<PAGE>
As filed with the Securities and Exchange Commission on October 31, 1996
Registration No. 33-36528
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 24 [ X ]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 26 [ X ]
(Check appropriate box or boxes)
PIMCO Funds: Equity Advisors Series
(Exact Name of Registrant as Specified in Charter)
840 Newport Center Drive, Newport Beach, CA 92660
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number: (714) 760-4867
R. Wesley Burns
Pacific Investment Management Company
840 Newport Center Drive
Newport Beach, CA 92660
(Name and Address of Agent for Service)
Copies to:
Jeffrey S. Puretz Newton B. Schott, Jr. Joseph B. Kittredge
Dechert Price & Rhoads PIMCO Advisors L.P. Ropes & Gray
1500 K Street, N.W. 2187 Atlantic Street One International Place
Suite 500 Stamford, Boston,
Washington, D.C. 20005 Connecticut 06902 Massachusetts 02110
[X] It is proposed that this filing will become effective on January 14,
1997 pursuant to paragraph (a)(2) of Rule 485.
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the
<PAGE>
Investment Company Act of 1940 and filed its Notice pursuant to Rule 24f-2
for the fiscal year ended June 30, 1996 on August 28, 1996.
Pursuant to Agreements and Plans of Reorganization expected to be
submitted to shareholders of certain series of PIMCO Advisors Funds ("PAF")
(File Nos. 2-87203 and 811-3881), the Registrant will be permitted to use
any redemption credits pursuant to Rules 24e-2 and 24f-2 of the
International Fund, Equity Income Fund, Growth Fund, Target Fund,
Opportunity Fund, Innovation Fund, Tax Exempt Fund, and Precious Metals
Fund of PAF, in connection with the acquisition of these series by the
Registrant's PIMCO International Fund, PIMCO Renaissance Fund, PIMCO Growth
Fund, PIMCO Target Fund, PIMCO Opportunity Fund, PIMCO Innovation Fund,
PIMCO Tax Exempt Fund, and PIMCO Precious Metals Fund, respectively, in
reliance on Rule 24f-2(b)(3)(ii) under the Investment Company Act of 1940.
<PAGE>
"Cross"
PIMCO FUNDS: EQUITY ADVISORS SERIES
CROSS-REFERENCE SHEET
Required by Rule 404 Under the Securities Act of 1933
Prospectus for the Institutional Class and Administrative
Class Shares of PIMCO Equity Income Fund, PIMCO Value Fund, PIMCO Small Cap
Value Fund, PIMCO Capital Appreciation Fund, PIMCO Mid Cap Growth Fund, PIMCO
Small Cap Growth Fund, PIMCO Micro Cap Growth Fund, PIMCO Renaissance Fund,
PIMCO Core Equity Fund, PIMCO Mid Cap Equity Fund, PIMCO Opportunity Fund,
PIMCO Innovation Fund, PIMCO Tax Exempt Fund, PIMCO Enhanced Equity Fund,
PIMCO Structured Emerging Markets Fund, PIMCO Emerging Markets Fund, PIMCO
International Developed Fund, PIMCO International Fund, PIMCO Balanced Fund,
and PIMCO Precious Metals Fund
Part A
Item Heading
1. Cover Page Cover Page
2. Synopsis Prospectus Summary; Expense
Information
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objectives and
Registrant Policies; Investment Restrictions;
Characteristics and Risks of Securities
and Investment Techniques
5. Management of the Fund Management of the Trust;
Portfolio Transactions
6. Capital Stock and Other Other Information; Portfolio Transactions;
Securities Dividends, Distributions and Taxes
7. Purchase of Securities Management of the Trust;
Being Offered Purchase of Shares; Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Legal Proceedings Not Applicable
<PAGE>
PIMCO FUNDS: EQUITY ADVISORS SERIES
CROSS-REFERENCE SHEET
Required by Rule 404 Under the Securities Act of 1933
Prospectus for the Class A, Class B, and/or
Class C Shares of PIMCO Equity Income Fund, PIMCO Value Fund, PIMCO Small Cap
Value Fund, PIMCO Capital Appreciation Fund, PIMCO Mid Cap Growth Fund, PIMCO
Small Cap Growth Fund, PIMCO Micro Cap Growth Fund, PIMCO Renaissance Fund,
PIMCO Growth Fund, PIMCO Target Fund, PIMCO Opportunity Fund, PIMCO Innovation
Fund, PIMCO Tax Exempt Fund, PIMCO Enhanced Equity Fund, PIMCO Emerging
Markets Fund, PIMCO International Developed Fund, PIMCO International Fund,
PIMCO Balanced Fund, and PIMCO Precious Metals Fund
Part A
Item Heading
1. Cover Page Cover Page
2. Synopsis Prospectus Summary; Schedule of Fees
3. Condensed Financial Financial Highlights;
Information Performance Information
4. General Description of Investment Objectives and Policies;
Registrant Characteristics and Risks of Securities
and Investment Techniques; Description
of the Trust
5. Management of the Fund Management of the Trust; Back Cover
6. Capital Stock and Other Description of the Trust; Distributions;
Securities Taxes; Back Cover
7. Purchase of Securities How to Buy Shares; General; How Net Asset
Being Offered Value is Determined; Alternative Purchase
Arrangements; Distributor and Distribution and
Servicing Plans
8. Redemption or Repurchase How to Redeem
9. Legal Proceedings Not Applicable
<PAGE>
PIMCO FUNDS: EQUITY ADVISORS SERIES
CROSS-REFERENCE SHEET
Required by Rule 404 Under the Securities Act of 1933
Statement of Additional Information for the PIMCO Equity Income Fund, PIMCO
Value Fund, PIMCO Small Cap Value Fund, PIMCO Capital Appreciation Fund, PIMCO
Mid Cap Growth Fund, PIMCO Small Cap Growth Fund, PIMCO Micro Cap Growth Fund,
PIMCO Renaissance Fund, PIMCO Growth Fund, PIMCO Core Equity Fund, PIMCO
Target Fund, PIMCO Mid Cap Equity Fund, PIMCO Opportunity Fund, PIMCO
Innovation Fund, PIMCO Tax Exempt Fund, PIMCO Enhanced Equity Fund, PIMCO
Structured Emerging Markets Fund, PIMCO Emerging Markets Fund, PIMCO
International Developed Fund, PIMCO International Fund, PIMCO Balanced Fund,
and PIMCO Precious Metals Fund
Part B
Item Heading
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Cover Page
History
13. Investment Objectives and Investment Objectives and
Policies Policies; Investment
Restrictions
14. Management of the Management of the Trust;
Registrant
15. Control Persons and Other Information
Principal Holders of
Securities
16. Investment Advisory and Management of the Trust;
Other Services Distribution of Trust Shares
17. Brokerage Allocation Portfolio Transactions and
Brokerage
18. Capital Stock and Other Other Information
Securities
<PAGE>
19. Purchase, Redemption and Distribution of Trust
Pricing Shares; Net Asset Value
20. Tax Status Taxation
21. Underwriters Distribution of Trust Shares
22. Calculation of Performance Other Information
Data
23. Financial Statements Other Information
<PAGE>
PIMCO Funds
Prospectus
January 14, 1997
Multi-Manager STOCK FUNDS
Series
Equity Income Fund
Value Fund
Renaissance Fund
Enhanced Equity Fund
Growth Fund
Capital Appreciation Fund
AGGRESSIVE STOCK FUNDS
Mid Cap Growth Fund
Target Fund
Small Cap Value Fund
Small Cap Growth Fund
Opportunity Fund
Micro Cap Growth Fund
STOCK AND BOND FUNDS
Balanced Fund
INTERNATIONAL STOCK FUNDS
International Fund
International Developed Fund
Emerging Markets Fund
SPECIALIZED STOCK FUNDS
Innovation Fund
Precious Metals Fund
BOND FUNDS
Tax Exempt Fund
PIMCO (logo)
<PAGE>
PIMCO Funds: Multi-Manager Series
PROSPECTUS
JANUARY 14, 1997
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 Funds: Multi-Manager Series (the "Trust") is an open-end series management
investment company offering nineteen separate investment portfolios in this
Prospectus (each a "Fund") with different investment objectives and strategies.
The address of PIMCO Funds: Multi-Manager Series is 840 Newport Center Drive,
Suite 360, Newport Beach, CA 92660.
Each Fund (except the Opportunity Fund) offers three classes of shares in this
Prospectus: Class A shares (generally sold subject to an initial sales charge),
Class B shares (sold subject to a contingent deferred sales charge) and Class C
shares (sold subject to an assets based sales charge). The Opportunity Fund does
not offer Class B shares [Information regarding offering period for Class A and
Class C shares of the Opportunity Fund to be provided in a post-effective
amendment filed pursuant to Rule 485(b)]. Through a separate prospectus, certain
of the Funds offer up to two additional classes of shares, Institutional Class
shares and Administrative Class shares. See "Alternative Purchase Arrangements."
This Prospectus concisely describes the information investors should know before
investing in Class A, Class B and Class C shares of the Funds. Please read this
Prospectus carefully and keep it for further reference.
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, is 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 will
also vary.
A Statement of Additional Information dated January 14, 1997, as supplemented
from time to time, is available free of charge by writing to PIMCO Funds
Distribution Company, 2187 Atlantic Street, Stamford, Connecticut 06902, or by
telephoning 800-426-0107. The Statement of Additional Information, which
contains more detailed information about the Trust, has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated by reference
in this Prospectus.
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.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary ........................................ X
Schedule of Fees .......................................... X
Financial Highlights ...................................... X
Investment Objectives and Policies ........................ X
Characteristics and Risks of
Securities and Investment Techniques ...................... X
Performance Information ................................... X
How to Buy Shares ......................................... X
General ................................................... X
Alternative Purchase Arrangements ......................... X
Exchange Privilege ........................................ X
How to Redeem ............................................. X
Distributor and Distribution and Servicing Plans.......... X
How Net Asset Value is Determined ......................... X
Distributions ............................................. X
Taxes ..................................................... X
Management of the Trust ................................... X
Description of the Trust .................................. X
Mailings to Shareholders .................................. X
</TABLE>
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
PROSPECTUS SUMMARY
PIMCO Advisors L.P. (the "Adviser") is the investment adviser of all the Funds.
PIMCO Advisors L.P. is one of the largest investment management firms in the
U.S. As of September 30, 1996, PIMCO Advisors L.P. had over $104 billion in
assets under management. Each of the Funds also has a sub-adviser (each a
"Portfolio Manager") responsible for portfolio investment decisions. All of the
Funds' Portfolio Managers are affiliates of PIMCO Advisors L.P. except for Van
Eck Associates Corporation ("Van Eck"), an independent Portfolio Manager that
advises the Precious Metals Fund. The affiliated Portfolio Managers are listed
below.
PIMCO FUND PORTFOLIO MANAGERS
<TABLE>
<CAPTION>
LOCATION INVESTMENT SPECIALTY
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COLUMBUS CIRCLE INVESTORS Stamford, CT Stocks, using its "Positive Momentum & Positive Surprise" discipline.
("Columbus Circle")
- ----------------------------------------------------------------------------------------------------------------------------
CADENCE CAPITAL MANAGEMENT Boston, MA Stocks of growth companies that the Portfolio Manager believes are
("Cadence") trading at a reasonable price.
- ----------------------------------------------------------------------------------------------------------------------------
NFJ INVESTMENT GROUP Dallas, TX Value stocks that the Portfolio Manager believes are undervalued
("NFJ") and/or offer above average dividend yields.
- -----------------------------------------------------------------------------------------------------------------------------
BLAIRLOGIE CAPITAL MANAGEMENT Edinburgh, Scotland International stocks.
("Blairlogie")
- -----------------------------------------------------------------------------------------------------------------------------
PACIFIC INVESTMENT Newport Beach, CA All sectors of the bond market using its total return philosophy--
MANAGEMENT COMPANY seeking both yield and appreciation.
("Pacific Investment Management")
</TABLE>
PIMCO FUND PROFILES
<TABLE>
<CAPTION>
PIMCO PRIMARY AVG. MARKET INVESTMENT PIMCO FUNDS
FUND NAME OBJECTIVE CAPITALIZATION(1) STYLE(1) MANAGER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STOCK FUNDS Equity Income Current income as a primary Medium Value NFJ
objective; long-term
growth of capital as a
secondary objective
-------------------------------------------------------------------------------------------------------------------
Value Long-term growth of capital Medium Value NFJ
and income
------------------------------------------------------------------------------------------------------------------
Renaissance Long-term growth of capital Large Value Columbus Circle
and income
-------------------------------------------------------------------------------------------------------------------
Enhanced Equity Total return which equals or Large ---- Parametric
exceeds the total return
performance of the S&P 500
-------------------------------------------------------------------------------------------------------------------
Growth Long-term growth of capital; Large Growth Columbus Circle
income is incidental
-------------------------------------------------------------------------------------------------------------------
Capital Appreciation Growth of capital Large Blend Cadence
- ------------------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE Mid Cap Growth of capital Medium Blend Cadence
STOCK FUNDS Growth
-------------------------------------------------------------------------------------------------------------------
Target Capital appreciation Medium Growth Columbus Circle
-------------------------------------------------------------------------------------------------------------------
Small Cap Value Long-term growth of capital Small Value NFJ
and income
-------------------------------------------------------------------------------------------------------------------
Small Cap Growth Growth of capital Small Growth Cadence
-------------------------------------------------------------------------------------------------------------------
Opportunity(2) Capital appreciation Small Growth Columbus Circle
-------------------------------------------------------------------------------------------------------------------
Micro Cap Growth Long-term growth of capital Small Growth Cadence
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL International Capital appreciation Large Blend Blairlogie
STOCK FUNDS (developed & emerging markets)
-------------------------------------------------------------------------------------------------------------------
International Developed Long-term growth of capital Large Blend Blairlogie
(developed markets)
-------------------------------------------------------------------------------------------------------------------
Emerging Markets Long-term growth of capital Medium Blend Blairlogie
(emerging markets)
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALIZED Innovation Capital appreciation Medium Growth Columbus Circle
STOCK FUNDS (technology stocks)
-------------------------------------------------------------------------------------------------------------------
Precious Metals Capital appreciation Medium Growth Van Eck
- ------------------------------------------------------------------------------------------------------------------------------------
STOCK & BOND Balanced Total return consistent Large Blend Cadence, NFJ and
FUNDS with prudent investment Pacific investment
management Management
- ------------------------------------------------------------------------------------------------------------------------------------
BOND FUNDS Tax Exempt High current income, exempt n/a n/a Columbus Circle
from federal income tax,
consistent with preservation
of capital
</TABLE>
1. For specific information concerning the market capitalizations of companies
in which each Fund may invest and each Fund's investment style, see "Investment
Objectives and Policies" in this Prospectus.
2. The Opportunity Fund is currently closed to new investors. [Information
regarding offering period for the Opportunity Fund to be provided in a post-
effective amendment filed pursuant to Rule 485(b).]
<PAGE>
4 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
SCHEDULE OF FEES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION
EXPENSES (ALL FUNDS) CLASS A CLASS B CLASS C
SHARES SHARES(1) SHARES
<S> <C> <C> <C>
Maximum initial sales charge imposed on purchases
(as a percentage of offering price at time of
purchase)
All Funds except the Tax Exempt Fund............. 5.50% None None
Tax Exempt Fund.................................. 4.75% None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of net asset value at
time of purchase)................................. None None None
Maximum contingent deferred sales
charge ("CDSC") (as a percentage
of original purchase price)....................... 1%(2) 5%(3) 1%(4)
Exchange Fee ....................... None None None
</TABLE>
(1) The Opportunity Fund does not offer Class B shares. [Information about
offering period for Class A and C shares of the Opportunity Fund to be provided
in a subsequent post-effective amendment filed pursuant to Rule 485(b)].
(2) Imposed only in certain circumstances where Class A shares are purchased
without a sales charge at the time of purchase. See "Alternative Purchase
Arrangements" in this Prospectus.
(3) The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the schedules
set forth under "Deferred Sales Charge Alternative--Class B Shares" in this
Prospectus.
(4) The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
<PAGE>
PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------- 5
<TABLE>
<CAPTION>
EXAMPLE: You would
EXAMPLE: You would pay the pay the following
following expenses on a $1,000 expenses on a $1,000
ANNUAL FUND investment assuming (1) 5% annual investment assuming
OPERATING EXPENSES return and (2) redemption at the (1) 5% annual return
CLASS A SHARES (As a percentage of average net assets) end of each time period: and (2) redemption:
- ------------------------------------------------------------------------------------------------------------------------------------
Admini- Total Fund
Advisory strative 12b-1 Operating
Fund Fees Fees/1/ Fees/2/ Expenses 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income........... .45% .40% .25% 1.10% $ $ $ $ $ $ $ $
Value................... .45 .40 .25 1.10
Renaissance............. .60 .40 .25 1.25
Enhanced Equity......... .45 .40 .25 1.10
Growth.................. .50 .40 .25 1.15
Capital Appreciation... .45 .40 .25 1.10
Mid Cap Growth.......... .45 .40 .25 1.10
Target.................. .55 .40 .25 1.20
Small Cap Value......... .60 .40 .25 1.25
Small Cap Growth........ 1.00 .40 .25 1.65
Opportunity............. .65 .40 .25 1.30
Micro Cap Growth........ 1.25 .40 .25 1.90
Innovation.............. .65 .40 .25 1.30
International........... .55 .65 .25 1.45
International Developed. .60 .65 .25 1.50
Emerging Markets........ .85 .65 .25 1.75
Precious Metals......... .60 .45 .25 1.30
Balanced................ .45 .40 .25 1.10
Tax Exempt.............. .30 .40 .25 .95
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Administrative Fee for each Fund is paid at the annual percentage rate
specified above of the first $2.5 billion of the average daily net assets
attributable in the aggregate to the Fund's Class A, Class B and Class C shares
and at an annual percentage rate of .05% less than the percentages shown of
such assets in excess of $2.5 billion. See "Management of the Trust - Advisory
and Administrative Fees."
/2/ 12b-1 fees represent servicing fees which are paid annually to the
Distributor and repaid to participating brokers, certain banks and other
financial intermediaries. See "Distributor and Distribution and Servicing
Plans."
<TABLE>
<CAPTION>
EXAMPLE: You would
EXAMPLE: You would pay the pay the following
following expenses on a $1,000 expenses on a $1,000
ANNUAL FUND investment assuming (1) 5% annual investment assuming
OPERATING EXPENSES return and (2) redemption at the (1) 5% annual return
CLASS B SHARES (As a percentage of average net assets) end of each time period: and (2) redemption:
- ------------------------------------------------------------------------------------------------------------------------------------
Admini- Total Fund
Advisory strative 12b-1 Operating
Fund Fees Fees/1/ Fees Expenses 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income........... .45% .40% 1.00% 1.85% $ $ $ $ $ $ $ $
Value................... .45 .40 1.00 1.85
Renaissance............. .60 .40 1.00 2.00
Enhanced Equity......... .45 .40 1.00 1.85
Growth.................. .50 .40 1.00 1.90
Capital Appreciation... .45 .40 1.00 1.85
Mid Cap Growth.......... .45 .40 1.00 1.85
Target.................. .55 .40 1.00 1.95
Small Cap Value......... .60 .40 1.00 2.00
Small Cap Growth........ 1.00 .40 1.00 2.40
Micro Cap Growth........ 1.25 .40 1.00 2.65
Innovation.............. .65 .40 1.00 2.05
International........... .55 .65 1.00 2.20
International Developed. .60 .65 1.00 2.25
Emerging Markets........ .85 .65 1.00 2.50
Precious Metals......... .60 .45 1.00 2.05
Balanced................ .45 .40 1.00 1.85
Tax Exempt.............. .30 .40 1.00 1.70
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Admimistrative fee for each Fund is paid at the annual percentage rate
specified above of the first $2.5 billion of the average daily net assets
attributable in the aggregate to the Fund's Class A, Class B and Class C shares
and at an annual percentage rate of 0.05% less then the percentage shown of such
assets in excess of 2.5 billion. See "Management of the Trust - Advisory and
Adminstrative Fees."
<PAGE>
6 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXAMPLE: You would
EXAMPLE: You would pay the pay the following
following expenses on a $1,000 expenses on a $1,000
ANNUAL FUND investment assuming (1) 5% annual investment assuming
OPERATING EXPENSES return and (2) redemption at the (1) 5% annual return
CLASS C SHARES (As a percentage of average net assets) end of each time period: and (2) redemption
- -----------------------------------------------------------------------------------------------------------------------------------
Admini- Total Fund
Advisory strative 12b-1 Operating
Fund Fees Fees/1/ Fees/2/ Expenses 1 3 5 10 1 3 5 10
Year Years Years Years Year Years Years Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity.................. .45% .40% 1.00% 1.85% $ $ $ $ $ $ $ $
Value................... .45 .40 1.00 1.85
Renaissance............. .60 .40 1.00 2.00
Enhanced Equity......... .45 .40 1.00 1.85
Growth.................. .50 .40 1.00 1.90
Capital Appreciation... .45 .40 1.00 1.85
Mid Cap Growth.......... .45 .40 1.00 1.85
Target.................. .55 .40 1.00 1.95
Small Cap Value......... .60 .40 1.00 2.00
Small Cap Growth........ 1.00 .40 1.00 2.40
Opportunity............. .65 .40 1.00 2.05
Micro Cap Growth........ 1.25 .40 1.00 2.65
Innovation.............. .65 .40 1.00 2.05
International........... .55 .65 1.00 2.20
International Developed. .60 .65 1.00 2.25
Emerging Markets........ .85 .65 1.00 2.50
Precious Metals......... .60 .45 1.00 2.05
Balanced................ .45 .40 1.00 1.85
Tax Exempt.............. .30 .40 1.00 1.70
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The Admimistrative fee for each Fund is paid at the annual percentage rate
specified above of the first $2.5 billion of the average daily net assets
attributable in the aggregate to the Fund's Class A, Class B and Class C shares
and at an annual percentage rate of 0.05% less then the percentage shown of such
assets in excess of 2.5 billion. See "Management of the Trust - Advisory and
Adminstrative Fees."
/2/ 12b-1 fees which are equal or are less than .25% represent servicing fees
which are paid annually to the Distributor and repaid to participating brokers,
certain banks and other financial intermediaries. 12b-1 fees which exceed .25%
represent aggregate distribution and servicing fees. See "Distributor and
Distribution and Servicing Plans."
The purpose of the foregoing tables is to assist investors in understanding the
various costs and expenses of the Trust that are borne directly or indirectly by
Class A, Class B and Class C shareholders of the Funds. Class A, Class B and
Class C shares of the Funds were not offered prior to the date of this
Prospectus, although Class A, Class B (except for the Opportunity Fund) and
Class C shares were previously offered by predecessor series of the Renaissance,
Growth, Target, Opportunity, Innovation, International, Precious Metals and Tax
Exempt Funds, each of which was a series of PIMCO Advisors Funds that
reorganized as a series of the Trust on January __, 1997. The Examples for Class
A shares assume payment of the current maximum applicable sales load. Due to the
12b-1 distribution fee imposed on Class B and Class C shares, a Class B or Class
C shareholder of the Trust may, depending on the length of time the shares are
held, pay more than the economic equivalent of the maximum front-end sales
charges permtted by relevant rules of the National Association of Securities
Dealers, Inc.
NOTE: THE FIGURES SHOWN IN THE EXAMPLES ARE ENTIRELY HYPOTHETICAL. THEY ARE NOT
REPRESENTATIONS OF PAST OR FUTURE PERFORMANCE OR EXPENSES; ACTUAL PERFORMANCE
AND/OR EXPENSES MAY BE MORE OR LESS THAN SHOWN.
<PAGE>
PIMCO Funds: Multi-Manager Series 7
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights set forth on the following pages present certain
information and ratios as well as performance information for Funds which
offered Class A, Class B, or Class C shares prior to the date of this Prospectus
as former series of PIMCO Advisors Funds (each of which reorganized as series of
the Trust on _______, 1997). [The information provided below for these Funds has
been audited by Coopers & Lybrand L.L.P., independent accountants to PIMCO
Advisors Funds for the periods listed. Coopers & Lybrand's report thereon is
included in PIMCO Advisors Fund's Annual Report dated September 30, 1996, which
is incorporated by reference in the Statement of Additional Information and may
be obtained without charge from the Distributor.] Financial Statements and
related Notes are also incorporated by reference in the Statement of Additional
Information. The remaining Funds did not offer Class A, Class B or Class C
shares prior to the date of this Prospectus.
The following schedule of financial highlights for the Renaissance Fund is for
shares outstanding throughout the periods listed. The information provided
reflects results of operations under the Fund's former investment objective and
policies through January 31, 1992; such results would not necessarily have been
achieved had the Fund's current objective and policies then been in effect.
RENAISSANCE FUND
[TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT TO BE FILED PURSUANT TO RULE
485(B) PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT.]
<PAGE>
8 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Growth Fund is for shares
outstanding throughout the periods listed.
GROWTH FUND
[TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT TO BE FILED PURSUANT TO RULE
485(B) PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT.]
<PAGE>
PIMCO Funds: Multi-Manager Series 9
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Target Fund is for shares
outstanding throughout the periods listed.
TARGET FUND
[TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT TO BE FILED PURSUANT TO RULE
485(B) PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT.]
<PAGE>
10 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Opportunity Fund is for
shares outstanding throughout the periods listed.
OPPORTUNITY FUND
[TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT TO BE FILED PURSUANT TO RULE
485(B) PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT.]
<PAGE>
PIMCO Funds: Multi-Manager Series 11
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Innovation Fund is for
shares outstanding throughout the period listed.
INNOVATION FUND
[TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT TO BE FILED PURSUANT TO RULE
485(B) PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT.]
<PAGE>
12 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the International Fund is for
shares outstanding throughout the period listed.
INTERNATIONAL FUND
[TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT TO BE FILED PURSUANT TO RULE
485(B) PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT.]
<PAGE>
PIMCO Funds: Multi-Manager Series 13
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Precious Metals Fund is
for shares outstanding throughout the periods listed. The information provided
reflects results of operations under the Fund's former investment objective and
policies through November 14, 1994; such results would not necessarily have been
achieved had the Fund's current objective and policies been in effect.
PRECIOUS METALS FUND
[TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT TO BE FILED PURSUANT TO RULE
485(B) PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT.]
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14 PIMCO Funds: Multi-Manager Series
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FINANCIAL HIGHLIGHTS
The following schedule of financial highlights for the Tax Exempt Fund is for
shares outstanding throughout the periods listed.
TAX EXEMPT FUND
[TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT TO BE FILED PURSUANT TO RULE
485(B) PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT.]
<PAGE>
PIMCO Funds: Multi-Manager Series 15
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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 will also vary.
EQUITY INCOME FUND seeks current income as a primary investment objective, and
long-term growth of capital as a secondary objective. 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. The Portfolio
Manager for the Equity Income Fund is NFJ.
VALUE FUND seeks long-term growth of capital and income. 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. The Portfolio Manager for the Value Fund is
NFJ.
RENAISSANCE FUND seeks long-term growth of capital and income. The Fund invests
primarily in a variety of income-producing equity securities. Income-producing
equity securities include common stocks that pay dividends, preferred stocks and
securities (including debt securities) that are convertible into common stocks
("convertible securities"). Under unusual conditions, for temporary defensive
purposes, the Fund may invest up to 100% of its assets in non-convertible debt
securities.
The Fund may invest a portion of its assets in preferred stocks and convertible
securities rated at least B by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") (or similarly rated by another Nationally
Recognized Statistical Rating Organization ("NRSRO"), or unrated but determined
by the Portfolio Manager to be of comparable quality), and may invest up to 10%
of its total assets in convertible securities rated below B by Moody's or S&P
(or similarly rated by another NRSRO or unrated but determined by the Portfolio
Manager to be of comparable quality). Securities rated Ba or below by Moody's or
BB or below by S&P (or of similar quality) are not considered to be of
"investment grade" quality. These lesser rated debt securities may involve
special risks. See "Characteristics and Risks of Securities and Investment
Techniques -- Risks of High Yield Securities ("Junk Bonds")." Although the Fund
may invest in such securities, it neither invests nor has the present intention
of investing 35% or more of its net assets in securities that are not considered
to be of "investment grade" quality. The Fund will not invest in convertible
securities that are in default at the time of acquisition.
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16 PIMCO Funds: Multi-Manager Series
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The non-convertible debt securities in which the Fund may invest include
corporate or government debt securities of any maturity, including zero coupon
securities. These non-convertible debt securities may be rated B or higher by
Moody's or S&P (or similarly rated by another NRSRO or unrated and determined by
the Portfolio Manager to be of comparable quality). The Fund may invest a
portion of its assets in securities of foreign issuers traded in foreign
securities markets (not including Eurodollar certificates of deposit), which
will not exceed 15% of the Fund's 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 and securities indexes;
enter into futures contracts and use options on futures contracts; buy or sell
foreign currencies; 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. The Portfolio Manager for the Renaissance Fund is Columbus
Circle.
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. 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.
The Fund may engage in the purchase and writing of options on securities
indexes, and may also invest in stock index futures 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. The Portfolio Manager for the Enhanced Equity Fund is
Parametric.
GROWTH FUND seeks long-term growth of capital. Income is an incidental
consideration. The Fund invests primarily in common stocks of companies with
medium to large market capitalizations. The Fund may invest a portion of its
assets in securities of foreign issuers traded in foreign securities markets
(not including Eurodollar certificates of deposit), which will not exceed 15% of
the Fund's 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 and securities indexes; enter into
futures contracts and use options on futures contracts; buy or sell foreign
currencies; 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. The Portfolio
Manager for the Growth Fund is Columbus Circle.
CAPITAL APPRECIATION FUND seeks growth of capital. 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
<PAGE>
PIMCO Funds: Multi-Manager Series 17
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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 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. The Portfolio
Manager for the Capital Appreciation Fund is Cadence.
MID CAP GROWTH FUND seeks growth of capital. 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 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. The Portfolio Manager for the Mid Cap Growth
Fund is Cadence.
TARGET FUND seeks capital appreciation. No consideration is given to income.
The Fund invests primarily in common stocks of companies with medium market
capitalizations. The Fund may invest a portion of its assets in securities of
foreign issuers traded in foreign securities markets (not including Eurodollar
certificates of deposit), which will not exceed 15% of the Fund's 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 and securities indexes; enter into futures contracts and use options
on futures contracts; buy or sell foreign currencies; 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. The Portfolio Manager for the Target Fund is
Columbus Circle.
SMALL CAP VALUE FUND seeks long-term growth of capital and income. The Fund
invests primarily in common stocks of companies with market capitalizations
between $50 million and $1 billion 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 $1 billion,
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. The Portfolio Manager for the Small Cap Value Fund is
NFJ.
SMALL CAP GROWTH FUND seeks growth of capital. 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 $1 billion at
the time of investment. Each issue is screened and ranked using five distinct
computerized models, including: (i) a dividend growth screen, (ii) an
<PAGE>
18 PIMCO Funds: Multi-Manager Series
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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. The Portfolio Manager for the Small Cap Growth Fund is
Cadence.
OPPORTUNITY FUND seeks capital appreciation. No consideration is given to
income. [NOTE: INFORMATION REGARDING OFFERING PERIOD FOR CLASS A AND C SHARES
OF THE OPPORTUNITY FUND TO BE PROVIDED IN POST-EFFECTIVE AMENDMENT FILED
PURSUANT TO RULE 485(B).] The Fund invests primarily in common stocks of
companies with market capitalizations of less than $1 billion. The Fund is
intended for aggressive investors seeking above average gains and willing to
accept the greater risks associated therewith. The Fund may invest a portion of
its assets in securities of foreign issuers traded in foreign securities markets
(not including Eurodollar certificates of deposit), which will not exceed 15% of
the Fund's 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 and securities indexes; enter into
futures contracts and use options on futures contracts; buy or sell foreign
currencies; 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. The Portfolio
Manager for the Opportunity Fund is Columbus Circle.
MICRO CAP GROWTH FUND seeks long-term growth of capital. 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. The Portfolio
Manager for the Micro Cap Growth Fund is Cadence.
INNOVATION FUND seeks capital appreciation. No consideration is given to
income. The Fund invests primarily (i.e., at least 65% of its assets) in common
stocks of companies which utilize innovative technologies to gain a strategic
competitive advantage in their industry as well as companies that provide and
service those technologies. Securities will be selected with minimal emphasis on
more traditional factors such as growth potential or value relative to intrinsic
worth. Instead, the Fund will be guided by the theory of Positive Momentum &
Positive Surprise, with special emphasis on common stocks of companies whose
perceived strength lies in their use of innovative technologies in new products,
enhanced distribution systems and improved management techniques. Although the
Fund emphasizes the utilization of technologies, it is not restricted to
investment in companies in a particular business sector or industry.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets (not including Eurodollar certificates of
deposit), which will not exceed 15% of the Fund's 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 and securities indexes; enter into futures contracts and use options
on futures contracts; buy or sell foreign currencies; and engage in forward
foreign currency contracts. For information on other investment policies, see
"Investment Objectives and Policies--Equity Funds." See
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PIMCO Funds: Multi-Manager Series 19
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"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. The Portfolio
Manager for the Innovation Fund is Columbus Circle.
INTERNATIONAL FUND seeks capital appreciation through investments in an
international portfolio. Income is an incidental consideration. Under normal
market conditions, at least 65% of the Fund's total assets will be invested in
common stocks, which may or may not pay dividends, as well as convertible bonds,
convertible preferred stocks, warrants, rights or other equity securities for a
combination of capital appreciation and income. Convertible securities may
include securities convertible only by certain classes of investors (which may
not include the Fund), but the Fund may not invest in convertible securities
which are of less than investment grade quality at the time of purchase.
The Fund will normally invest in securities traded in foreign securities markets
with particular consideration given to investments principally traded in North
and South American (other than United States), Japanese, European, Pacific and
Australian securities markets, and in foreign securities traded on United
States' securities markets. Investing in foreign securities and securities of
foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies. The Fund will also invest in
emerging markets, where markets may not yet fully reflect the potential of the
developing economy. There are no prescribed limits on geographic asset
distribution and the Fund has the authority to invest in securities traded in
securities markets of any country in the world. In allocating the Fund's assets
among the various securities markets of the world, the Portfolio Manager will
consider such factors as the condition and growth potential of the various
economies and securities markets, currency and taxation considerations and other
pertinent financial, social national and political factors. Under certain
adverse investment conditions, the Fund may restrict the number of securities
markets in which its assets will be invested, although under normal market
circumstances the Fund's investments will involve securities principally traded
in at least three different countries. The Fund will not limit its investments
to any particular type or size of company.
The Fund may invest up to 10% of its assets in securities of other investment
companies, such as closed-end investment management companies which invest in
foreign markets. The Fund may also purchase and write call and put options on
securities and securities indexes; enter into futures contracts and use options
on futures contracts, including futures contracts on stock indexes and on
foreign currencies; buy or sell foreign currencies; and engage in forward
foreign currency contracts.
The Fund will not normally invest in securities of U.S. issuers traded on U.S.
securities markets. However, when the Portfolio Manager believes that
conditions in international securities markets warrant a defensive investment
strategy, the Fund may invest up to 100% of its assets in domestic debt, foreign
debt and equity securities principally traded in the U.S., including money
market instruments, obligations issued or guaranteed by the U.S. or a foreign
government or their respective agencies, authorities or instrumentalities or
corporate bonds and sponsored American Depository Receipts.
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. The Portfolio Manager of the International Fund is
Blairlogie.
INTERNATIONAL DEVELOPED FUND seeks long-term growth of capital. 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
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20 PIMCO Funds: Multi-Manager Series
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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. Up
to 10% of the Fund's assets may be invested in the securities of other
investment companies. 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. The Portfolio Manager of the International Developed Fund
is Blairlogie.
EMERGING MARKETS FUND seeks long-term growth of capital. 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 Republic Israel Philippines Taiwan
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
<PAGE>
PIMCO Funds: Multi-Manager Series 21
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transactions on a spot (i.e., cash) basis, put and call options on foreign
currencies, and foreign exchange futures contracts. Up to 10% of the Fund's
assets may be invested in the securities of other investment companies. 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.
For information on other investment policies, see ''Investment Objectives and
Policies -- Equity Funds.'' For a discussion of certain risks posed by investing
in emerging market countries, see ''Characteristics and Risks of Securities and
Investment Techniques -- Foreign Securities.'' 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. The Portfolio Manager for the Emerging Markets
Fund is Blairlogie.
PRECIOUS METALS FUND seeks capital appreciation. No consideration is given to
income. The Fund concentrates investments in a global portfolio of common
stocks of companies principally engaged in precious metals-related activities
which include companies principally engaged in the extraction, processing,
distribution or marketing of precious metals (the "precious metals industry").
A particular company is deemed to be "principally engaged" in the precious
metals industry if at the time of investment the Portfolio Manager considers
that at least 50% of the company's assets, revenues or profits are derived from
the precious metals industry. Normally at least 65% of the assets of the Fund
will be invested in the precious metals industry plus securities the value of
which is linked to the price of a precious metal. See "Characteristics and
Risks of Securities and Investment Techniques -- Precious Metals."
The Fund will seek to identify securities of companies which, based upon the
Portfolio Manager's evaluation of their fundamental investment characteristics,
are undervalued in comparison to the present or anticipated value of the
precious metals relevant to them. Examples of precious metals include gold,
silver and platinum. To the extent permitted by state securities laws and
federal tax law, the Fund may invest directly in gold bullion and other precious
metals. The Fund has no present intention of investing directly in precious
metals other than gold.
The Fund does not presently intend to invest more than 10% of its assets in
either precious metals such as gold bullion or in futures on precious metals,
such as gold futures, and options thereon. The Fund may invest up to 100% of
its assets in securities principally traded on foreign securities markets and in
securities of foreign issuers that are traded on U.S. securities markets and may
invest up to 100% of its assets in securities of companies whose assets,
revenues or profits are derived from a single precious metal. At the present
time, the Fund has no intention of investing more than 5% of its assets in
securities the value of which is linked to the price of a single precious metal.
The Fund may invest without limit in securities of foreign issuers traded in
foreign securities markets. 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, commodity indexes, and on foreign
currencies; enter into futures contracts and use options on futures contracts,
including futures contracts on stock indexes, foreign currencies, and precious
metals; buy or sell foreign currencies; and engage in forward foreign currency
contracts. For temporary defensive purposes, the Fund may invest up to 100% of
its net assets in any combination of high-quality, short- or long-term debt
instruments or in common, preferred or convertible securities.
The Fund, because of its emphasis on one industrial sector, should be considered
as one aspect of a diversified portfolio and may not be suitable by itself as a
balanced investment program. 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. The Portfolio Manager of the Precious Metals
Fund is Van Eck.
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 asset allocation principles which take into
account certain economic factors, market
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22 PIMCO Funds: Multi-Manager Series
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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, the Fund will normally 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.
In managing the Fund, the Adviser uses a specialist approach and has engaged
three 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 further
allocated by the Adviser for investment by NFJ and Cadence. The portion of the
Common Stock Segment allocated to NFJ will be managed in accordance with the
investment policies of the Value Fund; the portion allocated to Cadence will be
managed in accordance with the investment policies of the Capital Appreciation
Fund. Allocations of the Common Stock Segment to NFJ and Cadence will vary from
time to time as determined by the Adviser.
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 Pacific Investment Management. The Fund invests the Fixed Income
Securities Segment in fixed income securities of varying maturities. Portfolio
holdings will be concentrated in areas of the bond market (based on quality,
sector, coupon or maturity) that Pacific Investment Management believes to be
relatively undervalued. Fixed income securities in which the Fund may invest
will, at the time of investment, be rated Baa or better by Moody's, BBB or
better by S&P or, if not rated by Moody's or S&P, will be of comparable quality
as determined by Pacific Investment Management, except that up to 10% of the
Fixed Income Securities Segment may be invested in lower rated securities that
are rated B or higher by Moody's or S&P or, if not rated by Moody's or S&P,
determined by Pacific Investment Management to be of comparable quality. High
yield fixed income securities rated lower than Baa by Moody's or BBB by S&P, or
of equivalent quality, are not considered to be investment grade, and are
commonly referred to as "junk bonds." The Fund also may invest up to 20% of the
Fixed Income Securities Segment in securities denominated in foreign currencies,
and may invest beyond this limit in U.S. dollar-denominated securities of
foreign issuers.
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.
Securities rated below investment grade are described as "speculative" by both
Moody's and S&P. Securities rated B are judged to be predominately speculative
with respect to their capacity to pay interest and repay principal under the
terms of the obligations. In the event that an existing holding is downgraded,
the Fund may nonetheless retain the security.
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.
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. The Fund
also may enter into swap agreements with respect to foreign currencies, interest
rates, and securities indexes. With respect to securities of the Fixed Income
Securities Segment denominated in foreign currencies, the Fund may engage in
foreign currency exchange transactions by means of buying or selling foreign
currencies on a spot basis, entering into foreign currency forward contracts,
and buying and selling foreign currency options, foreign currency futures, and
options on foreign currency futures. Foreign currency exchange transactions may
be entered into for the purpose of hedging against foreign currency exchange
risk arising from a Fund's investment or anticipated investment in securities
denominated in foreign currencies and for purposes of increasing exposure to a
particular foreign currency or to shift exposure to foreign currency
fluctuations from one country to
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PIMCO Funds: Multi-Manager Series 23
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another. 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.
TAX EXEMPT FUND seeks high current income exempt from federal income tax,
consistent with preservation of capital, by investing in debt securities whose
interest is, in the opinion of bond counsel for the issuer at the time of
issuance, exempt from federal income tax ("Tax Exempt Bonds"). Tax Exempt Bonds
generally are issued by states and local governments and their agencies,
authorities and other instrumentalities. It is a policy of the Fund that, under
normal market conditions, at least 80% of its net assets will be invested in Tax
Exempt Bonds rated Baa or higher by Moody's or BBB or higher by S&P, or which
are similarly rated by another NRSRO or if unrated, determined by the Portfolio
Manager to be of quality comparable to obligations so rated. Tax Exempt Bonds
rated in the fourth highest rating category (e.g. Baa by Moody's) may be
considered to possess some speculative characteristics by certain NRSROs.
The Fund may invest up to 20% of its net assets, under normal market conditions,
in any combination of (1) Tax Exempt Bonds which are rated at least Ba by
Moody's or BB by S&P (or similarly rated by another NRSRO or, if unrated,
determined by the Portfolio Manager to be of comparable quality) and (2) U.S.
Government securities, money market instruments or "private activity" bonds.
Securities rated below investment grade and comparable unrated securities are
subject to greater risks than higher quality bonds. See "Characteristics and
Risks of Securities and Investment Techniques - Risks of High Yield Securities
("Junk Bonds"). For temporary defensive purposes the Fund may invest all or a
portion of its assets in U.S. Government securities and money market
instruments.
The Tax Exempt Fund may purchase put or call options on U.S. Government
Securities, Tax Exempt Bonds and Tax Exempt Bond indices, purchase and sell
futures contracts on U.S. Government Securities, Tax Exempt Bonds and Tax Exempt
Bond indices, and purchase put and call options on such futures contracts.
The Tax Exempt Fund may lend its portfolio securities to brokers, dealers and
other financial institutions to earn income; enter into repurchase agreements
with banks and broker-dealers; make short sales of securities held in the Fund's
portfolio or which the Fund has the right to acquire without the payment of
further consideration; and purchase and sell securities on a when-issued or
delayed delivery basis and enter into forward commitments to purchase
securities. The Tax Exempt Fund may also invest a portion or, for temporary
defensive purposes, up to 100% of its assets in the money market instruments.
Dividends to Fund shareholders derived from money market instruments and U.S.
Government securities are taxable as ordinary income. The Fund may seek to
reduce fluctuations in its net asset value by engaging in portfolio strategies
involving options on securities, futures contracts, and options on futures
contracts as described below under "Characteristics and Risks of Securities and
Investment Techniques - Derivatives." Any gain derived by the Fund from the
use of such instruments will be treated as a combination of short-term and long-
term capital gain and, if not offset by realized capital losses incurred by the
Fund, will be distributed to shareholders and will be taxable to shareholders as
a combination of ordinary income and long-term capital gain.
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. The Portfolio
Manager of the Tax Exempt Fund is Columbus Circle.
EQUITY FUNDS
With the exception of the Tax Exempt Fund and the Balanced Fund, each remaining
Fund (together the "Equity Funds") will invest primarily (normally at least 65%
of its total assets) in equity securities. The Equity Income, Value, Enhanced
Equity, Capital Appreciation, Mid Cap Growth, Small Cap Value, Small Cap Growth,
Micro Cap Growth, International Developed and Emerging Markets Funds will each
invest primarily (normally at least 65% of its total assets) in common stock.
Each of these Funds 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. It is the policy of these Funds to be as fully
invested in common stocks as practicable at all times. This policy precludes
these Funds from investing in debt securities as a defensive investment posture
(although these Funds may invest in such securities to provide for payment of
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24 PIMCO Funds: Multi-Manager Series
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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 Renaissance, Growth, Target, Opportunity, Innovation, International and
Precious Metals Funds will each invest primarily (normally at least 65% of its
total assets) in equity securities (income-producing equity securities in the
case of the Renaissance Fund), including common stocks, preferred stocks and
securities (including debt securities and warrants) convertible into or
exercisable for common stocks. Each of these Funds may invest a portion or, for
temporary defensive purposes, up to 100% of their assets short-term U.S.
Government Securities and other money market instruments.
Any of the Equity Funds may not be invested primarily in equity securities
temporarily after the commencement of operations or after receipt of significant
new monies. Any of the Equity Funds may temporarily not own the number of
stocks or other securities 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.
The Equity Funds may also invest in convertible securities, preferred stock, and
warrants subject to certain limitations; lend portfolio securities; enter into
repurchase agreements and reverse repurchase agreements (subject to the Funds'
investment limitations described below); and purchase and sell securities
on a when-issued or delayed delivery basis and enter into forward commitments to
purchase securities. The Equity Funds may invest in American Depository
Receipts (''ADRs''), the Emerging Markets, International Developed,
International and Precious Metals Funds may invest in European Depository
Receipts ("EDRs"), and the Emerging Markets and International Developed Funds
may also invest in Global Depository Receipts ("GDRs"). 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. 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.
DURATION
Under normal circumstances, the average portfolio duration of the Fixed Income
Securities Segment of the Balanced Fund will vary within a three- to six-year
time frame, and the average portfolio duration of the Tax Exempt Fund, will vary
within a three- to ten-year time frame, based on the relevant Portfolio
Manager's forecast for interest rates. Duration is a measure that was developed
as a more precise alternative to the concept of "term to maturity."
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. In contrast, duration incorporates a bond's yield, coupon
interest payments, final maturity and call features into one measure of the
average life of a fixed income security on a present value basis. Duration
management is one of the fundamental tools used by the Portfolio Managers in
portfolio selection for the Fixed Income Securities Segment of the Balanced Fund
and for the Tax Exempt Fund. For more information on investments in fixed
income securities, see "Characteristics and Risks of Securities and Investment
Techniques" in the Prospectus and "Investment Objectives and Policies" in the
Statement of Additional Information.
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 schedule interest or principal
payments. Because each Fund seeks a different investment objective and has
different investment policies, each is subject to varying degrees
<PAGE>
PIMCO Funds: Multi-Manager Series 25
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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 in greater detail the securities and investment
techniques used by the various Funds, describes the risks associated with them
and sets forth certain other information about the Funds. Additional
information about the Funds' investment practices can be found in the Statement
of Additional Information.
INVESTMENTS IN COMPANIES WITH SMALL AND MEDIUM MARKET CAPITALIZATIONS
The Equity Income, Value, Small Cap Value, Mid Cap Growth, Micro Cap Growth,
Small Cap Growth, Renaissance, Opportunity, Innovation, Emerging Markets,
International Developed, International and Precious Metals Funds may invest in
common stock of companies with market capitalization that is low compared to
other publicly traded companies. Under normal market conditions, the Small Cap
Value, Small Cap Growth and Opportunity Funds will invest in companies with
market capitalizations of $1 billion or less, and the Micro Cap Growth Fund will
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.
Many of the Funds may also invest in stocks of companies with medium market
capitalizations. The Target Fund may invest primarily in such securities.
Whether an issuer's market capitalization is medium is determined by reference
to the capitalization for all issuers whose equity securities are listed on a
United States national securities exchange or which are reported on NASDAQ.
Issuers with market capitalization within the range of capitalization of
companies included in the S&P Mid Cap 400 Index may be regarded as being issuers
with medium market capitalization. Such investments share some of the risk
characteristics of investments in stocks of companies with small market
capitalizations described above, although such companies tend to have longer
operating histories, broader product lines and greater financial resources and
their stocks tend to be more liquid and less volatile than those of smaller
capitalization issuers.
FOREIGN INVESTMENTS
Many of the Funds may invest a portion of their assets in securities of foreign
issuers, securities traded principally in securities markets outside of the
United States and/or securities denominated in foreign currencies.
The Emerging Markets, International and International Developed 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 (except for the
International Fund). 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 Precious Metals Fund may
invest primarily in securities of foreign issuers, securities denominated in
foreign currencies, securities principally traded on securities markets outside
of the United States and in securities of foreign issuers that are traded on
U.S. securities markets, including ADRs and EDRs. The other Equity Funds, as
well as the Balanced Fund, may also invest in ADRs. The Enhanced Equity Fund may
invest in common stock of foreign issuers if included in the index from which
stocks are selected. The Balanced Fund may invest up to 20% of its Fixed Income
Securities Segment in securities denominated in foreign currencies, and may
invest beyond this limit in U.S. dollar-denominated securities of foreign
issuers. The Renaissance, Growth, Target, Opportunity and Innovation Funds may
invest up to 15% of their respective 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), and may
invest without limit in securities of foreign issuers that are traded in U.S.
securities markets.
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26 PIMCO Funds: Multi-Manager Series
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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.
A Fund's investments in foreign currency denominated debt obligations and
hedging activities will likely produce a difference between its book income and
its taxable income. This difference may cause a portion of the Fund's income
distributions to constitute returns of capital for tax purposes or require the
Fund to make distributions exceeding book income to qualify as a regulated
investment company for federal tax purposes.
Certain of the Funds 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. 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 a Fund. Inflation and rapid fluctuations in inflation rates
have had, and may continue to have, negative effects on the economies and
securities markets of certain emerging market countries. Many of the emerging
securities markets are relatively small, have low trading volumes, suffer
periods of relative 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 a Fund's
investment.
Additional risks of investing in emerging market countries may include: currency
exchange rate fluctuations; greater social, economic and political uncertainty
and instability (including the risk of war); more substantial government
involvement in the economy; less government supervision and regulation of the
securities markets and participants in those markets; unavailability of currency
hedging techniques in certain developing countries; the fact that companies in
developing countries may be newly organized and may be smaller and less
seasoned; 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 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 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, or 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.
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PIMCO Funds: Multi-Manager Series 27
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The Renaissance, Growth, Target, Opportunity, Innovation, International,
International Developed, Emerging Markets, Precious Metals and Balanced Funds
may enter into forward foreign currency exchange contracts to reduce the risks
of adverse changes in foreign exchange rates. In addition, the Emerging Markets,
International Developed, International, Balanced, and Precious Metals Funds may
buy and sell foreign currency futures contracts and options on foreign
currencies and foreign currency futures. All of the Funds that may buy or sell
foreign currencies may 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 exchange 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
currency. Contracts to sell foreign currencies 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 risks arising from the Funds' investment or anticipated investment in
securities denominated in foreign currencies. Such hedging transactions may not
be successful and may eliminate any chance for a Fund to benefit from favorable
fluctuations in relevant foreign currencies. The International, International
Developed and Emerging Markets Funds may also enter into hedging contracts for
purposes of increasing exposure to a foreign currency or to shift exposure to
foreign currency fluctuations from one currency to another. To the extent that
they do so, the International, International Developed and Emerging Markets
Funds will be subject to the additional risk that the relative value of
currencies will be different than anticipated by the particular Fund's Portfolio
Manager. These Funds 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. These Funds will segregate assets determined to be liquid by the
Portfolio Manager in accordance with procedures established by the Board of
Trustees in a segregated account to cover forward currency contracts entered
into for non-hedging purposes.
MONEY MARKET INSTRUMENTS
Each of the Funds may invest at least a portion of its assets in the following
kinds of money market instruments:
(1) short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other bank obligations
rated in the two highest rating categories by at least two NRSROs, or, if
rated by only one NRSRO, in such agency's two highest grades, or unrated
but determined to be of comparable quality by the Portfolio Manager. Bank
obligations must be those of a bank that has deposits in excess of $2
billion or that is a member of the Federal Deposit Insurance Corporation.
A Fund may invest in obligations of U.S. branches or subsidiaries of
foreign banks ("Yankee dollar obligations") or foreign branches of U.S.
banks ("Eurodollar obligations");
(3) commercial paper rated in the two highest rating categories by at least two
NRSROs, or, if rated by only one NRSRO, in such agency's two highest
grades, or if not rated, of comparable quality as determined by the
Portfolio Manager;
(4) corporate obligations with a remaining maturity of 397 days or less whose
issuers have outstanding short-term debt obligations rated in the highest
rating category by at least two NRSROs, or, if rated by only one NRSRO, in
such agency's highest grade, or if not rated, of comparable quality as
determined by the Portfolio Manager; and
(5) repurchase agreements with domestic commercial banks or registered broker-
dealers.
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28 PIMCO Funds: Multi-Manager Series
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MORTGAGE-RELATED AND OTHER 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 Fund, 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. The rate of prepayments on underlying mortgages will
affect the price and volatility of a mortgage-related security, and may have the
effect of shortening or extending the effective maturity of the security beyond
what was anticipated at the time of purchase. To the extent that unanticipated
rates of prepayment on underlying mortgages increase the effective maturity of a
mortgage-related security, the volatility of such security can be expected to
increase.
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. 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.
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PIMCO Funds: Multi-Manager Series 29
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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 Balanced 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.
TAX EXEMPT BONDS
The Tax Exempt Fund invests in Tax Exempt Bonds which are generally issued by
states and local governments and their agencies, authorities and other
instrumentalities. Tax Exempt Bonds are subject to credit and market risk.
Credit risk relates to the ability of the issuer to make payments of principal
and interest. The issuer of a Tax Exempt Bond may make such payments from money
raised through a variety of sources, including (1) the issuer's general taxing
power, (2) a specific type of tax, or (3) a particular facility or project. The
ability of an issuer to make such payments could be affected by litigation,
legislation or other political events or the bankruptcy of the issuer. Market
risk relates to changes in a security's value as a result of changes in interest
rates. Lower rated Tax Exempt Bonds generally provide higher yields but are
subject to greater credit and market risk than higher quality Tax Exempt Bonds.
CONVERTIBLE SECURITIES
Many of the Funds may invest in convertible securities. Convertible securities
are generally preferred stocks or fixed income securities that are convertible
into common stock at either a stated price or a stated rate. The price of the
convertible security will normally vary in some proportion to changes in the
price of the underlying common stock because of this conversion feature. A
convertible security will normally also provide a fixed income stream. For this
reason, the convertible security may not decline in price as rapidly as the
underlying common stock.
A Fund's Portfolio Manager will select convertible securities to be purchased by
the Fund based primarily upon its evaluation of the fundamental investment
characteristics and growth prospects of the issuer of the security. As a fixed
income security, a convertible security tends to increase in market value when
interest rates decline and to decrease in value when interest rates rise. While
convertible securities generally offer lower interest or dividend yields than
non-convertible fixed income securities of similar quality, their value tends to
increase as the market value of the underlying stock increases and to decrease
when the value of the underlying stock decreases.
The Renaissance Fund may invest in so-called "synthetic convertible securities,"
which are composed of two or more different securities whose investment
characteristics, taken together, resemble those of convertible securities. For
example, the Renaissance Fund may purchase a non-convertible debt security and a
warrant or option. The synthetic convertible differs from the true convertible
security in several respects. Unlike a true convertible security, which is a
single security having a unitary market value, a synthetic convertible comprises
two or more separate securities, each with its own market value. Therefore, the
"market value" of a synthetic convertible is the sum of the values of its fixed
income component and its convertible component. For this reason, the values of a
synthetic convertible and a true convertible security may respond differently to
market fluctuations.
RISKS OF HIGH YIELD SECURITIES ("JUNK BONDS")
The Renaissance, Tax Exempt, and Balanced Funds may invest a portion of their
assets in fixed income securities rated lower than Baa by Moody's or lower than
BBB by S&P but rated at least B by Moody's or S&P or, if not rated, determined
by the Portfolio Manager to be of comparable quality. Securities rated lower
than Baa by
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30 PIMCO Funds: Multi-Manager Series
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Moody's or lower than BBB by S&P are sometimes referred to as "high yield" or
"junk" bonds. Investors should consider the risks associated with high yield
securities before investing in these Funds.
Investing in high yield securities involves special risks in addition to the
risks associated with investments in higher rated fixed income securities. While
offering a greater potential opportunity for capital appreciation and higher
yields than investments in higher rated debt securities, high yield securities
typically entail greater potential price volatility and may be less liquid than
investment grade debt. High yield securities may be regarded as predominately
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. Analysis of the creditworthiness of issuers of high yield
securities may be more complex than for issuers of higher quality debt
securities, and achievement of a Fund's investment objective may, to the extent
of its investments in high yield securities, depend more heavily on the
Portfolio Manager's creditworthiness analysis than would be the case if the Fund
were investing in higher quality securities. High yield securities may be more
susceptible to real or perceived adverse economic and competitive industry
conditions than higher grade securities.
The following chart provides information on the weighted average percentage of
rated and unrated debt or fixed-income securities in the portfolios of each Fund
that invested at least 5% of its average annual assets in high yield securities
during the Fund's most recent fiscal year. The numerical rating designations
correspond to the associated rating categories. The designation "1st"
corresponds to the top rating category (i.e., Aaa by Moody's and/or AAA by S&P),
"2nd" corresponds to the second highest rating category (i.e., Aa by Moody's
and/or AA by S&P), etc. For further description of these rating categories, see
the Appendix to the Statement of Additional Information. The columns related to
unrated securities present the percentage of a Fund's total net assets invested
during such fiscal year (1) in unrated high yield securities believed by the
Adviser or the relevant Portfolio Manager to be equivalent in quality to fixed
income securities of the indicated rating and (2) in all unrated fixed income
securities.
RATED
____________________________________________________________
1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH
Renaissance*
UNRATED BUT CONSIDERED EQUIVALENT TO
__________________________________________________________________
TOTAL
1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH UNRATED
Renaissance*
*Represents holdings of the PIMCO Advisors Equity Income Fund which
reorganized as the Renaissance Fund of the Trust on ______, 1997.
For additional discussion of the characteristics of lower rated fixed income
securities, see the Statement of Additional Information. Ratings assigned to
fixed income securities are described in the Appendix to the Statement of
Additional Information.
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 Renaissance, Growth, Target, Opportunity, Innovation,
International, International Developed, Emerging Markets, Precious Metals and
Balanced Funds may engage in the purchase and writing of call and put options on
securities; each of these Funds, along with the Enhanced Equity Fund, may engage
in the purchase and writing of options on securities indexes. The Tax Exempt
Fund may purchase call or put options on U.S. Government Securities, Tax Exempt
Bonds and Tax Exempt Bond indexes. The Precious Metals Fund may purchase and
write options on commodities indexes. The Funds that may invest in foreign-
currency denominated securities may engage in the purchase and writing of call
and put options on foreign currencies. The International Developed, Emerging
Markets and Balanced Funds may
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PIMCO Funds: Multi-Manager Series 31
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also enter into swap agreements with respect to securities indexes. The Balanced
Fund may also enter into swap agreements with respect to foreign currencies and
interest rates. The Funds may use these techniques to hedge against changes in
interest rates, foreign currency exchange rates or securities prices; and except
for the Precious Metals Fund, to increase exposure to a foreign currency, 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 assets determined to be liquid by the Portfolio Manager
in accordance with procedures established by the Board of Trustees (or, as
permitted by applicable regulation, enter into certain offsetting positions) to
cover its obligations under options, futures, and swaps to avoid leveraging of
the particular Fund.
For these purposes, derivative instruments are deemed 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. See "Mortgage-Related and 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.
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, Commodity 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.
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32 PIMCO Funds: Multi-Manager Series
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For each of the Renaissance, Growth, Target, Opportunity, Innovation,
International, and Precious Metals Funds, in the case of a written call option
on a securities index, the Fund will own corresponding securities whose historic
volatility correlates with that of the index.
The International, International Developed, Emerging Markets, Precious Metals
and Balanced 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 International Developed and Emerging Markets 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. The Balanced Fund may enter into swap agreements to hedge against
changes in interest rates, foreign currency exchange rates or securities prices.
