise indicated, a Fund
may not:
(A) invest for the purpose of exercising control or management;
(B) invest in securities of another open-end investment company;
(C)(a) for the NFJ Equity Income, NFJ Diversified Low P/E, NFJ Small Cap
Value, Cadence Capital Appreciation, Cadence Mid Cap Growth, Cadence Small
Cap Growth, Parametric Enhanced Equity, and Balanced Funds: invest more
than 10% of the net assets of a Fund (taken at market value at the time of
the investment) in "illiquid securities," illiquid securities being defined
to include repurchase agreements maturing in more than seven days, certain
loan participation interests, fixed time deposits which are not subject to
prepayment or provide withdrawal penalties upon prepayment (other than
overnight deposits), or other securities which legally or in the Adviser's
or Portfolio Manager's opinion may be deemed illiquid (other than
securities issued pursuant to Rule 144A under the Securities Act of 1933
and certain commercial paper that the Adviser or Portfolio Manager has
determined to be liquid under procedures approved by the Board of
Trustees); nor invest more than 5% of the net assets of a Fund in
securities that are illiquid because they are subject to legal or
contractual restrictions on resale;
(b) for the Columbus Circle Investors Core Equity, Columbus Circle
Investors Mid Cap Equity, Cadence Micro Cap Growth, Blairlogie Emerging
Markets, and Blairlogie International Active Funds: invest more than 15% of
the net assets of a Fund (taken at market value at the time of the
investment) in securities that are illiquid because they are subject to
legal or contractual restrictions on resale, in repurchase agreements
maturing in more than seven days, or other securities which are illiquid;
(D) purchase any security if, as a result, the Fund will then have more
than 5% of its total assets invested in securities of companies (including
predecessor companies) that have been in continuous operation for less than
three years;
(E) purchase or retain securities of any issuer if, to the knowledge of
the Fund, any of the Fund's officers or Trustees, or any officer or
Director of PIMCO Advisors or the Portfolio Manager of the Fund,
individually owns more than one-half of 1% of the outstanding securities of
the issuer and together own beneficially more than 5% of such issuer's
securities;
(F) purchase securities for the Fund from, or sell portfolio securities
to, any of the officers and Directors or Trustees of the Trust or the
Adviser;
(G) invest in a security if, with respect to 100% of the total assets,
the Fund would own more than 10% (taken at the time of such investment) of
the outstanding voting securities of any one issuer, except that this
restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities;
PIMCO ADVISORS
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20
(H) invest more than 5% of the assets of a Fund (taken at market value at
the time of investment) in any combination of interest only, principal
only, or inverse floating rate securities;
(I) borrow money (excluding reverse repurchase agreements which are
subject to the Fund's fundamental borrowing restriction), except for
temporary administrative purposes in an amount up to 5% of its total
assets;
(J) sell securities or property short, except short sales against the
box;
(K) purchase, write, or sell puts, calls, straddles, spreads, or
combinations thereof, except that this restriction does not apply to puts
that are a feature of floating rate securities or to puts that are a
feature of other corporate debt securities, and except that any Fund may
engage in options on securities, options on securities indexes, options on
foreign currencies, options on futures contracts, and options on other
financial instruments or one or more groups of instruments;
(L) invest in warrants (other than warrants acquired by the Fund as part
of a unit or attached to securities at the time of purchase) if, as a
result, the investment in warrants (valued to the lower of cost or market)
would exceed 5% of the value of the Fund's net assets, of which not more
than 2% of the Fund's net assets may be invested in warrants not listed on
a recognized U.S. or foreign stock exchange;
(M) invest in securities sold in foreign over-the-counter markets unless
the foreign dealers effecting such transactions have a minimum net worth of
$20 million; or
(N) invest in oil, gas or other mineral exploration or development
programs (including oil, gas, or other mineral leases), except that a Fund
may invest in the securities of companies that invest in or sponsor those
programs.
For purposes of fundamental investment restriction (5), swap agreements are
not deemed to be commodities contracts. Unless otherwise indicated, all
limitations applicable to Fund investments apply only at the time a
transaction is entered into. Any subsequent change in a rating assigned by any
rating service to a security (or, if unrated, deemed to be of comparable
quality), or change in the percentage of Fund assets invested in certain
securities or other instruments resulting from market fluctuations or other
changes in a Fund's total assets will not require a Fund to dispose of an
investment until the Adviser or Portfolio Manager determines that it is
practicable to sell or close out the investment without undue market or tax
consequences to the Fund. In the event that ratings services assign different
ratings to the same security, the Adviser or Portfolio Manager will determine
which rating it believes best reflects the security's quality and risk at that
time, which may be the higher of the several assigned ratings.
CHARACTERISTICS AND RISKS OF SECURITIES
AND INVESTMENT TECHNIQUES
The different types of securities and investment techniques used by the
individual Funds all have attendant risks of varying degrees. For example,
with respect to common stock, there can be no assurance of capital
appreciation, and there is a risk of market decline. With respect to debt
securities, including money market instruments, there is the risk that the
issuer of a security may not be able to meet its obligation to make scheduled
interest or principal payments. In addition, the value of debt securities
generally rises and falls inversely with interest rates, and the longer the
maturity of the debt security, the more volatile it may be in terms of changes
in value. Because each Fund seeks a different investment objective and has
different investment policies, each is subject to varying degrees of
financial, market, and credit risks. Therefore, investors should carefully
consider the investment objective, investment policies, and potential risks of
any Fund or Funds before investing.
The following describes potential risks associated with different types of
investment techniques that may be used by the individual Funds. For more
detailed information on these investment techniques, as well as information on
the types of securities in which some or all of the Funds may invest, see the
Statement of Additional Information.
<PAGE>
21
LOW CAPITALIZATION STOCKS
The NFJ Equity Income, NFJ Diversified Low P/E, NFJ Small Cap Value, Cadence
Mid Cap Growth, Cadence Micro Cap Growth, Cadence Small Cap Growth, Blairlogie
Emerging Markets, and Blairlogie International Active Funds may invest in
common stock of companies with market capitalization that is low compared to
other publicly traded companies. NFJ Small Cap Value and Cadence Small Cap
Growth Funds may invest in companies with market capitalizations of $500
million or less, and Cadence Micro Cap Growth Fund may invest in companies
with market capitalizations of $100 million or less. Investments in larger
companies present certain advantages in that such companies generally have
greater financial resources, more extensive research and development,
manufacturing, marketing and service capabilities, and more stability and
greater depth of management and technical personnel. Investments in smaller,
less seasoned companies may present greater opportunities for growth but also
may involve greater risks than customarily are associated with more
established companies. The securities of smaller companies may be subject to
more abrupt or erratic market movements than larger, more established
companies. These companies may have limited product lines, markets or
financial resources, or they may be dependent upon a limited management group.
Their securities may be traded only in the over-the-counter market or on a
regional securities exchange. As a result, the disposition of securities to
meet redemptions may require a Fund to sell these securities at a
disadvantageous time, or at disadvantageous prices, or to make many small
sales over a lengthy period of time.
REPURCHASE AGREEMENTS
For the purposes of maintaining liquidity and achieving income, each Fund
may enter into repurchase agreements, which entail the purchase of a portfolio
eligible security from a bank or broker-dealer that agrees to repurchase the
security at the Fund's cost plus interest within a specified time (normally
one day). If the party agreeing to repurchase should default, as a result of
bankruptcy or otherwise, the Fund will seek to sell the securities which it
holds, which action could involve procedural costs or delays in addition to a
loss on the securities if their value should fall below their repurchase
price. Those Funds whose investment objectives do not include the earning of
income will invest in repurchase agreements only as a cash management
technique with respect to that portion of the portfolio maintained in cash.
Each Fund will limit its investment in repurchase agreements maturing in more
than seven days consistent with the Fund's policy on investment in illiquid
securities.
REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS
A reverse repurchase agreement is a form of leverage that involves the sale
of a security by a Fund and its agreement to repurchase the instrument at a
specified time and price. The Fund will maintain a segregated account
consisting of liquid assets, such as cash, U.S. Government securities or high
grade debt obligations, maturing not later than the expiration of the reverse
repurchase agreement, to cover its obligations under reverse repurchase
agreements.
Reverse repurchase agreements will be subject to the Funds' limitations on
borrowings, which will restrict the aggregate of such transactions (plus any
other borrowings) to 33 1/3% of a Fund's total assets. Apart from transactions
involving reverse repurchase agreements, a Fund will not borrow money, except
for temporary administrative purposes, in an amount exceeding 5% of its total
assets.
LOANS OF PORTFOLIO SECURITIES
For the purpose of achieving income, the Funds may lend their portfolio
securities, provided: (i) the loan is secured continuously by collateral
consisting of U.S. Government securities, cash or cash equivalents (negotiable
certificates of deposit, bankers' acceptances or letters of credit) maintained
on a daily mark-to-market basis in an amount at least equal to the current
market value of the securities loaned; (ii) the Fund may at any time call the
loan and obtain the return of the securities loaned; (iii) the Fund will
receive any interest or dividends paid on the loaned securities; and (iv) the
aggregate market value of securities loaned will not at any time exceed 33
1/3% of the total assets of the Fund.
PIMCO ADVISORS
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22
FOREIGN SECURITIES
The Blairlogie Emerging Markets and Blairlogie International Active Funds
may invest directly in foreign equity securities; U.S. dollar- or foreign
currency-denominated foreign corporate debt securities; foreign preferred
securities; certificates of deposit, fixed time deposits and bankers'
acceptances issued by foreign banks; obligations of foreign governments or
their subdivisions, agencies and instrumentalities, international agencies and
supranational entities; and securities represented by EDRs, ADRs, or GDRs.
ADRs are dollar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign issuer, and
are publicly traded on exchanges or over-the-counter in the United States.
EDRs are receipts similar to ADRs and are issued and traded in Europe. GDRs
may be offered privately in the United States and also trade in public or
private markets in other countries. The Columbus Circle Investors Core Equity
and Columbus Circle Investors Mid Cap Equity Funds each may invest up to 15%
of their respective net assets in securities which are traded principally in
securities markets outside the United States (Eurodollar certificates of
deposit are excluded for purposes of these limitations). In addition, the
Funds may invest up to 35% of their respective assets in ADRs, EDRs, and GDRs,
reduced by such amount that may be reserved for investments in high quality
debt securities, money market obligations, and cash or other permissible
investments. The NFJ Equity Income, NFJ Diversified Low P/E, NFJ Small Cap
Value, Cadence Capital Appreciation, Cadence Mid Cap Growth, Cadence Micro Cap
Growth, Cadence Small Cap Growth, Parametric Enhanced Equity, and Balanced
Funds may also invest in ADRs. The Parametric Enhanced Equity Fund may invest
in common stock of foreign issuers if included in the index from which stocks
are selected.
Investing in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing in
U.S. companies. Shareholders should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations. 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 (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Additionally, 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. Additional costs associated
with an investment in foreign securities may include higher custodial fees
than apply to domestic custodial arrangements and transaction costs of foreign
currency conversions. Changes in foreign exchange rates also will affect the
value of securities denominated or quoted in currencies other than the U.S.
dollar.
The Blairlogie Emerging Markets Fund may invest in the securities of issuers
based in countries with developing economies. Investing in developing
countries involves certain risks not typically associated with investing in
U.S. securities, and imposes risks greater than, or in addition to, risks of
investing in foreign, developed countries. These risks include: greater risk
of nationalization or expropriation of assets or confiscatory taxation;
currency devaluations and other currency exchange rate fluctuations; greater
social, economic and political uncertainty and instability (including the risk
of war); more substantial government involvement in the economy; higher rates
of inflation; less government supervision and regulation of the securities
markets and participants in those markets; controls on foreign investment and
limitations on repatriation of invested capital and on the Fund's ability to
exchange local currencies for U.S. dollars; unavailability of currency hedging
techniques in certain developing countries; the fact that companies in
developing countries may be smaller, less seasoned and newly organized
companies; the difference in, or lack of, auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; the risk that it may be more difficult to obtain and/or enforce a
judgment in a court outside the United States; and greater price volatility,
substantially less liquidity and significantly smaller market capitalization
of securities markets.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of 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, as seen
<PAGE>
23
from an international perspective. Currency exchange rates also can be
affected unpredictably by intervention (or the failure to intervene) by U.S.
or foreign governments or central banks, by currency controls or political
developments in the U.S. or abroad. Currencies in which the Funds' assets are
denominated may be devalued against the U.S. dollar, resulting in a loss to
the Funds.
The Columbus Circle Investors Core Equity, Columbus Circle Investors Mid Cap
Equity, Blairlogie Emerging Markets, and Blairlogie International Active Funds
may, in addition to buying and selling foreign currency futures contracts and
options on foreign currencies and foreign currency futures, enter into forward
foreign currency exchange contracts to reduce the risks of adverse changes in
foreign exchange rates. A forward foreign currency exchange contract involves
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. By entering into a
forward foreign currency contract, the Fund "locks in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. As a result, a Fund reduces its 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 exchange into. The effect on the
value of a Fund is similar to selling securities denominated in one currency
and purchasing securities denominated in another. Contracts to sell foreign
currency would limit any potential gain which might be realized by a Fund if
the value of the hedged currency increases. A Fund may enter into these
contracts for the purpose of hedging against foreign exchange risk arising
from the Fund's investment or anticipated investment in securities denominated
in foreign currencies. A Fund also may enter into these contracts for purposes
of increasing exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one country to another. 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. A Fund will segregate liquid assets,
such as cash or high grade debt obligations, in a segregated account to cover
forward currency contracts entered into for non-hedging purposes.
DERIVATIVE INSTRUMENTS
Certain Funds may purchase and write call and put options on securities,
securities indexes and foreign currencies, and enter into futures contracts
and use options on futures contracts as further described below. In pursuit of
their investment objectives, the Columbus Circle Investors Core Equity,
Columbus Circle Investors Mid Cap Equity, Blairlogie Emerging Markets,
Blairlogie International Active, and Balanced Funds may engage in the purchase
and writing of call and put options on securities; each of these Funds, along
with the Parametric Enhanced Equity Fund, may engage in the purchase and
writing of options on securities indexes. The Columbus Circle Investors Core
Equity, Columbus Circle Investors Mid Cap Equity, Blairlogie Emerging Markets,
and Blairlogie International Active Funds may engage in the purchase and
writing of call and put options on foreign currencies. The Blairlogie Emerging
Markets and Blairlogie International Active Funds also may enter into swap
agreements with respect to securities indexes. The Funds may use these
techniques to hedge against changes in interest rates, foreign currency
exchange rates or securities prices; to increase exposure to a foreign
currency; to shift exposure to foreign currency fluctuations from one country
to another; or as part of their overall investment strategies. Each Fund will
maintain segregated accounts consisting of liquid assets, such as cash, U.S.
Government securities, or other high grade debt obligations (or, as permitted
by applicable regulation, enter into certain offsetting positions) to cover
its obligations under options, futures, and swaps to avoid leveraging of the
Fund.
The Funds consider derivative instruments to consist of securities or other
instruments whose value is derived from or related to the value of some other
instrument or asset, and not to include those securities whose payment of
principal and/or interest depend upon cash flows from underlying assets, such
as mortgage or asset-backed securities. The value of some derivative
instruments in which the Funds invest may be particularly sensitive to changes
in prevailing interest rates, and, like the other investments of the Funds,
the ability of a Fund to successfully utilize these instruments may depend in
part upon the ability of the Portfolio Manager to forecast interest rates and
other economic factors correctly. If the Portfolio Manager incorrectly
forecasts such factors and has taken positions in derivative instruments
contrary to prevailing market trends, the Funds could be exposed to the risk
of loss.
PIMCO ADVISORS
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24
The Funds might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If the Portfolio
Manager incorrectly forecasts interest rates, market values or other economic
factors in utilizing a derivatives strategy for a Fund, the Fund might have
been in a better position if it had not entered into the transaction at all.
The use of these strategies involves certain special risks, including a
possible imperfect correlation, or even no correlation, between price
movements of derivative instruments and price movements of related
investments. While some strategies involving derivative instruments can reduce
the risk of loss, they can also reduce the opportunity for gain or even result
in losses by offsetting favorable price movements in related investments, or
due to the possible inability of a Fund to purchase or sell a portfolio
security at a time that otherwise would be favorable for it to do so, or the
possible need for a Fund to sell a portfolio security at a disadvantageous
time, because the Fund is required to maintain asset coverage or offsetting
positions in connection with transactions in derivative instruments, and the
possible inability of a Fund to close out or to liquidate its derivatives
positions.
Options on Securities, Securities Indexes, and Currencies Certain Funds may
purchase put options on securities. One purpose of purchasing put options is
to protect holdings in an underlying or related security against a substantial
decline in market value. These Funds may also purchase call options on
securities. One purpose of purchasing call options is to protect against
substantial increases in prices of securities the Fund intends to purchase
pending its ability to invest in such securities in an orderly manner. A Fund
may sell put or call options it has previously purchased, which could result
in a net gain or loss depending on whether the amount realized on the sale is
more or less than the premium and other transaction costs paid on the put or
call option which is sold. A Fund may write a call or put option only if the
option is "covered" by the Fund holding a position in the underlying
securities or by other means which would permit immediate satisfaction of the
Fund's obligation as writer of the option. Prior to exercise or expiration, an
option may be closed out by an offsetting purchase or sale of an option of the
same series.
The purchase and writing of options involves certain risks. During the
option period, the covered call writer has, in return for the premium on the
option, given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as its obligation
as a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation
under the option and must deliver the underlying securities at the exercise
price. If a put or call option purchased by the Fund is not sold when it has
remaining value, and if the market price of the underlying security remains
equal to or greater than the exercise price (in the case of a put), or remains
less than or equal to the exercise price (in the case of a call), the Fund
will lose its entire investment in the option. Also, where a put or call
option on a particular security is purchased to hedge against price movements
in a related security, the price of the put or call option may move more or
less than the price of the related security. There can be no assurance that a
liquid market will exist when a Fund seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
markets, a Fund may be unable to close out a position.
The Columbus Circle Investors Core Equity, Columbus Circle Investors Mid Cap
Equity, Blairlogie Emerging Markets, and Blairlogie International Active
Funds may buy or sell put and call options on foreign currencies as a hedge
against changes in the value of the U.S. dollar (or another currency) in
relation to a foreign currency in which a Fund's securities may be
denominated. Currency options traded on U.S. or other exchanges may be subject
to position limits which may limit the ability of a Fund to reduce foreign
currency risk using such options. Over-the-counter options differ from traded
options in that they are two-party contracts with price and other terms
negotiated between buyer and seller and generally do not have as much market
liquidity as exchange-traded options. The Funds may be required to treat as
illiquid over-the-counter options purchased and securities being used to cover
certain written over-the-counter options.
Swap Agreements The Blairlogie Emerging Markets and Blairlogie
International Active Funds may enter into equity index swap agreements for
purposes of gaining exposure to the stocks making up an index of securities in
a foreign market without actually purchasing those stocks. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard swap
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned
<PAGE>
25
or realized on particular predetermined investments or instruments, which may
be adjusted for an interest factor. The gross returns to be exchanged or
"swapped" between the parties are generally calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, or in a "basket" of
securities representing a particular index.
Most swap agreements entered into by the Funds would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current obligations (or rights) under a swap agreement will generally
be equal only to the net amount to be paid or received under the agreement
based on the relative values of the positions held by each party to the
agreement (the "net amount"). A Fund's current obligations under a swap
agreement will be accrued daily (offset against amounts owed to the Fund), and
any accrued but unpaid net amounts owed to a swap counterparty will be covered
by the maintenance of a segregated account consisting of liquid assets such as
cash, U.S. Government securities, or high grade debt obligations, to avoid any
potential leveraging of the Fund's portfolio. Obligations under swap
agreements so covered will not be construed to be "senior securities" for
purposes of the Funds' investment restriction concerning senior securities. A
Fund will not enter into a swap agreement with any single party if the net
amount owed or to be received under existing contracts with that party would
exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the Portfolio Manager's ability to predict
correctly whether certain types of investments are likely to produce greater
returns than other investments. Because they are two-party contracts and
because they may have terms of greater than seven days, swap agreements may be
considered to be illiquid investments. Moreover, a Fund bears the risk of loss
of the amount expected to be received under a swap agreement in the event of
the default or bankruptcy of a swap agreement counterparty. The Funds will
enter into swap agreements only with counterparties that meet certain
standards for creditworthiness (generally, such counterparties would have to
be eligible counterparties under the terms of the Funds' repurchase agreement
guidelines). Certain restrictions imposed on the Funds by the Internal Revenue
Code may limit the Funds' ability to use swap agreements. The swaps market is
a relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect a Fund's ability to terminate existing swap agreements
or to realize amounts to be received under such agreements.
Futures Contracts and Options on Futures Contracts The Balanced Fund may
invest in interest rate futures contracts and options thereon. The Columbus
Circle Investors Core Equity, Columbus Circle Investors Mid Cap Equity,
Parametric Enhanced Equity, Blairlogie Emerging Markets, Blairlogie
International Active, and Balanced Funds may invest in stock index futures
contracts and options thereon. The Columbus Circle Investors Core Equity,
Columbus Circle Investors Mid Cap Equity, Blairlogie Emerging Markets, and
Blairlogie International Active Funds may invest in foreign exchange futures
contracts and options thereon ("futures options") that are traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted on an
automated quotation system. These Funds may engage in such futures
transactions as an adjunct to their securities activities.
There are several risks associated with the use of futures and futures
options for hedging purposes. There can be no guarantee that there will be a
correlation between price movements in the hedging vehicle and in the
portfolio securities being hedged. An incorrect correlation could result in a
loss on both the hedged securities in a Fund and the hedging vehicle so that
the portfolio return might have been greater had hedging not been attempted.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there
is no assurance that an active secondary market will develop or continue to
exist. Lack of a liquid market for any reason may prevent a Fund from
liquidating an unfavorable position, and the Fund would remain obligated to
meet margin requirements until the position is closed.
The Funds will only enter into futures contracts or futures options which
are standardized and traded on a U.S. or foreign exchange or board of trade,
or similar entity, or quoted on an automated quotation system. Each Fund will
use financial futures contracts and related options only for "bona fide
hedging" purposes, as such
PIMCO ADVISORS
<PAGE>
26
term is defined in applicable regulations of the Commodity Futures Trading
Commission ("CFTC"), or, with respect to positions in financial futures and
related options that do not qualify as "bona fide hedging" positions, will
enter such positions only to the extent that aggregate initial margin deposits
plus premiums paid by it for open futures option positions, less the amount by
which any such positions are "in-the-money," would not exceed 5% of the Fund's
net assets.
MORTGAGE-RELATED AND ASSET-BACKED SECURITIES
The Balanced Fund may invest in mortgage-related securities, and in other
asset-backed securities (unrelated to mortgage loans) that are offered to
investors in the future. The value of some mortgage-related or asset-backed
securities in which the Fund invests may be particularly sensitive to changes
in prevailing interest rates, and, like the other investments of the Funds,
the ability of the Fund to successfully utilize these instruments may depend
in part upon the ability of the Portfolio Manager to forecast interest rates
and other economic factors correctly.
Mortgage Pass-Through Securities are securities representing interests in
"pools" of mortgage loans secured by residential or commercial real property
in which payments of both interest and principal on the securities are
generally made monthly, in effect "passing through" monthly payments made by
the individual borrowers on the mortgage loans which underlie the securities
(net of fees paid to the issuer or guarantor of the securities). Early
repayment of principal on some mortgage-related securities (arising from
prepayments of principal due to sale of the underlying property, refinancing,
or foreclosure, net of fees and costs which may be incurred) may expose the
Fund to a lower rate of return upon reinvestment of principal. Also, if a
security subject to prepayment has been purchased at a premium, the value of
the premium would be lost in the event of prepayment. Like other fixed income
securities, 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.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA")); or
guaranteed by agencies or instrumentalities of the U.S. Government (in the
case of securities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are
supported only by the discretionary authority of the U.S. Government to
purchase the agency's obligations). Mortgage-related securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-related
instruments. Similar to a bond, interest and pre-paid principal on a CMO are
paid, in most cases, semi-annually. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are
structured into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class; investors holding
the longer maturity classes receive principal only after the first class has
been retired. CMOs that are issued or guaranteed by the U.S. Government or by
any of its agencies or instrumentalities will be considered U.S. Government
securities by the Fund, while other CMOs, even if collateralized by U.S.
