<PAGE>
[LOGO OF PIMCO APPEARS HERE]
PIMCO FUNDS
- -----------
Multi-Manager Series
BLAIRLOGIE CAPITAL MANAGEMENT
PIMCO Emerging Markets Fund
PIMCO International Developed Fund
PIMCO International 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 Innovation Fund
NFJ INVESTMENT GROUP
PIMCO Equity Income Fund
PIMCO Value Fund
PIMCO Small Cap Value Fund
PARAMETRIC PORTFOLIO ASSOCIATES
PIMCO Enhanced Equity Fund
PIMCO Structured Emerging Markets Fund
MULTIPLE MANAGERS
PIMCO Balanced Fund
PROSPECTUS
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January 17, 1997
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PIMCO Funds: Multi-Manager Series
Prospectus
January 17, 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 seventeen separate diversified 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 the Funds' Portfolio Managers.
This Prospectus describes two classes of shares offered by each Fund: the
"Institutional Class" and the "Administrative Class." Through a separate
prospectus, certain Funds offer up to three additional classes of shares,
Class A shares, Class B shares and Class C shares. See "Other Information--
Multiple Classes of Shares." 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 high net worth individuals (Institutional Class shares may also be offered
through certain financial intermediaries that charge their customers
transaction or other fees with respect to the customers' investments in the
Funds). Shares of the Administrative Class are offered primarily through
employee benefit plan alliances, broker-dealers and other intermediaries, and
each Fund's Administrative Class shares are subject to service and/or
distribution fees paid 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 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.
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
will vary.
A Statement of Additional Information, dated January 14, 1997, as amended or
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)
(800) 987-4626 (PIMCO Infolink Audio Response
Network)
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.
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.
January 17, 1997 Prospectus
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................................................... 3
Expense Information..................................................... 8
Financial Highlights.................................................... 10
Investment Objectives and Policies...................................... 14
Investment Restrictions................................................. 25
Characteristics and Risks of Securities and Investment Techniques....... 27
Management of the Trust................................................. 39
Purchase of Shares...................................................... 45
Redemption of Shares.................................................... 47
Portfolio Transactions.................................................. 49
Net Asset Value......................................................... 50
Dividends, Distributions and Taxes...................................... 51
Other Information....................................................... 52
</TABLE>
PIMCO Funds: Multi-Manager Series
2
<PAGE>
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 seventeen separate diversified
investment portfolios (the "Funds") offered by the Trust.
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.
PORTFOLIO MANAGER AND FUND
INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS
- --------------------------------------------------------------------------------
BLAIRLOGIE CAPITAL
MANAGEMENT
Emerging Markets Seeks long-term growth of capital; invests primarily in
common stocks of companies located in emerging market
countries.
- --------------------------------------------------------------------------------
International Seeks long-term growth of capital; invests primarily in
Developed a diversified portfolio of international equity
securities.
- --------------------------------------------------------------------------------
International Seeks capital appreciation, income is incidental;
invests primarily in common stocks of non-U.S. issuers.
- --------------------------------------------------------------------------------
CADENCE CAPITAL
MANAGEMENT
Capital Seeks growth of capital; invests primarily in common
Appreciation stocks of companies with market capitalizations of at
least $100 million that have improving fundamentals and
whose stock is reasonably valued by the market.
- --------------------------------------------------------------------------------
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 Growth Seeks long-term growth of capital; invests primarily in
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 Growth Seeks growth of capital; invests primarily in common
stocks of companies with market capitalizations between
$50 million and $1 billion that have improving
fundamentals and whose stock is reasonably valued by the
market.
- --------------------------------------------------------------------------------
COLUMBUS CIRCLE
INVESTORS
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.
- --------------------------------------------------------------------------------
Innovation Seeks capital appreciation; invests primarily in common
stocks of technology-related companies.