Swap agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard swap transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest factor. The
gross returns to be exchanged or "swapped" between the parties are generally
calculated with respect to a "notional amount," i.e., the return on or increase
in value of a particular dollar amount invested at a particular interest rate,
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 assets determined to be liquid by the Portfolio
Manager in accordance with procedures established by the Board of Trustees to
avoid any potential leveraging of the Fund's portfolio. Obligations under swap
agreements so covered will not be construed to be "senior securities" for
purposes of the 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 Precious Metals Fund
may purchase and sell futures contracts on precious metals (such as gold), and
purchase and write options on precious metals futures contracts. The Enhanced
Equity, International, International Developed, Emerging Markets, Precious
Metals and Balanced Funds may invest in stock index futures contracts and
options thereon. The International, International Developed, Emerging Markets,
Precious Metals and Balanced Funds may invest in foreign exchange futures
contracts and options
<PAGE>
PIMCO Funds: Multi-Manager Series 33
- --------------------------------------------------------------------------------
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.
The Tax Exempt Fund may purchase and sell futures contracts on U.S. Government
securities and Tax Exempt Bonds, as well as purchase put and call options on
such futures contracts. 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 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.
PRECIOUS METALS
The Precious Metals Fund will concentrate its investments in the precious metals
industry. Prices of precious metals can be expected to respond to changes in
rates of inflation and to perceptions of economic and political instability. The
values of companies engaged in precious metal-related activities whose
securities are principally traded on foreign securities exchanges may also be
affected by changes in the exchange rate between the relevant foreign currency
and the dollar. Based on historical experience, the prices of precious metals
and of securities of companies engaged in precious metal-related activities may
be subject to extreme fluctuations, reflecting wider economic or political
instability or for other reasons.
LOANS OF PORTFOLIO SECURITIES
For the purpose of achieving income, each Fund (with the exception of the Tax
Exempt Fund) may lend its portfolio securities to brokers and dealers, and to
other financial institutions, provided: (i) the loan is secured continuously by
collateral consisting of U.S. Government securities, cash or cash equivalents
(negotiable certificates of 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 the
Fund's limitation on lending its portfolio securities. Each Fund's performance
will continue to reflect changes in the value of the securities loaned and will
also reflect the receipt of either interest, through investment of cash
collateral by the Fund in permissible investments, or a fee, if the collateral
is U.S. Government securities. Securities lending involves the risk of loss of
rights in the collateral or delay in recovery of the collateral should the
borrower fail financially. The Funds will normally pay lending fees to the party
arranging the loan.
SHORT SALES
Each Fund may from time to time make short sales involving securities held in
the Fund's portfolio or which the Fund has the right to acquire without the
payment of further consideration. Short sales expose the Fund to the risk that
it will be required to purchase securities to cover its short position at a time
when the securities have appreciated in value, thus resulting in a loss to the
Fund.
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34 PIMCO Funds: Multi-Manager Series
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FORWARD COMMITMENTS, WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Fund may purchase securities which it is eligible to purchase on a when-
issued basis, may purchase and sell such securities for delayed delivery and may
make contracts to purchase such securities for a fixed price at a future date
beyond normal settlement time (forward commitments). When-issued transactions,
delayed delivery purchases and forward commitments involve a risk of loss if the
value of the securities declines prior to the settlement date, which risk is in
addition to the risk of decline in the value of the Fund's other assets. No
income accrues to the purchaser of such securities prior to delivery.
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. To the extent required by the 1940 Act, a Fund will maintain a
segregated account consisting of assets determined to be liquid by the Portfolio
Manager in accordance with procedures established by the Board of Trustees
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. A Fund
also may borrow money for investment purposes subject to any policies of the
Fund currently described in this Prospectus or in the Statement of Additional
Information. Such a practice will result in leveraging of a Fund's assets.
Leverage will tend to exaggerate the effect on net asset value of any increase
or decrease in the value of a Fund's portfolio and may cause a Fund to liquidate
portfolio positions when it would not be advantageous to do so.
ILLIQUID SECURITIES
The Equity Income, Value, Enhanced Equity, Capital Appreciation, Mid Cap Growth,
Small Cap Value, Small Cap Growth 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 the particular 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 Renaissance,
Growth, Target, Opportunity, Micro Cap Growth, Innovation, International,
International Developed, Emerging Markets, Precious Metals and Tax Exempt Funds
may invest in securities that are illiquid so long as no more than 15% of the
value of the Fund's net assets (taken at market value at the time of investment)
would be invested in such securities. Certain illiquid securities may require
pricing at fair value as determined in good faith under the supervision of the
Board of Trustees. A Portfolio Manager may be subject to significant delays in
disposing of illiquid securities, and transactions in illiquid securities may
entail registration expenses and other transaction costs that are higher than
transactions in liquid securities.
The term "illiquid securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which a Fund has valued the securities. Illiquid
securities are considered to include, among other things, written over-the-
counter options, securities or other
<PAGE>
PIMCO Funds: Multi-Manager Series 35
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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).
INVESTMENT IN INVESTMENT COMPANIES
The International, International Developed and Emerging Markets Funds may invest
in securities of other investment companies, such as closed-end investment
management companies or in pooled accounts or other investment vehicles which
invest in foreign markets. As a shareholder of an investment company, these
Funds may indirectly bear service and other fees which are in addition to the
fees the Funds pay their service providers.
CREDIT AND MARKET RISK OF FIXED INCOME SECURITIES
All fixed income securities are subject to market risk and credit risk. Market
risk relates to market-induced changes in a security's value, usually as a
result of changes in interest rates. The value of a Fund's investments in fixed
income securities will change as the general level of interest rates fluctuate.
During periods of falling interest rates, the value of a Fund's fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the value of a Fund's fixed income securities generally decline. Credit risk
relates to the ability of the issuer to make payments of principal and interest.
"FUNDAMENTAL" POLICIES
The investment objective of the Renaissance, Growth, Target, Opportunity,
Innovation, International, Precious Metals and Tax Exempt Funds described in
this Prospectus may be changed by the Board of Trustees without shareholder
approval. The investment objective of each other Fund is fundamental and may not
be changed without shareholder approval by vote of a majority of the outstanding
shares of that Fund. If there is a change in a Fund's investment objective,
including a change approved by shareholder vote, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs.
PERFORMANCE INFORMATION
From time to time the Trust may make available certain information about the
performance of the Class A, Class B and Class C shares of some or all of the
Funds. Information about a Fund's performance is based on that Fund's record to
a recent date and is not intended to indicate future performance. Performance
information is computed separately for each Fund's Class A, Class B and Class C
shares in accordance with the formulas described below. Because Class B and
Class C shares bear the expense of the distribution fee attending the deferred
sales charge (Class B) and asset based sales charge (Class C) alternatives and
certain other expenses, it is expected that, under normal circumstances, the
level of performance of a Fund's Class B and Class C shares will be lower than
that of the Fund's Class A shares.
All Funds may include the Total Return of Class A, B and C shares in
advertisements or other written material. When a Fund advertises its Total
Return with respect to its Class A, Class B and Class C shares, it will be
calculated for the past year, the past five years, the past ten years or the
period since the establishment of the Fund, or of a series of PIMCO Advisors
Funds which reorganized as a Fund of the Trust on ______, 1997. Total Return is
measured by comparing the value of an investment in the class at the beginning
of the relevant period (in the case of Class A shares, giving effect to the
maximum initial sales charge) to the redemption value of the investment in the
class at the end of the period (assuming immediate reinvestment of any dividends
or capital gains distributions at net asset value and giving effect to the
deduction of any contingent deferred sales charge which would be payable).
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. The Tax Exempt Fund may also advertise the tax
<PAGE>
36 PIMCO Funds: Multi-Manager Series
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equivalent yield of its Class A, Class B and Class C shares, calculated like
Yield as described above except that, for any given tax bracket, net investment
income will be calculated as the sum of (i) any taxable income of the class plus
(ii) the tax exempt income of the class divided by the difference between 1 and
the effective federal income tax rates for taxpayers in that tax bracket.
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 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.
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.
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.
HOW TO BUY SHARES
Class A, B (except the Opportunity Fund) and C shares of each Fund of the Trust
are continuously offered through the Trust's principal underwriter, PIMCO Funds
Distribution Company (the "Distributor"), and through other firms which have
dealer agreements with the Distributor ("participating brokers") or which have
agreed to act as introducing brokers for the Distributor ("introducing
brokers"). [Shares of the Opportunity Fund are currently not offered to new
investors]. [INFORMATION REGARDING OFFERING PERIOD FOR CLASS A AND C SHARES OF
THE OPPORTUNITY FUND TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT UNDER RULE
485(B).]
There are two ways to purchase Class A, B or C shares: either 1) through your
dealer or broker which has a dealer agreement or 2) directly by mailing an
Account Application with payment, as described below under the heading Direct
Investment, to the Distributor (if no dealer is named in the application, the
Distributor may act as dealer).
Each Fund (except the Opportunity Fund) currently offers and sells three classes
of shares in this Prospectus (Class A, Class B and Class C). The Opportunity
Fund does not offer Class B shares. [INFORMATION REGARDING OFFERING PERIOD FOR
CLASS A AND C SHARES OF THE OPPORTUNITY FUND TO BE PROVIDED]. Institutional
Class and Administrative Class shares of the Funds are offered through a
separate prospectus. Shares may be purchased at a price equal to their net asset
value per share next determined after receipt of an order, plus a sales charge
which, at the election of the purchaser, may be imposed either (i) at the time
of the purchase in the case of Class A shares (the "initial sales charge
alternative"), (ii) on a contingent deferred basis in the case of Class B shares
(the "deferred sales charge alternative"), or (iii) by the deduction of an
ongoing asset based sales charge in the case of Class C shares (the "asset based
sales charge alternative"). In certain circumstances Class A and Class C shares
are also subject to a contingent deferred sales charge. See "Alternative
Purchase Arrangements." Purchase payments for Class B and Class C shares are
fully invested at the net asset value next determined after acceptance of the
trade. Purchase payments for Class A shares, less the applicable sales charge,
are invested at the net asset value next determined after acceptance of the
trade.
All purchase orders received by the Distributor prior to the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time), on a
regular business day, are processed at that day's offering price. However,
orders received by the Distributor from dealers or brokers after the offering
price is determined
<PAGE>
PIMCO Funds: Multi-Manager Series 37
- --------------------------------------------------------------------------------
that day will receive such offering price if the orders were received by the
dealer or broker from its customer prior to such determination and were
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 p.m. Eastern time) or, in the case of certain retirement
plans, received by the Distributor prior to 10:00 a.m. Eastern time on the next
business day. Purchase orders received on other than a regular business day will
be executed on the next succeeding regular business day. The Distributor, in its
sole discretion, may accept or reject any order for purchase of Fund shares. The
sale of shares will be suspended during any period in which the New York Stock
Exchange (the "Exchange") is closed for other than weekends or holidays, or if
permitted by the rules of the SEC when trading on the Exchange is restricted or
during an emergency which makes it impracticable for the Funds to dispose of
their securities or to determine fairly the value of their net assets, or during
any other period permitted by the SEC for the protection of investors.
Except for purchases through the PIMCO Auto Invest plan, the PIMCO Auto Exchange
plan and tax-qualified programs referred to below, the minimum initial
investment in Class A, B or C shares of the Trust is $1,000 and in any Fund is
$250, and the minimum additional investment is $100 per Fund. For information
about dealer commissions, see "Alternative Purchase Arrangements" below. Persons
selling Fund shares may receive different compensation for selling Class A,
Class B or Class C shares. Normally Trust shares purchased through participating
brokers are held in the investor's account with that broker. No share
certificates will be issued unless specifically requested in writing by an
investor or broker-dealer.
DIRECT INVESTMENT Investors who wish to invest in the Trust directly, rather
than through a participating broker, may do so by opening an account with the
Distributor. To open an account, an investor should complete the Account
Application included with this Prospectus. All shareholders who open direct
accounts with the Distributor will receive from the Distributor individual
confirmations of each purchase, redemption, dividend reinvestment, exchange or
transfer of Trust shares, including the total number of Trust shares owned as of
the confirmation date except that purchases which result from the reinvestment
of daily-accrued dividends and/or distributions will be confirmed once each
calendar quarter. See "Distributions" below. Information regarding direct
investment or any other features or plans offered by the Trust may be obtained
by calling the Distributor at 800-426-0107 or by calling your broker.
PURCHASE BY MAIL Investors who wish to invest directly may send a check payable
to PIMCO Funds Distribution Company, along with a completed application form to:
PIMCO Funds Distribution Company
P.O. Box 5866
Denver, CO 80217-5866
Purchases are accepted subject to collection of checks at full value and
conversion into federal funds. Payment by a check drawn on any member of the
Federal Reserve System can normally be converted into federal funds within two
business days after receipt of the check. Checks drawn on a non-member bank may
take up to 15 days to convert into federal funds. In all cases, the purchase
price is based on the net asset value next determined after the purchase order
and check are accepted, even though the check may not yet have been converted
into federal funds.
SUBSEQUENT PURCHASES OF SHARES Subsequent purchases can be made as indicated
above by mailing a check with a letter describing the investment or with the
additional investment portion of a confirmation statement. Except for subsequent
purchases through the PIMCO Auto Invest plan, the PIMCO Auto Exchange plan, tax-
qualified programs and PIMCO Fund Link referred to below, and except during
periods when an Automatic Withdrawal Plan is in effect, the minimum subsequent
purchase is $100 in any Fund. All payments should be made payable to PIMCO Funds
Distribution Company and should clearly indicate the shareholder's account
number. Checks should be mailed to the address above under "Purchase by Mail."
TAX-QUALIFIED RETIREMENT PLANS The Distributor makes available retirement plan
services and documents for Individual Retirement Accounts (IRAs), for which
First National Bank of Boston serves as trustee. These accounts include
Simplified Employee Pension Plan (SEP) and Salary Reduction Simplified Employee
Pension Plan (SAR/SEP) IRA accounts and prototype documents. In addition,
prototype documents are available for establishing 403(b)(7) Custodial Accounts
with First National Bank of Boston as custodian. This type of plan is available
to employees of certain non-profit organizations.
<PAGE>
38 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
The Distributor also makes available prototype documents for establishing Money
Purchase and/or Profit Sharing Plans and 401(k) Retirement Savings Plans.
Investors should call the Distributor at 800-426-0107 for further information
about these plans and should consult with their own tax advisers before
establishing any retirement plan. Investors who maintain their accounts with
participating brokers should consult their broker about similar types of
accounts that may be offered through the broker. The minimum initial and
subsequent investment in any Fund for tax-qualified plans is $25.
PIMCO AUTO INVEST The PIMCO Auto Invest plan provides for periodic investments
into the shareholder's account with the Trust by means of automatic transfers of
a designated amount from the shareholder's bank account. Investments may be made
monthly or quarterly, and may be in any amount subject to a minimum of $50 per
month for each Fund in which shares are purchased through the plan. Further
information regarding the PIMCO Auto Invest plan is available from the
Distributor or participating brokers. You may enroll by completing the
appropriate section on the PIMCO Funds Account Application, or you may obtain an
Auto-Invest Application by calling the Distributor or your broker.
PIMCO AUTO EXCHANGE PIMCO Auto Exchange plan establishes regular, periodic
exchanges from one Fund to another. The plan provides for regular investments
into a shareholder's account in a specific Fund by means of automatic exchanges
of a designated amount from another Fund account of the same class of shares and
with identical account registration. [Exchanges for Class C shares of the
Opportunity Fund are currently restricted. See "Restrictions on Sales of and
Exchanges for Shares of the Opportunity Fund" below.] [INFORMATION REGARDING
OFFERING PERIOD FOR CLASS A AND C SHARES OF THE OPPORTUNITY FUND TO BE PROVIDED]
Exchanges may be made monthly or quarterly, and may be in any amount subject to
a minimum of $50 for each Fund whose shares are purchased through the plan.
Further information regarding the PIMCO Auto Exchange plan is available from the
Distributor at 800-426-0107 or participating brokers. You may enroll by
completing an application which may be obtained from the Distributor or by
telephone request at 800-426-0107. For more information on exchanges, see
"Exchange Privilege."
PIMCO FUND LINK (Does not apply to shares held in broker "street name"
accounts.) PIMCO Fund Link ("Fund Link") connects your Fund account with a bank
account. Fund Link may be used for subsequent purchases and for redemptions and
other transactions described under "How to Redeem." Purchase transactions are
effected by electronic funds transfers from the shareholder's account at a U.S.
bank or other financial institution that is an Automated Clearing House ("ACH")
member. Investors may use Fund Link to make subsequent purchases of shares in
amounts from $50 to $10,000. To initiate such purchases, call 800-852-8457. All
such calls will be recorded. Fund Link is normally established within 45 days of
receipt of an Application by Shareholder Services, Inc., (the "Transfer Agent")
for the Trust's Class A, Class B and Class C shares. The minimum investment by
Fund Link is $50 per Fund. Shares will be purchased on the regular business day
the Distributor receives the funds through the ACH system, provided the funds
are received before the close of regular trading on the New York Stock Exchange.
If the funds are received after the close of regular trading, the shares will be
purchased on the next regular business day.
Fund Link privileges must be requested on the PIMCO Funds Account Application.
To establish Fund Link on an existing account, complete a Fund Link Application,
which is available from the Distributor or your broker, with signatures
guaranteed from all shareholders of record for the account. See "Signature
Guarantee" under "General" below. Such privileges apply to each shareholder of
record for the account unless and until the Distributor receives written
instructions from a shareholder of record canceling such privileges. Changes of
bank account information must be made by completing a new Fund Link Application
signed by all owners of record of the account, with all signatures guaranteed.
The Distributor, the Transfer Agent and the Fund may rely on any telephone
instructions believed to be genuine and will not be responsible to shareholders
for any damage, loss or expenses arising out of such instructions. The Fund
reserves the right to amend, suspend or discontinue Fund Link privileges at any
time without prior notice.
[SPECIFIC INFORMATION REGARDING OFFERING PERIOD FOR CLASS A AND C SHARES OF THE
OPPORTUNITY FUND TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT UNDER RULE
485(B).] [RESTRICTIONS ON SALES AND EXCHANGES FOR SHARES OF THE OPPORTUNITY FUND
Shares of the Opportunity Fund are not available for purchase by new
<PAGE>
PIMCO Funds: Multi-Manager series 39
- --------------------------------------------------------------------------------
investors in the Fund. Shareholders who owned shares of the Opportunity Fund on
December 31, 1992 will still be permitted to purchase additional shares of the
Fund for as long as they continue to own some shares of the Opportunity Fund.
Similarly, participants in any self-directed qualified benefit plan (for
example, 401(k), 403(b) and Keogh Plans, but not IRAs or SEP IRAs) that owned
Opportunity Fund shares on March 1, 1993 for any single plan participant will be
eligible to direct the purchase of Opportunity Fund shares by their plan account
for so long as the plan continues to own some shares of the Opportunity Fund
for any single plan participant. In the event a shareholder redeems all of his
or her shares of the Opportunity Fund, or all participants in a self-directed
qualified benefit plan described above redeem their shares of the Opportunity
Fund, such shareholder and the participants in such plan will no longer be
eligible to purchase shares of the Opportunity Fund. The Opportunity Fund does
not offer Class B shares to new or existing investors.
Shareholders of other Funds are not permitted to exchange any of their shares
for Opportunity Fund shares unless the shareholders are independently eligible
to purchase Opportunity Fund shares because they already owned such shares of
the Opportunity Fund on December 31, 1992 (March 1, 1993, in the case of the
self-directed qualified benefit plans described above).
The Trust reserves the right at any time to modify these restrictions, including
the suspension of all sales of Opportunity Fund shares or the lifting of
restrictions on different classes of investors and/or transactions.]
GENERAL
Changes in registration or account privileges may be made in writing to the
Transfer Agent. Signature guarantees may be required. See "Signature
Guarantee" below.
All correspondence must include the account number and must be sent to:
PIMCO Funds Distribution Company
P.O. Box 5866
Denver, CO 80217-5866
SIGNATURE GUARANTEE When a signature guarantee is called for, the shareholder
should have "Signature Guaranteed" stamped under his signature and guaranteed by
any of the following entities: U.S. banks, foreign banks having a U.S.
correspondent bank, credit unions, savings associations, U.S. registered dealers
and brokers, municipal securities dealers and brokers, government securities
dealers and brokers, national securities exchanges, registered securities
associations and clearing agencies (each an "Eligible Guarantor Institution").
The Distributor reserves the right to reject any signature guarantee pursuant to
its written signature guarantee standards or procedures, which may be revised in
the future to permit it to reject signature guarantees from Eligible Guarantor
Institutions that do not, based on credit guidelines, satisfy such written
standards or procedures. The Trust may change the signature guarantee
requirements from time to time upon notice to shareholders, which may be given
by means of a new or supplemented Prospectus.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Trust offers investors three classes of shares in this Prospectus (Class A,
Class B and Class C) which bear sales charges in different forms and amounts and
which bear different levels of expenses. Through a separate prospectus, the
Funds offer two additional classes of shares, Institutional Class shares and
Administrative Class shares to pension and profit sharing plans, employee
benefit trusts, endowments, foundations, corporations and other institutions.
Institutional Class shares and Administrative Class shares are sold without
sales charges and have different expenses than Class A, B and C shares. As a
result of lower sales charges and/or operating expenses, Administrative Class
and Institutional Class shares are generally expected to achieve higher
investment return than Class A, B or C shares. To obtain more information about
Institutional Class or Administrative Class shares, please call the Distributor
at 800-426-0107.
The alternative purchase arrangements offered in this prospectus are designed to
enable a retail investor to choose the method of purchasing Fund shares that is
most beneficial to the investor based on all factors to be considered, which
include: the amount and intended length of the investment, the particular Fund
and whether the investor intends to exchange shares for shares of other Funds.
Generally, when making an investment decision, investors
<PAGE>
40 PIMCO Funds: Multi-Manager series
- --------------------------------------------------------------------------------
should at least consider the anticipated life of an intended investment in the
Funds, the accumulated distribution and servicing fees plus contingent deferred
sales charges on Class B or Class C shares, the initial sales charge plus
accumulated servicing fees on Class A shares (plus a contingent deferred sales
charge in certain circumstances), the possibility that the anticipated higher
return on Class A shares due to the lower ongoing charges will offset the
initial sales charge paid on such shares, the automatic conversion of Class B
shares to Class A shares and the difference in the contingent deferred sales
charges applicable to Class A, B and C shares.
CLASS A: The initial sales charge alternative (Class A) might be preferred by
investors purchasing shares of sufficient aggregate value to qualify for
reductions in the initial sales charge applicable to such shares. Similar
reductions are not available on the contingent deferred sales charge alternative
(Class B) or the asset based sales charge alternative (Class C). Class A shares
are subject to a servicing fee but are not subject to a distribution fee and,
accordingly, such shares are expected to pay correspondingly higher dividends on
a per share basis. However, because initial sales charges are deducted at the
time of purchase, not all of the purchase payment for Class A shares is invested
initially. Class B and Class C shares might be preferable to investors who wish
to have all purchase payments invested initially, although remaining subject to
higher distribution and servicing fees and, for certain periods, being subject
to a contingent deferred sales charge. An investor who qualifies for an
elimination of the Class A initial sales charge should also consider whether he
or she anticipates redeeming shares in a time period which will subject such
shares to a contingent deferred sales charge as described below. See "Initial
Sales Charge Alternative -- Class A Shares -- Class A Deferred Sales Charge"
below.
CLASS B: Class B shares might be preferred by investors who intend to invest in
the Funds for longer periods and who do not intend to purchase shares of
sufficient aggregate value to qualify for sales charge reductions applicable to
Class A shares. Both Class B and Class C shares can be purchased at net asset
value without an initial sales charge. However, unlike Class C shares, Class B
shares convert into Class A shares after the shares have been held for seven
years. After the conversion takes place, the shares will no longer be subject
to a contingent deferred sales charge, and will be subject to the servicing fees
charged for Class A shares which are lower than the distribution and servicing
fees charged on either Class B or Class C shares. See "Deferred Sales Charge
Alternative -- Class B Shares" below.
CLASS C: Class C shares might be preferred by investors who intend to purchase
shares which are not of sufficient aggregate value to qualify for Class A sales
charges of 1% or less and who wish to have all purchase payments invested
initially. Class C shares are preferable to Class B shares for investors who
intend to maintain their investment for intermediate periods and therefore may
also be preferable for investors who are unsure of the intended length of their
investment. Unlike Class B shares, Class C shares are not subject to a
contingent deferred sales charge after they have been held for one year and are
subject to only a 1% contingent deferred sales charge during the first year.
However, because Class C shares do not convert into Class A shares, Class B
shares are preferable to Class C shares for investors who intend to maintain
their investment in the Funds for long periods. See "Asset Based Sales Charge
Alternative -- Class C Shares" below.
In determining which class of shares to purchase, an investor should always
consider whether any waiver or reduction of a sales charge or a contingent
deferred sales charge is available. See generally "Initial Sales Charge
Alternative -- Class A Shares" and "Waiver of Contingent Deferred Sales Charges"
below.
There is no size limit on purchases of Class A shares. The maximum single
purchase of Class B shares accepted is $249,999. The maximum single purchase of
Class C shares accepted is $999,999. The Funds may refuse any order to purchase
shares.
For a description of the Distribution and Servicing Plans and distribution and
servicing fees payable thereunder with respect to Class A, Class B and Class C
shares, see "Distributor and Distribution and Servicing Plans" below.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES The contingent deferred sales
charge applicable to Class A and C shares is currently waived for (i) any
partial or complete redemption in connection with a distribution without penalty
under Section 72(t) of the Internal Revenue Code of 1986, as amended (the
"Code") from a retirement plan, including a 403(b)(7) plan or an IRA (a) upon
attaining age 59 1/2, (b) as part of a series of substantially
<PAGE>
PIMCO Funds: Multi-Manager series 41
- --------------------------------------------------------------------------------
equal periodic payments, or (c) in the case of an employer sponsored retirement
plan, upon separation from service and attaining age 55; (ii) any partial or
complete redemption in connection with a qualifying loan or hardship withdrawal
from an employer sponsored retirement plan; (iii) any complete redemption in
connection with a distribution from a qualified employer retirement plan in
connection with termination of employment or termination of the employer's plan
and the transfer to another employer's plan or to an IRA; (iv) any partial or
complete redemption following death or disability (as defined in the Code) of a
shareholder (including one who owns the shares as joint tenant with his or her
spouse) from an account in which the deceased or disabled is named, provided the
redemption is requested within one year of the death or initial determination of
disability; (v) any redemption resulting from a return of an excess contribution
to a qualified employer retirement plan or an IRA; or (vi) certain periodic
redemptions under an Automatic Withdrawal Plan from an account meeting certain
minimum balance requirements, in amounts meeting certain maximums established
from time to time by the Distributor; (vii) redemptions by Trustees, officers
and employees of the Trust and by directors, officers and employees of the
Distributor and the Adviser; (viii) redemptions effected pursuant to a Fund's
right to involuntarily redeem a shareholder's account if the aggregate net asset
value of shares held in such shareholder's account is less than a minimum
account size specified in such Fund's prospectus; (ix) involuntary redemptions
caused by operation of law; (x) redemption of shares of any Fund that is
combined with another Fund, investment company, or personal holding company by
virtue of a merger, acquisition or other similar reorganization transaction;
(xi) redemptions by a shareholder who is a participant making periodic purchases
of not less than $50 through certain employer sponsored savings plans that are
clients of a broker-dealer with which the Distributor has an agreement with
respect to such purchases; or (xii) redemptions effected by trustees or other
fiduciaries who have purchased shares for employer sponsored plans, the
administrator for which has an agreement with the Distributor with respect to
such purchases.
The contingent deferred sales charge applicable to Class B shares is currently
waived for any partial or complete redemption (a) in connection with a
distribution without penalty under Section 72(t) of the Code from a 403(b)(7)
plan or an IRA upon attaining age 59 1/2 and (b) following death or disability
(as defined in the Code) of a shareholder (including one who owns the shares as
joint tenant with his or her spouse) from an account in which the deceased or
disabled is named, provided the redemption is requested within one year of the
death or initial determination of disability.
The Distributor may require documentation prior to waiver of the contingent
deferred sales charge for any class including distribution letters,
certification by plan administrators, applicable tax forms, death certificates,
physicians certificates, etc.
INITIAL SALES CHARGE ALTERNATIVE - CLASS A SHARES
Class A shares are sold at a public offering price equal to their net asset
value per share plus a sales charge, as set forth below. As indicated below
under "Class A Deferred Sales Charge," certain investors that purchase
$1,000,000 or more of any Fund's Class A shares (and thus pay no initial sales
charge) may be subject to a 1% contingent deferred sales charge if they redeem
such shares during the first 18 months after their purchase.
ALL FUNDS EXCEPT TAX EXEMPT FUND
<TABLE>
<CAPTION>
DISCOUNT OR
COMMISSION
SALES SALES TO DEALERS
CHARGE AS CHARGE AS AS % OF
% OF NET % OF PUBLIC PUBLIC
AMOUNT OF AMOUNT OFFERING OFFERING
PURCHASE INVESTED PRICE PRICE
--------- --------- ----------- -----------
<S> <C> <C> <C>
$0 - $49,999 5.82% 5.50% 4.75%
$50,000 - $99,999 4.71% 4.50% 3.75%
$100,000 - $249,999 3.90% 3.75% 3.00%
$250,000 - $499,999 2.56% 2.50% 2.00%
$500,000 - $999,999 1.78% 1.75% 1.50%
$1,000,000 + 0.00%/1/ 0.00%/1/ 0.75%
</TABLE>
<PAGE>
42 PIMCO Funds: Multi-Manager series
- --------------------------------------------------------------------------------
TAX EXEMPT FUND
<TABLE>
<CAPTION>
DISCOUNT OR
COMMISSION
SALES SALES TO DEALERS
CHARGE AS CHARGE AS AS % OF
% OF NET % OF PUBLIC PUBLIC
AMOUNT OF AMOUNT OFFERING OFFERING
PURCHASE INVESTED PRICE PRICE
--------- --------- ----------- -----------
<S> <C> <C> <C>
$0 - $49,999 4.99% 4.75% 4.00%
$50,000 - $99,999 4.44% 4.25% 3.50%
$100,000 - $249,999 3.90% 3.75% 3.00%
$250,000 - $499,999 2.56% 2.50% 2.00%
$500,000 - $999,999 1.78% 1.75% 1.50%
$1,000,000 + 0.00%/1/ 0.00%/1/ 0.50%
</TABLE>
/1/ As shown, investors that purchase more than $1,000,000 of any Fund's Class
A shares will not pay any initial sales charge on such purchase. However,
purchasers of $1,000,000 or more of Class A shares (other than those
purchasers described below under "Sales at Net Asset Value" where no
commission is paid) will be subject to a contingent deferred sales charge
of 1% if such shares are redeemed during the first 18 months after such
shares are purchased unless such purchaser is eligible for a waiver of the
contingent deferred sales charge as described under "Waiver of Contingent
Deferred Sales Charge" above. See "Class A Deferred Sales Charge" below.
The Distributor will pay a commission to dealers who sell amounts of
$1,000,000 or more of Class A shares (or who sell Class A shares at net
asset value to certain employer-sponsored plans as outlined in "Sales at
Net Asset Value" below) of each Fund except the Tax Exempt Fund, according
to the following schedule: 0.75% of the first $2,000,000, 0.50% of amounts
from $2,000,001 to $5,000,000 and 0.25% of amounts over $5,000,000; and for
Class A shares of the Tax Exempt Fund, according to the following schedule:
0.50% of the first $2,000,000 and 0.25% of amounts over $2,000,000.
Each Fund receives the entire net asset value of its Class A shares purchased by
investors. The Distributor receives the sales charge shown above less any
applicable discount or commission "reallowed" to participating brokers in the
amounts indicated in the table above. The Distributor may, however, elect to
reallow the entire sales charge to participating brokers for all sales with
respect to which orders are placed with the Distributor for any particular Fund
during a particular period. A participating broker who receives a reallowance
of 90% or more of the sales charge may be deemed to be an "underwriter" under
the Securities Act of 1933. During such periods as may from time to time be
designated by the Distributor, the Distributor will pay an additional amount of
up to 0.50% of the purchase price on sales of Class A shares of all or selected
Funds purchased to each participating broker which obtains purchase orders in
amounts exceeding thresholds established from time to time by the Distributor.
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are issued at net asset value and are not subject to
any sales charges.
Under the circumstances described below, investors may be entitled to pay
reduced sales charges for Class A shares.
COMBINED PURCHASE PRIVILEGE Investors may qualify for a reduced sales charge by
combining purchases of the Class A shares of one or more Funds into a "single
purchase," if the resulting purchase totals at least $50,000. The term single
purchase refers to: (i) a single purchase by an individual, or concurrent
purchases, which in the aggregate are at least equal to the prescribed amounts,
by an individual, his spouse and their children under the age of 21 years
purchasing Class A shares of the Funds for his, her or their own account; (ii) a
single purchase by a trustee or other fiduciary purchasing shares for a single
trust, estate or fiduciary account although more than one beneficiary is
involved; or (iii) a single purchase for the employee benefit plans of a single
employer. For further information, consult the Statement of Additional
Information or call the Distributor at 800-426-0107 or your broker.
<PAGE>
PIMCO Funds: Multi-Manager series 43
- --------------------------------------------------------------------------------
CUMULATIVE QUALITY DISCOUNT (RIGHT OF ACCUMULATION) A purchase of additional
Class A shares of any Fund may qualify for a Cumulative Quantity Discount at the
rate applicable to the discount bracket obtained by adding:
(i) the investor's current purchase;
(ii) the value (at the close of business on the day of the current
purchase) of all Class A shares of any Fund held by the investor
computed at the maximum offering price; and
(iii) the value of all shares described in paragraph (ii) owned by another
shareholder eligible to be combined with the investor's purchase
into a "single purchase" as defined above under "Combined Purchase
Privilege."
For example, if you owned Class A shares of the Tax Exempt Fund worth $25,000 at
the current maximum offering price and wished to purchase Class A shares of the
Growth Fund worth an additional $30,000, the sales charge for the $30,000
purchase would be at the 4.50% rate applicable to a single $55,000 purchase of
shares of the Growth Fund, rather than the 5.50% rate.
An investor or participating broker must notify the Distributor whenever a
quantity discount or reduced sales charge is applicable to a purchase and must
provide the Distributor with sufficient information at the time of purchase to
verify that each purchase qualifies for the privilege or discount. Upon such
notification, the investor will receive the lowest applicable sales charge. The
quantity discounts described above may be modified or terminated at any time.
LETTER OF INTENT An investor may also obtain a reduced sales charge by means of
a written Letter of Intent, which expresses an intention to invest not less than
$50,000 within a period of 13 months in Class A shares of any Fund(s). Each
purchase of shares under a Letter of Intent will be made at the public offering
price or prices applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Letter. At the investor's option, a
Letter of Intent may include purchases of Class A shares of any Fund made not
more than 90 days prior to the date the Letter of Intent is signed; however, the
13-month period during which the Letter is in effect will begin on the date of
the earliest purchase to be included and the sales charge on any purchases prior
to the Letter will not be adjusted.
Investors qualifying for the Combined Purchase Privilege described above may
purchase shares of the Funds under a single Letter of Intent. For example, if
at the time you sign a Letter of Intent to invest at least $100,000 in Class A
shares of any Fund, you and your spouse each purchase Class A shares of the
Growth Fund worth $30,000 (for a total of $60,000), it will only be necessary to
invest a total of $40,000 during the following 13 months in Class A shares of
any of the Funds to qualify for the 3.75% sales charge on the total amount being
invested (the sales charge applicable to an investment of $100,000 in any of the
Funds).
A Letter of Intent is not a binding obligation to purchase the full amount
indicated. The minimum initial investment under a Letter of Intent is 5% of such
amount. Shares purchased with the first 5% of such amount will be held in
escrow (while remaining registered in your name) to secure payment of the higher
sales charge applicable to the shares actually purchased in the event the full
intended amount is not purchased. If the full amount indicated is not
purchased, a sufficient amount of such escrowed shares will be involuntarily
redeemed to pay the additional sales charge applicable to the amount actually
purchased, if necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released.
If you wish to enter into a Letter of Intent in conjunction with your initial
investment in Class A shares of a Fund, you should complete the appropriate
portion of the Account Application included with this Prospectus. If you are a
current Class A shareholder desiring to do so you can obtain a form of Letter of
Intent by contacting the Distributor at 800-426-0107 or any broker participating
in this program.
REINSTATEMENT PRIVILEGE A Class A shareholder who has caused any or all of his
shares to be redeemed may reinvest all or any portion of the redemption proceeds
in Class A shares of any Fund at net asset value without any sales charge,
provided that such reinvestment is made within 120 calendar days after the
redemption or repurchase date. Shares are sold to a reinvesting shareholder at
the net asset value next determined as described above. A reinstatement
pursuant to this privilege will not cancel the redemption transaction and,
consequently, any gain or
<PAGE>
44 PIMCO Funds: Multi-Manager series
- --------------------------------------------------------------------------------
loss so realized may be recognized for federal tax purposes except that no loss
may be recognized to the extent that the proceeds are reinvested in shares of
the same Fund within 30 days. The reinstatement privilege may be utilized by a
shareholder only once, irrespective of the number of shares redeemed, except
that the privilege may be utilized without limit in connection with transactions
whose sole purpose is to transfer a shareholder's interest in a Fund to his
Individual Retirement Account or other qualified retirement plan account. An
investor may exercise the reinstatement privilege by written request sent to the
Distributor or to the investor's broker.
SALES AT NET ASSET VALUE Each Fund may sell its Class A shares at net asset
value without a sales charge to a) current or retired officers, trustees,
directors or employees of the Trust, the Adviser or the Distributor, to a spouse
or child of such person or to any trust, profit sharing or pension plan for the
benefit of any such person, b) current or retired trustees of Cash Accumulation
Trust, another registered investment company for which the Adviser acts as
investment adviser, c) current registered representatives and other full-time
employees of participating brokers or such persons' spouses, d) trustees or
other fiduciaries purchasing shares for certain employer sponsored plans that
have at least 100 eligible participants or at least $1 million in total plan
assets, e) trustees or other fiduciaries purchasing shares for certain employer-
sponsored plans, the trustee, fiduciary or administrator for which has an
agreement with the Distributor with respect to such purchases, f) participants
investing through accounts known as "wrap accounts" established with brokers or
dealers approved by the Distributor where such brokers or dealers are paid a
single, inclusive fee for brokerage and investment management services, g)
broker-dealers or registered investment advisers affiliated with such broker-
dealers with which the Distributor has an agreement for the use of PIMCO Funds:
Multi-Manager Series in particular investment products for which a fee is
charged, and h) trust accounts for which trust companies affiliated with the
Trust or the Adviser serve as trustee. As described above, the Distributor will
not pay any initial commission to dealers upon the sale of Class A shares to the
purchasers described in this paragraph except for sales to purchasers described
under d) or e) in this paragraph.
CLASS A DEFERRED SALES CHARGE For all Funds, investors who purchase $1,000,000
or more of Class A shares (and, thus, purchase such shares without any initial
sales charge) may be subject to a 1% contingent deferred sales charge (the
"Class A CDSC") if such shares are redeemed within 18 months of their purchase.
The Class A CDSC does not apply to investors purchasing $1,000,000 or more of
any Fund's Class A shares if such investors are otherwise eligible to purchase
Class A shares without any sales charge because they are described under "Sales
at Net Asset Value" above.
For purchases subject to the Class A CDSC, a 1% CDSC will apply for any
redemption of such Class A shares that occurs within 18 months of their
purchase. No CDSC will be imposed if the shares redeemed have been acquired
through the reinvestment of dividends or capital gains distributions or if the
amount redeemed is derived from increases in the value of the account above the
amount of purchase payments subject to the CDSC. In determining whether a CDSC
is payable, it is assumed that Class A shares acquired through the reinvestment
of dividends and distributions are redeemed first, and thereafter that Class A
shares that have been held by an investor for the longest period of time are
redeemed first.
The Class A CDSC is currently waived in connection with certain redemptions as
described above under "Alternative Purchase Arrangements -- Waiver of Contingent
Deferred Sales Charges."
For more information about the Class A CDSC, call the Distributor at 800-426-
0107.
PARTICIPATING BROKERS Investment dealers and other financial intermediaries
provide varying arrangements for their clients to purchase and redeem Fund
shares. Some may establish higher minimum investment requirements than set
forth above. Firms may arrange with their clients for other investment or
administrative services and may independently establish and charge additional
amounts to their clients for such services, which charges would reduce clients'
return. Firms also may hold Fund shares in nominee or street name as agent for
and on behalf of their customers. In such instances, the Trust's transfer agent
will have no information with respect to or control over accounts of specific
shareholders. Such shareholders may obtain access to their accounts and
information about their accounts only from their broker. In addition, certain
privileges with respect to the purchase and redemption of shares or the
reinvestment of dividends may not be available through such firms. Some firms
may participate in a program allowing them access to their clients' accounts for
servicing including, without limitation,
<PAGE>
PIMCO Funds: Multi-Manager series 45
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transfers of registration and dividend payee changes; and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. This Prospectus should be read in connection with such firms'
material regarding their fees and services.
DEFERRED SALES CHARGE ALTERNATIVE - CLASS B SHARES
Class B shares are sold at their current net asset value without any initial
sales charge. The full amount of an investor's purchase payment will be
invested in shares of the Fund(s) selected. A contingent deferred sales charge
("CDSC") will be imposed on Class B shares if an investor redeems an amount
which causes the current value of the investor's account for a Fund to fall
below the total dollar amount of purchase payments subject to the CDSC, except
that no CDSC is imposed if the shares redeemed have been acquired through the
reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments subject to the CDSC. THE OPPORTUNITY FUND DOES NOT OFFER
CLASS B SHARES.
Class B shares are not available for purchase by employer sponsored retirement
plans.
Whether a CDSC is imposed and the amount of the CDSC will depend on the number
of years since the investor made a purchase payment from which an amount is
being redeemed. Purchases are subject to the CDSC according to the following
schedule:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
-------------------------- ---------------------
<S> <C>
First ................... 5
Second ................... 4
Third ................... 3
Fourth .................. 3
Fifth ................... 2
Sixth ................... 1
Seventh ................. 0
Eighth .................. *
</TABLE>
* Class B shares convert into Class A shares as described
below.
In determining whether a CDSC is payable, it is assumed that the purchase
payment from which a redemption is made is the earliest purchase payment from
which a redemption or exchange has not already been fully effected.
In determining whether an amount is available for redemption without incurring a
CDSC, the purchase payments made for all Class B shares in the shareholder's
account with the particular Fund are aggregated, and the current value of all
such shares is aggregated. Any CDSC imposed on a redemption of Class B shares is
paid to the Distributor.
Class B shares are subject to higher distribution fees than Class A shares for a
fixed period after their purchase, after which they automatically convert to
Class A shares and are no longer subject to such higher distribution fees. Class
B shares of each Fund automatically convert into Class A shares after they have
been held for seven years.
For sales of Class B shares made and services rendered to Class B shareholders,
the Distributor intends to make payments to participating brokers, at the time a
shareholder purchases Class B shares, of 4% of the purchase amount for each of
the Funds. During such periods as may from time to time be designated by the
Distributor, the Distributor will pay selected participating brokers an
additional amount of up to 0.50% of the purchase price on sales of Class B
shares of all or selected Funds purchased to each participating broker which
obtains purchase orders in amounts exceeding thresholds established from time to
time by the Distributor.
The Class B CDSC is currently waived in connection with certain redemptions as
described above under "Alternative Purchase Arrangements -- Waiver of Contingent
Deferred Sales Charges."
For more information about the Class B CDSC, call the Distributor at 800-426-
0107.
<PAGE>
46 PIMCO Funds: Multi-Manager series
- --------------------------------------------------------------------------------
ASSET BASED SALES CHARGE ALTERNATIVE - CLASS C SHARES
Class C shares are sold at their current net asset value without any initial
sales charge. A CDSC is imposed on Class C shares if an investor redeems an
amount which causes the current value of the investor's account for a Fund to
fall below the total dollar amount of purchase payments subject to the CDSC,
except that no CDSC is imposed if the shares redeemed have been acquired through
the reinvestment of dividends or capital gains distributions or if the amount
redeemed is derived from increases in the value of the account above the amount
of purchase payments subject to the CDSC. All of an investor's purchase
payments are invested in shares of the Fund(s) selected.
Whether a CDSC is imposed and the amount of the CDSC will depend on the number
of years since the investor made a purchase payment from which an amount is
being redeemed. Purchases are subject to the CDSC according to the following
schedules:
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
------------------------ ---------------------
First 1
Thereafter 0
In determining whether a CDSC is payable, it is assumed that the purchase
payment from which the redemption is made is the earliest purchase payment (from
which a redemption or exchange has not already been effected).
The following example will illustrate the operation of the CDSC:
Assume that an individual opens an account and makes a purchase
payment of $10,000 for Class C shares of a Fund and that six months
later the value of the investor's account for that Fund has grown
through investment performance and reinvestment of distributions to
$11,000. The investor then may redeem up to $1,000 from that Fund
($11,000 minus $10,000) without incurring a CDSC. If the investor
should redeem $3,000, a CDSC would be imposed on $2,000 of the
redemption (the amount by which the investor's account for the Fund
was reduced below the amount of the purchase payment). At the rate of
1%, the CDSC would be $20.
In determining whether an amount is available for redemption without incurring a
CDSC, the purchase payments made for all Class C shares in the shareholder's
account with the particular Fund are aggregated, and the current value of all
such shares is aggregated. Any CDSC imposed on a redemption of Class C shares is
paid to the Distributor.
Unlike Class B shares, Class C shares do not automatically convert to any other
class of shares of the Funds.
Except as described below, for sales of Class C shares made and services
rendered to Class C shareholders, the Distributor expects to make payments to
participating brokers, at the time the shareholder purchases Class C shares, of
1.00% (representing 0.75% distribution fees and 0.25% servicing fees) of the
purchase amount for all Funds. For sales of Class C shares made to participants
making periodic purchases of not less than $50 through certain employer
sponsored savings plans which are clients of a broker-dealer with which the
Distributor has an agreement with respect to such purchases, no payments are
made at the time of purchase. During such periods as may from time to time be
designated by the Distributor, the Distributor will pay an additional amount of
up to 0.50% of the purchase price on sales of Class C shares of all or selected
Funds purchased to each participating broker which obtains purchase orders in
amounts exceeding thresholds established from time to time by the Distributor.
The Class C CDSC is currently waived in connection with certain redemptions as
described above under "Alternative Purchase Arrangements -- Waiver of Contingent
Deferred Sales Charges."
<PAGE>
PIMCO Funds: Multi-Manager series 47
- --------------------------------------------------------------------------------
For more information about the Class C CDSC, contact the Distributor at 800-426-
0107.
EXCHANGE PRIVILEGE
[SPECIFIC INFORMATION REGARDING EXCHANGES OF CLASS A AND C SHARES OF THE
OPPORTUNITY FUND TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT UNDER RULE
485(B).] A shareholder may exchange Class A, Class B and Class C shares of any
Fund for the same Class of shares of any other Fund in an account with identical
registration on the basis of their respective net asset values. [For information
on restrictions applicable to exchanges of shares for shares of the Opportunity
Fund, see "How To Buy Shares -- Restrictions on Sales of and Exchanges for
Shares of the Opportunity Fund" above.] Class A, B and C shares of each Fund
may also be exchanged for shares of the same class of a series of PIMCO Funds:
Pacific Investment Management Series, an affiliated mutual fund family comprised
primarily of fixed income portfolios managed by Pacific Investment Management.
There are currently no exchange fees or charges. Except with respect to tax-
qualified programs and exchanges effected through the PIMCO Auto Exchange plan,
exchanges are subject to the $250 minimum initial purchase requirement for each
Fund. An exchange will constitute a taxable sale for federal income tax
purposes.
Investors who maintain their account with the Distributor may exchange shares by
a written exchange request sent to PIMCO Funds Distribution Company, P.O. Box
5866, Denver, CO 80217-5866 or, unless the investor has specifically declined
telephone exchange privileges on the Account Application or elected in writing
not to utilize telephone exchanges, by a telephone request to the Transfer Agent
at 800-852-8457. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and may be liable for any
losses due to unauthorized or fraudulent instructions if it fails to employ such
procedures. The Trust will require a form of personal identification prior to
acting on a caller's telephone instructions, will provide written confirmations
of such transactions and will record telephone instructions. Exchange forms are
available from the Distributor at 800-426-0107 and may be used if there will be
no change in the registered name or address of the shareholder. Changes in
registration information or account privileges may be made in writing to the
Transfer Agent, Shareholder Services, Inc., P.O. Box 5866, Denver, Colorado
80217-5866, or by use of forms which are available from the Distributor. A
signature guarantee is required. See "Signature Guarantee" under "General."
Telephone exchanges may be made between 9:00 a.m. Eastern time and the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on any day the Exchange is open (generally weekdays other than normal holidays).
The Trust reserves the right to refuse exchange purchases if, in the judgment of
the Adviser, the purchase would adversely affect the Fund and its shareholders.
In particular, a pattern of exchanges characteristic of "market-timing"
strategies may be deemed by the Adviser to be detrimental to the Fund. Although
the Trust has no current intention of terminating or modifying the exchange
privilege, it reserves the right to do so at any time. Except as otherwise
permitted by SEC regulations, the Trust will give 60 days' advance notice to
shareholders of any termination or material modification of the exchange
privilege. For further information about exchange privileges, contact your
participating broker or call the Transfer Agent at 800-426-0107.
With respect to Class B and Class C shares, or Class A shares subject to a CDSC,
if less than all of an investment is exchanged out of a Fund, any portion of the
investment attributable to capital appreciation and/or reinvested dividends or
capital gains distributions will be exchanged first, and thereafter any portions
exchanged will be from the earliest investment made in the Fund from which the
exchange was made. Shareholders should take into account the effect of any
exchange on the applicability of any CDSC that may be imposed upon any
subsequent redemption.
AUTO EXCHANGE Investors may also select the PIMCO Auto Exchange plan which
establishes automatic periodic exchanges. For further information on automatic
exchanges see "PIMCO Auto Exchange" under "How to Buy Shares."
HOW TO REDEEM
Class A, Class B or Class C shares may be redeemed through a participating
broker, by telephone, by submitting a written redemption request directly to the
Transfer Agent (for non-broker accounts) or through an Automatic Withdrawal Plan
or PIMCO Fund Link. [SPECIFIC INFORMATION REGARDING REDEMPTIONS OF CLASS A AND C
SHARES OF THE OPPORTUNITY FUND TO BE PROVIDED IN A POST-EFFECTIVE AMENDMENT
UNDER RULE 485(B).] [In the event a shareholder redeems all of his or her shares
of the Opportunity Fund after December 31, 1992, or all participants
<PAGE>
48 PIMCO Funds: Multi-Manager series
- --------------------------------------------------------------------------------
in certain self-directed qualified benefit plans redeem their shares of the
Opportunity Fund after March 31, 1993, such shareholder and the participants in
such plans will no longer be eligible to purchase shares of the Opportunity
Fund. See "How to Buy Shares --Restrictions on Sales of and Exchanges for
Shares of the Opportunity Fund."]
A CDSC may apply to a redemption of Class A, Class B or Class C shares. See
"Alternative Purchase Arrangements" above. Shares are redeemed at their net
asset value next determined after a proper redemption request has been received,
less any applicable CDSC. There is no charge by the Distributor (other than an
applicable CDSC) with respect to a redemption; however, a participating broker
who processes a redemption for an investor may charge customary commissions for
its services. Dealers and other financial services firms are obligated to
transmit orders promptly. Requests for redemption received by dealers or other
firms prior to the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on a regular business day and received by the
Distributor prior to the close of the Distributor's business day will be
confirmed at the net asset value effective as of the closing of the Exchange on
that day, less any applicable CDSC.
DIRECT REDEMPTION A shareholder's original Account Application permits the
shareholder to redeem by written request and by telephone (unless the
shareholder specifically elects not to utilize telephone redemptions) and to
elect one or more of the additional redemption procedures described below. A
shareholder may change the instructions indicated on his original Account
Application, or may request additional redemption options, only by transmitting
a written direction to the Transfer Agent. Requests to institute or change any
of the additional redemption procedures will require a signature guarantee.
Redemption proceeds will normally be mailed to the redeeming shareholder within
seven days or, in the case of wire transfer or Fund Link redemptions, sent to
the designated bank account within one business day. Fund Link redemptions may
be received by the bank on the second or third business day. In cases where
shares have recently been purchased by personal check, redemption proceeds may
be withheld until the check has been collected, which may take up to 15 days.
To avoid such withholding, investors should purchase shares by certified or bank
check or by wire transfer.
WRITTEN REQUESTS (Does not apply to shares held in broker "street name"
accounts.) To redeem shares in writing (whether or not represented by
certificates), a shareholder must send the following items to the Fund's
Transfer Agent, Shareholder Services, Inc., P.O. Box 5866, Denver, Colorado
80217-5866: (1) a written request for redemption signed by all registered
owners exactly as the account is registered on the Transfer Agent's records,
including fiduciary titles, if any, and specifying the account number and the
dollar amount or number of shares to be redeemed; (2) for certain redemptions
described below, a guarantee of all signatures on the written request or on the
share certificate or accompanying stock power, if required, as described under
"Signature Guarantee"; (3) any share certificates issued for any of the shares
to be redeemed (see "Certificated Shares" below); and (4) any additional
documents which may be required by the Transfer Agent for redemption by
corporations, partnerships or other organizations, executors, administrators,
trustees, custodians or guardians, or if the redemption is requested by anyone
other than the shareholder(s) of record. Transfers of shares are subject to the
same requirements. A signature guarantee is not required for redemptions of
$50,000 or less, requested by and payable to all shareholders of record for the
account, to be sent to the address of record for that account. To avoid delay
in redemption or transfer, shareholders having any questions about these
requirements should contact the Transfer Agent in writing or call 1-800-426-0107
before submitting a request. REDEMPTION OR TRANSFER REQUESTS WILL NOT BE
HONORED UNTIL ALL REQUIRED DOCUMENTS IN THE PROPER FORM HAVE BEEN RECEIVED BY
THE TRANSFER AGENT.
If the proceeds of the redemption (i) exceed $50,000, (ii) are to be paid to a
person other than the record owner, (iii) are to be sent to an address other
than the address of the account on the Transfer Agent's records, or (iv) are to
be paid to a corporation, partnership, trust or fiduciary, the signature(s) on
the redemption request and on the certificates, if any, or stock power must be
guaranteed as described above, except that the Distributor may waive the
signature guarantee requirement for redemptions up to $2,500 by a trustee of a
qualified retirement plan, the administrator for which has an agreement with the
Distributor.
TELEPHONE REDEMPTIONS (Does not apply to shares held in broker "street name"
accounts.) The Trust accepts telephone requests for redemption of uncertificated
shares for amounts up to $50,000 within any 7 calendar day period, except for
investors who have specifically declined telephone redemption privileges on the
Account
<PAGE>
PIMCO Funds: Multi-Manager series 49
- --------------------------------------------------------------------------------
Application or elected in writing not to utilize telephone redemptions. The
proceeds of a telephone redemption will be sent to the record shareholder at his
record address. Changes in account information must be made in a written
authorization with a signature guarantee. See "Signature Guarantee" under
"General." Telephone redemptions will not be accepted during the 30-day period
following any change in an account's record address.
By completing an Account Application, an investor agrees that the Trust, the
Distributor and the Transfer Agent shall not be liable for any loss incurred by
the investor by reason of the Trust accepting unauthorized telephone redemption
requests for his account if the Trust reasonably believes the instructions to be
genuine. Thus, shareholders risk possible losses in the event of a telephone
redemption not authorized by them. The Trust may accept telephone redemption
instructions from any person identifying himself as the owner of an account or
the owner's broker where the owner has not declined in writing to utilize this
service. The Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and may be liable for any
losses due to unauthorized or fraudulent instructions if it fails to employ such
procedures. The Trust will require a form of personal identification prior to
acting on a caller's telephone instructions, will provide written confirmations
of such transactions and will record telephone instructions.
A shareholder making a telephone redemption should call the Transfer Agent at
800-852-8457 and state (i) the name of the shareholder as it appears on the
Transfer Agent's records, (ii) his account number with the Trust, (iii) the
amount to be withdrawn and (iv) the name of the person requesting the
redemption. Usually the proceeds are sent to the investor on the next Trust
business day after the redemption is effected, provided the redemption request
is received prior to the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) that day. If the redemption request is
received after the closing of the Exchange, the redemption is effected on the
following Trust business day at that day's net asset value and the proceeds are
usually sent to the investor on the second following Trust business day. The
Trust reserves the right to terminate or modify the telephone redemption service
at any time. During times of severe disruptions in the securities markets, the
volume of calls may make it difficult to redeem by telephone, in which case a
shareholder may wish to send a written request for redemption as described under
"Written Requests" above. Telephone communications may be recorded by the
Distributor or the Transfer Agent.
FUND LINK REDEMPTIONS (Does not apply to shares held in broker "street name"
accounts.) If a shareholder has established Fund Link, the shareholder may
redeem shares by telephone and have the redemption proceeds sent to a designated
account at a financial institution. Fund Link is normally established within 45
days of receipt of the Application by the Transfer Agent. To use Fund Link for
redemptions, call the Transfer Agent at 800-852-8457. Subject to the limitations
set forth above under "Telephone Redemptions," the Distributor, the Trust and
the Transfer Agent may rely on instructions by any registered owner believed to
be genuine and will not be responsible to any shareholder for any loss, damage
or expense arising out of such instructions. Requests received by the Transfer
Agent prior to the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on a business day will be processed at the net
asset value on that day and the proceeds (less any CDSC) will normally be sent
to the designated bank account on the following business day and received by the
bank on the second or third business day. If the redemption request is received
after the close of regular trading on the Exchange, the redemption is effected
on the following business day. Shares purchased by check may not be redeemed
through Fund Link until such shares have been owned (i.e., paid for) for at
least 15 days. Fund Link may not be used to redeem shares held in certificated
form. Changes in bank account information must be made by completing a new Fund
Link Application, signed by all owners of record of the account, with all
signatures guaranteed. See "Signature Guarantee" under "General." See "PIMCO
Fund Link" under "How to Buy Shares" for information on establishing the Fund
Link privilege. The Trust may terminate the Fund Link program at any time
without notice to shareholders.
EXPEDITED WIRE TRANSFER REDEMPTIONS (Does not apply to shares held in broker
"street name" accounts.) If a shareholder has given authorization for expedited
wire redemption, shares can be redeemed and the proceeds sent by federal wire
transfer to a single previously designated bank account. Requests received by
the Trust prior to the close of the Exchange will result in shares being
redeemed that day at the next determined net asset value (less any CDSC) and
normally the proceeds being sent to the designated bank account the following
business day. The bank must be a member of the Federal Reserve wire system.
Delivery of the proceeds of a wire redemption request may be delayed by the
Trust for up to 7 days if the Distributor deems it appropriate under then
current market conditions. Once authorization is on file, the Trust will honor
requests by any person identifying himself as the owner of an account or the
owner's broker by telephone at 800-852-8457 or by written instructions. The
Trust cannot be responsible for the efficiency of the Federal Reserve wire
system or the shareholder's bank. The
<PAGE>
50 PIMCO Funds: Multi-Manager series
- --------------------------------------------------------------------------------
Trust does not currently charge for wire transfers. The shareholder is
responsible for any charges imposed by the shareholder's bank. The minimum
amount that may be wired is $2,500. The Trust reserves the right to change this
minimum or to terminate the wire redemption privilege. Shares purchased by
check may not be redeemed by wire transfer until such shares have been owned
(i.e., paid for) for at least 15 days. Expedited wire transfer redemptions may
be authorized by completing a form available from the Distributor. Wire
redemptions may not be used to redeem shares in certificated form. To change
the name of the single bank account designated to receive wire redemption
proceeds, it is necessary to send a written request with signatures guaranteed
to PIMCO Funds Distribution Company, P.O. Box 5866, Denver, CO 80217-5866. See
"Signature Guarantee" under "General."
CERTIFICATED SHARES To redeem shares for which certificates have been issued,
the certificates must be mailed to or deposited with the Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "Signature
Guarantee." Further documentation may be requested from institutions or
fiduciary accounts, such as corporations, custodians (e.g., under the Uniform
Gifts to Minors Act), executors, administrators, trustees or guardians
("institutional account owners"). The redemption request and stock power must be
signed exactly as the account is registered, including indication of any special
capacity of the registered owner.
AUTOMATIC WITHDRAWAL PLAN An investor who owns or buys shares of a Fund having a
net asset value of $10,000 or more may open an Automatic Withdrawal Plan and
have a designated sum of money (not less than $100 per Fund) paid monthly (or
quarterly) to the investor or another person. Such a plan may be established by
completing the appropriate section of the PIMCO Account Application or you may
obtain an Automatic Withdrawal Plan Application from the Distributor or your
broker. If an Automatic Withdrawal Plan is set up after the account is
established providing for payment to a person other than the record shareholder
or to an address other than the address of record, a signature guarantee is
required. See "Signature Guarantee" under "General." Class A, B and C shares of
any Fund are deposited in a plan account and all distributions are reinvested in
additional shares of the particular class of the Fund at net asset value. Shares
in a plan account are then redeemed at net asset value (less any applicable
CDSC) to make each withdrawal payment. Any applicable CDSC may be waived for
certain redemptions under an Automatic Withdrawal Plan. See "Waiver of
Contingent Deferred Sales Charges" under "Alternative Purchase Agreements"
above.