Government securities, will have the same status as other privately issued
securities for purposes of applying the Fund's diversification tests.
Commercial Mortgage-Backed Securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property.
The market for commercial mortgage-backed securities developed more recently
and in terms of total outstanding principal amount of issues is relatively
small compared to the market for residential single-family mortgage-backed
securities. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans.
<PAGE>
27
These risks reflect the effects of local and other economic conditions on real
estate markets, the ability of tenants to make loan payments, and the ability
of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility than other
types of mortgage- or asset-backed securities.
Mortgage-Related Securities include securities other than those described
above that directly or indirectly represent a participation in, or are secured
by and payable from, mortgage loans on real property, such as CMO residuals or
stripped mortgage-backed securities ("SMBS"), and may be structured in classes
with rights to receive varying proportions of principal and interest.
A common type of SMBS will have one class receiving some of the interest and
most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the "IO" class),
while the other class will receive all of the principal (the principal-only,
or "PO" class). The yield to maturity on an IO class is extremely sensitive to
the rate of principal payments (including prepayments) on the related
underlying mortgage assets, and a rapid rate of principal payments may have a
material adverse effect on the Fund's yield to maturity from these securities.
The Fund has adopted a policy under which it will not invest more than 5% of
its net assets in any combination of IO, PO, or inverse floater securities.
For a discussion of the characteristics of some of these instruments, see the
Statement of Additional Information.
ILLIQUID SECURITIES
The NFJ Equity Income, NFJ Diversified Low P/E, NFJ Small Cap Value, Cadence
Capital Appreciation, Cadence Mid Cap Growth, Cadence Small Cap Growth,
Parametric Enhanced Equity, and Balanced Funds may invest in securities that
are illiquid, but will not acquire such securities if they would compose more
than 10% of the value of a Fund's net assets (taken at market value at the
time of investment), and will not invest in securities that are illiquid
because they are subject to legal or contractual restrictions on resale if
such securities would compose more than 5% of the value of the Fund's net
assets (taken at market value at the time of investment). The Columbus Circle
Investors Core Equity, Columbus Circle Investors Mid Cap Equity, Cadence Micro
Cap Growth, Blairlogie Emerging Markets, and Blairlogie International Active
Funds may invest in securities that are illiquid so long as no more than 15%
of the net assets of the Fund (taken at market value at the time of
investment), would be invested in such 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. Illiquid
securities are considered to include, among other things, written over-the-
counter options, securities or other liquid assets being used as cover for
such options, repurchase agreements with maturities in excess of seven days,
certain loan participation interests, fixed time deposits which are not
subject to prepayment or provide for withdrawal penalties upon prepayment
(other than overnight deposits), securities that are subject to legal or
contractual restrictions on resale (such as privately placed debt securities),
and other securities whose disposition is restricted under the federal
securities laws (other than securities issued pursuant to Rule 144A under the
Securities Act of 1933 and certain commercial paper that the Adviser or a
Portfolio Manager has determined to be liquid under procedures approved by the
Board of Trustees).
PIMCO ADVISORS
<PAGE>
28
MANAGEMENT OF THE TRUST
The business affairs of the Trust are managed under the direction of the
Board of Trustees. The Trustees are William D. Cvengros, Richard L. Nelson,
Lyman W. Porter, and Alan Richards. Additional information about the Trustees
and the Trust's executive officers may be found in the Statement of Additional
Information under the heading "Management--Trustees and Officers."
INVESTMENT ADVISER
PIMCO Advisors L.P. serves as Investment Adviser to the Funds pursuant to an
investment advisory agreement with the Trust. PIMCO Advisors is a Delaware
limited partnership organized in 1987. PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. Total assets under management by PIMCO
Advisors and its subsidiary partnerships at September 30, 1995 were
approximately $87.6 billion. A portion of the units of the limited partner
interest in PIMCO Advisors is traded publicly on the New York Stock Exchange.
The general partner of PIMCO Advisors is PIMCO Partners, G.P. Pacific Mutual
Life Insurance Company and its affiliates hold a substantial interest in PIMCO
Advisors through direct or indirect ownership of units of PIMCO Advisors, and
indirectly hold a majority interest in PIMCO Partners, G.P., with the
remainder held indirectly by a group composed of the Managing Directors of
PIMCO. PIMCO Advisors is governed by an Operating Board and Equity Board,
which exercise substantially all of the governance powers of the general
partner and serve as the functional equivalent of a board of directors. PIMCO
Advisors' address is 840 Newport Center Drive, Newport Beach, California
92660. PIMCO Advisors is registered as an investment adviser with the SEC.
PIMCO Advisors currently has six subsidiary partnerships: PIMCO, Parametric,
Cadence, NFJ, Blairlogie, and Columbus Circle.
Under the investment advisory agreement, PIMCO Advisors, subject to the
supervision of the Board of Trustees, is responsible for providing advice and
guidance with respect to the Funds and for managing, either directly or
through others selected by the Adviser, the investment of the Funds. PIMCO
Advisors also furnishes to the Board of Trustees periodic reports on the
investment performance of each Fund.
PORTFOLIO MANAGERS
Pursuant to portfolio management agreements, PIMCO Advisors employs its
affiliates as Portfolio Managers for all of the Funds. PIMCO Advisors
compensates these Portfolio Managers from its advisory fee (not from the
Trust). Under these agreements, a Portfolio Manager has full investment
discretion and makes all determinations with respect to the investment of a
Fund's assets, or, for the Balanced Fund, with respect to the portion of the
Fund's assets allocated to the Portfolio Manager for investment, and makes all
determinations respecting the purchase and sale of a Fund's securities and
other investments.
PIMCO manages the Fixed Income Securities Segment of the Balanced Fund.
PIMCO is an investment management firm organized as a general partnership.
PIMCO has two partners: PIMCO Advisors as the supervisory partner, and PIMCO
Management, Inc. as the managing partner. Pacific Investment Management
Company, the predecessor investment adviser to PIMCO, commenced operations in
1971. PIMCO had approximately $68.5 billion of assets under management as of
September 30, 1995. PIMCO's address is 840 Newport Center Drive, Suite 360,
Newport Beach, California 92660. PIMCO is registered as an investment adviser
with the SEC and as a commodity trading adviser with the CFTC.
William H. Gross is responsible for the day-to-day management of the Fixed
Income Securities Segment of the Balanced Fund. Mr. Gross is a founder and
Managing Director of PIMCO and has been associated with PIMCO or its
predecessor for 24 years. He has extensive investment experience in both
credit research and fixed income portfolio management. He received his
bachelor's degree from Duke University and his MBA from UCLA Graduate School
of Business. Mr. Gross is a Chartered Financial Analyst and a member of The
Los Angeles Society of Financial Analysts.
<PAGE>
29
Parametric manages the Parametric Enhanced Equity Fund and the Common Stock
Segment of the Balanced Fund. Parametric is an investment management firm
organized as a general partnership. Parametric has two partners: PIMCO
Advisors as the supervisory partner, and Parametric Management, Inc. as the
managing partner. Parametric Portfolio Associates, Inc., the predecessor
investment adviser to Parametric, commenced operations in 1987. Accounts
managed by Parametric had combined assets as of September 30, 1995 of
approximately $1.5 billion. Parametric's address is 7310 Columbia Center, 701
Fifth Avenue, Seattle, Washington 98104-7090. Parametric is registered as an
investment adviser with the SEC and as a commodity trading adviser with the
CFTC.
Mark England-Markun and Devin Wate are primarily responsible for the day-to-
day management of the Parametric Enhanced Equity Fund and the Common Stock
Segment of the Balanced Fund. Mr. England-Markun is a Managing Director and
founding partner of Parametric and has been associated with Parametric or its
predecessor since its inception in 1987. He also directs research and product
development for Parametric. Mr. England-Markun graduated with a bachelor's
degree in Mathematics and Economics, and a master's degree in Economics and
Statistics from the University of Minnesota, and received his MBA from the
University of California at Berkeley. Mr. Wate is Director of Execution and
Administration of Parametric and has been associated with Parametric or its
predecessor since its inception. He has previous experience in equity
analysis, trading, portfolio accounting and compliance for large international
and domestic equity funds. Mr. Wate graduated from the University of Oregon
with a bachelor's degree in Finance and Accounting.
NFJ manages the NFJ Equity Income Fund, the NFJ Diversified Low P/E Fund,
and the NFJ Small Cap Value Fund. NFJ is an investment management firm
organized as a general partnership. NFJ has two partners: PIMCO Advisors as
the supervisory partner, and NFJ Management, Inc. as the managing partner. NFJ
Investment Group, Inc., the predecessor investment adviser to NFJ, commenced
operations in 1989. Accounts managed by NFJ had combined assets as of
September 30, 1995 of approximately $1.4 billion. NFJ's address is 2121 San
Jacinto, Suite 1440, Dallas, Texas 75201. NFJ is registered as an investment
adviser with the SEC.
Chris Najork is responsible for the day-to-day management of the NFJ Equity
Income Fund and the NFJ Diversified Low P/E Fund. Mr. Najork is a Managing
Director and a founding partner of NFJ and has 23 years' experience
encompassing equity research and portfolio management. He received his
bachelor's degree and MBA from Southern Methodist University. Mr. Najork is a
Chartered Financial Analyst. Mr. Najork and Paul A. Magnuson are primarily
responsible for the day-to-day management of the NFJ Small Cap Value Fund. Mr.
Magnuson, a research analyst at NFJ, has 11 years' experience in equity
research and portfolio management. He received his bachelor's degree in
Finance from the University of Nebraska-Lincoln.
Cadence manages the Cadence Capital Appreciation Fund, the Cadence Mid Cap
Growth Fund, the Cadence Micro Cap Growth Fund, and the Cadence Small Cap
Growth Fund (the "Cadence Funds"). Cadence is an investment management firm
organized as a general partnership. Cadence has two partners: PIMCO Advisors
as the supervisory partner, and Cadence Capital Management, Inc. as the
managing partner. Cadence Capital Management Corporation, the predecessor
investment adviser to Cadence, commenced operations in 1988. Accounts managed
by Cadence had combined assets as of September 30, 1995 of approximately $2.4
billion. Cadence's address is Exchange Place, 53 State Street, Boston,
Massachusetts 02109. Cadence is registered as an investment adviser with the
SEC.
David B. Breed and William B. Bannick are primarily responsible for the day-
to-day management of the Cadence Funds. Mr. Breed is a Managing Director,
Chief Executive Officer, and founding partner of Cadence and has 23 years'
investment management experience. He has been the driving force in developing
the firm's growth-oriented stock screening and selection process and has been
with Cadence or its predecessor since its inception. Mr. Breed graduated from
the University of Massachusetts and received his MBA from the Wharton School
of Business. He is a Chartered Financial Analyst. Mr. Bannick is a Managing
Director of Cadence and has 11 years' investment management experience. He had
previously served as Executive Vice President of George D. Bjurman &
Associates and as Supervising Portfolio Manager of Trinity Investment
Management Corporation. Mr. Bannick joined Cadence's predecessor in 1992. He
graduated from the University of Massachusetts and received his MBA from
Boston University. Mr. Bannick is a Chartered Financial Analyst.
PIMCO ADVISORS
<PAGE>
30
Columbus Circle manages the Columbus Circle Investors Core Equity Fund and
the Columbus Circle Investors Mid Cap Equity Fund (the "Columbus Circle
Funds"). Columbus Circle is an investment management firm organized as a
general partnership. Columbus Circle has two partners: PIMCO Advisors as the
supervisory partner, and Columbus Circle Investors Management, Inc. as the
managing partner. Columbus Circle Investors Division of Thomson Advisory Group
L.P. ("TAG"), the predecessor investment adviser to Columbus Circle, commenced
operations in 1975 as a division of Gulf + Western Industries (now Paramount
Communications). In 1985, the business was acquired by Thomson McKinnon Asset
Management, and in 1990, Irwin S. Smith and Donald A. Chiboucas, Chairman and
Managing Director, and President and Managing Director, respectively, of
Columbus Circle, participated in a management led purchase of the controlling
interest in TAG, of which Columbus Circle was a division. Accounts managed by
Columbus Circle had combined assets as of September 30, 1995 of approximately
$13 billion. Columbus Circle's address is Metro Center, One Station Place, 8th
Floor, Stamford, Connecticut 06902. Columbus Circle is registered as an
investment adviser with the SEC.
The investment decisions made by Columbus Circle with respect to the
Columbus Circle Funds are made by a committee rather than by a single person
acting as portfolio manager. No person is primarily responsible for making
recommendations to that committee.
Blairlogie manages the Blairlogie Emerging Markets Fund and the Blairlogie
International Active Fund (the "Blairlogie Funds"). Blairlogie is a Scottish
investment management firm, organized as a United Kingdom limited partnership
with two general partners and one limited partner. The general partners are
PIMCO Advisors, which serves as the supervisory partner, and Blairlogie
Holdings Limited, a wholly owned corporate subsidiary of PIMCO Advisors, which
serves as the managing partner. The limited partner is Blairlogie Partners
L.P., a limited partnership, the general partner of which is Pacific Financial
Asset Management Corporation, and the limited partners of which are the
principal executive officers of Blairlogie Capital Management Ltd. Blairlogie
Partners L.P. has agreed with PIMCO Advisors that PIMCO Advisors will acquire
one-fifth of its 25% interest annually, beginning December 31, 1997.
Blairlogie Capital Management Ltd., the predecessor investment adviser to
Blairlogie, commenced operations in 1992. Accounts managed by Blairlogie had
combined assets as of September 30, 1995 of approximately $0.6 billion.
Blairlogie's address is 4th Floor, 125 Princes Street, Edinburgh EH2 4AD,
Scotland. Blairlogie is registered as an investment adviser with the SEC in
the United States and with the Investment Management Regulatory Organisation
("IMRO") in the United Kingdom.
James Smith is primarily responsible for the day-to-day management of the
Blairlogie Funds. Mr. Smith is a Managing Director and Chief Investment
Officer of Blairlogie and is responsible for managing an investment team of
seven professionals who, in turn, specialize in selection of stocks within
Europe, Asia, the Americas and in currency and derivatives. He previously
served as a senior portfolio manager at Murray Johnstone in Glasgow, Scotland,
responsible for international investment management for North American
clients, and at Schroder Investment Management in London. Mr. Smith received
his bachelor's degree in Economics from London University and his MBA from
Edinburgh University. He is an Associate of the Institute of Investment
Management and Research.
PIMCO Advisors determines the allocation of the Balanced Fund's assets among
various asset classes, and manages the Money Market Segment of that Fund.
Registration as an investment adviser with the SEC does not involve
supervision by the SEC over investment advice, and registration with the CFTC
as a commodity trading adviser does not involve supervision by the CFTC over
commodities trading. The portfolio management agreements are not exclusive,
and PIMCO, Parametric, NFJ, Cadence, Columbus Circle, and Blairlogie may
provide, and currently are providing, investment management services to other
clients, including other investment companies.
FUND ADMINISTRATOR
PIMCO serves as administrator to the Funds pursuant to an administration
agreement. PIMCO provides administrative services to the Funds, which include
clerical help and accounting, bookkeeping, internal audit services, and
certain other services required by the Funds, preparation of reports to the
Funds' shareholders and regulatory filings. In addition, PIMCO, at its own
expense, arranges for the provision of legal, audit, custody, transfer agency
and other services for the Funds, and is responsible for the costs of
registration of the Trust's shares and the printing of prospectuses and
shareholder reports for current shareholders.
<PAGE>
31
The Trust is responsible for the following expenses: (i) salaries and other
compensation of any of the Trust's executive officers and employees who are
not officers, directors, stockholders, or employees of PIMCO Advisors, PIMCO,
or its subsidiaries or affiliates; (ii) taxes and governmental fees; (iii)
brokerage fees and commissions and other portfolio transaction expenses; (iv)
the costs of borrowing money, including interest expenses; (v) fees and
expenses of the Trustees who are not "interested persons" of the Adviser,
PIMCO, Portfolio Managers, or the Trust, and any counsel retained exclusively
for their benefit; (vi) extraordinary expenses, including costs of litigation
and indemnification expenses; (vii) expenses which are capitalized in
accordance with generally accepted accounting principles; and (viii) any
expenses allocated or allocable to a specific class of shares, which include
service fees payable with respect to the Administrative Class shares and may
include certain other expenses as permitted by the Trust's Multiple Class Plan
adopted pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the
"1940 Act") and subject to review and approval by the Trustees.
ADVISORY AND ADMINISTRATIVE FEES
The Funds feature fixed advisory and administrative fees. For providing
investment advisory services to the Funds, PIMCO Advisors receives monthly
fees from each Fund at an annual rate based on the average daily net assets of
the Fund as follows:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE RATE
---- --------
<S> <C>
NJF Equity Income, NFJ Diversified Low P/E, Cadence Capital Appreci-
ation,
Cadence Mid Cap Growth, Parametric Enhanced Equity, and Balanced
Funds.............................................................. .45%
Columbus Circle Investors Core Equity Fund.......................... .57%
NFJ Small Cap Value and Blairlogie International Active Funds....... .60%
Columbus Circle Investors Mid Cap Equity Fund....................... .63%
Blairlogie Emerging Markets Fund.................................... .85%
Cadence Small Cap Growth Fund....................................... 1.00%
Cadence Micro Cap Growth Fund....................................... 1.25%
</TABLE>
For providing administrative services to the Funds as described above, PIMCO
receives monthly fees from each Fund at an annual rate based on the average
daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEE RATE
---- --------------
<S> <C>
Blairlogie International Active and Blairlogie Emerging Mar-
kets Funds................................................... .50%
All Other Funds............................................... .25%
</TABLE>
Both the investment advisory and administration agreements for the Funds may
be terminated by the Trustees, or by PIMCO Advisors or PIMCO (as the case may
be), on 60 days' written notice. Following their initial two-year terms, the
agreements will continue from year to year if approved by the Trustees.
Pursuant to the portfolio management agreements between the Adviser and each
of the Portfolio Managers, PIMCO Advisors (not the Trust) pays each Portfolio
Manager a fee based on a percentage of the average daily net assets of a Fund
as follows: PIMCO--.25% for the Fixed Income Securities Segment of the
Balanced Fund; Parametric--.45% for the Common Stock Segment of the Balanced
Fund and .45% for the Parametric Enhanced Equity Fund; NFJ--.45% for the NFJ
Equity Income Fund, .45% for the NFJ Diversified Low P/E Fund, and .60% for
the NFJ Small Cap Value Fund; Cadence--.45% for the Cadence Capital
Appreciation Fund, .45% for the Cadence Mid Cap Growth Fund, 1.00% for the
Cadence Small Cap Growth Fund, and 1.25% for the Cadence Micro Cap Growth
Fund; Columbus Circle--.57% for the Columbus Circle Investors Core Equity Fund
and .63% for the Columbus Circle Investors Mid Cap Equity Fund; and
Blairlogie--.60% for the Blairlogie International Active Fund and .85% for the
Blairlogie Emerging Markets Fund.
SERVICE FEES
The Trust has adopted an Administrative Services Plan (the "Plan") with
respect to the Administrative Class shares of each Fund. Under the terms of
the Plan, PIMCO is permitted to reimburse, in an amount up to 0.25% on an
annual basis of the average daily net assets of the Administrative Class,
financial intermediaries
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that provide services in connection with the administration of plans or
programs that use Fund shares as their funding medium. Fees paid pursuant to
the Plan may be paid for shareholder service and the maintenance of accounts,
and therefore may constitute "service fees" for purposes of applicable rules
of the National Association of Securities Dealers, Inc. The Plan has been
adopted in accordance with the requirements of Rule 12b-1 under the 1940 Act
and will be administered in accordance with the provisions of that rule,
except that shareholders will not have the voting rights set forth in Rule
12b-1 with respect to the Plan. For more complete disclosure regarding the
Plan and its terms, see the Statement of Additional Information.
Institutional Class shares of the Trust may also be offered through certain
brokers and financial intermediaries ("service agents") that have established
a shareholder servicing relationship with the Trust on behalf of their
customers. The Trust pays no compensation to such entities. Service agents may
impose additional or different conditions on the purchase or redemption of
Trust shares by their customers and may charge their customers transaction or
other account fees on the purchase and redemption of Trust shares. Each
service agent is responsible for transmitting to its customers a schedule of
any such fees and information regarding any additional or different conditions
regarding purchases and redemptions. Shareholders who are customers of service
agents should consult their service agent for information regarding these fees
and conditions.
DISTRIBUTOR
Shares of the Trust are distributed through PIMCO Advisors Distribution
Company (the "Distributor"), an indirect wholly owned subsidiary of PIMCO
Advisors. The Distributor is a broker-dealer registered with the SEC.
PURCHASE OF SHARES
Each Fund offers its shares in two classes: the "Institutional Class" and
the "Administrative Class." Shares of the Institutional Class are offered
primarily for direct investment by institutional investors and high net worth
individuals. They also are offered through certain financial intermediaries
that charge their customers transaction or other fees with respect to their
customers' investment in the Funds. Shares of the Administrative Class are
offered primarily through broker-dealers, retirement plan administrators and
other financial intermediaries. Administrative Class shares indirectly pay
service fees to such entities for services they provide to shareholders of
that class.
Shares of either class of the Funds may be purchased at the relevant net
asset value of that class without a sales charge. The minimum initial
investment for shares of either class is $200,000.
INITIAL INVESTMENT
An account may be opened by completing and signing a Client Registration
Application and mailing it to PIMCO Advisors Institutional Funds at the
following address: 840 Newport Center Drive, Suite 360, Newport Beach,
California 92660.
Except as provided below, purchases of shares can only be made by wiring
Federal funds to Investors Fiduciary Trust Company (the "Transfer Agent").
Before wiring Federal funds, the investor must first telephone the Trust at
(800) 927-4648 to receive instructions for wire transfer, and the following
information will be requested: name of authorized person; shareholder name;
shareholder account number; name of Fund and share class; amount being wired;
and wiring bank name.
Shares may be purchased without first wiring Federal funds if the proceeds
of the investment are derived from an advisory account maintained by the
investor with PIMCO Advisors or one of its affiliates; from surrender or other
payment from an annuity, insurance, or other contract held by Pacific Mutual;
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.
All purchase orders are effected at the relevant net asset value for that
class next determined after receipt of the purchase order. A purchase order,
together with payment in proper form, received by the Transfer Agent
<PAGE>
33
prior to the close of business (4:00 p.m., Eastern time) on a day the Trust is
open for business will be effected at that day's net asset value; an order
received after the close of business will be effected at the net asset value
determined on the next business day. The Trust is "open for business" on each
day the New York Stock Exchange is open for trading, which excludes the
following holidays: New Year's Day, 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.
ADDITIONAL INVESTMENTS
Additional investments may be made at any time at the relevant net asset
value for that class by calling the Trust and wiring Federal funds to the
Transfer Agent as outlined above.
OTHER PURCHASE INFORMATION
Purchases of a Fund's shares will be made in full and fractional shares. In
the interest of economy and convenience, certificates for shares will not be
issued.
The Trust and the Distributor each reserves the right, in its sole
discretion, to suspend the offering of shares of the 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; to waive the
minimum initial investment for certain investors; and to redeem shares if
information provided in the Client Registration Application should prove to be
incorrect in any manner judged by the Trust to be material (e.g., in a manner
such as to render the shareholder ineligible to purchase shares of the Trust).