(CONTINUED ON NEXT PAGE)
January 17, 1997 Prospectus
3
<PAGE>
(CONTINUED)
PORTFOLIO MANAGER AND FUND
INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS
- --------------------------------------------------------------------------------
NFJ INVESTMENT GROUP
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.
- --------------------------------------------------------------------------------
PARAMETRIC PORTFOLIO
ASSOCIATES
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 Markets common stocks of companies located in emerging market
countries.
- --------------------------------------------------------------------------------
MULTIPLE MANAGERS
Balanced Seeks total return consistent with prudent investment
management; invests in common stocks, fixed income
securities and money market instruments.
- --------------------------------------------------------------------------------
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
this 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
Balanced Fund, all of the Funds invest primarily in common stock or other types
of equity securities (the "Equity Funds"). While each of the International,
Renaissance, and Innovation 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
Corporation ("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.
PIMCO Funds: Multi-Manager Series
4
<PAGE>
Certain Funds may use derivative instruments, including 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 taxable capital gains.
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
PIMCO Advisors L.P. ("PIMCO Advisors" or the "Adviser") serves as investment
adviser to the Trust. PIMCO Advisors is one of the largest investment
management firms in the U.S. As of November 30, 1996, PIMCO Advisors and its
subsidiary partnerships had over $111.2 billion in assets under management.
Subject to the supervision of the Board of Trustees of the Trust, the Adviser
is responsible for the investment program for the Funds in accordance with each
Fund's investment objective, policies, and restrictions. For all of the Funds,
the Adviser has engaged its affiliates to serve as Portfolio Managers. These
affiliated Portfolio Managers, each of which is a subsidiary partnership of
PIMCO Advisors, are Blairlogie Capital Management ("Blairlogie"), Cadence
Capital Management ("Cadence"), Columbus Circle Investors ("Columbus Circle"),
NFJ Investment Group ("NFJ"), Pacific Investment Management Company ("Pacific
Investment Management"), and Parametric Portfolio Associates ("Parametric").
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. For the Balanced Fund, PIMCO Advisors determines the allocation
of the Fund's assets among common stock and fixed income securities and manages
directly 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."
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 (Institutional Class shares may also be offered through
certain financial intermediaries that charge their customers transaction or
other fees with respect to the customers' investments in the Funds). Shares of
the Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers and other intermediaries. Each Fund pays service
and/or distribution fees to such entities for services they provide to such
Fund's shareholders of that class. Administrative Class shares of certain Funds
are not currently available for investment.
January 17, 1997 Prospectus
5
<PAGE>
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. Shares of either class may also be offered to
clients of the Adviser and its affiliates. The Micro Cap Growth Fund limits the
purchase of shares (contributed capital) by any one investor to $10 million,
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
million. 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 International Fund, Small Cap Growth Fund,
and Structured Emerging Markets 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 on the basis of relative net asset values for shares of the same
class of any other Fund of the Trust offered generally to the public, or for
shares of the same class of a series of 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 Renaissance, Equity Income, Value, and Balanced Funds,
which will distribute dividends quarterly), 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 and/or distribution fees by that class. See "Dividends, Distributions
and Taxes."
PIMCO Funds: Multi-Manager Series
6
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January 17, 1997 Prospectus
7
<PAGE>
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>
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
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
Innovation Fund............................. 0.65 0.25 0.90
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
Enhanced Equity Fund........................ 0.45 0.25 0.70
Structured Emerging Markets Fund............ 0.45 0.50 0.95
Balanced Fund............................... 0.45 0.25 0.70
</TABLE>
<TABLE>
<CAPTION>
SERVICE/
ADVISORY ADMINISTRATIVE 12B-1 TOTAL
ADMINISTRATIVE CLASS SHARES FEE FEE FEE EXPENSES
--------------------------- -------- -------------- -------- --------
<S> <C> <C> <C> <C>
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
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
Innovation Fund................... 0.65 0.25 0.25 1.15
Equity Income Fund ............... 0.45 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
Enhanced Equity Fund.............. 0.45 0.25 0.25 0.95
Structured Emerging Markets Fund.. 0.45 0.50 0.25 1.20
Balanced Fund..................... 0.45 0.25 0.25 0.95
</TABLE>
For a more detailed discussion of the Funds' fees and expenses, see "Fund
Administrator," "Advisory and Administrative Fees," and "Service and
Distribution Fees" under the caption "Management of the Trust."