Redemptions for the purpose of withdrawals are ordinarily made on the business
day preceding the day of payment at that day's closing net asset value and
checks are mailed on the day of payment selected by the shareholder. The
Transfer Agent may accelerate the redemption and check mailing date by one day
to avoid weekend delays. Payment will be made to any person the investor
designates; however, if the shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary, except in the case
of a profit-sharing or pension plan where payment will be made to the designee.
As withdrawal payments may include a return of principal, they cannot be
considered a guaranteed annuity or actual yield of income to the investor. The
redemption of shares in connection with an Automatic Withdrawal Plan may result
in a gain or loss for tax purposes. Continued withdrawals in excess of income
will reduce and possibly exhaust invested principal, especially in the event of
a market decline. The maintenance of an Automatic Withdrawal Plan concurrently
with purchases of additional shares of the Fund would be disadvantageous to the
investor because of the CDSC that may become payable on such withdrawals in the
case of Class A, Class B or Class C shares and because of the initial sales
charge in the case of Class A shares. For this reason, the minimum investment
accepted for a Fund while an Automatic Withdrawal Plan is in effect for that
Fund is $1,000, and an investor may not maintain a plan for the accumulation of
shares of the Fund (other than through reinvestment of distributions) and an
Automatic Withdrawal Plan at the same time. The Trust or the Distributor may
terminate or change the terms of the Automatic Withdrawal Plan at any time.
Because the Automatic Withdrawal Plan may involve invasion of capital, investors
should consider carefully with their own financial advisers whether the plan and
the specified amounts to be withdrawn are appropriate in their circumstances.
The Trust and the Distributor make no recommendations or representations in this
regard.
<PAGE>
PIMCO Funds: Multi-Manager series 51
- --------------------------------------------------------------------------------
DISTRIBUTOR AND DISTRIBUTION AND SERVICING PLANS
PIMCO Funds Distribution Company (the "Distributor"), an indirect wholly-owned
subsidiary of the Adviser, is the principal underwriter of the Trust's shares
and in that connection makes distribution and servicing payments to
participating brokers and servicing payments to certain banks and other
financial intermediaries in connection with the sale of Class B or Class C
shares and servicing payments to participating brokers, certain banks and other
financial intermediaries in connection with the sale of Class A shares. In the
case of Class A shares, these parties are compensated based on the amount of the
front-end sales charge reallowed by the Distributor, except in cases where Class
A shares are sold without a front-end sales charge. In the case of Class B
shares, participating brokers and other financial intermediaries are compensated
by an advance of a sales commission by the Distributor. In the case of Class C
shares, part or all of the first year's distribution and servicing fee is
generally paid at the time of sale. Pursuant to a Distribution Agreement with
the Trust with respect to each Fund's Class A, Class B and Class C shares, the
Distributor bears various other promotional and sales related expenses,
including the cost of printing and mailing prospectuses to persons other than
shareholders.
CLASS A SERVICING FEES: As compensation for services rendered and expenses borne
by the Distributor in connection with personal services rendered to Class A
shareholders of the Trust and the maintenance of Class A shareholder accounts,
the Trust pays the Distributor servicing fees up to the annual rate of .25%
(calculated as a percentage of each Fund's average daily net assets attributable
to Class A shares).
CLASS B AND CLASS C DISTRIBUTION AND SERVICING FEES: As compensation for
services rendered and expenses borne by the Distributor in connection with the
distribution of Class B and C shares of each Fund of the Trust and in connection
with personal services rendered to Class B and C shareholders of the Trust and
the maintenance of Class B and C shareholder accounts, the Trust pays the
Distributor distribution fees and servicing fees up to the annual rates set
forth below (calculated as a percentage of each Fund's average daily net assets
attributable to Class B and C shares, respectively):
<TABLE>
<CAPTION>
FUND SERVICING FEE DISTRIBUTION FEE
---- -------------- -----------------
<S> <C> <C>
All Funds 0.25% 0.75%
</TABLE>
The Class A servicing fees and Class B and C distribution and servicing fees
paid to the Distributor are made under Distribution and Servicing Plans adopted
pursuant to Rule 12b-l under the Investment Company Act of 1940 and are of the
type known as "compensation" plans. This means that, although the Trustees of
the Trust are expected to take into account the expenses of the Distributor and
its predecessors in their periodic review of the Distribution and Servicing
Plans, the fees are payable to compensate the Distributor for services rendered
even if the amount paid exceeds the Distributor's expenses.
The distribution fee applicable to Class B and C shares may be spent by the
Distributor on any activities or expenses primarily intended to result in the
sale of Class B or C shares, respectively, including compensation to, and
expenses (including overhead and telephone expenses) of, financial consultants
or other employees of the Distributor or of participating or introducing brokers
who engage in distribution of Class B or C shares, printing of prospectuses and
reports for other than existing Class B or C shareholders, advertising and
preparation, printing and distribution of sales literature. The servicing fee,
applicable to Class A, Class B and Class C shares of the Trust, may be spent by
the Distributor on personal services rendered to shareholders of the Trust and
the maintenance of shareholder accounts, including compensation to, and expenses
(including telephone and overhead expenses) of, financial consultants or other
employees of the Distributor or participating or introducing brokers, certain
banks and other financial intermediaries who aid in the processing of purchase
or redemption requests or the processing of dividend payments, who provide
information periodically to shareholders showing their positions in a Fund's
shares, who forward communications from the Trust to shareholders, who render
ongoing advice concerning the suitability of particular investment opportunities
offered by the Trust in light of the shareholders' needs, who respond to
inquiries from shareholders relating to such services, or who train personnel in
the provision of such services. Distribution and servicing fees may also be
spent on interest relating to unreimbursed distribution or servicing expenses
from prior years.
<PAGE>
52 PIMCO Funds: Multi-Manager series
- --------------------------------------------------------------------------------
Many of the Distributor's sales and servicing efforts involve the Trust as a
whole, so that fees paid by any class of shares of any Fund may indirectly
support sales and servicing efforts relating to the other Funds' shares of the
same class. In reporting its expenses to the Trustees, the Distributor itemizes
expenses that relate to the distribution and/or servicing of a single Fund's
shares, and allocates other expenses among the Funds based on their relative net
assets. Expenses allocated to each Fund are further allocated among its classes
of shares annually based on the relative sales of each class, except for any
expenses that relate only to the sale or servicing of a single class. The
Distributor may make payments to brokers (and with respect to servicing fees
only, to certain banks and other financial intermediaries) of up to the
following percentages annually of the average daily net assets attributable to
shares in the accounts of their customers or clients:
<TABLE>
<CAPTION>
ALL FUNDS/1/
SERVICING FEE DISTRIBUTION FEE
-------------- ----------------
<S> <C> <C>
Class A 0.25% N/A
Class B/2/ 0.25% None
Class C/3/ (purchased 0.25% None
before July 1, 1991)
Class C/3/ (purchased on 0.25% 0.65%
or after July 1, 1991)
</TABLE>
/1/ Applies, in part, to Class A, B and C shares of the Trust issued
to former shareholders of PIMCO Advisors Funds in connection with the
reorganizations/mergers of series of PIMCO Advisors Funds as/with
Funds of the Trust in a transaction which took place on January __,
1997.
/2/ Payable only with respect to shares outstanding for one
year or more.
/3/ Payable only with respect to shares outstanding for one year or
more except in the case of shares for which no payment is made to
the party at the time of sale.
The Distributor may from time to time pay additional cash bonuses or other
incentives to selected participating brokers in connection with the sale or
servicing of Class A, B and C shares of the Funds. On some occasions, such
bonuses or incentives may be conditioned upon the sale of a specified minimum
dollar amount of the shares of a Fund and/or all of the Funds together or a
particular class of shares, during a specific period of time. The Distributor
currently expects that such additional bonuses or incentives will not exceed
.50% of the amount of any sale.
If in any year the Distributor's expenses incurred in connection with the
distribution of Class B and C shares and, for Class A, B and C shares, in
connection with the servicing of shareholders and the maintenance of shareholder
accounts exceed the distribution and/or servicing fees paid by the Trust, the
Distributor would recover such excess only if the Distribution and Servicing
Plan with respect to such class of shares continues to be in effect in some
later year when the distribution and/or servicing fees exceed the Distributor's
expenses. The Trust is not obligated to repay any unreimbursed expenses that
may exist at such time, if any, as the relevant Distribution and Servicing Plan
terminates.
From time to time, expenses of principal underwriters incurred in connection
with the sale of Class B and Class C shares of the Funds and in connection with
the servicing of Class B and Class C shareholders of the Funds and the
maintenance of shareholder accounts may exceed the distribution and servicing
fees collected by the Distributor. Class B and C Distribution and Servicing
Plans were in effect prior to the date of this Prospectus for series of PIMCO
Advisors Funds which reorganized as the following Funds of the Trust on January
__, 1997. The remaining Funds did not offer Class B or C shares prior to the
date of this Prospectus. As of September 30, 1996, such expenses were
approximately $__________ in excess of payments under the Distribution and
Servicing Plan for such series of PIMCO Advisors Funds with respect to Class C
shares and $_________ in excess of payments under the Distribution and Servicing
Plan with respect to Class B shares of such series of PIMCO Advisors Funds. The
allocation of such excess among those Funds as of September 30, 1996 was as
follows:
<PAGE>
PIMCO Funds: Multi-Manager series 53
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXCESS EXPENSES
ClASS B CLASS C
------- -------
(As a Percentage (As a Percentage
($ in Thousands) of Net Assets) ($ in Thousands) of Net Assets)
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Renaissance Fund (formerly
PIMCO Advisors Equity Income
Fund)
Growth Fund (formerly PIMCO
Advisors Growth Fund)...........
Target Fund (formerly PIMCO
Advisors Target Fund)...........
Opportunity Fund (formerly
PIMCO Advisors Opportunity
Fund)...........................
Innovation Fund (formerly
PIMCO Advisors Growth
Fund)...........................
International Fund (formerly
PIMCO Advisors International
Fund)...........................
Precious Metals Fund (formerly
PIMCO Advisors Growth Fund).....
Tax Exempt Fund (formerly
PIMCO Advisors Tax Exempt
Fund)...........................
</TABLE>
HOW NET ASSET VALUE IS DETERMINED
The net asset values of Class A, B and C shares of each Fund of the Trust will
be determined once on each day on which the New York Stock Exchange (the
"Exchange") is open (a "Business Day"), as of the close of regular trading on
the Exchange. Portfolio securities for which market quotations are readily
available are valued at market value. Fixed income securities are valued on the
basis of valuations furnished by a pricing service, which are based on a variety
of factors, including market transactions for institutional-size trading units
of such securities. 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. Exchange-traded options, futures and
options on futures are valued at the settlement price as determined by the
appropriate clearing corporation. All other securities and assets are valued at
their fair value as determined in good faith by the Trustees or by persons
acting at their direction. Each Fund's liabilities are allocated among its
classes. The total of such liabilities allocated to a class plus that class'
distribution and/or servicing fees and any other expenses specially allocated to
that class are then deducted from the class' proportionate interest in the
Fund's assets, and the resulting amount for each class is divided by the number
of shares of that class outstanding to produce the "net asset value" per share.
Under certain circumstances, the per share net asset value of the Class B and
Class C shares of the Funds that do not declare regular income dividends on a
daily basis may be lower than the per share net asset value of the Class A
shares as a result of the daily expense accruals of the distribution fee
applicable to the Class B and Class C shares. Generally, for Funds that pay
income dividends, those dividends are expected to differ over time by
approximately the amount of the expense accrual differential between the
classes.
Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using foreign exchange quotations received from independent
dealers. The calculation of the net asset value of the International,
International Developed, Emerging Markets and Precious Metals Funds may not take
place contemporaneously with the determination of the prices of certain
portfolio securities of foreign issuers used in such calculation. Further, under
the Trust's procedures, the prices of foreign securities are determined using
information derived
<PAGE>
54 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
from pricing services and other sources. Prices derived under these procedures
will be used in determining daily net asset value. Information that becomes
known to the Trust or its agents after the time that net asset value is
calculated on any business day may be assessed in determining net asset value
per share after the time of receipt of the information, but will not be used to
retroactively adjust the price of the security so determined earlier or on a
prior day. Events affecting the values of portfolio securities that occur
between the time their prices are determined and 4:00 p.m., Eastern time, may
not be reflected in the calculation of net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities may be valued at fair value as determined by the management and
approved in good faith by the Board of Trustees.
DISTRIBUTIONS
Shares begin earning dividends on the effective date of purchase, which is the
date that funds are received by the Trust for the purchase of shares. Net
investment income from interest and dividends, if any, will be declared daily
and paid monthly to shareholders of record of the Tax Exempt Fund and declared
and paid quarterly to shareholders of record by the Equity Income, Value,
Renaissance, and Balanced Funds. Net investment income from interest and
dividends, if any, will be declared and paid at least annually to shareholders
of record by the Small Cap Value, Capital Appreciation, Mid Cap Growth, Micro
Cap Growth, Small Cap Growth, Growth, Target, Opportunity, Innovation, Enhanced
Equity, Structured Emerging Markets, Emerging Markets, International Developed,
International, and Precious Metals Funds. 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.
All dividends and/or distributions will be paid in the form of additional shares
of the class of shares of the fund to which the dividends and/or distributions
relate or, at the election of the shareholder, of another fund of the trust as
described below, at net asset value of such fund, unless the shareholder elects
to receive cash (either paid to shareholders directly or credited to their
account with their participating broker). Dividends paid by each fund with
respect to each class of shares are calculated in the same manner and at the
same time, but dividends on Class B and Class C shares are expected to be lower
than dividends on Class A shares as a result of the distribution fee applicable
to Class B and Class C shares. there are no charges on reinvested dividends.
Shareholders may elect to invest dividends and/or distributions paid by any fund
in shares of the same class of any other fund of the trust at net asset value.
The shareholder must have an account existing in the fund selected for
investment with the identical registered name and address and must elect this
option on the account application, on a form provided for that purpose or by a
telephone request to the transfer agent at 800-852-8457. For further
information on this option, contact your broker or call the distributor at 800-
426-0107.
TAXES
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 (the "Code"). 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. All shareholders must treat
dividends, other than capital gain dividends, exempt-interest dividends and
dividends that represent a return of capital to shareholders, as ordinary
income. In particular, distributions derived from short-term gains will be
treated as ordinary income. Dividends designated by a Fund as
<PAGE>
PIMCO Funds: Multi-Manager Series 55
- --------------------------------------------------------------------------------
capital gain dividends derived from the Fund's net capital gains (that is, the
excess of its net long-term capital gains over its net short-term capital
losses) 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.
Dividends paid to shareholders by the tax exempt fund which are derived from
interest on tax exempt bonds are expected to be designated by the fund as
"exempt-interest dividends," and shareholders may exclude such dividends from
gross income for federal income tax purposes. However, if a shareholder
receives social security or railroad retirement benefits, the shareholder may be
taxed on a portion of those benefits as a result of receiving tax-exempt income.
In addition, certain exempt-interest dividends could, as discussed below, cause
certain shareholders to become subject to the alternative minimum tax and may
increase the alternative minimum tax liability of shareholders already subject
to this tax. Other distributions from the tax exempt fund may constitute
taxable income, and any gain realized on a redemption of shares will be taxable
gain, subject to any applicable tax exemption for which an investor may qualify.
Dividends derived from interest on certain U.S. Government securities may be
exempt from state and local taxes, although interest on mortgage-backed U.S.
government securities may not be so exempt. The distributions of "exempt-
interest dividends" paid by the tax exempt fund may be exempt from state and
local taxation when received by a shareholder to the extent that they are
derived from interest on tax exempt bonds issued by the state or political
subdivision in which such shareholder resides. The federal exemption for
"exempt-interest dividends" attributable to tax exempt bonds does not
necessarily result in exemption of such dividends from income for the purpose of
state and local taxes. The trust will report annually on a state-by-state basis
the source of income the tax exempt fund receives on tax exempt bonds that was
paid out as dividends during the preceding year.
The Code provides that exempt-interest dividends allocable to interest received
from "private activity bonds" issued after August 7, 1986 are an item of tax
preference for individual and corporate alternative minimum tax at the
applicable rate for individuals and corporations. Therefore, if the tax exempt
fund invests in such private activity bonds, certain of its shareholders may
become subject to the alternative minimum tax on that part of its distributions
to them that are derived from interest income on such bonds and certain
shareholders already subject to such tax may have increased liability therefor.
However, it is the present policy of the tax exempt fund to invest no more than
20% of its assets in such bonds. Other provisions of the code affect the tax
treatment of distributions from the tax exempt fund for corporations, casualty
insurance companies and financial institutions. In particular, under the code,
for corporations, alternative minimum taxable income will be increased by a
percentage of the amount by which the corporation's "adjusted current earnings"
(which includes various items of tax-exempt income) exceeds the amount otherwise
determined to be alternative minimum taxable income. Accordingly, an investment
in the tax exempt fund may cause shareholders to be subject to (or result in an
increased liability under) the alternative minimum tax.
Current federal tax law requires the holder of a treasury or other fixed-income
zero-coupon security to accrue as income each year a portion of the discount at
which the security was purchased, even though the holder receives no interest
payment in cash on the security during the year. In addition, pay-in-kind
securities will give rise to income which is required to be distributed and is
taxable even though the fund holding the security receives no interest payment
in cash on the security during the year. Also, a portion of the yield on certain
high yield securities (including certain pay-in-kind securities) issued after
July 10, 1987 may be treated as dividends. Accordingly, each fund that holds the
foregoing kinds of securities may be required to pay out as an income
distribution each year an amount which is greater than the total amount of cash
interest the fund actually received. Such distributions may be made from the
cash assets of the fund or by liquidation of portfolio securities, if necessary.
The fund may realize gains or losses from such liquidations. In the event the
fund realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution, if any, than they would in the
absence of such transactions.
<PAGE>
56 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
taxable shareholders should note that the timing of their investment or
redemptions could have undesirable tax consequences. If shares are purchased on
or just before the record date of a dividend, taxable shareholders will pay full
price for the shares and may receive a portion of their investment back as a
taxable distribution. If shares are redeemed before payment of an exempt-
interest dividend, shareholders may realize a taxable capital gain, whereas by
waiting and receiving the exempt-interest dividend, a portion of their share
value would have been received in the form of tax-free income.
The preceding discussion relates only to Federal Income Tax; the consequences
under other tax laws may differ. Shareholders should consult their tax advisers
as to the possible application of state and local income tax laws to trust
dividends and capital gain distributions. For additional information relating
to the tax aspects of investing in a fund, see the statement of additional
information.
MANAGEMENT OF THE TRUST
The business affairs of the Trust are managed under the direction of the Board
of Trustees. The Trustees are E. Phillip Cannon, Donald P. Carter, Gary A.
Childress, William D. Cvengros, Gary L. Light, Richard L. Nelson, Lyman W.
Porter, Robert A. Prinidiville, Alan Richards, Joel Segall, W. Bryant Stooks and
Gerald M. Thorne. 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 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 _____, 1996 were approximately
$_____ 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 Pacific Investment Management.
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
800 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: Blairlogie, Cadence, Columbus Circle, NFJ, Pacific
Investment Management and Parametric.
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.
PIMCO Advisors determines the allocation of the Balanced Fund's assets among
various asset classes and manages the Money Market Segment of that Fund.
PORTFOLIO MANAGERS
Pursuant to portfolio management agreements, PIMCO Advisors employs Portfolio
Managers for all of the Funds. With the exception of Van Eck (which manages the
Precious Metals Fund), each Portfolio Manager is an affiliate of PIMCO Advisors.
PIMCO Advisors compensates the Portfolio Managers from its advisory fee (not
from the Trust). Under the portfolio management agreements, each 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.
<PAGE>
PIMCO Funds: Multi-Manager Series 57
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COLUMBUS CIRCLE manages the Renaissance Fund, the Growth Fund, the Target Fund,
the Opportunity Fund, the Innovation Fund and the Tax Exempt 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 July 31, 1996 of approximately $12.8
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.
At the center of Columbus Circle's equity investment strategy is its theory of
Positive Momentum & Positive Surprise. This theory asserts that a good company
doing better than generally expected will experience a rise in its stock price,
and conversely, a company falling short of expectations will experience a drop
in its stock price. Based on this theory, Columbus Circle attempts to manage the
Funds it manages (except the Tax Exempt Fund) with a view to investing in
growing companies that are surprising the market with business results that are
better than anticipated. The investment decisions made by Columbus Circle for
each Columbus Circle Fund 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.
NFJ manages the Equity Income Fund, the Value Fund, the Small Cap Value Fund and
a portion of the Common Stock Segment of the Balanced 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
July 31, 1996 of approximately $1.6 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 Equity Income
and Value Funds and the portion of the Common Stock Segment of the Balanced Fund
allocated to NFJ. Mr. Najork is a Managing Director and a founding partner of
NFJ and has 27 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 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 Capital Appreciation Fund, the Mid Cap Growth Fund, the
Small Cap Growth Fund, the Micro Cap Growth Fund, and a portion of the Common
Stock Segment of the Balanced 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 July 31, 1996 of
approximately $2.7 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, William B. Bannick, Katherine A. Burdon, Eric M. Wetlaufer, and
Peter B. McManus 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 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 and Executive Vice President of Cadence and has
11 years' investment management experience. He 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
in 1992. He graduated from the University of Massachusetts and received his MBA
from Boston University. Mr.
<PAGE>
58 PIMCO Funds: Multi-Manager Series
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Bannick is a Chartered Financial Analyst. Ms. Burdon is a Managing Director and
Portfolio Manager of Cadence and has nine years' investment management
experience. She previously served as a Vice President and Portfolio Manager of
The Boston Company. Ms. Burdon joined Cadence in 1993. She graduated from
Stanford University and received a Master of Science degree from Northeastern
University. Ms. Burdon is a Chartered Financial Analyst and Certified Public
Accountant. Mr. Wetlaufer is a Managing Director and Portfolio Manager of
Cadence and has 11 years' investment management experience. He previously
served as Vice President of Northfield Information Services. Mr. Wetlaufer
joined Cadence in 1991. He graduated from Wesleyan University and is a
Chartered Financial Analyst. Mr. McManus is Director of Fund Management of
Cadence and has 19 years' investment management experience. He previously
served as a Vice President of Bank of Boston. Mr. McManus joined Cadence in
1994. He graduated from the University of Massachusetts, and is certified as a
Financial Planner.
BLAIRLOGIE manages the International Fund, the International Developed Fund and
the Emerging Markets Fund (the "Blairlogie Funds"). Blairlogie is an investment
management firm, organized as a limited partnership under the laws of Scotland,
United Kingdom, 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.
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 July 31, 1996 of approximately $.7 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 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.
PARAMETRIC manages the Enhanced Equity 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 July 31, 1996 of approximately $1.6
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.
David Stein, Linda Mauzy, and Cliff Quisenberry are primarily responsible for
the day-to-day management of the Enhanced Equity Fund. Mr. Stein is a Managing
Director of Parametric and has been associated with Parametric since June, 1996.
He also directs research and product development for Parametric. Mr. Stein
graduated with bachelor's and master's degrees in Applied Mathematics from the
University of Witwatersrand, South Africa, and received a Ph.D. in Applied
Mathematics from Harvard University. Prior to joining Parametric, Mr. Stein
served as the Director of Investment Research at GTE Investment Management,
Director of Active Equity Strategies at the Vanguard Group, and Director of
Quantitative Portfolio Management and Research at IBM. Ms. Mauzy is a Senior
Investment Manager of Parametric and has been with Parametric since 1988. She
previously served as Portfolio Manager at GW Capital, and as senior investment
analyst at Composite Research & Management. Ms. Mauzy graduated from the
California State University with a bachelor's degree in Chemistry, and from the
University of California with a master's degree in Economics. She is a Chartered
Financial Analyst. Mr. Quisenberry is a Senior Investment Manager and Research
Manager of Parametric and has been with Parametric
<PAGE>
PIMCO Funds: Multi-Manager Series 59
- --------------------------------------------------------------------------------
since 1994. He previously served as a Vice President and Portfolio Manager at
Cutler & Co., and as a Security Analyst and Portfolio Manager at Fred Alger
Management. Mr. Quisenberry graduated from Yale University with a bachelor's
degree in Economics. He is a Chartered Financial Analyst.
PACIFIC INVESTMENT MANAGEMENT manages the Fixed Income Securities Segment of the
Balanced Fund. Pacific Investment Management is an investment management firm
organized as a general partnership and has two partners: PIMCO Advisors as the
supervisory partner, and PIMCO Management, Inc. as the managing partner. Pacific
Investment Management Company commenced operations in 1971 and had approximately
$80.0 billion of assets under management as of July 31, 1996. Pacific Investment
Management's address is 840 Newport Center Drive, Suite 360, Newport Beach,
California 92660. Pacific Investment Management 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 Pacific Investment Management and has been associated with
the firm 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.
VAN ECK is an unaffiliated sub-adviser which serves as the Portfolio Manager of
the Precious Metals Fund. Van Eck is a Delaware Corporation which, together
with its affiliates, advises other mutual funds and private accounts. Van Eck is
controlled by John C. Van Eck who, along with members of his immediate family,
owns 100% of the stock of Van Eck. Accounts managed by Van Eck had combined
assets as of _____, 1996 of approximately $____. Van Eck's address is 99 Park
Avenue, New York, NY 10001. Van Eck is registered as an investment adviser with
the SEC.
Henry J. Bingham, Executive Managing Director of Van Eck and President of the
International Investors series of Van Eck Funds, has served as the portfolio
manager of the Precious Metals Fund since the Fund commenced operations.
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 Columbus
Circle, NFJ, Cadence, Blairlogie, Parametric, Pacific Investment Management and
Van Eck may provide, and currently are providing, investment management services
to other clients, including other investment companies.
FUND ADMINISTRATOR
In addition to its services as Adviser, PIMCO Advisors L.P. serves as
administrator (the "Administrator") to the Funds pursuant to an administration
agreement with the Trust. The Administrator provides or procures administrative
services for 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. PIMCO
Advisors has retained Pacific Investment Management to provide such services as
sub-administrator. In addition, the Administrator, at its own expense, arranges
for the provision of legal, audit, custody, transfer agency and other services
necessary for the ordinary operation of 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.
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 the Adviser, Pacific
Investment Management, or their 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, Pacific Investment Management the 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 distribution and/or service fees
payable with respect to Class
<PAGE>
60 PIMCO Funds: Multi-Manager Series
- --------------------------------------------------------------------------------
A, B and C shares and may include certain other expenses as permitted by the
Trust's Multiple Class Plan adopted pursuant to Rule 18f-3 under 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:
FUND ADVISORY FEE RATE
---- -----------------
Tax Exempt Fund ...................................... .30%
Equity Income, Value, Enhanced Equity, Capital
Appreciation, Mid Cap Growth and Balanced Funds ... .45%
Growth Fund .......................................... .50%
Target and International Funds........................ .55%
Renaissance, Small Cap Value, International Developed
and Precious Metals Funds ......................... .60%
Opportunity and Innovation Funds ..................... .65%
Emerging Markets Fund ................................ .85%
Small Cap Growth Fund ................................ 1.00%
Micro Cap Growth Fund ............................... 1.25%
For providing or procuring administrative services to the Funds as described
above, the Administrator receives monthly fees from each Fund at an annual rate
based on the average daily net assets attributable in the aggregate to the
Fund's Class A, Class B and Class C shares as follows:
<TABLE>
<CAPTION>
FUND ADMINISTRATIVE FEE RATE
---- ------------------------
<S> <C>
Precious Metals Funds ............................ .45% of first $2.5 billion
.40% of amodunts in excess of $2.5 billion
International, International Developed and .65% of first $2.5 billion
Emerging Markets Funds ........................... .60% of amounts in excess of $2.5 billion
All Other Funds .................................. .40% of first $2.5 billion
.35% of amounts in excess of $2.5 billion
</TABLE>
The investment advisory, administration and sub-administration agreements for
the Funds may be terminated by the Trustees, or by the Administrator or Pacific
Investment Management (as the case may be), on 60 days' written notice. In
addition, these agreements may be terminated with regard to the Renaissance
Fund, Growth Fund, Target Fund, Opportunity Fund, Innovation Fund, Tax Exempt
Fund, International Fund and Precious Metals Fund by a majority of the Trustees
that are not interested persons of the Trust, PIMCO Advisors, or Pacific
Investment Management (as the case may be), on 60 days' written notice.
Following their initial 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: Columbus Circle -- .38% for the Renaissance Fund, .34% for the Growth
Fund, .36% for the Target Fund, .48% for the Opportunity Fund, .38% for the
Innovation Fund and .30% for the Tax Exempt Fund; NFJ -- .35% for the Equity
Income Fund, .35% for the Value Fund, .50% for the Small Cap Value Fund and .35%
for the portion of the Common Stock Segment of the Balanced Fund allocated to
NFJ; Cadence -- .35% for the Capital Appreciation Fund, .35% for the Mid Cap
Growth Fund, .90% for the Small Cap Growth Fund, 1.15% for the Micro Cap Growth
Fund and .35% for the portion of the Common Stock Segment of the Balanced Fund
allocated to Cadence; Parametric -- .35% for the Enhanced Equity Fund;
Blairlogie -- .40% for the International Fund, .50% for the International
Developed and .75% for the Emerging Markets Fund; Pacific Investment Management
- -- .35% for the Fixed Income Securities Segment of the Balanced Fund; and Van
Eck -- .35% for the Precious Metals Fund.
<PAGE>
PIMCO Funds: Multi-Manager Series 61
- --------------------------------------------------------------------------------
DESCRIPTION OF THE TRUST
CAPITALIZATION
The Trust was organized as a Massachusetts business trust on August 24, 1990,
and currently consists of twenty-two portfolios that are operational, nineteen
of which are described in this Prospectus. Other portfolios may be offered by
means of a separate prospectus. The Board of Trustees may establish additional
portfolios in the future. The capitalization of the Trust consists of an
unlimited number of shares of beneficial interest. When issued, shares of the
Trust are fully paid, non-assessable and freely transferable.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Trust. However, the Second Amended and
Restated Agreement and Declaration of Trust of the Trust (the "Declaration of
Trust") disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or the Trustees. The
Declaration of Trust provides for indemnification out of a Fund's property for
all loss and expense of any shareholder of that Fund held liable on account of
being or having been a shareholder. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund of which he or she is or was a shareholder would be unable to
meet its obligations.
MULTIPLE CLASSES OF SHARES
In addition to Class A shares, Class B shares and Class C shares, each Fund
except the Growth and Target Funds also offers Institutional Class shares, and
many Funds also offer Administrative Class shares. These other classes of the
Funds may have different sales charges and expense levels, which will affect
performance. Investors may contact the Distributor at 800-426-0107 for more
information concerning other classes of shares of the Funds. This Prospectus
relates only to the Class A shares, Class B shares and Class C shares of the
Funds. Each Class of shares of each Fund represent interests in the assets of
that Fund and have identical dividend, liquidation and other rights and the same
terms and conditions except that expenses related to the distribution and
shareholder servicing of Class A, Class B and Class C shares are borne solely by
such class and each class may, at the Trustees' discretion, also pay a different
share of other expenses, not including advisory or custodial fees or other
expenses related to the management of the Trust's assets, if these expenses are
actually incurred in a different amount by that class, or if the class receives
services of a different kind or to a different degree than the other classes.
All other expenses are allocated to each class on the basis of the net asset
value of that class in relation to the net asset value of the particular Fund.
VOTING
Each class of shares of each Fund has identical voting rights except that each
class of shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. Each class of shares has exclusive
voting rights with respect to matters pertaining to any Distribution and
Servicing Plan applicable to that class. These shares are entitled to vote at
meetings of shareholders. Matters submitted to shareholder vote must be approved
by each Fund separately except (i) when required by the 1940 Act shares shall be
voted together and (ii) when the Trustees have determined that the matter does
not affect all Funds, then only shareholders of the Fund or Funds affected shall
be entitled to vote on the matter. All classes of shares of a Fund will vote
together, except with respect to a Distribution and Servicing Plan applicable to
a class of shares or when a class vote is required as specified above or
otherwise by the 1940 Act. Shares are freely transferable, are entitled to
dividends as declared by the Trustees and, in liquidation of the Trust, are
entitled to receive the net assets of their Fund, but not of the other Funds.
The Trust does not generally hold annual meetings of shareholders and will do so
only when required by law. Shareholders may remove Trustees from office by votes
cast in person or by proxy at a meeting of shareholders or by written consent.
Such a meeting will be called at the written request of the holders of 10% of
the Trust's outstanding shares.
MAILINGS TO SHAREHOLDERS
To reduce the volume of mail shareholders receive, it is anticipated that only
one copy of most Trust reports, such as the Trust's annual report, will be
mailed to a shareholder's household (same surname, same address). A shareholder
may call 800-227-7337 if additional shareholder reports are desired.
<PAGE>
62
PIMCO Funds: Multi-Manager Series
- ---------------------------------
<TABLE>
<S> <C>
INVESTMENT ADVISER AND ADMINISTRATOR PIMCO Advisors L.P., 800 Newport Center Drive, Suite
100, Newport Beach, CA 92660
- ---------------------------------------------------------------------------------------------------------
PORTFOLIO MANAGERS Columbus Circle Investors, NFJ Investment Group,
Cadence Capital Management, Blairlogie Capital
Management, Parametric Portfolio Associates, Van Eck
Associates Corporation, Pacific Investment Management
Company
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTOR PIMCO Funds Distribution Company, 2187 Atlantic
Street,
Stamford, Connecticut 06902
- ---------------------------------------------------------------------------------------------------------
CUSTODIAN [_]
- ---------------------------------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT Shareholder Services, Inc., P.O. Box 5866, Denver,
Colorado 80217
- ---------------------------------------------------------------------------------------------------------
</TABLE>
For further information about the Trust, call 1-800-426-0107
[PRINTED ON RECYCLED PAPER USING SOY-BASED INKS.]
<PAGE>
[LOGO OF PIMCO APPEARS HERE]
PIMCO FUNDS
- -----------
Multi-Manager Series
NFJ Investment Group:
PIMCO Equity Income Fund
PIMCO Value Fund
PIMCO Small Cap Value Fund
Cadence Capital Management:
PIMCO Capital Appreciation Fund
PIMCO Mid Cap Growth Fund
PIMCO Micro Cap Growth Fund
PIMCO Small Cap Growth Fund
Columbus Circle Investors:
PIMCO Renaissance Fund
PIMCO Core Equity Fund
PIMCO Mid Cap Equity Fund
PIMCO Opportunity Fund
PIMCO Innovation Fund
PIMCO Tax Exempt Fund
Parametric Portfolio Associates:
PIMCO Enhanced Equity Fund
PIMCO Structured Emerging Markets Fund
Blairlogie Capital Management:
PIMCO Emerging Markets Fund
PIMCO International Developed Fund
PIMCO International Fund
Multiple Managers:
PIMCO Balanced Fund
Van Eck Associates Corporation:
PIMCO Precious Metals Fund
PROSPECTUS
- --------------------------------------------------------------------------------
January , 1997
<PAGE>
PROSPECTUS
January , 1997
PIMCO Funds: Multi-Manager Series (the "Trust"), formerly PIMCO Funds:
Equity Advisors Series, is an open-end management investment company ("mutual
fund"). This Prospectus offers twenty separate investment portfolios (the
"Funds") of the Trust. 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>
PIMCO Equity Income Fund PIMCO Opportunity Fund*
PIMCO Value Fund PIMCO Innovation Fund
PIMCO Small Cap Value Fund PIMCO Tax Exempt Fund*
PIMCO Capital Appreciation Fund PIMCO Enhanced Equity Fund
PIMCO Mid Cap Growth Fund PIMCO Structured Emerging Markets Fund*
PIMCO Micro Cap Growth Fund PIMCO Emerging Markets Fund
PIMCO Small Cap Growth Fund* PIMCO International Developed Fund
PIMCO Renaissance Fund PIMCO International Fund*
PIMCO Core Equity Fund PIMCO Balanced Fund
PIMCO Mid Cap Equity Fund PIMCO Precious Metals Fund*
</TABLE>
*Not currently available for investment through this Prospectus.
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.
This Prospectus describes two classes of shares offered by each Fund: 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. 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 employee benefit plan
alliances, broker-dealers, and other intermediaries, and each Fund pays
service and distribution fees to such entities for services they provide to
shareholders of that Class. Administrative Class shares of certain Funds are
not currently available for investment. Institutional Class and Administrative
Class shares of each class of the Funds are offered for sale at the relevant
next determined net asset value for each 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 January , 1997, 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 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 FUNDS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................................................... 3
Expense Information..................................................... 7
Financial Highlights.................................................... 10
Investment Objectives and Policies...................................... 14
Investment Restrictions................................................. 25
Characteristics and Risks of Securities and Investment Techniques....... 27
Management of the Trust................................................. 38
Purchase of Shares...................................................... 43
Redemption of Shares.................................................... 46
Portfolio Transactions.................................................. 47
Net Asset Value......................................................... 48
Dividends, Distributions and Taxes...................................... 48
Other Information....................................................... 50
</TABLE>
<PAGE>
3
PROSPECTUS SUMMARY
PIMCO Funds: Multi-Manager Series (the "Trust") is an open-end management
investment company ("mutual fund") organized as a Massachusetts business trust
on August 24, 1990. This Prospectus describes twenty separate investment
portfolios offered by the Trust (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.
FUND INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Value Seeks long-term growth of capital and income; invests
primarily in common stocks with below-average price to
earnings ratios relative to their industry groups.
- --------------------------------------------------------------------------------
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 $1 billion and below-
average price to earnings ratios relative to their industry
groups.
- --------------------------------------------------------------------------------
Capital Seeks growth of capital; invests primarily in common stocks
Appreciation of companies with market capitalizations of at least $100
million that have improving fundamentals and whose stock is
reasonably valued by the market.
- --------------------------------------------------------------------------------
Mid Cap Growth Seeks growth of capital; invests primarily in common stocks
of companies with market capitalizations in excess of $500
million that have improving fundamentals and whose stock is
reasonably valued by the market.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Small Cap Seeks growth of capital; invests primarily in common stocks
Growth of companies with market capitalizations between $50 million
and $1 billion that have improving fundamentals and whose
stock is reasonably valued by the market.
- --------------------------------------------------------------------------------
Renaissance Seeks long-term growth of capital and income; invests
primarily in income-producing stocks and convertibles.
- --------------------------------------------------------------------------------
Core Equity Seeks long-term growth of capital, with income as a secondary
objective; invests primarily in common stocks of companies
with market capitalizations in excess of $3 billion.
- --------------------------------------------------------------------------------
Mid Cap Equity Seeks long-term growth of capital; invests primarily in
common stocks of companies with market capitalizations
between $800 million and $3 billion.
- --------------------------------------------------------------------------------
Opportunity Seeks capital appreciation; invests primarily in common
stocks of companies with market capitalizations of less than
$1 billion.
- --------------------------------------------------------------------------------
Innovation Seeks capital appreciation; invests primarily in common
stocks of technology-related companies.
- --------------------------------------------------------------------------------
Tax Exempt Seeks high current income exempt from federal income taxes,
consistent with preservation of capital; invests primarily in
investment grade municipal securities.
- --------------------------------------------------------------------------------
Enhanced Equity Seeks to provide a total return which equals or exceeds the
total return performance of the Standard & Poor's 500
Composite Stock Price Index; invests in common stocks
represented in that Index.
- --------------------------------------------------------------------------------
Structured Seeks long-term growth of capital; invests primarily in
Emerging common stocks of companies located in emerging market
Markets countries.
- --------------------------------------------------------------------------------
PIMCO FUNDS
<PAGE>
FUND INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS
- --------------------------------------------------------------------------------
Emerging Seeks long-term growth of capital; invests primarily in
Markets common stocks of companies located in emerging market
countries.
- --------------------------------------------------------------------------------
International
Developed Seeks long-term growth of capital; invests primarily in a
diversified portfolio of international equity securities.
- --------------------------------------------------------------------------------
International Seeks capital appreciation, income is incidental; invests
primarily in common stocks of non-U.S. issuers.
- --------------------------------------------------------------------------------
Balanced Seeks total return consistent with prudent investment
management; invests in common stocks, fixed income securities
and money market instruments.
- --------------------------------------------------------------------------------
Precious Metals Seeks capital appreciation; invests in common stocks of
companies that are engaged in precious metals-related
activities.
- --------------------------------------------------------------------------------
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. Except for the Tax
Exempt Fund and the Balanced Fund, all of the Funds invest primarily in common
stock or other types of equity securities (the "Equity Funds"). While each of
the Renaissance, Opportunity, Innovation, International, and Precious Metals
Funds may invest up to 100% of its assets in money market instruments for
temporary defensive purposes, it is the policy of the other Equity Funds to be
as fully invested as practicable in common stock. These Equity Funds may not
invest in debt securities as a defensive investment posture (although they may
invest in such securities to provide for payment of expenses and to meet
redemption requests), and, therefore, may be more vulnerable to general declines
in stock prices. For further information, see "Investment Objectives and
Policies--Equity Funds."
Certain of the Funds may invest in debt securities rated lower than Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
("S&P"). Such securities carry a high degree of credit risk and are considered
speculative by the major rating agencies. 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. Investments by certain Funds in securities of issuers based in
countries with developing economies may pose political, currency, and market
risks greater than, or in addition to, risks of investing in foreign developed
countries. 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.
The Funds offer their shares to both retail and institutional investors.
Institutional shareholders, some of whom also may be investment advisory
clients of PIMCO Advisors L.P or its affiliates, may hold large positions in
certain of the Funds. Such shareholders may on occasion make large redemptions
of their holdings in the Funds to meet their liquidity needs, in connection
with strategic adjustments to their overall portfolio of investments, or for
other purposes. Large redemptions from some Funds could require liquidation of
portfolio positions when it is not most desirable to do so. Liquidation of
portfolio holdings also may cause a Fund to realize capital gains.
4
<PAGE>
5
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 except the Precious Metals Fund, the Adviser has engaged
its affiliates to serve as Portfolio Managers. These affiliated Portfolio
Managers are Pacific Investment Management Company ("Pacific Investment
Management"), Parametric Portfolio Associates ("Parametric"), NFJ Investment
Group ("NFJ"), Cadence Capital Management ("Cadence"), Columbus Circle
Investors ("Columbus Circle"), and Blairlogie Capital Management
("Blairlogie"). Van Eck Associates Corporation ("Van Eck") is the Portfolio
Manager for the Precious Metals Fund. 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. Listed below are the Funds managed by
each Portfolio Manager:
<TABLE>
<CAPTION>
PORTFOLIO MANAGER FUNDS
----------------- -----
<S> <C>
Pacific Investment Management Balanced Fund
(portion of assets allocated for
investment in fixed income securities)
Parametric Enhanced Equity Fund
Structured Emerging Markets Fund
NFJ Equity Income Fund
Value Fund
Small Cap Value Fund
Balanced Fund
(portion of assets allocated for
investment in common stock)
Cadence Capital Appreciation Fund
Mid Cap Growth Fund
Micro Cap Growth Fund
Small Cap Growth Fund
Balanced Fund
(portion of assets allocated for
investment in common stock)
Columbus Circle Renaissance Fund
Core Equity Fund
Mid Cap Equity Fund
Opportunity Fund
Innovation Fund
Tax Exempt Fund
Blairlogie Emerging Markets Fund
International Developed Fund
International Fund
Van Eck Precious Metals Fund
</TABLE>
Pacific Investment Management, 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."
PIMCO FUNDS
<PAGE>
PURCHASE OF SHARES
This Prospectus describes two classes of shares of each Fund: the
"Institutional Class" and the "Administrative Class." Shares of the
Institutional Class are offered primarily for direct investment by
institutional investors. 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 employee benefit plan alliances, broker-
dealers, and other intermediaries, and each Fund pays service fees to such
entities for services they provide to shareholders of that Class.
Administrative Class shares of certain Funds are not currently available for
investment.
Shares of the Institutional Class and Administrative 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 $5 million,
subject to certain exceptions. The 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 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, Institutional Class and
Administrative Class shares of the Small Cap Growth Fund, Opportunity Fund, Tax
Exempt Fund, Structured Emerging Markets Fund, International Fund, and Precious
Metals Fund are not offered as of the date of this Prospectus; however,
additional investment opportunities in these Funds may be available in the
future. 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
Institutional Class and Administrative Class shares 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.
Institutional Class and Administrative Class shares 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: Pacific Investment
Management Series, an affiliated mutual fund family composed primarily of fixed
income portfolios managed by Pacific Investment Management. See "Redemption of
Shares."
DIVIDENDS AND DISTRIBUTIONS
Each Fund will distribute dividends from net investment income at least
annually (except for the Equity Income, Value, Renaissance, and Balanced Funds,
which will distribute quarterly, and the Tax Exempt Fund, which will distribute
dividends on a monthly basis), 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."
6
<PAGE>
7
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES (INSTITUTIONAL CLASS AND ADMINISTRATIVE
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>
Equity Income Fund.......................... 0.45% 0.25% 0.70%
Value Fund.................................. 0.45 0.25 0.70
Small Cap Value Fund........................ 0.60 0.25 0.85
Capital Appreciation Fund................... 0.45 0.25 0.70
Mid Cap Growth Fund......................... 0.45 0.25 0.70
Micro Cap Growth Fund....................... 1.25 0.25 1.50
Small Cap Growth Fund....................... 1.00 0.25 1.25
Renaissance Fund............................ 0.60 0.25 0.85
Core Equity Fund............................ 0.57 0.25 0.82
Mid Cap Equity Fund......................... 0.63 0.25 0.88
Opportunity Fund............................ 0.65 0.25 0.90
Innovation Fund............................. 0.65 0.25 0.90
Tax Exempt Fund............................. 0.30 0.25 0.55
Enhanced Equity Fund........................ 0.45 0.25 0.70
Structured Emerging Markets Fund............ 0.45 0.50 0.95
Emerging Markets Fund....................... 0.85 0.50 1.35
International Developed Fund................ 0.60 0.50 1.10
International Fund.......................... 0.55 0.50 1.05
Balanced Fund............................... 0.45 0.25 0.70
Precious Metals Fund........................ 0.60 0.30 0.90
</TABLE>
<TABLE>
<CAPTION>
ADVISORY ADMINISTRATIVE SERVICE TOTAL
ADMINISTRATIVE CLASS SHARES FEE FEE FEE EXPENSES
--------------------------- -------- -------------- ------- --------
<S> <C> <C> <C> <C>
Equity Income Fund ................ 0.25% 0.25% 0.25% 0.95%
Value Fund......................... 0.45 0.25 0.25 0.95
Small Cap Value Fund............... 0.60 0.25 0.25 1.10
Capital Appreciation Fund.......... 0.45 0.25 0.25 0.95
Mid Cap Growth Fund................ 0.45 0.25 0.25 0.95
Micro Cap Growth Fund.............. 1.25 0.25 0.25 1.75
Small Cap Growth Fund.............. 1.00 0.25 0.25 1.50
Renaissance Fund................... 0.60 0.25 0.25 1.10
Core Equity Fund................... 0.57 0.25 0.25 1.07
Mid Cap Equity Fund................ 0.63 0.25 0.25 1.13
Opportunity Fund................... 0.65 0.25 0.25 1.15
Innovation Fund.................... 0.65 0.25 0.25 1.15
Tax Exempt Fund.................... 0.30 0.25 0.25 0.80
Enhanced Equity Fund............... 0.45 0.25 0.25 0.95
Structured Emerging Markets Fund... 0.45 0.50 0.25 1.20
Emerging Markets Fund.............. 0.85 0.50 0.25 1.60
International Developed Fund....... 0.60 0.50 0.25 1.35
International Fund................. 0.55 0.50 0.25 1.30
Balanced Fund...................... 0.45 0.25 0.25 0.95
Precious Metals Fund............... 0.60 0.30 0.25 1.15
</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."
PIMCO FUNDS
<PAGE>
8
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>
Equity Income Fund........................... $ 7 $22 $39 $ 87
Value Fund................................... $ 7 $22 $39 $ 87
Small Cap Value Fund......................... $ 9 $27 $47 $105
Capital Appreciation Fund.................... $ 7 $22 $39 $ 87
Mid Cap Growth Fund.......................... $ 7 $22 $39 $ 87
Micro Cap Growth Fund........................ $15 $47 $82 $179
Small Cap Growth Fund........................ $13 $40 $69 $151
Renaissance Fund............................. $ 9 $27 $47 $105
Core Equity Fund............................. $ 8 $26 $46 $101
Mid Cap Equity Fund.......................... $ 9 $28 $49 $108
Opportunity Fund............................. $ 9 $29 $50 $111
Innovation Fund.............................. $ 9 $29 $50 $111
Tax Exempt Fund.............................. $ 6 $18 $31 $ 69
Enhanced Equity Fund......................... $ 7 $22 $39 $ 87
Structured Emerging Markets Fund............. $10 $30 $53 $117
Emerging Markets Fund........................ $14 $43 $74 $162
International Developed Fund................. $11 $35 $61 $134
International Fund........................... $11 $33 $58 $128
Balanced Fund................................ $ 7 $22 $39 $ 87
Precious Metals Fund......................... $12 $37 $63 $140
<CAPTION>
ADMINISTRATIVE CLASS SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Income Fund........................... $10 $30 $53 $117
Value Fund................................... $10 $30 $53 $117
Small Cap Value Fund......................... $11 $35 $61 $134
Capital Appreciation Fund.................... $10 $30 $53 $117
Mid Cap Growth Fund.......................... $10 $30 $53 $117
Micro Cap Growth Fund........................ $18 $55 $95 $206
Small Cap Growth Fund........................ $15 $47 $82 $179
Renaissance Fund............................. $11 $35 $61 $134
Core Equity Fund............................. $11 $34 $59 $131
Mid Cap Equity Fund ......................... $12 $36 $62 $137
Opportunity Fund............................. $12 $37 $63 $140
Innovation Fund.............................. $12 $37 $63 $140
Tax Exempt Fund.............................. $ 8 $26 $44 $ 99
Enhanced Equity Fund......................... $10 $30 $53 $117
Structured Emerging Markets Fund............. $12 $38 $66 $145
Emerging Markets Fund........................ $16 $50 $87 $190
International Developed Fund................. $14 $43 $74 $163
International Fund........................... $13 $41 $71 $157
Balanced Fund................................ $10 $30 $53 $117
Precious Metals Fund......................... $14 $44 $77 $168
</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.
<PAGE>
9
(This page intentionally left blank)
PIMCO FUNDS
<PAGE>
FINANCIAL HIGHLIGHTS
The following information regarding selected per share data and ratios for
shares of certain of the Funds is part of the Trust's financial statements
which are included in the Trust's Annual Report dated June 30, 1996 and
incorporated by reference in the Statement of Additional Information. The
Trust's audited financial statements and the selected per share data and
ratios as of June 30, 1996 have been examined by Price Waterhouse LLP,
independent accountants, whose opinion thereon is also included in the Annual
Report, which may be obtained without charge. Information is presented for
each Fund of the Trust which had investment operations and offered
Institutional and Administrative Class shares during the reporting periods.
The Renaissance, Opportunity, Innovation, International, Tax Exempt, and
Precious Metals Funds did not offer Institutional or Administrative Class
shares during the reporting periods. Prior to November 1, 1995, the Trust's
fiscal year end was October 31, and information for each of the five years in
the period ended October 31, 1995 has been audited by the Funds' former
independent accountants.
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>
EQUITY INCOME FUND
Institutional Class
6/30/96 $13.09 $ 0.78 $ 1.31 $ 2.09 $(0.34) $(0.48) $ 0.00
10/31/95 11.75 0.46 1.67 2.13 (0.46) (0.33) 0.00
10/31/94 11.95 0.42 (0.16) 0.26 (0.42) (0.04) 0.00
10/31/93 10.92 0.40 1.40 1.80 (0.40) (0.37) 0.00
10/31/92 10.77 0.45 0.93 1.38 (0.43) (0.57) (0.23)
10/31/91(a) 10.00 0.24 0.92 1.16 (0.24) (0.15) 0.00
Administrative Class
6/30/96 13.13 0.75 1.31 2.06 (0.36) (0.48) 0.00
10/31/95(b) 11.12 0.39 2.35 2.74 (0.40) (0.33) 0.00
VALUE FUND
Institutional Class
6/30/96 $12.53 $ 0.25 $ 1.62 $ 1.87 $(0.17) $(1.77) $ 0.00
10/31/95 11.55 0.30 2.18 2.48 (0.30) (1.20) 0.00
10/31/94 11.92 0.30 (0.28) 0.02 (0.29) (0.10) 0.00
10/31/93 10.05 0.28 2.36 2.64 (0.28) (0.49) 0.00
10/31/92(c) 10.00 0.24 0.23 0.47 (0.24) (0.18) 0.00
SMALL CAP VALUE FUND
Institutional Class
6/30/96 $13.10 $ 0.56 $ 1.49 $ 2.05 $(0.21) $(0.74) $ 0.00
10/31/95 12.07 0.28 1.92 2.20 (0.28) (0.89) 0.00
10/31/94 12.81 0.29 (0.65) (0.36) (0.29) (0.09) 0.00
10/31/93 10.98 0.24 2.33 2.57 (0.24) (0.50) 0.00
10/31/92 10.09 0.22 1.17 1.39 (0.22) (0.24) (0.04)
10/31/91(d) 10.00 0.02 0.10 0.12 (0.03) 0.00 0.00
Administrative Class
6/30/96(e) 13.16 0.54 1.43 1.97 (0.19) (0.74) 0.00
CAPITAL APPRECIATION FUND
Institutional Class
6/30/96 $16.94 $ 0.35 $ 1.99 $ 2.34 $(0.15) $(1.03) $ 0.00
10/31/95 13.34 0.18 3.60 3.78 (0.18) 0.00 0.00
10/31/94 13.50 0.14 (0.12) 0.02 (0.14) (0.04) 0.00
10/31/93 11.27 0.11 2.73 2.84 (0.11) (0.50) 0.00
10/31/92 11.02 0.14 1.05 1.19 (0.14) (0.72) (0.08)
10/31/91(a) 10.00 0.09 1.02 1.11 (0.09) 0.00 0.00
MID CAP GROWTH FUND
Institutional Class
6/30/96 $18.16 $ 0.32 $ 1.53 $ 1.85 $(0.14) $(0.43) $ 0.00
6/30/95 13.97 0.07 4.19 4.26 (0.07) 0.00 0.00
10/31/94 13.97 0.06 0.01 0.07 (0.06) (0.01) 0.00
10/31/93 11.29 0.07 2.70 2.77 (0.07) (0.02) 0.00
10/31/92 10.28 0.10 1.03 1.13 (0.10) 0.00 (0.02)
10/31/91(f) 10.00 0.02 0.27 0.29 (0.01) 0.00 0.00
Administrative Class
6/30/96 18.17 0.28 1.53 1.81 (0.11) (0.43) 0.00
10/31/95(b) 13.31 0.03 4.85 4.88 (0.02) 0.00 0.00
MICRO CAP GROWTH FUND
Institutional Class
6/30/96 $15.38 $ 0.00 $ 3.43 $ 3.43 $ 0.00 $(0.34) $ 0.00
10/31/95 11.87 (0.04) 3.55 3.51 0.00 0.00 0.00
10/31/94 11.06 (0.03) 0.84 0.81 0.00 0.00 0.00
10/31/93(g) 10.00 0.00 1.07 1.07 0.00 0.00 0.00
Administrative Class
6/30/96(h) 16.73 0.03 1.70 1.73 0.00 0.00 0.00
</TABLE>
- --------
(a) From commencement of operations, March 8, 1991.
(e) From commencement of operations,
November 1, 1995.
(b) From commencement of operations, November 30, 1994.
(f) From commencement of operations,
August 26, 1991.
(c) From commencement of operations, December 30, 1991.
(d) From commencement of operations, October 1, 1991.
(g) From commencement of operations,
June 25, 1993.
(h) From commencement of operations,
April 1, 1996.
* Annualized.
10
<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 AVERAGE
FROM RETURN TOTAL END TOTAL OF PERIOD AVERAGE AVERAGE TURNOVER COMMISSION
OF CAPITAL DISTRIBUTIONS OF PERIOD RETURN (000'S) NET ASSETS NET ASSETS RATE RATE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.82) $14.36 16.35% $116,714 0.70%* 3.41%* 52.30% $0.06
0.00 (0.79) 13.09 19.36 118,015 0.70 3.83 46.49 0.06
0.00 (0.46) 11.75 2.25 92,365 0.70 3.77 35.56
0.00 (0.77) 11.95 16.65 67,854 0.70 3.55 38.60
0.00 (1.23) 10.92 12.89 30,506 0.70 3.83 46.74
0.00 (0.39) 10.77 11.81 15,628 0.74* 4.18* 61.51
0.00 (0.84) 14.35 16.08 6,097 0.95* 3.19* 52.30 0.06
0.00 (0.73) 13.13 25.69 140 0.95* 3.43* 43.27 N/A
$ 0.00 $(1.94) $12.46 16.24% $ 52,727 0.70% 2.40% 28.53% $0.06
0.00 (1.50) 12.53 24.98 14,443 0.70 2.50 71.02 0.06
0.00 (0.39) 11.55 0.15 15,442 0.70 2.34 43.70
0.00 (0.77) 11.92 26.35 22,930 0.70 2.43 28.19
0.00 (0.42) 10.05 4.68 18,083 0.70* 2.57* 72.77
$ 0.00 $(0.95) $14.20 16.35% 29,017 0.85%* 2.12%* 35.21% $0.04
0.00 (1.17) 13.10 19.88 35,090 0.85 2.25 49.57 0.04
0.00 (0.38) 12.07 (2.89) 31,236 0.85 2.23 48.12
0.00 (0.74) 12.81 23.60 46,523 0.85 2.05 41.80
0.00 (0.50) 10.98 13.75 18,261 0.85 2.16 26.77
0.00 (0.03) 10.09 1.19 5,060 1.09* 3.06* 0.00
0.00 (0.93) 14.20 15.64 4,433 1.10* 1.86* 35.21 0.04
$ 0.00 $(1.18) $18.10 14.65% $348,728 0.70%* 1.33%* 73.48% $0.04
0.00 (0.18) 16.94 28.47 236,220 0.70 1.22 82.69 0.05
0.00 (0.18) 13.34 0.15 165,441 0.70 1.17 76.75
0.00 (0.61) 13.50 25.30 84,990 0.70 0.94 81.15
0.00 (0.94) 11.27 10.75 36,334 0.70 1.13 134.17
0.00 (0.09) 11.02 11.19 18,813 0.75* 1.55* 40.54
$ 0.00 $(0.57) $19.44 10.37% $231,011 0.70%* 1.11%* 78.81% $0.04
0.00 (0.07) 18.16 30.54 189,320 0.70 0.43 78.29 0.04
0.00 (0.07) 13.97 0.58 121,791 0.70 0.45 60.85
0.00 (0.09) 13.97 24.57 67,625 0.70 0.56 97.87
0.00 (0.12) 11.29 10.91 21,213 0.70 0.87 65.92
0.00 (0.01) 10.28 2.98 2,748 0.82* 0.92* 13.41
0.00 (0.54) 19.44 10.17 1,071 0.95* 0.89* 78.81 0.04
0.00 (0.02) 18.17 36.64 892 0.94* 0.23* 71.73 N/A
$ 0.00 $(0.34) $18.47 22.64% $ 83,973 1.50%* (0.45)%* 53.96% $0.02
0.00 0.00 15.38 29.54 69,775 1.50 (0.37) 86.68 0.03
0.00 0.00 11.87 7.31 32,605 1.50 (0.25) 58.81
(0.01) (0.01) 11.06 10.81 10,827 1.50* (0.02)* 15.98
0.00 0.00 18.46 10.34 566 1.73* (0.74)* 53.96 0.02
</TABLE>
PIMCO FUNDS
<PAGE>
12
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>
SMALL CAP GROWTH FUND
Institutional Class
6/30/96 $21.02 $2.02 $(0.61) $ 1.41 $ 0.00 $(1.60) $0.00
10/31/95 19.38 (0.05) 3.12 3.07 0.00 (1.43) 0.00
10/31/94 19.15 (0.02) 0.89 0.87 0.00 (0.64) 0.00
10/31/93 15.80 (0.06) 6.19 6.13 0.00 (2.78) 0.00
10/31/92 14.87 0.01 1.50 1.51 (0.01) (0.57) 0.00
10/31/91(i) 10.00 0.02 5.03 5.05 (0.02) (0.16) 0.00
Administrative Class
6/30/96 21.01 2.02+ (0.61)+ 1.41 0.00 (1.60) 0.00
10/31/95(j) 21.90 (0.02) (0.87) (0.89) 0.00 0.00 0.00
CORE EQUITY FUND
Institutional Class
6/30/96 $12.72 $0.51 $ 0.65 $ 1.16 $(0.05)+ $(0.28) $0.00
10/31/95(k) 10.00 0.07 2.71 2.78 (0.06) 0.00 0.00
Administrative Class
6/30/96 12.73 0.49 0.65 1.14 (0.03)+ (0.28) 0.00
10/31/95(l) 11.45 0.02 1.28 1.30 (0.02) 0.00 0.00
MID CAP EQUITY FUND
Institutional Class
6/30/96 $12.92 $0.49 $ 1.62 $ 2.11 $ 0.00 $(0.37) $0.00
10/31/95(k) 10.00 0.02 2.92 2.94 (0.02) 0.00 $0.00
ENHANCED EQUITY FUND
Institutional Class
6/30/96 $14.44 $0.34 $ 1.67 $ 2.01 $(0.16) $(0.38) $0.00
10/31/95 11.99 0.25 2.62 2.87 (0.25) (0.17) 0.00
10/31/94 12.08 0.25 (0.04) 0.21 (0.25) (0.05) 0.00
10/31/93 11.76 0.23 0.74 0.97 (0.23) (0.42) 0.00
10/31/92 10.80 0.16 1.06 1.22 (0.16) (0.04) (0.06)
10/31/91(m) 10.00 0.16 0.80 0.96 (0.16) 0.00 0.00
EMERGING MARKETS FUND
Institutional Class
6/30/96 $11.27 $0.03 $ 1.40 $ 1.43 $(0.04) $ 0.00 $0.00
10/31/95 16.53 0.07 (4.55) (4.48) (0.06) (0.72) 0.00
10/31/94 12.27 (0.01) 4.45 4.44 0.00 (0.18) 0.00
10/31/93(n) 10.00 0.03 2.52 2.55 (0.02) (0.26) 0.00
Administrative Class
6/30/96 11.24 0.02 1.40 1.42 (0.03) 0.00 0.00
10/31/95 16.95 0.00 (4.95) (4.95) (0.05) (0.71) 0.00
INTERNATIONAL DEVELOPED FUND
Institutional Class
6/30/96 $11.74 $0.72 $ 0.72 $ 1.44 $(0.43)++ $(0.21) $0.00
10/31/95 11.86 0.10 0.30 0.40 (0.09) (0.43) 0.00
10/31/94 10.69 0.09 1.15 1.24 (0.03) (0.04) 0.00
10/31/93(o) 10.00 0.05 0.69 0.74 (0.04) (0.01) 0.00
Administrative Class
6/30/96 11.73 0.69 0.72 1.41 (0.42)+++ (0.21) 0.00
10/31/95(b) 11.21 0.02 1.01 1.03 (0.08) (0.43) 0.00
BALANCED FUND#
Institutional Class
6/30/96 $11.89 $0.27 $ 0.76 $ 1.03 $(0.27) $(1.01) $0.00
10/31/95 10.35 0.44 1.54 1.98 (0.44) 0.00 0.00
10/31/94 10.84 0.34 (0.34) 0.00 (0.34) (0.15) 0.00
10/31/93 10.42 0.35 0.68 1.03 (0.35) (0.26) 0.00
10/31/92(p) 10.00 0.12 0.52 0.64 (0.12) (0.10) 0.00
</TABLE>
- --------
(i) From commencement of operations, January 7, 1991.