Shares of the Trust are not qualified or registered for sale in all states.
Prospective investors should inquire as to whether shares of a particular Fund
are available for offer and sale in their 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.
Investors may, subject to the approval of the Trust, purchase shares of a
Fund with liquid securities that are eligible for purchase by the Fund
(consistent with such 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 the Portfolio
Manager intends to retain the security in the Fund as an investment. Assets so
purchased by a Fund 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.
CONTRIBUTED CAPITAL LIMITATIONS
The Cadence Micro Cap Growth Fund limits the purchase of shares (contributed
capital) by any one investor to $10,000,000, exclusive of shares purchased
through reinvestment of dividends and distributions. Additionally, the Trust
has determined to limit the aggregate contributed capital by all investors in
the Fund to $100,000,000. Therefore, when the aggregate contributed capital in
the Fund reaches such amount, the Fund will no longer be available for
additional investment, until such time as an existing investor redeems a
dollar amount sufficient to allow a new investment into the Fund. In addition,
shares of the Cadence Small Cap Growth Fund are not offered as of the date of
this Prospectus; however, additional investment in the Fund may be available
in the event that an existing shareholder redeems a sufficient dollar amount.
These limitations may be changed or eliminated at any time at the discretion
of the Trust's Board of Trustees.
RETIREMENT PLANS
The Funds are available as an investment option for participants in
retirement and savings plans, including Keogh plans, 401(k) plans, 403(b)
plans, 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
PIMCO ADVISORS
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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 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 his order with the plan administrator, and the time the
order is forwarded to the Transfer Agent for execution.
REDEMPTION OF SHARES
REDEMPTIONS BY MAIL
Shares may be redeemed by submitting a written request to PIMCO Advisors
Institutional Funds, 840 Newport Center Drive, Suite 360, Newport Beach,
California 92660, stating 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
If an election is made on the Client Registration Application (or
subsequently in writing), redemptions of shares may be requested by calling
the Trust at (800) 927-4648, by sending a facsimile to (714) 760-4456, or by
other means of wire communication. Investors should state the Fund and class
from which the shares are to be redeemed, the number or dollar amount of the
shares to be redeemed and the account number. Redemption requests of an amount
of $10,000,000 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 and the Transfer
Agent to be genuine. Neither the Trust nor its Transfer Agent will 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 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 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 "Redemption of Shares--
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.
<PAGE>
35
OTHER REDEMPTION INFORMATION
Payment of the redemption price will ordinarily be wired to the investor's
bank three business days after the tender 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 Fund 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 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.
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. If shares are redeemed in kind, however, the
redeeming shareholder should expect to incur transaction costs upon the
disposition of the securities received in the distribution.
EXCHANGE PRIVILEGE
Shares of a Fund may be exchanged for shares of the same class of any other
Fund based on the respective net asset values of the shares involved. An
exchange may be made by following the redemption procedure described above
under "Redemptions by Mail" or, if the telephone redemption option has been
elected, by calling the Trust at (800) 927-4648. Shares of a Fund may also be
exchanged for shares of the same class of a series of the PIMCO Funds, an
affiliated, open-end management investment company, composed primarily of
fixed income portfolios managed by PIMCO. Shareholders interested in such an
exchange may request a prospectus for these funds by contacting the PIMCO
Funds at the same address and telephone number as the Trust.
Exchanges may be made only with respect to Funds or PIMCO Funds series
registered in the state of residence of the investor or where an exemption
from registration is available. An exchange order is treated the same as a
redemption followed by a purchase and may result in a capital gain or loss for
tax purposes, and special rules may apply in computing tax basis when
determining gain or loss. See "Taxation" in the Statement of Additional
Information.
PORTFOLIO TRANSACTIONS
Pursuant to the portfolio management agreements, a Portfolio Manager places
orders for the purchase and sale of portfolio investments for the Funds'
accounts with brokers or dealers selected by it in its discretion. In
effecting purchases and sales of portfolio securities for the account of the
Funds, the Portfolio Manager will seek the best price and execution of the
Funds' orders. In doing so, a Fund may pay higher commission rates than the
lowest available when the Portfolio Manager believes it is reasonable to do so
in light of the value of the
PIMCO ADVISORS
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brokerage and research services provided by the broker effecting the
transaction. The Portfolio Manager also may consider sales of shares of the
Trust as a factor in the selection of broker-dealers to execute portfolio
transactions for the Trust.
The Portfolio Managers manage the Funds without regard generally to
restrictions on portfolio turnover, except those imposed on its ability to
engage in short-term trading by provisions of the federal tax laws. The use of
futures contracts and other derivative instruments with relatively short
maturities may tend to exaggerate the portfolio turnover rate for some of the
Funds. The use of futures contracts may involve the payment of commissions to
futures commission merchants. The higher the rate of portfolio turnover of a
Fund, the higher the transaction costs borne by the Fund generally will be.
Some securities considered for investment by the Funds may also be
appropriate for other clients served by the Portfolio Manager. If a purchase
or sale of securities consistent with the investment policies of a Fund and
one or more of these clients served by the Portfolio Manager is considered at
or about the same time, transactions in such securities will be allocated
among the Fund and clients in a manner deemed fair and reasonable by the
Portfolio Manager.
NET ASSET VALUE
The net asset value per share of each class of each Fund is determined as of
the close of trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time) by dividing the total market value of a Fund's portfolio
investments and other assets attributable to that class, less any liabilities,
by the number of total outstanding shares of that class. The net asset values
of the Institutional Class and Administrative Class of a Fund may diverge due
to the effect of rounding at the time net asset value is calculated. Net asset
value will not be determined on days on which the New York Stock Exchange is
closed.
Portfolio securities and other assets for which market quotations are
readily available are stated at market value. Market value is determined on
the basis of last reported sales prices, or if no sales are reported, as is
the case for most securities traded over-the-counter, at the mean between
representative bid and asked quotations obtained from a quotation reporting
system or from established market makers. Fixed income securities, including
those to be purchased under firm commitment agreements (other than obligations
having a maturity of 60 days or less), are normally valued on the basis of
quotations obtained from brokers and dealers or pricing services, which take
into account appropriate factors such as institutional-sized trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data. Quotations of foreign
securities in foreign currency are converted to U.S. dollar equivalents using
foreign exchange quotations received from independent dealers. Short-term
investments having a maturity of 60 days or less are valued at amortized cost,
when the Board of Trustees determines that amortized cost is their fair value.
Certain fixed income securities for which daily market quotations are not
readily available may be valued, pursuant to guidelines established by the
Board of Trustees, with reference to fixed income securities whose prices are
more readily obtainable and whose durations are comparable to the securities
being valued. Subject to the foregoing, other securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by the Board of Trustees.
DIVIDENDS, DISTRIBUTION AND TAXES
Shares begin earning dividends on the effective date of purchase, provided
notification deadlines are met. See "Purchase of Shares." Net investment
income from interest and dividends, if any, will be declared and paid
quarterly to shareholders of record by the NFJ Equity Income, NFJ Diversified
Low P/E, NFJ Small Cap Value, Cadence Capital Appreciation, Cadence Mid Cap
Growth, Cadence Micro Cap Growth, Cadence Small Cap Growth, Parametric
Enhanced Equity, and Balanced Funds. Net Investment income from interest and
dividends, if any, will be declared and paid semi-annually to shareholders of
record by the Columbus Circle Investors Core Equity Fund. The Columbus Circle
Investors Mid Cap Equity, Blairlogie Emerging Markets, and Blairlogie
International Active Funds will distribute all net investment income, if any,
in dividend payments
<PAGE>
37
made at least annually. Any net realized capital gains from the sale of
portfolio securities will be distributed no less frequently than once yearly.
Net realized short-term capital gains may be paid more frequently. Dividend
and capital gain distributions of a Fund will be reinvested in additional
shares of that Fund unless the shareholder elects to have them paid in cash.
Dividends from net investment income with respect to Administrative Class
shares will be lower than those paid with respect to Institutional Class
shares, reflecting the payment of service fees by that class.
Each Fund intends to qualify as a regulated investment company annually and
to elect to be treated as a regulated investment company under the Internal
Revenue Code of 1986, as amended. As such, a Fund generally will not pay
Federal income tax on the income and gains it pays as dividends to its
shareholders. In order to avoid a 4% Federal excise tax, each Fund intends to
distribute each year substantially all of its net income and gains.
Distributions received by tax-exempt shareholders will not be subject to
Federal income tax to the extent permitted under applicable tax law. To the
extent that a shareholder is not exempt from tax on Fund distributions, such
shareholder will be subject to tax on dividends received from a Fund,
regardless of whether received in cash or reinvested in additional shares.
Shareholders must treat dividends, other than capital gain dividends or
dividends that represent a return of capital to shareholders, as ordinary
income. Dividends designated by a Fund as capital gain dividends are taxable
to shareholders as long-term capital gain except as provided by an applicable
tax exemption. Any distributions that are not from a Fund's net investment
income or net capital gain may be characterized as a return of capital to
shareholders or, in some cases, as capital gain. Certain dividends declared in
October, November or December of a calendar year are taxable to shareholders
(who otherwise are subject to tax on dividends) as though received on December
31 of that year if paid to shareholders during January of the following
calendar year. Each Fund will advise shareholders annually of the amount and
nature of the dividends paid to them.
The preceding discussion relates only to Federal income tax; the
consequences under other tax laws may differ. For additional information
relating to the tax aspects of investing in a Fund, see the Statement of
Additional Information.
OTHER INFORMATION
CAPITALIZATION
The Trust was organized as a Massachusetts business trust on August 24,
1990. The Board of Trustees may establish additional portfolios in the future.
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest with a par value of $0.001 each. When issued,
shares of the Trust are fully paid, non-assessable and freely transferable.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Amended
and Restated Agreement and Declaration of Trust (the "Declaration of Trust")
disclaims liability of the shareholders, Trustees or officers of the Trust for
acts or obligations of the Trust, which are binding only on the assets and
property of the Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of Trust
property for all loss and expense of any shareholder held personally liable
for the obligations of the Trust. The risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations, and thus
should be considered remote.
VOTING
Shareholders have the right to vote on the election of Trustees and on any
and all matters on which the law or the Declaration of Trust states they may
be entitled to vote. The Trust is not required to hold regular annual meetings
of Trust shareholders and does not intend to do so. Shareholders of a class of
shares have separate voting rights with respect to matters that only affect
that class. See "Other Information--Voting Rights" in the Statement of
Additional Information.
PIMCO ADVISORS
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The Declaration of Trust provides that the holders of not less than two-
thirds of the outstanding shares of the Trust may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Trust.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As of September 30, 1995, The Northern Trust
Company as Trustee for Great Lakes Chemical Master Retirement Trust (Chicago,
Illinois) owned a controlling interest (as that term is defined in the 1940
Act) of the NFJ Diversified Low P/E Fund; Pacific Mutual Life Insurance
Company (Newport Beach, California) owned a controlling interest of the NFJ
Small Cap Value Fund and the Columbus Circle Investors Mid Cap Equity Fund;
The Bank of New York as Trustee for Melville Corporation (Rye, New York) owned
a controlling interest of the Columbus Circle Investors Core Equity Fund;
Charles Schwab & Company, Inc. (San Francisco, California) owned a controlling
interest of the Blairlogie Emerging Markets Fund; and Pacific Financial Asset
Management Corporation (Newport Beach, California) owned a controlling
interest of the Blairlogie International Active Fund. As used in this
Prospectus, the phrase "vote of a majority of the outstanding shares" of a
Fund (or the Trust) means the vote of the lesser of: (1) 67% of the shares of
the Fund (or the Trust) present at a meeting, if the holders of more than 50%
of the outstanding shares are present in person or by proxy; or (2) more than
50% of the outstanding shares of the Fund (or the Trust).
PERFORMANCE INFORMATION
The Trust may, from time to time, include the yield and total return for
each class of shares of its Funds in advertisements or reports to shareholders
or prospective investors. Quotations of yield for a Fund or class will be
based on the investment income per share (as defined by the SEC) during a
particular 30-day (or one-month) period (including dividends and interest),
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering
price per share on the last day of the period. Quotations of average annual
total return for a Fund or class will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in the Fund or
class over periods of one, five and ten years (up to the life of the Fund),
reflect the deduction of a proportional share of Fund or class expenses (on an
annual basis), and assume that all dividends and distributions are reinvested
when paid.
The Trust also may provide current distribution information to its
shareholders in shareholder reports or other shareholder communications, or in
certain types of sales literature provided to prospective investors. Current
distribution information for a particular class of a Fund will be based on
distributions for a specified period (i.e., total dividends from net
investment income), divided by the relevant class net asset value per share on
the last day of the period and annualized. The rate of current distributions
does not reflect deductions for unrealized losses from transactions in
derivative instruments such as options and futures, which may reduce total
return. Current distribution rates differ from standardized yield rates in
that they represent what a class of a Fund has declared and paid to
shareholders as of the end of a specified period rather than the Fund's actual
net investment income for that period.
Performance information for the Trust may also be compared to: (i) the S&P
500, the Dow Jones Industrial Average, the EAFE Index, the MSCI Free Index,
the IFC Index, the Russell 1000 Value Index, the Russell 1000 Growth Index,
the Standard & Poor's Mid Cap Index, the Russell 2000 Index, the Lehman
Brothers Aggregate Bond Index, or other unmanaged indexes that measure
performance of a pertinent group of securities; (ii) other groups of mutual
funds tracked by Lipper Analytical Services ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Funds. Unmanaged indexes
(i.e., other than Lipper) generally do not reflect deductions for
administrative and management costs and expenses. The Adviser and any of the
Portfolio Managers may also report to shareholders or to the public in
advertisements concerning the performance of the Adviser and the Portfolio
Manager as advisers to clients other than the Trust, and on the comparative
performance or standing of the Adviser or the Portfolio Managers in relation
to other money managers. Such comparative information may be
<PAGE>
39
compiled or provided by independent ratings services or by news organizations.
Any performance information, whether related to the Funds, the Adviser or the
Portfolio Managers, should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Funds, and the
market conditions during the time period indicated, and should not be
considered to be representative of what may be achieved in the future. For a
description of the methods used to determine yield and total return for the
Funds, see the Statement of Additional Information.
Investment results of the Funds will fluctuate over time, and any
representation of the Funds' total return or yield for any prior period should
not be considered as a representation of what an investor's total return or
yield may be in any future period. The Trust's Annual Report and Semi-Annual
Report contain additional performance information for the Funds and is
available upon request, without charge, by calling (800) 927-4648 (Current
Shareholders), or (800) 800-0952 (New Accounts).
PIMCO ADVISORS
<PAGE>
LOGO
PIMCO Advisors Institutional Funds
INVESTMENT ADVISER
PIMCO Advisors L.P.
840 Newport Center Drive
Newport Beach, CA 92660
ADMINISTRATOR
Pacific Investment Management Company
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
ACCOUNTANTS
Deloitte & Touche LLP
695 Town Center Drive, Suite 1200
Costa Mesa, CA 92626
COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W., Suite 500
Washington, DC 20005
PROSPECTUS
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November 1, 1995
<PAGE>
PIMCO ADVISORS INSTITUTIONAL FUNDS
STATEMENT OF ADDITIONAL INFORMATION
PIMCO Advisors Institutional Funds (the "Trust") is a no-load, open-end
management investment company ("mutual fund") currently offering thirteen
separate investment portfolios (the "Funds"): the NFJ EQUITY INCOME FUND, the
NFJ DIVERSIFIED LOW P/E FUND, the NFJ SMALL CAP VALUE FUND, the CADENCE CAPITAL
APPRECIATION FUND, the CADENCE MID CAP GROWTH FUND, the CADENCE MICRO CAP GROWTH
FUND, the CADENCE SMALL CAP GROWTH FUND, the COLUMBUS CIRCLE INVESTORS CORE
EQUITY FUND, the COLUMBUS CIRCLE INVESTORS MID CAP EQUITY FUND, the PARAMETRIC
ENHANCED EQUITY FUND, the BLAIRLOGIE EMERGING MARKETS FUND, the BLAIRLOGIE
INTERNATIONAL ACTIVE FUND, and the BALANCED FUND.
The Trust's investment adviser is PIMCO Advisors L.P. ("PIMCO Advisors" or
the "Adviser"), 840 Newport Center Drive, Newport Beach, California 92660.
This Statement of Additional Information is not a Prospectus, and should be
used in conjunction with the Prospectus for the Trust dated November 1, 1995. A
copy of the Prospectus may be obtained free of charge from the Trust at the
address and telephone number listed below.
PIMCO Advisors Institutional Funds
840 Newport Center Drive
Suite 360
Newport Beach, California 92660
Telephone: (800) 927-4648
November 1, 1995
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TABLE OF CONTENTS
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INVESTMENT OBJECTIVES AND POLICIES................................. 2
U.S. Government Securities.................................... 2
Borrowing..................................................... 2
Preferred Stocks.............................................. 3
Corporate Debt Securities..................................... 3
Variable and Floating Rate Securities......................... 4
Mortgage-Related and Asset-Backed Securities.................. 4
Foreign Securities............................................ 8
Bank Obligations.............................................. 10
Commercial Paper.............................................. 11
Derivative Instruments........................................ 11
Delayed Delivery Transactions................................. 17
Warrants to Purchase Securities............................... 18
Illiquid Securities........................................... 18
INVESTMENT RESTRICTIONS............................................ 19
MANAGEMENT OF THE TRUST............................................ 22
Trustees and Officers......................................... 22
Compensation Table............................................ 24
Investment Adviser............................................ 24
Portfolio Management Agreements............................... 26
Fund Administrator............................................ 29
Expense Limitations........................................... 31
Distribution of Trust Shares.................................. 31
Service Fees.................................................. 32
Purchases and Redemptions..................................... 33
PORTFOLIO TRANSACTIONS AND BROKERAGE............................... 33
Investment Decisions.......................................... 33
Brokerage and Research Services............................... 34
NET ASSET VALUE.................................................... 36
TAXATION........................................................... 37
Distributions................................................. 38
Sales of Shares............................................... 38
Backup Withholding............................................ 38
Options, Futures and Forward Contracts, and Swap Agreements... 38
Passive Foreign Investment Companies.......................... 39
Foreign Currency Transactions................................. 40
Foreign Taxation.............................................. 40
Original Issue Discount....................................... 41
Other Taxation................................................ 42
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OTHER INFORMATION............................................ 42
Capitalization............................................ 42
Performance Information................................... 43
Voting Rights............................................. 45
Code of Ethics............................................ 54
Custodian, Transfer Agent and Dividend Disbursing Agent... 54
Independent Accountants................................... 54
Counsel................................................... 55
Registration Statement.................................... 55
Financial Statements...................................... 55
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INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and general investment policies of each Fund are
described in the Prospectus. Additional information concerning the
characteristics of certain of the Funds' investments are set forth below.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. The U.S. Government does not
guarantee the net asset value of the Funds' shares. Some U.S. Government
securities, such as Treasury bills, notes and bonds, and securities guaranteed
by the Government National Mortgage Association ("GNMA"), are supported by the
full faith and credit of the United States; others, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from the
U.S. Treasury; others, such as those of the Federal National Mortgage
Association ("FNMA"), are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, such as those
of the Student Loan Marketing Association, are supported only by the credit of
the instrumentality. U.S. Government securities include securities that have no
coupons, or have been stripped of their unmatured interest coupons, individual
interest coupons from such securities that trade separately, and evidences of
receipt of such securities. Such securities may pay no cash income, and are
purchased at a deep discount from their value at maturity. Because interest on
zero coupon securities is not distributed on a current basis but is, in effect,
compounded, zero coupon securities tend to be subject to greater market risk
than interest-paying securities of similar maturities. Custodial receipts
issued in connection with so-called trademark zero coupon securities, such as
CATs and TIGRs, are not issued by the U.S. Treasury, and are therefore not U.S.
Government securities, although the underlying bond represented by such receipt
is a debt obligation of the U.S. Treasury. Other zero coupon Treasury
securities (STRIPs and CUBEs) are direct obligations of the U.S. Government.
BORROWING
A Fund may borrow for temporary administrative purposes in an amount not
exceeding 5% of the value of its total assets. This borrowing may be unsecured.
Some temporary borrowings are not subject to the requirements imposed by the
Investment Company Act of 1940 ("1940 Act") that otherwise require a Fund to
maintain continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed. These
asset coverage limits of the 1940 Act would apply to borrowings in excess of 5%
of the Fund's total assets or borrowings made for other than temporary
administrative purposes. If the 300% asset coverage should decline as a result
of market fluctuations or other reasons, a Fund may be required to sell some of
its portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. Borrowing will tend to exaggerate
the effect on net asset value of any increase or decrease in the market value of
a Fund's portfolio. Money borrowed will be subject to interest costs which may
or may not be recovered by appreciation of the securities purchased. A Fund
also may be required to maintain minimum average balances in connection with
such borrowing or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the
stated interest rate.
In addition to borrowing for temporary purposes, a Fund may enter into
reverse repurchase agreements. A reverse repurchase agreement involves the sale
of a portfolio-eligible security by a Fund, coupled with its agreement to
repurchase the instrument at a specified time and price. The Fund will maintain
a segregated account with its custodian consisting of liquid assets, such as
cash, U.S. Government securities or high quality debt securities equal (on a
daily mark-to-market basis) to its obligations under reverse repurchase
agreements with broker-dealers (but not banks). However, reverse
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repurchase agreements involve the risk that the market value of securities
retained by the Fund may decline below the repurchase price of the securities
sold by the Fund which it is obligated to repurchase. To the extent that a Fund
collateralizes its obligations under a reverse repurchase agreement, the asset
coverage requirements of the 1940 Act will not apply. However, the Funds may
elect to impose such requirements as a matter of policy.
PREFERRED STOCKS
All Funds may invest in preferred stocks. Preferred stock is a form of
equity ownership in a publicly held corporation. The dividend on a preferred
stock is a fixed payment. In these securities, the firm is not legally bound to
pay the dividend. Certain classes of preferred stock are convertible, meaning
the preferred stock is convertible into shares of common stock of the issuing
company. By holding convertible preferred stock, a Fund can receive a steady
stream of dividends and still have the option to convert it to common stock.
CORPORATE DEBT SECURITIES
All Funds may invest in corporate debt securities. The NFJ Equity Income,
NFJ Diversified Low P/E, NFJ Small Cap Value, Cadence Capital Appreciation,
Cadence Mid Cap Growth, Cadence Micro Cap Growth, Cadence Small Cap Growth,
Columbus Circle Investors Core Equity, Columbus Circle Investors Mid Cap Equity,
Parametric Enhanced Equity, Blairlogie Emerging Markets, and Blairlogie
International Active Funds' investments in corporate debt securities are limited
to short term corporate debt securities. The investment return of corporate debt
securities reflects interest earnings and changes in the market value of the
security. The market value of a corporate debt obligation may also be expected
to rise and fall inversely with interest rates generally. There also exists the
risk that the issuers of the securities may not be able to meet their
obligations on interest or principal payments at the time called for by an
instrument.
A Fund's investments in U.S. dollar or foreign currency-denominated
corporate debt securities of domestic or foreign issuers are limited to
corporate debt securities (corporate bonds, debentures, notes and other similar
corporate debt instruments, including convertible securities) which meet the
minimum ratings criteria set forth for the Fund, or, if unrated, are deemed to
be comparable in quality to corporate debt securities in which the Fund may
invest. The rate of return or return of principal on some debt obligations may
be linked or indexed to the level of exchange rates between the U.S. dollar and
a foreign currency or currencies.
Among the corporate bonds in which the Funds may invest are convertible
securities. A convertible security is a bond, debenture, note, or other
security that entitles the holder to acquire common stock or other equity
securities of the same or a different issuer. A convertible security generally
entitles the holder to receive interest paid or accrued until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities have characteristics similar to nonconvertible debt
securities. Convertible securities rank senior to common stock in a
corporation's capital structure and, therefore, generally entail less risk than
the corporation's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security.