PIMCO Funds: Multi-Manager Series
8
<PAGE>
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>
Emerging Markets Fund........................ $14 $43 $74 $162
International Developed Fund................. 11 35 61 134
International Fund........................... 11 33 58 128
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
Innovation Fund.............................. 9 29 50 111
Equity Income Fund........................... 7 22 39 87
Value Fund................................... 7 22 39 87
Small Cap Value Fund......................... 9 27 47 105
Enhanced Equity Fund......................... 7 22 39 87
Structured Emerging Markets Fund............. 10 30 53 117
Balanced Fund................................ 7 22 39 87
<CAPTION>
ADMINISTRATIVE CLASS SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Emerging Markets Fund........................ $16 $50 $87 $190
International Developed Fund................. 14 43 74 163
International Fund........................... 13 41 71 157
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
Innovation Fund.............................. 12 37 63 140
Equity Income Fund........................... 10 30 53 117
Value Fund................................... 10 30 53 117
Small Cap Value Fund......................... 11 35 61 134
Enhanced Equity Fund......................... 10 30 53 117
Structured Emerging Markets Fund............. 12 38 66 145
Balanced Fund................................ 10 30 53 117
</TABLE>
The above tables are provided to assist investors in understanding the
various expenses which may be borne directly or indirectly in connection with
an investment in the Funds. This example should not be considered a
representation of past or future expenses or performance. Actual expenses may
be higher or lower than those shown.
January 17, 1997 Prospectus
9
<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 International,
Renaissance, and Innovation 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>
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(a) 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(b) 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(c) 11.21 0.02 1.01 1.03 (0.08) (0.43) 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(d) 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
10/31/95 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(e) 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(c) 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(f) 10.00 0.00 1.07 1.07 0.00 0.00 0.00
Administrative Class
6/30/96(g) 16.73 0.03 1.70 1.73 0.00 0.00 0.00
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(h) 10.00 0.02 5.03 5.05 (0.02) (0.16) 0.00
</TABLE>
- --------
<TABLE>
<S> <C>
(a) From commencement of operations, June 1, 1993. (h) From commencement of operations, January 7, 1991.
(b) From commencement of operations, June 8, 1993. + Per share amounts based on average number of shares outstanding
(c) From commencement of operations, November 30, 1994. during the period.
(d) From commencement of operations, March 8, 1991. + Including dividend in excess of $0.36 of net investment income.
(e) From commencement of operations, August 26, 1991. ++ Including dividend in excess of $0.35 of net investment income.
(f) From commencement of operations, June 25, 1993. # Formerly the Blairlogie International Active Fund.
(g) From commencement of operations, April 1, 1996. * Annualized.
</TABLE>
10
PIMCO Funds: Multi-Manager Series
<PAGE>
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 $(0.04) $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 $(1.18) $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
$ 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
</TABLE>
January 17, 1997 Prospectus
11
<PAGE>
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
(CONTINUED)
Administrative Class
6/30/96 $21.01 $ 2.02+ $(0.61)+ $ 1.41 $ 0.00 $(1.60) $ 0.00
10/31/95(i) 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(j) 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(k) 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(j) 10.00 0.02 2.92 2.94 (0.02) 0.00 0.00
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(d) 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(c) 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(l) 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(m) 10.00 0.02 0.10 0.12 (0.03) 0.00 0.00
Administrative Class
6/30/96(n) 13.16 0.54 1.43 1.97 (0.19) (0.74) 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(o) 10.00 0.16 0.80 0.96 (0.16) 0.00 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>
- --------
<TABLE>
<S> <C>
(i) From commencement of operations, September 27, 1995.+ + Per share amounts based on average number of shares outstanding
(j) From commencement of operations, December 28, 1994 during the period.