+ Per share amounts based on average
number of shares outstanding during
the period.
(j) From commencement of operations, September 27, 1995.
(k) From commencement of operations, December 28, 1994.
+ Including dividend in excess of $0.01
of net investment income.
(l) From commencement of operations, May 31, 1995.
(m) From commencement of operations, February 11, 1991.
++ Including dividend in excess of
$0.36 of net investment income.
(n) From commencement of operations, June 1, 1993.
(o) From commencement of operations, June 8, 1993.
+++ Including dividend in excess of
$0.35 of net investment income.
(p) From commencement of operations, June 25, 1992.
# NFJ and Cadence began serving as
Portfolio Managers of the portion of
the Balanced Fund allocated for
investment in common stock on August
1, 1996. Prior to August 1, 1996, a
different firm served as Portfolio
Manager.
* Annualized.
<PAGE>
13
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 AVERAGE
FROM RETURN TOTAL END TOTAL OF PERIOD AVERAGE AVERAGE TURNOVER COMMISSION
OF CAPITAL DISTRIBUTIONS OF PERIOD RETURN (000'S) NET ASSETS NET ASSETS RATE RATE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(1.60) $20.83 7.22% $32,954 1.25%* (0.20)%* 59.00% $0.02
0.00 (1.43) 21.02 17.39 73,977 1.25 (0.27) 85.61 0.02
0.00 (0.64) 19.38 4.62 50,425 1.25 (0.33) 65.53
0.00 (2.78) 19.15 38.80 43,308 1.25 (0.35) 62.15
0.00 (0.58) 15.80 10.20 33,734 1.25 0.09 66.05
0.00 (0.18) 14.87 50.68 33,168 1.29* 0.11* 47.84
0.00 (1.60) 20.82 7.18 112 1.50* (0.41)* 59.00
0.00 0.00 21.01 (5.34) 544 1.60* (0.82)* 8.80
$0.00 $(0.33) $13.55 9.41% $10,452 0.82%* 0.53%* 73.16% $0.04
0.00 (0.06) 12.72 27.86 7,791 0.82* 0.79* 122.88 0.03
0.00 (0.31) 13.56 9.23 33,575 1.07* 0.28* 73.16 0.04
0.00 (0.02) 12.73 11.34 24,645 1.06* 0.34* 57.96 N/A
$0.00 $(0.37) $14.66 16.72% $ 8,378 0.88%* (0.32)%* 96.62% $0.03
0.00 (0.02) 12.92 29.34 8,357 0.88 0.24 131.58 0.04
$0.00 $(0.54) $15.91 14.21% $83,425 0.70%* 1.58%* 52.83% $0.05
0.00 (0.42) 14.44 24.46 73,999 0.70 1.91 20.59 0.05
0.00 (0.30) 11.99 1.83 65,915 0.70 2.20 43.58
0.00 (0.65) 12.08 8.20 46,724 0.70 1.89 15.02
0.00 (0.26) 11.76 11.46 36,515 0.70 1.81 16.85
0.00 (0.16) 10.80 9.59 4,451 0.73* 2.14* 0.15
$0.00 $(0.04) $12.66 12.70% $80,545 1.35%* 0.84%* 74.04% $0.01
0.00 (0.78) 11.27 (27.70) 73,539 1.35 0.57 118.18 0.03
0.00 (0.18) 16.53 36.31 79,620 1.35 (0.06) 79.04
0.00 (0.28) 12.27 25.55 14,625 1.34* 0.64* 36.51
0.00 (0.03) 12.63 12.70 368 1.61* 0.18* 74.04 0.01
0.00 (0.76) 11.24 (27.96) 830 1.62 0.02 118.18 N/A
$0.00 $(0.64) $12.54 12.54% $70,207 1.10%* 0.81%* 59.56% $0.02
0.00 (0.52) 11.74 3.83 63,607 1.10 1.10 63.12 0.03
0.00 (0.07) 11.86 11.68 22,569 1.10 1.12 88.55
0.00 (0.05) 10.69 7.39 8,299 1.10* 0.91* 19.61
0.00 (0.63) 12.51 12.33 5,624 1.35* 1.04* 59.56 0.02
0.00 (0.51) 11.73 9.61 675 1.34* 0.50* 58.07 N/A
$0.00 $(1.28) $11.64 9.07% $82,562 0.70%* 3.46%* 139.59% $0.05
0.00 (0.44) 11.89 19.47 72,638 0.70 3.73 43.10 0.04
0.00 (0.49) 10.35 0.08 130,694 0.70 3.25 46.72
0.00 (0.61) 10.84 10.06 126,410 0.70 3.10 19.32
0.00 (0.22) 10.42 6.40 99,198 0.70* 3.36* 38.51
</TABLE>
PIMCO FUNDS
<PAGE>
14
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.
Equity Income Fund seeks current income as a primary investment objective,
and long-term growth of capital as a secondary objective. 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. The Portfolio Manager for the Equity Income Fund is NFJ.
Value Fund seeks long-term growth of capital and income. 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. The Portfolio Manager for the Value Fund is
NFJ.
Small Cap Value Fund seeks long-term growth of capital and income. The Fund
invests primarily in common stocks from companies with market capitalizations
between $50 million and $1 billion 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 $1
billion, 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. The Portfolio Manager for the Small
Cap Value Fund is NFJ.
Capital Appreciation Fund seeks growth of capital. 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
<PAGE>
15
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. The Portfolio
Manager for the Capital Appreciation Fund is Cadence.
Mid Cap Growth Fund seeks growth of capital. 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. The Portfolio Manager for the Mid Cap Growth Fund is
Cadence.
Micro Cap Growth Fund seeks long-term growth of capital. 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. The Portfolio Manager for the Micro Cap Growth Fund is
Cadence.
Small Cap Growth Fund seeks growth of capital. 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 $1
billion 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
PIMCO FUNDS
<PAGE>
16
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices. The Portfolio Manager for the Small Cap Growth
Fund is Cadence.
Renaissance Fund seeks long-term growth of capital and income. The Fund
invests primarily in a variety of income-producing equity securities. Income-
producing equity securities include common stocks that pay dividends, preferred
stocks and securities (including debt securities) that are convertible into
common stocks ("convertible securities"). Under unusual conditions, for
temporary defensive purposes, the Fund may invest up to 100% of its assets in
non-convertible debt securities.
The Fund may invest a portion of its assets in preferred stocks and
convertible securities rated at least B by Moody's or S&P (or similarly rated by
another Nationally Recognized Statistical Rating Organization ("NRSRO"), or
unrated but determined by the Portfolio Manager to be of comparable quality),
and may invest up to 10% of its total assets in convertible securities rated
below B by Moody's or S&P (or similarly rated by another NRSRO, or unrated but
determined by the Portfolio Manager to be of comparable quality). Securities
rated Ba or below by Moody's or BB or below by S&P (or similar quality) are not
considered to be of "investment grade" quality. These lesser rated debt
securities may involve special risks. See "Characteristics and Risks of
Securities and Investment Techniques--High Yield Securities" ("Junk Bonds").
Although the Fund may invest in such securities, it neither invests nor has the
present intention of investing 35% or more of its net assets in securities that
are not considered to be of "investment grade" quality. The Fund will not invest
in convertible securities that are in default at the time of acquisition.
The non-convertible debt securities in which the Fund may invest include
corporate or government debt securities of any maturity, including zero coupon
securities. These non-convertible debt securities may be rated B or higher by
Moody's or S&P (or similarly rated by another NRSRO, or unrated and determined
by Portfolio Manager to be of comparable quality). The Fund may invest a portion
of its assets in securities of foreign issuers traded in foreign securities
markets (not including Eurodollar certificates of deposit), which will not
exceed 15% of the Fund's 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 and securities indexes;
enter into futures contracts and use options on futures contracts; buy or sell
foreign currencies; 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. The Portfolio Manager for the Renaissance Fund is
Columbus Circle.
Core Equity Fund seeks long-term growth of capital, with income as a
secondary objective. 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. The Portfolio Manager for the Core
Equity Fund is Columbus Circle.
<PAGE>
17
Mid Cap Equity Fund seeks long-term growth of capital. 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. The Portfolio
Manager for the Mid Cap Equity Fund is Columbus Circle.
Opportunity Fund seeks capital appreciation. No consideration is given to
income. The Fund invests primarily in common stocks of companies with market
capitalizations of less than $1 billion. The Fund is intended for aggressive
investors seeking above average gains and willing to accept the greater risks
associated therewith.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets (not including Eurodollar certificates of
deposit), which will not exceed 15% of the Fund's 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 and securities indexes; enter into futures contracts and use
options on futures contracts; buy or sell foreign currencies; 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. The Portfolio
Manager for the Opportunity Fund is Columbus Circle.
Innovation Fund seeks capital appreciation. No consideration is given to
income. The Fund will invest primarily in common stocks of companies which
utilize innovative technologies to gain a strategic competitive advantage in
their industry as well as companies that provide a service those technologies.
Securities will be selected with minimal emphasis on more traditional factors
such as growth potential or value relative to intrinsic worth. Instead, the
Fund will be guided by the theory of Positive Momentum & Positive Surprise,
with special emphasis on common stocks of companies whose perceived strength
lies in their use of innovative technologies in new products, enhanced
distribution systems and improved management techniques. Although the Fund
emphasizes the utilization of technologies, it is not restricted to investment
in companies in a particular business sector or industry.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets (not including Eurodollar certificates of
deposit), which will not exceed 15% of the Fund's 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 and securities indexes; enter into futures contracts and use
options on futures contracts; buy or sell foreign currencies; 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. The Portfolio
Manager for the Innovation Fund is Columbus Circle.
PIMCO FUNDS
<PAGE>
18
Tax Exempt Fund seeks high current income exempt from federal income tax,
consistent with preservation of capital, by investing in debt securities whose
interest is, in the opinion of bond counsel for the issuer at the time of
issuance, exempt from federal income tax ("Tax Exempt Bonds"). Tax Exempt Bonds
generally are issued by states and local governments and their agencies,
authorities and other instrumentalities. It is a policy of the Fund that, under
normal market conditions, at least 80% of its net assets will be invested in
Tax Exempt Bonds rated Baa or higher by Moody's or BBB or higher by S&P, or
which are similarly rated by another NRSRO or if unrated, determined by the
Portfolio Manager to be of quality comparable to obligations so rated. Tax
Exempt Bonds rated in the fourth highest rating category (e.g., BAA by Moody's)
may be considered to possess some speculative characteristics by certain
NRSROs.
The Fund may invest up to 20% of its net assets, under normal market
conditions, in any combination of (1) Tax Exempt Bonds which are rated at least
Ba by Moody's or BB by S&P (or similarly rated by another NRSRO or, if unrated,
determined by the Portfolio Manager to be of comparable quality) and (2) U.S.
Government securities, money market instruments or "private activity" bonds.
Securities rated below investment grade and comparable unrated securities are
subject to greater risks than higher quality bonds. See "Characteristics and
Risks of Securities and Investment Techniques--High Yield Securities ("Junk
Bonds")." For temporary defensive purposes, the Fund may invest all or a
portion of its assets in U.S. Government securities and money market
instruments.
The Tax Exempt Fund may purchase put or call options on U.S. Government
securities, Tax Exempt Bonds and Tax Exempt Bond indexes, purchase and sell
futures contracts on U.S. Government securities, Tax Exempt Bonds and Tax
Exempt Bond indexes, and purchase put and call options on such futures
contracts.
The Tax Exempt Fund may lend its portfolio securities to brokers, dealers and
other financial institutions to earn income; enter into repurchase agreements
with banks and broker-dealers; make short sales of securities held in the
Fund's portfolio or which the Fund has the right to acquire without the payment
of further consideration; and purchase and sell securities on a when-issued or
delayed delivery basis and enter into forward commitments to purchase
securities. The Tax Exempt Fund may also invest a portion or, for temporary
defensive purposes, up to 100% of its assets in money market instruments.
Dividends to Fund shareholders derived from money market instruments and U.S.
Government securities are taxable as ordinary income. The Fund may seek to
reduce fluctuations in its net asset value by engaging in portfolio strategies
involving options on securities, futures contracts, and options on futures
contracts. Any gain derived by the Fund from the use of such instruments will
be treated as a combination of short-term and long-term capital gain and, if
not offset by realize capital losses incurred by the Fund, will be distributed
to shareholders and will be taxable to shareholders as a combination of
ordinary income and long-term capital gain.
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. The Portfolio
Manager for the Tax Exempt Fund is Columbus Circle.
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. 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>
19
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. The Portfolio Manager for the Enhanced Equity
Fund is Parametric.
Structured Emerging Markets Fund seeks long-term growth of capital. The Fund
invests primarily in equity securities of companies located in, or whose
business relates to, emerging markets. The Portfolio Manager will identify
those markets that it considers to be emerging markets, relying primarily on
those countries listed on the Morgan Stanley Capital International Emerging
Markets Free Index ("MSCI Free Index") or the Baring Emerging Markets Index
(the "Baring Index"). However, the Portfolio Manager has discretion in
identifying other countries that qualify as emerging markets on the basis of
market capitalization and liquidity, as well as their inclusion, or
consideration for inclusion, as emerging market countries in other broad-based
market indexes. The Fund seeks to achieve its objective by following a
disciplined and systematic methodology for selecting and weighting countries,
industries, and stocks. Diversification and consistent exposure to opportunity
are emphasized over tactical timing decisions with regard to countries,
industries, or stocks. A disciplined methodology for maintaining the
allocation to countries, industries, and stocks is utilized in portfolio
composition, rather than discretionary shifting in country and industry
concentration levels. First, countries are selected based upon their level of
development and equity market institutions. GNP per capita, local economic
diversification, and freedom of investment flows are the primary
considerations in country selection decisions. Most countries are assigned an
equal weight in the Fund unless the size of their equity market is
prohibitive; countries with smaller markets (i.e., less than $5 billion of
market capitalization) are assigned one-half of the weight assigned to
countries with larger markets. Secondly, all stocks in each eligible country
are divided into five broad economic sector groups: financial, industrial,
consumer, utilities, and natural resources. The Portfolio Manager will
generally endeavor to maintain exposure across all five sectors in each
country. Finally, stocks are selected and purchased to fill out the country
and industry structure. Stock purchase candidates are examined for liquidity,
industry representation, performance relative to industry, and profitability.
Under normal market conditions and assuming Fund size of at least $5 million,
the Portfolio Manager will endeavor to maintain investment exposure to roughly
20 countries and hold in excess of 200 securities in the Fund. The allocation
methodology described above may be changed from time to time based on
evaluations of economic trends by the Portfolio Manager, consistent with the
principles of broad country and company diversification of the Fund's
investments.
For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries:
<TABLE>
<S> <C> <C> <C>
Argentina Hong Kong Morocco South Africa
Brazil Hungary Pakistan South Korea
Chile India Peru Sri Lanka
China Indonesia Philippines Taiwan
Colombia Israel Poland Thailand
Czech Republic Jordan Portugal Turkey
Estonia Malaysia Slovakia Venezuela
Greece Mexico Slovenia Zimbabwe
</TABLE>
For purposes of allocating the Fund's investments, a company is considered
to be located in the country in which the company is domiciled, and a
company's business "relates to" any emerging market country in which the
company's securities are primarily traded, from which the company derives a
significant portion of its revenues, or in which a significant portion of the
company's 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 Baring 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
PIMCO FUNDS
<PAGE>
20
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.
For information on other investment policies, see "Investment Objectives and
Policies--Equity Funds." For a discussion of certain risks posed by investing
in emerging market countries, see "Characteristics and Risks of Securities and
Investment Techniques--Foreign Securities." 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. The Portfolio Manager for the Structured
Emerging Markets Fund is Parametric.
Emerging Markets Fund seeks long-term growth of capital. The Fund invests
primarily in common stocks of companies located in countries identified as
emerging market countries. The 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.
<TABLE>
<S> <C> <C> <C>
Argentina Hong Kong Mexico South Korea
Brazil Hungary Pakistan Sri Lanka
Chile India Peru Taiwan
China Indonesia Philippines Thailand
Colombia Israel Poland Turkey
Czech Republic Jordan Portugal Venezuela
Greece Malaysia South Africa Zimbabwe
</TABLE>
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. Up to 10% of the Fund's assets may be
invested in the securities of other investment companies. 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.
For information on other investment policies, see "Investment Objectives and
Policies--Equity Funds." For a discussion of certain risks posed by investing
in emerging market countries, see "Characteristics and Risks of Securities and
Investment Techniques--Foreign Securities." 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. The Portfolio Manager for the Emerging Markets
Fund is Blairlogie.
<PAGE>
21
International Developed Fund seeks long-term growth of capital. 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. Up to 10% of the Fund's assets may be invested in the
securities of other investment companies. 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. The Portfolio Manager for the International Developed
Fund is Blairlogie.
International Fund seeks capital appreciation through investments in an
international portfolio. Income is an incidental consideration. Under normal
market conditions, at least 65% of the International Fund's total assets will
be invested in common stocks, which may or may not pay dividends, as well as
convertible bonds, convertible preferred stocks, warrants, rights or other
equity securities for a combination of capital appreciation and income.
Convertible securities may include securities convertible only by certain
classes of investors (which may not include the Fund), but the Fund may not
invest in convertible securities which are of less than investment grade
quality at the time of purchase.
The Fund will normally invest in securities traded in foreign securities
markets with particular consideration given to investments principally traded
in North and South American (other than United States), Japanese, European,
Pacific and Australian securities markets, and in foreign securities traded on
United States securities markets. Investing in foreign securities and
securities of foreign issuers presents special risks. The Fund will also
invest in emerging markets, where markets may not yet fully reflect the
potential of the developing economy. There are no prescribed limits on
geographic asset distribution and the Fund has the authority to invest in
securities traded in securities markets of any country in the world. In
allocating the Fund's assets among the various securities markets of any
country in the world, the Portfolio Manager will consider such factors as the
condition and growth potential of the various economies and securities
markets, currency and taxation considerations and other pertinent financial,
social, national and political factors. Under certain adverse investment
conditions, the Fund may restrict the number of securities markets in which
its assets will be invested, although under normal market circumstances the
Fund's investments will involve securities principally traded in at least
three different countries. The Fund will not limit its investments to any
particular type or size of company.
PIMCO FUNDS
<PAGE>
22
The Fund may invest up to 10% of its assets in securities of other investment
companies, such as closed-end investment management companies which invest in
foreign markets. 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, including futures contracts on
stock indexes and foreign currencies; buy or sell foreign currencies; and
engage in forward foreign currency contracts.
The Fund will not normally invest in securities of U. S. issuers traded on U.
S. securities markets. However, when the Portfolio Manager believes that
conditions in international securities markets warrant a defensive investment
strategy, the Fund may invest up to 100% of its assets in domestic debt,
foreign debt and equity securities principally traded in the U. S., including
money market instruments, obligations issued or guaranteed by the U.S. or a
foreign government or their respective agencies, authorities or
instrumentalities or corporate bonds and sponsored American Depository
Receipts.
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. The Portfolio Manager for the International Fund is
Blairlogie.
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 asset allocation principles which 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, the Fund will normally 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.
In managing the Fund, the Adviser uses a specialist approach and has engaged
three 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 further
allocated by the Adviser for investment by NFJ and Cadence. The portion of the
Common Stock Segment allocated to NFJ will be managed in accordance with the
investment policies of the Value Fund; the portion allocated to Cadence will be
managed in accordance with the investment policies of the Capital Appreciation
Fund. Allocations of the Common Stock Segment to NFJ and Cadence will vary from
time to time as determined by the Adviser.
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 Pacific Investment Management. The Fund invests the Fixed Income
Securities Segment in fixed income securities of varying maturities. Portfolio
holdings will be concentrated in areas of the bond market (based on quality,
sector, coupon or maturity) that the Portfolio Manager believes to be
relatively undervalued. Fixed income securities in which the Fund may invest
will, at the time of investment, be rated Baa or better by Moody's, BBB or
better by S&P or, if not rated by Moody's or S&P, will be of comparable quality
as determined by the Portfolio Manager, except that up to 10% of the Fixed
Income Securities Segment may be invested in lower rated securities that are
rated B or higher by Moody's or S&P or, if not rated by Moody's or S&P,
determined by the Portfolio Manager to be of comparable quality.
<PAGE>
23
High yield fixed income securities rated lower than Baa by Moody's or BBB by
S&P, or of equivalent quality, are not considered to be investment grade, and
are commonly referred to as "junk bonds." The Fund also may invest up to 20%
of the Fixed Income Securities Segment in securities denominated in foreign
currencies, and may invest beyond this limit in U.S. dollar-denominated
securities of foreign issuers.
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. Securities rated below investment grade are described as
"speculative" by both Moody's and S&P. Securities rated B are judged to be
predominately speculative with respect to their capacity to pay interest and
repay principal under the terms of the obligations. In the event that an
existing holding is downgraded, the Fund may nonetheless retain the security.
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.
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.
The Fund also may enter into swap agreements with respect to foreign
currencies, interest rates, and securities indexes. With respect to securities
of the Fixed Income Securities Segment denominated in foreign currencies, the
Fund may engage in foreign currency exchange transactions by means of buying
or selling foreign currencies on a spot basis, entering into foreign currency
forward contracts, and buying and selling foreign currency options, foreign
currency futures, and options on foreign currency futures. Foreign currency
exchange transactions may be entered into for the purpose of hedging against
foreign currency exchange risk arising from a Fund's investment or anticipated
investment in securities denominated in foreign currencies and for purposes of
increasing exposure to a particular foreign currency or to shift exposure to
foreign currency fluctuations from one country to another. 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.
Precious Metals Fund seeks capital appreciation. No consideration is given
to income. The Fund concentrates investments in a global portfolio of common
stocks of companies principally engaged in precious metals-related activities,
which include companies principally engaged in the extraction, processing,
distribution or marketing of precious metals (the "precious metals industry").
A particular company is deemed to be "principally engaged" in the precious
metals industry if at the time of investment the Portfolio Manager considers
that at least 50% of the company's assets, revenues or profits are derived
from the precious metals industry. Normally at least 65% of the assets of the
Fund will be invested in the precious metal industry plus securities the value
of which is linked to the price of a precious metal. See "Precious Metals"
under "Characteristics and Risks of Securities and Investment Techniques."
The Fund will seek to identify securities of companies which, based upon the
Portfolio Manager's evaluation of their fundamental investment
characteristics, are undervalued in comparison to the present or anticipated
value of the precious metals relevant to them. Examples of precious metals
include gold, silver and platinum. To the extent permitted by state securities
laws and federal tax law, the Fund may invest directly in gold bullion and
other precious metals. The Fund has no present intention of investing directly
in precious metals other than gold.
The Fund does not presently intend to invest more than 10% of its assets in
either precious metals such as gold bullion or in futures on precious metals,
such as gold futures, and options thereon. The Fund may invest up to 100% of
its assets in securities principally traded on foreign securities markets and
in securities of foreign issuers that are traded on U.S. securities markets,
including American Depository Receipts, and may invest up to 100% of its
assets in securities of companies whose assets, revenues or profits are
derived from a single precious metal. At the present time, the Fund has no
intention of investing more than 5% of its assets in securities the value of
which is linked to the price of a single precious metal.
PIMCO FUNDS
<PAGE>
24
The Fund may invest without limit in securities of foreign issuers traded in
foreign securities markets. 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, commodity indexes, and on foreign
currencies; enter into futures contracts and use options on futures contracts,
including futures contracts on stock indexes, foreign currencies, and precious
metals; buy or sell foreign currencies; and engage in forward foreign currency
contracts. For temporary defensive purposes, the Fund may invest up to 100% of
its net assets in any combination of high-quality, short- or long-term debt
instruments or in common, preferred on convertible securities.
The Fund, because of its emphasis on one industrial sector, should be
considered as one aspect of a diversified portfolio and may not be suitable by
itself as a balanced investment program. 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. The Portfolio
Manager of the Precious Metals Fund is Van Eck.
EQUITY FUNDS
The Equity Income, Value, Small Cap Value, Capital Appreciation, Mid Cap
Growth, Micro Cap Growth, Small Cap Growth, Core Equity, Mid Cap Equity,
Enhanced Equity, Structured Emerging Markets, Emerging Markets, and
International Developed Funds will each invest primarily (normally at least 65%
of its assets) in common stock. Each of these Funds 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. It is the
policy of these Funds to be as fully invested in common stock as practicable at
all times. This policy precludes these Funds from investing in debt securities
as a defensive investment posture (although these 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 Renaissance, Opportunity, Innovation, International, and Precious Metals
Funds will each invest primarily (normally at least 65% of its assets) in
equity securities (income-producing equity securities in the case of the
Renaissance Fund), including common stocks, preferred stocks and securities
(including debt securities and warrants) convertible into or exercisable for
common stocks. Each of these Funds may invest
a portion or, for temporary defensive purposes, up to 100% of its assets in
short-term U.S. Government securities and other money market instruments.
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.
The Equity Funds may also invest in convertible securities, preferred stock,
and warrants subject to certain limitations; lend portfolio securities; enter
into repurchase agreements and reverse repurchase agreements (subject to the
Funds' investment limitations described below); and purchase and sell
securities on a when-issued or delayed delivery basis and enter into forward
commitments to purchase securities. The Equity Funds may invest in American
Depository Receipts ("ADRs"), the Core Equity, Mid Cap Equity, Structured
Emerging Markets, Emerging Markets, International Developed, International, and
Precious Metals Funds may invest in European Depository Receipts ("EDRs"), and
the Core Equity, Mid Cap Equity, Structured Emerging Markets, Emerging Markets,
and International Developed Funds may also invest in Global Depository Receipts
("GDRs"). 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. 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.
<PAGE>
25
DURATION
Under normal circumstances, the average portfolio duration of the Fixed
Income Securities Segment of the Balanced Fund will vary within a three- to
six-year time frame, and the average portfolio duration of the Tax Exempt Fund
will vary within a three- to ten- year time frame, based on the relevant
Portfolio Manager's forecast for interest rates. 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." 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. In contrast, duration incorporates a bond's yield, coupon
interest payments, final maturity and call features into one measure of the
average life of a fixed income security on a present value basis. Duration
management is one of the fundamental tools used by the Portfolio Managers for
the Fixed Income Securities Segment of the Balanced Fund and the Tax Exempt
Fund. For more information on investments in fixed income securities, see
"Characteristics and Risks of Securities and Investment Techniques" in the
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of the
Renaissance, Opportunity, Innovation, International, Precious Metals and Tax
Exempt Funds and may not be changed with respect to any such Fund without
shareholder approval by vote of a majority of the outstanding voting
securities of that Fund. Under these restrictions, none of the above-
referenced Funds may:
(1) Borrow money in excess of 10% of the value (taken at the lower of
cost or current value) of such Fund's total assets (not including the
amount borrowed) at the time the borrowing is made, and then only from
banks as a temporary measure to facilitate the meeting of redemption
requests (not for leverage) which might otherwise require the untimely
disposition of portfolio investments or for extraordinary or emergency
purposes. Such borrowings will be repaid before any additional investments
are purchased.
(2) Pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 10% of such Fund's total assets (taken at cost) and then only to
secure borrowings permitted by Restriction 1 above. (The deposit of
securities or cash or cash equivalents in escrow in connection with the
writing of covered call or put options, respectively, is not deemed to be
pledges or other encumbrances.) (For the purpose of this restriction,
collateral arrangements with respect to the writing of options, futures
contracts, options on futures contracts, and collateral arrangements with
respect to initial and variation margin are not deemed to be a pledge of
assets and neither such arrangements nor the purchase or sale of futures or
related options are deemed to be the issuance of a senior security).
(3) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter under federal securities laws.
(4) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, including securities of real estate
investment trusts, and may purchase securities which are secured by
interests in real estate, except that the Precious Metals Fund may purchase
or sell agricultural land.
(5) Acquire more than 10% of the voting securities of any issuer, both
with respect to any such Fund and to the Funds to which this policy relates
in the aggregate.
(6) Concentrate more than 25% of the value of its total assets in any one
industry, or, in the case of the Tax Exempt Fund, in industrial development
revenue bonds based, directly or indirectly, on the credit of private
entities in any one industry; except that the Precious Metals Fund will
concentrate more than 25% of its total assets in securities of companies
principally engaged in the extraction, processing, distribution or
marketing of precious metals, and the Innovation Fund will concentrate more
than 25% of its assets in companies which use innovative technology to gain
a strategic, competitive advantage in their industry as well as companies
that provide and service those technologies. With respect to investments of
the Tax
PIMCO FUNDS
<PAGE>
26
Exempt Fund in utilities, gas, electric, water and telephone companies will
be considered as being in
separate industries.
The investment objective of each of the above-referenced Funds is non-
fundamental and may be changed with respect to each such Fund by the Trustees
without shareholder approval.
The investment objective of each of the Equity Income, Value, Small Cap
Value, Capital Appreciation, Mid Cap Growth, Small Cap Growth, Micro Cap
Growth, Core Equity, Mid Cap Equity, Enhanced Equity, Structured Emerging
Markets, Emerging Markets, International Developed and Balanced Funds, as set
forth under "Investment Objectives and Policies," together with the investment
restrictions set forth below, are fundamental policies of each such Fund and
may not be changed with respect to any such Fund without shareholder approval
by vote of a majority of the outstanding shares of that Fund. Under these
restrictions, none of the above-referenced Funds may:
(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 or swap agreements), except that any such 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 such
Fund's assets).
(8) Issue senior securities, except insofar as such 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.
<PAGE>
27
(9) Lend any funds or other assets, except that such 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.
(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.
For purposes of fundamental investment restriction (5) above for these
Funds, swap agreements are not deemed to be commodities contracts. Each Fund
is also subject to certain non-fundamental restrictions and policies (which
may be changed without shareholder approval) relating to the investment of its
assets and activities. As indicated above, certain fundamental investment
restrictions do not apply to certain Funds. However, the Trust's non-
fundamental restrictions, set forth in the Statement of Additional
Information, may place comparable limitations on these Funds. See "Investment
Restrictions" in the Statement of Additional Information.
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. 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.
LOW AND MEDIUM CAPITALIZATION STOCKS
The Equity Income, Value, Small Cap Value, Mid Cap Growth, Micro Cap Growth,
Small Cap Growth, Renaissance, Opportunity, Innovation, Structured Emerging
Markets, Emerging Markets, International Developed, International, and
Precious Metals Funds may invest in common stock of companies with market
capitalization that is low compared to other publicly traded companies. Under
normal market conditions, Small Cap Value, Small Cap Growth, and Opportunity
Funds will invest in companies with market capitalizations of $1 billion or
less, and Micro Cap Growth Fund will 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
PIMCO FUNDS
<PAGE>
28
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.
Many of the Funds may also invest in stocks of companies with medium market
capitalizations. Whether an issuer's market capitalization is medium is
determined by reference to the capitalization for all issuers whose equity
securities are listed on a United States national securities exchange or which
are reported on NASDAQ. Issuers with market capitalization within the range of
capitalization of companies included in the S&P Mid Cap 400 Index may be
regarded as being issuers with medium market capitalization. Such investments
share some of the risk characteristics of investments in stocks of companies
with small market capitalizations described above, although such companies tend
to have longer operating histories, broader product lines and greater financial
resources, and their stocks tend to be more liquid and less volatile than those
of smaller capitalization issuers.
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 assets determined to be liquid by the Portfolio Manager in
accordance with procedures established by the Board of Trustees 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. A Fund also may borrow
money for investment purposes subject to any policies of the Fund currently
described in this Prospectus or in the Statement of Additional Information.
Such a practice will result in leveraging of a Fund's assets. Leverage will
tend to exaggerate the effect on net asset value of any increase or decrease in
the value of a Fund's portfolio and may cause a Fund to liquidate portfolio
positions when it would not be advantageous to do so.
LOANS OF PORTFOLIO SECURITIES
For the purpose of achieving income, each Fund may lend its portfolio
securities to brokers, dealers, and other financial institutions, provided: (i)
the loan is secured continuously by collateral consisting of U.S. Government
securities, cash or cash equivalents (negotiable certificates of 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 the Fund's limitation on lending
its securities. Each Fund's performance will continue to reflect changes in the
value of the securities loaned and will also reflect the receipt of either
interest, through investment of cash collateral by the Fund in permissible
investments, or a fee, if the collateral is U.S. Government securities.
Securities lending involves the risk of loss of rights in the collateral or
delay in recovery of the collateral should the borrower fail financially. The
Funds will normally pay lending fees to the party arranging the loan.
FOREIGN SECURITIES
The Structured Emerging Markets, Emerging Markets, International Developed,
and International Funds may invest directly in foreign equity securities; U.S.
dollar- or foreign currency-denominated foreign corporate
<PAGE>
29
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 (except for the International Fund). 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 Core Equity and 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 Precious Metals Fund may invest primarily in
securities of foreign issuers, securities denominated in foreign currencies,
securities principally traded on securities markets outside of the United
States and in securities of foreign issuers that are traded on U.S. securities
markets, including ADRs and EDRs. The other Equity Funds, as well as the
Balanced Fund, may also invest in ADRs. The Enhanced Equity Fund may invest in
common stock of foreign issuers if included in the index from which stocks are
selected. The Balanced Fund may invest up to 20% of its Fixed Income
Securities Segment in securities denominated in foreign currencies, and may
invest beyond this limit in U.S. dollar-denominated securities of foreign
issuers. The Renaissance, Opportunity, and Innovation 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), and
may invest without limit in securities of foreign issuers that are traded in
U.S. markets.
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.
A Fund's investments in foreign currency denominated debt obligations and
hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Fund's
income distributions to constitute returns of capital for tax purposes or
require the Fund to make distributions exceeding book income to qualify as a
regulated investment company for federal tax purposes.
Certain of the Funds 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. 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 a Fund. Inflation and rapid fluctuations in inflation rates have
had, and may continue to have, negative effects on the economies and
securities markets of certain emerging market countries. Many of the emerging
securities markets are relatively small, have low trading volumes, suffer
periods of relative 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 a Fund's investment.
PIMCO FUNDS
<PAGE>
30
Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
government involvement in the economy; less government supervision and
regulation of the securities markets and participants in those markets;
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
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 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 Renaissance, Core Equity, Mid Cap Equity, Opportunity, Innovation,
Structured Emerging Markets, Emerging Markets, International Developed,
International, Balanced, and Precious Metals Funds may enter into forward
foreign currency exchange contracts to reduce the risks of adverse changes in
foreign exchange rates. In addition, the Structured Emerging Markets, Emerging
Markets, International Developed, International, Balanced, and Precious Metals
Funds may buy and sell foreign currency futures contracts and options on
foreign currencies and foreign currency futures. All of the Funds that may buy
or sell foreign currencies may 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. Such hedging
transactions may not be successful and may eliminate any chance for a Fund to
benefit from favorable fluctuations in relevant foreign currencies. The
International, International Developed, Structured Emerging Markets and
Emerging Markets Funds 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. To the extent that they do
so, the International, International Developed, Structured Emerging Markets,
and Emerging Markets Funds will be subject to the additional risk that the
relative value of currencies will be different than anticipated by the
particular Fund's Portfolio Manager. These Funds 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 assets determined
to be liquid by the Portfolio Manager in accordance with procedures established
by the Board of Trustees in a segregated account to cover forward currency
contracts entered into for non-hedging purposes.
HIGH YIELD SECURITIES ("JUNK BONDS")
The Renaissance, Tax Exempt, and Balanced Funds may invest a portion of their
assets in fixed income securities rated lower than Baa by Moody's or lower than
BBB by S&P but rated at least B by Moody's or S&P or, if not rated, determined
by the Portfolio Manager to be of comparable quality. Securities rated lower
than Baa by Moody's or lower than BBB by S&P are sometimes referred to as "high
yield" or "junk" bonds. Investors should consider the risks associated with
high yield securities before investing in these Funds.
Investing in high yield securities involves special risks in addition to the
risks associated with investments in higher rated fixed income securities.
While offering a greater potential opportunity for capital appreciation
<PAGE>
31
and higher yields than investments in higher rated debt securities, high yield
securities typically entail greater potential price volatility and may be less
liquid than investment grade debt. High yield securities may be regarded as
predominately speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Analysis of the creditworthiness of
issuers of high yield securities may be more complex than for issuers of
higher quality debt securities, and achievement of the a Fund's investment
objective may, to the extent of its investments in high yield securities,
depend more heavily on the Portfolio Manager's creditworthiness analysis than
would be the case if the Fund were investing in higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities.
The following chart provides information on the weighted average percentage
of rated and unrated debt or fixed-income securities in the portfolios of each
Fund that invested at least 5% of its average annual assets in high yield
securities during the Fund's most recent fiscal year. The numerical rating
designations correspond to the associated rating categories. The designation
"1st" corresponds to the top rating category (i.e., Aaa by Moody's and/or AAA
by S&P), "2nd" corresponds to the second highest rating category (i.e., Aa by
Moody's and/or AA by S&P), etc. For further description of these rating
categories, see the Appendix to the Statement of Additional Information. The
columns related to unrated securities present the percentage of a Fund's total
net assets invested during such fiscal year (1) in unrated high yield securities
believed by the Adviser or the relevant Portfolio Manager to be equivalent in
quality to fixed income securities of the indicated rating and (2) in all
unrated fixed income securities.
<TABLE>
<CAPTION>
RATED
----------------------------------------
1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH
--- --- --- --- --- --- --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Renaissance*...........................
</TABLE>
<TABLE>
<CAPTION>
UNRATED BUT CONSIDERED EQUIVALENT TO
------------------------------------------------
TOTAL
1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH UNRATED
--- --- --- --- --- --- --- --- --- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Renaissance*...................
</TABLE>
- --------
* Represents holdings of the PIMCO Advisors Equity Income Fund which
reorganized as the Renaissance Fund of the Trust on , 1997.
For additional discussion of the characteristics of lower rated fixed income
securities, see the Statement of Additional Information. Ratings assigned to
fixed income securities are described in the Appendix to the Statement of
Additional Information.
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 Renaissance, Core Equity, Mid Cap Equity,
Opportunity, Innovation, Structured Emerging Markets, Emerging Markets,
International Developed, International, Balanced, and Precious Metals Funds
may engage in the purchase and writing of call and put options on securities;
each of these Funds, along with the Enhanced Equity Fund, may engage in the
purchase and writing of options on securities indexes. The Tax Exempt Fund may
purchase call or put options on U.S. Government securities, Tax Exempt Bonds,
and Tax Exempt Bond indexes. The Precious Metals Fund may purchase and write
options on commodity indexes. The Funds that may invest in foreign currency
denominated securities may engage in the purchase and writing of call and put
options on foreign currencies. The Structured Emerging Markets, Emerging
Markets, International Developed, and Balanced Funds also may enter into swap
agreements with respect to securities indexes. The Balanced Fund may also
enter into swap agreements with respect to foreign currencies and interest
rates. The Funds may use these techniques to hedge against changes in interest
rates, foreign currency exchange rates or securities prices; and except for
the Precious Metals Fund, 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 assets determined to be liquid by the
Portfolio Manager in accordance with procedures established by the Board of
Trustees (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under options, futures, and
swaps to avoid leveraging of the Fund.
PIMCO FUNDS
<PAGE>
32
For these purposes, derivative instruments are deemed 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. See "Mortgage-
Related and 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.
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, Commodity 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.
For each of the Renaissance, Opportunity, Innovation, International, and
Precious Metals Funds, in the case of a written call option on a securities
index, the Fund will own corresponding securities whose historic volatility
correlates with that of the index.
<PAGE>
33
The Core Equity, Mid Cap Equity, Structured Emerging Markets, Emerging
Markets, International Developed, International, Balanced, and Precious Metals
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 Structured Emerging Markets, Emerging Markets, and
International Developed 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. The Balanced Fund
may enter into swap agreements to hedge against changes in interest rates,
foreign currency exchange rates or securities prices. Swap agreements are two-
party contracts entered into primarily by institutional investors for periods
ranging from a few weeks to more than one year. In a standard swap
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments, which may be adjusted for an interest factor. The gross returns
to be exchanged or "swapped" between the parties are generally calculated with
respect to a "notional amount," i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, 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 assets determined to
be liquid by the Portfolio Manager in accordance with procedures established
by the Board of Trustees to avoid any potential leveraging of the Fund's
portfolio. Obligations under swap agreements so covered will not be construed
to be "senior securities" for purposes of the 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 Precious
Metals Fund may purchase and sell futures contracts on precious metals (such
as gold), and purchase and write options on precious metals futures contracts.
The Core Equity, Mid Cap Equity, Enhanced Equity, Structured Emerging Markets,
Emerging Markets, International Developed, International, Balanced, and
Precious Metals Funds may invest in stock index futures contracts and options
thereon. The Core Equity, Mid Cap Equity, Structured Emerging Markets,
Emerging Markets, International Developed, International, Balanced, and
Precious Metals 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
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of trade, or similar entity, or quoted on an automated quotation system. The
Tax Exempt Fund may purchase and sell futures contracts on U.S. Government
securities and Tax Exempt Bonds, as well as purchase put and call options on
such futures contracts. 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 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.
SHORT SALES
Each Fund may from time to time make short sales involving securities held in
the Fund's portfolio or which the Fund has the right to acquire without the
payment of further consideration. Short sales expose the Fund to the risk that
it will be required to purchase securities to cover its short position at a
time when the securities have appreciated in value, thus relating in a loss to
the Fund.
FORWARD COMMITMENTS, WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Fund may purchase securities which it is eligible to purchase on a when-
issued basis, may purchase and sell such securities for delayed delivery and
may make contracts to purchase securities for a fixed price at a future date
beyond normal settlement time (forward commitments). When-issued transactions,
delayed delivery purchases and forward commitments involve a risk of loss if
the value of the securities declines prior to the settlement date, which risk
is in addition to the risk of decline in the value of the Fund's other assets.
No income accrues to the purchaser of such securities prior to delivery.
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
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35
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. The rate of
prepayments on underlying mortgages will affect the price and volatility of a
mortgage-related security, and may have the effect of shortening or extending
the effective maturity of the security beyond what was anticipated at the time
of purchase. To the extent than unanticipated rates of prepayment on
underlying mortgages increase the effective maturity of a mortgage-related
security, the volatility of such security can be expected to increase.
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. 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,
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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.
TAX EXEMPT BONDS
Tax Exempt Bonds generally are issued by states and local governments and
their agencies, authorities and other instrumentalities. Tax Exempt Bonds are
subject to credit and market risk. Credit risk relates to the ability of the
issuer to make payments of principal and interest. The issuer of a Tax Exempt
Bond may make such payments from money raised through a variety of sources,
including (1) the issuer's general taxing power, (2) a specific type of tax, or
(3) a particular facility or project. The ability of an issuer to make such
payments could be affected by litigation, legislation or other political events
or the bankruptcy of the issuer. Market risk relates to changes in a security's
value as a result of changes in interest rates. Lower rated Tax Exempt Bonds
generally provide higher yields but are subject to greater credit and market
risk than higher quality Tax Exempt Bonds.
CONVERTIBLE SECURITIES
Many of the Funds may invest in convertible securities. Convertible
securities are generally preferred stocks or fixed income securities that are
convertible into common stock at either a stated price or a stated rate. The
price of the convertible security will normally vary in some proportion to
changes in the price of the underlying common stock because of this conversion
feature. A convertible security will normally also provide a fixed income
stream. For this reason, the convertible security may not decline in price as
rapidly as the underlying common stock.
A Fund's Portfolio Manager will select convertible securities to be purchased
by the Fund based primarily upon its evaluation of the fundamental investment
characteristics and growth prospects of the issuer of the security. As a fixed
income security, a convertible security tends to increase in market value when
interest rates decline and to decrease in value when interest rates rise. While
convertible securities generally offer lower interest or dividend yields than
non-convertible fixed income securities of similar quality, their value tends
to increase as the market value of the underlying stock increases and to
decrease when the value of the underlying stock decreases.
The Renaissance Fund may invest in so-called "synthetic convertible
securities," which are composed of two or more different securities whose
investment characteristics, taken together, resemble those of convertible
securities. For example, the Renaissance Fund may purchase a non-convertible
debt security and a warrant or option. The synthetic convertible differs from
the true convertible security in several respects. Unlike a true convertible
security, which is a single security having a unitary market value, a synthetic
convertible comprises two or more separate securities, each with its own market
value. Therefore, the "market value" of a synthetic convertible is the sum of
the values of its fixed-income component. For this reason, the values of a
synthetic convertible and a true convertible security may respond differently
to market fluctuations.
PRECIOUS METALS
The Precious Metals Fund will concentrate its investments in the precious
metals industry. Prices of precious metals can be expected to respond to
changes in rates of inflation and to perceptions of economic and political
instability. The values of companies engaged in precious metal-related
activities whose securities are principally traded on foreign securities
exchanges may also be affected by changes in the exchange rate between the
relevant foreign currency and the U.S. dollar. Based on historical experience,
the prices of precious metals and of securities of companies engaged in
precious metal-related activities may be subject to extreme fluctuations,
reflecting wider economic or political instability or for other reasons.
INVESTMENT IN INVESTMENT COMPANIES
The Emerging Markets, International Developed, and International Funds may
invest in securities of other investment companies, such as closed-end
investment management companies, or in pooled accounts or other
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37
investment vehicles which invest in foreign markets. As a shareholder of an
investment company, a Fund may indirectly bear service and other fees which
are in addition to the fees the Fund pays its service providers.
CREDIT AND MARKET RISK OF FIXED INCOME SECURITIES
All fixed income securities are subject to market risk and credit risk.
Market risk relates to market-induced changes in a security's value, usually
as a result of changes in interest rates. The value of a Fund's investments in
fixed income securities will change as the general level of interest rates
fluctuate. During periods of falling interest rates, the value of a Fund's
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the value of a Fund's fixed income securities generally
decline. Credit risk relates to the ability of the issuer to make payments of
principal and interest.
MONEY MARKET INSTRUMENTS
Each of the Funds may invest at least a portion of its assets in the
following kinds of money market instruments:
(1) short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other bank
obligations rated in the two highest rating categories by at least two
NRSROs, or, if rated by only one NRSRO, in such agency's two highest
grades, or unrated but determined to be of comparable quality by the
Portfolio Manager. Bank obligations must be those of a bank that has
deposits in excess of $2 billion or that is a member of the Federal Deposit
Insurance Corporation. The Fund may invest in obligations of U.S. branches
or subsidiaries of foreign banks ("Yankee dollar obligations") or foreign
branches of U.S. banks ("Eurodollar obligations");
(3) commercial paper rated in the two highest rating categories by at
least two NRSROs, or, if rated by only one NRSRO, in such agency's two
highest grades, or if not rated, of comparable quality as determined by the
Portfolio Manager;
(4) corporate obligations with a remaining maturity of 397 days or less
whose issuers have outstanding short-term debt obligations rated in the
highest rating category by at least two NRSROs, or, if rated by only one
NRSRO, in such agency's highest grade, or if not rated, of comparable
quality as determined by the Portfolio Manager; and
(5) repurchase agreements with domestic commercial banks or registered
broker-dealers.
ILLIQUID SECURITIES
The Equity Income, Value, Small Cap Value, Capital Appreciation, Mid Cap
Growth, Small Cap Growth, 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 Micro Cap Growth, Renaissance, Core Equity, Mid Cap Equity,
Opportunity, Innovation, Tax Exempt, Structured Emerging Markets, Emerging
Markets, International Developed, International, and Precious Metals 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. Certain illiquid securities may require pricing
at fair value as determined in good faith under the supervision of the Board
of Trustees. A Portfolio Manager may be subject to significant delays in
disposing of illiquid securities, and transactions in illiquid securities may
entail registration expenses and other transaction costs that are higher than
transactions in liquid securities.
The term "illiquid securities" for this purpose means securities that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which a Fund has valued the securities. 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
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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).
"FUNDAMENTAL" POLICIES
The investment objective of each of the Renaissance, Opportunity, Innovation,
Tax Exempt, International, and Precious Metals Funds described in this
Prospectus may be changed by the Board of Trustees without shareholder approval.
The investment objective of each other Fund is fundamental and may not be
changed without shareholder approval by vote of a majority of the outstanding
shares of that Fund. If there is a change in a Fund's investment objective,
including a change approved by shareholder vote, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs.
MANAGEMENT OF THE TRUST
The business affairs of the Trust are managed under the direction of the
Board of Trustees. The Trustees are E. Philip Cannon, Donald P. Carter, Gary A.
Childress, William D. Cvengros, Gary L. Light, Richard L. Nelson, Lyman W.
Porter, Robert A. Prindiville, Alan Richards, Joel Segall, W. Bryant Stooks,
and Gerald M. Thorne. 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 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 July 31, 1996 were approximately
$99.4 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 Pacific Investment Management.
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 800 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: Pacific Investment Management,
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 Portfolio
Managers for all of the Funds. With the exception of Van Eck (which manages the
Precious Metals Fund), each Portfolio Manager is an affiliate of PIMCO
Advisors. 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.
Pacific Investment Management manages the Fixed Income Securities Segment of
the Balanced Fund. Pacific Investment Management is an investment management
firm organized as a general partnership. Pacific
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39
Investment Management 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 Pacific
Investment Management, commenced operations in 1971. Pacific Investment
Management had approximately $80.0 billion of assets under management as of
July 31, 1996. Pacific Investment Management's address is 840 Newport Center
Drive, Suite 360, Newport Beach, California 92660. Pacific Investment
Management 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 Pacific Investment Management and has been associated
with Pacific Investment Management 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.
Parametric manages the Enhanced Equity Fund and the Structured Emerging
Markets Fund (the "Parametric Funds"). 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 July 31, 1996 of approximately
$1.6 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.
David Stein, Linda Mauzy, and Cliff Quisenberry are primarily responsible
for the day-to-day management of the Parametric Funds. Mr. Stein is a Managing
Director of Parametric and has been associated with Parametric since June,
1996. He also directs research and product development for Parametric. Mr.
Stein graduated with bachelor's and master's degrees in Applied Mathematics
from the University of Witwatersrand, South Africa, and received a Ph.D. in
Applied Mathematics from Harvard University. Prior to joining Parametric, Mr.
Stein served as the Director of Investment Research at GTE Investment
Management, Director of Active Equity Strategies at the Vanguard Group, and
Director of Quantitative Portfolio Management and Research at IBM. Ms. Mauzy
is a Senior Investment Manager of Parametric and has been with Parametric
since 1988. Ms. Mauzy graduated from the California State University with a
bachelor's degree in Chemistry, and from the University of California with a
master's degree in Economics. She is a Chartered Financial Analyst. Mr.
Quisenberry is a Senior Investment Manager and Research Manager of Parametric
and has been with Parametric since 1994. He previously served as a Vice
President and Portfolio Manager at Cutler & Co., and as a Security Analyst and
Portfolio Manager at Fred Alger Management. Mr. Quisenberry graduated from
Yale University with a bachelor's degree in Economics. He is a Chartered
Financial Analyst.
NFJ manages the Equity Income Fund, the Value Fund, the Small Cap Value
Fund, and a portion of the Common Stock Segment of the Balanced 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 July 31, 1996 of approximately $1.6 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 Equity
Income Fund, the Value Fund, and the portion of the Common Stock Segment of
the Balanced Fund allocated to NFJ. Mr. Najork is a Managing Director and a
founding partner of NFJ and has 27 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 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.
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Cadence manages the Capital Appreciation Fund, the Mid Cap Growth Fund, the
Micro Cap Growth Fund, the Small Cap Growth Fund, and a portion of the Common
Stock Segment of the Balanced 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 July
31, 1996 of approximately $2.7 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, William B. Bannick, Katherine A. Burdon, Eric M. Wetlaufer,
and Peter B. McManus 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 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 and Executive Vice
President of Cadence and has 11 years' investment management experience. He
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 in 1992. He graduated from the
University of Massachusetts and received his MBA from Boston University. Mr.
Bannick is a Chartered Financial Analyst. Ms. Burdon is a Managing Director and
Portfolio Manager of Cadence and has nine years' investment management
experience. She previously served as a Vice President and Portfolio Manager of
The Boston Company. Ms. Burdon joined Cadence in 1993. She graduated from
Stanford University and received a Master of Science degree from Northeastern
University. Ms. Burdon is a Chartered Financial Analyst and Certified Public
Accountant. Mr. Wetlaufer is a Managing Director and Portfolio Manager of
Cadence and has 11 years' investment management experience. He previously
served as Vice President of Northfield Information Services. Mr. Wetlaufer
joined Cadence in 1991. He graduated from Wesleyan University and is a
Chartered Financial Analyst. Mr. McManus is Director of Fund Management of
Cadence and has 19 years' investment management experience. He previously
served as a Vice President of Bank of Boston. Mr. McManus joined Cadence in
1994. He graduated from the University of Massachusetts, and is certified as a
Financial Planner.
Columbus Circle manages the Renaissance Fund, the Core Equity Fund, the Mid
Cap Equity Fund, the Opportunity Fund, the Innovation Fund, and the Tax Exempt
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 July 31, 1996 of
approximately $12.8 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.
At the center of Columbus Circle's equity investment strategy is its theory
of Positive Momentum & Positive Surprise. This theory asserts that a good
company doing better than generally expected will experience a rise in its
stock price. And, conversely, a company falling short of expectations will
experience a drop in its stock price. Based on this theory, Columbus Circle
attempts to manage the Columbus Circle Funds, with a view to investing in
growing companies that are surprising the market with business results that are
better than anticipated. 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.
<PAGE>
41
Blairlogie manages the Emerging Markets Fund, the International Developed
Fund, and the International Fund (the "Blairlogie Funds"). Blairlogie is an
investment management firm, organized as a limited partnership under the laws
of Scotland, United Kingdom, 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. 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 July 31, 1996 of
approximately $.7 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.
Van Eck is an unaffiliated investment adviser that manages the Precious
Metals Fund. Van Eck, together with its affiliates, provides investment
advisory services to other mutual funds and to private accounts. Van Eck is
controlled by John C. Van Eck who, along with members of his immediate family,
owns 100% of the stock of Van Eck. Accounts managed by Van Eck had combined
assets as of , 1996 of approximately $ . Van Eck's address is 99 Park
Avenue, New York, New York 10001. Van Eck is registered as an investment
adviser with the SEC.
Henry J. Bingham, Executive Managing Director of Van Eck and President of
the International Investors series of Van Eck Funds, has served as the
portfolio manager of the Precious Metals Fund since the Fund commenced
operations.
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 Pacific Investment Management, Parametric, NFJ, Cadence, Columbus Circle,
Blairlogie, and Van Eck may provide, and currently are providing, investment
management services to other clients, including other investment companies.
FUND ADMINISTRATOR
PIMCO Advisors serves as administrator to the Funds pursuant to an
administration agreement. The administrator provides or procures
administrative services for 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. PIMCO Advisors has retained Pacific Investment Management
to provide such services as sub-administrator. In addition, PIMCO Advisors, at
its own expense, arranges for the provision of legal, audit, custody, transfer
agency and other services necessary for the ordinary operation of 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 FUNDS
<PAGE>
42
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, Pacific
Investment Management, or their 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, Pacific Investment Management, 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 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>
Tax Exempt Fund.................................................... .30%
Equity Income, Value, Capital Appreciation, Mid Cap Growth,
Enhanced Equity, Structured Emerging Markets, and Balanced Funds.. .45%
International Fund................................................. .55%
Core Equity Fund................................................... .57%
Small Cap Value, Renaissance, International Developed, and Precious
Metals Funds...................................................... .60%
Mid Cap Equity Fund................................................ .63%
Opportunity and Innovation Funds................................... .65%
Emerging Markets Fund.............................................. .85%
Small Cap Growth Fund.............................................. 1.00%
Micro Cap Growth Fund.............................................. 1.25%
</TABLE>
For providing or procuring administrative services for the Funds as described
above, PIMCO Advisors receives monthly fees from each Fund at an annual rate
based on the average daily net assets attributable in the aggregate to the
Fund's Institutional Class and Administrative Class shares as follows:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEE RATE
---- --------------
<S> <C>
Structured Emerging Markets, International Developed, Inter-
national and Emerging Markets Funds......................... .50%
Precious Metals Fund......................................... .30%
All Other Funds.............................................. .25%
</TABLE>
The investment advisory, administration, and sub-administration agreements
for the Funds may be terminated by the Trustees, PIMCO Advisors or Pacific
Investment Management (as the case may be), on 60 days' written notice. In
addition, these agreements may be terminated with regard to the Renaissance
Fund, Opportunity Fund, Innovation Fund, Tax Exempt Fund, International Fund,
and Precious Metals Fund by a majority of the Trustees that are not interested
persons of the Trust, PIMCO Advisors, or Pacific Investment Management (as the
case may be), on 60 days' written notice. Following their initial 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: Pacific Investment Management--.35% for the Fixed Income Securities
Segment
<PAGE>
43
of the Balanced Fund; Parametric--.35% for the Enhanced Equity Fund and .35%
for the Structured Emerging Markets Fund; NFJ--.35% for the Equity Income
Fund, .35% for the Value Fund, .35% for the portion of the Common Stock
Segment of the Balanced Fund allocated to NFJ, and .50% for the Small Cap
Value Fund; Cadence--.35% for the Capital Appreciation Fund, .35% for the Mid
Cap Growth Fund, .35% for the portion of the Common Stock Segment of the
Balanced Fund allocated to Cadence, .90% for the Small Cap Growth Fund, and
1.15% for the Micro Cap Growth Fund; Columbus Circle--.30% for the Tax Exempt
Fund, .38% for the Renaissance Fund, .38% for the Innovation Fund, .47% for
the Core Equity Fund, .48% for the Opportunity Fund, and .53% for the Mid Cap
Equity Fund; Blairlogie--.40% for the International Fund, .50% for the
International Developed Fund, and .75% for the Emerging Markets Fund; and Van
Eck--.35% for the Precious Metals Fund.