A convertible security may be subject to redemption at the option of the
issuer at a predetermined price. If a convertible security held by a Fund is
called for redemption, the Fund would be required to permit the issuer to redeem
the security and convert it to underlying common stock, or would sell the
convertible security to a third party. A Fund generally would invest in
convertible securities for their favorable price characteristics and total
return potential and would normally not exercise an option to convert.
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Securities rated Baa and BBB are the lowest which are considered
"investment grade" obligations. Moody's Investors Services, Inc. ("Moody's")
describes securities rated Baa as "medium-grade" obligations; they are "neither
highly protected nor poorly secured...[i]nterest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well." Standard & Poor's Corporation ("S&P") describes
securities rated BBB as "regarded as having an adequate capacity to pay interest
and repay principal...[w]hereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity than in higher rated categories."
VARIABLE AND FLOATING RATE SECURITIES
Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. The terms of such obligations must
provide that interest rates are adjusted periodically based upon an interest
rate adjustment index as provided in the respective obligations. The adjustment
intervals may be regular, and range from daily up to annually, or may be event
based, such as based on a change in the prime rate.
The Balanced Fund may invest in floating rate debt instruments
("floaters"). The interest rate on a floater is a variable rate which is tied
to another interest rate, such as a money-market index or Treasury bill rate.
The interest rate on a floater resets periodically, typically every six months.
While, because of the interest rate reset feature, floaters provide the Fund
with a certain degree of protection against rises in interest rates, the Fund
will participate in any declines in interest rates as well.
The Balanced Fund may also invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse floater
is indexed. An inverse floating rate security may exhibit greater price
volatility than a fixed rate obligation of similar credit quality. The Trust
has adopted a policy under which the Balanced Fund will invest no more than 5%
of its net assets in any combination of inverse floater, interest only ("IO"),
or principal only ("PO") securities. See "Mortgage-Related and Asset-Backed
Securities" for a discussion of IOs and POs.
MORTGAGE-RELATED AND ASSET-BACKED SECURITIES
Mortgage-related securities are interests in pools of residential or
commercial mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations, see "Mortgage Pass-Through
Securities." The Balanced Fund may also invest in debt securities which are
secured with collateral consisting of mortgage-related securities, see
"Collateralized Mortgage Obligations," and in other types of mortgage-related
securities.
MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect,
these payments are a "pass-through" of the monthly payments made by the
individual borrowers on their residential or commercial mortgage loans, net of
any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by repayments of principal resulting from the sale of the
underlying property, refinancing or foreclosure, net of fees or costs which may
be incurred. Some mortgage-related securities (such as securities issued by the
GNMA) are described as "modified pass-through." These securities entitle the
holder to receive all interest and principal payments owed on the mortgage pool,
net of certain fees, at the scheduled payment dates regardless of whether or not
the mortgagor actually makes the payment.
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The principal governmental guarantor of mortgage-related securities is the
GNMA. GNMA is a wholly owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of mortgages insured by the Federal Housing Administration (the "FHA"), or
guaranteed by the Department of Veterans Affairs (the "VA").
Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the FNMA and the Federal Home
Loan Mortgage Corporation ("FHLMC"). FNMA is a government-sponsored corporation
owned entirely by private stockholders. It is subject to general regulation by
the Secretary of Housing and Urban Development. FNMA purchases conventional
(i.e., not insured or guaranteed by any government agency) residential mortgages
from a list of approved seller/servicers which include state and federally
chartered savings and loan associations, mutual savings banks, commercial banks,
and credit unions and mortgage bankers. Pass-through securities issued by FNMA
are guaranteed as to timely payment of principal and interest by FNMA but are
not backed by the full faith and credit of the United States Government.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a government-
sponsored corporation formerly owned by the twelve Federal Home Loan Banks and
now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("Pcs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but Pcs are not backed by the full faith and
credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools may be supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance and letters of credit. The insurance and guarantees are
issued by governmental entities, private insurers and the mortgage poolers.
Such insurance and guarantees, and the creditworthiness of the issuers thereof,
will be considered in determining whether a mortgage-related security meets the
Trust's investment quality standards. There can be no assurance that the
private insurers or guarantors can meet their obligations under the insurance
policies or guarantee arrangements. The Balanced Fund may buy mortgage-related
securities without insurance or guarantees if, through an examination of the
loan experience and practices of the originator/servicers and poolers, the
Portfolio Manager determines that the securities meet the Trust's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable. The Balanced Fund will not purchase mortgage-related securities or
any other assets which in the Portfolio Manager's opinion are illiquid if, as a
result, more than 10% of the value of the Fund's total assets will be illiquid.
Mortgage-related securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Balanced
Fund's industry concentration restrictions, see "Investment Restrictions," by
virtue of the exclusion from that test available to all U.S. Government
securities. In the case of privately issued mortgage-related securities, the
Balanced Fund takes the position that mortgage-related securities do not
represent interests in any particular "industry" or group of industries. The
assets underlying such securities may be represented by a portfolio of first
lien residential mortgages (including both whole mortgage loans and mortgage
participation interests) or portfolios of mortgage pass-through securities
issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a
mortgage-related security may in turn be insured or guaranteed by the FHA or the
VA. In
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the case of private issue mortgage-related securities whose underlying
assets are neither U.S. Government securities nor U.S. Government-insured
mortgages, to the extent that real properties securing such assets may be
located in the same geographical region, the security may be subject to a
greater risk of default than other comparable securities in the event of adverse
economic, political or business developments that may affect such region and,
ultimately, the ability of residential homeowners to make payments of principal
and interest on the underlying mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, semi-annually. CMOs may
be collateralized by whole mortgage loans, but are more typically collateralized
by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
--------
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding
the longer maturity classes receive principal only after the first class has
been retired. An investor is partially guarded against a sooner than desired
return of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C
Bonds all bear current interest. Interest on the Series Z Bond is accrued and
added to principal and a like amount is paid as principal on the Series A, B, or
C Bond currently being paid off. When the Series A, B, and C Bonds are paid in
full, interest and principal on the Series Z Bond begins to be paid currently.
With some CMOs, the issuer serves as a conduit to allow loan originators
(primarily builders or savings and loan associations) to borrow against their
loan portfolios.
FHLMC COLLATERALIZED MORTGAGE OBLIGATIONS. FHLMC CMOs are debt obligations
of FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC Pcs, payments of principal and interest on the CMOs are
made semi-annually, as opposed to monthly. The amount of principal payable on
each semi-annual payment date is determined in accordance with FHLMC's mandatory
sinking fund schedule, which in turn, is equal to approximately 100% of FHA
prepayment experience applied to the mortgage collateral pool. All sinking fund
payments in the CMOs are allocated to the retirement of the individual classes
of bonds in the order of their stated maturities. Payment of principal on the
mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum
sinking fund obligation for any payment date are paid to the holders of the CMOs
as additional sinking fund payments. Because of the "pass-through" nature of
all principal payments received on the collateral pool in excess of FHLMC's
minimum sinking fund requirement, the rate at which principal of the CMOs is
actually repaid is likely to be such that each class of bonds will be retired in
advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans
during any semi-annual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC Pcs. FHLMC has the right to substitute collateral
in the event of delinquencies and/or defaults.
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COMMERCIAL MORTGAGE-BACKED SECURITIES include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property.
The market for commercial mortgage-backed securities developed more recently and
in terms of total outstanding principal amount of issues is relatively small
compared to the market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial mortgage-backed securities reflect
the risks of investing in the real estate securing the underlying mortgage
loans. These risks reflect the effects of local and other economic conditions
on real estate markets, the ability of tenants to make loan payments, and the
ability of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility than other
types of mortgage- or asset-backed securities.
OTHER MORTGAGE-RELATED SECURITIES. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals or stripped mortgage-backed
securities. Other mortgage-related securities may be equity or debt securities
issued by agencies or instrumentalities of the U.S. Government or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
CMO Residuals. CMO residuals are mortgage securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.
The cash flow generated by the mortgage assets underlying a series of CMOs
is applied first to make required payments of principal and interest on the CMOs
and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets.
In particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
IO class of stripped mortgage-backed securities. See "Other Mortgage-Related
Securities--Stripped Mortgage-Backed Securities." In addition, if a series of a
CMO includes a class that bears interest at an adjustable rate, the yield to
maturity on the related CMO residual will also be extremely sensitive to changes
in the level of the index upon which interest rate adjustments are based. As
described below with respect to stripped mortgage-backed securities, in certain
circumstances the Balanced Fund may fail to recoup fully its initial investment
in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets. Transactions in CMO residuals are generally completed only after
careful review of the characteristics of the securities in question. In
addition, CMO residuals may, or pursuant to an exemption therefrom, may not have
been registered under the Securities Act of 1933, as amended (the "1933 Act").
CMO residuals, whether or not registered under the 1933 Act, may be subject to
certain restrictions on transferability, and may be deemed "illiquid" and
subject to the Balanced Fund's limitations on investment in illiquid securities.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities
("SMBS") are derivative multi-class mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose entities
of the foregoing.
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SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the
interest and most of the principal from the mortgage assets, while the other
class will receive most of the interest and the remainder of the principal. In
the most extreme case, one class will receive all of the interest (the IO
class), while the other class will receive all of the principal (the "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on the Balanced Fund's yield to maturity from these securities. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Balanced Fund may fail to fully recoup its initial investment in
these securities even if the security is in one of the highest rating
categories.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and
subject to the Balanced Fund's limitations on investment in illiquid securities.
OTHER ASSET-BACKED SECURITIES. Similarly, the Adviser and Portfolio
Managers expect that other asset-backed securities (unrelated to mortgage loans)
will be offered to investors in the future. Several types of asset-backed
securities have already been offered to investors, including Certificates for
Automobile Receivables/SM/ ("CARS/SM"/). CARS/SM/ represent undivided
fractional interests in a trust ("trust") whose assets consist of a pool of
motor vehicle retail installment sales contracts and security interests in the
vehicles securing the contracts. Payments of principal and interest on CARS/SM/
are passed through monthly to certificate holders, and are guaranteed up to
certain amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with the trustee or originator of the trust.
An investor's return on CARS/SM/ may be affected by early prepayment of
principal on the underlying vehicle sales contracts. If the letter of credit is
exhausted, the trust may be prevented from realizing the full amount due on a
sales contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the obtaining of deficiency judgments
following such sales or because of depreciation, damage or loss of a vehicle,
the application of federal and state bankruptcy and insolvency laws, or other
factors. As a result, certificate holders may experience delays in payments or
losses if the letter of credit is exhausted.
Consistent with a Fund's investment objectives and policies, the Adviser
and Portfolio Manager also may invest in other types of asset-backed securities.
FOREIGN SECURITIES
The Blairlogie Emerging Markets and Blairlogie International Active Funds
may invest in U.S. dollar or foreign currency-denominated corporate debt
securities of foreign issuers; preferred securities of foreign issuers; certain
foreign bank obligations; and U.S. dollar- or foreign currency-denominated
obligations of foreign governments or their subdivisions, agencies and
instrumentalities, international agencies and supranational entities. The
Blairlogie Emerging Markets and Blairlogie International Active Funds may also
invest in common stocks issued by foreign companies or in securities represented
by American Depository Receipts ("ADRs"), European Depository Receipts ("EDRs),
or Global Depository Receipts ("GDRs"). ADRs are dollar-denominated receipts
issued generally by domestic banks and represent the deposit with the bank of a
security of a foreign issuer. EDRs are foreign currency-denominated receipts
similar to ADRs and are issued and traded in Europe, and are publicly traded on
exchanges or over-the-counter in the United States. GDRs may be offered
privately in the United States and also trade in public or private markets in
other countries. ADRs, EDRs and GDRs may be issued as sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities trade in the form of ADRs, EDRs or GDRs. In unsponsored programs,
the issuer may not be directly involved in the creation of the program.
Although regulatory requirements with respect to sponsored and unsponsored
programs are generally similar, in some cases it may be easier to obtain
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financial information from an issuer that has participated in the creation of a
sponsored program. The Columbus Circle Investors Core Equity and Columbus
Circle Investors Mid Cap Equity Funds each may invest up to 15% of their
respective net assets in securities which are traded principally in securities
markets outside the United States (Eurodollar certificates of deposit are
excluded for purposes of these limitations). In addition, the Funds may invest
up to 35% of their respective assets in ADRs, EDRs, and GDRs, reduced by such
amount that may be reserved for investments in high quality debt securities,
money market obligations, and cash or other permissible investments. The NFJ
Equity Income, NFJ Diversified Low P/E, NFJ Small Cap Value, Cadence Capital
Appreciation, Cadence Mid Cap Growth, Cadence Micro Cap Growth, Cadence Small
Cap Growth, and Parametric Enhanced Equity Funds may also invest in ADRs. The
Parametric Enhanced Equity Fund may invest in common stock of foreign issuers if
it is included in the index from which stocks are selected.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. These
include: differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which can
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. In addition, 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. Changes in foreign exchange
rates will affect the value of those securities which are denominated or quoted
in currencies other than the U.S. dollar.
The Blairlogie Emerging Markets Fund may invest in the securities of
issuers based in developing countries. Investing in developing countries
involves certain risks not typically associated with investing in U.S.
securities, and imposes risks greater than, or in addition to, risks of
investing in foreign, developed countries. These risks include: greater risks
of nationalization or expropriation of assets or confiscatory taxation; currency
devaluations and other currency exchange rate fluctuations; greater social,
economic and political uncertainty and instability (including the risk of war);
more substantial government involvement in the economy; higher rates of
inflation; less government supervision and regulation of the securities markets
and participants in those markets; controls on foreign investment and
limitations on repatriation of invested capital and on the Fund's ability to
exchange local currencies for U.S. dollars; unavailability of currency hedging
techniques in certain developing countries; the fact that companies in
developing countries may be smaller, less seasoned and newly organized
companies; the difference in, or lack of, auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; the risk that it may be more difficult to obtain and/or enforce a
judgment in a court outside the United States; and greater price volatility,
substantially less liquidity and significantly smaller market capitalization of
securities markets.
The Columbus Circle Investors Core Equity, Columbus Circle Investors Mid
Cap Equity, Blairlogie Emerging Markets, and Blairlogie International Active
Funds may also purchase and sell foreign currency options and foreign currency
futures contracts and related options (see "Derivative Instruments"), and enter
into forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates in the purchase and
sale of securities. The Funds may also use foreign currency options and foreign
currency forward contracts to increase exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another.
A forward foreign currency contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts may be bought or sold to protect a Fund
against a possible loss resulting from an adverse change in the relationship
between foreign currencies and the U.S. dollar or to increase exposure to a
particular foreign currency. Open positions in forward contracts used for non-
hedging purposes will be covered by the segregation with the Trust's custodian
of
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liquid assets, such as cash, U.S. Government securities and high quality
short-term investments and are marked to market daily. Although forward
contracts are intended to minimize the risk of loss due to a decline in the
value of the hedged currencies, at the same time, they tend to limit any
potential gain which might result should the value of such currencies increase.
BANK OBLIGATIONS
Bank obligations in which the Funds invest include certificates of deposit,
bankers' acceptances, and fixed time deposits. Each Fund may also hold funds on
deposit with its sub-custodian bank in an interest-bearing account for temporary
purposes.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on
demand by the investor, but may be subject to early withdrawal penalties which
vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed time deposit to a third party, although there is
no market for such deposits. A Fund will not invest in fixed time deposits which
(1) are not subject to prepayment or (2) provide for withdrawal penalties upon
prepayment (other than overnight deposits) if, in the aggregate, more than 10%
(in the case of the NFJ Equity Income, NFJ Diversified Low P/E, NJF Small Cap
Value, Cadence Capital Appreciation, Cadence Mid Cap Growth, Cadence Small Cap
Growth, Parametric Enhanced Equity and Balanced Funds), or 15% (in the case of
the Columbus Circle Investors Core Equity, Columbus Circle Investors Mid Cap
Equity, Cadence Micro Cap Growth, Blairlogie Emerging Markets, and Blairlogie
International Active Funds) of its net assets would be invested in such
deposits, repurchase agreements maturing in more than seven days and other
illiquid assets.
Each Fund limits its investments in United States bank obligations to
obligations of United States banks (including foreign branches) which have more
than $1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the Federal Deposit Insurance Corporation. A Fund
also may invest in certificates of deposit of savings and loan associations
(federally or state chartered and federally insured) having total assets in
excess of $1 billion.
The Columbus Circle Investors Core Equity, Columbus Circle Investors Mid
Cap Equity, Blairlogie Emerging Markets, and Blairlogie International Active
Funds limit their investments in foreign bank obligations to United States
dollar or foreign currency-denominated obligations of foreign banks (including
United States branches of foreign banks) which at the time of investment (i)
have more than $10 billion, or the equivalent in other currencies, in total
assets; (ii) in terms of assets are among the 75 largest foreign banks in the
world; (iii) have branches or agencies (limited purpose offices which do not
offer all banking services) in the United States; and (iv) in the opinion of the
Portfolio Managers, are of an investment quality comparable to obligations of
United States banks in which the Funds may invest. Subject to the Trust's
limitation on concentration of no more than 25% of its assets in the securities
of issuers in a particular industry, there is no limitation on the amount of a
Fund's assets which may be invested in obligations of foreign banks which meet
the conditions set forth herein.
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Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.
COMMERCIAL PAPER
All Funds may invest in commercial paper. Commercial paper represents
short-term unsecured promissory notes issued in bearer form by banks or bank
holding companies, corporations and finance companies. The commercial paper
purchased by the Funds consists of U.S. dollar-denominated obligations of
domestic issuers, or, additionally for the Columbus Circle Investors Core
Equity, Columbus Circle Investors Mid Cap Equity, Blairlogie Emerging Markets,
and Blairlogie International Active Funds, foreign currency-denominated
obligations of domestic or foreign issuers which, at the time of investment, are
(i) rated "P-1" or "P-2" by Moody's or "A-1" or "A-2" or better by S&P, (ii)
issued or guaranteed as to principal and interest by issuers or guarantors
having an existing debt security rating of "A" or better by Moody's or "A" or
better by S&P, or (iii) securities which, if not rated, are, in the opinion of
the Portfolio Manager, of an investment quality comparable to rated commercial
paper in which the Fund may invest. The rate of return on commercial paper may
be linked or indexed to the level of exchange rates between the U.S. dollar and
a foreign currency or currencies.
DERIVATIVE INSTRUMENTS
Certain Funds may purchase and sell (write) both call options and put
options on securities, securities indexes and foreign currencies, and enter into
futures contracts as further described below. In pursuit of their investment
objectives, the Columbus Circle Investors Core Equity, Columbus Circle Investors
Mid Cap Equity, Blairlogie Emerging Markets, Blairlogie International Active,
and Balanced Funds may engage in the purchase and writing of call and put
options on securities; and may also purchase and sell foreign currency options
for purposes of increasing exposure to a foreign currency or to shift exposure
to foreign currency fluctuations from one country to another. These Funds,
along with the Parametric Enhanced Equity Fund, may engage in the purchase and
writing of options on securities indexes. If other types of financial
instruments, including other types of options, futures contracts, or futures
options are traded in the future, a Fund may also use those instruments,
provided that the Trustees determine that their use is consistent with the
Fund's investment objective, and provided that their use is consistent with
restrictions applicable to options and futures contracts currently eligible for
use by the Trust (i.e., that written call or put options will be "covered" or
"secured," and that futures and futures options will be used only for hedging
purposes).
OPTIONS ON SECURITIES AND INDEXES. A Fund may, as specified for the Fund
in the Prospectus, purchase and sell both put and call options on fixed income
or other securities or indexes in standardized contracts traded on foreign or
domestic securities exchanges, boards of trade, or similar entities, or quoted
on National Association of Securities Dealers Automated Quotations ("NASDAQ") or
on a regulated foreign over-the-counter market, and agreements, sometimes called
cash puts, which may accompany the purchase of a new issue of bonds from a
dealer.
An option on a security (or index) is a contract that gives the holder of
the option, in return for a premium, the right to buy from (in the case of a
call) or sell to (in the case of a put) the writer of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at
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any time during the term of the option. The writer of an option on a
security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security. Upon exercise, the writer of an
option on an index is obligated to pay the difference between the cash value of
the index and the exercise price multiplied by the specified multiplier for the
index option. (An index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial instruments or
securities, or certain economic indicators.)
A Fund will write call options and put options only if they are "covered."
In the case of a call option on a security, the option is "covered" if the Fund
owns the security underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or, if additional
cash consideration is required, cash or other liquid assets such as U.S.
Government securities or high grade debt obligations in such amount are placed
in a segregated account by its custodian) upon conversion or exchange of other
securities held by the Fund. For a call option on an index, the option is
covered if the Fund maintains with its custodian liquid assets such as cash,
U.S. Government securities or high grade debt obligations in an amount equal to
the contract value of the index. A call option is also covered if the Fund
holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written, or (ii) greater than the exercise price of the call
written, provided the difference is maintained by the Fund in liquid assets such
as cash, U.S. Government securities or high grade debt obligations in a
segregated account with its custodian. A put option on a security or an index
is "covered" if the Fund maintains liquid assets such as cash, U.S. Government
securities or high grade debt obligations equal to the exercise price in a
segregated account with its custodian. A put option is also covered if the Fund
holds a put on the same security or index as the put written where the exercise
price of the put held is (i) equal to or greater than the exercise price of the
put written, or (ii) less than the exercise price of the put written, provided
the difference is maintained by the Fund in cash or cash equivalents in a
segregated account with its custodian.
If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by a Fund expires unexercised, the Fund realizes a capital loss equal
to the premium paid. Prior to the earlier of exercise or expiration, an option
may be closed out by an offsetting purchase or sale of an option of the same
series (type, exchange, underlying security or index, exercise price, and
expiration). There can be no assurance, however, that a closing purchase or
sale transaction can be effected when the Fund desires.
A Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the market
value of a put or a call option include supply and demand, interest rates, the
current market price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying security or
index, and the time remaining until the expiration date.
The premium paid for a put or call option purchased by a Fund is an asset
of the Fund. The premium received for an option written by a Fund is recorded
as a deferred credit. The value of an option purchased or written is marked to
market daily and is valued at the closing price on the exchange on which it is
traded or, if not traded on an exchange or no closing price is available, at the
mean between the last bid and asked prices.
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RISKS ASSOCIATED WITH OPTIONS ON SECURITIES AND INDEXES. There are several
risks associated with transactions in options on securities and on indexes. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option may expire worthless. If a Fund were
unable to close out a covered call option that it had written on a security, it
would not be able to sell the underlying security unless the option expired
without exercise. As the writer of a covered call option, a Fund forgoes,
during the option's life, the opportunity to profit from increases in the market
value of the security covering the call option above the sum of the premium and
the exercise price of the call.
If trading were suspended in an option purchased by a Fund, the Fund would
not be able to close out the option. If restrictions on exercise were imposed,
the Fund might be unable to exercise an option it has purchased. Except to the
extent that a call option on an index written by the Fund is covered by an
option on the same index purchased by the Fund, movements in the index may
result in a loss to the Fund; however, such losses may be mitigated by changes
in the value of the Fund's securities during the period the option was
outstanding.