(k) From commencement of operations, May 31, 1995. +++ Including dividend in excess of $0.01 of net investment income.
(l) From commencement of operations, December 30, 1991. ## Formerly the NFJ Diversified Low P/E Fund.
(m) From commencement of operations, October 1, 1991. ### NFJ and Cadence began serving as Portfolio Managers of the
(n) From commencement of operations, November 1, 1995. portion of the Balanced Fund allocatedfor investment in
(o) From commencement of operations, February 11, 1991. common stock on August 1, 1996. Prior to August 1, 1996,
(p) From commencement of operations, June 25, 1992. a different firm served as Portfolio Manager.
* Annualized.
</TABLE>
12 PIMCO Funds: Multi-Manager Series
<PAGE>
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) $20.82 7.18% $ 112 1.50%* (0.41)%* 59.00% $0.02
0.00 0.00 21.01 (5.34) 544 1.60* (0.82)* 8.80 N/A
$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 $(0.82) $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 35,093 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 $(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 $(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>
January 17, 1997 Prospectus
13
<PAGE>
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.
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 (this list
is not exclusive):
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
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, foreign exchange futures
contracts, and options thereon, currency exchange transactions on a spot
(i.e., cash) basis, and put and call options on foreign currencies. 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, 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 this Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices and related risks. The Portfolio Manager for
the Emerging Markets Fund is Blairlogie.
14
PIMCO Funds: Multi-Manager Series
<PAGE>
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. Under normal market
conditions, the Fund will invest no more than 35% of its assets in securities
issued by companies located in countries that the Portfolio Manager
determines, on the basis of market capitalization, liquidity, and other
considerations, to have underdeveloped securities markets. 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 and also 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 international equity securities in which the Fund invests will
be traded 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, foreign exchange futures contracts, and
options thereon, currency exchange transactions on a spot (i.e., cash) basis,
and put and call options on foreign currencies. 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, 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 this Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices and related risks. 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). 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 developed foreign
securities markets. Particular consideration is given to investments
principally traded in developed North American (other than United States),
Japanese, European, Pacific and Australian securities markets, and in
securities of foreign issuers traded on United States securities markets.
January 17, 1997 Prospectus
15
<PAGE>
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 include 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 management investment 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 enter into 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 this Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices and related risks. The Portfolio Manager for the
International Fund is Blairlogie.
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 selected from a universe of the
approximately 1,000 largest market capitalization stocks, all of which are
those of 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. 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 this Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices and related risks. The Portfolio Manager for the Capital
Appreciation Fund is Cadence.
16
PIMCO Funds: Multi-Manager Series
<PAGE>
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 this Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices and related risks. 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. The Fund
is intended for aggressive investors seeking above-average gains and willing
to accept the greater risks associated therewith. For information on other
investment policies, see "Investment Objectives and Policies--Equity Funds."
See "Characteristics and Risks of Securities and Investment Techniques" in
this Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices and related
risks. 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. The Fund is intended for aggressive
investors seeking above-average gains and willing to accept the greater risks
associated therewith. For information on other investment policies, see
"Investment Objectives and Policies--Equity Funds." See "Characteristics and
Risks of Securities and Investment Techniques" in this Prospectus and
"Investment Objectives and Policies" in the Statement of Additional
Information for more details on investment practices and related risks. The
Portfolio Manager for the Small Cap Growth Fund is Cadence.
January 17, 1997 Prospectus
17
<PAGE>
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").