SERVICE FEES
Under the terms of the Multiple Class Plan, PIMCO Advisors is permitted to
reimburse, out of the Administrative Class assets of each Fund, financial
intermediaries that provide services in connection with the administration of
plans or programs that use Fund shares as their funding medium. The Trust also
has adopted a Distribution Plan with respect to the Administrative Class
shares of each Fund. Under the terms of the Distribution Plan, the Trust is
permitted to reimburse, out of the Administrative Class assets of each Fund,
broker-dealers that provide services in connection with the distribution of
shares and to reimburse certain other distribution-related expenses. Total
reimbursements under these Plans may be paid in an amount up to 0.25% on an
annual basis of the average daily net assets of the Administrative Class. The
same entity may not receive both distribution and administrative services fees
with respect to the same assets but may with respect to separate assets
receive fees under each Plan. Fees paid pursuant to the Distribution Plan may
be paid for shareholder services 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 Distribution 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.
For more complete disclosure regarding the terms of the Multiple Class Plan
and the Distribution Plan, 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 Funds Distribution Company
(the "Distributor"), an indirect wholly owned subsidiary of PIMCO Advisors.
The Distributor, which is located at 2187 Atlantic Street, Stamford,
Connecticut 06902, is a broker-dealer registered with the SEC.
PURCHASE OF SHARES
Except for the Core Equity, Mid Cap Equity, and Opportunity Funds, each Fund
offers its shares in five classes: "Institutional Class," "Administrative
Class," "Class A," "Class B," and "Class C." This Prospectus relates only to
the Institutional Class shares and Administrative Class shares of the Funds.
For information regarding Class A, Class B, and Class C shares, see "Other
Information--Multiple Classes of Shares" below.
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, and other institutions.
They
PIMCO FUNDS
<PAGE>
44
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
employee benefit plan alliances, broker-dealers, and other intermediaries, and
each Fund pays service and distribution fees to such entities for services they
provide to shareholders of that Class.
Pension and profit-sharing plans, employee benefit trusts and employee
benefit plan alliances and "wrap account" programs established with broker-
dealers of financial intermediaries may purchase shares of either class only if
the plan or program for which the shares are being acquired will maintain an
omnibus or pooled account for each Fund and will not require a Fund to pay any
type of administrative payment per participant account to any third party.
Shares of either the Institutional Class or the Administrative 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 $5
million. They may also be offered to clients of Blairlogie, Cadence, Columbus
Circle, NFJ, Pacific Investment Management, Parametric, and their affiliates.
In addition, the minimum initial investment does not apply to shares of the
Institutional Class offered through fee-based programs sponsored and maintained
by a registered broker-dealer and approved by the Distributor pursuant to which
each investor pays an asset based fee at an annual rate of at least .50% of the
assets in the account to a financial intermediary for investment advisory
and/or administrative services.
INITIAL INVESTMENT
An account may be opened by completing and signing a Client Registration
Application and mailing it to PIMCO Funds at the following address: 840 Newport
Center Drive, Suite 360, Newport Beach, California 92660. A Client Registration
Application may be obtained by calling (800) 800-0952.
Except as provided below, purchases of Institutional Class and Administrative
Class shares can only be made by wiring federal funds to Investors Fiduciary
Trust Company (the "Transfer Agent"), 127 West 10th Street, Kansas City,
Missouri 64105. 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 Life
Insurance Company; or from an investment by broker-dealers, institutional
clients or other financial intermediaries which have established a shareholder
servicing relationship with the Trust on behalf of their customers.
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 prior to
the close of business (ordinarily 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.
<PAGE>
45
OTHER PURCHASE INFORMATION
Purchases of a Fund's Institutional Class and Administrative Class shares
will be made in full and fractional shares. In the interest of economy and
convenience, certificates for shares will not be issued.
The Trust and the Distributor each reserves the right, in its sole
discretion, to suspend the offering of shares of the Funds or to reject any
purchase order, in whole or in part, when, in the judgment of management, such
suspension or rejection is in the best interests of the Trust; 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).
Purchases and sales should be made for long-term investment purposes only.
The Trust and Adviser each reserves the right to restrict purchases of Fund
shares (including exchanges) when a pattern of frequent purchases and sales
made in response to short-term fluctuations in share price appears evident.
Institutional Class and Administrative Class shares of the Trust are not
qualified or registered for sale in all states. 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 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
all classes of 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 Small Cap Growth Fund, Opportunity Fund, Tax
Exempt Fund, Structured Emerging Markets Fund, International Fund, and
Precious Metals Fund are not offered as of the date of this Prospectus;
however, investment opportunities in these Funds may be available in the
future. 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 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.
PIMCO FUNDS
<PAGE>
46
REDEMPTION OF SHARES
REDEMPTIONS BY MAIL
Institutional Class and Administrative Class shares may be redeemed by
submitting a written request to PIMCO 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 Pacific
Investment Management and the Transfer Agent to act on telephone instructions
from any person representing himself to be the investor, and reasonably
believed by Pacific Investment Management and the Transfer Agent to be genuine.
Neither the Trust nor its Transfer Agent may be liable for any loss, cost or
expense for acting on instructions (whether in writing or by telephone)
believed by the party receiving such instructions to be genuine and in
accordance with the procedures described in this Prospectus. Shareholders
should realize that by electing the telephone or wire redemption option, they
may be giving up a measure of security that they might have if they were to
redeem their shares in writing. Furthermore, interruptions in telephone service
may mean that a shareholder will be unable to effect a redemption by telephone
when desired. The Transfer Agent also provides written confirmation of
transactions initiated by telephone as a procedure designed to confirm that
telephone instructions are genuine (written confirmation is also provided for
redemption requests received in writing). All telephone transactions are
recorded, and Pacific Investment Management or the Transfer Agent may request
certain information in order to verify that the person giving instructions is
authorized to do so. If the Trust or Transfer Agent fails to employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
it may be liable for any losses due to unauthorized or fraudulent telephone
transactions. 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.
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 Trust may suspend the
right of redemption or postpone the payment date at times when the New York
Stock Exchange is closed, or during certain other periods as permitted under
the federal securities laws.
<PAGE>
47
For shareholder protection, a request to change information contained in an
account registration (for example, a request to change the bank designated to
receive wire redemption proceeds) must be received in writing, signed by the
minimum number of persons designated on the Client Registration Application
that are required to effect a redemption, and accompanied by a signature
guarantee from any eligible guarantor institution, as determined in accordance
with the Trust's procedures. Shareholders should inquire as to whether a
particular institution is an eligible guarantor institution. A signature
guarantee cannot be provided by a notary public. In addition, corporations,
trusts and other institutional organizations are required to furnish evidence
of the authority of the persons designated on the Client Registration
Application to effect transactions for the organization.
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem Institutional Class and Administrative Class
shares in any account for their then-current value (which will be promptly
paid to the investor) if at any time, due to redemption by the investor, the
shares in the account do not have a value of at least $100,000. A shareholder
will receive advance notice of a mandatory redemption and will be given at
least 30 days to bring the value of its account up to at least $100,000.
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: Pacific
Investment Management Series, an affiliated mutual fund family composed
primarily of fixed income portfolios managed by Pacific Investment Management.
Shareholders interested in such an exchange may request a prospectus for these
funds by contacting the PIMCO Funds: Pacific Investment Management Series at
the same address and telephone number as the Trust.
Exchanges may be made only with respect to Funds or PIMCO Funds: Pacific
Investment Management 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.
The Trust reserves the right to modify or revoke the exchange privilege of
any shareholder or to limit or reject any exchange. Although each Fund will
attempt to give shareholders prior notice whenever it is reasonably able to do
so, it may impose these restrictions at any time.
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 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.
PIMCO FUNDS
<PAGE>
48
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 values of Institutional and Administrative Class shares of each
Fund of the Trust will be determined once on each day on which the New York
Stock Exchange (the "Exchange") is open (a "Business Day"), as of the close of
regular trading on the Exchange. Portfolio securities for which market
quotations are readily available are valued at market value. Fixed income
securities are valued on the basis of valuations furnished by a pricing
service, which are based on a variety of factors, including market transactions
for institutional-size trading units of such securities. 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. Exchange-
traded options, futures and options on futures are valued at the settlement
price as determined by the appropriate clearing corporation. All other
securities and assets are valued at their fair value as determined in good
faith by the Trustees or by persons acting at their direction. Each Fund's
liabilities are allocated among its classes. The total of such liabilities
allocated to a class plus that class' distribution and/or servicing fees and
any other expenses specially allocated to that class are then deduced from the
class' proportionate interest in the Fund's assets, and the resulting amount
for each class is divided by the number of shares of that class outstanding to
produce the "net asset value" per share. Under certain circumstances, the per
share net asset value of the Administrative Class shares of the Funds that do
not declare regular income dividends on a daily basis may be lower than the per
share net asset value of the Institutional Class shares as a result of the
daily expense accruals of the servicing fee applicable to the Administrative
Class shares. Generally, for Funds that pay income dividends, those dividends
are expected to differ over time by approximately the amount of the expense
accrual differential between the classes.
Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using foreign exchange quotations received from independent
dealers. The calculation of the net asset value of the Structured Emerging
Markets, Emerging Markets, International Developed, International, and Precious
Metals Funds may not take place contemporaneously with the determination of the
prices of certain portfolio securities of foreign issuers used in such
calculation. Further, under the Trust's procedures, the prices of foreign
securities are determined using information derived from pricing services and
other sources. Prices derived under these procedures will be used in
determining daily net asset value. Information that becomes known to the Trust
or its agents after the time that net asset value is calculated on any business
day may be assessed in determining net asset value per share after the time of
receipt of the information, but will not be used to retroactively adjust the
price of the security so determined earlier or on a prior day. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and 4:00 p.m., Eastern time, may not be reflected in the calculation
of net asset value. If events materially affecting the value of such securities
occur during such period, then these securities may be valued at fair value as
determined by the management and approved in good faith by the Board of
Trustees.
DIVIDENDS, DISTRIBUTIONS 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 daily
<PAGE>
49
and paid monthly to shareholders of record of the Tax Exempt Fund and declared
and paid quarterly to shareholders of record by the Equity Income, Value,
Renaissance, and Balanced Funds. Net investment income from interest and
dividends, if any, will be declared and paid at least annually to shareholders
of record by the Small Cap Value, Capital Appreciation, Mid Cap Growth, Micro
Cap Growth, Small Cap Growth, Core Equity, Mid Cap Equity, Opportunity,
Innovation, Enhanced Equity, Structured Emerging Markets, Emerging Markets,
International Developed, International, and Precious Metals Funds. 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 (the "Code"). 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. All
shareholders must treat dividends, other than capital gain dividends, exempt-
interest dividends, and dividends that represent a return of capital to
shareholders, as ordinary income. In particular, distributions derived from
short-term gains will be treated as ordinary income. Dividends designated by a
Fund as capital gain dividends derived from the Fund's net capital gains (that
is, the excess of its net long-term capital gains over its net short-term
capital losses) 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.
Dividends paid to shareholders by the Tax Exempt Fund which are derived from
interest on Tax Exempt Bonds are expected to be designated by the Fund as
"exempt-interest dividends," and shareholders may exclude such dividends from
gross income for federal income tax purposes. However, if a shareholder
receives social security or railroad retirement benefits, the shareholder may
be taxed on a portion of those benefits as a result of receiving tax-exempt
income. In addition, certain exempt-interest dividends could, as discussed
below, cause certain shareholders to become subject to the alternative minimum
tax and may increase the alternative minimum tax liability of shareholders
already subject to this tax. Other distributions from the Tax Exempt Fund may
constitute taxable income, and any gain realized on a redemption of shares
will be taxable gain, subject to any applicable tax exemption for which an
investor may qualify.
Dividends derived from interest on certain U.S. Government securities may be
exempt from state and local taxes, although interest on mortgage-backed U.S.
Government securities may not be so exempt. The distributions of "exempt-
interest dividends" paid by the Tax Exempt Fund may be exempt from state and
local taxation when received by a shareholder to the extent that they are
derived from interest on Tax Exempt Bonds issued by the state or political
subdivision in which such shareholder resides. The federal exemption for
"exempt-interest dividends" attributable to Tax Exempt Bonds does not
necessarily result in exemption of such dividends from income for the purpose
of state and local taxes. The Trust will report annually on a state-by-state
basis the source of income the Tax Exempt Fund receives on Tax Exempt Bonds
that was paid out as dividends during the preceding year.
PIMCO FUNDS
<PAGE>
50
The Code also provides that exempt-interest dividends allocable to interest
received from "private activity bonds" issued after August 7, 1986 are an item
of tax preference for individual and corporate alternative minimum tax at the
applicable rate for individuals and corporations. Therefore, if the Tax Exempt
Fund invests in such private activity bonds, certain of its shareholders may
become subject to the alternative minimum tax on that part of its distributions
to them that are derived from interest income on such bonds, and certain
shareholders already subject to such tax may have increased liability therefor.
However, it is the present policy of the Tax Exempt Fund to invest no more than
20% of its assets in such bonds. Other provisions of the Code affect the tax
treatment of distributions from the Tax Exempt Fund for corporations, casualty
insurance companies, and financial institutions. In particular, under the Code,
for corporations, alternative minimum taxable income will be increased by a
percentage of the amount by which the corporation's "adjusted current earnings"
(which includes various items of tax-exempt income) exceeds the amount
otherwise determined to be alternative minimum taxable income. Accordingly, an
investment in the Tax Exempt Fund may cause shareholders to be subject to (or
result in an increased liability under) the alternative minimum tax.
Current federal tax law requires the holder of a Treasury or other fixed
income zero coupon security to accrue as income each year a portion of the
discount at which the security was purchased, even though the holder receives
no interest payment in cash on the security during the year. In addition, pay-
in-kind securities will give rise to income which is required to be distributed
and is taxable even though the Fund holding the security receives no interest
payment in cash on the security during the year. Also, a portion of the yield
on certain high yield securities (including certain pay-in-kind securities)
issued after July 10, 1987 may be treated as dividends. Accordingly, each Fund
that holds the foregoing kinds of securities may be required to pay out as an
income distribution each year an amount which is greater than the total amount
of cash interest the Fund actually received. Such distributions may be made
from the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize gains or losses from such liquidations. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution, if any, than they
would in the absence of such transactions.
Taxable shareholders should note that the timing of their investment or
redemptions could have undesirable tax consequences. If shares are purchased on
or just before the record date of a dividend, taxable shareholders will pay full
price for the shares and may receive a portion of their investment back as a
taxable distribution. If shares are redeemed before payment of an exempt-
interest dividend, shareholders may realize a taxable capital gain, whereas by
waiting and receiving the exempt-interest dividend, a portion of their share
value would have been received in the form of tax-free income.
The preceding discussion relates only to federal income tax; the consequences
under other tax laws may differ. Shareholders should consult their tax advisers
as to the possible application of state and local income tax laws to Trust
dividends and capital gain distributions. 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,
and currently consists of twenty-two portfolios that are operational, twenty of
which are described in this Prospectus. Other portfolios may be offered by
means of a separate prospectus. The Board of Trustees may establish additional
portfolios in the future. The capitalization of the Trust consists of an
unlimited number of shares of beneficial interest. 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 Second
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.
<PAGE>
51
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.
MULTIPLE CLASSES OF SHARES
In addition to Institutional Class shares and Administrative Class shares,
each Fund except for the Core Equity, Mid Cap Equity, and Opportunity Funds
offers Class A shares, Class B shares, and Class C shares. The Opportunity
Fund offers Class A and Class C shares in addition to Institutional and
Administrative Class shares, while the Core Equity and Mid Cap Equity Funds do
not offer other classes of shares. These other classes of the Funds may have
different sales charges and expense levels, which will affect performance.
Investors may contact PIMCO Funds at (800) 800-0952 for more information
concerning other classes of shares of the Funds. This Prospectus relates only
to the Institutional Class shares and Administrative Class shares of the
Funds.
Each class of shares of each Fund represents interests in the assets of that
Fund, and each class has identical dividend, liquidation and other rights and
the same terms and conditions, except that expenses related to the
distribution and shareholder services of Administrative Class shares are borne
solely by such class, and each class may, at the Trustees' discretion, also
pay a different share of other expenses, not including advisory or custodial
fees or other expenses related to the management of the Trust's assets, if
these expenses are actually incurred in a different amount by that class, or
if the class receives services of a different kind or to a different degree
than the other classes. All other expenses are allocated to each class on the
basis of the net asset value of that class in relation to the net asset value
of the particular Fund.
VOTING
Each class of shares of each Fund has identical voting rights except that
each class of shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. Each class of shares has
exclusive voting rights with respect to matters pertaining to any Distribution
Plan applicable to that class. These shares are entitled to vote at meetings
of shareholders. Matters submitted to shareholder vote must be approved by
each Fund separately except (i) when required by the 1940 Act, shares shall be
voted together, and (ii) when the Trustees have determined that the matter
does not affect all Funds, then only shareholders of the Fund or Funds
affected shall be entitled to vote on the matter. All classes of shares of a
Fund will vote together, except with respect to a Distribution Plan applicable
to a class of shares or when a class vote is required as specified above or
otherwise by the 1940 Act. Shares are freely transferable, are entitled to
dividends as declared by the Trustees and, in liquidation of the Trust, are
entitled to receive the net assets of their Fund, but not of the other Funds.
The Trust does not generally hold annual meetings of shareholders and will do
so only when required by law. Shareholders may remove Trustees from office by
votes cast in person or by proxy at a meeting of shareholders or by written
consent. Such a meeting will be called at the written request of the holders
of 10% of the Trust's outstanding shares.
As of , 199 , [INSERT REGARDING CONTROLLING SHAREHOLDERS]. 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. For a description of the methods used to determine
yield and total return for the Funds, see the Statement of Additional
Information.
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
PIMCO FUNDS
<PAGE>
52
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. The Tax Exempt Fund also may advertise tax equivalent
yield, which is calculated like yield except that, for any given tax bracket,
net investment income will be calculated as the sum of (i) taxable income of
the class plus (ii) the tax exempt income of the class, divided by the
difference between 1 and the effective federal income tax rates for taxpayers
in that tax bracket. 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.
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.
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 contains
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).
<PAGE>
[LOGO OF PIMCO APPEARS HERE]
PIMCO FUNDS
- -----------
Multi-Manager Series
INVESTMENT ADVISER
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, CA 92660
ADMINISTRATOR
PIMCO Advisors L.P.
800 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
Price Waterhouse LLP
1055 Broadway
Kansas City, MO 64105
COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W., Suite 500
Washington, DC 20005
PROSPECTUS
- --------------------------------------------------------------------------------
January , 1997
<PAGE>
PIMCO FUNDS
MULTI-MANAGER SERIES
STATEMENT OF ADDITIONAL INFORMATION
JANUARY __, 1997
PIMCO Funds: Multi-Manager Series (the "Trust"), formerly PIMCO Funds:
Equity Advisors Series, PIMCO Advisors Institutional Funds, PFAMCo Funds, and
PFAMCo Fund, is an open-end management investment company ("mutual fund")
currently offering twenty-two separate investment portfolios (the "Funds"): the
EQUITY INCOME FUND, the VALUE FUND, the RENAISSANCE FUND, the ENHANCED EQUITY
FUND, the GROWTH FUND, the CAPITAL APPRECIATION FUND, the MID CAP GROWTH FUND,
the CORE EQUITY FUND, the MID CAP EQUITY FUND, the TARGET FUND, the SMALL CAP
VALUE FUND, the SMALL CAP GROWTH FUND, the OPPORTUNITY FUND, the MICRO CAP
GROWTH FUND, the INNOVATION FUND, the INTERNATIONAL BOND FUND, the INTERNATIONAL
DEVELOPED FUND, the EMERGING MARKETS FUND, the STRUCTURED EMERGING MARKETS FUND,
the PRECIOUS METALS FUND, the BALANCED FUND, and the TAX EXEMPT FUND.
The Trust's investment adviser is PIMCO Advisors L.P. ("PIMCO Advisors" or
the "Adviser"), 800 Newport Center Drive, Newport Beach, California 92660.
This Statement of Additional Information is not a Prospectus, and should be
used in conjunction with the Prospectuses for the Trust dated January __, 1997,
as supplemented from time to time. The Trust offers up to five classes of
shares of each of its Funds through two Prospectuses. Class A, B and C shares
are offered through the "Retail Prospectus," and Institutional and
Administrative Class shares are offered through the "Institutional Prospectus"
(collectively with the Retail Prospectus, the "Prospectuses"). A copy of the
applicable Prospectus may be obtained free of charge from the Trust at the
address and telephone number listed below.
Institutional Prospectus: Retail Prospectus:
------------------------ -----------------
PIMCO Funds: Multi-Manager Series PIMCO Funds Distribution Company
840 Newport Center Drive 2187 Atlantic Street
Suite 360 Stamford, Connecticut 06902
Newport Beach, California 92660 Telephone:(800)426-0107
Telephone: (800) 927-4648
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES.............................................................. 1
U.S. Government Securities................................................................. 1
Borrowing.................................................................................. 1
Preferred Stocks........................................................................... 2
Corporate Debt Securities.................................................................. 2
High Yield Securities ("Junk Bonds")....................................................... 3
Participation on Creditors Committees...................................................... 5
Variable and Floating Rate Securities...................................................... 5
Mortgage-Related and Asset-Backed Securities............................................... 6
Foreign Securities......................................................................... 10
Bank Obligations........................................................................... 11
Commercial Paper........................................................................... 11
Derivative Instruments..................................................................... 11
Forward Commitments, When-Issued and Delayed Delivery Transactions......................... 17
Warrants to Purchase Securities............................................................ 18
Illiquid Securities........................................................................ 18
Metal-Indexed Notes and Precious Metals.................................................... 19
INVESTMENT RESTRICTIONS......................................................................... 21
Fundamental Investment Restrictions........................................................ 21
Non-Fundamental Investment Restrictions.................................................... 23
MANAGEMENT OF THE TRUST......................................................................... 28
Trustees and Officers...................................................................... 28
Compensation Table......................................................................... 30
Investment Adviser......................................................................... 30
Portfolio Management Agreements............................................................ 32
Fund Administrator......................................................................... 35
Expense Limitations........................................................................ 38
DISTRIBUTION OF TRUST SHARES
Distributor and Multi-Class Plan........................................................... 38
Contingent Deferred Sales Charge and Initial Sales Charge.................................. 39
Distribution and Servicing Plans for Class A, Class B and Class C Shares................... 39
Distribution and Administrative Services Plans for Administrative Class Shares............. 40
Purchases, Exchanges and Redemptions....................................................... 42
PORTFOLIO TRANSACTIONS AND BROKERAGE............................................................ 43
Investment Decisions....................................................................... 43
Brokerage and Research Services............................................................ 43
Portfolio Turnover......................................................................... 45
NET ASSET VALUE................................................................................. 46
TAXATION........................................................................................ 46
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Distributions............................................................................. 49
Sales of Shares........................................................................... 49
Backup Withholding........................................................................ 49
Options, Futures, Forward Contracts and Swap Agreements................................... 49
Passive Foreign Investment Companies...................................................... 50
Foreign Currency Transactions............................................................. 51
Foreign Taxation.......................................................................... 51
Original Issue Discount................................................................... 52
Other Taxation............................................................................ 52
OTHER INFORMATION.............................................................................. 53
Capitalization............................................................................ 53
Performance Information................................................................... 53
Voting Rights............................................................................. 55
Certain Ownership of Trust Shares......................................................... 56
Code of Ethics............................................................................ 66
Custodian, Transfer Agent and Dividend Disbursing Agent................................... 66
Independent Accountants................................................................... 66
Counsel................................................................................... 66
Registration Statement.................................................................... 66
Financial Statements...................................................................... 67
APPENDIX A..................................................................................... A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and general investment policies of each Fund are
described in the Prospectuses. Additional information concerning the
characteristics of certain of the Funds' investments is set forth below.
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. Govern ment 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
Subject to the limitations described under "Investment Restrictions" below,
a Fund may be permitted to borrow for temporary purposes and/or for investment
purposes. Such a practice will result in leveraging of a Fund's assets and may
cause a Fund to liquidate portfolio positions when it would not be advantageous
to do so. This borrowing may be unsecured. Provisions of the Investment Company
Act of 1940 ("1940 Act") require a Fund to maintain continuous asset coverage
(that is, total assets including borrowings, less liabilities exclusive of
borrowings) of 300% of the amount borrowed, with an exception for borrowings not
in excess of 5% of the Fund's total assets made for temporary administrative
purposes. As noted under "Investment Restrictions," certain Funds are subject
to limitations on borrowings which are more strict than those imposed by the
1940 Act. Any borrowings for temporary administrative purposes in excess of 5%
of the Fund's total assets must maintain continuous asset coverage. If the 300%
asset coverage should decline as a result of market fluctuations or other
reasons, a Fund may be required to sell some of its portfolio holdings within
three days to reduce the debt and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time. 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 if permitted to do so under its specific
limitations on borrowings. 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 assets determined to be
liquid by the Portfolio Manager in accordance with procedures established by the
Board of Trustees equal (on a daily mark-to-market basis) to its obligations
under reverse repurchase agreements with broker-dealers (but not banks).
-1-
<PAGE>
However, reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. 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 331/3% of a Fund's total assets in the case of the Equity Income,
Value, Enhanced Equity, Capital Appreciation, Mid Cap Growth, Small Cap Value,
Small Cap Growth, Core Equity, Mid Cap Equity, Micro Cap Growth, International
Developed, Emerging Markets, Structured Emerging Markets and Balanced Funds.
Each of the Renaissance, Growth, Target, Opportunity, Innovation, International
Bond, Precious Metals and Tax Exempt Funds may not borrow money in excess of 10%
of the value (taken at the lower of cost or current value) of the Fund's total
assets and then only from banks for temporary defensive purposes (not for
leverage) as described under "Investment Restrictions" below.
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 Equity Income,
Value, Capital Appreciation, Mid Cap Growth, Micro Cap Growth, Small Cap Value,
Small Cap Growth, Core Equity, Mid Cap Equity, Enhanced Equity, Emerging
Markets, Structured Emerging Markets and International Developed 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.
-2-
<PAGE>
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 ("S&P") describes securities rated
BBB as "regarded as having an adequate capacity to pay interest and repay
principal...[w]hereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal...than in higher rated
categories."
Prices of high yield/high risk securities have been found to be less
sensitive to interest rate changes than more highly rated investments, but more
sensitive to economic downturns or individual corporate developments. The
markets on which lower rated securities are traded may be less liquid than for
higher grade securities, and adverse publicity and investor perceptions may
decrease the liquidity of these markets. Lower liquidity in secondary markets
could adversely affect the value of high yield/high risk securities held by the
Renaissance, Tax Exempt and Balanced Funds. While lower rated securities
typically are less sensitive to interest rate changes than higher rated debt,
the market prices of high yield/high risk securities structured as "zero coupon"
or "payment-in-kind" securities may be affected to a greater extent by interest
rate changes. See "High Yield Securities" and "Appendix A - Description of
Securities Ratings" for further information regarding high yield/high risk
securities.
HIGH YIELD SECURITIES ("JUNK BONDS")
As described in the Prospectuses, certain of the Funds may invest in
debt/fixed income securities of domestic or foreign issuers that meet minimum
ratings criteria set forth for a Fund, or if unrated, are of comparable quality
in the opinion of the Fund's Portfolio Manager. A description of the ratings
categories used is set forth in Appendix A to this Statement of Additional
Information.
A security is considered to be below "investment grade" quality if it is
either (1) not rated in one of the four highest rating categories by one of the
Nationally Recognized Statistical Rating Organizations ("NRSRO") (i.e., rated Ba
or below by Moody's or BB or below by S&P) or (2) if unrated, determined by the
Adviser or relevant Portfolio Manager to be of comparable quality to obligations
so rated.
As stated in the Prospectuses, certain of the Funds may purchase high yield
securities (as defined in the Prospectuses) rated in either the fifth or (except
for the Tax Exempt Fund) sixth highest rating categories by any NRSRO or
comparable unrated securities, and the Renaissance Fund may purchase high yield
securities rated below the sixth highest rating category by any NRSRO or
comparable unrated securities (but will not purchase any security in default on
the date of acquisition). Investment in high yield securities generally
provides greater income and increased opportunity for capital appreciation than
investments in higher quality securities, but they also typically entail greater
price volatility and principal and income risk. These high yield securities are
regarded as predominantly speculative with respect to the issuer's continuing
ability to meet principal and interest payments. The market for these
securities is relatively new, and many of the outstanding high yield securities
have not endured a major business recession. A long-term track record on
default rates, such as that for investment grade corporate bonds, does not exist
for this market. Analysis of the creditworthiness of issuers of high yield
securities may be more complex than for issuers of higher quality debt/fixed-
income securities. Each Fund of the Trust that may purchase high yield
securities may continue to hold such securities following a decline in their
rating if in the opinion of the Adviser or the Portfolio Manager, as the case
may be, it would be advantageous to do so. Investments in high yield securities
that are eligible for purchase by certain of the Funds, in particular, by the
Renaissance Fund, are described as "speculative" by both Moody's and S&P.
Investing in high yield securities involves special risks in addition to
the risks associated with investments in higher rated fixed income securities.
While offering a greater potential opportunity for capital appreciation and
higher
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yields than investments in higher rated debt securities, high yield securities
typically entail greater potential price volatility and may be less liquid than
investment grade debt. High yield securities may be regarded as predominately
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. Analysis of the creditworthiness of issuers of high yield
securities may be more complex than for issuers of higher quality debt
securities, and achievement of a Fund's investment objective may, to the extent
of its investments in high yield securities, depend more heavily on the
Portfolio Manager's creditworthiness analysis than would be the case if the Fund
were investing in higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of high yield securities have been found to be less sensitive to
interest rate changes than higher-rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection
of an economic downturn or of a period of rising interest rates, for example,
could cause a decline in high yield security prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt/fixed income securities. If an
issuer of high yield securities defaults, in addition to risking payment of all
or a portion of interest and principal, the Funds may incur additional expenses
to seek recovery. In the case of high yield securities structured as zero-
coupon or pay-in-kind securities, their market prices are affected to a greater
extent by interest rate changes, and therefore tend to be more volatile than
securities which pay interest periodically and in cash.
The secondary market on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading market could adversely affect the price at which the Funds
could sell a high yield security, and could adversely affect the daily net asset
value of the shares. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of high
yield securities especially in a thinly traded market. When secondary markets
for high yield securities are less liquid than the market for higher grade
securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is less reliable, objective data available.
The Adviser and the Portfolio Managers will seek to minimize the risks of
investing in all debt/fixed income securities through diversification, in-depth
credit analysis and attention to current developments in interest rates and
market conditions.
Securities are purchased and sold principally in response to current
assessments of future changes in business conditions and the levels of interest
rates on debt/fixed-income securities of varying maturities, the availability of
new investment opportunities at higher relative yields, and current evaluations
of an issuer's continuing ability to meet its obligations in the future. The
average maturity or duration of the debt/fixed income securities in the Fund's
portfolio may be varied in response to anticipated changes in interest rates and
to other economic factors, although under normal circumstances the Fund's
debt/fixed income securities will be primarily those with more than one year
remaining to maturity. Securities may be bought and sold in anticipation of a
decline or a rise in market interest rates. In addition, a security may be sold
and another of comparable quality and maturity (usually, but not always, of a
different issuer) purchased at approximately the same time to take advantage of
what are believed to be short-term differentials in values or yields.
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PARTICIPATION ON CREDITORS COMMITTEES
A Fund may from time to time participate on committees formed by creditors
to negotiate with the management of financially troubled issuers of securities
held by the Fund. Such participation may subject the Fund to expenses such as
legal fees and may make the Fund an "insider" of the issuer for purposes of the
federal securities laws, and therefore may restrict the Fund's ability to trade
in or acquire additional positions in a particular security when it might
otherwise desire to do so. Participation by the Fund on such committees also
may expose the Fund to potential liabilities under the federal bankruptcy laws
or other laws governing the rights of creditors and debtors. The Fund would
participate on such committees only when the Manager and the Portfolio Manager
believe that such participation is necessary or desirable to enforce the Fund's
rights as a creditor or to protect the value of securities held by the
Fund.
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.
Certain of the Funds 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.
Certain Funds may also invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse floater
is indexed. An inverse floating rate security may exhibit greater price
volatility than a fixed rate obligation of similar credit quality. The Trust
has adopted a policy under which the Balanced Fund will invest no more than 5%
of its net
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assets in any combination of inverse floater, interest only ("IO"), or principal
only ("PO") securities. See "Mortgage-Related and Asset-Backed Securities" below
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" below). The Balanced Fund may also invest in debt securities which
are secured with collateral consisting of mortgage-related securities (see
"Collateralized Mortgage Obligations" below) 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.
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/services 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
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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 instru mentalities, 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 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.
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<PAGE>
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.
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
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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.
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 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.
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FOREIGN SECURITIES
The Emerging Markets, Structured Emerging Markets, International Developed
and International 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. Each of the Equity Funds may invest in American
Depository Receipts ("ADRs"), as may the Balanced Fund. The Emerging Markets,
Structured Emerging Markets, International Developed and International Funds may
also invest in common stocks issued by foreign companies or in securities
represented by European Depository Receipts ("EDRs") or Global Depository
Receipts ("GDRs") (except for the International Fund). 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 financial information from an issuer that has participated in the
creation of a sponsored program. The Precious Metals Fund may invest primarily
in securities of foreign issuers, securities denominated in foreign currencies,
securities principally traded on securities markets outside of the United States
and in securities of foreign issuers that are traded on U. S. securities
markets, including ADRs, EDRs and GDRs. The Renaissance, Core Equity, Mid Cap
Equity, Growth, Target, Opportunity and Innovation 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), and (except for the Core Equity
and Mid Cap Equity Funds) may invest without limit in securities of foreign
issuers that are traded in U.S. securities markets. The Equity Income, Value,
Enhanced Equity, Capital Appreciation, Mid Cap Growth, Small Cap Value, Small
Cap Growth, Micro Cap Growth and Balanced Funds may also invest in ADRs. The
Enhanced Equity Fund may invest in common stock of foreign issuers if it is
included in the index from which stocks are selected. The Balanced Fund may
invest up to 20% of its assets allocated for investment in fixed income
securities in securities denominated in foreign currencies, and may invest
beyond this limit in U.S. dollar-denominated securities of foreign issuers.
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 Emerging Markets, Structured Emerging Markets and International Funds
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
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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 Renaissance, Growth, Target, Opportunity, Innovation, International,
International Developed, Emerging Markets, Structured Emerging Markets, Precious
Metals and Balanced Funds may enter into forward foreign currency exchange
contracts to reduce the risks of adverse changes in foreign exchange rates. In
addition, the Emerging Markets, Structured Emerging Markets, International
Developed, International, Balanced and Precious Metals Funds may buy and sell
foreign currency futures contracts and options on foreign currencies and foreign
currency futures. All of the Funds that may buy or sell foreign currencies may
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 exchange 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 currency.
Contracts to sell foreign currencies 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
risks arising from the Funds' investment or anticipated investment in securities
denominated in foreign currencies. Such hedging transactions may not be
successful and may eliminate any chance for a Fund to benefit from favorable
fluctuations in relevant foreign currencies. The International, International
Developed, Emerging Markets and Structured Emerging Markets Funds may also enter
into hedging contracts for purposes of increasing exposure to a foreign currency
or to shift exposure to foreign currency fluctuations from one currency to
another. To the extent that they do so, the International, International
Developed, Emerging Markets and Structured Emerging Markets Funds will be
subject to the additional risk that the relative value of currencies will be
different than anticipated by the particular Fund's Portfolio Manager. 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 assets determined to be liquid by the Portfolio Manager in accordance
with procedures established by the Board of Trustees in a segregated account to
cover forward currency contracts entered into for non-hedging purposes. The
Funds may also use foreign currency futures contracts and related options on
currencies for the same reasons for which forward foreign currency exchange
contracts are used.
BANK OBLIGATIONS
Bank obligations in which the Funds invest include certificates of deposit,
bankers' acceptances, and fixed time deposits. Certificates of deposit are
negotiable certificates issued against funds deposited in a commercial bank for
a definite period of time and earning a specified return. Bankers' acceptances
are negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor, but may be subject to early
withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. A Fund will not invest in
fixed time deposits which (1) are not subject to prepayment or (2) provide for
withdrawal penalties upon prepayment (other than overnight deposits) if, in the
aggregate, more than
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10% (in the case of the Equity Income, Value, Enhanced Equity, Capital
Appreciation, Mid Cap Growth, Small Cap Value, Small Cap Growth and Balanced
Funds), or 15% (in the case of the Renaissance, Growth, Mid Cap Equity, Core
Equity, Target, Opportunity, Micro Cap Growth, Innovation, International,
Emerging Markets, Structured Emerging Markets, International Developed, Precious
Metals and Tax Exempt 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 may also hold funds on deposit with its sub-custodian
bank in an interest-bearing account for temporary purposes.
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 Renaissance, Growth, Target, Core Equity, Mid Cap Equity, Opportunity,
Innovation, International, Emerging Markets, Structured Emerging Markets,
International Developed, and Balanced 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 limitations on concentration of no more than 25%
of its assets in the securities of issuers in a particular industry, there is no
limitation on the amount of a Fund's assets which may be invested in obligations
of foreign banks which meet the conditions set forth herein.
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.
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 Renaissance, Growth, Target, Core
Equity, Mid Cap Equity, Opportunity, Innovation, Emerging Markets, Structured
Emerging Markets, International and International Developed 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.
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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 future contracts as further described below. In pursuit of their
investment objectives, the Renaissance, Core Equity, Mid Cap Equity, Growth,
Target, Opportunity, Innovation, International Bond, International Developed,
Emerging Markets, Structured Emerging Markets, Precious Metals and Balanced
Funds may engage in the purchase and writing of call and put options on
securities; each of these Funds, along with the Enhanced Equity Fund, may engage
in the purchase and writing of options on securities indexes. The Tax Exempt
Fund may purchase call or put options on U.S. Government Securities, Tax Exempt
Bonds and Tax Exempt Bond indexes. The Precious Metals Fund may purchase and
write options on commodities indexes.
OPTIONS ON SECURITIES AND INDEXES. A Fund may, as specified for the Fund
in the Prospectuses, purchase and sell both put and call options on fixed income
or other securities or indexes in standardized contracts traded on foreign or
domestic securities exchanges, boards of trade, or similar entities, or quoted
on 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 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 assets determined to be liquid by
the Portfolio Manager in accordance with procedures established by the Board of
Trustees 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 assets determined to be liquid by the Portfolio Manager in accordance
with procedures established by the Board of Trustees in an amount equal to the
contract value of the index. A call option is also covered if the 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 assets determined to be liquid by
the Portfolio Manager in accordance with procedures established by the Board of
Trustees in a segregated account with its custodian. A put option on a security
or an index is "covered" if the Fund maintains assets determined to be liquid by
the Portfolio Manager in accordance with procedures established by the Board of
Trustees 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 assets determined to be liquid by the Portfolio Manager in accordance
with procedures established by the Board of Trustees 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
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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.
OTC OPTIONS. The Renaissance, Growth, Target, Opportunity, Innovation,
International, Precious Metals and Tax Exempt Funds will enter into over-
the-counter ("OTC") options transactions only with primary dealers in U.S.
Government securities and only pursuant to agreements that will assure that the
relevant Fund will at all times have the right to repurchase the option written
by it from the dealer at a specified formula price. The Funds will treat the
amount by which such formula price exceeds the intrinsic value of the option
(i.e., the amount, if any, by which the market price of the underlying security
exceeds the exercise price of the option) as an illiquid investment.
It is the present policy of each of the Renaissance, Growth, Target,
Opportunity, Innovation, International, Precious Metals and Tax Exempt
Funds not to enter into any OTC option transaction if, as a result, more than
15% of that Fund's net assets would be invested in (i) OTC options purchased by
the Fund, (ii) the illiquid portion (determined under the foregoing formula) of
OTC options written by the Fund, and (iii) other illiquid investments as set
forth below under the heading "Investment Restrictions."
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.
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FOREIGN CURRENCY OPTIONS. Each of the Funds that may buy or sell foreign
currencies 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 Prospectuses. 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.
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 assets determined to be liquid by the Portfolio Manager in
accordance with procedures established by the Board of Trustees ("initial
margin"). The margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the
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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.
LIMITATIONS ON USE OF FUTURES AND FUTURES OPTIONS. In general, the Funds
intend to enter into positions in futures contracts and related options only for
"bona fide hedging" purposes. With respect to positions in futures and related
options that do not constitute bona fide hedging positions, a Fund will not
enter into a futures contract or futures option contract if, immediately
thereafter, the aggregate initial margin deposits relating to such positions
plus premiums paid by it for open futures option positions, less the amount by
which any such options are "in-the-money," would exceed 5% of the Fund's net
assets. A call option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures contract
that is the subject of the option.
When purchasing a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) assets determined to be liquid by the
Portfolio Manager in accordance with procedures established by the Board of
Trustees, that, when added to the amounts deposited with a futures commission
merchant as margin, are equal to the market value of the futures contract.
Alternatively, the Fund may "cover" its position by purchasing a put option on
the same futures contract with a strike price as high or higher than the price
of the contract held by the Fund.
When selling a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) assets determined to be liquid by the
Portfolio Manager in accordance with procedures established by the Board of
Trustees, that are equal to the market value of the instruments underlying the
contract. Alternatively, the Fund may "cover" its position by owning the
instruments underlying the contract (or, in the case of an index futures
contract, a portfolio with a volatility substantially similar to that of the
index on which the futures contract is based), or by holding a call option
permitting the Fund to purchase the same futures contract at a price no higher
than the price of the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Trust's custodian).
When selling a call option on a futures contract, a Fund will maintain with
its custodian (and mark-to-market on a daily basis) assets determined to be
liquid by the Portfolio Manager in accordance with procedures established by the
Board of Trustees, that, when added to the amounts deposited with a futures
commission merchant as margin, equal the total market value of the futures
contract underlying the call option. Alternatively, the Fund may cover its
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position by entering into a long position in the same futures contract at a
price no higher than the strike price of the call option, by owning the
instruments underlying the futures contract, or by holding a separate call
option permitting the Fund to purchase the same futures contract at a price not
higher than the strike price of the call option sold by the Fund.
When selling a put option on a futures contract, a Fund will maintain with
its custodian (and mark-to-market on a daily basis) assets determined to be
liquid by the Portfolio Manager in accordance with procedures established by the
Board of Trustees that equal the purchase price of the futures contract, less
any margin on deposit. Alternatively, the Fund may cover the position either by
entering into a short position in the same futures contract, or by owning a
separate put option permitting it to sell the same futures contract so long as
the strike price of the purchased put option is the same or higher than the
strike price of the put option sold by the Fund.
The requirements for qualification as a regulated investment company also
may limit the extent to which a Fund may enter into futures, futures options or
forward contracts. See "Taxation".
RISKS ASSOCIATED WITH FUTURES AND FUTURES OPTIONS. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in the Fund securities being hedged. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given hedge
not to achieve its objectives. The degree of imperfection of correlation
depends on circumstances such as variations in speculative market demand for
futures and futures options on securities, including technical influences in
futures trading and futures options, and differences between the financial
instruments being hedged and the instruments underlying the standard contracts
available for trading in such respects as interest rate levels, maturities, and
creditworthiness of issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.
Futures 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
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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 Emerging Markets, Structured Emerging Markets and
International Developed 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. The
Balanced Fund may enter into swap agreements to hedge against changes in
interest rates, foreign currency exchange rates or securities prices. 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.
Most swap agreements entered into by the Funds would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Fund's current obligations under a swap agreement will be
accrued daily (offset against any amounts owing to the Fund) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of assets determined to be liquid
by the Portfolio Manager in accordance with procedures established by the Board
of Trustees, to avoid any potential leveraging of the Fund's portfolio.
Obligations under swap agreements so covered will not be construed to be "senior
securities" for purposes of the 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. Moreover, a Fund bears the risk of loss of the
amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. The Funds will enter
into swap agreements only with counterparties that meet certain standards of
creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Funds' repurchase agreement guidelines).
Certain restrictions imposed on the Funds by the Internal Revenue Code may limit
the Funds' ability to use swap agreements. The swaps market is a relatively new
market and is largely unregulated. It is possible that developments in the
swaps market, including potential government regulation, could adversely affect
a Fund's ability to terminate existing swap agreements or to realize amounts to
be received under such agreements.
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
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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.
FORWARD COMMITMENTS, WHEN-ISSUED AND 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, assets determined to be liquid by the
Portfolio Manager in accordance with procedures established by the Board of
Trustees in an amount sufficient to meet the purchase price. Typically, no
income accrues on securities 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, 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.
As described in the Prospectuses, each Fund may make contracts to purchase
securities for a fixed price at a future date beyond customary settlement time
("forward commitments") if the Fund either (i) holds, and maintains until the
settlement date in a segregated account, assets determined to be liquid by the
Portfolio Manager in accordance with procedures established by the Board of
Trustees in an amount sufficient to meet the purchase price or (ii) enters into
an offsetting contract for the forward sale of securities of equal value that it
owns. Certain Funds may enter into forward commitments for the purchase or sale
of foreign currencies. Forward commitments may be considered securities in
themselves. They involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. A Fund may dispose of a
commitment prior to settlement and may realize short-term profits or losses upon
such disposition.
Many of the Funds may enter into forward foreign currency exchange
contracts or purchase and sell foreign currency options in order to protect
against uncertainty in the level of future foreign exchange rates. Since
investment in foreign securities will usually involve foreign currencies, and
since a Fund may temporarily hold funds in bank deposits in foreign currencies
during the course of investment programs, the value of the assets of a Fund as
measured in United States dollars may be affected by changes in foreign currency
exchange rates and exchange control
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regulations, and the Fund may incur costs in connection with conversion between
various currencies. The International, International Developed, Emerging
Markets, and Structured Emerging Markets Funds may also use such instruments to
shift exposure to foreign currency fluctuations from one currency to
another.
All Funds other than the International, International Developed,
Emerging Markets and Structured Emerging Markets Funds may enter into forward
contracts only under two circumstances. First, when a Fund enters into a
----
contract for the purchase or sale of a security, commodity or Metal-Indexed Note
(see below) denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for the
purchase or sale of the amount of foreign currency involved in the transactions
for a fixed amount of dollars, the Fund may be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the investment is purchased or sold and the date on which payment is
made or received.
Second, when management of the Fund believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio investments denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those investments between the date the forward
contract is entered into and the date it matures.
Of course, a Fund is not required to enter into such transactions with
regard to its foreign currency-denominated securities and will not do so unless
deemed appropriate by the Adviser or the Portfolio Manager. The Funds' ability
to engage in forward contracts may be limited by tax considerations.
WARRANTS TO PURCHASE SECURITIES
All Funds except the Tax Exempt Fund 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 Equity Income, Value, Enhanced Equity, Capital Appreciation, Mid Cap
Growth, Small Cap Value, Small Cap Growth 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 Renaissance, Core
Equity, Mid Cap Equity, Growth, Target, Opportunity, Micro Cap Growth,
Innovation, International, Emerging Markets, Structured Emerging Markets,
International Developed, Precious Metals and Tax Exempt 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.
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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).
TAX EXEMPT BONDS
As noted in the Prospectuses, it is a policy of the Tax Exempt Fund to have
80% of its net assets invested in debt obligations the interest on which, in the
opinion of bond counsel to the issuer at the time of issuance, is exempt from
federal income tax ("Tax Exempt Bonds") which are rated Baa or higher by Moody's
or BBB or higher by S&P, or in one of the four highest rating categories of any
other NRSRO, or which are unrated and determined by the Adviser or the Fund's
Portfolio Manager to be of quality comparable to obligations so rated. Under
such policy, the Fund may invest up to 20% of its net assets in Tax Exempt Bonds
rated in the fifth highest rating category by any NRSRO, or unrated obligations
determined by the Fund's sub-adviser to be of quality comparable to obligations
so rated. A description of these ratings is set forth in Appendix A hereto.
From time to time, however, the Fund may have less than 80% of its net assets
invested in Tax Exempt Bonds for temporary defensive purposes. The ability of
the Fund to invest in securities other than Tax Exempt Bonds is limited by a
requirement of the Internal Revenue Code of 1986 that at least 50% of the Fund's
total assets be invested in Tax Exempt Bonds at the end of each calendar
quarter. See "Taxes."
Tax Exempt Bonds share the attributes of debt/fixed income securities in
general, but are generally issued by states, municipalities and other political
subdivisions, agencies, authorities and instrumentalities of states and multi-
state agencies or authorities. The Tax Exempt Bonds which the Tax Exempt Fund
may purchase include general obligation bonds and limited obligation bonds (or
revenue bonds), including industrial development bonds issued pursuant to former
federal tax law. General obligation bonds are obligations involving the credit
of an issuer possessing taxing power and are payable from such issuer's general
revenues and not from any particular source. Limited obligation bonds are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source. Tax-exempt private activity bonds and industrial
development bonds generally are also revenue bonds and thus are not payable from
the issuer's general revenues. The credit and quality of private activity bonds
and industrial development bonds are usually related to the credit of the
corporate user of the facilities. Payment of interest on and repayment of
principal of such bonds is the responsibility of the corporate user (and/or any
guarantor).
Under the Internal Revenue Code of 1986, certain limited obligation bonds
are considered "private activity bonds" and interest paid on such bonds is
treated as an item of tax preference for purposes of calculating federal
alternative minimum tax liability.
Tax Exempt Bonds are subject to credit and market risk. Generally, prices
of higher quality issues tend to fluctuate less with changes in market interest
rates than prices of lower quality issues and prices of longer maturity issues
tend to fluctuate more than prices of shorter maturity issues.
The Tax Exempt Fund may purchase and sell portfolio investments to take
advantage of changes or anticipated changes in yield relationships, markets or
economic conditions. The Fund may also sell Tax Exempt Bonds due to changes in
the Portfolio Manager's evaluation of the issuer or cash needs resulting from
redemption requests for Fund shares. The secondary market for Tax Exempt Bonds
typically has been less liquid than that for
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taxable debt/fixed-income securities, and this may affect the Fund's ability to
sell particular Tax Exempt Bonds at then-current market prices, especially in
periods when other investors are attempting to sell the same securities.
Prices and yields on Tax Exempt Bonds are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the Tax Exempt Bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
A number of these factors, including the ratings of particular issues, are
subject to change from time to time. Information about the financial condition
of an issuer of Tax Exempt Bonds may not be as extensive as that which is made
available by corporations whose securities are publicly traded.
Obligations of issuers of Tax Exempt Bonds are subject to the provisions of
bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Reform Act
of 1978, affecting the rights and remedies of creditors. Congress or state
legislatures may seek to extend the time for payment of principal or interest,
or both, or to impose other constraints upon enforcement of such obligations.
There is also the possibility that as a result of litigation or other conditions
the power or ability of issuers to meet their obligations for the payment of
interest and principal on their Tax Exempt Bonds may be materially affected or
their obligations may be found to be invalid or unenforceable. Such litigation
or conditions may from time to time have the effect of introducing uncertainties
in the market for Tax Exempt Bonds or certain segments thereof, or of materially
affecting the credit risk with respect to particular bonds. Adverse economic,
business, legal or political developments might affect all or a substantial
portion of the Fund's Tax Exempt Bonds in the same manner.
METAL-INDEXED NOTES AND PRECIOUS METALS
The Precious Metals Fund may invest in notes, the principal amount or
redemption price of which is indexed to and thus varies directly with changes in
the market price of gold bullion or other precious metals ("Metal-Indexed
Notes"). It is expected that the value of Metal-Indexed Notes will be as
volatile as the price of the underlying metal.
The Precious Metals Fund will only purchase Metal-Indexed Notes which are
rated, or are issued by issuers that have outstanding debt obligations rated
investment grade or commercial paper rated in the top rating category by any
NRSRO or of issuers that the Adviser or the Portfolio Manager has determined to
be of similar creditworthiness. Debt obligations rated in the fourth highest
rating category by an NRSRO are considered to have some speculative
characteristics. The Metal-Indexed Notes might be backed by a bank letter of
credit, performance bond or might be otherwise secured, and any such security,
which would be held by the Fund's custodian, would be taken into account in
determining the creditworthiness of the securities. The Precious Metals Fund
might purchase unsecured Metal-Indexed Notes if the issuer thereof met the
Fund's credit standards without any such security. While the principal amount
or redemption price of Metal-Indexed Notes would vary with the price of the
resource, such securities would not be secured by a pledge of the resource or
any other security interest in or claim on the resource. In the case of Metal-
Indexed Notes not backed by a performance bond, letter of credit or similar
security, it is expected that such securities generally would not be secured by
any other specific assets.
The Precious Metals Fund anticipates that if Metal-Indexed senior
securities were to be purchased, such securities would be issued by precious
metals or commodity brokers or dealers, by mining companies, by commercial banks
or by other financial institutions. Such issuers would issue notes to hedge
their inventories and reserves of the resource, or to borrow money at a
relatively low cost (which would include the nominal rate of interest paid on
Metal-Indexed Notes, described below, and the cost of hedging the issuer's
metals exposure). The Precious Metals Fund would not purchase a Metal-Indexed
Note issued by a broker or dealer if as a result of such purchase more than 5%
of the value of the Fund's total assets would be invested in securities of such
issuer. The Precious Metals Fund might purchase Metal-Indexed Notes from
brokers or dealers which are not also securities brokers or dealers. Precious
metals or commodity brokers or dealers are not subject to supervision or
regulation by any governmental authority or self-regulatory organization in
connection with the issuance of Metal-Indexed Notes.
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Until recently, there were no Metal-Indexed Notes outstanding and
consequently there is no secondary trading market for such securities. Although
a limited secondary market might develop among institutional traders, there is
no assurance that such a market will develop. No public market is expected to
develop, since the Precious Metals Fund expects that Metal-Indexed Notes will
not be registered under the 1933 Act and therefore disposition of such
securities, other than to the issuer thereof (as described below), would be
dependent upon the availability of an exemption from such registration.
Any Metal-Indexed Notes which the Precious Metals Fund might purchase
generally will have maturities of one year or less. Such notes, however, will
be subject to being called for redemption by the issuer on relatively short
notice. In addition, it is expected that the Metal-Indexed Notes will be
subject to being put by the Precious Metals Fund to the issuer or to a stand-by
broker meeting the credit standards set forth above, with payments being
received by the Precious Metals Fund on no more than seven days' notice. A
stand-by broker might be a securities broker-dealer, in which case the Precious
Metals Fund's investment will be limited by applicable regulations of the
Securities and Exchange Commission (the "SEC"). The put feature of the Metal-
Indexed Notes will ensure liquidity even in the absence of a secondary trading
market. The securities will be repurchased upon exercise of the holder's put at
the price determined in the manner described above, less repurchase fees, if
any, which are not expected to exceed 1% of the redemption or repurchase
proceeds. Depending upon the terms of particular Metal-Indexed Notes, there
might be a period as long as five days between the date upon which the Precious
Metals Fund notifies the issuer of the exercise of the put and determination of
the sale price.
It is expected that any Metal-Indexed Notes which the Precious Metals Fund
might purchase will bear interest or pay preferred dividends at relatively
nominal rates under 2% per annum. The Precious Metals Fund's holdings of such
senior securities therefore would not generate appreciable current income, and
the return from such senior securities would be primarily from any profit on the
sale or maturity thereof at a time when the price of the relevant precious metal
is higher than it was when the senior securities were purchased. The Precious
Metals Fund will not invest in Metal-Indexed Notes that are not publicly traded
until it is certain of how the Internal Revenue Service would characterize
income derived from such notes.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements with domestic
commercial banks or registered broker/dealers. A repurchase agreement is a
contract under which a Fund would acquire a security for a relatively short
period (usually not more than one week) subject to the obligation of the seller
to repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). In the case of repurchase
agreements with broker-dealers, the value of the underlying securities (or
collateral) will be at least equal at all times to the total amount of the
repurchase obligation, including the interest factor. The Fund bears a risk of
loss in the event that the other party to a repurchase agreement defaults on its
obligations and the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities. The Adviser and the Portfolio Managers,
as appropriate, will monitor the creditworthiness of the counterparties.
SECURITIES LOANS
Each of the Equity Income, Value, Enhanced Equity, Capital Appreciation,
Mid Cap Growth, Small Cap Value, Small Cap Growth, Core Equity, Mid Cap Equity,
Micro Cap Growth, International Developed, Emerging Markets, Structured Emerging
Markets and Balanced Funds may make secured loans of its portfolio securities
amounting to no more than 33 1/3% of its total assets. The Renaissance, Growth,
Target, Opportunity, Innovation, International, Precious Metal and Tax
Exempt Funds may make such loans amounting to no more than 25% of their
total assets. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
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However, such loans will be made only to broker-dealers that are believed by the
Adviser or the Portfolio Manager to be of relatively high credit standing.
Securities loans are made to broker-dealers pursuant to agreements requiring
that loans be continuously secured by collateral in cash, U.S. Government
securities or other liquid high grade debt obligations at least equal at all
times to the market value of the securities lent, provided that such loans made
by the U.S. Government Fund will only be secured by cash and U.S. Government
securities. The borrower pays to the lending Fund an amount equal to any
dividends or interest received on the securities lent. The Fund may invest the
cash collateral received in interest-bearing, short-term securities or receive a
fee from the borrower. Although voting rights or rights to consent with respect
to the loaned securities pass to the borrower, the Fund retains the right to
call the loans at any time on reasonable notice, and it will do so in order that
the securities may be voted by the Fund if the holders of such securities are
asked to vote upon or consent to matters materially affecting the investment.
The Fund may also call such loans in order to sell the securities involved.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of the
RENAISSANCE, GROWTH, TARGET, OPPORTUNITY, INNOVATION, INTERNATIONAL,
PRECIOUS METALS AND TAX EXEMPT FUNDS and may not be changed with respect to any
such Fund without shareholder approval by vote of a majority of the outstanding
voting securities of that Fund. Under these restrictions, none of the above-
----
mentioned Funds may:
(1) borrow money in excess of 10% of the value (taken at the lower of cost
or current value) of such Fund's total assets (not including the amount
borrowed) at the time the borrowing is made, and then only from banks as a
temporary measure to facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such borrowings will be
repaid before any additional investments are purchased;
(2) pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 10% of such Fund's total assets (taken at cost) and then only to
secure borrowings permitted by Restriction 1 above. (The deposit of securities
or cash or cash equivalents in escrow in connection with the writing of covered
call or put options, respectively, is not deemed to be pledges or other
encumbrances.) (For the purpose of this restriction, collateral arrangements
with respect to the writing of options, futures contracts, options on futures
contracts, and collateral arrangements with respect to initial and variation
margin are not deemed to be a pledge of assets and neither such arrangements nor
the purchase or sale of futures or related options are deemed to be the issuance
of a senior security.);
(3) underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under federal securities laws;
(4) purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, including securities of real estate
investment trusts, and may purchase securities which are secured by interests in
real estate, except that the Precious Metals Fund may purchase or sell
agricultural land;
(5) acquire more than 10% of the voting securities of any issuer, both
with respect to any such Fund [and to the Funds to which this policy relates, in
the aggregate]; or
(6) concentrate more than 25% of the value of its total assets in any one
industry, or, in the case of the Tax Exempt Fund, in industrial development
revenue bonds based, directly or indirectly, on the credit of private entities
in any one industry; except that the Precious Metals Fund will concentrate more
than 25% of its total assets in securities of companies principally engaged in
the extraction, processing, distribution or marketing of precious metals, and
the Innovation Fund will concentrate more than 25% of its assets in companies
which use innovative technology to gain a strategic, competitive advantage in
their industry as well as companies that provide and service
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those technologies. With respect to investments of the Tax Exempt Fund in
utilities, gas, electric, water and telephone companies will be considered as
being in separate industries.
The investment objective of each of the EQUITY INCOME, VALUE, ENHANCED
EQUITY, CAPITAL APPRECIATION, MID CAP GROWTH, SMALL CAP VALUE, SMALL CAP GROWTH,
CORE EQUITY, MID CAP EQUITY, MICRO CAP GROWTH, INTERNATIONAL DEVELOPED, EMERGING
MARKETS, STRUCTURED EMERGING MARKETS AND BALANCED FUNDS, as set forth in the
Prospectuses under "Investment Objectives and Policies," together with the
investment restrictions set forth below, are fundamental policies of each such
Fund and may not be changed with respect to any such Fund without shareholder
approval by vote of a majority of the outstanding shares of that Fund. Under
these restrictions, none of the above-mentioned Funds may:
----
(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 or swap agreements), except that any such 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 such Fund's assets);
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(8) issue senior securities, except insofar as such 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 such 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 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.
For purposes of fundamental investment restriction (5) above, swap
agreements are not deemed to be commodities contracts. Notwithstanding the
provisions of fundamental investment restrictions (7) and (8) above, a Fund may
borrow money for temporary administrative purposes. To the extent that
borrowings for temporary administrative purposes exceed 5% of the total assets
of a Fund, such excess shall be subject to the 300% asset coverage requirement
of fundamental investment restriction (7).