FOREIGN CURRENCY OPTIONS. The Columbus Circle Investors Core Equity,
Columbus Circle Investors Mid Cap Equity, Blairlogie Emerging Markets, and
Blairlogie International Active Funds may buy or sell put and call options on
foreign currencies either on exchanges or in the over-the-counter market. A put
option on a foreign currency gives the purchaser of the option the right to sell
a foreign currency at the exercise price until the option expires. A call
option on a foreign currency gives the purchaser of the option the right to
purchase the currency at the exercise price until the option expires. Currency
options traded on U.S. or other exchanges may be subject to position limits
which may limit the ability of a Fund to reduce foreign currency risk using such
options. Over-the-counter options differ from traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller, and generally do not have as much market liquidity as exchange-traded
options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Fund may use
interest rate, foreign currency or index futures contracts, as specified for
that Fund in the Prospectus. An interest rate, foreign currency or index
futures contract provides for the future sale by one party and purchase by
another party of a specified quantity of a financial instrument, foreign
currency or the cash value of an index at a specified price and time. A futures
contract on an index is an agreement pursuant to which two parties agree to take
or make delivery of an amount of cash equal to the difference between the value
of the index at the close of the last trading day of the contract and the price
at which the index contract was originally written. Although the value of an
index might be a function of the value of certain specified securities, no
physical delivery of these securities is made. A public market exists in
futures contracts covering a number of indexes as well as financial instruments
and foreign currencies, including: the S&P 500; the S&P Midcap 400; the Nikkei
225; the NYSE composite; U.S. Treasury bonds; U.S. Treasury notes; GNMA
Certificates; three-month U.S. Treasury bills; 90-day commercial paper; bank
certificates of deposit; Eurodollar certificates of deposit; the Australian
dollar; the Canadian dollar; the British pound; the German mark; the Japanese
yen; the French franc; the Swiss franc; the Mexican peso; and certain
multinational currencies, such as the European Currency Unit ("ECU"). It is
expected that other futures contracts will be developed and traded in the
future.
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Certain Funds may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities and
indexes (discussed above). A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true.
To comply with applicable rules of the Commodity Futures Trading Commission
("CFTC") under which the Trust and the Funds avoid being deemed a "commodity
pool" or a "commodity pool operator," each Fund intends generally to limit its
use of futures contracts and futures options to "bona fide hedging"
transactions, as such term is defined in applicable regulations, interpretations
and practice. For example, a Fund might use futures contracts to hedge against
anticipated changes in interest rates that might adversely affect either the
value of the Fund's securities or the price of the securities which the Fund
intends to purchase. A Fund's hedging activities may include sales of futures
contracts as an offset against the effect of expected increases in interest
rates, and purchases of futures contracts as an offset against the effect of
expected declines in interest rates. Although other techniques could be used to
reduce that Fund's exposure to interest rate fluctuations, the Fund may be able
to hedge its exposure more effectively and perhaps at a lower cost by using
futures contracts and futures options.
A Fund will only enter into futures contracts and futures options which are
standardized and traded on a U.S. or foreign exchange, board of trade, or
similar entity, or in the case of futures options, for which an established
over-the-counter market exists.
When a purchase or sale of a futures contract is made by a Fund, the Fund
is required to deposit with its custodian (or broker, if legally permitted) a
specified amount of liquid assets, such as cash, U.S. Government securities or
high grade debt obligations ("initial margin"). The margin required for a
futures contract is set by the exchange on which the contract is traded and may
be modified during the term of the contract. Margin requirements on foreign
exchanges may be different than U.S. exchanges. The initial margin is in the
nature of a performance bond or good faith deposit on the futures contract which
is returned to the Fund upon termination of the contract, assuming all
contractual obligations have been satisfied. Each Fund expects to earn interest
income on its initial margin deposits. A futures contract held by a Fund is
valued daily at the official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called "variation margin,"
equal to the daily change in value of the futures contract. This process is
known as "marking to market." Variation margin does not represent a borrowing
or loan by a Fund but is instead a settlement between the Fund and the broker of
the amount one would owe the other if the futures contract expired. In
computing daily net asset value, each Fund will mark to market its open futures
positions.
A Fund is also required to deposit and maintain margin with respect to put
and call options on futures contracts written by it. Such margin deposits will
vary depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund realizes a capital
gain, or if it is more, the Fund realizes a capital loss. Conversely, if an
offsetting sale price is more than the original purchase price, the Fund
realizes a capital gain, or if it is less, the Fund realizes a capital loss.
The transaction costs must also be included in these calculations.
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LIMITATIONS ON USE OF FUTURES AND FUTURES OPTIONS. In general, the Funds
intend to enter into positions in futures contracts and related options only for
"bona fide hedging" purposes. With respect to positions in futures and related
options that do not constitute bona fide hedging positions, a Fund will not
enter into a futures contract or futures option contract if, immediately
thereafter, the aggregate initial margin deposits relating to such positions
plus premiums paid by it for open futures option positions, less the amount by
which any such options are "in-the-money," would exceed 5% of the Fund's net
assets. A call option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures contract
that is the subject of the option.
When purchasing a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) liquid assets, such as cash, U.S.
Government securities, or other highly liquid debt securities that, when added
to the amounts deposited with a futures commission merchant as margin, are equal
to the market value of the futures contract. Alternatively, the Fund may
"cover" its position by purchasing a put option on the same futures contract
with a strike price as high or higher than the price of the contract held by the
Fund.
When selling a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) liquid assets, such as cash, U.S.
Government securities or high grade debt obligations that are equal to the
market value of the instruments underlying the contract. Alternatively, the
Fund may "cover" its position by owning the instruments underlying the contract
(or, in the case of an index futures contract, a portfolio with a volatility
substantially similar to that of the index on which the futures contract is
based), or by holding a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of the contract written by
the Fund (or at a higher price if the difference is maintained in liquid assets
with the Trust's custodian).
When selling a call option on a futures contract, a Fund will maintain with
its custodian (and mark-to-market on a daily basis) liquid assets, such as cash,
U.S. Government securities, or other highly liquid debt securities that, when
added to the amounts deposited with a futures commission merchant as margin,
equal the total market value of the futures contract underlying the call option.
Alternatively, the Fund may cover its position by entering into a long position
in the same futures contract at a price no higher than the strike price of the
call option, by owning the instruments underlying the futures contract, or by
holding a separate call option permitting the Fund to purchase the same futures
contract at a price not higher than the strike price of the call option sold by
the Fund.
When selling a put option on a futures contract, a Fund will maintain with
its custodian (and mark-to-market on a daily basis) cash, U.S. Government
securities, or other highly liquid debt securities that equal the purchase price
of the futures contract, less any margin on deposit. Alternatively, the Fund
may cover the position either by entering into a short position in the same
futures contract, or by owning a separate put option permitting it to sell the
same futures contract so long as the strike price of the purchased put option is
the same or higher than the strike price of the put option sold by the Fund.
The requirements for qualification as a regulated investment company also
may limit the extent to which a Fund may enter into futures, futures options or
forward contracts. See "Taxation".
RISKS ASSOCIATED WITH FUTURES AND FUTURES OPTIONS. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in the Fund securities being hedged. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given hedge
not to achieve its objectives. The degree of imperfection of correlation
depends on circumstances such as variations in speculative market demand for
futures and futures options on securities, including technical influences in
futures trading and futures options, and differences between the financial
instruments being
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hedged and the instruments underlying the standard contracts available for
trading in such respects as interest rate levels, maturities, and
creditworthiness of issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures or a futures option position, and that Fund
would remain obligated to meet margin requirements until the position is closed.
In addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue to exist.
ADDITIONAL RISKS OF OPTIONS ON SECURITIES, FUTURES CONTRACTS, OPTIONS ON
FUTURES CONTRACTS, AND FORWARD CURRENCY EXCHANGE CONTRACTS AND OPTIONS THEREON.
Options on securities, futures contracts, options on futures contracts, and
options on currencies may be traded on foreign exchanges. Such transactions may
not be regulated as effectively as similar transactions in the United States;
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities. The value of such positions also could be adversely affected by (i)
other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Trust's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (v) lesser trading
volume.
SWAP AGREEMENTS. The Blairlogie Emerging Markets and Blairlogie
International Active Funds may enter into equity index swap agreements for
purposes of attempting to gain exposure to the stocks making up an index of
securities in a foreign market without actually purchasing those stocks. Swap
agreements are two party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments. The gross returns to be exchanged or "swapped"
between the parties are calculated with respect to a "notional amount," i.e.,
the return on or increase in value of a particular dollar amount invested in a
"basket" of securities representing a particular index. The "notional amount"
of the swap agreement is only a fictive basis on which to calculate the
obligations which the parties to a swap agreement have agreed to exchange.
Consequently, a Fund's current obligations (or rights) under a swap agreement
will generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). A Fund's current obligations under a swap
agreement will be accrued daily (offset against any amounts owing to the Fund)
and any accrued but unpaid net amounts owed to a swap counterparty will be
covered by the maintenance of a segregated account consisting of cash, U.S.
Government securities, or high grade debt obligations, to avoid any potential
leveraging of the Fund's portfolio. A Fund will not enter into a swap agreement
with any single party if the net amount owed or to be received under existing
contracts with that party would exceed 5% of the Fund's assets.
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Whether a Fund's use of swap agreements will be successful in furthering
its investment objective will depend on the Portfolio Manager's ability to
correctly predict whether certain types of investments are likely to produce
greater returns than other investments. Because they are two party contracts
and because they may have terms of greater than seven days, swap agreements may
be considered to be illiquid. Moreover, a Fund bears the risk of loss of the
amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. The Portfolio Manager
will cause a Fund to enter into swap agreements only with counterparties that
would be eligible for consideration as repurchase agreement counterparties under
the Funds' repurchase agreement guidelines. Certain restrictions imposed on the
Funds by the Internal Revenue Code may limit the Funds' ability to use swap
agreements. The swaps market is a relatively new market and is largely
unregulated. It is possible that developments in the swaps market, including
potential government regulation, could adversely affect a Fund's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the CFTC
effective February 22, 1993. To qualify for this exemption, a swap agreement
must be entered into by "eligible participants," which includes the following,
provided the participants' total assets exceed established levels: a bank or
trust company, savings association or credit union, insurance company,
investment company subject to regulation under the 1940 Act, commodity pool,
corporation, partnership, proprietorship, organization, trust or other entity,
employee benefit plan, governmental entity, broker-dealer, futures commission
merchant, natural person, or regulated foreign person. To be eligible, natural
persons and most other entities must have total assets exceeding $10 million;
commodity pools and employee benefit plans must have assets exceeding $5
million. In addition, an eligible swap transaction must meet three conditions.
First, the swap agreement may not be part of a fungible class of agreements that
are standardized as to their material economic terms. Second, the
creditworthiness of parties with actual or potential obligations under the swap
agreement must be a material consideration in entering into or determining the
terms of the swap agreement, including pricing, cost or credit enhancement
terms. Third, swap agreements may not be entered into and traded on or through
a multilateral transaction execution facility.
This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a safe harbor for swap transactions from regulation as futures
or commodity option transactions under the CEA or its regulations. The Policy
Statement applies to swap transactions settled in cash that (1) have
individually tailored terms, (2) lack exchange-style offset and the use of a
clearing organization or margin system, (3) are undertaken in conjunction with a
line of business, and (4) are not marketed to the public.
DELAYED DELIVERY TRANSACTIONS
A Fund may purchase or sell securities on a when-issued or delayed delivery
basis. These transactions involve a commitment by the Fund to purchase or sell
securities for a predetermined price or yield, with payment and delivery taking
place more than seven days in the future, or after a period longer than the
customary settlement period for that type of security. When delayed delivery
purchases are outstanding, the Fund will set aside and maintain until the
settlement date in a segregated account, liquid assets, such as cash, U.S.
Government securities or high grade debt obligations in an amount sufficient to
meet the purchase price. Typically, no income accrues on securities purchased
on a delayed delivery basis prior to the time delivery of the securities is
made, although a Fund may earn income on securities it has deposited in a
segregated account. When purchasing a security on a delayed delivery basis, the
Fund assumes the rights and risks of ownership of the security, including the
risk of price and yield fluctuations, and takes such fluctuations into account
when determining its net asset value. Because the Fund is not required to pay
for the security until the delivery date, these risks are in addition to the
risks associated with the Fund's other investments. If the Fund remains
substantially fully invested at a time when delayed delivery purchases are
outstanding, the delayed delivery purchases may result in a form of leverage,
17
<PAGE>
although a Fund will not enter into such a transaction for the purpose of
investment leverage. When the Fund has sold a security on a delayed delivery
basis, the Fund does not participate in future gains or losses with respect to
the security. If the other party to a delayed delivery transaction fails to
deliver or pay for the securities, the Fund could miss a favorable price or
yield opportunity or could suffer a loss. A Fund may dispose of or renegotiate
a delayed delivery transaction after it is entered into, and may sell when-
issued securities before they are delivered, which may result in a capital gain
or loss. There is no percentage limitation on the extent to which the Funds may
purchase or sell securities on a delayed delivery basis.
WARRANTS TO PURCHASE SECURITIES
All Funds may invest in warrants to purchase equity or fixed income
securities. Bonds with warrants attached to purchase equity securities have
many characteristics of convertible bonds and their prices may, to some degree,
reflect the performance of the underlying stock. Bonds also may be issued with
warrants attached to purchase additional fixed income securities at the same
coupon rate. A decline in interest rates would permit a Fund to buy additional
bonds at the favorable rate or to sell the warrants at a profit. If interest
rates rise, the warrants would generally expire with no value.
A Fund will not invest more than 5% of its net assets, valued at the lower
of cost or market, in warrants to purchase securities. Included within that
amount, but not to exceed 2% of the Fund's net assets, may be warrants that are
not listed on the New York or American Stock Exchanges. Warrants acquired in
units or attached to securities will be deemed to be without value for purposes
of this restriction.
ILLIQUID SECURITIES
The NFJ Equity Income, NFJ Diversified Low P/E, NFJ Small Cap Value,
Cadence Capital Appreciation, Cadence Mid Cap Growth, Cadence Small Cap Growth,
Parametric Enhanced Equity, and Balanced Funds may invest in securities that are
illiquid, but will not acquire such securities if they would compose more than
10% of the value of a Fund's net assets (taken at market value at the time of
investment), and will not invest in securities that are illiquid because they
are subject to legal or contractual restrictions on resale if such securities
would compose more than 5% of the value of the Fund's net assets (taken at
market value at the time of investment). The Columbus Circle Investors Core
Equity, Columbus Circle Investors Mid Cap Equity, Cadence Micro Cap Growth,
Blairlogie Emerging Markets, and Blairlogie International Active Funds may
invest in securities that are illiquid so long as no more than 15% of the net
assets of the Fund (taken at market value at the time of investment), would be
invested in such 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. Illiquid
securities are considered to include, among other things, written over-the-
counter options, securities or other liquid assets being used as cover for such
options, repurchase agreements with maturities in excess of seven days, certain
loan participation interests, fixed time deposits which are not subject to
prepayment or provide for withdrawal penalties upon prepayment (other than
overnight deposits), securities that are subject to legal or contractual
restrictions on resale (such as privately placed debt securities), and other
securities whose disposition is restricted under the federal securities laws
(other than securities issued pursuant to Rule 144A under the 1933 Act and
certain commercial paper that the Adviser or a Portfolio Manager has determined
to be liquid under procedures approved by the Board of Trustees).
18
<PAGE>
INVESTMENT RESTRICTIONS
Each Fund's investment objective as set forth in the Prospectus under
"Investment Objectives and Policies," together with the investment restrictions
set forth below, are fundamental policies of the Fund and may not be changed
with respect to a Fund without the approval of a majority of the outstanding
voting shares of that Fund. Under these restrictions, a Fund may not:
(1) invest in a security if, as a result of such investment, more than
25% of its total assets (taken at market value at the time of such
investment) would be invested in the securities of issuers in any particular
industry, except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities (or
repurchase agreements with respect thereto);
(2) with respect to 75% of its assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at market
value at the time of such investment) would be invested in the securities of
any one issuer, except that this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities;
(3) with respect to 75% of its assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the time of
such investment) of the outstanding voting securities of any one issuer,
except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities;
(4) purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies in the real estate industry or which invest in real estate or
interests therein;
(5) purchase or sell commodities or commodities contracts (which, for
the purpose of this restriction, shall not include foreign currency or
forward foreign currency contracts), except that any Fund may engage in
interest rate futures contracts, stock index futures contracts, futures
contracts based on other financial instruments or one or more groups of
instruments, and on options on such futures contracts;
(6) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but
it may make margin deposits in connection with transactions in options,
futures, and options on futures, and except that effecting short sales will
be deemed not to constitute a margin purchase for purposes of this
restriction;
(7) borrow money, or pledge, mortgage or hypothecate its assets, except
that a Fund may (i) borrow from banks or enter into reverse repurchase
agreements, or employ similar investment techniques, and pledge its assets in
connection therewith, but only if immediately after each borrowing and
continuing thereafter, there is asset coverage of 300% and (ii) enter into
reverse repurchase agreements and transactions in options, futures, options
on futures, and forward foreign currency contracts as described in the
Prospectus and in this Statement of Additional Information (the deposit of
assets in escrow in connection with the writing of covered put and call
options and the purchase of securities on a when-issued or delayed delivery
basis and collateral arrangements with respect to initial or variation margin
deposits for futures contracts, options on futures contracts, and forward
foreign currency contracts will not be deemed to be pledges of a Fund's
assets);
19
<PAGE>
(8) issue senior securities, except insofar as a Fund may be deemed to
have issued a senior security by reason of borrowing money in accordance with
the Fund's borrowing policies, and except for purposes of this investment
restriction, collateral, escrow, or margin or other deposits with respect to
the making of short sales, the purchase or sale of futures contracts or
related options, purchase or sale of forward foreign currency contracts, and
the writing of options on securities are not deemed to be an issuance of a
senior security;
(9) lend any funds or other assets, except that a Fund may, consistent
with its investment objective and policies: (a) invest in debt obligations,
including bonds, debentures, or other debt securities, bankers' acceptances
and commercial paper, even though the purchase of such obligations may be
deemed to be the making of loans, (b) enter into repurchase agreements and
reverse repurchase agreements, and (c) lend its portfolio securities in an
amount not to exceed one-third of the value of its total assets, provided
such loans are made in accordance with applicable guidelines established by
the Securities and Exchange Commission ("SEC") and the Trustees of the Trust;
or
(10) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities, it
may be deemed to be an underwriter under the federal securities laws.
Each Fund is also subject to the following non-fundamental restrictions
and policies (which may be changed without shareholder approval) relating to
the investment of its assets and activities. Unless otherwise indicated, a
Fund may not:
(A) invest for the purpose of exercising control or management;
(B) invest in securities of another open-end investment company;
(C) (a) for the NFJ Equity Income, NFJ Diversified Low P/E, NFJ Small
Cap Value, Cadence Capital Appreciation, Cadence Mid Cap Growth, Cadence
Small Cap Growth, Parametric Enhanced Equity, and Balanced Funds: invest
more than 10% of the net assets of a Fund (taken at market value at the time
of the investment) in "illiquid securities," illiquid securities being
defined to include repurchase agreements maturing in more than seven days,
certain loan participation interests, fixed time deposits which are not
subject to prepayment or provide withdrawal penalities upon prepayment (other
than overnight deposits), or other securities which legally or in the
Adviser's or Portfolio Manager's opinion may be deemed illiquid (other than
securities issued pursuant to Rule 144A under the 1933 Act and certain
commercial paper that the Adviser or Portfolio Manager has determined to be
liquid under procedures approved by the Board of Trustees); nor invest more
than 5% of the net assets of a Fund in securities that are illiquid because
they are subject to legal or contractual restrictions on resale;
(b) for the Columbus Circle Investors Core Equity, Columbus Circle
Investors Mid Cap Equity, Cadence Micro Cap Growth, Blairlogie Emerging
Markets, and Blairlogie International Active Funds: invest more than 15% of
the net assets of a Fund (taken at market value at the time of the
investment) in securities that are illiquid because they are subject to legal
or contractual restrictions on resale, in repurchase agreements maturing in
more than seven days, or other securities which are illiquid;
(D) purchase any security if, as a result, the Fund will then have more
than 5% of its total assets invested in securities of companies (including
predecessor companies) that have been in continuous operation for less than
three years;
20
<PAGE>
(E) purchase or retain securities of any issuer if, to the knowledge of
the Fund, any of the Fund's officers or Trustees, or any officer or Director
of PIMCO Advisors or the Portfolio Manager of the Fund, individually owns
more than one-half of 1% of the outstanding securities of the issuer and
together own beneficially more than 5% of such issuer's securities;
(F) purchase securities for the Fund from, or sell portfolio securities
to, any of the officers and Directors or Trustees of the Trust or the
Adviser;
(G) invest in a security if, with respect to 100% of the total assets,
the Fund would own more than 10% (taken at the time of such investment) of
the outstanding voting securities of any one issuer, except that this
restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities;
(H) invest more than 5% of the assets of a Fund (taken at market value
at the time of investment) in any combination of interest only, principal
only, or inverse floating rate securities;
(I) borrow money (excluding reverse repurchase agreements which are
subject to the Fund's fundamental borrowing restriction), except for
temporary administrative purposes in an amount up to 5% of its total assets;
(J) sell securities or property short, except short sales against the
box;
(K) purchase, write, or sell puts, calls, straddles, spreads, or
combinations thereof, except that this restriction does not apply to puts
that are a feature of floating rate securities or to puts that are a feature
of other corporate debt securities, and except that any Fund may engage in
options on securities, options on securities indexes, options on foreign
currencies, options on futures contracts, and options on other financial
instruments or one or more groups of instruments;
(L) invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase) if as a
result, the investment in warrants (valued to the lower of cost or market)
would exceed 5% of the value of the Fund's net assets, of which not more than
2% of the Fund's net assets may be invested in warrants not listed on a
recognized U.S. or foreign stock exchange;
(M) invest in securities sold in foreign over-the-counter markets
unless the foreign dealers effecting such transactions have a minimum net
worth of $20 million; or
(N) invest in oil, gas or other mineral exploration or development
programs (including oil, gas, or other mineral leases), except that a Fund
may invest in the securities of companies that invest in or sponsor those
programs.
For purposes of fundamental investment restriction (5), swap agreements are
not deemed to be commodities contracts. Unless otherwise indicated, all
limitations applicable to Fund investments apply only at the time a transaction
is entered into. Any subsequent change in a rating assigned by any rating
service to a security (or, if unrated, deemed to be of comparable quality), or
change in the percentage of Fund assets invested in certain securities or other
instruments resulting from market fluctuations or other changes in a Fund's
total assets will not require a Fund to dispose of an investment until the
Adviser or Portfolio Manager determines that it is practicable to sell or close
out the investment without undue market or tax consequences to the Fund. In the
event that ratings services assign different ratings to the same security, the
Adviser or Portfolio Manager will determine which rating it believes best
reflects the security's quality and risk at that time, which may be the higher
of the several assigned ratings.
21
<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their business address
and principal occupations during the past five years are as follows (unless
otherwise indicated, the address of all persons below is 840 Newport Center
Drive, Suite 360, Newport Beach, California 92660):
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION WITH PRINCIPAL OCCUPATION(S)
AND AGE THE TRUST DURING THE PAST FIVE YEARS
- ---------------------------------------------------------------------------------
<S> <C> <C>
William D. Cvengros* Chairman of the Chief Executive Officer
Age 47 Board, President and member of the
and Trustee Operating board, Operating
Committee, and Equity
Board, PIMCO Advisors;
Director, Furon Company;
formerly Director,
President, and Chief
Executive Officer, Pacific
Financial Asset Management
Corporation ("PFAMCo");
formerly Chairman of the
Board and Director,
Pacific Investment
Management Company
("PIMCO"), Parametric
Portfolio Associates,
Inc., and Cadence Capital
Management Corporation;
formerly Director,
Blairlogie Capital
Management Limited and
PFAMCo U.K. Limited;
formerly Director, Vice
Chairman, and Chief
Executive Officer, Pacific
Mutual Life Insurance
Company; formerly
Director, President, and
Chief Executive Officer,
PMRealty Advisors, Inc.;
formerly Director, Mutual
Service Corporation,
Pacific Equities Network
and Pacific Corinthian
Life Insurance Company.
Richard L. Nelson Trustee President, Nelson
8 Cherry Hills Lane Financial Consultants;
Newport Beach, CA 92660 retired Partner with Ernst
Age 65 & Young.