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 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 enter into 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 this Prospectus and "Investment Objectives and
Policies" in the Statement of Additional Information for more details on
investment practices and related risks. 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 Standard & Poor's 500 Composite Stock Price Index ("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 enter
into forward foreign currency contracts. For information on other investment
policies, see "Investment Objectives and Policies--Equity Funds." See
"Characteristics and Risks of
18
PIMCO Funds: Multi-Manager Series
<PAGE>
Securities and Investment Techniques" in this Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices and related risks. The Portfolio Manager for
the Core Equity Fund is Columbus Circle.
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 enter
into 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 this
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices and related
risks. The Portfolio Manager for the Mid Cap Equity Fund is Columbus Circle.
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 (see "Management of the Trust--Portfolio
Managers--Columbus Circle"), 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 enter into
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 this
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices and related
risks. The Portfolio Manager for the Innovation Fund is Columbus Circle.
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
January 17, 1997 Prospectus
19
<PAGE>
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 this Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices and related risks. 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 this Prospectus and
"Investment Objectives and Policies" in the Statement of Additional
Information for more details on investment practices and related risks. 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 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 S&P 500's 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. The Fund is
intended for aggressive investors seeking above-average gains and willing to
accept the greater risks associated therewith. For information on other
investment policies, see "Investment Objectives and Policies--Equity Funds."
See "Characteristics and Risks of Securities and Investment Techniques" in
this Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices and related
risks. The Portfolio Manager for the Small Cap Value Fund is NFJ.
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 currently 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
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PIMCO Funds: Multi-Manager Series
<PAGE>
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
meet simultaneously 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
without shareholder approval the index whose total return the Fund will
attempt to equal or exceed, 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 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 this Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices and related risks. 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 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. Second, 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.
January 17, 1997 Prospectus
21
<PAGE>
For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries (this list
is not exclusive):
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
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, foreign exchange futures
contracts, and options thereon, currency exchange transactions on a spot
(i.e., cash) basis, put and call options on foreign currencies. The Fund may
invest in stock index 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 this Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information for more
details on investment practices and related risks. The Portfolio Manager for
the Structured Emerging Markets Fund is Parametric.
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.
22
PIMCO Funds: Multi-Manager Series
<PAGE>
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 Cadence and NFJ. The portion of the
Common Stock Segment allocated to Cadence will be managed in accordance with
the investment policies of the Capital Appreciation Fund; the portion
allocated to NFJ will be managed in accordance with the investment policies of
the Value Fund. Allocations of the Common Stock Segment to Cadence and NFJ
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 may
invest the Fixed Income Securities Segment in the following types of
securities: securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; corporate debt securities, including
convertible securities and corporate commercial paper; mortgage-related and
other asset-backed securities; inflation-indexed bonds issued by both
governments and corporations; structured notes and loan participations; bank
certificates of deposit, fixed time deposits and bankers' acceptances;
repurchase agreements and reverse repurchase agreements; obligations of
foreign governments or their subdivisions, agencies and instrumentalities; and
obligations of international agencies or supranational entities. Fixed income
securities may have fixed, variable, or floating rates of interest.
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. 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." Securities
rated below investment grade and comparable unrated securities are subject to
greater risks than higher quality fixed income securities. See
"Characteristics and Risks of Securities and Investment Techniques--High Yield
Securities ("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.
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 forward foreign
currency 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 the 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
January 17, 1997 Prospectus
23
<PAGE>
exposure to foreign currency fluctuations from one country to another. See
"Characteristics and Risks of Securities and Investment Techniques" in this
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information for more details on investment practices and related
risks.
EQUITY FUNDS
The Emerging Markets, International Developed, Capital Appreciation, Mid Cap
Growth, Micro Cap Growth, Small Cap Growth, Core Equity, Mid Cap Equity,
Equity Income, Value, Small Cap Value, Enhanced Equity, and Structured
Emerging Markets 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 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 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 Funds may also invest
in convertible securities, preferred stock, and warrants, subject to certain
limitations.
The International, Renaissance, and Innovation 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.