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
The RENAISSANCE, GROWTH, TARGET, OPPORTUNITY, INNOVATION, INTERNATIONAL,
PRECIOUS METALS AND TAX EXEMPT FUNDS are also subject to the following
non-fundamental restrictions and policies (which may be changed without
shareholder approval) and, unless otherwise indicated, may not:
(1) invest in (a) securities which at the time of such investment are not
readily marketable, (b) securities the disposition of which is restricted under
federal securities laws, (c) repurchase agreements maturing in more than seven
days (d) OTC options (to the extent described above under "Derivative
Instruments -- OTC Options"), and (e) IO/PO SMBS (as described above under
"Mortgage-Related and Asset-Backed Securities -- Stripped Mortgage -Backed
Securities") if, as a result, more than 15% of a Fund's net assets, taken at
current value, would then be invested in securities described in (a), (b), (c),
(d) and (e) above. For the purpose of this restriction securities subject to a
7-day put option or convertible into readily saleable securities or commodities
are not included with subsections (a) or (b);
(2) with respect to the Tax Exempt Fund, invest less than 80% of such
Fund's net assets in Tax Exempt Bonds rated Baa or higher by Moody's or BBB or
higher by S&P or which are unrated and determined by such Fund's Portfolio
Manager to be of comparable quality;
(3) purchase securities on margin, except such short-term credits as may
be necessary for the clearance of purchases and sales of securities. (For this
purpose, the deposit or payment by a Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.);
(4) make short sales of securities or maintain a short position for the
account of a Fund unless at all times when a short position is open such Fund
owns an equal amount of such securities or owns securities which, without
payment of any further consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the securities sold
short;
-26-
<PAGE>
(5) purchase or sell commodities or commodity contracts except that such
Funds may purchase and sell financial futures contracts and related options and
the Precious Metals Fund may purchase and sell precious metals and other
commodities and futures thereon;
(6) make loans, except by purchase of debt obligations or by entering into
repurchase agreements (in the case of the Tax Exempt Fund, with respect to not
more than 20% of its total assets) or through the lending of the Fund's
portfolio securities with respect to not more than 25% of its total assets (33
1/3% in the case of the Target Fund);
(7) invest in securities of any issuer if, to the knowledge of the Trust,
any officers and Trustees of the Trust and officers and directors of the Adviser
or the Portfolio Manager of the Fund who individually own beneficially more than
1/2 of 1% of the securities of that issuer, own beneficially in the aggregate
more than 5% of the securities of such issuer;
(8) invest in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of such Fund (taken at current
value) would be invested in the securities of such issuer, except that up to 25%
of the International Fund's and Target Fund's total assets taken at current
value may be invested (without regard to such 5% limitation) in the securities
of an issuer; and provided that this limitation does not apply to bank
certificates of deposit or to obligations issued or guaranteed as to interest
and principal by the U.S. government or its agencies or instrumentalities. For
the purpose of this restriction, each state and each separate political
subdivision, agency, authority or instrumentality of such state, each multi-
state agency or authority, and each guarantor, if any, are treated as separate
issuers of Tax Exempt Bonds;
(9) invest in securities of other investment companies, except by purchase
in the open market involving only customary brokers' commissions except for the
International Fund, which may invest up to 10% of its assets in securities
of other investment companies without regard to this restriction. For purposes
of this restriction, foreign banks and foreign insurance companies or their
respective agents or subsidiaries are not considered investment companies.
(Under the 1940 Act no registered investment company may (a) invest more than
10% of its total assets (taken at current value) in securities of other
investment companies, (b) own securities of any one investment company having a
value in excess of 5% of its total assets (taken at current value), or (c) own
more than 3% of the outstanding voting stock of any one investment company.);
(10) purchase securities the disposition of which is restricted under the
federal securities laws (excluding for purposes of this restriction securities
offered and sold pursuant to Rule 144A of the 1933 Act and Section 4(2)
commercial paper) if, as a result, such investments would exceed 10% of the
value of the net assets of the relevant Fund; provided, however, that so long as
a similar restriction applies under the Ohio Administrative Code, no Fund will
invest more than 15% of its total assets in the securities of issuers which
together with any predecessors have a record of less than three years continuous
operation or securities of issuers which are restricted as to disposition
(including Rule 144A securities and Section 4(2) commercial paper);
(11) invest in warrants or rights excluding options (other than warrants
or rights acquired by such Fund as a part of a unit or attached to securities at
the time of purchase) if as a result such investments (valued at the lower of
cost or market) would exceed 5% of the value of such Fund's net assets; provided
that not more than 2% of the Fund's net assets may be invested in warrants not
listed on the New York or American Stock Exchanges;
(12) invest in securities of an issuer, which, together with any
predecessors or controlling persons, has been in operation for less than three
consecutive years and in equity securities for which market quotations are not
readily available (excluding restricted securities) if, as a result, the
aggregate of such investments would exceed 5% of the value of the Fund's net
assets; provided, however, that this restriction shall not apply to any
obligation of the U.S. Government or its instrumentalities or agencies. (Debt
securities having equity features are not considered "equity securities" for
purposes of this restriction.);
-27-
<PAGE>
(13) write (sell) or purchase options except that (i) each such Fund other
than the Tax Exempt Fund may (a) write covered call options or covered put
options on securities that it is eligible to purchase (and, with respect to the
Renaissance, Growth, Opportunity, Target, Innovation, International and
Precious Metals Funds, on stock indexes) and enter into closing purchase
transactions with respect to such options, and (b) in combination therewith, or
separately, purchase put and call options on securities it is eligible to
purchase, and (ii) the Tax Exempt Fund may purchase put options with respect to
all or any part of its portfolio securities and call options with respect to
securities that it is eligible to purchase; provided that the premiums paid by
each such Fund on all outstanding options it has purchased do not exceed 5% of
its total assets. Each such Fund may enter into closing sale transactions with
respect to options it has purchased;
(14) buy or sell oil, gas or other mineral leases, rights or royalty
contracts, except that the Precious Metals Fund may purchase and sell interests
in oil, gas and other natural resources (other than oil, gas or other mineral
leases);
(15) make investments for the purpose of gaining control of a company's
management;
(16) invest in certificates of deposit of any bank if, immediately after
such investment, more than 5% of the total assets of such Fund (taken at current
value) would be invested in the securities (including certificates of deposit)
of that bank, except that (i) each diversified Fund may invest up to 25% of its
total assets without regard to this restriction and (ii) each non-diversified
Fund shall not be subject to this restriction;
(17) purchase or sell real estate, including investments in limited
partnerships that invest directly in real estate; provided, however, that these
Funds may invest in readily marketable interests in real estate investment
trusts or readily marketable securities of companies that invest in real estate;
(18) with respect to the Target Fund, invest in commodities or commodity
futures contracts; or
(19) engage in short-term trading as a matter of policy; provided,
however, that in pursuing such Fund's investment objective, the Fund's Portfolio
Manager will continue to monitor all securities positions of the Fund and will
seek to dispose of any position that it believes is no longer consistent with
achieving optimum performance.
Each of each of the EQUITY INCOME, VALUE, ENHANCED EQUITY, CAPITAL
APPRECIATION, MID CAP GROWTH, SMALL CAP VALUE, SMALL CAP GROWTH, CORE EQUITY,
MID CAP EQUITY, MICRO CAP GROWTH, INTERNATIONAL DEVELOPED, EMERGING MARKETS,
STRUCTURED EMERGING MARKETS AND BALANCED FUNDS 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, none of the above-mentioned Funds may:
(1) invest for the purpose of exercising control or management;
(2) invest in securities of another open-end investment company, except
that each of the International Developed and Emerging Markets Funds may invest
up to 10% of its total assets in the securities of other investment companies;
(3) (a) for the Equity Income, Value, Enhanced Equity, Capital
Appreciation, Mid Cap Growth, Small Cap Growth, Small Cap Value, 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 1933 Act and certain commercial paper that the
Adviser or Portfolio Manager has determined to be liquid under procedures
approved by the Board of
-28-
<PAGE>
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 Micro Cap Growth, Core Equity, Mid Cap Equity, International
Developed, Emerging Markets, Structured Emerging Markets, Precious Metals and
Tax Exempt Funds: invest more than 15% of the net assets of such 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;
(4) 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;
(5) 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;
(6) 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;
(7) 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;
(8) invest more than 5% of the assets of such Fund (taken at market value
at the time of investment) in any combination of interest only, principal only,
or inverse floating rate securities;
(9) borrow money (excluding reverse repurchase agreements which are
subject to such Fund's fundamental borrowing restriction), except for temporary
administrative purposes;
(10) sell securities or property short, except short sales against the
box;
(11) 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 such 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;
(12) 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;
(13) 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
(14) 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.
-29-
<PAGE>
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.
Under the 1940 Act, a "senior security" does not include any promissory
note or evidence of indebtedness where such loan is for temporary purposes only
and in an amount not exceeding 5% of the value of the total assets of the issuer
at the time the loan is made. A loan is presumed to be for temporary purposes
if it is repaid within sixty days and is not extended or renewed.
The phrase "shareholder approval," as used in the Prospectuses, and the
phrase a "vote of a majority of the outstanding voting securities," as used
herein, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund or the Trust, as the case may be, or (2) 67% or
more of the shares of the Fund or the Trust, as the case may be, present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
-30-
<PAGE>
MANAGEMENT OF THE TRUST
CURRENT TRUSTEES
Currently, four persons serve as Trustees on the Trust's Board: William D.
Cvengros, Richard L. Nelson, Lyman W. Porter and Alan Richards. The current
Trustees, their ages, and a description of their principal occupations during
the past five years are listed below. Except as shown, each Trustee's principal
occupation and business experience for the last five years have been with the
employer(s) indicated, although in some cases the Trustee may have held
different positions with such employer(s). Unless otherwise indicated, the
business address of all persons listed below is 840 Newport Center Drive, Suite
360, Newport Beach, California 92660:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
William D. Cvengros* Chairman of Board and President of the Trust; Chief Executive Officer,
800 Newport Center Drive President, and member of the Operating Board, Operating Committee, and
Newport Beach, CA 92660 Equity Board, PIMCO Funds; Director, PIMCO Funds Distribution
Age 47 Company. Formerly, Director, Vice Chairman, and Chief Executive
Officer, Pacific Mutual Life Insurance Company ("Pacific Mutual")
- ----------------------------------------------------------------------------------------------------------------
Richard L. Nelson President, Nelson Financial Consultants. Formerly, Partner, Ernst &
8 Cherry Hills Lane Young
Newport Beach, CA 92660
Age 66
- ----------------------------------------------------------------------------------------------------------------
Lyman W. Porter Professor of Management at the University of California, Irvine
2639 Bamboo Street
Newport Beach, CA 92660
Age 65
- ----------------------------------------------------------------------------------------------------------------
Alan Richards Consultant. Formerly, President, Chief Executive Officer and Director,
P.O. Box 675760 E.F. Hutton Insurance Group, Inc.; Chairman of the Board, Chief
15401 Pimlico Corte Executive Officer and President, E.F. Hutton Life Insurance Company;
Rancho Santa Fe, CA 92067 Director, E.F. Hutton & Company, Inc.
Age 66
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Is an "interested person" of the Trust (as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended).
-31-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
E. Philip Cannon Trustee, PIMCO Advisors Funds; Headmaster, St. John's School,
Age 55 Houston, Texas. Formerly, General Partner, J.B. Poindexter & Co.,
Houston, Texas (private partnership), and Partner, Iberia Petroleum
Company (oil and gas production). Mr. Cannon was a director of WNS
Inc., a retailing company which filed a petition in bankruptcy within the
last five years.
- --------------------------------------------------------------------------------------------------------------------
Donald P. Carter Trustee, PIMCO Advisors Funds; Formerly Chairman, Executive Vice
Age 69 President and Director, Cunningham & Walsh, Inc., Chicago
(advertising agency).
- -------------------------------------------------------------------------------------------------------------------
Gary A. Childress Trustee, PIMCO Advisors Funds; Chairman and Director, Bellefonte
Age 62 Lime Company, Inc.; Chief Executive Officer, Woodings & Verona
Toolworks Inc. Mr. Childress is a partner in GenLime, L.P., a private
limited partnership, which has filed a petition in bankruptcy within the
last five years.
- -------------------------------------------------------------------------------------------------------------------
Gary L. Light Trustee, PIMCO Advisors Funds; Partner, E.V.A. Investors Inc.
Age 59 (private investments); Consultant to and, prior to March, 1987,
Executive Vice President, Mayflower Corporation (trucking and
transportation); Vice Chairman and Chief Executive Officer, Sofamor
Danek (medical devices).
- -------------------------------------------------------------------------------------------------------------------
Joel Segall Trustee, PIMCO Advisors Funds. Formerly, President and University
Age 73 Professor, Bernard M. Baruch College, The City University of New
York; Deputy Under Secretary for International Affairs, United States
Department of Labor; and Professor of Finance, University of Chicago.
Board of Managers, Coffee, Sugar and Cocoa Exchange.
- -------------------------------------------------------------------------------------------------------------------
W. Bryant Stooks Trustee, PIMCO Advisors Funds; Formerly, President, Senior Vice
Age 55 President, Director and Chief Executive Officer, Archirodon Group Inc.;
Partner, Arthur Andersen & Co.
- -------------------------------------------------------------------------------------------------------------------
Gerald M. Thorne Trustee, PIMCO Advisors Funds; Formerly, President and Director,
Age 58 Firstar National Bank of Milwaukee; Chairman, President and Director,
Firstar National Bank of Sheboygan.
- -------------------------------------------------------------------------------------------------------------------
Robert A. Prindiville * Trustee and President, PIMCO Advisors Funds; President and Director,
Age 61 Thomson Advisory Group Inc.; Vice President, PIMCO Advisors;
Director and Chairman, Thomson Investor Services Inc. [Formerly,
Director and Chair, PIMCO Funds Distribution Company; and
Executive Vice President, PIMCO Advisors.]
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Is or will be an "interested person" of the Trust (as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended). Mr. Prindiville
may be deemed an "interested person" of the Trust because of his affiliations
with PIMCO Advisors and former affiliation with the Trust's Distributor, PIMCO
Funds Distribution Company, as indicated in the above chart.
-32-
<PAGE>
OFFICERS
The chart below sets forth the name, address, age, position with the Trust,
and principal occupation during the past five years of each officer of the
Trust. Unless otherwise indicated, the business address of all persons listed
below is 840 Newport Center Drive, Suite 360, Newport Beach, California 92660:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE * POSITION(S) WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST
TRUST [TO BE REVISED] FIVE YEARS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Steven J. Treadway President and Chief Executive Vice President, PIMCO Advisors;
Age 49 Executive Officer Director and Chairman, PIMCO Funds
Distribution Company.
Formerly, Executive Vice President, Smith
Barney Inc.
- --------------------------------------------------------------------------------------------------------
R. Wesley Burns Executive Vice Executive Vice President, PIMCO.
Age 37 President Formerly, Vice President, PIMCO.
- --------------------------------------------------------------------------------------------------------
Newton B. Schott, Jr. Vice President and Senior Vice President-Legal and Secretary,
Age 54 Secretary PIMCO Advisors; Senior Vice President and
Secretary, PADCo. Formerly, Executive
Vice President, Secretary and General
Counsel, TAG and PIMCO Advisors;
Executive Vice President, Secretary, General
Counsel and Director, Thomson McKinnon
Inc.
- --------------------------------------------------------------------------------------------------------
John P. Hardaway Vice President and Vice President and Manager of Fund
Age 39 Treasurer Operations, PIMCO.
- --------------------------------------------------------------------------------------------------------
Joseph D. Hattesohl Assistant Treasurer Manager of Fund Taxation, PIMCO.
Age 32 Formerly, Director of Financial Reporting,
Carl I. Brown & Co.; Tax Manager, Price
Waterhouse LLP.
- --------------------------------------------------------------------------------------------------------
Jeffrey M. Sargent Vice President Vice President and Manager of Fund
Age 33 Shareholder Servicing, PIMCO. Formerly,
Project Specialist, PIMCO.
- ---------------------------------------------------------------------------------------------------------
Teresa A. Wagner Vice President Vice President and Manager of Fund
Age 34 Administration, PIMCO. Formerly, Vice
President, PIMCO Advisors Institutional
Services; Finance Director, PFAMCo.
- --------------------------------------------------------------------------------------------------------
John O. Leasure Vice President Senior Vice President, PIMCO Advisors;
Age 56 President and Director, PADCo. Formerly,
Executive Vice President, PIMCO Advisors.
- --------------------------------------------------------------------------------------------------------
</TABLE>
-33-
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Richard M. Weil Vice President Senior Vice President - Legal, PIMCO
Age 33 Advisors. Formerly, Vice President,
Bankers Trust Company; Associate,
Simpson, Thatcher & Bartlett.
- --------------------------------------------------------------------------------------------------------
Garlin G. Flynn Assistant Secretary Senior Fund Administrator, PIMCO.
Age 50 Formerly, Senior Mutual Fund Analyst,
PIMCO Advisors Institutional Services;
Senior Mutual Fund Analyst, PFAMCo.
- --------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION TABLE
The following table sets forth information regarding compensation received
by the Trustees for the fiscal period ended June 30, 1996:
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION TRUST AND FUND COMPLEX
NAME AND POSITION FROM TRUST/1/ PAID TO TRUSTEES
----------------- ------------- -----------------------
<S> <C> <C>
William D. Cvengros $0 $0
Chairman and
Trustee
Richard L. Nelson $14,333.33 $14,333.33
Trustee
Lyman W. Porter $12,166.67 $12,166.67
Trustee
Alan Richards $14,333.33 $14,333.33
Trustee
</TABLE>
[Information regarding each PAF Trustee who is nominated to the Board of
Trustees of the Trust is to be provided via post-effective amendment filed
pursuant to Rule 485(b) pending his election.]
____________________
/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. Trustees do not receive any pension or retirement
benefits from the Trust or the Fund Complex.
INVESTMENT ADVISER
PIMCO Advisors serves as investment adviser to each of 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
-34-
<PAGE>
liability company controlled by the PIMCO Managing Directors. PIMCO Advisors had
approximately $99.4 billion of assets under management as of July 31, 1996.
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 except the Precious Metals Fund, PIMCO Advisors has engaged its affiliates
to serve as Portfolio Managers.
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 September 17,
1996.
The Advisory Agreement will continue in effect with respect to a Fund for
two years from its effective date, 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 Fund 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. In addition, the
Advisory Agreement may be terminated with regard to the Renaissance, Growth,
Target, Opportunity, Innovation, Tax Exempt, International and Precious Metals
Funds by a majority of the Independent Trustees that are not interested persons
of PIMCO Advisors, on 60 days' written notice.
The Adviser 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 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>
FUND ADVISORY
- ----
FEE RATE
--------
<S> <C>
Tax Exempt Fund.............................................. .30%
Equity Income, Value, Capital Appreciation,
Mid Cap Growth, Structured Emerging Markets,
Enhanced Equity and Balanced Funds.......................... .45%
Growth Fund.................................................. .50%
International and Target Funds............................... .55%
Core Equity Fund............................................. .57%
Small Cap Value, Renaissance, Precious Metals
and International Developed Funds........................... .60%
Mid Cap Equity Fund.......................................... .63%
Opportunity and Innovation Funds............................. .65%
Emerging Markets Fund........................................ .85%
Small Cap Growth Fund........................................ 1.00%
Micro Cap Growth Fund........................................ 1.25%
</TABLE>
-35-
<PAGE>
For the fiscal periods ended June 30, 1996, October 31, 1995, and October
31, 1994 (and for fiscal periods ended September 30, 1996 for the Growth,
Target, Renaissance, Opportunity, Innovation, International, Precious Metals and
Tax Exempt Funds (collectively, the "Former PAF Funds")), the aggregate amount
of the advisory fees paid by each operational Fund was as follows:
<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
FUND 06/30/96** 10/31/95 10/31/94
- ---- ----------- --------- ---------
<S> <C> <C> <C>
Equity Income Fund $425,899 $445,739 $368,971
Value Fund 65,873 60,686 85,078
Small Cap Value Fund 156,721 203,158 214,936
Core Equity Fund 145,931 73,930 N/A
Mid Cap Equity Fund 35,315 26,276 N/A
Capital Appreciation Fund 883,498 881,358 595,724
Mid Cap Growth Fund 617,546 650,017 453,846
Micro Cap Growth Fund 669,726 609,540 251,431
Small Cap Growth Fund 426,098 594,905 456,981
Growth Fund* ------ ------ ------
Target Fund*
Enhanced Equity Fund 274,512 319,036 267,252
Emerging Markets Fund 440,978 638,097 319,725
International Developed Fund 294,777 282,055 84,712
Balanced Fund 235,529 417,190 597,672
Renaissance Fund* ------ ------ ------
Opportunity Fund* ------ ------ ------
Innovation Fund* ------ ------ ------
International Fund* ------ ------ ------
Precious Metals Fund* ------ ------ ------
Tax Exempt Fund* ------ ------ ------
</TABLE>
____________________
* Advisory and management fees for these Funds were paid by their PAF
predecessors pursuant to Management Contracts between the Adviser and PIMCO
Advisors Funds, an affiliated fund family, on behalf of each Fund.
** The fees for the Fomer PAF Funds are for fiscal period ended September
30, 1996.
PORTFOLIO MANAGEMENT AGREEMENTS
The Adviser employs Portfolio Managers for all of the Funds to provide
investment advisory services to the Funds under portfolio management agreements.
All of the Portfolio Managers are affiliates of PIMCO Advisors except for Van
Eck Associates Corporation ("Van Eck"), which is an independent Portfolio
Manager that advises the Precious Metals Fund. PIMCO Advisors currently has six
subsidiary partnerships which manage the remaining Funds: 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
-36-
<PAGE>
services provided, The Adviser (not the Trust) pays PIMCO a fee at an annual
rate of .35% 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 $80.0 billion of assets under management as of July 31, 1996.
Pursuant to a portfolio management agreement between the Adviser and
Parametric, Parametric is the Portfolio Manager and provides investment advisory
services to the Enhanced Equity and Structured Emerging Markets Funds. For the
services provided, the Adviser (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: .35% for the Enhanced Equity Fund and .45% for the Structured
Emerging Markets Fund.
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 July 31, 1996, of approximately $1.6
billion.
Pursuant to a portfolio management agreement between the Adviser and
Cadence, Cadence is the Portfolio Manager and provides investment advisory
services to the Capital Appreciation Fund, the Mid Cap Growth Fund, the Micro
Cap Growth Fund, the Small Cap Growth Fund and a portion of the Balanced Fund
allocated by the Adviser for investment in common stock. 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: .35% for the Capital Appreciation Fund, the Mid Cap Growth Fund, and
for the portion of the Balanced Fund allocated to Cadence for investment in
common stock, .90% for the Small Cap Growth Fund, and 1.15% for the 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 July 31, 1996, of approximately $2.7 billion.
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<PAGE>
Pursuant to a portfolio management agreement between the Adviser and NFJ,
NFJ is the Portfolio Manager and provides investment advisory services to the
Equity Income Fund, the Value Fund, the Small Cap Value Fund, and a portion of
the Balanced Fund allocated by the Adviser for investment in common stock. 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: .35% for the Equity Income Fund, the Value Fund, and for the
portion of the Balanced Fund allocated to NFJ for investment in common stock,
and .50% for the 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 July 31, 1996,
of approximately $1.6 billion.
Pursuant to portfolio management agreements between the Adviser and
Columbus Circle, Columbus Circle is the Portfolio Manager and provides
investment advisory services to the Renaissance, Growth, Target, Opportunity,
Innovation, Tax Exempt, Core Equity and Mid Cap Equity Funds. 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: .30% for the Tax Exempt Fund, .34% for the Growth Fund, .36% for the
Target Fund, .38% for the Renaissance Fund, .38% for the Innovation Fund, .48%
for the Opportunity Fund, .57% for the Core Equity Fund and .63% for the 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
Cash Accumulation Trust. Accounts managed by Columbus Circle had combined
assets, as of July 31, 1996, of $12.8 billion.
Pursuant to a portfolio management agreement between the Adviser and
Blairlogie, Blairlogie is the Portfolio Manager and provides investment advisory
services to the International, International Developed and Emerging Markets
Funds. 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: .40% for the International Fund, .75% for the
Emerging Markets Fund and .50% for the International Developed Fund.
Blairlogie is an investment management firm, organized as a limited
partnership under the laws of Scotland, United Kingdom. Blairlogie is the
successor investment adviser to Blairlogie Capital Management Ltd., an indirect
subsidiary of PFAMCo. Blairlogie has 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. 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
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<PAGE>
endowment funds and foundations. Accounts managed by Blairlogie had combined
assets, as of July 31, 1996, of approximately $.7 billion.
Pursuant to a portfolio management agreement between the Adviser and Van
Eck, Van Eck is the Portfolio Manager and provides investment advisory services
to the Precious Metals Fund. For the Services provided, the Adviser (not the
Trust) pays Van Eck a fee at an annual rate of .35% of the average daily net
assets of the Precious Metals Fund.
Van Eck is a Delaware corporation registered as an investment adviser with
the SEC. Van Eck, together with its affiliates, advises other mutual funds and
private accounts. Van Eck is controlled by John C. Van Eck who, along with
members of his immediate family, owns 100% of the stock of Van Eck. Van Eck is
located at 99 Park Avenue, New York, New York 10001. Accounts managed by Van
Eck had combined assets as of [_________], 1996 of approximately
[$__________].
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.
For the fiscal periods ended June 30, 1996, October 31, 1995, and October
31, 1994 (and for fiscal periods ended September 30, 1996 for the Former PAF
Funds), the amount of net portfolio management fees accrued by the Adviser or
its predecessor to the Portfolio Managers or their predecessors for each
operational Fund was as follows:
<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
FUND 06/30/96** 10/31/95 10/31/94
- ---- ----------- --------- ---------
<S> <C> <C> <C>
Equity Income Fund $425,899 $445,739 $368,971
Value Fund 65,873 60,686 85,078
Small Cap Value Fund 156,721 203,158 214,936
Core Equity Fund 136,615 62,906 N/A
Mid Cap Equity Fund 23,814 13,832 N/A
Capital Appreciation Fund 883,498 881,358 595,724
Mid Cap Growth Fund 617,546 650,017 453,846
Micro Cap Growth Fund 669,726 609,540 251,431
Small Cap Growth Fund 426,098 594,905 456,981
Growth Fund* ------ ------ ------
Target Fund* ------ ------ ------
Enhanced Equity Fund 274,512 319,036 267,252
Emerging Markets Fund 385,438 550,590 195,258
International Developed Fund 237,138 241,135 34,947
Balanced Fund 161,345 332,255 481,304
International Fund* ------ ------ ------
Renaissance Fund* ------ ------ ------
Opportunity Fund* ------ ------ ------
Innovation Fund* ------ ------ ------
Precious Metals Fund* ------ ------ ------
Tax Exempt Fund*
</TABLE>
____________________
*Portfolio management fees for period ended September 30, 1996 for these
Funds were paid by their respective PAF predecessors pursuant to sub-advisory
agreements between the Portfolio Managers and the PAF.
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<PAGE>
** The fees for the Former PAF Funds are for fiscal period ended September
30, 1996.
FUND ADMINISTRATOR
In addition to its services as Adviser, PIMCO Advisors serves as
administrator (the "Administrator") to the Funds pursuant to an administration
agreement with the Trust. The Administrator provides or arranges for the
provision of 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. PIMCO Advisors has retained PIMCO, as sub-administrator to
provide such services pursuant to a sub-administration agreement (the "Sub-
Administration Agreement"). In addition, the Administrator, at its own expense,
arranges for the provision of legal, audit, custody, transfer agency and other
services necessary for the ordinary operation of 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. The Administrator
has contractually agreed to provide or procure these services, and to bear these
expenses, at the following rates for each Fund (each expressed as a percentage
of the Fund's average daily net assets attributable to the indicated classes of
shares on an annual basis):
<TABLE>
<CAPTION>
ADMINISTRATIVE FEE RATE
-----------------------
INSTITUTIONAL AND
FUND ADMINISTRATIVE CLASS CLASS A, CLASS B AND CLASS C
- ---- -------------------- ----------------------------
<S> <C> <C>
Emerging Markets, Structured Emerging 0.50% 0.65% of first $2.5 billion
Markets, International Developed and 0.60% of amounts in excess of
International Funds 2.5 billion
Precious Metals Fund 0.30% 0.45% of first $2.5 billion
0.40% of amounts in excess of
$2.5 billion
All Other Funds 0.25% 0.40% of first $2.5 billion
0.35% of amounts in excess of
$2.5 billion
</TABLE>
Except for the expenses paid by the Administrator, the Trust bears all
costs of its operations. 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 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 PIMCO Advisors, PIMCO, the 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 distribution and/or service fees payable
with respect to the Class A, Class B, Class C or Administrative Class shares and
may include certain other expenses as permitted by the Trust's Amended and
Restated Multi-Class Plan ("Multi-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 distribution and/or service
fees will be allocated on a class-specific basis.
The Administration Agreement and Sub-Administration Agreement for the Funds
may be terminated by the Trustees, PIMCO Advisors or PIMCO (as the case may be)
at any time on 60 days' written notice. In addition, the Administration and Sub-
Administration Agreements may be terminated with regard to the Renaissance,
Growth,
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<PAGE>
Target, Opportunity, Innovation, Tax Exempt, International and Precious
Metals Funds by a majority of the Independent Trustees that are not interested
persons of PIMCO Advisors or PIMCO (as the case may be), on 60 days' written
notice. Following its initial term, each contract would continue from
year to year if approved by the Trustees.
The Administration Agreement is subject to annual approval by the Board of
Trustees, 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 September 17, 1996. 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.
For the fiscal periods ended June 30, 1996, October 31, 1995, and October
31, 1994, the aggregate amount of the administration fees paid by each
operational Fund was as follows:
<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
FUND 06/30/96 10/31/95 10/31/94
- ---- --------- --------- ---------
<S> <C> <C> <C>
Equity Income Fund $236,611 $247,633 $204,984
Value Fund 36,596 33,714 47,265
Small Cap Value Fund 65,176 84,649 89,556
Core Equity Fund 63,942 32,425 N/A
Mid Cap Equity Fund 14,011 10,427 N/A
Capital Appreciation Fund 490,803 489,643 330,958
Mid Cap Growth Fund 342,880 361,121 252,137
Micro Cap Growth Fund 133,934 121,908 50,286
Small Cap Growth Fund 106,715 148,726 114,245
Enhanced Equity Fund 151,842 177,243 148,474
Emerging Markets Fund 259,300 375,351 188,073
International Developed Fund 244,350 235,046 70,593
Balanced Fund 130,017 231,772 332,040
</TABLE>
____________________
EXPENSE LIMITATIONS
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<PAGE>
Fees foregone for payments made by the Administrator 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
DISTRIBUTOR AND MULTI-CLASS PLAN
PIMCO Funds Distribution Company (the "Distributor") serves as the Trust's
Distributor pursuant to a distribution contract ("Distribution Contract") dated
January __, 1997, which is subject to annual approval by the Board. The
Distributor is a wholly owned subsidiary of PIMCO Advisors. The Distribution
Contract is terminable with respect to a Fund or class without penalty, at any
time, by the Fund or class by not more than 60 days' nor less than 30 days'
written notice to the Distributor, or by the Distributor upon not more than 60
days' nor less than 30 days' written notice to the Trust. The Distributor is not
obligated to sell any specific amount of Trust shares.
The Distribution Contract will continue in effect with respect to each Fund
and each class of shares thereof for successive one-year periods, provided that
each such continuance is specifically approved (i) by the vote of a majority of
the Independent Trustees and (ii) by the vote of a majority of the entire Board
of Trustees cast in person at a meeting called for that purpose. If the
Distribution Contract is terminated (or not renewed) with respect to one or more
Funds, it may continue in effect with respect to any class of any Fund as to
which it has not been terminated (or has been renewed).
The Trust offers up to five classes of shares of each of the Funds: Class
A, Class B, Class C, Institutional Class and Administrative Class shares. Class
A, Class B and Class C shares of the Trust are offered through firms
("participating brokers") which are members of the National Association of
Securities Dealers, Inc. ("NASD"), and which have dealer agreements with the
Distributor, or which have agreed to act as introducing brokers for the
Distributor ("introducing brokers"). Shares of the Institutional Class are
offered primarily for direct investment by institutional investors. They are
also 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.
Under the Trust's Multi-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; (c) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements; and (d) 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. In addition, each class may
have a differing sales charge structure, and differing exchange and conversion
features.
-42-
<PAGE>
CONTINGENT DEFERRED SALES CHARGE AND INITIAL SALES CHARGE
As described in the Retail Prospectus under the caption "How to Redeem," a
contingent deferred sales charge is imposed upon certain redemptions of Class A,
Class B and Class C shares. No contingent deferred sales charge is imposed upon
Institutional Class or Administrative Class shares. Because contingent deferred
sales charges are calculated on a Fund-by-Fund basis, shareholders should
consider whether to exchange shares of one Fund for shares of another Fund prior
to redeeming an investment if such an exchange would reduce the contingent
deferred sales charge applicable to such redemption.
For the fiscal years ended September 30, 1996, 1995 and 1994, the
Distributor received $_________, $__________ and $___________, respectively, in
contingent deferred sales charges on Class C shares of the Former PAF Funds. The
contingent deferred sales charge applicable to Class B shares (which were not
yet offered) and certain Class A shares as described in the Retail Prospectus
was not in effect through September 30, 1994. For the fiscal years ended
September 30, 1995 and 1996, the Distributor received $0 and $______ in
contingent deferred sales charges on Class A shares of the Former PAF Funds and
$_______ and $________ in contingent deferred sales charges on Class B shares of
these Funds.
In certain cases described in the Retail Prospectus, the contingent
deferred sales charge is waived on redemptions of Class A, Class B or Class C
shares for certain classes of individuals or entities on account of (i) the fact
that the Trust's sales-related expenses are lower for certain of such classes
than for classes for which the contingent deferred sales charge is not waived,
(ii) waiver of the contingent deferred sales charge with respect to certain of
such classes is consistent with certain Internal Revenue Code policies
concerning the favored tax treatment of accumulations, and (iii) with respect to
certain of such classes, considerations of fairness, and competitive and
administrative factors.
As described in the Retail Prospectus under the caption "Alternative
Purchase Arrangements--Initial Sales Charge Alternative - Class A Shares," Class
A shares of the Trust are sold pursuant to an initial sales charge, which
declines as the amount of the purchase reaches certain defined levels. For the
fiscal years ended September 30, 1996, 1995 and 1994, the Distributor received
$_____, $_____, and $_____, respectively, and retained $_____, $_____, and
$_____, respectively, in initial sales charges paid by shareholders of the
Former PAF Funds.
DISTRIBUTION AND SERVICING PLANS FOR CLASS A, CLASS B AND CLASS C SHARES
As stated in the text of the Retail Prospectus under the caption
"Distributor and Distribution and Servicing Plans," shares of the Trust are
continuously offered through firms ("participating brokers") which are members
of the National Association of Securities Dealers, Inc. and which have dealer
agreements with the Distributor, or which have agreed to act as introducing
brokers for the Distributor ("introducing brokers"). Under the Distributor's
Contract between the Trust and the Distributor (the "Distribution Agreement"),
the Distributor is not obligated to sell any specific amount of shares of the
Trust and will purchase shares for resale only against orders for shares.
Pursuant to the Distribution and Servicing Plans described in the Retail
Prospectus, the Distributor receives (i) in connection with the distribution of
Class B and Class C shares of the Trust, certain distribution fees from the
Trust, and (ii) in connection with personal services rendered to Class A, Class
B and Class C shareholders of the Trust and the maintenance of shareholder
accounts, certain servicing fees from the Trust. Subject to the percentage
limitations on these distribution and servicing fees set forth in the Retail
Prospectus, the distribution and servicing fees may be paid with respect to
services rendered and expenses borne in the past with respect to each such class
as to which no distribution and servicing fees were paid on account of such
limitations. As described in the Retail Prospectus, the Distributor pays (i) all
or a portion of the distribution fees it receives
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<PAGE>
from the Trust to participating and introducing brokers, and (ii) all or a
portion of the servicing fees it receives from the Trust to participating and
introducing brokers, certain banks and other financial intermediaries.
Each Distribution and Servicing Plan may be terminated with respect to the
class of shares of any Fund to which the Plan relates by vote of a majority of
the Trustees who are not interested persons of the Trust (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Plan or the Distribution Contract, or by vote of a majority of the
outstanding voting securities of that class. Any change in any Plan that would
materially increase the cost to the class of shares of any Fund to which the
Plan relates requires approval by the affected class of shareholders of that
Fund. The Trustees review quarterly a written report of such costs and the
purposes for which such costs have been incurred. Each Plan may be amended by
vote of the Trustees, including a majority of the Independent Trustees, cast in
person at a meeting called for the purpose. As long as the Distribution and
Servicing Plans are in effect, selection and nomination of those Trustees who
are not interested persons of the Trust shall be committed to the discretion of
such disinterested Trustees.
The Distribution and Servicing Plans will continue in effect with respect
to each Fund and each class of shares thereof for successive one-year periods,
provided that each such continuance is specifically approved (i) by the vote of
a majority of the Independent Trustees and (ii) by the vote of a majority of the
entire Board of Trustees cast in person at a meeting called for that purpose.
If the Distribution and Servicing Plans are terminated (or not renewed)
with respect to one or more Funds, they may continue in effect with respect to
any class of any Fund as to which they have not been terminated (or have been
renewed).
For the fiscal years ended September 30, 1996, 1995 and 1994, PAF paid the
Distributor $_________, $__________, and $__________, respectively, pursuant to
the Distribution and Servicing Plan applicable to the Class C shares (the "Class
C Plan") allocated among the Former PAF Funds as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Sept. 30, 1994 Sept. 30, 1995 Sept. 30, 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Renaissance* $ $ $
Growth* 9,799,698 10,702,536 11,397,447
Target* 1,073,001 4,419,960 6,402,149
Opportunity* 4,129,361 5,720,431 5,976,316
Innovation* N/A N/A 229,411
International* 566,091 2,493,832 2,422,761
Precious Metals* 129,784 455,351 490,116
Tax Exempt* 640,396 786,687 589,843
-------------- ---------- ----------
Total $ $ $
============== ========== ==========
</TABLE>
- ----------------
* Distribution and servicing fees for these Former PAF Funds were paid by
their respective PAF predecessors. The remaining Funds of the Trust did not
previously offer Class A, Class B or Class C shares.
During the fiscal year ended September 30, 1996, the amounts collected
pursuant to the Class C Plan and the contingent deferred sales charge imposed on
Class C shares were used as follows: sales commissions and other compensation to
sales personnel, $[__________]; preparing, printing and distributing sales
material and advertising (including preparing, printing and distributing
prospectuses to non-shareholders), and other expenses (including data
processing, legal and operations), $[_________]. The total, if allocated among
the Former PAF
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<PAGE>
Funds based on the net assets attributable to their Class C shares at September
30, 1996, would have been as follows:
<TABLE>
<CAPTION>
Sales Material
and Other
Compensation Expenses Total
------------ ---------- -----
<S> <C> <C> <C>
Renaissance* $1,094,000 $ 427,000 $ 1,522,000
Growth* 8,102,000 3,164,000 11,266,000
Target* 4,901,000 1,914,000 6,815,000
Opportunity* 4,490,000 1,754,000 6,244,000
Innovation* 401,000 166,000 557,000
International* 1,352,000 528,000 1,881,000
Precious Metals* 265,000 104,000 369,000
Tax Exempt 341,000 133,000 474,000
---------- ---------- -----------
Total $ $ $
========== ========== ===========
</TABLE>
________________
* Amounts collected for these Former PAF Funds were collected by their PAF
predecessors.
During the fiscal year ended September 30, 1996, unreimbursed expenses of
the Trust's principal underwriters under the Class C Plan were reduced from
$[_________] to $[_________].
For the fiscal years ended September 30, 1996, 1995 and 1994, PAF paid the
Distributor $[_______], $[_______] and $[_________], respectively, pursuant to
the Distribution and Servicing Plan applicable to the Class A shares (the "Class
A Plan"):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Sept. 30, 1994 Sept. 30, 1995 Sept. 30, 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Renaissance* $ 9,463 $ 28,435 $ 33,249
Growth* 216,014 247,275 289,263
Target* 47,625 175,437 251,511
Opportunity* 161,347 247,239 255,940
Innovation* N/A N/A 28,918
International* 8,785 51,731 49,788
Precious Metals* 5,914 19,794 22,178
Tax Exempt* 6,213 7,170 6,485
-------- -------- --------
Total $ $ $
======== ======== ========
</TABLE>
________________
* Distribution and servicing fees for these Former PAF Funds were paid by
their PAF predecessors.
The remaining Funds of the Trust did not previously offer Class A, Class B
or Class C shares.
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<PAGE>
During the fiscal year ended September 30, 1996, the amounts collected
pursuant to the Class A Plan were used as follows: commissions and other
compensation to dealers, $[_________]; preparing, printing and distributing
materials to shareholders, and other expenses (including data processing, legal
and operations), $[_________]. The total, if allocated among the Funds based on
the net assets attributable to their Class A shares at September 30, 1995, would
have been as follows:
<TABLE>
<CAPTION>
Distribution
of Materials
and Other
Compensation Expenses Total
------------ -------- -----
<S> <C> <C> <C>
Renaissance* $ 31,000 $ 58,000 $ 89,000
Growth* 321,000 609,000 930,000
Target* 290,000 551,000 841,000
Discovery* 18,000 35,000 53,000
Opportunity* 287,000 546,000 833,000
Innovation* 67,000 128,000 195,000
International* 43,000 81,000 124,000
Precious Metals* 18,000 35,000 53,000
Tax Exempt* 6,000 12,000 19,000
-------- -------- --------
Total $ $ $
======== ======== ========
</TABLE>
________________
* Amounts collected for these Former PAF Funds were collectedby their PAF
predecessors.
The Distribution and Servicing Plan applicable to the Class B shares (the
"Class B Plan") was not in effect during the fiscal year ended September 30,
1994.
For the fiscal years ended September 30, 1996 and 1995, PAF paid the
Distributor $[______] and $[ ], respectively, pursuant to the Distribution and
Servicing Plan applicable to the Class B shares (the "Class B Plan") allocated
among the Funds as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
Sept. 30, 1995 Sept. 30, 1996
-------------- --------------
<S> <C> <C>
Renaissance* $ 2,071 $
Growth* 12,583
Target* 11,816
Opportunity* N/A
Innovation* 9,364
International* 555
Precious Metals* 270
Tax Exempt* 745
------- --------
Total $ $
======= ==========
</TABLE>
________________
* Distribution and servicing fees for these Former PAF Funds were paid by
their respective PAF predecessors.
-46-
<PAGE>
The remaining Funds of the Trust did not previously offer Class A, Class B
or Class C shares.
During the fiscal year ended September 30, 1996, the amounts collected
pursuant to the Class B Plan and the contingent deferred sales charge imposed on
Class B shares were used as follows: sales commissions and other compensation
to sales personnel, $[________]; preparing, printing and distributing sales
material and advertising (including preparing, printing and distributing
prospectuses to non-shareholders), and other expenses (including data
processing, legal and operations), $[_______]. The total, if allocated among
the Funds based on the net assets attributable to their Class B shares at
September 30, 1996, would have been as follows:
<TABLE>
<CAPTION>
Sales Material
and Other
Compensation Expenses Total
------------ --------- --------
<S> <C> <C> <C>
Renaissance* $ 66,000 $10,000 $ 76,000
Growth* 288,000 44,000 333,000
Target* 284,000 43,000 327,000
Discovery* 407,000 62,000 470,000
Opportunity* N/A N/A N/A
Innovation* 245,000 37,000 282,000
International* 19,000 3,000 22,000
Precious Metals* 9,000 1,000 11,000
Tax Exempt* 11,000 2,000 12,000
-------- ------- --------
Total $ $ $
======== ======= ========
</TABLE>
_________________
* Amounts collected for these Former PAF Funds were collected by their PAF
predecessors.
The Trustees believe that the Distribution and Servicing Plans will provide
benefits to the Trust. The Trustees believe that the Class A, Class B and Class
C Plans will result in greater sales and/or fewer redemptions of Trust shares,
although it is impossible to know for certain the level of sales and redemptions
of Trust shares that would occur in the absence of the Plans or under
alternative distribution schemes. The Trustees believe that the effect on sales
and/or redemptions will benefit the Trust by reducing Fund expense ratios and/or
by affording greater flexibility to Portfolio Managers.
DISTRIBUTION AND ADMINISTRATIVE SERVICES PLANS FOR ADMINISTRATIVE CLASS SHARES
The Trust has adopted an Administrative Services Plan and a Distribution
Plan with respect to the Administrative Class shares of each Fund. Under the
terms of each Plan, the Trust is permitted to reimburse, out of the
Administrative Class assets of each Fund, in an amount up to 0.25% on an annual
basis of the average daily net assets of that class, financial intermediaries
that provide services in connection with the distribution of shares or
administration of plans or programs that use Fund shares as their funding
medium, and to reimburse certain other distribution related expenses. Under the
terms of the Distribution Plan, these services may include, but are not limited
to the following functions: providing facilities to answer questions from
prospective investors about the Fund; receiving and answering correspondence,
including requests for prospectuses and statements of additional information;
preparing, printing and delivering prospectuses and shareholder reports to
prospective shareholders; complying with federal and state securities laws
pertaining to the sale of Administrative Class shares; and assisting investors
in completing application forms and selecting dividend and other account
options.
Under the terms of the Administrative Services Plan, the services may
include, but are not limited to, the following functions: receiving,
aggregating and processing shareholder orders; furnishing shareholder sub-
-47-
<PAGE>
accounting; providing and maintaining elective shareholder services such as
check writing and wire transfer services; providing and maintaining pre-
authorized investment plans; communicating periodically with shareholders;
acting as the sole shareholder of record and nominee for shareholders;
maintaining accounting records for shareholders; answering questions and
handling correspondence from shareholders about their accounts; and performing
similar account administrative services.
The same entity may be the recipient of fees under both the Distribution
Plan and the Administrative Services Plan, but may not receive fees under both
plans with respect to the same assets.
Each Plan provides that it may not be amended to materially increase the
costs which Administrative Class shareholders may bear under the Plan without
the approval of a majority of the outstanding voting securities of the class,
and by vote of a majority of both (i) the Trustees of the Trust and (ii) those
Trustees who are not "interested persons" of the Trust (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Plan or any agreements related to it (the "Plan Trustees"), cast in person
at a meeting called for the purpose of voting on the Plan and any related
amendments.
Each 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
Distribution Plan further provides that it may not take effect unless approved
by the vote of a majority of the outstanding voting securities of the class.
The Plans were approved by the Trustees, including the Plan Trustees, at a
meeting held on September 17, 1996.
Each 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. Each Plan provides that any person authorized to direct the
disposition of monies paid or payable by a class pursuant to the Plan or any
related agreement shall provide to the Trustees, and the Board shall review at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
Each Plan provides that expenses payable under the Plan may be carried
forward for reimbursement for up to twelve months beyond the date in which the
expense is incurred, subject to the limit that not more than 0.25% of the
average daily net assets of each class may be used in any month to pay expenses
under the Plan. Each Plan requires that Administrative Class shares will incur
no interest or carrying charges.
Rules of the NASD limit the amount of distribution fees that may be paid by
mutual funds. "Service fees," defined to mean fees paid for providing
shareholder services or the maintenance of accounts (but not transfer agency
services) are not subject to the limits. The Trust believes that most, if not
all, of the fees paid pursuant to the Plan will qualify as "service fees" and
therefore will not be limited by NASD rules.
PURCHASES, EXCHANGES AND REDEMPTIONS
Purchases, exchanges and redemptions of Class A, Class B and Class C shares
are discussed in the Retail Prospectus under the headings "How to Buy Shares,"
"Exchange Privilege," and "How to Redeem," and that information is incorporated
herein by reference. Purchases, exchanges and redemptions of Institutional
Class and Administrative Class shares are discussed in the Institutional
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.
-48-
<PAGE>
Certain clients of the Adviser or a Portfolio Manager 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
or class are available for offer and sale in their state of domicile or
residence. Shares of a Fund may not be offered or sold in any state unless
registered or qualified in that jurisdiction, unless an exemption from
registration or qualification is available.
As described in the Retail Prospectus under the caption "Exchange
Privilege," and in the Institutional Prospectus under the caption "Redemption of
Shares," a shareholder may exchange shares of any Fund for shares of any other
Fund of the Trust that is available for investment, or any series of PIMCO
Funds: Pacific Investment Management Series, an affiliated mutual fund family,
within the same class on the basis of their respective net asset values. The
original purchase date(s) of shares exchanged for purposes of calculating any
contingent deferred sales charge will carry over to the investment in the new
Fund. For example, if a shareholder invests in the Class C shares of one Fund
and 6 months later (when the contingent deferred sales charge upon redemption
would be 1%) exchanges his shares for Class C shares of another Fund, no sales
charge would be imposed upon the exchange but the investment in the other Fund
would be subject to the 1% contingent deferred sales charge until one year after
the date of the shareholder's investment in the first Fund as described in the
Retail Prospectus under "Alternative Purchase Arrangements." With respect to
Class B or Class C shares, or Class A shares subject to a contingent deferred
sales charge only, if less than all of an investment is exchanged, any portion
of the investment attributable to capital appreciation and/or reinvested
dividends or capital gains distributions will be exchanged first, and thereafter
any portions exchanged will be from the earliest investment made in the Fund
from which the exchange was made.
Orders for exchanges accepted prior to the close of regular trading on the
New York Stock Exchange on any day the Trust is open for business will be
executed at the respective net asset values determined as of the close of
business that day. Orders for exchanges received after the close of regular
trading on the New York Stock Exchange on any business day will be executed at
the respective net asset values determined at the close of the next business
day.
An excessive number of exchanges may be disadvantageous to the Trust.
Therefore, the Trust, in addition to its right to reject any exchange, reserves
the right to adopt a policy of terminating the exchange privilege of any
shareholder who makes more than a specified number of exchanges in a 12-month
period or in any calendar quarter. The Trust reserves the right to modify or
discontinue the exchange privilege at any time.
The Trust reserves the right to suspend or postpone redemptions during any
period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the SEC, or that Exchange is closed for other than customary
weekend and holiday closings; (b) the SEC has by order permitted such
suspension; or (c) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of the 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 Second 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.
-49-
<PAGE>
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.
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 trans actions 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 periods ended June 30, 1996, October 31, 1995, and October
31, 1994, (and for fiscal periods ended September 30, 1996, 1995 and 1994 for
the Former PAF Funds) the amount of brokerage commissions paid by each
operational Fund was as follows:
<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD
ENDED ENDED ENDED
FUND 10/31/94/1/ 10/31/95/2/ 06/30/96/3/
- ---- ----------- ----------- -----------
<S> <C> <C> <C>
Equity Income Fund $ 172,646 $ 170,712 $ 221,694
Value Fund 39,671 39,801 65,062
Small Cap Value Fund 115,477 74,739 74,170
</TABLE>
-50-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Capital Appreciation Fund 368,018 411,595 467,569
Mid Cap Growth Fund 258,765 332,045 382,764
Micro Cap Growth Fund 118,750 202,678 124,194
Small Cap Growth Fund 87,362 111,918 76,333
Growth Fund* ------- ------- -------
Target Fund* ------- ------- -------
Enhanced Equity Fund 106,389 47,226 114,363
Emerging Markets Fund 618,574 1,061,823 622,328
International Developed Fund 150,878 302,313 306,741
Balanced Fund 108,394 95,606 32,346
Renaissance Fund* ------- ------- -------
International Fund* ------- ------- -------
Opportunity Fund* ------- ------- -------
Innovation Fund* ------- ------- -------
Precious Metals Fund* ------- ------- -------
Tax Exempt Fund* ------- ------- -------
Core Equity Fund ------- ------- -------
Mid Cap Equity Fund ------- ------- -------
</TABLE>
- -------------------
* Brokerage Commissions for each of these Funds were paid by their respective
PAF predecessors.
/1/ For fiscal period ended September 30, 1994 for Former PAF Funds.
/2/ For fiscal period ended September 30, 1995 for Former PAF Funds.
/3/ For fiscal period ended September 30, 1996 for Former PAF Funds.
All or substantially all of the broker-dealers through which brokerage
transactions were executed for all of the Funds provided research services to
the pertinent Portfolio Manager or its predecessor.
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.
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<PAGE>
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.
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."
PORTFOLIO TURNOVER
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.
NET ASSET VALUE
As indicated in the Retail Prospectus under the heading "How Net Asset
Value is Determined" and in the Institutional Prospectus under the heading "Net
Asset Value," 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.
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
-52-
<PAGE>
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 certain
Funds that invest in foreign securities 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.
TAXATION
While the Adviser anticipates that many Institutional Class
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 Subchapter M of 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 (including but not limited to
gains from options, futures or forward contracts) 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, 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 (other than U.S. Government securities or
the securities of other regulated investment companies) of any one issuer or of
two or more issuers which the Fund controls and which are engaged in the same,
similar or related trades or businesses; and (d) distribute each taxable year
the sum of (i) at least 90% of its investment company taxable income (which
includes dividends, interest and net short-term capital gains in excess of any
net long-term capital losses) and (ii) 90% of its tax exempt interest, net of
expenses allocable thereto. Under the 30% of gross income test described above,
the Fund will be restricted from selling certain assets held (or considered
under Code rules to have been held) for less than three months, and in engaging
in certain hedging transactions (including hedging transactions in futures and
options) that in some circumstances could cause certain Fund assets to be
treated as held for less than three months. By so qualifying, each Fund will not
be subject to federal income taxes to the extent that its net investment income,
net realized short-term capital gains and net realized long-term capital gains
are distributed. In addition, 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.
The Tax Exempt Fund must have at least 50% of its total assets
invested in Tax Exempt Bonds at the end of each calendar quarter so that
dividends derived from its net interest income on Tax Exempt Bonds and so
designated by the Fund will be "exempt-interest dividends," which are exempt
from federal income tax when received by an investor. Certain exempt-interest
dividends, as described in the Retail Prospectus, may increase alternative
minimum taxable income for purposes of determining a shareholder's liability for
the alternative minimum tax. In addition,
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<PAGE>
exempt-interest dividends allocable to interest from certain "private activity
bonds" will not be tax exempt for purposes of the regular income tax to
shareholders who are "substantial users" of the facilities financed by such
obligations or "related persons" of such "substantial users." The tax-exempt
portion of dividends paid for a calendar year constituting "exempt-interest
dividends" will be designated after the end of that year and will be based upon
the ratio of net tax-exempt income to total net income earned by the Fund during
the entire year. That ratio may be substantially different than the ratio of
net tax-exempt income to total net income earned during a portion of the year.
Thus, an investor who holds shares for only a part of the year may be allocated
more or less tax-exempt interest dividends than would be the case if the
allocation were based on the ratio of net tax-exempt income to total net income
actually earned by the Fund while the investor was a shareholder. All or a
portion of interest on indebtedness incurred or continued by a shareholder to
purchase or carry shares of the Tax Exempt Fund will not be deductible by the
shareholder. The portion of interest that is not deductible is equal to the
total interest paid or accrued on the indebtedness multiplied by the percentage
of the Fund's total distributions (not including distributions of the excess of
net long-term capital gains over net short-term capital losses) paid to the
shareholder that are exempt-interest dividends. Under rules used by the
Internal Revenue Service for determining when borrowed funds are considered used
for the purpose of purchasing or carrying particular assets, the purchase of
shares may be considered to have been made with borrowed funds even though such
funds are not directly traceable to the purchase of shares.
Shareholders of the Tax Exempt Fund receiving social security or
railroad retirement benefits may be taxed on a portion of those benefits as a
result of receiving tax exempt income (including exempt-interest dividends
distributed by the Fund). The tax may be imposed on up to 50% of a recipient's
benefits in cases where the sum of the recipient's adjusted gross income (with
certain adjustments, including tax-exempt interest), exceeds a base amount. In
addition, up to 85% of a recipient's benefits may be subject to tax if the
recipient's adjusted gross income (with certain adjustments, including tax-
exempt interest), exceeds a higher base amount. Shareholders receiving social
security or railroad retirement benefits should consult with their tax advisors.
In years when a Fund distributes amounts in excess of its earnings and
profits, such distributions may be treated in part as a return of capital. A
return of capital is not taxable to a shareholder and has the effect of reducing
the shareholder's basis in the shares. Since certain of the Tax Exempt Fund's
expenses attributable to earning tax-exempt income do not reduce such Fund's
current earnings and profits, it is possible that distributions, if any, in
excess of such Fund's net tax-exempt and taxable income will be treated as
taxable dividends to the extent of such Fund's remaining earnings and profits
(i.e., the amount of such expenses).
The proper tax treatment of income or loss realized by the Precious
Metals Fund from the retirement or sale of a Metal-Indexed Note is unclear. The
Precious Metals Fund will report such income or loss as capital or ordinary
income or loss in a manner consistent with any Internal Revenue Service position
on the subject following the publication of such a position. Gain or loss from
the sale or exchange of preferred stock indexed to the price of a natural
resource is expected to be capital gain or loss to the Precious Metals Fund.
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
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<PAGE>
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.
DISTRIBUTIONS
The tax status of the Trust and the distributions which it may make
are summarized in the Retail Prospectus under the caption "Taxes" and in the
Institutional Prospectus under the caption "Dividends, Distributions and Taxes."
Except for exempt-interest dividends paid by the Tax Exempt Fund, as described
in the Retail Prospectus, all dividends and distributions of a Fund, whether
received in shares or cash, are taxable and must be reported on each
shareholder's federal income tax return. Distributions received by tax-exempt
shareholders will not be subject to federal income tax to the extent permitted
under the applicable tax exemption. A dividend or capital gains distribution
received after the purchase of a Fund's shares reduces the net asset value of
the shares by the amount of the dividend or distribution and will be subject to
federal income taxes.
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, 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
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<PAGE>
taxable year (and, for purposes of the 4% excise tax, on certain other dates as
prescribed under the Code) are "marked to market" with the result that
unrealized gains or losses are treated as though they were realized and the
resulting gain or loss is treated as ordinary or 60/40 gain or loss.
Generally, the hedging transactions and certain other transactions in
options, futures and forward contracts undertaken by a Fund, may result in
"straddles" for U.S. federal income tax purposes. In some cases, the straddle
rules also could apply in connection with swap agreements. The straddle rules
may affect the character of gains (or losses) realized by a Fund. In addition,
losses realized by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences of transactions in options, futures,
forward contracts, and swap agreements to a Fund are not entirely clear. The
transactions may increase the amount of short-term capital gain realized by a
Fund which is taxed as ordinary income when distributed to shareholders.
A Fund may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
Rules governing the tax aspects of swap agreements are in a developing
stage and are not entirely clear in certain respects. Accordingly, while the
Emerging Markets, Structured Emerging Markets, International Developed,
International and Balanced 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
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<PAGE>
PFIC stock are treated as excess distributions. Excess distributions are
characterized as ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. 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.
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
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<PAGE>
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.
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 Micro Cap Growth and 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.
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<PAGE>
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. The Trust is organized as a Massachusetts business
trust. Under current law, so long as each Fund qualifies for the federal income
tax treatment described above, it is believed that neither the Trust nor any
Fund will be liable for any income or franchise tax imposed by Massachusetts.
Shareholders, in any event, 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. 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.
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.
CALCULATION OF YIELD
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:
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YIELD = 2[( a-b + 1)/6/-1]
---
cd
where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period.
The yield of the Tax Exempt Fund will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and operating
expenses of the Trust allocated to the Fund or its classes of shares. These
factors, possible differences in the methods used in calculating yield and the
tax exempt status of distributions should be considered when comparing the Tax
Exempt Fund's yield to yields published for other investment companies and other
investment vehicles. Yield should also be considered relative to changes in the
value of the Fund's various classes of shares. These yields do not take into
account any applicable contingent deferred sales charges.
The Tax Exempt Fund may advertise a tax equivalent yield of each class of its
shares, calculated as described above except that, for any given tax bracket,
net investment income of each class will be calculated using as gross investment
income an amount equal to the sum of (i) any taxable income of each class of the
Fund plus (ii) the tax exempt income of each class of the Fund divided by the
difference between 1 and the effective federal income tax rates for taxpayers in
that tax bracket. For example, taxpayers with the marginal federal income tax
rates indicated in the following table, which reflects the changes in marginal
tax rates and income tax brackets in effect for 1996, would have to earn the tax
equivalent yields shown in order to realize an after-tax return equal to the
corresponding tax free yield shown.
<TABLE>
<CAPTION>
FILING STATUS MARGINAL A TAX-EXEMPT YIELD OF
Single Married filing jointly tax rate* 3% 4% 5% 6% 7%
IS EQUIVALENT TO A TAXABLE YIELD OF
TAXABLE INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
$23,350 or less $39,000 or less 15% 3.53% 4.71% 5.88% 7.06% 8.24%
Over $23,350 but Over $39,000 but 28% 4.17% 5.56% 6.94% 8.33% 9.72%
not over $56,550 not over $94,250
Over $56,550 but Over $94,250 but 31% 4.35% 5.80% 7.25% 8.70% 10.14%
not over $117,950 not over $143,600
Over $117,950 but Over $143,600 but 36% 4.69% 6.25% 7.81% 9.38% 10.94%
not over $256,500 not over $256,500
Over $256,500 Over $256,500 39.6% 4.97% 6.62% 8.28% 9.93% 11.59%
</TABLE>
- -------------------
* These marginal tax rates do not take into account the effect of the phaseout
of itemized deductions and personal exemptions.