Lyman W. Porter Trustee Professor of Management at
2639 Bamboo Street the University of
Newport Beach, CA 92660 California, Irvine.
Age 65
Alan Richards Trustee Consultant; formerly
P.O. Box 675760 President, Chief Executive
15401 Pimlico Corte Officer and Director, E.F.
Rancho Santa Fe, CA Hutton Insurance Group
92067 Inc.; Chairman of the
Age 65 Board, Chief Executive
Officer and President,
E.F. Hutton Life Insurance
Company; Director, E.F.
Hutton & Company, Inc.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION WITH PRINCIPAL OCCUPATION(S)
AND AGE THE TRUST DURING THE PAST FIVE YEARS
- ---------------------------------------------------------------------------------
<S> <C> <C>
Michele Mitchell Sr. Vice President Sr. Vice President, PIMCO
Age 50 Advisors Institutional
Services; Vice President,
PIMCO Advisors; formerly
Sr. Vice President, PFAMCo.
Sharon A. Cheever Vice President and Vice President and
700 Newport Center Drive General Counsel Investment Counsel,
Newport Beach, CA 92660 Pacific Mutual Life
Age 40 Insurance Company
("Pacific Mutual");
formerly Assistant Vice
President and Associate
Counsel of Pacific Mutual.
Teresa A. Wagner Vice President and Vice President and Manager
Age 33 Secretary of Fund Administration,
PIMCO; Vice President,
PIMCO Funds and PIMCO
Commercial Mortgage
Securities Trust, Inc;
formerly Vice President,
PIMCO Advisors
Institutional Services;
formerly Finance Director,
PFAMCo.
R. Wesley Burns Vice President Vice President, PIMCO;
Age 36 President, PIMCO Funds and
PIMCO Commercial Morgtage
Securities Trust, Inc.
John P. Hardaway Vice President Vice President and Manager
Age 38 of Fund Operations, PIMCO;
Treasurer, PIMCO Funds and
PIMCO Commercial Mortgage
Securities Trust, Inc.
R.Mark Brandenberger Treasurer Project Lead, PIMCO;
Age 29 formerly Finance Manager,
PIMCO Advisors
Institutional Services;
formerly Financial
Analyst, PFAMCo; prior to
July, 1993, Senior
Accountant, Deloitte &
Touche.
Garlin G. Flynn Assistant Secretary Sr. Fund Administrator,
Age 49 PIMCO; Secretary, PIMCO
Funds and PIMCO Commercial
Mortgage Securities Trust,
Inc.; formerly Senior
Mutual Fund Analyst, PIMCO
Advisors Institutional
Services; formerly Senior
Mutual Fund Analyst,
PFAMCo.
</TABLE>
* Mr. Cvengros is an "interested person" of the Trust (as that term is defined
in the 1940 Act) because of his affiliations with PIMCO Advisors.
23
<PAGE>
COMPENSATION TABLE
The following table sets forth information regarding compensation received
by the Trustees for the year ended October 31, 1995:
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS ESTIMATED FROM TRUST
ACCRUED ANNUAL AND FUND
AGGREGATE AS PART BENEFITS COMPLEX
COMPENSATION OF TRUST UPON PAID TO
NAME AND POSITION FROM TRUST/1/ EXPENSES RETIREMENT TRUSTEES
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William D. Cvengros 0 0 0 0
Chairman, President
and Trustee
Richard L. Nelson $17,500 0 0 $17,500
Trustee
Lyman W. Porter $16,500 0 0 $16,500
Trustee
Alan Richards $17,250 0 0 $17,250
Trustee
</TABLE>
/1/ Trustees other than those affiliated with the Adviser, a Portfolio Manager,
or Pacific Mutual, receive an annual retainer of $10,000, plus $1,000 for
each Board of Trustees meeting attended, and $1,000 for each Audit,
Nominating or Policy Committee meeting attended, plus reimbursement of
related expenses. The Chairmen of the Audit and Policy Committees receive
an additional annual retainer of $1,000.
INVESTMENT ADVISER
PIMCO Advisors serves as investment adviser to the Funds pursuant to an
investment advisory agreement ("Advisory Agreement") between PIMCO Advisors and
the Trust. A majority interest of PIMCO Advisors is held by PIMCO Partners,
G.P., a general partnership between PIMCO, a California corporation and indirect
wholly owned subsidiary of Pacific Mutual, and PIMCO Partners, LLC ("PIMCO
Partners"), a limited liability company controlled by the PIMCO Managing
Directors. William H. Gross, a Managing Director of PIMCO, holds approximately
41.9% of the ownership interests in PIMCO Partners (representing an indirect
economic interest in approximately 15.6% of the partnership units of PIMCO
Advisors owned by PIMCO Partners, G.P., or approximately 12.5% of the
outstanding partnership units of PIMCO Advisors).
PIMCO Advisors, subject to the supervision of the Board of Trustees, is
responsible for providing advice and guidance with respect to the Funds and for
managing, either directly or through others selected by the Adviser, the
investment of the Funds. PIMCO Advisors also furnishes to the Board of Trustees
periodic reports on the investment performance of each Fund. For all of the
Funds, PIMCO Advisors has engaged its affiliates to serve as Portfolio Managers.
24
<PAGE>
Under the terms of the Advisory Agreement, PIMCO Advisors is obligated to
manage the Funds in accordance with applicable laws and regulations. The
investment advisory services of PIMCO Advisors to the Trust are not exclusive
under the terms of the Advisory Agreement. PIMCO Advisors is free to, and does,
render investment advisory services to others. The current Advisory Agreement
was approved by the Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust (as defined in the 1940 Act)
("Independent Trustees") and who have no direct or indirect financial interest
in the Advisory Agreement or a party thereto, at a meeting held on August 12,
1994, and was last approved by shareholders of the NFJ Equity Income, NFJ
Diversified Low P/E, NFJ Small Cap Value, Cadence Capital Appreciation, Cadence
Mid Cap Growth, Cadence Micro Cap Growth, Cadence Small Cap Growth, Parametric
Enhanced Equity, Blairlogie Emerging Markets, Blairlogie International Active,
and Balanced Funds at a meeting of shareholders on October 26, 1994, and by the
sole shareholder of the Columbus Circle Investors Core Equity and Columbus
Circle Investors Mid Cap Equity Funds at a meeting on December 28, 1994.
The Advisory Agreement will continue in effect until November 15, 1996, and
thereafter on a yearly basis, provided such continuance is approved annually (i)
by the holders of a majority of the outstanding voting securities of the Trust
or by the Board of Trustees and (ii) by a majority of the Independent Trustees.
The Advisory Agreement may be terminated without penalty by vote of the Trustees
or the shareholders of the Trust, or by the Adviser, on 60 days' written notice
by either party to the contract and will terminate automatically if assigned.
PIMCO Advisors succeeded to the investment advisory and other businesses of
PFAMCo, the Trust's former investment adviser and administrator, as a result of
the consolidation of the investment advisory and other businesses of PFAMCo and
its subsidiaries with Thomson Advisory Group L.P. ("TAG"), the former name for
PIMCO Advisors, which closed on November 15, 1994 (the "Consolidation"). Prior
to the Consolidation, and since the inception of each of the Funds, PFAMCo had
served as investment adviser to the Funds, pursuant to an advisory agreement,
last approved by the Trustees on October 29, 1993, and last approved by
shareholders of the then-operational Funds on April 30, 1992 (the "Prior
Advisory Agreement"). The terms and conditions of the Advisory Agreement are
identical in all material respects to the Prior Advisory Agreement, with the
exception of the identity of the service provider and its effective date and
termination date.
The Adviser currently receives a monthly investment advisory fee from each
Fund at an annual rate based on average daily net assets of the Funds as
follows:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE RATE
- ---- --------
<S> <C>
NJF Equity Income, NFJ Diversified Low P/E, Cadence Capital Appreciation,
Cadence Mid Cap Growth, Parametric Enhanced Equity, and Balanced Funds
.45% Columbus Circle Investors Core Equity Fund.............................. .57%
NFJ Small Cap Value and Blairlogie International Active Funds................ .60%
Columbus Circle Investors Mid Cap Equity Fund................................ .63%
Blairlogie Emerging Markets Fund............................................. .85%
Cadence Small Cap Growth Fund................................................ 1.00%
Cadence Micro Cap Growth Fund................................................ 1.25%
</TABLE>
25
<PAGE>
For the fiscal years ended October 31, 1994, 1993, and 1992, the
aggregate amount of the advisory fee paid by each operational Fund was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND 10/31/94 10/31/93 10/31/92
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
NFJ Equity Income Fund $ 368,971 $ 226,729 $ 110,847
NFJ Diversified Low P/E Fund 85,078 93,761 68,382
NFJ Small Cap Value Fund 214,936 177,018 65,571
Cadence Capital Appreciation Fund 595,724 261,697 151,716
Cadence Mid Cap Growth Fund 453,846 223,366 59,669
Cadence Micro Cap Growth Fund* 251,431 31,207 N/A
Cadence Small Cap Growth Fund 456,981 402,219 334,059
Columbus Circle Investors Core Equity N/A N/A N/A
Fund*
Columbus Circle Investors Mid Cap Equity
Fund* N/A N/A N/A
Parametric Enhanced Equity Fund 267,252 190,730 67,320
Blairlogie Emerging Markets Fund* 319,725 41,319 N/A
Blairlogie International Active Fund* 84,712 18,020 N/A
Balanced Fund 597,672 505,311 149,837
</TABLE>
* These Funds had not commenced operations as of the indicated date.
PORTFOLIO MANAGEMENT AGREEMENTS
PIMCO Advisors employs certain of its affiliates as Portfolio Managers
for all of the Funds to provide investment advisory services to the Funds under
portfolio management agreements. PIMCO Advisors currently has six subsidiary
partnerships called PIMCO, Parametric Portfolio Associates ("Parametric"),
Cadence Capital Management ("Cadence"), NFJ Investment Group ("NFJ"), Columbus
Circle Investors ("Columbus Circle"), and Blairlogie Capital Management
("Blairlogie").
Pursuant to a portfolio management agreement between the Adviser and
PIMCO, PIMCO is the Portfolio Manager and provides investment advice and makes
and implements investment decisions with respect to the portion of the assets of
the Balanced Fund allocated by the Adviser for investment in fixed income
securities. For the services provided, PIMCO Advisors (not the Trust) pays PIMCO
a fee at an annual rate of .25% of the average daily net assets of the portion
of the Balanced Fund allocated to PIMCO for investment in fixed income
securities.
PIMCO is an investment management firm organized as a general
partnership. PIMCO is the successor investment adviser to Pacific Investment
Management Company, a wholly owned subsidiary of PFAMCo. PIMCO has two partners:
PIMCO Advisors as the supervisory partner, and PIMCO Management, Inc. as the
managing partner. Pacific Investment Management Company, the predecessor
investment adviser to PIMCO, commenced operations in 1971. PIMCO is located at
840 Newport Center Drive, Suite 360, Newport Beach, California 92660. PIMCO also
provides investment advisory services to the PIMCO Funds, Harbor Fund, various
funds advised by Frank Russell Investment Management Company, Total Return Bond
Portfolio and Intermediate Term Bond Portfolio of Prudential Securities Target
Portfolio Trust, PIMCO Commercial Mortgage Securities Trust, Inc., Total Return
Bond and Limited Maturity Bond Portfolios of American Skandia Trust, Total
Return Fund of Fremont Mutual Fund, Inc., Managed Bond and Government Securities
Series of Pacific Select Fund, and the PaineWebber Short-Term U.S. Government
Income Fund, a series of PaineWebber Managed Investments Trust, all of which are
open-end management investment companies, as well as to managed accounts
consisting of proceeds from pension and profit sharing plans. PIMCO had
approximately $68.5 billion of assets under management as of September 30, 1995.
26
<PAGE>
Pursuant to a portfolio management agreement between the Adviser and
Parametric, Parametric is the Portfolio Manager and provides investment advisory
services to the Parametric Enhanced Equity Fund and the portion of the Balanced
Fund allocated by the Adviser for investment in common stock. For the services
provided, PIMCO Advisors (not the Trust) pays Parametric a fee at an annual rate
based on a percentage of the average daily net assets of each of the Funds as
follows: .45% for the Parametric Enhanced Equity Fund and .45% for the portion
of the Balanced Fund allocated to Parametric for investment in common stock.
Parametric is an investment management firm organized as a general
partnership. Parametric is the successor investment adviser to Parametric
Portfolio Associates, Inc., a wholly owned corporate subsidiary of PFAMCo.
Parametric has two partners: PIMCO Advisors as the supervisory partner, and
Parametric Management, Inc. as the managing partner. Parametric Portfolio
Associates, Inc., the predecessor investment adviser to Parametric, commenced
operations in 1987. Parametric is located at 7310 Columbia Center, 701 Fifth
Avenue, Seattle, Washington 98104-7090. Parametric provides investment
management services to a limited number of large accounts, such as employee
benefit plans, college endowment funds and foundations. Accounts managed by
Parametric had combined assets, as of September 30, 1995, of approximately $1.5
billion.
Pursuant to a portfolio management agreement between the Adviser and
Cadence, Cadence is the Portfolio Manager and provides investment advisory
services to the Cadence Capital Appreciation Fund, the Cadence Mid Cap Growth
Fund, the Cadence Micro Cap Growth Fund, and the Cadence Small Cap Growth Fund.
For the services provided, PIMCO Advisors (not the Trust) pays Cadence a fee at
an annual rate based on a percentage of the average daily net assets of each of
the Funds as follows: .45% for the Cadence Capital Appreciation Fund and the
Cadence Mid Cap Growth Fund, 1.00% for the Cadence Small Cap Growth Fund, and
1.25% for the Cadence Micro Cap Growth Fund.
Cadence is an investment management firm organized as a general
partnership. Cadence is the successor investment adviser to Cadence Capital
Management Corporation, a wholly owned subsidiary of PFAMCo. Cadence has two
partners: PIMCO Advisors as the supervisory partner, and Cadence Capital
Management, Inc. as the managing partner. Cadence Capital Management
Corporation, the predecessor investment adviser to Cadence, commenced operations
in 1988. Cadence is located at Exchange Place, 53 State Street, Boston,
Massachusetts 02109. Cadence provides investment management services to a
limited number of large accounts, such as employee benefit plans, college
endowment funds and foundations. Accounts managed by Cadence had combined
assets, as of September 30, 1995, of approximately $2.4 billion.
Pursuant to a portfolio management agreement between the Adviser and
NFJ, NFJ is the Portfolio Manager and provides investment advisory services to
the NFJ Equity Income Fund, the NFJ Diversified Low P/E Fund, and the NFJ Small
Cap Value Fund. For the services provided, PIMCO Advisors (not the Trust) pays
NFJ a fee at an annual rate based on a percentage of the average daily net
assets of each of the Funds as follows: .45% for the NFJ Equity Income Fund and
the NFJ Diversified Low P/E Fund, and .60% for the NFJ Small Cap Value Fund.
NFJ is an investment management firm organized as a general
partnership. NFJ is the successor investment adviser to NFJ Investment Group,
Inc., a wholly owned subsidiary of PFAMCo. NFJ has two partners: PIMCO Advisors
as the supervisory partner, and NFJ Management, Inc. as the managing partner.
NFJ Investment Group, Inc., the predecessor investment adviser to NFJ, commenced
operations in 1989. NFJ is located at 2121 San Jacinto, Suite 1440, Dallas,
Texas 75201. NFJ provides investment management services to a limited number of
large accounts, such as employee benefit plans, college endowment funds and
foundations. Accounts managed by NFJ had combined assets, as of September 30,
1995, of approximately $1.4 billion.
27
<PAGE>
Pursuant to a portfolio management agreement between the Adviser and
Columbus Circle, Columbus Circle is the Portfolio Manager and provides
investment advisory services to the Columbus Circle Investors Core Equity Fund
and Columbus Circle Investors Mid Cap Equity Fund. For the services provided,
PIMCO Advisors (not the Trust) pays Columbus Circle a fee at an annual rate
based on a percentage of the average daily net assets of each of the Funds as
follows: .57% for the Columbus Circle Investors Core Equity Fund and .63% for
the Columbus Circle Investors Mid Cap Equity Fund.
Columbus Circle is an investment management firm organized as a
general partnership. Columbus Circle is the successor investment adviser to the
Columbus Circle Investors Division of TAG. Columbus Circle has two partners:
PIMCO Advisors as the supervisory partner, and Columbus Circle Investors
Management, Inc. as the managing partner. Columbus Circle Investors Division of
TAG, the predecessor investment adviser to Columbus Circle, commenced operations
in 1975. Columbus Circle is located at Metro Center, One Station Place, 8th
Floor, Stamford, Connecticut 06902. Columbus Circle manages discretionary
accounts for institutions, such as corporate, government and union pension and
profit-sharing plans, foundations and educational institutions, as well as
several funds in the PIMCO Advisors Funds and the Cash Accumulation Trust.
Accounts managed by Columbus Circle had combined assets, as of September 30,
1995, of $13 billion.
Pursuant to a portfolio management agreement between the Adviser and
Blairlogie, Blairlogie is the Portfolio Manager and provides investment advisory
services to the Blairlogie Emerging Markets Fund and the Blairlogie
International Active Fund. For the services provided, PIMCO Advisors (not the
Trust) pays Blairlogie a fee at an annual rate based on a percentage of the
average daily net assets of each of the Funds as follows: .85% for the
Blairlogie Emerging Markets Fund and .60% for the Blairlogie International
Active Fund.
Blairlogie is a Scottish investment management firm, organized as a
limited partnership. Blairlogie is the successor investment adviser to
Blairlogie Capital Management Ltd., an indirect subsidiary of PFAMCo. Blairlogie
is organized as a United Kingdom limited partnership with two general partners
and one limited partner. The general partners are PIMCO Advisors, which serves
as the supervisory partner, and Blairlogie Holdings Limited, a wholly owned
corporate subsidiary of PIMCO Advisors, which serves as the managing partner.
The limited partner is Blairlogie Partners L.P., a limited partnership, the
general partner of which is PFAMCo, and the limited partners of which are the
principal executive officers of Blairlogie Capital Management Ltd. Blairlogie
Partners L.P. has agreed with PIMCO Advisors that PIMCO Advisors will acquire
one-fifth of its 25% interest annually, beginning December 31, 1997. Blairlogie
Capital Management Ltd., the predecessor investment adviser to Blairlogie,
commenced operations in 1992. Blairlogie is located at 4th Floor, 125 Princes
Street, Edinburgh EH2 4AD, Scotland. Blairlogie provides investment management
services to a limited number of large accounts, such as employee benefit plans,
college endowment funds and foundations. Accounts managed by Blairlogie had
combined assets, as of September 30, 1995, of approximately $0.6 billion.
PIMCO Advisors determines the allocation of the Balanced Fund's assets
among the various asset classes, and manages the portion of that Fund's assets
allocated for investment in money market instruments.
28
<PAGE>
For the fiscal years ended October 31, 1994, 1993, and 1992, the
amount of net fee accrued by PFAMCo to the predecessors of the Portfolio
Managers for each operational Fund was as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND 10/31/94 10/31/93 10/31/92
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
NFJ Equity Income Fund $ 368,971 $ 93,761 $ 111,245
NFJ Diversified Low P/E Fund 85,078 93,761 68,528
NFJ Small Cap Value Fund 214,936 177,018 53,218
Cadence Capital Appreciation Fund 595,724 261,697 143,150
Cadence Mid Cap Growth Fund 453,846 223,366 60,781
Cadence Micro Cap Growth Fund* 251,431 14,778 N/A
Cadence Small Cap Growth Fund 456,981 402,219 335,322
Columbus Circle Investors Core Equity N/A N/A N/A
Fund*
Columbus Circle Investors Mid Cap Equity
Fund* N/A N/A N/A
Parametric Enhanced Equity Fund 267,252 190,730 67,390
Blairlogie Emerging Markets Fund* 195,258 2,880 N/A
Blairlogie International Active Fund* 34,947 468 N/A
Balanced Fund 481,304 399,046 117,626
</TABLE>
* These funds had not commenced operations as of the indicated date.
FUND ADMINISTRATOR
PIMCO serves as administrator to the Funds pursuant to an
administration agreement (the "Administration Agreement") between PIMCO and the
Trust. PIMCO provides the Funds with certain administrative and shareholder
services necessary for Fund operations and is responsible for the supervision of
other Fund service providers. The administrative services provided by PIMCO
include, but are not limited to: (1) shareholder servicing functions, including
preparation of shareholder reports and communications, (2) regulatory
compliance, such as reports and filings with the SEC and state securities
commissions, and (3) general supervision of the operations of the Funds,
including coordination of the services performed by the Funds' transfer agent,
custodian, legal counsel, independent accountants, and others. PIMCO (or an
affiliate of PIMCO) also furnishes the Funds with office space and facilities
required for conducting the business of the Funds, and pays the compensation of
those officers, employees and Trustees of the Trust affiliated with PIMCO. In
addition, PIMCO, at its own expense, arranges for the provision of legal, audit,
custody, transfer agency and other services for the Funds, and is responsible
for the costs of registration of the Trust's shares and the printing of
prospectuses and shareholder reports for current shareholders. PIMCO has
contractually agreed to provide these services, and to bear these expenses, at
the following rates (each expressed as a percentage of the Fund's average daily
net assets on an annual basis):
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEE RATE
- ---- --------------
<S> <C>
Blairlogie Emerging Markets and Blairlogie International Active Funds.... 0.50%
All Other Funds.......................................................... 0.25%
</TABLE>
Except for the expenses paid by PIMCO, the Trust bears all costs of
its operations. The Funds are responsible for: (i) salaries and other
compensation of any of the Trust's executive officers and employees who are not
officers, directors, stockholders, or employees of PIMCO Advisors, PIMCO, or
their subsidiaries or affiliates; (ii) taxes and governmental fees; (iii)
brokerage fees and commissions and other portfolio transaction expenses; (iv)
costs of borrowing money, including interest expenses; (v) fees and expenses of
the Trustees who are not "interested persons" of the Adviser, PIMCO, the
29
<PAGE>
Portfolio Managers, or the Trust, and any counsel retained exclusively for their
benefit; (vi) extraordinary expenses, including costs of litigation and
indemnification expenses; (vii) expenses which are capitalized in accordance
with generally accepted accounting principals; and (viii) any expenses allocated
or allocable to a specific class of shares ("Class-specific expenses").
Class-specific expenses include service fees payable with respect to
the Administrative Class shares and may include certain other expenses as
permitted by the Trust's multiple class plan ("Multiple Class Plan") adopted
pursuant to Rule 18f-3 under the 1940 Act and subject to review and approval by
the Trustees. It is not presently anticipated that any expenses other than
service fees will be allocated on a class-specific basis.
The Administration Agreement for the Funds may be terminated by the
Trustees or PIMCO at any time on 60 days' written notice. Following its initial
two-year term, the contract would continue from year to year if approved by the
Trustees.
The Administration Agreement is subject to annual approval by the
Board, including a majority of the Trust's Independent Trustees. The current
Administration Agreement was approved by the Board of Trustees, including all of
the Independent Trustees at a meeting held on August 11, 1995. In approving the
Administration Agreement, the Trustees determined that: (1) the Administration
Agreement is in the best interests of the Funds and their shareholders; (2) the
services to be performed under the Administration Agreement are services
required for the operation of the Funds; (3) PIMCO is able to provide, or to
procure, services for the Funds which are at least equal in nature and quality
to services that could be provided by others; and (4) the fees to be charged
pursuant to the Administration Agreement are fair and reasonable in light of the
usual and customary charges made by others for services of the same nature and
quality.
A previous administration agreement ("Prior Agreement") between the
Trust and PFAMCo was initially approved by the Trustees at a meeting held on
November 16, 1990 (and thereafter by the then-sole shareholder of the Funds).