One or more of the Equity Funds may temporarily not be invested primarily in
equity securities immediately following the commencement of operations or
after receipt of significant new monies. Any of the Equity Funds may
temporarily not contain the number of 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 lend portfolio securities; enter into repurchase
agreements and reverse repurchase agreements (subject to the Funds' investment
limitations described below); purchase and sell securities on a when-issued or
delayed delivery basis; and enter into forward commitments to purchase
securities. Each of the Equity Funds may invest in American Depository
Receipts ("ADRs"). The Emerging Markets, International Developed,
International, Core Equity, Mid Cap Equity, and Structured Emerging Markets
Funds may invest in European Depository Receipts ("EDRs") and Global
Depository Receipts ("GDRs"). The Equity Funds that invest primarily in
securities of foreign issuers may invest a portion of their assets in debt
securities and money market obligations issued by U.S. and foreign issuers
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 this 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, based on the 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
24
PIMCO Funds: Multi-Manager Series
<PAGE>
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 Manager for the Fixed
Income Securities Segment of the Balanced Fund. For more information on
investments in fixed income securities, see "Characteristics and Risks of
Securities and Investment Techniques" in this 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
International, Renaissance, and Innovation 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. The investment objective of
these Funds is non-fundamental and may be changed with respect to each such
Fund by the Trustees without shareholder approval. Under the following
fundamental 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.
(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; except that 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.
The investment objective of each of the Emerging Markets, International
Developed, Capital Appreciation, Mid Cap Growth, Micro Cap Growth, Small Cap
Growth, Core Equity, Mid Cap Equity, Equity Income, Value, Small Cap Value,
Enhanced Equity, Structured Emerging Markets, 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
January 17, 1997 Prospectus
25
<PAGE>
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.
(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,
26
PIMCO Funds: Multi-Manager Series
<PAGE>
(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.
Unless otherwise noted, the remaining restrictions and policies of each Fund
relating to the investment of its assets and activities are non-fundamental
and may be changed without shareholder approval. 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.
SMALL AND MEDIUM CAPITALIZATION STOCKS
Certain of the Funds may invest in common stock of companies with market
capitalizations that are small compared to those of other publicly traded
companies. Generally, small market capitalization is considered to be less
than $1 billion and large market capitalization is considered to be more than
$5 billion. Under normal market conditions, the Small Cap Growth and Small Cap
Value Funds will invest primarily in companies with market capitalizations of
$1 billion or less, and the Micro Cap Growth Fund will invest primarily 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
January 17, 1997 Prospectus
27
<PAGE>
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. Whether a U.S. 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 capitalizations 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 capitalizations. 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 may for some purposes be considered borrowing
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 Adviser
or a 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
28
PIMCO Funds: Multi-Manager Series
<PAGE>
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 to return the security loaned or become insolvent. The Funds may pay
lending fees to the party arranging the loan.
FOREIGN SECURITIES
The Emerging Markets, International Developed, International, and Structured
Emerging Markets 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 ADRs, EDRs, or GDRs. ADRs are dollar-denominated receipts issued generally
by domestic banks and representing the deposit with the bank of a security of
a foreign issuer, and are publicly traded on exchanges or over-the-counter in
the United States. EDRs are receipts similar to ADRs and are issued and traded
in Europe. GDRs may be offered privately in the United States and also trade
in public or private markets in other countries. The Core Equity and Mid Cap
Equity Funds 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, these 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 remaining Funds
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 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. 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
January 17, 1997 Prospectus
29
<PAGE>
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 and, in particular, the Emerging Markets and Structured
Emerging Markets Funds, may invest in the securities of issuers based in
countries with developing economies. Investing in developing (or "emerging
market") 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 emerging market
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
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned 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, 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.
The Emerging Markets, International Developed, International, Renaissance,
Core Equity, Mid Cap Equity, Innovation, Structured Emerging Markets, 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, Structured
Emerging Markets, and Balanced Funds may buy and sell foreign currency futures
contracts and
30
PIMCO Funds: Multi-Manager Series
<PAGE>
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. 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 Emerging Markets,
International Developed, International, and Structured 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 Emerging Markets,
International Developed, International, 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.