As is shown in the above table, the advantage of tax-free investing
becomes more advantageous to an investor as his or her marginal tax rate
increases.
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<PAGE>
The Trust, in its advertisements, may refer to pending legislation
from time to time and the possible impact of such legislation on investors,
investment strategy and related matters. This would include any tax proposals
and their effect on marginal tax rates and tax-equivalent yields. At any time in
the future, yields and total return may be higher or lower than past yields and
there can be no assurance that any historical results will continue.
CALCULATION OF TOTAL RETURN
Quotations of average annual total return for a Fund or class will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund or class over periods of one, five, and ten
years (up to the life of the Fund), calculated pursuant to the following
formula: P (1 + T)/n/ = ERV (where P = a hypothetical initial payment of $1,000,
T = the average annual total return, n = the number of years, and ERV = the
ending redeemable value of a hypothetical $1,000 payment made at the beginning
of the period). 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.
For the period ended June 30, 1996, the total return of the operative
Funds of the Trust (Institutional Class, unless otherwise noted, as these Funds
did not offer Class A, Class B or Class C shares during this period) was as
follows:
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIOD
ENDED JUNE 30, 1996
-----------------------
SINCE
INCEPTION INCEPTION
FUND 1 YEAR 5 YEARS (ANNUALIZED) DATE
------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Equity Income Fund 24.86% 15.21% 14.89% 03/08/91
Equity Income Fund (Administrative) 24.47% N/A 27.08% 11/30/94
Value Fund 26.66% N/A 15.71% 12/30/91
Small Cap Value Fund 21.99% N/A 14.83% 10/01/91
Small Cap Value Fund (Administrative) N/A N/A 15.64% 11/01/95
Capital Appreciation Fund 24.67% 18.20% 16.74% 03/08/91
Mid Cap Growth Fund 21.56% N/A 16.10% 08/26/91
Mid Cap Growth Fund (Administrative) 21.25% N/A 29.60% 11/30/94
Micro Cap Growth Fund 36.19% N/A 23.52% 06/25/93
Micro Cap Growth Fund (Administrative) N/A N/A 10.34% 04/01/96
Small Cap Growth Fund 17.33% 18.11% 22.47% 01/07/91
Small Cap Growth Fund (Administrative) N/A N/A 2.88% 09/27/95
Enhanced Equity Fund 22.72% 13.45% 12.82% 02/11/91
Emerging Markets Fund 7.70% N/A 11.41% 06/01/93
Emerging Markets Fund (Administrative) 7.53% N/A (12.95)% 11/01/94
International Developed Fund 18.48% N/A 11.67% 06/08/93
International Developed Fund (Administrative) 18.13% N/A 14.08% 11/30/94
Balanced Fund 15.13% N/A 11.13% 06/25/92
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Core Equity Fund ____ ____ ____ ____
Mid Cap Equity Fund ____ ____ ____ ____
</TABLE>
* These funds are newly created series of the Trust and have not previously
offered any class of shares.
RECENT PERFORMANCE OF CLASS A, B AND C SHARES OF FORMER PAF FUNDS
Total return with respect to a Fund's Class A, Class B and Class C
shares is a measure of the change in value of an investment in a class of shares
of a Fund over the period covered (in the case of Class A shares, giving effect
to the maximum initial sales charge), which assumes any dividends or capital
gains distributions are reinvested in that class of the Fund's shares
immediately rather than paid to the investor in cash. The formula for total
return used herein includes four steps: (1) adding to the total number of shares
purchased by a hypothetical $1,000 investment in the class (deducting in the
case of Class A shares the maximum applicable initial sales charge) all
additional shares which would have been purchased if all dividends and
distributions paid or distributed during the period had been immediately
reinvested; (2) calculating the value of the hypothetical initial investment of
$1,000 as of the end of the period by multiplying the total number of shares in
the class owned at the end of the period by the net asset value per share of the
class on the last trading day of the period; (3) assuming redemption at the end
of the period (deducting any applicable contingent deferred sales charge); and
(4) dividing this account value for the hypothetical investor by the initial
$1,000 investment and annualizing the result for periods of less than one
year.
The manner in which total return and yield of the Class A, Class B and
Class C shares will be calculated for public use is described above. The
following tables summarize the calculation of total return and yield for the
Class A, Class B and Class C shares of each Former PAF Fund, where applicable,
through September 30, 1996. The remaining Funds did not offer Class A, Class B
or Class C shares prior to the date of this Statement of Additional
Information.
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<PAGE>
RECENT PERFORMANCE OF CLASS A SHARES
(BASED ON MAXIMUM OFFERING PRICE)
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Average Annual Total Return
- ----------------------------------------------------------------------------------------------------------
Date of Current Inception Year 5 Years 10 Years Lipper
Fund*** Initial SEC to Ended Ended Ended Rank Year
Offering Yield at 9/30/96* 9/30/96* 9/30/96* 9/30/96* Ended
of Class 9/30/96* 9/30/96*
A Shares
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Renaissance** 02/01/91
Growth 10/26/90
Target 12/17/92
Opportunity 12/17/90
Innovation 12/22/94
International** 02/01/91
Precious Metals** 02/01/91
Tax Exempt 03/14/91
- ----------------------------------------------------------------------------------------------------------
</TABLE>
More recently updated performance figures can be obtained from the Distributor.
* Assumes payment of current maximum sales charge at time of purchase.
** The investment objective and policies of the Renaissance Fund and
International Fund were changed effective February 1, 1992 and September 1,
1992, respectively. The investment objective and policies of the Precious Metals
Fund were changed effective on November 15, 1994. Performance information for
prior periods does not necessarily represent results that would have been
obtained had the current investment objective and policies then been in effect.
*** Each Fund listed was formerly a series of PIMCO Advisors Funds and
reorganized as a series of the Trust on ______________, 1997.
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<PAGE>
RECENT PERFORMANCE OF CLASS B SHARES
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Average Annual Total Return
- ----------------------------------------------------------------------------------------------------------
Fund* Date of Current Inception Year 5 Years 10 Years
Initial SEC to 9/30/96 Ended Ended Ended
Offering of Yield at 9/30/96 9/30/96 9/30/96
Class B 9/30/96
Shares
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Renaissance 02/01/91
Growth 10/26/90
Target 12/17/92
Opportunity 12/17/90
Innovation 12/22/94
International 02/01/91
Precious Metals 02/01/91
Tax Exempt 03/14/91
</TABLE>
More recently updated performance figures can be obtained from the Distributor.
* Each Fund listed was formerly a series of PIMCO Advisors Funds and
reorganized as a series of the Trust on ______________, 1997.
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<PAGE>
RECENT PERFORMANCE OF CLASS C SHARES
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Average Annual Total Return
- -----------------------------------------------------------------------------------------------------
Fund Current Inception Year 5 Years 10 Years
Fund** Inception SEC to 9/30/96 Ended Ended Ended
Date Yield at 9/30/96 9/30/96 9/30/96
9/30/96
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Renaissance* 04/18/88
Growth 02/24/84
Target 12/17/92
Opportunity 02/24/84
Innovation 12/22/94
International* 08/25/86
Precious Metals* 10/10/88
Tax Exempt 11/01/85 3.64 7.96 10.05 7.02 NA
Indexes
- -------
S&P 500
Russell 2000
Index
Lehman
Government
Index
</TABLE>
More recently updated performance figures can be obtained from the Distributor.
* The investment objective and policies of the Renaissance and International
Funds were changed effective February 1, 1992 and September 1, 1992,
respectively. The investment objective and policies of the Precious Metals Fund
was changed effective on November 15, 1994. Performance information for prior
periods does not necessarily represent results that would have been obtained had
the current investment objective and policies then been in effect.
** Each Fund listed was formerly a series of PIMCO Advisors Funds and
reorganized as a series of the Trust on ____________, 1997.
Performance information for a Fund may also be compared to: (i) the
Standard & Poor's 500 Composite Stock Price 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, the Baring
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 investment in the Funds. Unmanaged indexes (i.e., other than Lipper)
generally do not reflect deductions for administrative and management costs or
-65-
<PAGE>
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.
PERFORMANCE COMPARISONS
Performance information is computed separately for each class of a
Fund's shares. Each Fund may from time to time include the Total Return of each
class of its shares in advertisements or in information furnished to present or
prospective shareholders. The Tax Exempt and Balanced Funds may from time to
time include the Yield and Total Return of each class of their shares in
advertisements or information furnished to present or prospective shareholders.
Each Fund may from time to time include in advertisements the Total Return of
each class (and Yield of each class in the case of the Tax Exempt and Balanced
Funds) and the ranking of those performance figures relative to such figures for
groups of mutual funds categorized by Lipper Analytical Services as having the
same investment objectives.
Information provided to any newspaper or similar listing of the Fund's
net asset values and public offering prices will separately present each class
of shares.
The Total Return of each class (and Yield of each class in the case of
the Tax Exempt and Balanced Funds) may also be used to compare the performance
of each class of a Fund's shares against certain widely acknowledged standards
or indices for stock and bond market performance, against interest rates on
certificates of deposit and bank accounts, against the yield on money market
funds, against the cost of living (inflation) index, and against hypothetical
results based on a fixed rate of return.
The S&P's Composite Index of 500 Stocks (the "S&P 500") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 385 industrial, 15 transportation, 45 utilities and 55
financial services concerns. The S&P 500 represents about 77% of the market
value of all issues traded on the New York Stock Exchange.
The S&P's 400 Mid-Cap Index (the "S&P 400 Mid-Cap Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 400 stocks of companies whose capitalization range from $100 million to
over $5 billion and which represent a wide range of industries. As of December
31, 1995, approximately 26% of the 400 stocks were stocks listed on the National
Association of Securities Dealers Automated Quotations ("NASDAQ") system, 72%
were stocks listed on the New York Stock Exchange and 2% were stocks listed on
the American Stock Exchange. The Standard & Poor's Midcap 400 Index P/TR
consists of 400 domestic stocks chosen for market size (median market
capitalization of $676 million), liquidity and industry group representation. It
is a market-value weighted index (stock price times shares outstanding), with
each stock affecting the index in proportion to its market value. The index is
comprised of industrials, utilities, financials and transportation, in size
order.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-
weighted and unmanaged index showing the changes in the aggregate market value
of approximately 3,500 stocks relative to the base measure of 100.00 on February
5, 1971. The NASDAQ Index is composed entirely of common stocks of companies
traded
-66-
<PAGE>
over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.
The Russell 2000 Small Stock Index is an unmanaged index of the 2000
smallest securities in the Russell 3000 Index, representing approximately 7% of
the Russell 3000 Index. The Russell 3000 Index represents approximately 98% of
the U.S. equity market by capitalization. The Russell 1000 Index is composed of
the 1,000 largest companies in the Russell 3000 Index. The Russell 1000 Index
represents the universe of stocks from which most active money managers
typically select. This large cap index is highly correlated with the S&P 500
Index. The Russell 1000 Value Index contains stocks from the Russell 1000 Index
with a less-than-average growth orientation. It represents the universe of
stocks from which value managers typically select.
The Lehman Government Bond Index (the "SL Government Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. Government and all quasi-
federal corporations; and all corporate debt guaranteed by the U.S. Government.
Mortgage backed securities, flower bonds and foreign targeted issues are not
included in the SL Government Index.
The Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,000 bonds. To be included in the SL Government/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher by a nationally recognized rating agency.
The Merrill Lynch U.S. Treasury Intermediate-term Index is an
unmanaged index of ten U.S. Treasury securities with maturities ranging from 10
to 14.99 years. Over the ten year period from December 31, 1985 to December 31,
1995, according to the Merrill Lynch U.S. Treasury Intermediate-term Index, 18%
of Total Return was derived from price appreciation and 82% of Total Return was
derived from income.
BanXquote Money Market, a service of Masterfund Inc., provides the
average rate of return paid on 3 month certificates of deposit offered by major
banks and the average rate paid by major banks on bank money market funds. The
Donoghue Organization, Inc. a subsidiary of IBC USA Inc., publishes the Money
Fund Report which lists the 7 day average yield paid on money market funds.
From time to time, the Trust may use, in its advertisements or
information furnished to present or prospective shareholders, data concerning
the performance and ranking of certain countries' stock markets, including
performance and ranking data based on annualized returns over one, three, five
and ten-year periods. The Trust may also use data about the portion of world
equity capitalization represented by U.S. securities. As of December 31, 1995,
the U.S. equity market capitalization represented approximately 30% of the
equity market capitalization of all the world's markets. This compares with 52%
in 1980 and 70% in 1972.
From time to time, the Trust may use, in its advertisements and other
information relating to certain of the Funds, data concerning the performance of
stocks relative to that of fixed income investments and relative to the cost of
living over various periods of time. The table below sets forth the annual
returns for each calendar year from 1970 through 1994 (as well as a cumulative
return and average annual return for that 25 year period) for the S& P's 500
Stock Index (the "S&P 500 Index") and Treasury bills (using the formula set
forth after the table) as well as the rates of inflation (based on the Consumer
Price Index) during such periods.
-67-
<PAGE>
<TABLE>
<CAPTION>
S&P 500 Consumer Price
Period Index Treasury Bills Index
- ------ ----- -------------- ------
<S> <C> <C> <C>
1971 14.3% 4.4% 3.4%
1972 18.9 3.8 3.4
1973 -14.7 6.9 8.8
1974 -26.5 8.0 12.2
1975 37.2 5.8 7.0
1976 23.8 5.0 4.8
1977 -7.2 5.1 6.8
1978 6.5 7.2 9.0
1979 18.4 10.4 13.3
1980 32.4 11.2 12.4
1981 -4.9 14.7 8.9
1982 21.4 10.5 3.8
1983 22.5 8.8 3.8
1984 6.3 9.9 3.9
1985 32.2 7.7 3.8
1986 18.5 6.1 1.1
1987 5.2 5.5 4.4
1988 16.8 6.3 4.4
1989 31.5 8.4 4.6
1990 -3.2 7.8 6.1
1991 30.5 5.6 3.1
1992 7.7 3.5 2.9
1993 10.1 2.9 2.7
1994 1.3 3.9 2.7
1995 37.4 5.6 2.7
- ------------------------------------------------------------------------------
Cumulative Return
1971-1995 1683.3% 439.5% 286.1%
- ------------------------------------------------------------------------------
Average Annual Return
1971-1995 12.2% 7.2% 5.6%
- ------------------------------------------------------------------------------
</TABLE>
The average returns for Treasury bills were computed using the
following method. For each month during a period, the Treasury bill having the
shortest remaining maturity (but not less than one month ) was selected. (Only
the remaining maturity was considered; the bill's original maturity was not
considered). The return for the selected Treasury bill was computed based on the
price of the bill as of the last trading day of the previous month and the price
on the last trading day of the current month. The price of the bill (P) at each
time (t) is given by
P\\t\\ = [1- rd ]
[ --- ]
[ 360 ]
where,
r = decimal yield on the bill at time t (the average of bid
and ask quotes); and
d = the number of days to maturity as of time t.
-68-
<PAGE>
Advertisements and information relating to the Target Fund may use
data comparing the performance of stocks of medium-sized companies to that of
other companies. The following table sets forth the annual returns for each year
from March 1981 (inception of Mid-Cap Index) through 1995 (as well as a
cumulative return and average annual return for this period) for stocks of
medium-sized companies (based on the Standard & Poor's Mid-Cap Index), stocks of
small companies (based on the Russell 2000 Index) and stocks of larger companies
(based on the S&P 500 Index).
<TABLE>
<CAPTION>
Small Mid-Sized Large
Period Companies Companies Companies
- ------ ---------- --------- ---------
<S> <C> <C> <C>
1981 (2/28 -12/31) 1.8 10.6 -2.5
1982 25.0 22.7 21.4
1983 29.1 26.1 22.5
1984 -7.3 1.2 6.3
1985 31.1 36.0 32.2
1986 5.7 16.2 18.5
1987 -8.8 -2.0 5.2
1988 24.9 20.9 16.8
1989 16.2 35.6 31.5
1990 -19.5 -5.1 -3.2
1991 46.1 50.1 30.5
1992 18.4 11.9 7.7
1993 18.9 14.0 10.1
1994 -1.8 -3.6 1.3
1995 28.4 30.9 37.6
- --------------------------------------------------------------------------------
Cumulative Return
2/28/81-12/31/95 483.4% 903.6% 714.30%
- --------------------------------------------------------------------------------
Average Annual Return
2/28/81-12/31/95 12.6% 16.8% 15.2%
- --------------------------------------------------------------------------------
</TABLE>
From time to time, the Trust may use, in its advertisements and other
information relating to the Precious Metals Fund, data concerning the relevant
performance and volatility of portfolios consisting of all stocks, portfolios
consisting of all bonds and portfolios consisting of stocks and bonds blended
with stocks of companies engaged in the extraction, processing, distribution or
marketing of gold and other precious metals. The following table shows the
annual returns for each calendar year from 1970 through 1994 (as well as
cumulative return and average annual return for that 25 year period) for an all-
stock portfolio (using the S&P 500 Index), an all-bond portfolio (using the
Salomon Brothers Long Term Corporate Bond Index), and for a hypothetical
portfolio with 45% of its assets in stocks comprising the S&P 500 Index, 45% in
bonds comprising the Salomon Brothers Long Term Corporate Bond Index and 10% in
stocks comprising the Morgan Stanley Capital International Gold Mining Index.
(Information for the calendar year ended 1995 was not available on the date of
this Statement of Additional Information).
-69-
<PAGE>
<TABLE>
<CAPTION>
Stocks 45%
All All Bonds 45%
Period Stocks Bonds Gold Stocks 10%
- ------ ------ ------ ---------------
<S> <C> <C> <C>
1971 14.3 11.0 10.4
1972 19.0 7.3 15.5
1973 -14.7 1.1 4.2
1974 -26.5 -3.1 -10.9
1975 37.5 14.6 20.4
1976 23.8 18.6 15.0
1977 -7.2 1.7 .5
1978 6.5 0.00 3.4
1979 18.4 -4.2 21.3
1980 32.4 -2.6 19.3
1981 -4.9 -0.1 -6.0
1982 21.4 43.8 33.9
1983 22.5 4.7 12.0
1984 6.3 16.4 7.2
1985 32.2 30.9 26.2
1986 18.5 19.8 18.5
1987 5.2 -0.02 6.6
1988 16.8 10.7 9.1
1989 31.5 16.2 26.4
1990 -3.2 6.8 -1.0
1991 30.5 19.9 21.8
1992 7.7 9.4 4.9
1993 10.1 13.2 23.5
1994 1.3 -5.8 -3.1
1995 37.4 27.2 29.7
- -------------------------------------------------------------------------------
Cumulative Return
1971-1995 1683.3% 899.6% 1504.3%
- -------------------------------------------------------------------------------
Average Annual Return
1971-1995 12.2% 9.6% 11.7%
- -------------------------------------------------------------------------------
</TABLE>
The Trust may use, in its advertisements and other information, data
concerning the projected cost of a college education in future years based on
1993/1994 costs of college and an assumed rate of increase for such costs. For
example, the table below sets forth the projected cost of four years of college
at a public college and a private college assuming a steady increase in both
cases of 7% per year. In presenting this information, the Trust is making no
prediction regarding what will be the actual growth rate in the cost of a
college education, which may be greater or less than 7% per year and may vary
significantly from year to year. The Trust makes no representation that an
investment in any of the Funds will grow at or above the rate of growth of the
cost of a college education. (Information based on 1994/1995 costs was not
available on the date of this Statement of Additional Information).
-70-
<PAGE>
POTENTIAL COLLEGE COST TABLE
<TABLE>
<CAPTION>
Start Public Private Start Public Private
Year College College Year College College
- ----- ------- ------- ----- ------- -------
<S> <C> <C> <C> <C> <C>
1996 $33,761 $ 86,035 2004 $58,007 $147,817
1997 $36,124 $ 92,057 2005 $62,067 $158,165
1998 $38,653 $ 98,501 2006 $66,412 $169,237
1999 $41,358 $105,396 2007 $71,061 $181,084
2000 $44,253 $112,774 2008 $76,035 $193,761
2001 $47,351 $120,668 2009 $81,357 $207,325
2002 $50,665 $129,115 2010 $87,051 $221,838
2003 $54,212 $138,146 2011 $93,143 $237,367
</TABLE>
Costs assume a steady increase in the annual cost of college of 7% per year from
a 1993-94 base year amount. Actual rates of increase may be more or less than 7%
and may vary.
In its advertisements and other materials, the Trust may compare the
returns over periods of time of investments in stocks, bonds and treasury bills
to each other and to the general rate of inflation. For example, the average
annual return of each during the 25 years from 1971 to 1995 was:
*Stocks: 12.2%
Bonds: 9.6%
T-Bills: 7.2%
Inflation: 5.6%
*Returns of unmanaged indices do not reflect past or future
performance of any of the Funds of PIMCO Funds: Equity Advisers
Series. Stocks is represented by Ibbotson's Common Stock Total
Return Index. Bonds are represented by Ibbotson's Long-term
Corporate Bond Index. T-bills are represented by Ibbotson's
Treasury Bill Index and Inflation is represented by the Cost of
Living Index. These are all unmanaged indices, which can not be
invested in directly. While Treasury bills are insured and offer a
fixed rate of return, both the principal and yield of investment
securities will fluctuate with changes in market conditions.
Source: Ibbotson, Roger G., and Rex A. Sinquefiled, Stocks, Bonds,
Bill and Inflation (SBBI), 1989, updated in Stocks, Bonds, Bills
and Inflation 1996 Yearbook, Ibbotson Associates, Chicago. All
rights reserved.
The Trust may also compare the relative historic returns and range of
returns for an investment in each of common stocks, bonds and treasury bills to
a portfolio that blends all three investments. For example, over the 25 years
from 1971-1995, the average annual return of stocks comprising the Ibbotson's
Common Stock Total Return Index ranged from -26.5% to 37.4% while the annual
return of a hypothetical portfolio comprised 40% of such common stocks, 40% of
bonds comprising the Ibbotson's Long-term Corporate bond Index and 20% of
Treasury bills comprising the Ibbottson's Treasury Bill Index (a "mixed
portfolio") would have ranged from -10.2% to 28.2% over the same period. The
average annual returns of each investment for each of the years from 1971
through 1995 is set forth in the following table.
-71-
<PAGE>
<TABLE>
<CAPTION>
MIXED
YEAR STOCKS BONDS T-BILLS INFLATION PORTFOLIO
- ------ ------ ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
1971 14.31% 11.01% 4.39% 3.36% 11.01%
1972 18.98% 7.26% 3.84% 3.41% 11.26%
1973 -14.66% 1.14% 6.93% 8.80% -4.02%
1974 -26.47% -3.06% 8.00% 12.26% -10.21%
1975 37.20% 14.64% 5.80% 7.01% 21.90%
1976 23.84% 18.65% 5.08% 4.81% 18.01%
1977 -7.18% 1.71% 5.12% 6.77% -1.17%
1978 6.56% -0.07% 7.18% 9.03% 4.03%
1979 18.44% -4.18% 10.38% 13.31% 7.78%
1980 32.42% 2.61% 11.24% 12.40% 14.17%
1981 -4.91% -0.96% 14.71% 8.94% 0.59%
1982 21.41% 43.79% 10.54% 3.87% 28.19%
1983 22.51% 4.70% 8.80% 3.80% 12.64%
1984 6.27% 16.39% 9.85% 3.95% 11.03%
1985 32.16% 30.90% 7.72% 3.77% 26.77%
1986 18.47% 19.85% 6.16% 1.13% 16.56%
1987 5.23% -0.27% 5.46% 4.41% 3.08%
1988 16.81% 10.70% 6.35% 4.42% 12.28%
1989 31.49% 16.23% 8.37% 4.65% 20.76%
1990 -3.17% 6.87% 7.52% 6.11% 2.98%
1991 30.55% 19.79% 5.88% 3.06% 21.31%
1992 7.67% 9.39% 3.51% 2.90% 7.53%
1993 10.06% 13.17% 2.89% 2.75% 9.84%
1994 1.31% -5.76% 3.90% 2.67% -1.00%
1995 37.40% 27.20% 5.60% 2.70% 26.90%
</TABLE>
Returns of unmanaged indices do not reflect past or future performance of
any of the Funds of PIMCO Funds: Equity Advisers Series. Stocks is
represented by Ibbotson's Common Stock Total Return Index. Bonds are
represented by Ibbotson's Long-term Corporate Bond Index. T'bills are
represented by Ibbotson's Treasury Bill Index and Inflation is represented
by the Cost of Living Index. These are all unmanaged indices, which can
not be invested in directly. While Treasury bills are insured and offer a
fixed rate of return, both the principal and yield of investment securities
will fluctuate with changes in market conditions. Source: Ibbotson, Roger
G., and Rex A. Sinquefiled, Stocks, Bonds, Bill and Inflation (SBBI), 1989,
updated in Stocks, Bonds, Bills and Inflation 1996 Yearbook, Ibbotson
Associates, Chicago. All rights reserved.
The Trust may use in its advertisement and other materials examples
designed to demonstrate the effect of compounding when an investment is
maintained over several or many years. For example, the following table shows
the annual and total contributions necessary to accumulate $200,000 of savings
(assuming a fixed rate of return) over various periods of time:
-72-
<PAGE>
<TABLE>
<CAPTION>
Investment Annual Total Total
Period Contribution Contribution Saved
------ ------------ ------------ --------
<S> <C> <C> <C>
30 Years $ 1,979 $ 59,370 $200,000
25 Years $ 2,955 $ 73,875 $200,000
20 Years $ 4,559 $ 91,180 $200,000
15 Years $ 7,438 $111,570 $200,000
10 Years $13,529 $135,290 $200,000
</TABLE>
This hypothetical example assumes a fixed 7% return compounded annually and
a guaranteed return of principal. The example is intended to show the
benefits of a long-term, regular investment program, and is in no way
representative of any past or future performance of a Fund of PIMCO Funds:
Equity Advisors Series. There can be no guarantee that you will be able to
find an investment that would provide such a return at the times you invest
and an investor in any of the Funds of PIMCO Funds: Equity Advisors Series
should be aware that certain of the Funds of PIMCO Funds: Equity Advisors
Series have experienced periods of negative growth in the past and may
again in the future.
The Trust may set forth in its advertisements and other materials
information regarding the relative reliance in recent years on personal savings
for retirement income versus reliance on Social Security benefits and company
sponsored retirement plans. For example, the following table offers such
information for 1990:
% of Income for Individuals
Aged 65 Years and Older in 1990*
-------------------------------
Social Security
Year and Pension Plans Other
---- ----------------- -----
1990 38% 62%
* For individuals with an annual income of at least $51,000. Other
includes personal savings, earnings and other undisclosed sources of
income. Source: Social Security Administration.
Articles or reports which include information relating to performance,
rankings and other characteristics of the Funds may appear in various national
publications and services including, but not limited to: The Wall Street
Journal, Barron's, Pensions and Investments, Forbes, Smart Money, Mutual Fund
Magazine, The New York Times, Kiplinger's Personal Finance, Fortune, Money
Magazine, Morningstar's Mutual Fund Values, CDA Investment Technologies and The
Donoghue Organization. Some or all of these publications or reports may publish
their own rankings or performance reviews of mutual funds, including the Funds,
and may provide information relating to the Adviser and the Funds' Portfolio
Managers, including descriptions of assets under management and client base, and
opinions of the author(s) regarding the skills of personnel and employees of the
Adviser or the Funds' Portfolio Managers who have portfolio management
responsibility. From time to time, the Trust may include references to or
reprints of such publications or reports in its advertisements and other
information relating to the Funds.
From time to time, the Trust may set forth in its advertisements
and other materials information about the growth of a certain dollar-amount
invested in one or more of the Funds over a specified period of time and may
use charts and graphs to display that growth.
-73-
<PAGE>
Ibbotson Associates ("Ibbotson") has analyzed the risk and returns of the
Funds and relevant benchmark market indices in a variety of market conditions.
Based on its independent research and analysis, Ibbotson has developed model
portfolios of the Funds which indicate how, in Ibbotson's opinion, a
hypothetical investor with a 5+ year investment horizon might allocate his or
her assets among the Funds. Ibbotson bases its model portfolios on five levels
of investor risk tolerance which it developed and defines as ranging from "Very
Conservative" (low volatility; emphasis on capital preservation, with some
growth potential) to "Very Aggressive" (high volatility; emphasis on long-term
growth potential). For instance, Ibbotson developed the following model
portfolios for the Funds: (1) "Very Conservative" - 10% in Renaissance Fund, 5%
in Growth Fund and 5% in International Bond Fund; (2) "Conservative" - 5% in
Growth Fund, 15% in Target Fund and 10% in International Bond Fund; (3)
"Moderate" - 10% in Growth Fund, 15% in Target Fund and 15% in International
Bond Fund; (4) "Aggressive" - 10% in Growth Fund, 15% in Target Fund, 15% in
Discovery Fund and 20% in International Bond Fund; and (5) "Very Aggressive" -
10% in Growth Fund, 15% in Target Fund, 30% in Discovery Fund and 25% in
International Bond Fund. From time to time, the Trust may include model
portfolios developed by Ibbotson in its advertisements and other materials
relating to the Funds. However, neither Ibbotson nor the Trust offers
Ibbotson's model portfolios as investments. Moreover, neither the Trust, the
Adviser, the Portfolio Managers nor Ibbotson represent or guarantee that
investors who allocate their assets according to Ibbotson's models will achieve
their desired investment results.
VOTING RIGHTS
Under the 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. Holders of a majority 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.
All classes of shares of the Funds have identical voting rights except that
each class of shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. Each class of shares has
exclusive voting rights with respect to matters pertaining to the Distribution
and Servicing Plan applicable to that class. These shares are entitled to vote
at meetings of shareholders. Matters submitted to shareholder vote must be
approved by each Fund separately except (i) when required by the 1940 Act shares
shall be voted together and (ii) when the Trustees have determined that the
matter does not affect all Funds, then only shareholders of the Fund or Funds
affected shall be entitled to vote on the matter. All classes of shares of a
Fund will vote together, except with respect to the Distribution and Servicing
Plan applicable to Class A, Class B or Class C shares, to the Distribution and
Administrative Services Plans for Administrative Class shares or when a class
vote is required as specified above or otherwise by the 1940 Act.
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.
CERTAIN OWNERSHIP OF TRUST SHARES
As of October 18, 1996, the Trustees and officers of the Trust owned the
following amounts of shares of each Fund (including each Former PAF Fund):
-74-
<PAGE>
<TABLE>
<CAPTION>
INSTITUTIONAL ADMINISTRATIVE
CLASS A CLASS B CLASS C CLASS CLASS
FUND NO. OF SHARES NO. OF SHARES NO. OF SHARES NO. OF SHARES NO. OF SHARES
- ---- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Equity Income* N/A N/A N/A 0 0
Renaissance** 46,977.701 0 0 N/A N/A
Enhanced Equity** N/A N/A N/A 0 0
Growth** 145,767.235 0 1,040.410 N/A N/A
Capital Appreciation* N/A N/A N/A 0 0
Mid Cap Growth* N/A N/A N/A 0 0
Target** 112,699.714 0 0 N/A N/A
Small Cap Value* N/A N/A N/A 0 0
Core Equity* N/A N/A N/A 0 0
Mid Cap Equity* N/A N/A N/A 0 0
Opportunity** 67,994.830 0 971.624 N/A N/A
Micro Cap Growth* N/A N/A N/A 55.340 0
Innovation** 20,757.382 0 0 N/A N/A
International ** 26,511.064 0 0 N/A N/A
International Developed* N/A N/A N/A 12,526.838 0
Emerging Markets* N/A N/A N/A 8,433.709 0
Precious Metals** 0 0 0 N/A N/A
Balanced* N/A N/A N/A 0 0
Tax Exempt** 80.233 0 0 N/A N/A
</TABLE>
* These Funds have not previously offered Class A, Class B or Class C shares.
** These Funds have not previously offered Institutional Class or Administrative
Class shares.
As of October 18, 1996, the following persons owned of record or beneficially
5% or more of the shares of the following Funds:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
FUND BENEFICIAL OWNER CLASS OF NO. OF PERCENTAGE
SHARES OWNED SHARES OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EQUITY INCOME FUND Pacific Mutual Life Insurance Company Institutional 1,356,224.690 17.89%
FBO PM RISP
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
NBD Bank NA as Trustee for Institutional 1,306,329.863 17.23%
AM Castle & Company Employee
Pension
P.O. Box 77975
Detroit, Michigan 48277-0975
- -------------------------------------------------------------------------------------------------------------------
Santa Barbara Foundation Institutional 787,412.509 10.38%
15 East Carillo Street
Santa Barbara, California 93101-2780
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-75-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
FUND BENEFICIAL OWNER CLASS OF NO. OF PERCENTAGE
SHARES OWNED SHARES OF
BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hazlehurst & Associates Institutional 413,436.145 5.45%
400 Perimeter Center Terrace, Suite 850
Atlanta, Georgia 30346
- -------------------------------------------------------------------------------------------------------------------
First Union National Bank Administrative 418,547.222 97.60%*
401 S. Tyron Street, FRB-3
Charlotte, North Carolina 28288-1151
- -------------------------------------------------------------------------------------------------------------------
VALUE FUND Pacific Mutual Life Insurance Company Institutional 2,040,756.360 46.31%*
FBO PM Retirement Plan
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
The Northern Trust Company as Institutional 863,461.875 19.59%
Trustee for Great Lakes Chemical
Master Retirement Trust
P.O. Box 2200
West Lafayette, Indiana 47906
- -------------------------------------------------------------------------------------------------------------------
BAC Local 19 Pension Trust Fund Institutional 312,980.893 7.10%
777 Davis Street
San Francisco, California 94126-2500
- -------------------------------------------------------------------------------------------------------------------
PM Charitable Foundation Institutional 275,939.195 6.26%
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
SMALL CAP VALUE FUND Pacific Mutual Life Insurance Company Institutional 443,140.165 22.33%
FBO PM Retirement Plan
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
First Union National Bank Administrative 306,739.669 100.00%*
401 South Tyron Street, FRB-3
Charlotte, North Carolina 28202-1911
- -------------------------------------------------------------------------------------------------------------------
Sheet Metal Workers' Local Unions Institutional 300,894.876 15.17%
and Councils Pension Fund
601 N. Fairfax Street, Suite 500
Alexandria, Virginia 22314-2054
- -------------------------------------------------------------------------------------------------------------------
Victoria Bank and Trust Company, Institutional 228,491.233 11.52%
Structural Metals, Inc. Pension Plan
One O'Connor Plaza, 6th Floor
Victoria, Texas 77901-65497
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-76-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND BENEFICIAL OWNER CLASS OF SHARES NO. OF SHARES PERCENTAGE OF
OWNED BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mellon Bank, NA FBO Institutional 108,350.681 5.46%
Mac & Co A/C 855-577
P.O. Box 320
Pittsburgh, Pennsylvania
15230-0320
- -------------------------------------------------------------------------------------------------------------------
CAPITAL Donaldson Lufkin & Jenrette** Institutional 3,979,488.471 19.40%
APPRECIATION Pershing Division
FUND P.O. Box 2052
Jersey City, New Jersey
07303-2052
- -------------------------------------------------------------------------------------------------------------------
Bank of New York as Trustee for Institutional 2,999,866.508 14.63%
Coopers & Lybrand Retirement Trust
One Wall Street
New York, New York 10286-0001
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 1,362,011.619 6.64%
FBO PM Retirement Plan
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Ingram Industries Inc. Institutional 1,098,303.191 5.35%
1 Belle Meade Plaza
P.O. Box 23049
Nashville, Tennessee 37202
- -------------------------------------------------------------------------------------------------------------------
Amsouth Bank as Trustee for Institutional 1,031,065.255 5.03%
Infirmary Health Systems
P.O. Box 11426
Birmingham, Alabama 35202-1426
- -------------------------------------------------------------------------------------------------------------------
FIICO as Agent for Administrative 4,559.856 83.73%*
Certain Employee Benefits Plan
100 Magetian KWIC
Covington, Kentucky 41015
- -------------------------------------------------------------------------------------------------------------------
First Union National Bank Administrative 886.232 16.27%
401 S. Tyron Street, FRB-3
Charlotte, North Carolina 28288-1151
- -------------------------------------------------------------------------------------------------------------------
MID CAP First Trust as Trustee for Institutional 2,105,080.446 20.35%
GROWTH FUND Dayton Hudson Corporation
P.O. Box 64010
St. Paul, Minnesota 55164-0010
- -------------------------------------------------------------------------------------------------------------------
Caremark International, Inc. Institutional 883,887.454 8.54%
c/o State Street Bank & Trust
1 Enterprise Drive
North Quincy, Massachusetts 02171-2126
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-77-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND BENEFICIAL OWNER CLASS OF SHARES NO. OF SHARES PERCENTAGE OF
OWNED BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fleet Bank for Institutional 718,798.331 6.95%
University of Massachusetts
10 Tremont Street, 4th Floor
Boston, Massachusetts 02108
- -------------------------------------------------------------------------------------------------------------------
Berklee College of Music, Inc. Institutional 637,636.681 6.16%
1140 Boylston Street
Boston, Massachusetts 02215-3693
- -------------------------------------------------------------------------------------------------------------------
Staff Retirement Plan of the Institutional 535,575.625 5.18%
International Telecommunications
Satellite Organization
3400 International Drive, N.W.
Washington, D.C. 20008-3006
- -------------------------------------------------------------------------------------------------------------------
First Interstate Bank FBO Administrative 48,900.607 84.57%*
Choicemaster
5808 East Telephone Road, 2nd Floor
Ventura, California 93003
- -------------------------------------------------------------------------------------------------------------------
Canterbury Consultant FBO Administrative 5,258.486 9.09%
Sandra Hogue Trust
660 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
MICRO CAP Charles Schwab & Co., Inc.** Institutional 1,199,263.540 24.69%
GROWTH FUND 101 Montgomery Street
San Francisco, California 94104-4122
- -------------------------------------------------------------------------------------------------------------------
Dominion Resources, Inc. Institutional 854,664.929 17.59%
701 East Byrd Street
P.O. Box 26532
Richmond, Virginia 23261
- -------------------------------------------------------------------------------------------------------------------
University of Southern California Institutional 812,844.768 16.73%
Treasurer's Office
University Park, BKS 402
Los Angeles, California 90089-2541
- -------------------------------------------------------------------------------------------------------------------
The Northern Trust Company as Trustee Institutional 385,554.673 7.94%
for
Toyota Directed Retirement Trust
P.O. Box 92956
Chicago, Illinois 60690
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 361,010.830 7.43%
700 Newport Center Drive
Newport Beach, California 92660-6397
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-78-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND BENEFICIAL OWNER CLASS OF SHARES NO. OF SHARES PERCENTAGE OF
OWNED BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Northern Trust Company as Trustee for Administrative 51,947.229 100.00%*
Sunday School Board
P.O. Box 92956
Chicago, Illinois 60675
- -------------------------------------------------------------------------------------------------------------------
SMALL CAP The Jewish Federation of Institutional 423,780.013 26.16%*
GROWTH FUND Metropolitan Chicago
One South Franklin Street
Room 625
Chicago, Illinois 60606-4609
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 260,281.104 16.07%
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
ESOR & Co. Institutional 197,355.259 12.18%
Associated Bank Green Bay
Trust Operations Department
P.O. Box 19006
Green Bay, Wisconsin 54307-9006
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 151,823.341 9.37%
FBO PM Retirement Plan
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Auburn Theological Seminary Institutional 145,018.519 8.95%
3041 Broadway
New York, New York 10027-5710
- -------------------------------------------------------------------------------------------------------------------
Bessemer Trust Company for Institutional 99,453.008 6.14%
Naidot & Co.
100 Woodbridge Center Drive
Woodbridge, New Jersey 07095
- -------------------------------------------------------------------------------------------------------------------
FTC & Co. Administrative 5,312.555 100.00%*
First Trust (Multi-Financial Group)
P.O. Box 173736
Denver, Colorado 80217-3736
- -------------------------------------------------------------------------------------------------------------------
CORE EQUITY Pacific Mutual Life Insurance Company Institutional 428,426.396 54.98%*
FUND 700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Charitable Foundation Institutional 123,479.016 15.85%
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-79-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND BENEFICIAL OWNER CLASS OF SHARES NO. OF SHARES PEERCENTAGE OF
OWNED BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Union Bank as Trustee for Institutional 94,328.867 12.11%
Pacific Corinthian Life Insurance
Company
Pension Plan
10241 Wateridge Circle
San Diego, California 92121-2733
- -------------------------------------------------------------------------------------------------------------------
The Bank of New York as Administrative 2,203,401.359 83.47%*
Trustee for Melville Corporation
One Theall Road
Rye, New York, 10580-1404
- -------------------------------------------------------------------------------------------------------------------
The Bank of New York as Trustee for Administrative 350,815.389 13.29%
Marshalls Association 401(k) Trust
One Wall Street
MT/MC 12th Floor
New York, New York 10286-0001
- -------------------------------------------------------------------------------------------------------------------
MID CAP Pacific Mutual Life Insurance Company Institutional 439,316.239 76.22%
EQUITY FUND 700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
John W. Barnum Institutional 52,308.574 9.08%
5175 Tilden Street, N.W.
Washington, DC 20016-1961
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Charitable Foundation Institutional 29,398.169 5.10%
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
ENHANCED First Interstate Bank of CA, Institutional 1,863,469.422 40.29%*
EQUITY FUND Custodian S.F. BART
P.O. Box 9800
Calabasas, California 91372-0800
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 841,703.411 18.20%*
FBO PM Retirement Plan
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 594,518.448 12.85%
FBO CMTA-GMPP & Allied Workers Pension
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Santa Clara Mission Institutional 299,385.088 6.47%
The Rector-Nobili Hall
Santa Clara University
Santa Clara, California 00009-5053
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-80-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND BENEFICIAL OWNER CLASS OF SHARES NO. OF SHARES PERCENTAGE OF
OWNED BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EMERGING Charles Schwab & Co., Inc.** Institutional 2,351,321.558 43.79%*
MARKETS FUND 101 Montgomery Street
San Francisco, California 94104-4122
- -------------------------------------------------------------------------------------------------------------------
Donaldson Lufkin & Jenrette** Institutional 687,127.741 12.80%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey 07303-2052
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 575,190.664 10.71%
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 378,425.453 7.05%
FBO PM Retirement Plan
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
FTC & Co. Administrative 25,799.415 100.00%*
First Trust (Multi-Financial Group)
P.O. Box 173736
Denver, Colorado 80217-3736
- -------------------------------------------------------------------------------------------------------------------
INTERNATIONAL Pacific Financial Asset Institutional 1,158,760.796 17.10%
DEVELOPED Management Corporation
FUND 700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Wachovia Bank of N.C. as Trustee for Institutional 1,016,260.163 15.00%
Atlanta Gas Light Co. Retirement Plan
301 North Main Street
P.O. Box 3073
Winston-Salem, North Carolina 27150
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 745,690.023 11.01%
FBO PM Retirement Plan
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Nissan Motor Corporation USA Institutional 688,713.823 10.17%
P.O. Box 191
Gardena, California 90248-0191
- -------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co., Inc. ** Institutional 613,707.441 9.06%
101 Montgomery Street
San Francisco, California 94104-4122
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-81-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND BENEFICIAL OWNER CLASS OF SHARES NO. OF SHARES PERCENTAGE OF
OWNED BENEFICIALLY OUTSTANDING
OWNED SHARES OWNED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Interstate Bank as Trustee for Institutional 533,712.057 7.88%
Cadence Design System Inc.
P.O. Box 9800
Calabasas, California 91372-0800
- -------------------------------------------------------------------------------------------------------------------
FTC & Co. Administrative 257,125.37 54.74%*
First Trust (Multi-Financial Group)
P.O. Box 173736
Denver, Colorado 80217-3736
- -------------------------------------------------------------------------------------------------------------------
Northern Trust Company as Trustee for Administrative 209,428.808 44.59%
Sunday School Board
P.O. Box 92956
Chicago, Illinois 60675
- -------------------------------------------------------------------------------------------------------------------
BALANCED FUND Pacific Mutual Life Insurance Company Institutional 1,139,129.985 22.21%
FBO California Race Track Association
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 987,578.620 19.26%
FBO PM RISP
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Trustees of the Redlands Community Institutional 630,292.357 12.29%
Hospital Retirement Plan
350 Terracina Blvd.
Redlands, California 92373-4850
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 624,999.431 12.19%
FBO WESCOM Credit Union
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 607,667.327 11.85%
FBO California Hardware Company
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Company Institutional 435,220.166 8.49%
FBO Dominguez Water Corporation
Pension Fund
700 Newport Center Drive
Newport Beach, California 92660
- -------------------------------------------------------------------------------------------------------------------
</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 are held only as nominee.
-82-
<PAGE>
As of October 18 1996, the Trustees and officers of the Trust, as a group, owned
less than 1% of each Fund and of all Funds in the aggregate.
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.
[Information concerning the Custodian, Transfer Agent, Dividend Reimbursement
Agent, Auditors and Counsel to be provided.]
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectuses do not
contain all of the information included in the Trust's registration statements
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 statements, including the exhibits
filed therewith, may be examined at the offices of the SEC in Washington, D.C.
Statements contained herein and in the Prospectuses as to the contents
of any contract or other documents referred to are not necessarily complete,
and, in each instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the relevant registration statement, each such
statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
Financial statements for Institutional Class and Administrative Class
shares (if applicable) of the Equity Income, Value, Enhanced Equity, Capital
Appreciation, Mid Cap Growth, Small Cap Value, Small Cap Growth, Micro Cap
Growth, International Developed, Emerging Markets, Structured Emerging Markets,
Core Equity, Mid Cap Equity and Balanced Funds of the Trust as of June 30, 1996,
for these Funds' fiscal years then ended, including notes thereto, and the
report of Price Waterhouse LLP thereon dated August 12, 1996 are incorporated by
reference from the Trust's 1996 Annual Report. Financial statements for Class A,
Class B (except for the Opportunity Fund) and Class C shares of the Renaissance,
Growth, Target, Opportunity, Innovation, Tax Exempt, International and Precious
Metals Funds (prior to January 17, 1997, the Equity Income, Growth, Target,
Opportunity, Innovation, Tax Exempt, International, and Precious Metals Funds of
PAF, respectively) as of September 30, 1996, for these Funds' fiscal years then
ended, including notes thereto, and the report of Coopers & Lybrand LLP thereon
dated ____________, 1996 are incorporated by reference from the Trust's 1996
Annual Report of PIMCO Advisors Funds. [Note: Financial information for these
Funds is to be provided in a subsequent post-effective amendment pursuant to
Rule 485(b).]
-83-
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Certain of the Funds make use of average portfolio credit quality
standards to assist institutional investors whose own investment guidelines
limit their investments accordingly. In determining a Fund's overall dollar-
weighted average quality, unrated securities are treated as if rated, based on
the Adviser's view of their comparability to rated securities. A Fund's use of
average quality criteria is intended to be a guide for those institutional
investors whose investment guidelines require that assets be invested according
to comparable criteria. Reference to an overall average quality rating for a
Fund does not mean that all securities held by the Fund will be rated in that
category or higher. A Fund's investments may range in quality from securities
rated in the lowest category in which the Fund is permitted to invest to
securities rated in the highest category (as rated by Moody's or S&P or, if
unrated, determined by the Adviser to be of comparable quality). The percentage
of a Fund's assets invested in securities in a particular rating category will
vary. Following is a description of Moody's and S&P's ratings applicable to
fixed income securities.
MOODY'S INVESTORS SERVICE, INC.
CORPORATE AND MUNICIPAL BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than with Aaa securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present that suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
A-1
<PAGE>
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classified from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
CORPORATE SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as letters
of credit and bonds of indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and well-
established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the
Prime rating categories.
A-2
<PAGE>
STANDARD & POOR'S
CORPORATE AND MUNICIPAL BOND RATINGS
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
A-3
<PAGE>
CI: The rating CI is reserved for income bonds on which no interest
is being paid.
D: Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating will also be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
r: The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high volatility or high
variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities.
The absence of an "r" symbol should not be taken as an indication that
an obligation will exhibit no volatility or variability in total return.
N.R.: Not rated.
Debt obligations of issuers outside the United States and its
territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the creditworthiness of the obligor but do not take
into account currency exchange and related uncertainties.
COMMERCIAL PAPER RATING DEFINITIONS
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded into several categories, ranging from A for
the highest quality obligations to D for the lowest. These categories are as
follows:
A-1: This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B: Issues rated B are regarded as having only speculative capacity
for timely payment.
C: This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
A-4
<PAGE>
D: Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
A commercial paper rating is not a recommendation to purchase, sell or
hold a security inasmuch as it does not comment as to market price or
suitability for a particular investor. The ratings are based on current
information furnished to Standard & Poor's by the issuer or obtained from other
sources it considers reliable. Standard & Poor's does not perform an audit in
connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information.
A-5
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
(1) Part A
Financial Highlights
(2) Part B
Financial statements dated as of June 30, 1996 are
incorporated by reference in the Statement of Additional
Information from the Funds' Annual Report dated as of June
30, 1996 and include the following:
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Financial Highlights
Schedule of Investments
Notes to Financial Statements
Report of Independent Accountants
Financial statements for the PIMCO Renaissance Fund, PIMCO
Growth Fund, PIMCO Target Fund, PIMCO Opportunity Fund,
PIMCO Innovation Fund, PIMCO Tax Exempt Fund, PIMCO
International Fund and PIMCO Precious Metals Fund (prior to
January 17, 1997, the Equity Income Fund, Growth Fund,
Target Fund, Opportunity Fund, Innovation Fund, Tax Exempt
Fund, International Fund and Precious Metals Fund,
respectively) for the fiscal year ended September 30, 1996,
and a related report of Coopers & Lybrand L.L.P., will be
incorporated by reference into a subsequent post-effective
amendment filed pursuant to Rule 485(b) prior to the
effective date of this amendment.
(b) Exhibits (the number of each exhibit relates to the exhibit
designation in Form N-1A):
(1)(a) Agreement and Declaration of Trust(1)
(b) Amendment to Agreement and Declaration of Trust dated
October 24, 1990(2)
<PAGE>
(c) Amendment to Agreement and Declaration of Trust dated
November 16, 1990(3)
(d) Amendment to Agreement and Declaration of Trust dated
November 29, 1990(4)
(e) Amendment to Agreement and Declaration of Trust dated
December 14, 1990(4)
(f) Form of Amendment to Agreement and Declaration of Trust
dated February 1, 1991(4)
(g) Amendment to Agreement and Declaration of Trust dated May 9,
1991(5)
(h) Amendment to Agreement and Declaration Trust dated August 6,
1992(6)
(i) Amendment to Agreement and Declaration of Trust dated
February 26, 1993(7)
(j) Amended and Restated Agreement and Declaration of Trust
dated May 7, 1993(8)
(k) Amendment to Amended and Restated Agreement and Declaration
of Trust dated July 15, 1993(9)
(l) Amendment to Amended and Restated Agreement and Declaration
of Trust dated October 29, 1993(10)
(m) Amendment to Amended and Restated Agreement and Declaration
of Trust dated March 4, 1994(11)
(n) Amendment to Amended and Restated Agreement and Declaration
of Trust dated August 12, 1994(12)
(o) Amendment to Amended and Restated Agreement and Declaration
of Trust dated November 7, 1994(13)
- 2 -
<PAGE>
(p) Form of Amended and Restated Agreement and Declaration of
Trust as of November 28, 1995(16)
(q) Form of Amended and Restated Agreement and Declaration of
Trust as of February 2, 1996(17)
(r) Form of Amended and Restated Agreement and Declaration of
Trust as of August 20, 1996(18)
(s) Form of Amended and Restated Agreement and Declaration of
Trust as of October 31, 1996
(t) Form of Second Amended and Restated Agreement and
Declaration of Trust*
(2)(a) By-Laws(1)
(b) Form of First Amended and Restated Bylaws*
(3) Not Applicable
(4)(a) Specimen of Security(4)
(b) Form of Specimen of Security for Mid Cap Growth Portfolio(5)
(c) Form of Specimen of Security for Emerging Markets
Portfolio(6)
(d) Form of Specimen of Security for International Diversified
Portfolio(7)
(e) Form of Specimen of Security for Micro Cap Growth
Portfolio(7)
(f) Forms of Specimen of Security for Variable Portfolios(9)
(g) Form of Specimen of Security for Utility Stock Portfolio(10)
(h) Forms of Specimen of Security for Core Equity, Mid Cap
Equity, and Small Cap Equity
- 3 -
<PAGE>
Funds (collectively, "Columbus Circle Funds")(12)
(i) Form of Specimen of Security for Parametric Structured
Emerging Markets Fund(18)
(j) Forms of Specimen of Security for PIMCO Equity Income Fund,
PIMCO Value Fund, PIMCO Small Cap Value Fund, PIMCO Capital
Appreciation Fund, PIMCO Mid Cap Growth Fund, PIMCO Small
Cap Growth Fund, PIMCO Micro Cap Growth Fund, PIMCO
Renaissance Fund, PIMCO Growth Fund, PIMCO Core Equity Fund,
PIMCO Target Fund, PIMCO Mid Cap Equity Fund, PIMCO
Opportunity Fund, PIMCO Innovation Fund, PIMCO Tax Exempt
Fund, PIMCO Enhanced Equity Fund, PIMCO Structured Emerging
Markets Fund, PIMCO Emerging Markets Fund, PIMCO
International Developed Fund, PIMCO International Fund,
PIMCO Balanced Fund, and PIMCO Precious Metals Fund*
(5)(a) (i) Form of Investment Advisory Agreement(18)
(ii) Form of Amended and Restated Investment Advisory
Agreement*
(b) (i) Form of Portfolio Management Agreement with
Pacific Mutual Life Insurance Company(12)
(ii) Form of Portfolio Management Agreement with
Pacific Investment Management Company(12)
(iii) Form of Portfolio Management Agreement, as
amended, with Pacific Investment Management
Company*
(iv) Form of Portfolio Management Agreement with NFJ
Investment Group(18)
(v) Form of Portfolio Management Agreement, as
amended, with NFJ Investment Group*
- 4 -
<PAGE>
(vi) Form of Portfolio Management Agreement with
Cadence Capital Management(18)
(vii) Form of Portfolio Management Agreement, as
amended, with Cadence Capital Management*
(viii) Form of Portfolio Management Agreement with
Parametric Portfolio Associates(18)
(ix) Form of Portfolio Management Agreement, as
amended, with Parametric Portfolio Associates*
(x) Form of Portfolio Management Agreement with
Blairlogie Capital Management(12)
(xi) Form of Amended and Restated Portfolio Management
Agreement with Blairlogie Capital Management*
(xii) Form of Portfolio Management Agreement with
Columbus Circle Investors(12)
(xiii) Amended Form of Portfolio Management Agreement
with Columbus Circle Investors*
(xiv) Form of Portfolio Management Agreement with Van
Eck Associates Corporation*
(c) (i) Form of Administration Agreement(18)
(ii) Amended Form of Administration Agreement*
(iii) Form of Sub-Administration Agreement(15)
(iv) Amended Form of Sub-Administration Agreement*
- 5 -
<PAGE>
(6)(a) Form of Distribution Agreement(18)
(b) Amended Form of Distribution Agreement*
(7) Not Applicable
(8)(a) Form of Custody Agreement and Addenda(18)
(b) Form of Assignment of Custody Agreement*
(9)(a) Form of Agency Agreement and Addenda(18)
(b) Form of Assignment of Agency Agreement*
(c) Form of Service Plan for Institutional Services Shares(11)
(d) Form of Administrative Services Plan for Administrative
Class Shares*
(10) Opinion and Consent of Counsel(2)
(11) Consent of Independent Accountants
(12) Not Applicable
(13) Initial Capital Agreement(2)
(14) Not Applicable
(15)(a) Form of Distribution and Servicing Plan (Class A)*
(b) Form of Distribution and Servicing Plan (Class B)*
(c) Form of Distribution and Servicing Plan (Class C)*
(d) Form of Distribution Plan for Administrative Class Shares*
(16) Schedule of Computation of Performance(13)
(17) Financial Data Schedule (filed as Exhibit 27)
- 6 -
<PAGE>
(18)(a) Form of Multiple Class Plan Pursuant to Rule 18f-3(18)
(b) Form of Amended and Restated Multi-Class Plan*
(19) Powers of Attorney and Certificate of Secretary(18)
- --------------------
1 Included in the Registrant's initial Registration Statement on Form N-1A
(File No. 33-36528), as filed on August 24, 1990.
2 Included in Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-36528), as filed on November 2, 1990.
3 Included in Pre-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 33-36528), as filed on November 30, 1990.
4 Included in Post-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-36528), as filed on February 5, 1991.
5 Included in Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 33-36528), as filed on June 18, 1991.
6 Included in Post-Effective Amendment No. 4 to the Registration Statement on
Form N-1A (File No. 33-36528), as filed on October 30, 1992.
7 Included in Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A (File No. 33-36528), as filed on April 2, 1993.
8 Included in Post-Effective Amendment No. 8 to the Registration Statement on
Form N-1A (File No. 33-36528), as filed on July 9, 1993.
9 Included in Post-Effective Amendment No. 9 to the Registration Statement on
Form N-1A (File No. 33-36528), as filed on August 11, 1993.
- 7 -
<PAGE>
10 Included in Post-Effective Amendment No. 10 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on November 4, 1993.
11 Included in Post-Effective Amendment No. 13 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on April 12, 1994.
12 Included in Post-Effective Amendment No. 15 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on October 14, 1994.
13 Included in Post-Effective Amendment No. 16 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on December 28, 1994.
14 Included in Post-Effective Amendment No. 17 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on June 28, 1995.
15 Included in Post-Effective Amendment No. 19 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on October 31, 1995.
16 Included in Post-Effective Amendment No. 20 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on December 29, 1995.
17 Included in Post-Effective Amendment No. 21 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on February 29, 1996.
18 Included in Post-Effective Amendment No. 22 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on July 1, 1996.
* To be filed by post-effective amendment.
Item 25. Persons Controlled by or Under Common Control with Registrant.
Not Applicable.
Item 26. Number of Holders of Securities.
- 8 -
<PAGE>
As of August 21, 1996, the number of shareholders of each operational
Fund was as follows:
<TABLE>
<CAPTION>
Institutional Class Administrative Class
Number of Number of
Fund Record Holders Record Holders
<S> <C> <C>
NFJ Equity Income Fund 131 4
NFJ Diversified Low P/E Fund 137 0
NFJ Small Cap Value Fund 184 1
Cadence Capital Appreciation Fund.... 248 0
Cadence Mid Cap Growth Fund.......... 241 5
Cadence Micro Cap Growth Fund........ 75 1
Cadence Small Cap Growth Fund........ 44 1
Columbus Circle Investors Core
Equity Fund......................... 126 6
Columbus Circle Investors Mid Cap
Equity Fund......................... 125 0
Parametric Enhanced Equity Fund...... 147 0
Blairlogie Emerging Markets Fund..... 206 1
Blairlogie International Active Fund. 158 4
Balanced Fund........................ 23 0
</TABLE>
Item 27. Indemnification.
Reference is made to Article 5, Section 5.4 of the Registrant's
Agreement and Declaration of Trust, which is incorporated by reference herein.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant by the Registrant pursuant to the Fund's Articles of
Incorporation, its By-Laws or otherwise, the Registrant is aware that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore, is unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by directors,
officers or controlling persons or the Registrant in connection with the
successful defense of any act, suit or proceeding) is asserted by such
directors, officers or controlling persons in connection with shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
- 9 -
<PAGE>
policy as expressed in the Act and will be governed by the final adjudication of
such issues.
Item 28. Business and Other Connections of Current Investment Adviser.
Unless otherwise stated, the principal business address of each
organization listed is 800 Newport Center Drive, Newport Beach, CA 92660.
PIMCO Advisors L.P.
Position
Name with Adviser Other Affiliations
Walter E. Auch, Sr. Member of Equity Management
Board Consultant;
Director, Fort
Dearborn Fund,
Shearson VIP Fund,
Shearson Advisors
Fund, Shearson TRAK
Fund, Banyan Land
Trust, Banyan Land
Fund II, Banyan
Mortgage Fund,
Allied Healthcare
Products, Inc.,
First Western Inc.,
DHR Group and
Geotech Industries.
David B. Breed Member of Director, Managing
Operating Board Director and Chief
Executive Officer,
Cadence Capital
Management, Inc.;
Managing Director
and Chief Executive
Officer, Cadence
Capital Management.
Donald A. Chiboucas Member of Director and
Operating Board President, Columbus
Circle Investors
Management, Inc.;
Managing Director
- 10 -
<PAGE>
and President,
Columbus Circle
Investors.
William D. Cvengros Chief Executive Trustee and Chairman
Officer and of the Trust;
President, Member Trustee, PIMCO
of Operating Advisors Funds and
Board, Operating Cash Accumulation
Committee, and Trust; Director,
Equity Board PIMCO Advisors
Distribution
Company.