The Prior Agreement was last approved by the Board of Trustees on October 28,
1994. In connection with the Consolidation, PIMCO Advisors assumed the duties of
PFAMCo as administrator to the Funds. The terms and conditions of the
Administration Agreement are substantially identical in all material respects to
those of the Prior Agreement and addenda thereto, with the primary exception of
the identity of the service provider and its effective date and termination
date.
30
<PAGE>
For the fiscal years ended October 31, 1994, 1993, and 1992, the
aggregate amount of the administration fees paid by each operational Fund was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND 10/31/94 10/31/93 10/31/92
- ---- ---------- --------- ---------
<S> <C> <C> <C>
NFJ Equity Income Fund $ 204,984 $ 125,961 $ 61,582
NFJ Diversified Low P/E Fund 47,265 52,089 37,990
NFJ Small Cap Value Fund 89,556 73,757 27,321
Cadence Capital Appreciation Fund 330,958 145,387 84,289
Cadence Mid Cap Growth Fund 252,137 124,092 33,149
Cadence Micro Cap Growth Fund* 50,286 6,241 N/A
Cadence Small Cap Growth Fund 114,245 100,555 83,515
Columbus Circle Investors Core Equity N/A N/A N/A
Fund*
Columbus Circle Investors Mid Cap Equity
Fund* N/A N/A N/A
Parametric Enhanced Equity Fund 148,474 105,960 37,401
Blairlogie Emerging Markets Fund* 188,073 24,305 N/A
Blairlogie International Active Fund* 70,593 15,016 N/A
Balanced Fund 332,040 280,729 83,779
</TABLE>
* These Funds had not commenced operations as of the indicated date.
EXPENSE LIMITATIONS
Certain of the states in which the shares of the Trust are qualified
for sale impose limitations on the expenses of the Trust. If, in any fiscal
year, the total expenses of the Trust (excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses, other expenditures which
are capitalized in accordance with generally accepted accounting principles and
extraordinary expenses, but including the advisory and administrative fees)
exceed the expense limitations applicable to the Trust imposed by the securities
regulations of any state, PIMCO will reimburse the Trust for the excess.
Fees foregone for payments made by PIMCO with respect to a Fund
pursuant to the expense limitation are contingent liabilities of the Fund which
are subject to potential reimbursement to be made without causing the covered
expenses of the Fund to exceed the amount as may be imposed by any state expense
limit to which the Trust is subject, and provided such reimbursement is made
within four years of the recognition of the contingent liability of the Fund.
If a reimbursement appears probable, it will be accounted for as an expense of
the Fund regardless of the time period over which the reimbursement may actually
be paid by the Fund.
DISTRIBUTION OF TRUST SHARES
Each Fund offers two classes of shares: the "Institutional Class" and
the "Administrative Class." Shares of the Institutional Class are offered
primarily for direct investment by institutional investors and high net worth
individuals. They also are offered through certain financial intermediaries
that charge their customers transaction or other fees with respect to the
customer's investment in the Funds. Shares of the Administrative Class are
offered primarily through brokers, retirement plan administrators and other
financial intermediaries. Administrative Class shares indirectly pay service
fees to such entities for services they provide to shareholders of that class.
31
<PAGE>
Under the Trust's Multiple Class Plan, shares of each class of a Fund
represent an equal pro rata interest in such Fund and, generally, have identical
voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except that:
(a) each class has a different designation; (b) each class of shares bears any
class-specific expenses allocated to it; and (c) each class has separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class.
PIMCO Advisors Distribution Company ("PADCO" or the "Distributor")
serves as the Trust's Distributor pursuant to a distribution agreement
("Distribution Agreement") dated November 15, 1994, which is subject to annual
approval by the Board. The Distributor is a wholly owned subsidiary of PIMCO
Advisors. The Distribution Agreement is terminable with respect to a Fund
without penalty, at any time, by vote of a majority of the Independent Trustees,
by the Trust upon 60 days' notice to the Distributor, by vote of the holders of
a majority of the shares of that Fund, or by the Distributor upon 60 days'
notice to the Trust. The Distributor is not obligated to sell any specific
amount of Trust shares.
SERVICE FEES
The Trust has adopted an Administrative Services Plan, (the "Plan")
with respect to the Administrative Class shares of each Fund. Under the terms
of the Plan, PIMCO is permitted to reimburse, out of the Administrative Class
assets of each Fund, in an amount up to 0.25% on an annual basis of the average
daily net assets of that class, financial intermediaries that provide services
in connection with the administration of shareholder accounts or of plans or
programs that use Fund shares as their funding medium. Under the terms of the
Plan, the services may include, but are not limited to, the following functions:
receiving, aggregating and processing shareholder orders; furnishing sub-
accounting; providing and maintaining elective shareholder services such as
check writing and wire transfer services; providing and maintaining pre-
authorized investment plans; communicating periodically with shareholders;
acting as the sole shareholder of record and nominee for shareholders;
maintaining accounting records for shareholders; answering questions and
handling correspondence from shareholders about their accounts; and performing
similar account administrative services.
The Plan provides that it may not be amended to materially increase
the costs under the Plan without the approval by vote of a majority of both (i)
the Trustees of the Trust and (ii) the Independent Trustees who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to it (the "Plan Trustees"), cast in person at a meeting called for the
purpose of voting on the Plan and any related amendments.
The Plan provides that it may not take effect until approved by vote
of a majority of both (i) the Trustees of the Trust and (ii) the Plan Trustees.
The Plan was approved by the Trustees, including the Plan Trustees, at a meeting
held on March 4, 1994.
The Plan provides that it shall continue in effect so long as such
continuance is specifically approved at least annually by the Trustees and the
Plan Trustees. The Plan provides that PIMCO shall provide to the Trustees, and
the Board shall review at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
32
<PAGE>
PURCHASES AND REDEMPTIONS
Purchases and redemptions are discussed in the Prospectus under the
headings "Purchase of Shares," "Redemption of Shares," and "Net Asset Value,"
and that information is incorporated herein by reference.
Certain managed account clients of the Adviser may purchase shares of
the Trust. To avoid the imposition of duplicative fees, the Adviser may be
required to make adjustments in the management fees charged separately by the
Adviser to these clients to offset the generally higher level of management fees
and expenses resulting from a client's investment in the Trust.
Certain clients of the Adviser whose assets would be eligible for
purchase by one or more of the Funds may purchase shares of the Trust with such
assets. Assets so purchased by a Fund will be valued in accordance with
procedures adopted by the Board of Trustees.
Shares of the Funds are not qualified or registered for sale in all
states. Prospective investors should inquire as to whether shares of a
particular Fund are available for offer and sale in their state of domicile or
residence. Shares of a Fund may not be offered or sold in any state unless
registered or qualified in that jurisdiction, unless an exemption from
registration or qualification is available.
The Trust reserves the right to suspend or postpone redemptions during
any period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the SEC, or that Exchange is closed for other than customary
weekend and holiday closings; (b) the SEC has by order permitted such
suspension; or (c) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
Due to the relatively high cost of maintaining smaller accounts, the
Trust reserves the right to redeem shares in any account for their then-current
value (which will be promptly paid to the investor) if at any time, due to
shareholder redemption, the shares in the account do not have a value of at
least $100,000. An investor will be notified that the value of his account is
less than the minimum and allowed at least 30 days to bring the value of the
account up to at least $100,000 before the redemption is processed. The Trust's
Amended and Restated Agreement and Declaration of Trust ("Declaration of Trust")
also authorizes the Trust to redeem shares under certain other circumstances as
may be specified by the Board of Trustees.
PORTFOLIO TRANSACTIONS AND BROKERAGE
INVESTMENT DECISIONS
Investment decisions for the Trust and for the other investment
advisory clients of the Adviser and Portfolio Managers are made with a view to
achieving their respective investment objectives. Investment decisions are the
product of many factors in addition to basic suitability for the particular
client involved (including the Trust). Thus, a particular security may be
bought or sold for certain clients even though it could have been bought or sold
for other clients at the same time. Likewise, a particular security may be
bought for one or more clients when one or more clients are selling the
security. In some instances, one client may sell a particular security to
another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in the Adviser's or the
Portfolio Manager's opinion is equitable to each and in accordance with the
amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients.
33
<PAGE>
BROKERAGE AND RESEARCH SERVICES
There is generally no stated commission in the case of fixed income
securities, which are traded in the over-the-counter markets, but the price paid
by the Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by the
Trust of negotiated brokerage commissions. Such commissions vary among
different brokers. Also, a particular broker may charge different commissions
according to such factors as the difficulty and size of the transaction.
Transactions in foreign securities generally involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States.
Each Portfolio Manager places all orders for the purchase and sale of
portfolio securities, options and futures contracts for the Trust and buys and
sells such securities, options and futures for the Trust through a substantial
number of brokers and dealers. In so doing, a Portfolio Manager uses its best
efforts to obtain for the Trust the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable price and
execution, the Portfolio Manager, having in mind the Trust's best interests,
considers all factors it deems relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial stability of
the broker-dealer involved and the quality of service rendered by the broker-
dealer in other transactions. The Trust reserves the right to direct portfolio
brokerage to affiliated persons of the Adviser or any Portfolio Manager.
For the fiscal years ended October 31, 1994, 1993, and 1992, the
amount of brokerage commissions paid by each operational Fund was as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FUND 10/31/94 10/31/93 10/31/92
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
NFJ Equity Income Fund $ 172,646 $ 128,921 $ 66,272
NFJ Diversified Low P/E Fund 39,671 23,481 47,421
NFJ Small Cap Value Fund 115,477 107,687 69,640
Cadence Capital Appreciation Fund 368,018 168,553 91,407
Cadence Mid Cap Growth Fund 258,765 186,462 38,784
Cadence Micro Cap Growth Fund* 118,750 43,428 N/A
Cadence Small Cap Growth Fund 87,362 88,876 61,777
Columbus Circle Investors Core Equity N/A N/A N/A
Fund*
Columbus Circle Investors Mid Cap N/A N/A N/A
Equity Fund*
Parametric Enhanced Equity Fund 106,389 32,362 52,243
Blairlogie Emerging Markets Fund* 618,574 96,534 N/A
Blairlogie International Active Fund* 150,878 41,564 N/A
Balanced Fund 108,394 62,296 9,166
</TABLE>
* These Funds had not commenced operations as of the indicated date.
34
<PAGE>
The Adviser and Portfolio Managers manage the Funds without regard
generally to restrictions on portfolio turnover, except those imposed on its
ability to engage in short-term trading by provisions of the federal tax laws,
see "Taxation". The use of futures contracts and other derivative instruments
with relatively short maturities may tend to exaggerate the portfolio turnover
rate for some of the Funds. Trading in fixed income securities does not
generally involve the payment of brokerage commissions, but does involve
indirect transaction costs. The use of futures contracts may involve the
payment of commissions to futures commission merchants. The higher the rate of
portfolio turnover of a Fund, the higher these transaction costs borne by the
Fund generally will be.
The portfolio turnover rate of a Fund is calculated by dividing (a)
the lesser of purchases or sales of portfolio securities for the particular
fiscal year by (b) the monthly average of the value of the portfolio securities
owned by the Fund during the particular fiscal year. In calculating the rate of
portfolio turnover, there is excluded from both (a) and (b) all securities,
including options, whose maturities or expiration dates at the time of
acquisition were one year or less. It is anticipated that the annual rate of
portfolio turnover will not exceed 100% for the NFJ Equity Income, NFJ
Diversified Low P/E, NFJ Small Cap Value, Cadence Capital Appreciation, Cadence
Mid Cap Growth, Cadence Micro Cap Growth, Cadence Small Cap Growth, Columbus
Circle Investors Core Equity, Columbus Circle Investors Mid Cap Equity, and
Parametric Enhanced Equity Funds, and 150% for the Blairlogie Emerging Markets,
Blairlogie International Active and Balanced Funds.
It has for many years been a common practice in the investment
advisory business for advisers of investment companies and other institutional
investors to receive research services from broker-dealers which execute
portfolio transactions for the clients of such advisers. Consistent with this
practice, the Adviser or Portfolio Manager receives research services from many
broker-dealers with which the Adviser or Portfolio Manager places the Trust's
portfolio transactions. These services, which in some cases may also be
purchased for cash, include such matters as general economic and security market
reviews, industry and company reviews, evaluations of securities and
recommendations as to the purchase and sale of securities. Some of these
services are of value to the Adviser or Portfolio Manager in advising various of
its clients (including the Trust), although not all of these services are
necessarily useful and of value in managing the Trust. The management fee paid
by the Trust is not reduced because the Adviser or Portfolio Manager and its
affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
the Adviser or Portfolio Manager may cause the Trust to pay a broker-dealer
which provides "brokerage and research services" (as defined in the Act) to the
Adviser or Portfolio Manager an amount of disclosed commission for effecting a
securities transaction for the Trust in excess of the commission which another
broker-dealer would have charged for effecting that transaction.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Adviser or Portfolio Manager may also consider sales of shares of the Trust as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Trust.
A Portfolio Manager may place orders for the purchase and sale of
exchange-listed portfolio securities with a broker-dealer that is an affiliate
of the Portfolio Manager where, in the judgment of the Portfolio Manager, such
firm will be able to obtain a price and execution at least as favorable as other
qualified broker-dealers.
35
<PAGE>
Pursuant to rules of the SEC, a broker-dealer that is an affiliate of
the Adviser or a Portfolio Manager may receive and retain compensation for
effecting portfolio transactions for a Fund on a national securities exchange of
which the broker-dealer is a member if the transaction is "executed" on the
floor of the exchange by another broker which is not an "associated person" of
the affiliated broker-dealer, and if there is in effect a written contract
between the Portfolio Manager and the Trust expressly permitting the affiliated
broker-dealer to receive and retain such compensation. The portfolio management
agreements provide that each Portfolio Manager is authorized to allocate the
orders placed by it on behalf of the Fund to its affiliate that is registered as
a broker or dealer with the SEC.
SEC rules further require that commissions paid to such an affiliated
broker-dealer or Portfolio Manager by a Fund on exchange transactions not exceed
"usual and customary brokerage commissions." The rules define "usual and
customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time."
NET ASSET VALUE
As indicated under "Net Asset Value" in the Prospectus, the Trust's
net asset value per share for the purpose of pricing purchase and redemption
orders is determined at 4:00 p.m. (Eastern time) on each day the New York Stock
Exchange is open for trading. Net asset value will not be determined on the
following holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
With respect to the Columbus Circle Investors Core Equity, Columbus
Circle Investors Mid Cap Equity, Blairlogie Emerging Markets, and Blairlogie
International Active Funds, the value of portfolio securities that are traded on
stock exchanges outside the United States is based upon the price on the
exchange as of the close of business of the exchange immediately preceding the
time of valuation. Securities traded in over-the-counter markets in European and
Pacific Basin countries are normally completed well before 4:00 P.M. (Eastern
time). In addition, European and Pacific Basin securities trading may not take
place on all business days in New York. Furthermore, trading takes place in
Japanese markets on certain Saturdays and in various foreign markets on days
which are not business days in New York and on which net asset value of these
Funds is not calculated. The calculation of the net asset value of the
Blairlogie Emerging Markets and Blairlogie International Active Funds may not
take place contemporaneously with the determination of the prices of portfolio
securities used in such calculation. Events affecting the values of portfolio
securities that occur between the time their prices are determined and 4:00 P.M.
(Eastern time), and at other times may not be reflected in the calculation of
net asset value of these Funds. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
fair value as determined by the management and approved in good faith by the
Board of Trustees.
36
<PAGE>
TAXATION
While the Adviser anticipates that many shareholders of the Trust will
be tax-exempt institutions, the following discussion may be of general interest
to these shareholders, as well as for those shareholders of the Trust who do not
have tax-exempt status. The following discussion is general in nature and
should not be regarded as an exhaustive presentation of all possible tax
ramifications. All shareholders should consult a qualified tax adviser
regarding their investment in a Fund.
Each Fund intends to qualify annually and elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). To qualify as a regulated investment company, each Fund generally
must, among other things, (a) derive in each taxable year at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of stock, securities or
foreign currencies, or other income derived with respect to its business of
investing in such stock, securities or currencies ("Qualifying Income Test");
(b) derive in each taxable year less than 30% of its gross income from the sale
or other disposition of certain assets held less than three months, namely (1)
stocks or securities, (2) options, futures, or forward contracts (other than
those on foreign currencies), and (3) foreign currencies (or options, futures,
and forward contracts on foreign currencies) not directly related to the Fund's
principal business of investing in stock or securities; (c) diversify its
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash, U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited for
the purposes of this calculation to an amount not greater than 5% of the value
of the Fund's total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies); and (d) distribute at
least 90% of its investment company taxable income (which includes dividends,
interest and net short-term capital gains in excess of any net long-term capital
losses) each taxable year. The Treasury Department is authorized to promulgate
regulations under which gains from foreign currencies (and options, futures, and
forward contracts on foreign currency) would constitute qualifying income for
purposes of the Qualifying Income Test only if such gains are directly relating
to investing in securities. To date, such regulations have not been issued.
As a regulated investment company, a Fund generally will not be
subject to U.S. federal income tax on its investment company taxable income and
net capital gains (any net long-term capital gains in excess of the sum of net
short-term capital losses and capital loss carryovers from prior years)
designated by the Fund as capital gain dividends, if any, that it distributes to
shareholders on a timely basis. Each Fund intends to distribute to its
shareholders, at least annually, substantially all of its investment company
taxable income and any net capital gains. In addition, amounts not distributed
by a Fund on a timely basis in accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise tax. To avoid the tax, a
Fund must distribute during each calendar year an amount equal to the sum of (1)
at least 98% of its ordinary income (not taking into account any capital gains
or losses) for the calendar year, (2) at least 98% of its capital gains in
excess of its capital losses (and adjusted for certain ordinary losses) for the
twelve month period ending on October 31 of the calendar year, and (3) all
ordinary income and capital gains for previous years that were not distributed
during such years. A distribution will be treated as paid on December 31 of the
calendar year if it is declared by a Fund in October, November or December of
that year to shareholders of record on a date in such a month and paid by the
Fund during January of the following year. Such distributions will be taxable
to shareholders (other than those not subject to federal income tax) in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received. To avoid application of the
excise tax, each Fund intends to make its distributions in accordance with the
calendar year distribution requirement.
37
<PAGE>
DISTRIBUTIONS
Dividends paid out of a Fund's investment company taxable income will
be taxable to a U.S. shareholder as ordinary income. Distributions received by
tax-exempt shareholders will not be subject to federal income tax to the extent
permitted under the applicable tax exemption.
A portion of the dividends paid by Funds that invest in stock of U.S.
corporations may qualify for the deduction for dividends received by
corporations. Dividends paid by the other Funds generally are not expected to
qualify for the deduction for dividends received by corporations. Distributions
of net capital gains, if any, designated as capital gain dividends, are taxable
as long-term capital gains, regardless of how long the shareholder has held a
Fund's shares and are not eligible for the dividends received deduction. Any
distributions that are not from a Fund's investment company taxable income or
net realized capital gains may be characterized as a return of capital to
shareholders or, in some cases, as capital gain. The tax treatment of dividends
and distributions will be the same whether a shareholder reinvests them in
additional shares or elects to receive them in cash.
SALES OF SHARES
Upon the disposition of shares of a Fund (whether by redemption, sale
or exchange), a shareholder will realize a gain or loss. Such gain or loss will
be capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term or short-term generally depending upon the
shareholder's holding period for the shares. Any loss realized on a disposition
will be disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized by a shareholder on
a disposition of shares held by the shareholder for six months or less will be
treated as a long-term capital loss to the extent of any distributions of
capital gain dividends received by the shareholder with respect to such shares.
BACKUP WITHHOLDING
A Fund may be required to withhold 31% of all taxable distributions
payable to shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code generally are exempt from such backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal tax liability.
OPTIONS, FUTURES AND FORWARD CONTRACTS, AND SWAP AGREEMENTS
Some of the options, futures contracts, forward contracts, and swap
agreements used by the Funds may be "section 1256 contracts." Any gains or
losses on section 1256 contracts are generally considered 60% long-term and 40%
short-term capital gains or losses ("60/40") although certain foreign currency
gains and losses from such contracts may be treated as ordinary in character.
Also, section 1256 contracts held by a Fund at the end of each taxable year
(and, for purposes of the 4% excise tax, on certain other dates as prescribed
under the Code) are "marked to market" with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is treated as ordinary or 60/40 gain or loss.
38
<PAGE>
Generally, the hedging transactions and certain other transactions in
options, futures and forward contracts undertaken by a Fund, may result in
"straddles" for U.S. federal income tax purposes. In some cases, the straddle
rules also could apply in connection with swap agreements. The straddle rules
may affect the character of gains (or losses) realized by a Fund. In addition,
losses realized by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences of transactions in options, futures,
forward contracts, and swap agreements to a Fund are not entirely clear. The
transactions may increase the amount of short-term capital gain realized by a
Fund which is taxed as ordinary income when distributed to shareholders.
A Fund may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
Rules governing the tax aspects of swap agreements are in a developing
stage and are not entirely clear in certain respects. Accordingly, while the
Blairlogie Emerging Markets and Blairlogie International Active Funds intend to
account for such transactions in a manner they deem to be appropriate, the
Internal Revenue Service might not accept such treatment. If it did not, the
status of a Fund as a regulated investment company might be affected. The Funds
intend to monitor developments in this area. Certain requirements that must be
met under the Code in order for a Fund to qualify as a regulated investment
company may limit the extent to which a Fund will be able to engage in swap
agreements.
The 30% limit on gains from the disposition of certain options,
futures, forward contracts, and swap agreements held less than three months and
the qualifying income and diversification requirements applicable to a Fund's
assets may limit the extent to which a Fund will be able to engage in
transactions in options, futures contracts, forward contracts, and swap
agreements.
PASSIVE FOREIGN INVESTMENT COMPANIES
Certain Funds may invest in the stock of foreign corporations which
may be classified under the Code as passive foreign investment companies
("PFICs"). In general, a foreign corporation is classified as a PFIC for a
taxable year if at least one-half of its assets constitute investment-type
assets or 75% or more of its gross income is investment-type income. If a Fund
receives a so-called "excess distribution" with respect to PFIC stock, the Fund
itself may be subject to tax on a portion of the excess distribution, whether or
not the corresponding income is distributed by the Fund to stockholders.
In general, under the PFIC rules, an excess distribution is treated as
having been realized ratably over the period during which the Fund held the PFIC
stock. A Fund itself will be subject to tax on the portion, if any, of an
excess distribution that is so allocated to prior taxable years and an interest
factor will be added to the tax, as if the tax had been payable in such prior
taxable years. Certain distributions from a PFIC as well as gain from the sale
of PFIC stock are treated as excess distributions. Excess distributions are
characterized as ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as capital gain.
39
<PAGE>
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, another election may be available
that would involve marking to market a Fund's PFIC shares at the end of each
taxable year (and on certain other dates prescribed in the Code), with the
result that unrealized gains are treated as though they were realized. If this
election were made, tax at the Fund level under the PFIC rules would generally
be eliminated, but the Fund could, in limited circumstances, incur nondeductible
interest charges. A Fund's intention to qualify annually as a regulated
investment company may limit its elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject a Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC shares.
FOREIGN CURRENCY TRANSACTIONS
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain other instruments, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its shareholders
as ordinary income.
FOREIGN TAXATION
Income received by the Funds from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. In addition, the Adviser and each Portfolio Manager intends to manage
the Funds with the intention of minimizing foreign taxation in cases where it is
deemed prudent to do so. If more than 50% of the value of a Fund's total assets
at the close of its taxable year consists of securities of foreign corporations,
such Fund will be eligible to elect to "pass-through" to the Fund's shareholders
the amount of foreign income and similar taxes paid by the Fund. If this
election is made, a shareholder generally subject to tax will be required to
include in gross income (in addition to taxable dividends actually received) his
pro rata share of the foreign taxes paid by the Fund, and may be entitled either
to deduct (as an itemized deduction) his or her pro rata share of foreign taxes
in computing his taxable income or to use it (subject to limitations) as a
foreign tax credit against his or her U.S. federal income tax liability. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Each shareholder will be notified within 60 days after the close of
the Fund's taxable year whether the foreign taxes paid by the Fund will "pass-
through" for that year.
40
<PAGE>
Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to his or her
total foreign source taxable income. For this purpose, if the pass-through
election is made, the source of the electing Fund's income will flow through to
shareholders of the Trust. With respect to such Funds, gains from the sale of
securities will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency-denominated
debt securities, receivables and payables will be treated as ordinary income
derived from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income, and to certain other types of
income. Shareholders may be unable to claim a credit for the full amount of
their proportionate share of the foreign taxes paid by the Fund. The foreign tax
credit can be used to offset only 90% of the revised alternative minimum tax
imposed on corporations and individuals and foreign taxes generally are not
deductible in computing alternative minimum taxable income.
ORIGINAL ISSUE DISCOUNT
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by a Fund may be
treated as debt securities that are issued originally at a discount. Generally,
the amount of the original issue discount ("OID") is treated as interest income
and is included in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures. A portion of the OID includable in income with respect to
certain high-yield corporate debt securities may be treated as a dividend for
Federal income tax purposes.
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by a Fund in the
secondary market may be treated as having market discount. Generally, any gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. Market discount generally accrues in equal daily
installments. A Fund may make one or more of the elections applicable to debt
securities having market discount, which could affect the character and timing
of recognition of income.
Some debt securities (with a fixed maturity date of one year or less
from the date of issuance) that may be acquired by a Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, the Fund will be required to include the acquisition
discount, or OID, in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures. The Fund may make one or more of the elections applicable to
debt securities having acquisition discount, or OID, which could affect the
character and timing of recognition of income.
A Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by the Fund. Cash to pay such dividends may be obtained from
sales proceeds of securities held by the Fund.
41
<PAGE>
OTHER TAXATION
Pursuant to Treasury Department regulations, certain expenses of
nonpublicly offered regulated investment companies, including advisory fees, are
not deductible by those regulated investment companies for purposes of
calculating the income of certain shareholders, generally including individuals
and entities that compute their taxable income in the same manner as an
individual (thus, for example, a qualified pension plan is not subject to this
rule). The shareholder's pro rata portion of such expenses will be treated as
income to the shareholder and will be deductible by the shareholder, subject to
the 2% "floor" on miscellaneous itemized deductions and other limitations on
itemized deductions set forth in the Code. A regulated investment company
generally will be classified as nonpublicly offered unless it either has 500
shareholders at all times during a taxable year or continuously offers shares
pursuant to a public offering. However, because of a lack of guidance in this
area, there can be no assurance that the Internal Revenue Service will agree
with this treatment with respect to the Cadence Micro Cap Growth and Cadence
Small Cap Growth Funds, both of which have limitations on contributed capital.
If these Funds are regarded as nonpublicly offered regulated investment
companies, shareholders of these Funds that are subject to this rule could be
subject to income tax adjustments.
Distributions also may be subject to additional state, local and
foreign taxes, depending on each shareholder's particular situation. Under the
laws of various states, distributions of investment company taxable income
generally are taxable to shareholders even though all or a substantial portion
of such distributions may be derived from interest on certain Federal
obligations which, if the interest were received directly by a resident of such
state, would be exempt from such state's income tax ("qualifying Federal
obligations"). However, some states may exempt all or a portion of such
distributions from income tax to the extent the shareholder is able to establish
that the distribution is derived from qualifying Federal obligations. Moreover,
for state income tax purposes, interest on some Federal obligations generally is
not exempt from taxation, whether received directly by a shareholder or through
distributions of investment company taxable income (for example, interest on
FNMA Certificates and GNMA Certificates). Each Fund will provide information
annually to shareholders indicating the amount and percentage of a Fund's
dividend distribution which is attributable to interest on Federal obligations,
and will indicate to the extent possible from what types of Federal obligations
such dividends are derived. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in a Fund.
OTHER INFORMATION
CAPITALIZATION
The Trust is a Massachusetts business trust established under an
Agreement and Declaration of Trust dated August 24, 1990. The capitalization of
the Trust consists solely of an unlimited number of shares of beneficial
interest with a par value of $0.001 each. The Board of Trustees may establish
additional series (with different investment objectives and fundamental
policies) at any time in the future. Establishment and offering of additional
series will not alter the rights of the Trust's shareholders. When issued,
shares are fully paid, non-assessable, redeemable and freely transferable.
Shares do not have preemptive rights or subscription rights. In liquidation of
a Fund, each shareholder is entitled to receive his pro rata share of the net
assets of that Fund.
42
<PAGE>
PERFORMANCE INFORMATION
The Trust may, from time to time, include the yield and total return
for each class of shares of all of the Funds, computed in accordance with SEC-
prescribed formulas, in advertisements or reports to shareholders or prospective
investors. The Funds also may compute current distribution rates and use this
information in their prospectuses and statement of additional information, in
reports to current shareholders, or in certain types of sales literature
provided to prospective investors.
Quotations of yield for the Funds will be based on all investment
income per share (as defined by the SEC) during a particular 30-day (or one
month) period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and are computed by dividing net
investment income by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2[( a-b + 1)/6/-1]
---
cd
where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period.
Quotations of average annual total return for a Fund or class will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund or class over periods of one, five, and ten
years (up to the life of the Fund), calculated pursuant to the following
formula: P (1 + T)/n/ = ERV (where P = a hypothetical initial payment of
$1,000, T = the average annual total return, n = the number of years, and ERV =
the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures reflect the deduction of a
proportional share of Fund or class expenses on an annual basis, and assume that
all dividend and distributions are reinvested when paid. Quotations of total
return may also be shown for other periods. Funds also may, with respect to
certain periods of less than one year, provide total return information for that
period that is unannualized. Any such information would be accomplished by
standardized total return information.
43
<PAGE>
For the period ended April 30, 1995, the total return of the Funds
(Institutional Class), unless otherwise noted) was as follows:
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIOD
FUND ENDED APRIL 30, 1995
- ---- -----------------------------
SINCE INCEPTION
1 YEAR (ANNUALIZED)
---------- ----------------
<S> <C> <C>
NFJ Equity Income Fund 13.20% 12.17%/1/
NFJ Equity Income Fund (Administrative) N/A 34.08%/2/
NFJ Diversified Low P/E Fund 12.90% 11.60%/3/
NFJ Small Cap Value Fund 4.88% 11.89%/4/
Cadence Capital Appreciation Fund 11.36% 13.47%/1/
Cadence Mid Cap Growth Fund 9.83% 12.62%/5/
Cadence Micro Cap Growth Fund (Administrative) N/A 35.96%/6/
Cadence Micro Cap Growth Fund 8.23% 14.18%/7/
Cadence Small Cap Growth Fund 2.94% 22.60%/8/
Columbus Circle Investors Core Equity Fund N/A 37.05%/9/
Columbus Circle Investors Mid Cap Equity Fund N/A 29.22%/9/
Parametric Enhanced Equity Fund 14.47% 9.49%/10/
Blairlogie Emerging Markets Fund -15.21% 11.50%/11/
Blairlogie Emerging Markets Fund (Administrative) N/A -49.60%/12/
Blairlogie International Active Fund 5.33% 10.83%/13/
Blairlogie International Active Fund (Administrative) N/A 18.00%/14/
Balanced Fund 11.15% 8.52%/15/
</TABLE>
___________________
1 From 03/08/91 (commencement of operations)
2 From 11/30/94 (commencement of operations)
3 From 12/30/91 (commencement of operations)
4 From 01/01/91 (commencement of operations)
5 From 08/26/91 (commencement of operations)
6 From 11/30/94 (commencement of operations)
7 From 06/25/93 (commencement of operations)
8 From 01/07/91 (commencement of operations)
9 From 12/28/95 (commencement of operations)
10 From 02/11/91 (commencement of operations)
11 From 06/01/93 (commencement of operations)
12 From 10/20/94 (commencement of operations)
13 From 06/08/93 (commencement of operations)
14 From 11/30/94 (commencement of operations)
15 From 06/25/92 (commencement of operations)
Performance information for a Fund may also be compared to: (i) the
Standard & Poor's 500 Stock Index, the Dow Jones Industrial Average, the Morgan
Stanley Capital International EAFE (Europe, Australasia, Far East) Index, the
Morgan Stanley Capital International Emerging Markets Free Index, the
International Finance Corporation Emerging Markets Index, or other unmanaged
indexes that measure performance of a pertinent group of securities; (ii) other
groups of mutual funds tracked by Lipper Analytical Services ("Lipper"), a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall performance
or other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an
44
<PAGE>
investment in the Funds. Unmanaged indexes (i.e., other than Lipper) generally
do not reflect deductions for administrative and management costs or expenses.
The Adviser and any of the Portfolio Managers may also report to shareholders or
to the public in advertisements concerning the performance of the Adviser and
the Portfolio Managers as advisers to clients other than the Trust, and on the
comparative performance or standing of the Adviser or the Portfolio Managers in
relation to other money managers. Such comparative information may be compiled
or provided by independent ratings services or by news organizations. Any
performance information, whether related to the Funds, the Adviser or the
Portfolio Managers, should be considered in light of the Funds' investment
objectives and policies, characteristics and quality of the Funds, and the
market conditions during the time period indicated, and should not be considered
to be representative of what may be achieved in the future.
VOTING RIGHTS
Under the Trust's Declaration of Trust, the Trust is not required to
hold annual meetings of Trust shareholders to elect Trustees or for other
purposes. It is not anticipated that the Trust will hold shareholders' meetings
unless required by law or the Declaration of Trust. In this regard, the Trust
will be required to hold a meeting to elect Trustees to fill any existing
vacancies on the Board if, at any time, fewer than a majority of the Trustees
have been elected by the shareholders of the Trust. In addition, the
Declaration of Trust provides that the holders of not less than two-thirds of
the outstanding shares of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting for the purpose of considering the
removal of a person serving as Trustee if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust. In the
event that such a request was made, the Trust has represented that it would
assist with any necessary shareholder communications. Shareholders of a class
of shares have different voting rights with respect to matters that affect only
that class.
The Trust's shares do not have cumulative voting rights, so that the
holder of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
As of October 15, 1995, the following persons owned of record or
beneficially 5% or more of the shares of the following Funds:
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
------------- -------------
<S> <C> <C>
NFJ EQUITY INCOME FUND
Pacific Mutual Life Insurance
Company (PM RISP)
700 Newport Center Drive
Newport Beach, California 92660 1,155,540.589 13.64%
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -------------
<S> <C> <C>
UC San Diego Foundation
9500 Gilman Drive
Mail Code 0940
La Jolla, California 92093-5003 593,761.769 7.01%
VBA Defined Benefit and Trust
P.O, Box 462
Richmond, Virginia 23203-0462 454,674.627 5.37%
Santa Barbara Foundation
15 East Carrillo Street
Santa Barbara, California 93101-2780 760,263.737 8.98%
NFJ DIVERSIFIED LOW P/E FUND
Pacific Mutual Life Insurance Company
Employees' Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660 190,425.783 16.62%
The Northern Trust Company as
Trustee for Great Lakes Chemical
Master Retirement Trust
P.O. Box 2200
West Lafayette, Indiana 47906 794,252.499 69.33%*
NFJ SMALL CAP VALUE FUND
Pacific Mutual Life Insurance Company
Employees' Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660 813,179.582 30.51%*
Sheet Metal Workers' Local Unions
and Councils Pension Fund
601 N. Fairfax Street, Suite 500
Alexandria, Virginia 22314-2054 278,963.622 10.47%
Victoria Bank and Trust Company,
Structural Metals, Inc. Pension Plan
One O'Connor Plaza, 6th Floor
Victoria, Texas 77901-65497 211,837.247 9.49%
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -------------
<S> <C> <C>
BAC Local #19 Pension Trust,
C/O Allied Administrators Inc.
777 Davis Street
San Francisco, California 94111-1405 150,790.110 5.66%
Sheet Metal Workers' Int'l
Association Staff Pension Plan
1750 New York Avenue, N.W.
Washington, D.C. 20006-5301 140,889.311 5.29%
CADENCE CAPITAL APPRECIATION FUND
Donaldson Lufkin & Jenrette-Pershing
Division **
P.O. Box 2052
Jersey City, New Jersey 07303-2052 1,632,726.116 11.78%
Coopers & Lybrand Master
Retirement Trust
34 Exchange Place
4th Floor
Jersey City, New Jersey 07302-3901 2,923,214.904 21.10%
CADENCE MID CAP GROWTH FUND
Staff Retirement Plan of the
International Telecommunications
Satellite Organization
3400 International Drive, N.W.
Washington, D.C. 20008-3006 518,993.669 5.00%
The Jacob & Hilda Blaustein
Foundation, Inc.
Blaustein Building
P.O. Box 238
Baltimore, Maryland 21203-0238 596,187.299 5.75%
First Trust NA TTEE of Dayton
Hudson Corporation Supplemental
Retirement Savings and Employee
Stock Ownership Plan
P.O. Box 64010
St. Paul, Minnesota 55164-0100 1,231,357.916 11.87%
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -------------
<S> <C> <C>
The Lighthouse, Inc.
111 E. 59th Street
New York, New York 10022-1202 563,447.357 5.43%
First Bank National Association
Custodian for St. Paul Foundation,
Mutual Funds A/C 10146495
P.O. Box 64482
St. Paul, Minnesota 55164-0482 1,063,582.163 10.25%
Berklee College of Music, Inc.
1140 Boylston Street
Boston, Massachusetts 02215-3693 617,894.813 5.96%
CADENCE MICRO CAP GROWTH FUND
Charles Schwab & Co., Inc.**
101 Montgomery Street
San Francisco, California 94104-4122 862,346.904 19.04%
Collins Group Trust IX
770 Broadway
Tenth Floor
New York, New York 10003-9598 278,310.153 6.15%
University of Southern California
Treasurer's Office
University Park, BKS 402
Los Angeles, California 90089-2541 473,933.649 10.46%
Collins Group Trust
770 Broadway, Tenth Floor
New York, New York 10003-9522 538,280.484 11.89%
Pacific Mutual Life Insurance
Company
700 Newport Center Drive
Newport Beach, California 92660-6397 361,010.830 7.97%
Bost & Co., A/C DOMF8526562
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, Pennsylvania 15230 836,911.838 18.48%
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -------------
<S> <C> <C>
Toyota Directed Retirement Trust
P.O. Box 92956
Chicago, Illinois 60690 377,545.935 8.34%
CADENCE SMALL CAP GROWTH FUND
The TTEE of the KN Energy Inc.,
Retirement Plan and Trust Agreement
for Non Bargain Employees
P.O. Box 281304
Lakewood, Colorado 80228-8304 586,035.771 16.53%
The TTEE of the KN Energy Inc.,
Retirement Plan and Trust Agreement
for Bargain Employees
P.O. Box 281304
Lakewood, Colorado 80228-8304 353,552.475 9.97%
The Jewish Federation of
Metropolitan Chicago
One South Franklin Street
Room 625
Chicago, Illinois 60606-4609 349,824.877 9.87%
Pacific Mutual Life Insurance Company
Employees' Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660 441,041.670 12.44%
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660-6397 260,281.104 7.34%
Bost & Co., A/C DOMF8526562
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, Pennsylvania 15230 721,936.057 20.36%
COLUMBUS CIRCLE INVESTORS CORE EQUITY FUND
The Bank of New York as
Trustee for Melvill Corporation
One Theall Road
Rye, New York 10580-1404 1,546,276.805 62.14%*
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -------------
<S> <C> <C>
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660 428,426.396 17.22%
COLUMBUS CIRCLE INVESTORS MID CAP EQUITY FUND
John W. Barnum
5175 Tilden Street, N.W.
Washington, D.C. 20016-1961 50,091.590 7.74%
Pacific Mutual Charitable Foundation
700 Newport Center Drive
Newport Beach, California 92660 59,506.989 9.20%
Union Bank Trustee for Pacific
Corinthian Life Insurance
Company Pension Plan
P.O. Box 109
San Diego, California 92112-4103 50,052.646 7.70%
PACIFIC MUTUAL LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, California 92660 439,316.239 67.92%*
PARAMETRIC ENHANCED EQUITY FUND
Pacific Mutual Life Insurance Company
Employees' Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660 715,650.713 13.78%
Glass, Molders, Pottery, Plastics
& Allied Workers Int'l Union-Death
Beneficiary Department
608 E. Baltimore Pike
P.O. Box 607
Media, Pennsylvania 19063 498,852.741 9.61%
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -------------
<S> <C> <C>
Santa Clara Mission Cemetery
Perpetual Care Endownment Fund
The Rector-Nobili Hall
Santa Clara University
Santa Clara, California 95053 287,548.155 5.54%
First Interstate Bank of CA,
Custodian S.F. Bay Area
Rapid Transit District Deferred
Compensation Plan
P.O. Box 9800
Calabasas, California 91372-0800 662,711.031 12.76%
First Interstate Bank of CA
TTEE S.F. Bay Area Rapid
Transit Pension
P.O. Box 9800
Calabasas, California 91372-0800 697,012.770 13.42%
Hoag Memorial Hospital Presbyterian
301 Newport Blvd.
Newport Beach, California 91102-2590 346,864.671 6.68%
Trustees of the CMTA-Glass,
Molders, Pottery, Plastics and
Allied Workers (Local 164B)
Pension Trust
1999 Harrison Street
Suite 500
Oakland, California 94623 832,930.671 16.04%
BLAIRLOGIE EMERGING MARKETS FUND
Pacific Mutual Life Insurance Company
Employees' Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660 813,411.978 12.39%
Donaldson Lufkin & Jenrette-Pershing
Division**
P.O. Box 2052
Jersey City, New Jersey 07303-2052 738,929.152 11.26%
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -------------
<S> <C> <C>
Charles Schwab & Co., Inc.**
101 Montgomery Street
San Francisco, California 94104-4122 2,268,137.840 34.55%
Pacific Mutual Life Insurance
Company
700 Newport Center Drive
Newport Beach, California 92660 685,622.958 10.45%
Harold L. Ahlberg
1616 Travis Circle South
Irving, Texas 75038-6247 385,727.598 5.88%
BLAIRLOGIE INTERNATIONAL ACTIVE FUND
Pacific Mutual Life Insurance Company Employees'
Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660 916,599.197 16.83%
Charles Schwab & Co., Inc.**
101 Montgomery Street
San Francisco, California 94104-4122 437,200.018 8.03%
Pacific Financial Asset
Management Corporation
700 Newport Center Drive
Newport Beach, California 92660 1,923,660.028 35.33%*
First Interstate Bank
TTEE FBO Cadence Design
System Inc.
P.O. Box 9
Calabasas, California 91372-0800 438,179.708 8.05%
BALANCED FUND
Pacific Mutual Life Insurance
Company (PM RISP)
700 Newport Center Drive
Newport Beach, California 92660 832,979.935 11.81%
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -------------
<S> <C> <C>
California Race Track Association
Santa Anita Park
Arcadia, California 91006-0808 889,726.774 12.62%
Hoag Memorial Hospital Presbyterian
301 Newport Blvd.
Newport Beach, California 92660 1,154,284.397 16.37%
IBEW (Local 1710) Pension Trust
P.O. Box 2590
Pasadena, California 91102-2590 1,009,902.705 14.32%
Key Bank of Washington as
Agent for Multicare Medical
Center Professional & General
Liability Trust
1101 Pacific Avenue
3rd Floor
Tacoma, Washington 98402-4304 680,423.212 9.65%
Trustees of the Redlands Community
Hospital Retirement Plan
350 Terracina Blvd.
Redlands, California 92373-4850 551,911.511 7.83%
Telephone Employees' Credit Union
123 S. Marengo Avenue
Pasadena, California 91109 550,566.014 7.81%
Dominguez Water
Corporation Pension Fund
21718 S. Alameda Street
Long Beach, California 90810 383,472.833 5.44%
</TABLE>
* Entity owned 25% or more of the outstanding shares of beneficial interest of
the Fund, and therefore may be presumed to "control" the Fund, as that term
is defined in the 1940 Act.
** Shares held of record by Charles Schwab & Co., Inc. and Donaldson Lufkin
& Jenrette-Pershing are held only as nominee.
53
<PAGE>
As of October 23, 1995, the Trustees and Officers of the Trust, as a group,
owned .079%, .13%, .028%, .079%, .059%, .010%, .012%, .050%, and .009% of the
outstanding shares of the NFJ Equity Income, NFJ Diversified Low P/E, Blairlogie
International Active, Blairlogie Emerging Markets, Cadence Micro Cap Growth,
Cadence Mid Cap Growth, Cadence Capital Appreciation, NFJ Small Cap Value, and
Columbus Circle Investors Mid Cap Equity Funds, respectively.
CODE OF ETHICS
The Trust, PIMCO Advisors, and the Portfolio Managers have each adopted a
Code of Ethics governing personal trading activities of all Trustees and
officers of the Trust, and Directors, officers and employees of PIMCO Advisors
and each Portfolio Manager who, in connection with their regular functions, play
a role in the recommendation of any purchase or sale of a security by the Trust
or obtain information pertaining to such purchase or sale or who have the power
to influence the management or policies of the Trust, PIMCO Advisors, or the
Portfolio Managers. Such persons are required to preclear certain security
transactions with a compliance officer or his designee and to report certain
transactions on a regular basis. PIMCO Advisors has developed procedures for
administration of the Codes of Ethics.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company ("IFTC") serves as custodian, transfer
agent and dividend disbursing agent for assets of all Funds. Pursuant to a sub-
custody agreement between IFTC and The Chase Manhattan Bank, N.A. ("Chase"),
Chase serves as subcustodian of the Trust for the custody of the foreign
securities acquired by the Columbus Circle Investors Core Equity, Columbus
Circle Investors Mid Cap Equity, Blairlogie Emerging Markets, and Blairlogie
International Active Funds. Under the agreement, Chase may hold the foreign
securities at its principal office at One Chase Manhattan Plaza, New York, New
York, 10081, and at Chase's branches, and subject to approval by the Board of
Trustees, at a foreign branch of a qualified U.S. bank, an eligible foreign
subcustodian, or an eligible foreign securities depository.
Pursuant to rules or other exemptions under the 1940 Act, the Trust may
maintain foreign securities and cash in the custody of certain eligible foreign
banks and securities depositories. Selection of these foreign custodial
institutions is made by the Board of Trustees following a consideration of a
number of factors, including (but not limited to) the reliability and financial
stability of the institution; the ability of the institution to perform capably
custodial services for the Trust; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and further risks of potential nationalization or
expropriation of Trust assets. The Board of Trustees reviews annually the
continuance of foreign custodial arrangements for the Trust. No assurance can
be given that the Trustees' appraisal of the risks in connection with foreign
custodial arrangements will always be correct or that expropriation,
nationalization, freezes, or confiscation of assets that would impact assets of
the Funds will not occur, and shareholders bear the risk of losses arising from
these or other events.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, 695 Town Center Drive, Suite 1200, Costa Mesa,
California 92626, serves as the independent public accountants for the Funds.
Deloitte & Touche LLP provides audit services, accounting assistance, and
consultation in connection with SEC filings.
54
<PAGE>
COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C. 20005, passes
upon certain legal matters in connection with the shares offered by the Trust,
and also acts as counsel to the Trust.
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not contain
all of the information included in the Trust's registration statement filed with
the SEC under the 1933 Act with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statement, including the exhibits
filed therewith, may be examined at the offices of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
Financial statements for the Trust as of October 31, 1994, for its fiscal
year then ended, including notes thereto, and the reports of Deloitte & Touche
LLP thereon dated December 16, 1994 are incorporated by reference from the
Trust's 1994 Annual Report. Financial statements for the Trust as of April 30,
1995, including the notes thereto, are incorporated by reference from the
Trust's 1995 Semi-Annual Report.
55