Walter B. Gerken Member of Equity Director, Mullin
Board Consulting Inc.;
Director, Executive
Services Corps. of
Southern California.
William H. Gross Member of Director and
Operating Board Managing Director,
and Equity Board PIMCO Management,
Inc.; Managing
Director, Pacific
Investment
Management Company;
Senior Vice
President, PIMCO
Funds; Director and
Vice President,
StocksPLUS
Management, Inc.; Member of PIMCO
Partners LLC.
Brent R. Harris Member of Director and
Operating Board Managing Director,
PIMCO Management,
Inc.; Managing
Director, Pacific
Investment
Management Company;
Director and Vice
President,
StocksPLUS
Management, Inc.;
Chairman of the
Board and
Trustee,
- 11 -
<PAGE>
PIMCO Funds and
PIMCO Commercial
Mortgage Securities
Trust, Inc.; Member of PIMCO Partners
LLC.
Amy M. Hogan Member of Managing Director,
Operating Board Columbus Circle
Investors; Director,
Columbus Circle
Investors
Management, Inc.
Donald R. Kurtz Member of Equity Formerly, Vice
Board President of
Internal Asset
Management, General
Motors Investment
Management Corp. and
Director, Thomson
Advisory Group L.P.
James F. McIntosh Member of Equity None
Board
Dean S. Meiling Member of Director and
Operating Board Managing Director,
PIMCO Management,
Inc.; Managing
Director, Pacific
Investment
Management Company;
Vice President,
PIMCO Funds and
PIMCO Commercial
Mortgage Securities
Trust, Inc.
Donald K. Miller Member of Equity Chairman, Greylock
Board Financial Inc.;
Director, Huffy
Corporation, RPM,
Inc., and
Christensen Boyles
Corporation;
Director,
President
- 12 -
<PAGE>
and Chief Executive
Officer, TAG Inc.;
Formerly, Director
and Vice Chairman,
Thomson Advisory
Group L.P.
James F. Muzzy Member of Director and
Operating Board Managing Director,
PIMCO Management,
Inc.; Managing
Director, Pacific
Investment
Management Company;
Vice President,
PIMCO Funds;
Director and Vice
President,
StocksPLUS
Management, Inc.; Member of PIMCO
Partners LLC.
William F. Podlich, Member of Director and
III Operating Board Managing Director,
and Equity Board PIMCO Management,
Inc.; Managing
Director, Pacific
Investment
Management Company;
Vice President,
PIMCO Commercial
Mortgage Securities
Trust, Inc.; Member of PIMCO Partners
LLC.
William C. Powers Member of Director and
Operating Board Managing Director,
PIMCO Management,
Inc.; Managing
Director, Pacific
Investment
Management
Company;
- 13 -
<PAGE>
Senior Vice
President, PIMCO
Commercial Mortgage
Securities Trust,
Inc., Member of
PIMCO Partners LLC.
Glenn S. Schafer Member of Equity President and
Board Director, Pacific
Mutual Life
Insurance Company;
Chairman and
Director, Mutual
Service Corporation,
United Planners
Group, Inc., Pacific
Equities Network and
Pacific Financial
Holding Company.
Irwin F. Smith Member of Chairman and Managing
Operating Board, Director, Columbus
Operating Circle Investors;
Committee, and Director and Chairman,
Equity Board Columbus Circle Investors
Management, Inc.
Thomas C. Sutton Member of Equity Chairman, Chief
Board Executive Officer
and Director,
Pacific Mutual Life
Insurance Company;
Chairman, Trustee
and President,
Pacific Select Fund;
Director, United
Planners Group,
Inc., Pacific
Equities Network,
Mutual Services
Corporation
and
- 14 -
<PAGE>
Pacific Financial
Holding Company.
William S. Chairman and Director, Managing
Thompson, Jr. Member of Director and Chief
Operating Board, Executive Officer,
Member of PIMCO Management,
Operating Inc.; Chief
Committee and Executive Officer
Equity Board and Managing
Director, Pacific
Investment
Management Company;
Director and
President,
StocksPLUS
Management, Inc.;
Vice President,
PIMCO Funds and
PIMCO Commercial
Mortgage Securities
Trust, Inc.
Sharon A. Cheever Vice President- None
Legal, and
Assistant
Secretary
Robert M. Senior Vice Chief Financial Officer,
Fitzgerald President- Senior Vice President -
Finance, Chief Finance and Controller, PIMCO
Financial Officer Advisors Distribution Company;
and Controller Senior Vice President, Finance
and Controller, Columbus Circle
Investors and Columbus Circle
Investors Management, Inc.;
Assistant Treasurer, Cadence
Capital Management; Treasurer,
Cadence Capital Management, Inc.;
NFJ Investment Group, NFJ
Management Inc.,
Parametric Portfolio Associates,
Parametric Management Inc., PIMCO,
PIMCO Management, Inc. and
StocksPLUS Management, Inc.
John O. Leasure Senior Vice Director, President
President and Chief Executive
Officer, PIMCO
Advisors
Distribution
Company.
- 15 -
<PAGE>
Kenneth M. Poovey General Counsel Partner, Latham &
and Board Watkins.
Secretary
Robert A. Vice President None
Prindiville
Ernest L. Schmider Vice President- Senior Vice
Legal, and President,
Assistant Secretary, Chief
Secretary Administrative and
Legal Officer, PIMCO
Management, Inc.,
Director and Assistant
Secretary/Assistant
Treasurer, StocksPLUS
Management, Inc., Vice
President - Legal and
Assistant Secretary,
PIMCO Advisors L.P.
Newton B. Schott, Senior Vice Secretary, Columbus Circle
Jr. President-Legal, Investors, Columbus Circle
and Secretary Investors Management, Inc.,
Cadence Capital Management,
Inc., NFJ Management, Inc., and
Parametric Management, Inc.;
Director, Senior Vice
President/Secretary, PIMCO
Advisors Distribution Company;
Vice President and Clerk, PIMCO
Advisors Funds and Cash
Accumulation Trust.
Stephen J. Treadway Executive Vice Director and
President Chairman, PIMCO
Advisors
Distribution
Company.
James Ward Vice President None
Richard M. Weil Senior Vice Assistant Secretary, Columbus
President, Legal Circle Investors, Columbus
Counsel Circle Investors, Inc., Cadence
Capital Management,
Cadence Capital Management,
Inc., NFJ Management, Inc.,
Parametric Management, Inc.,
PIMCO, PIMCO Management, Inc.
and PIMCO Advisors Distribution
Company; Secretary, NFJ Investment
Group, Parametric Portfolio
Associates, and StocksPLUS
Management
- 16 -
<PAGE>
Cadence Capital Management
Exchange Place, 53 State Street,
Boston, Massachusetts 02109
Position
Name with Adviser Other Affiliations
William B. Bannick Managing Director Director and
and Executive Managing Director,
Vice President Cadence Capital
Management, Inc.
David B. Breed Managing Director Member of
and Chief Operating
Executive Officer Board, PIMCO
Advisors L.P.;
Director, Managing
Director and Chief
Executive Officer,
Cadence Capital
Management, Inc.
Katherine A. Burdon Managing Director None
Eric M. Wetlaufer Managing Director None
NFJ Investment Group
2121 San Jacinto, Suite 1440,
Dallas, Texas 75201
Position
Name with Adviser Other Affiliations
Benno J. Fischer Managing Director Director and
and Chief Managing Director,
Financial Officer NFJ Management, Inc.
John L. Johnson Managing Director Director and
Managing Director,
NFJ Management, Inc.
Jack C. Najork Managing Director Director, Managing
Director and
Chairman, NFJ
Management, Inc.
- 17 -
<PAGE>
Parametric Portfolio Associates
7310 Columbia Center, 701 Fifth Avenue,
Seattle, Washington 98104-7090
Position
Name with Adviser Other Affiliations
William E. Managing Director Director and
Cornelius, Jr. Managing Director,
Parametric
Management, Inc.
Mark W. England- Managing Director Director, Managing
Markun Director and Chief
Executive Officer,
Parametric
Management, Inc.
David M. Stein Managing Director Director and
and Chief Managing Director,
Financial Officer Parametric
Management, Inc.
Pacific Investment Management Company ("PIMCO")
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
Position
Name with Adviser Other Affiliations
George C. Allan Vice President Vice President,
PIMCO Management,
Inc.
Tamara J. Arnold Vice President Vice President,
PIMCO Management,
Inc.
Leslie A. Barbi Vice President Vice President,
PIMCO Management,
Inc.
William R. Benz II Executive Vice Executive Vice
President President, PIMCO
Management, Inc.
- 18 -
<PAGE>
John B. Vice President Vice President,
Brynjolfsson PIMCO Management,
Inc.
R. Wesley Burns Executive Vice Executive Vice
President President, PIMCO
Management, Inc.;
President, PIMCO
Funds and PIMCO
Commercial Mortgage
Securities Trust,
Inc.; Vice President
of the Trust, PIMCO
Advisors Funds and
Cash Accumulation
Trust.
Wendy W. Cupps Vice President Vice President,
PIMCO Management,
Inc.
Charles M. Daniels, Executive Vice Executive Vice
III President President, PIMCO
Management, Inc.
Anita Dunn Vice President Vice President,
PIMCO Management,
Inc.
David H. Edington Managing Director Director and
Managing Director,
PIMCO Management,
Inc.; Member of
PIMCO Partners, LLC.
A. Benjamin Ehlert Executive Vice Executive Vice
President President, PIMCO
Management, Inc.
Robert A. Ettl Vice President Vice President,
PIMCO Management,
Inc.
Robert M. Treasurer Senior Vice President,
Fitzgerald Finance and
Controller, Columbus
Circle Investors and
Columbus Circle
Investors Management,
Inc.; Assistant
Treasurer, Cadence
Capital Management;
Treasurer, Cadence
Capital Management,
Inc.; NFJ Investment
Group, Parametric
Portfolio Associates,
NFJ Management,
Inc., Parametric
Management, Inc.,
PIMCO Management,
Inc., and StocksPLUS
Management, Inc.;
Senior Vice
President-Finance,
Chief Financial
Officer and
Controller, PIMCO
Advisors L.P.; Chief
Financial Officer,
Senior Vice President-
Finance and
Controller, PIMCO
Advisors Distribution
Company.
- 19 -
<PAGE>
William H. Gross Managing Director Director and
Managing Director,
PIMCO Management,
Inc.; Director and
Vice President,
StocksPLUS
Management, Inc.;
Senior Vice
President, PIMCO
Funds; Member of
Equity and Operating
Boards, PIMCO
Advisors L.P.; Member of PIMCO
Partners LLC.
John L. Hague Managing Director Director and
Managing Director,
PIMCO Management,
Inc.; Member of PIMCO Partners LLC.
Gordon C. Hally Executive Vice Executive Vice
President President, PIMCO
Management, Inc.
Pasi M. Hamalainen Vice President Vice President,
PIMCO Management,
Inc.
John P. Hardaway Vice President Vice President,
and Treasurer PIMCO Management,
Inc.; Vice President and Treasurer of
the Trust;
Treasurer, PIMCO
Funds, PIMCO
Commercial Mortgage
Securities Trust,
Inc., PIMCO Advisors
Funds and Cash
Accumulation Trust.
Brent R. Harris Managing Director Director and
Managing Director,
PIMCO Management,
Inc.; Director and
Vice President,
- 20 -
<PAGE>
StocksPLUS
Management, Inc.;
Trustee and
Chairman, PIMCO
Funds and PIMCO
Commercial Mortgage
Securities Trust,
Inc.; Member of
Operating Board,
PIMCO Advisors L.P.; Member of PIMCO
Partners LLC.
Douglas M. Hodge Senior Vice Senior Vice
President President, PIMCO
Management, Inc.
Brent L. Holden Executive Vice Executive Vice
President President, PIMCO
Management, Inc.
Dwight F. Holloway, Vice President Vice President,
Jr. PIMCO Management,
Inc.
Jane T. Howe Vice President Vice President,
PIMCO Management,
Inc.
Margaret E. Isberg Executive Vice Executive Vice
President President, PIMCO
Management, Inc.;
Senior Vice
President, PIMCO
Funds.
John S. Loftus Executive Vice Executive Vice
President President, PIMCO
Management, Inc.; Vice President and
Assistant Secretary, StocksPLUS
Management, Inc.
Dean S. Meiling Managing Director Director and
Managing Director,
PIMCO Management,
Inc.; Vice President,
PIMCO Funds and
PIMCO Commercial
- 21 -
<PAGE>
Mortgage Securities
Trust, Inc.; Member
of Operating Board,
PIMCO Advisors L.P.; Member of PIMCO
Partners LLC.
James F. Muzzy Managing Director Director and
Managing Director,
PIMCO Management,
Inc.; Director and
Vice President,
StocksPLUS
Management, Inc.;
Vice President,
PIMCO Funds; Member
of Operating Board,
PIMCO Advisors L.P.; Member of PIMCO
Partners LLC.
Thomas J. Otterbein Vice President Vice President,
PIMCO Management,
Inc.
William F. Podlich, Managing Director Director and
III Managing Director,
PIMCO Management,
Inc.; Vice
President, PIMCO
Commercial Mortgage
Securities Trust,
Inc.; Member of
Equity and Operating
Boards, PIMCO
Advisors L.P.; Member of PIMCO
Partners LLC.
William C. Powers Managing Director Director and
Managing Director,
PIMCO Management,
Inc.; Senior Vice
President PIMCO
Commercial Mortgage
Securities Trust,
Inc.; Member of
Operating Board,
PIMCO Advisors L.P.; Member of PIMCO
Partners LLC.
- 22 -
<PAGE>
Frank B.
Rabinovitch Managing Director Director and
Managing Director,
PIMCO Management,
Inc., Member of
PIMCO Partners LLC.
Edward P. Rennie Senior Vice Senior Vice
President President, PIMCO
Management, Inc.
Scott L. Roney Vice President Vice President,
PIMCO Management,
Inc.
Michael J. Vice President Vice President,
Rosborough PIMCO Management,
Inc.
Jeffrey M. Sargent Vice President Vice President of
the Trust, PIMCO
Management, Inc.,
PIMCO Funds, and
PIMCO Commercial
Mortgage Securities
Trust, Inc.
Ernest L. Schmider Senior Vice Senior Vice President,
President, Secretary, Chief
Secretary, Chief Administrative and Legal
Administrative Officer, PIMCO Management,
and Legal officer Inc.; Director and Assistant
Secretary/Assistant Treasurer,
StocksPLUS Management, Inc.;
Vice President - Legal and
Assistant Secretary,
PIMCO Advisors L.P.
Leland T. Scholey Senior Vice Senior Vice
President President, PIMCO
Management, Inc. and
PIMCO Funds.
Denise C. Seliga Vice President Vice President,
PIMCO Management,
Inc.
- 23 -
<PAGE>
Rita J. Seymour Vice President Vice President,
PIMCO Management,
Inc.
Lee R. Thomas Executive Vice Executive Vice
President President, PIMCO
Management, Inc.
William S. Chief Executive Director, Managing Director and
Thompson, Jr. Officer and Chief Executive Officer, PIMCO
Managing Director Management, Inc.; Director
and President, StocksPLUS
Management, Inc.; Vice President of
the PIMCO Funds and PIMCO Com-
mercial Mortgage Securities Trust,
Inc.; Member of Operating Board,
Operating Committee and Equity
Board of PIMCO Advisors
L.P.; Member of PIMCO Partners LLC.
Benjamin L. Trosky Managing Director Managing Director,
PIMCO Management,
Inc.; Senior Vice
President, PIMCO
Commercial Mortgage
Securities Trust,
Inc.; Member of PIMCO
Partners LLC.
Teresa A. Wagner Vice President Vice President of
the Trust, PIMCO
Management, Inc.,
PIMCO Funds, and
PIMCO Commercial
Mortgage Securities
- 24 -
<PAGE>
Trust, Inc.; Vice
President and
Assistant Clerk,
PIMCO Advisors Funds
and Cash
Accumulation Trust.
Andrew C. Ward Vice President Vice President,
PIMCO Management,
Inc.; Senior Vice
President, PIMCO
Funds.
Ram Willner Vice President Vice President,
PIMCO Management,
Inc.
Kristen M. Wilsey Vice President Vice President,
PIMCO Management,
Inc. and PIMCO
Funds.
George H. Wood Vice President Vice President,
PIMCO Management,
Inc.
Michael A. Yetter Vice President Vice President,
PIMCO Management,
Inc.
Columbus Circle Investors
Metro Center
One Station Place, 8th Floor
Stamford, Connecticut 06902
Position
Name with Adviser Other Affiliations
Irwin F. Smith Chairman and Member of Equity and
Managing Operating Boards and
Director Operating Committee,
PIMCO Advisors,
L.P.; Director and
Chairman, Columbus
Circle Investors
Management, Inc.
Richard M. Weil Assistant Assistant Secretary,
Secretary Columbus Circle
Investors, Columbus
Circle Investors,
Inc., Cadence Capital
Management, Cadence Capital
Management Inc.,
NFJ Management, Inc.
Parametric Management, Inc.
PIMCO Management, Inc. and
PIMCO Advisors
Distribution Company;
Secretary, NFJ
Investment Group,
Parametric Portfolio
Associates, and
StocksPLUS
Management, Inc.;
Senior Vice
President, Legal
Counsel, PIMCO Advisors L.P.
- 25 -
<PAGE>
Circle Trust
Company.
Donald A. Chiboucas President and Member of Operating
Managing Director Board, PIMCO
Advisors L.P.;
Director and
President, Columbus
Circle Investors
Management, Inc.
Louis P. Celentano Managing Director Director and Vice
President, Columbus
Circle Investors
Management, Inc.
Robert W. Fehrman Managing Director Director, Columbus
Circle Investors
Management, Inc.
Marc Felman Managing Director None
Amy M. Hogan Managing Director Member of Operating
Board, PIMCO
Advisors L.P.;
Director, Columbus
Circle Investors
Management, Inc.
Daniel S. Pickett Managing Director Director, Columbus
Circle Investors
Management, Inc.
Anthony Rizza Managing Director None
Paul C. Tyborowski Managing Director None
Winthrop S. Headley Vice President None
Clifford G. Fox Vice President None
- 26 -
<PAGE>
Harold R. Snedcof Vice President None
Sharon S. Weslow Vice President None
Michele Montano Vice President None
Cecelia Pastore Vice President None
Paul A. Pantalena Vice President None
Paul Meeks Vice President None
Anne Malone Vice President None
Norman Seltzer Vice President None
Nathaniel J. Vice President None
Belknap
Blairlogie Capital Management, Limited
4th Floor, 125 Princes Street
Edinburgh EH2 4AD, Scotland
Position
Name with Adviser Other Affiliations
Gavin R. Dobson Chief Executive Director and Chief
Officer and Executive Officer,
Managing Director Blairlogie Holdings
Limited (U.K.)
James G.S. Smith Chief Investment Director and Chief
Officer and Investment Officer,
Managing Director Blairlogie Holdings
Limited (U.K.)
John R.W. Stevens Chief Financial Director and Chief
Officer and Financial Officer,
Managing Director Blairlogie Holdings
Limited (U.K.)
Van Eck Associates Corporation
99 Park Avenue
New York, NY 10016
Position
Name with Adviser Other Affiliations
- ---- --------------- ------------------
Philip DeFeo Director, [To be provided]
President and
Chief Executive
Officer
John C. Van Eck Chairman of the Chairman of the Board and President,
Board Van Eck Funds ("VEF") and Van Eck
Worldwide Insurance Trust ("WWIT");
Chairman of the Board, Van Eck
Securities Corporation ("VESC");
Director, Eclipse Financial Asset
Trust. Formerly, Director Abex Inc.,
Director, The Henley Group, Inc.
Fred M. Van Eck Director Trustee, VEF and WWIT;
Private Investor, Director, VESC
Sigrid S. Van Eck Director, Vice Vice President, Assistant Treasurer
President and and Director of VESC
Assistant
Treasurer
Jan Van Eck Director Director and Executive
Vice President of VESC
Derek M. Van Eck Director and Director of VESC; President,
Executive Global Hard Assets and World
Vice President Trends Series of the Van Eck
Funds
Michael G. Doorley Vice President, Vice President, Treasurer, Controller
Treasurer, and Chief Financial Officer of VESC;
Controller and Vice President, VEF and WWIT
Chief Financial
Officer
Thaddeus M. Vice President, Vice President and Secretary
Leszcynski Secretary and of VEF and WWIT; Vice President,
General Counsel Secretary and General Counsel of
VESC.
William A. Director, Mining Vice President of VEF; Formerly,
Trebilcock Research Director Corner Bay Explorations
Ltd. Formerly, Director, Precambrian
Explorations Inc.
- 27 -
<PAGE>
Item 29. Principal Underwriters.
(a) PIMCO Advisors Distribution Company. PIMCO Advisors Distribution
Company (the "Distributor") serves as Distributor of shares of the
Fund. The Distributor is a wholly owned subsidiary of PIMCO Advisors
L.P., the Investment Adviser of the Registrant.
(b)
Positions and Positions
Name and Principal Offices with and Offices
Business Address* Underwriter with Registrant
William D. Badgley Vice President None
Jeffrey L. Booth Vice President None
James D. Bosch Vice President None
William D. Cvengros Director Trustee and
Chairman
Robert M. Fitzgerald Senior Vice None
President -
Finance and
Chief Financial
Officer and
Controller
Michael J. Gallagher Vice President None
Ronald H. Gray Vice President None
Edward W. Janeczek Vice President None
Johnathan C. Jones Vice President None
Jaishree B. Kemraj Assistant Vice None
President and
Assistant
Controller
John O. Leasure Director, None
President and
Chief Executive
Officer
- 28 -
<PAGE>
William E. Lynch Regional Vice None
President
Jacqueline A. McCarthy Vice President None
Richard J. McLaughlin Vice President None
Andrew J. Meyers Executive Vice None
President
Paul R. Moody Regional Vice None
President
Fioja Moyer Vice President None
Joffrey H. Pearlman Vice President None
Glynne Pisapia Vice President None
Matthew M. Russell Vice President None
Newton B. Schott, Jr. Director, None
Senior Vice
President and
Secretary
David P. Stone Vice President None
William H. Thomas, Jr. Regional Vice None
President
Stephen J. Treadway Director and None
Chairman
Paul H. Troyer Regional Vice None
President
Brian F. Trumbore Senior Vice None
President
Richard M. Weil Assistant None
Secretary
____________________
* Principal business address for all individuals listed is One Station Place,
Stamford, Connecticut 06902.
(c) Not Applicable.
- 29 -
<PAGE>
Item 30. Location of Accounts and Records.
The account books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices of the Fund's Transfer
Agent and Custodian, Investors Fiduciary Trust Company, 21 West 10th Street,
Kansas City, Missouri 64105.
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant, if requested to do so by the holders of at least 10% of
the Registrant's outstanding shares, will call a meeting of
shareholders for the purpose of voting upon the question of removal of
a trustee or trustees, and will assist communications among
shareholders as set forth within Section 16(c) of the 1940 Act.
(d) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest report to
shareholders, upon request and without charge.
(e) Registrant undertakes to file a post-effective amendment using
financial statements of the Parametric Structured Emerging Markets
Fund, which need not be certified, within four to six months from the
latter of the effective date of Post-Effective Amendment No. 23 or the
date on which shares of the Fund are first sold (other than shares
sold for seed money).
- 30 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No. 24 to the Registration Statement of PIMCO Funds: Equity
Advisors Series to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Newport Beach in the State of California on the 31st
day of October, 1996.
PIMCO Funds: Equity Advisors Series
By: /s/ William D. Cvengros
_____________________________________________
William D. Cvengros, Chairman of the Board,
President, and Trustee
- 31 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 24 to the Registration Statement of PIMCO Funds: Equity
Advisors Series has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
/s/ John P. Hardaway
- ------------------------ 10/31/96
John P. Hardaway Treasurer (Principal
Financial and
Accounting Officer
- ------------------------ 10/31/96
Richard L. Nelson* Trustee
- ------------------------ 10/31/96
Lyman W. Porter* Trustee
- ------------------------ 10/31/96
Alan Richards* Trustee
*By: /s/William D. Cvengros
------------------------
William D. Cvengros
Chairman of the Board, President, and Trustee
as Attorney-in-Fact
Powers of Attorney for Messrs. Nelson, Porter, Richards and Cvengros, and a
certificate included pursuant to Rule 483(b) under the Securities Act of 1933,
were filed as Exhibit 19 to Post-Effective Amendment No. 22 filed on July 1,
1996 and are incorporated herein by reference.
- 32 -
<PAGE>
EXHIBIT LIST
Exhibit Exhibit EDGAR
No. Name Exhibit No.
1(s) Form of Amended and
Restated Agreement and
Declaration of Trust as of
October 31, 1996
11 Consents of Independent
Accountants
17 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER> 031
<NAME> NFJ EQUITY INCOME FUND-INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 103,191
<INVESTMENTS-AT-VALUE> 120,863
<RECEIVABLES> 2,855
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,718
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 907
<TOTAL-LIABILITIES> 907
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,579
<SHARES-COMMON-STOCK> 8,130
<SHARES-COMMON-PRIOR> 9,013
<ACCUMULATED-NII-CURRENT> 3,782
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,778
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,672
<NET-ASSETS> 122,811
<DIVIDEND-INCOME> 3,622
<INTEREST-INCOME> 276
<OTHER-INCOME> 0
<EXPENSES-NET> 678
<NET-INVESTMENT-INCOME> 3,220
<REALIZED-GAINS-CURRENT> 11,596
<APPREC-INCREASE-CURRENT> 6,902
<NET-CHANGE-FROM-OPS> 21,718
<EQUALIZATION> (222)
<DISTRIBUTIONS-OF-INCOME> 3,072
<DISTRIBUTIONS-OF-GAINS> 4,404
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,560
<NUMBER-OF-SHARES-REDEEMED> 3,957
<SHARES-REINVESTED> 514
<NET-CHANGE-IN-ASSETS> 4,656
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,607
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 678
<AVERAGE-NET-ASSETS> 136,173
<PER-SHARE-NAV-BEGIN> 13.09
<PER-SHARE-NII> 0.78
<PER-SHARE-GAIN-APPREC> 1.31
<PER-SHARE-DIVIDEND> 0.34
<PER-SHARE-DISTRIBUTIONS> 0.48
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.36
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>032
<NAME>NFJ EQUITY INCOME FUND - ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 103,191
<INVESTMENTS-AT-VALUE> 120,863
<RECEIVABLES> 2,855
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,718
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 907
<TOTAL-LIABILITIES> 907
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,579
<SHARES-COMMON-STOCK> 425
<SHARES-COMMON-PRIOR> 11
<ACCUMULATED-NII-CURRENT> 3,782
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,778
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,672
<NET-ASSETS> 122,811
<DIVIDEND-INCOME> 3,622
<INTEREST-INCOME> 276
<OTHER-INCOME> 0
<EXPENSES-NET> 678
<NET-INVESTMENT-INCOME> 3,220
<REALIZED-GAINS-CURRENT> 11,596
<APPREC-INCREASE-CURRENT> 6,902
<NET-CHANGE-FROM-OPS> 21,718
<EQUALIZATION> (222)
<DISTRIBUTIONS-OF-INCOME> 155
<DISTRIBUTIONS-OF-GAINS> 232
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 524
<NUMBER-OF-SHARES-REDEEMED> 139
<SHARES-REINVESTED> 29
<NET-CHANGE-IN-ASSETS> 4,656
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,607
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 678
<AVERAGE-NET-ASSETS> 6,341
<PER-SHARE-NAV-BEGIN> 13.13
<PER-SHARE-NII> 0.75
<PER-SHARE-GAIN-APPREC> 1.31
<PER-SHARE-DIVIDEND> 0.36
<PER-SHARE-DISTRIBUTIONS> 0.48
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.35
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>041
<NAME>NFJ DIVERSIFIED LOW P/E FUND
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 52,446
<INVESTMENTS-AT-VALUE> 55,606
<RECEIVABLES> 139
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 499
<TOTAL-ASSETS> 56,244
<PAYABLE-FOR-SECURITIES> 3,492
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25
<TOTAL-LIABILITIES> 3,517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 48,467
<SHARES-COMMON-STOCK> 4,232
<SHARES-COMMON-PRIOR> 1,153
<ACCUMULATED-NII-CURRENT> 348
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 752
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,160
<NET-ASSETS> 52,727
<DIVIDEND-INCOME> 379
<INTEREST-INCOME> 79
<OTHER-INCOME> 0
<EXPENSES-NET> 103
<NET-INVESTMENT-INCOME> 355
<REALIZED-GAINS-CURRENT> 1,115
<APPREC-INCREASE-CURRENT> 1,082
<NET-CHANGE-FROM-OPS> 2,552
<EQUALIZATION> 42
<DISTRIBUTIONS-OF-INCOME> 355
<DISTRIBUTIONS-OF-GAINS> 2,045
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,925
<NUMBER-OF-SHARES-REDEEMED> 53
<SHARES-REINVESTED> 207
<NET-CHANGE-IN-ASSETS> 38,284
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,030
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 66
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 103
<AVERAGE-NET-ASSETS> 22,311
<PER-SHARE-NAV-BEGIN> 12.53
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 1.62
<PER-SHARE-DIVIDEND> 0.17
<PER-SHARE-DISTRIBUTIONS> 1.77
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.46
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>051
<NAME>PARAMETRIC ENHANCED EQUITY FUND
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 69,689
<INVESTMENTS-AT-VALUE> 83,354
<RECEIVABLES> 116
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 83,470
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45
<TOTAL-LIABILITIES> 45
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,946
<SHARES-COMMON-STOCK> 5,243
<SHARES-COMMON-PRIOR> 5,126
<ACCUMULATED-NII-CURRENT> 954
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10,860
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,665
<NET-ASSETS> 83,425
<DIVIDEND-INCOME> 1,342
<INTEREST-INCOME> 46
<OTHER-INCOME> 0
<EXPENSES-NET> 430
<NET-INVESTMENT-INCOME> 958
<REALIZED-GAINS-CURRENT> 11,972
<APPREC-INCREASE-CURRENT> (909)
<NET-CHANGE-FROM-OPS> 12,021
<EQUALIZATION> 10
<DISTRIBUTIONS-OF-INCOME> 958
<DISTRIBUTIONS-OF-GAINS> 2,327
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,985
<NUMBER-OF-SHARES-REDEEMED> 3,078
<SHARES-REINVESTED> 210
<NET-CHANGE-IN-ASSETS> 9,426
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,169
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 275
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 430
<AVERAGE-NET-ASSETS> 91,516
<PER-SHARE-NAV-BEGIN> 14.44
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 1.67
<PER-SHARE-DIVIDEND> 0.16
<PER-SHARE-DISTRIBUTIONS> 0.38
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.91
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>061
<NAME>CADENCE CAPITAL APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 292,387
<INVESTMENTS-AT-VALUE> 343,036
<RECEIVABLES> 6,079
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 349,115
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 387
<TOTAL-LIABILITIES> 387
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 266,949
<SHARES-COMMON-STOCK> 19,265
<SHARES-COMMON-PRIOR> 13,946
<ACCUMULATED-NII-CURRENT> 3,922
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 27,208
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50,649
<NET-ASSETS> 348,728
<DIVIDEND-INCOME> 3,231
<INTEREST-INCOME> 778
<OTHER-INCOME> 0
<EXPENSES-NET> 1,385
<NET-INVESTMENT-INCOME> 2,624
<REALIZED-GAINS-CURRENT> 31,135
<APPREC-INCREASE-CURRENT> 6,136
<NET-CHANGE-FROM-OPS> 39,895
<EQUALIZATION> 214
<DISTRIBUTIONS-OF-INCOME> 2,624
<DISTRIBUTIONS-OF-GAINS> 15,492
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,442
<NUMBER-OF-SHARES-REDEEMED> 1,070
<SHARES-REINVESTED> 947
<NET-CHANGE-IN-ASSETS> 112,508
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 15,487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 883
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,385
<AVERAGE-NET-ASSETS> 296,348
<PER-SHARE-NAV-BEGIN> 16.94
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> 1.99
<PER-SHARE-DIVIDEND> 0.15
<PER-SHARE-DISTRIBUTIONS> 1.03
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.10
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in is entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>071
<NAME>NFJ SMALL CAP VALUE FUND-INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 29,537
<INVESTMENTS-AT-VALUE> 33,417
<RECEIVABLES> 89
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,506
<PAYABLE-FOR-SECURITIES> 25
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31
<TOTAL-LIABILITIES> 56
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,770
<SHARES-COMMON-STOCK> 2,044
<SHARES-COMMON-PRIOR> 2,679
<ACCUMULATED-NII-CURRENT> 837
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,963
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,880
<NET-ASSETS> 33,450
<DIVIDEND-INCOME> 708
<INTEREST-INCOME> 67
<OTHER-INCOME> 0
<EXPENSES-NET> 231
<NET-INVESTMENT-INCOME> 544
<REALIZED-GAINS-CURRENT> 3,943
<APPREC-INCREASE-CURRENT> 1,415
<NET-CHANGE-FROM-OPS> 5,902
<EQUALIZATION> (26)
<DISTRIBUTIONS-OF-INCOME> 488
<DISTRIBUTIONS-OF-GAINS> 2,049
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 201
<NUMBER-OF-SHARES-REDEEMED> 1,028
<SHARES-REINVESTED> 192
<NET-CHANGE-IN-ASSETS> (1,643)
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> 2,205
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 157
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 231
<AVERAGE-NET-ASSETS> 34,470
<PER-SHARE-NAV-BEGIN> 13.10
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 1.49
<PER-SHARE-DIVIDEND> 0.21
<PER-SHARE-DISTRIBUTIONS> 0.74
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.20
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>072
<NAME>NFJ SMALL CAP VALUE FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 29,537
<INVESTMENTS-AT-VALUE> 33,417
<RECEIVABLES> 89
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,506
<PAYABLE-FOR-SECURITIES> 25
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31
<TOTAL-LIABILITIES> 56
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,770
<SHARES-COMMON-STOCK> 312
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 837
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,963
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,880
<NET-ASSETS> 33,450
<DIVIDEND-INCOME> 708
<INTEREST-INCOME> 67
<OTHER-INCOME> 0
<EXPENSES-NET> 231
<NET-INVESTMENT-INCOME> 544
<REALIZED-GAINS-CURRENT> 3,943
<APPREC-INCREASE-CURRENT> 1,415
<NET-CHANGE-FROM-OPS> 5,902
<EQUALIZATION> (26)
<DISTRIBUTIONS-OF-INCOME> 63
<DISTRIBUTIONS-OF-GAINS> 293
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 437
<NUMBER-OF-SHARES-REDEEMED> 152
<SHARES-REINVESTED> 27
<NET-CHANGE-IN-ASSETS> (1,643)
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> 2,205
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 157
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 231
<AVERAGE-NET-ASSETS> 4,823
<PER-SHARE-NAV-BEGIN> 13.16
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 1.43
<PER-SHARE-DIVIDEND> 0.19
<PER-SHARE-DISTRIBUTIONS> 0.74
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.20
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>081
<NAME>CADENCE SMALL CAP GROWTH FUND-INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 27,901
<INVESTMENTS-AT-VALUE> 32,870
<RECEIVABLES> 634
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,504
<PAYABLE-FOR-SECURITIES> 332
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 106
<TOTAL-LIABILITIES> 438
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,237
<SHARES-COMMON-STOCK> 1,582
<SHARES-COMMON-PRIOR> 3,519
<ACCUMULATED-NII-CURRENT> 3,202
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,658
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,969
<NET-ASSETS> 33,066
<DIVIDEND-INCOME> 345
<INTEREST-INCOME> 103
<OTHER-INCOME> 0
<EXPENSES-NET> 534
<NET-INVESTMENT-INCOME> (86)
<REALIZED-GAINS-CURRENT> 15,949
<APPREC-INCREASE-CURRENT> (11,349)
<NET-CHANGE-FROM-OPS> 4,514
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 5,641
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 238
<NUMBER-OF-SHARES-REDEEMED> 2,414
<SHARES-REINVESTED> 239
<NET-CHANGE-IN-ASSETS> (41,455)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5,693
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 534
<AVERAGE-NET-ASSETS> 63,443
<PER-SHARE-NAV-BEGIN> 21.02
<PER-SHARE-NII> 2.02
<PER-SHARE-GAIN-APPREC> (0.61)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.60
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.83
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>082
<NAME>CADENCE SMALL CAP GROWTH FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 27,901
<INVESTMENTS-AT-VALUE> 32,870
<RECEIVABLES> 634
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33,504
<PAYABLE-FOR-SECURITIES> 332
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 106
<TOTAL-LIABILITIES> 438
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,237
<SHARES-COMMON-STOCK> 5
<SHARES-COMMON-PRIOR> 26
<ACCUMULATED-NII-CURRENT> 3,202
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,658
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,969
<NET-ASSETS> 33,066
<DIVIDEND-INCOME> 345
<INTEREST-INCOME> 103
<OTHER-INCOME> 0
<EXPENSES-NET> 534
<NET-INVESTMENT-INCOME> (86)
<REALIZED-GAINS-CURRENT> 15,949
<APPREC-INCREASE-CURRENT> (11,349)
<NET-CHANGE-FROM-OPS> 4,514
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 55
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22
<NUMBER-OF-SHARES-REDEEMED> 45
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> (41,455)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5,693
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 534
<AVERAGE-NET-ASSETS> 506
<PER-SHARE-NAV-BEGIN> 21.01
<PER-SHARE-NII> 2.02
<PER-SHARE-GAIN-APPREC> (0.61)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.60
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.82
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>101
<NAME>BALANCED FUND
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 79,066
<INVESTMENTS-AT-VALUE> 89,475
<RECEIVABLES> 4,481
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 93,956
<PAYABLE-FOR-SECURITIES> 11,283
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111
<TOTAL-LIABILITIES> 11,394
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70,614
<SHARES-COMMON-STOCK> 7,096
<SHARES-COMMON-PRIOR> 6,109
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,338
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,610
<NET-ASSETS> 82,562
<DIVIDEND-INCOME> 680
<INTEREST-INCOME> 1,491
<OTHER-INCOME> 0
<EXPENSES-NET> 369
<NET-INVESTMENT-INCOME> 1,802
<REALIZED-GAINS-CURRENT> 1,778
<APPREC-INCREASE-CURRENT> 3,088
<NET-CHANGE-FROM-OPS> 6,668
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,802
<DISTRIBUTIONS-OF-GAINS> 6,227
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 821
<NUMBER-OF-SHARES-REDEEMED> 538
<SHARES-REINVESTED> 704
<NET-CHANGE-IN-ASSETS> 9,924
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5,787
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 369
<AVERAGE-NET-ASSETS> 78,368
<PER-SHARE-NAV-BEGIN> 11.89
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.76
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 1.01
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>111
<NAME>CADENCE MID CAP GROWTH FUND-INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 200,715
<INVESTMENTS-AT-VALUE> 231,855
<RECEIVABLES> 1,212
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 233,067
<PAYABLE-FOR-SECURITIES> 713
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 272
<TOTAL-LIABILITIES> 985
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169,974
<SHARES-COMMON-STOCK> 11,881
<SHARES-COMMON-PRIOR> 10,423
<ACCUMULATED-NII-CURRENT> 2,129
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 28,839
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31,140
<NET-ASSETS> 232,082
<DIVIDEND-INCOME> 2,042
<INTEREST-INCOME> 452
<OTHER-INCOME> 0
<EXPENSES-NET> 970
<NET-INVESTMENT-INCOME> 1,524
<REALIZED-GAINS-CURRENT> 30,980
<APPREC-INCREASE-CURRENT> (13,220)
<NET-CHANGE-FROM-OPS> 19,284
<EQUALIZATION> 59
<DISTRIBUTIONS-OF-INCOME> 1,520
<DISTRIBUTIONS-OF-GAINS> 4,245
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,438
<NUMBER-OF-SHARES-REDEEMED> 2,281
<SHARES-REINVESTED> 301
<NET-CHANGE-IN-ASSETS> 41,870
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,256
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 970
<AVERAGE-NET-ASSETS> 205,838
<PER-SHARE-NAV-BEGIN> 18.16
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 1.53
<PER-SHARE-DIVIDEND> 0.14
<PER-SHARE-DISTRIBUTIONS> 0.43
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.44
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>112
<NAME>CADENCE MID CAP GROWTH FUND - ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 200,715
<INVESTMENTS-AT-VALUE> 231,855
<RECEIVABLES> 1,212
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 233,067
<PAYABLE-FOR-SECURITIES> 713
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 272
<TOTAL-LIABILITIES> 985
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169,974
<SHARES-COMMON-STOCK> 55
<SHARES-COMMON-PRIOR> 49
<ACCUMULATED-NII-CURRENT> 2,129
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 28,839
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31,140
<NET-ASSETS> 232,082
<DIVIDEND-INCOME> 2,042
<INTEREST-INCOME> 452
<OTHER-INCOME> 0
<EXPENSES-NET> 970
<NET-INVESTMENT-INCOME> 1,524
<REALIZED-GAINS-CURRENT> 30,980
<APPREC-INCREASE-CURRENT> (13,220)
<NET-CHANGE-FROM-OPS> 19,284
<EQUALIZATION> 59
<DISTRIBUTIONS-OF-INCOME> 6
<DISTRIBUTIONS-OF-GAINS> 21
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14
<NUMBER-OF-SHARES-REDEEMED> 10
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 41,870
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,256
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 970
<AVERAGE-NET-ASSETS> 991
<PER-SHARE-NAV-BEGIN> 18.17
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 1.53
<PER-SHARE-DIVIDEND> 0.11
<PER-SHARE-DISTRIBUTIONS> 0.43
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.44
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>121
<NAME>BLAIRLOGIE EMERGING MARKETS FUND-INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 70,913
<INVESTMENTS-AT-VALUE> 77,256
<RECEIVABLES> 3,101
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 831
<TOTAL-ASSETS> 81,188
<PAYABLE-FOR-SECURITIES> 97
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 178
<TOTAL-LIABILITIES> 275
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 88,130
<SHARES-COMMON-STOCK> 6,361
<SHARES-COMMON-PRIOR> 6,525
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 33
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 13,517
<ACCUM-APPREC-OR-DEPREC> 6,333
<NET-ASSETS> 80,913
<DIVIDEND-INCOME> 1,083
<INTEREST-INCOME> 55
<OTHER-INCOME> 0
<EXPENSES-NET> 704
<NET-INVESTMENT-INCOME> 434
<REALIZED-GAINS-CURRENT> 1,358
<APPREC-INCREASE-CURRENT> 7,303
<NET-CHANGE-FROM-OPS> 9,095
<EQUALIZATION> (4)
<DISTRIBUTIONS-OF-INCOME> 236
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,675
<NUMBER-OF-SHARES-REDEEMED> 2,853
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 6,544
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 15,113
<GROSS-ADVISORY-FEES> 441
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 704
<AVERAGE-NET-ASSETS> 77,404
<PER-SHARE-NAV-BEGIN> 11.27
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 1.40
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.66
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>122
<NAME>BLAIRLOGIE EMERGING MARKETS FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 70,913
<INVESTMENTS-AT-VALUE> 77,256
<RECEIVABLES> 3,101
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 831
<TOTAL-ASSETS> 81,188
<PAYABLE-FOR-SECURITIES> 97
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 178
<TOTAL-LIABILITIES> 275
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 88,130
<SHARES-COMMON-STOCK> 29
<SHARES-COMMON-PRIOR> 74
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 33
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 13,517
<ACCUM-APPREC-OR-DEPREC> 6,333
<NET-ASSETS> 80,913
<DIVIDEND-INCOME> 1,083
<INTEREST-INCOME> 55
<OTHER-INCOME> 0
<EXPENSES-NET> 704
<NET-INVESTMENT-INCOME> 434
<REALIZED-GAINS-CURRENT> 1,358
<APPREC-INCREASE-CURRENT> 7,303
<NET-CHANGE-FROM-OPS> 9,095
<EQUALIZATION> (4)
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33
<NUMBER-OF-SHARES-REDEEMED> 78
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,544
<ACCUMULATED-NII-PRIOR> 10
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 15,113
<GROSS-ADVISORY-FEES> 441
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 704
<AVERAGE-NET-ASSETS> 756
<PER-SHARE-NAV-BEGIN> 11.24
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 1.40
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.63
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>131
<NAME>BLAIRLOGIE INTERNATIONAL ACTIVE FUND-INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 64,970
<INVESTMENTS-AT-VALUE> 71,062
<RECEIVABLES> 1,256
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,679
<TOTAL-ASSETS> 75,997
<PAYABLE-FOR-SECURITIES> 54
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 112
<TOTAL-LIABILITIES> 166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,518
<SHARES-COMMON-STOCK> 5,600
<SHARES-COMMON-PRIOR> 5,418
<ACCUMULATED-NII-CURRENT> 1,936
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,214
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,163
<NET-ASSETS> 75,831
<DIVIDEND-INCOME> 833
<INTEREST-INCOME> 112
<OTHER-INCOME> 0
<EXPENSES-NET> 546
<NET-INVESTMENT-INCOME> 399
<REALIZED-GAINS-CURRENT> 2,749
<APPREC-INCREASE-CURRENT> 5,113
<NET-CHANGE-FROM-OPS> 8,261
<EQUALIZATION> 62
<DISTRIBUTIONS-OF-INCOME> 2,278
<DISTRIBUTIONS-OF-GAINS> 1,127
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,178
<NUMBER-OF-SHARES-REDEEMED> 1,178
<SHARES-REINVESTED> 182
<NET-CHANGE-IN-ASSETS> 11,549
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,510
<OVERDISTRIB-NII-PRIOR> 13
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 295
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 546
<AVERAGE-NET-ASSETS> 71,131
<PER-SHARE-NAV-BEGIN> 11.74
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> 0.72
<PER-SHARE-DIVIDEND> 0.43
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.54
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>132
<NAME>BLAIRLOGIE INTERNATIONAL ACTIVE FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 64,970
<INVESTMENTS-AT-VALUE> 71,062
<RECEIVABLES> 1,256
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,679
<TOTAL-ASSETS> 75,997
<PAYABLE-FOR-SECURITIES> 54
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 112
<TOTAL-LIABILITIES> 166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,518
<SHARES-COMMON-STOCK> 450
<SHARES-COMMON-PRIOR> 58
<ACCUMULATED-NII-CURRENT> 1,936
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,214
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,163
<NET-ASSETS> 75,831
<DIVIDEND-INCOME> 833
<INTEREST-INCOME> 112
<OTHER-INCOME> 0
<EXPENSES-NET> 546
<NET-INVESTMENT-INCOME> 399
<REALIZED-GAINS-CURRENT> 2,749
<APPREC-INCREASE-CURRENT> 5,113
<NET-CHANGE-FROM-OPS> 8,261
<EQUALIZATION> 62
<DISTRIBUTIONS-OF-INCOME> 25
<DISTRIBUTIONS-OF-GAINS> 13
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 428
<NUMBER-OF-SHARES-REDEEMED> 39
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 11,549
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,510
<OVERDISTRIB-NII-PRIOR> 13
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 295
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 546
<AVERAGE-NET-ASSETS> 2,529
<PER-SHARE-NAV-BEGIN> 11.73
<PER-SHARE-NII> 0.69
<PER-SHARE-GAIN-APPREC> 0.72
<PER-SHARE-DIVIDEND> 0.42
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.51
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>141
<NAME>CADENCE MICRO CAP GROWTH FUND-INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 62,615
<INVESTMENTS-AT-VALUE> 84,865
<RECEIVABLES> 769
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85,634
<PAYABLE-FOR-SECURITIES> 986
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109
<TOTAL-LIABILITIES> 1,095
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53,355
<SHARES-COMMON-STOCK> 4,546
<SHARES-COMMON-PRIOR> 4,536
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,934
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,250
<NET-ASSETS> 84,539
<DIVIDEND-INCOME> 337
<INTEREST-INCOME> 226
<OTHER-INCOME> 0
<EXPENSES-NET> 807
<NET-INVESTMENT-INCOME> (244)
<REALIZED-GAINS-CURRENT> 8,951
<APPREC-INCREASE-CURRENT> 8,025
<NET-CHANGE-FROM-OPS> 16,732
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,543
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,333
<NUMBER-OF-SHARES-REDEEMED> 1,411
<SHARES-REINVESTED> 88
<NET-CHANGE-IN-ASSETS> 14,764
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,526
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 670
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 807
<AVERAGE-NET-ASSETS> 80,637
<PER-SHARE-NAV-BEGIN> 15.38
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 3.43
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.34
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.47
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>142
<NAME>CADENCE MICRO CAP GROWTH FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 62,615
<INVESTMENTS-AT-VALUE> 84,865
<RECEIVABLES> 769
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85,634
<PAYABLE-FOR-SECURITIES> 986
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109
<TOTAL-LIABILITIES> 1,095
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53,355
<SHARES-COMMON-STOCK> 31
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,934
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,250
<NET-ASSETS> 84,539
<DIVIDEND-INCOME> 337
<INTEREST-INCOME> 226
<OTHER-INCOME> 0
<EXPENSES-NET> 807
<NET-INVESTMENT-INCOME> (244)
<REALIZED-GAINS-CURRENT> 8,951
<APPREC-INCREASE-CURRENT> 8,025
<NET-CHANGE-FROM-OPS> 16,732
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40
<NUMBER-OF-SHARES-REDEEMED> 9
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 14,764
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,526
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 670
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 807
<AVERAGE-NET-ASSETS> 432
<PER-SHARE-NAV-BEGIN> 16.73
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 1.70
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.46
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>161
<NAME>COLUMBUS CIRCLE INVESTORS CORE EQUITY FUND-INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 40,203
<INVESTMENTS-AT-VALUE> 44,328
<RECEIVABLES> 459
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 44,788
<PAYABLE-FOR-SECURITIES> 330
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 431
<TOTAL-LIABILITIES> 761
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,342
<SHARES-COMMON-STOCK> 771
<SHARES-COMMON-PRIOR> 613
<ACCUMULATED-NII-CURRENT> 1,498
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 58
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,129
<NET-ASSETS> 44,027
<DIVIDEND-INCOME> 242
<INTEREST-INCOME> 105
<OTHER-INCOME> 0
<EXPENSES-NET> 260
<NET-INVESTMENT-INCOME> 87
<REALIZED-GAINS-CURRENT> 1,584
<APPREC-INCREASE-CURRENT> 1,689
<NET-CHANGE-FROM-OPS> 3,360
<EQUALIZATION> 21
<DISTRIBUTIONS-OF-INCOME> 38
<DISTRIBUTIONS-OF-GAINS> 180
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 162
<NUMBER-OF-SHARES-REDEEMED> 9
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 11,591
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 756
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 146
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 260
<AVERAGE-NET-ASSETS> 9,028
<PER-SHARE-NAV-BEGIN> 12.72
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> .65
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.28
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.55
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>162
<NAME>COLUMBUS CIRCLE INVESTORS CORE EQUITY FUND-ADMINISTRATIVE CLASS
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 40,203
<INVESTMENTS-AT-VALUE> 44,328
<RECEIVABLES> 459
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 44,788
<PAYABLE-FOR-SECURITIES> 330
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 431
<TOTAL-LIABILITIES> 761
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,342
<SHARES-COMMON-STOCK> 2,477
<SHARES-COMMON-PRIOR> 1,937
<ACCUMULATED-NII-CURRENT> 1,498
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 58
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,129
<NET-ASSETS> 44,027
<DIVIDEND-INCOME> 242
<INTEREST-INCOME> 105
<OTHER-INCOME> 0
<EXPENSES-NET> 260
<NET-INVESTMENT-INCOME> 87
<REALIZED-GAINS-CURRENT> 1,584
<APPREC-INCREASE-CURRENT> 1,689
<NET-CHANGE-FROM-OPS> 3,360
<EQUALIZATION> 21
<DISTRIBUTIONS-OF-INCOME> 76
<DISTRIBUTIONS-OF-GAINS> 577
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,313
<NUMBER-OF-SHARES-REDEEMED> 825
<SHARES-REINVESTED> 52
<NET-CHANGE-IN-ASSETS> 11,591
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 756
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 146
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 260
<AVERAGE-NET-ASSETS> 29,565
<PER-SHARE-NAV-BEGIN> 12.73
<PER-SHARE-NII> .49
<PER-SHARE-GAIN-APPREC> .65
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.28
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.56
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report dated June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000867297
<NAME> PIMCO FUNDS: EQUITY ADVISORS SERIES
<SERIES>
<NUMBER>171
<NAME>COLUMBUS CIRCLE INVESTORS MID CAP EQUITY FUND
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 6,449
<INVESTMENTS-AT-VALUE> 8,355
<RECEIVABLES> 180
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 28
<TOTAL-ASSETS> 8,563
<PAYABLE-FOR-SECURITIES> 179
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6
<TOTAL-LIABILITIES> 185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,019
<SHARES-COMMON-STOCK> 571
<SHARES-COMMON-PRIOR> 647
<ACCUMULATED-NII-CURRENT> 280
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 173
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,906
<NET-ASSETS> 8,378
<DIVIDEND-INCOME> 17
<INTEREST-INCOME> 15
<OTHER-INCOME> 0
<EXPENSES-NET> 50
<NET-INVESTMENT-INCOME> (18)
<REALIZED-GAINS-CURRENT> 471
<APPREC-INCREASE-CURRENT> 853
<NET-CHANGE-FROM-OPS> 1,306
<EQUALIZATION> (1)
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 243
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36
<NUMBER-OF-SHARES-REDEEMED> 118
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 21
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 243
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 35
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50
<AVERAGE-NET-ASSETS> 8,441
<PER-SHARE-NAV-BEGIN> 12.92
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 1.62
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.37
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.66
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit 99.011
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 24 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 12, 1996, relating to the financial
statements and financial highlights appearing in the June 30, 1996 Annual Report
to Shareholders of the PIMCO Funds: Equity Advisors Series, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the Prospectus
and under the headings "Independent Accountants" and "Financial Statements" in
the Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Kansas City, Missouri
October 31, 1996
<PAGE>
PIMCO FUNDS: EQUITY ADVISORS SERIES
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
WRITTEN INSTRUMENT AMENDING THE
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF PIMCO FUNDS: EQUITY ADVISORS SERIES
WHEREAS, PIMCO Funds: Equity Advisors Series (the "Trust"),
Massachusetts business trust, has entered into an agreement and plan of
reorganization (the "Agreement") with PIMCO Advisors Funds ("PAF") providing for
the acquisition and consolidation of certain series of PAF by the Trust (the
"Reorganization"); and
WHEREAS, in connection with the Reorganization, the Trust's Board of
Trustees desires to change the name of certain series of the Trust, establish
eight new series of the Trust, and establish three new classes of shares of the
Trust, effective as of October 31, 1996, such name changes being contingent upon
the consummation of the Reorganization; therefore be it
RESOLVED, that the undersigned, being a majority of the Trustees of
the Trust, acting pursuant to Section 6.2 of the Amended and Restated Agreement
and Declaration of Trust, dated May 7, 1993 and subsequently amended on July 15,
1993, October 29, 1993, March 4, 1994, August 12, 1994, November 7, 1994,
November 28, 1995, February 2, 1996, and August 20, 1996 (the "Declaration of
Trust"), and having heretofore divided the shares of beneficial interest of the
Trust into fourteen separate series (the "Current Funds"), hereby amend the
Declaration of Trust to redesignate the names of the Current Funds listed below
as follows, such amendment to become effective on the date indicated above:
Old Name New Name
- -------- --------
NFJ Equity Income Fund PIMCO Equity Income Fund
NFJ Diversified Low P/E Fund PIMCO Value Fund
NFJ Small Cap Value Fund PIMCO Small Cap Value Fund
Cadence Capital Appreciation PIMCO Capital Appreciation
Fund Fund
Cadence Mid Cap Growth Fund PIMCO Mid Cap Growth Fund
Cadence Micro Cap Growth Fund PIMCO Micro Cap Growth Fund
Cadence Small Cap Growth Fund PIMCO Small Cap Growth Fund
Columbus Circle Investors Core PIMCO Core Equity Fund
Equity Fund
Columbus Circle Investors Mid PIMCO Mid Cap Equity Fund
Cap Equity Fund
Parametric Enhanced Equity Fund PIMCO Enhanced Equity Fund
Parametric Structured Emerging PIMCO Structured Emerging
Markets Fund Markets Fund
<PAGE>
Blairlogie Emerging Markets Fund PIMCO Emerging Markets Fund
Blairlogie International Active PIMCO International Developed
Fund Fund
Balanced Fund PIMCO Balanced Fund
FURTHER RESOLVED, that the undersigned being a majority of the Trustees
of the Trust, acting pursuant to Section 6.2 of the Declaration of Trust, hereby
amend the Declaration of Trust by designating and establishing eight additional
series to be known as the "PIMCO International Fund", "PIMCO Growth Fund,"
"PIMCO Target Fund," "PIMCO Renaissance Fund," "PIMCO Opportunity Fund," "PIMCO
Innovation Fund," "PIMCO Tax Exempt Fund," and "PIMCO Precious Metals Fund"
(collectively, together with the Current Funds, the "Funds") such amendment to
become effective upon the date indicated above.
FURTHER RESOLVED, that the undersigned being a majority of the Trustees
of the Trust, acting pursuant to Section 6.2.1 of the Declaration of Trust,
having heretofore divided the shares of each series into three classes, hereby
amend the Declaration of Trust by dividing the Shares of each Fund into five
Classes designated as "Institutional" shares, "Administrative" shares, "Class A"
shares, "Class B" shares, and "Class C" shares (the "Classes"), such amendment
to become effective upon the date indicated above.
FURTHER RESOLVED, the Funds and their Classes shall have the following
special and relative rights:
(1) The Funds shall be authorized to invest in cash, securities, instruments
and other property as from time to time described in the Trust's then currently
effective prospectuses and registration statement under the Securities Act of
1933. Each share of beneficial interest of a Fund ("Share") shall be
redeemable, shall be entitled to one vote (or fraction thereof in respect of a
fractional Share) on matters on which Shares of the Fund shall be entitled to
vote, shall represent a pro rata beneficial interest in the assets allocated to
the Fund and shall be entitled to receive its pro rata share of net assets of
the Fund upon liquidation of the Fund, all as provided in the Declaration.
(2) Each Share of a Fund shall be entitled to one vote (or fraction thereof
in respect of a fractional Share) on matters on which such shares of the Fund
shall be entitled to vote. Shareholders of each Fund shall vote separately as a
Fund on any matter, except, consistent with the Investment Company Act of 1940,
as amended ("the Act"), and the rules and the Trust's registration statement
thereunder, with respect to (i) the election of Trustees, (ii) any amendment of
the Declaration of Trust, unless the amendment affects fewer than all Funds or
Classes of Shares, in which case only shareholders of the affected Funds or
Classes shall vote, and (iii) ratification of
<PAGE>
the selection of auditors, and except when the Trustees have determined that the
matter affects only the interests of shareholders of a particular Fund or Class
of Shares, in which case only the shareholders of such Fund or Case shall be
entitled to vote thereon. In each case of separate voting, the Trustees shall
determine whether, for the matter to be effectively acted upon within the
meaning of Rule 18f-2 under the Act (or any successor rule) as to a Fund or
Class, the applicable percentage (as specified in the Declaration, or the Act
and the rules thereunder) of the shares of that Fund or Class alone must be
voted in favor of the matter, or whether the favorable vote of such applicable
percentage of the shares of each Fund or Class entitled to vote on the matter is
required.
(3) The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.2 of the Declaration, except that only
preexisting Funds shall bear their allocable portion of the remaining
unamortized costs incurred and payable in connection with their organization and
registration; costs of establishing subsequent Series and of the registration
and public offering of their Shares shall be amortized for such Series over the
period beginning on the date such costs become payable and ending sixty months
thereafter.
(4) Shares of each Class of each Fund may vary between themselves as
to rights of redemption and conversion rights, as may be approved by the
Trustees and set out in each Fund's then-current prospectus.
(5) The Trustees shall have the right at any time and from time to
time to reallocate assets and expenses or to change the designation of any Fund
or Class thereof hitherto or hereafter created, or to otherwise change the
special and relative rights of such Fund or Class, provided that such change
shall not adversely affect the rights of the Shareholders of such Fund or
Class.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the __ day of September, 1996.
- ------------------------ -------------------------
William D. Cvengros Lyman W. Porter
Trustee Trustee
- ------------------------ -------------------------
Richard L. Nelson Alan Richards
Trustee Trustee
<PAGE>
PRESIDENT'S CERTIFICATE
The undersigned, being the duly appointed, qualified and active
President of PIMCO Advisors Institutional Funds (the "Trust"), hereby certifies
that Sections 6.2 and 6.2.1 of the Trust's Amended and Restated Agreement and
Declaration of Trust dated May 7, 1993 and subsequently amended on July 15,
1993, October 29, 1993, March 4, 1994, August 12, 1994, November 7, 1994,
November 28, 1995, February 2, 1996, and August 20, 1996 (the "Declaration of
Trust") have been duly amended in accordance with the provisions of Section 10.4
of the Declaration of Trust.
Date: September __, 1996
-------------------------------
William D. Cvengros
President