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. Each
Fund will segregate assets determined to be liquid by the Adviser or a
Portfolio Manager in accordance with procedures established by the Board of
Trustees in a segregated account to cover its obligations under forward
foreign currency exchange contracts entered into for non-hedging purposes.
HIGH YIELD SECURITIES ("JUNK BONDS")
The Renaissance 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 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 assets in high yield securities
January 17, 1997 Prospectus
31
<PAGE>
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 a 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*........................ 5.06 -- -- -- 2.94 4.16 -- -- -- --
</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*.................. -- -- -- -- -- 1.58 -- -- -- -- 1.58
</TABLE>
- --------
* Represents holdings of the PIMCO Advisors Equity Income Fund for its fiscal
year ended September 30, 1996. The Equity Income Fund reorganized as the
Renaissance Fund of the Trust on January 17, 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 Emerging Markets, International Developed,
International, Renaissance, Core Equity, Mid Cap Equity, Innovation,
Structured Emerging Markets, 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 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 Emerging Markets, International Developed, Structured
Emerging Markets, 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 for the Emerging Markets,
International Developed, International, and Structured Emerging Markets Funds,
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 a segregated account consisting
of assets determined to be liquid by the Adviser or a 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.
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-related or asset-backed securities. See
"Mortgage-Related and Other 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
32
PIMCO Funds: Multi-Manager Series
<PAGE>
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, 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 security above the exercise price, but, as long as its obligation
as a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation
under the option and must deliver the underlying security at the exercise
price. If a put or call option purchased by the 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 International, Renaissance, and Innovation 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.
January 17, 1997 Prospectus
33
<PAGE>
The Emerging Markets, International Developed, International, Core Equity,
Mid Cap Equity, Structured Emerging Markets, 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 Emerging Markets, International Developed, and
Structured 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 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 limit 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 a Fund's 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 Emerging
Markets, International Developed, International, Core Equity, Mid Cap Equity,
Enhanced
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PIMCO Funds: Multi-Manager Series
<PAGE>
Equity, Structured Emerging Markets, and Balanced Funds may invest in stock
index futures contracts and options thereon. The Emerging Markets,
International Developed, International, Core Equity, Mid Cap Equity,
Structured Emerging Markets, and Balanced Funds may invest in foreign exchange
futures contracts and options thereon ("futures options") that are traded on a
U.S. or foreign exchange or board of trade, or similar entity, or quoted on an
automated quotation system. These Funds may engage in such futures
transactions as an adjunct to their securities activities.
There are several risks associated with the use of futures and futures
options for hedging purposes. There can be no guarantee that there will be a
correlation between price movements in the hedging vehicle and in the
portfolio securities being hedged. An incorrect correlation could result in a
loss on both the hedged securities in a Fund and the hedging vehicle, so that
the portfolio return might have been greater had hedging not been attempted.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there
is no assurance that an active secondary market will develop or continue to
exist. Lack of a liquid market for any reason may prevent a Fund from
liquidating an unfavorable position, and the Fund would remain obligated to
meet margin requirements until the position is closed.
The Funds will only enter into futures contracts or futures options which
are standardized and traded on a U.S. or foreign exchange or board of trade,
or similar entity, or quoted on an automated quotation system. Each Fund will
use financial futures contracts and related options only for "bona fide
hedging" purposes, as such 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.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT 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 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
January 17, 1997 Prospectus
35
<PAGE>
investments of the Funds, the ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Portfolio Manager
to forecast interest rates and other economic factors correctly.
Mortgage Pass-Through Securities are securities representing interests in
"pools" of mortgage loans secured by residential or commercial real property
in which payments of both interest and principal on the securities are
generally made monthly, in effect "passing through" monthly payments made by
the individual borrowers on the mortgage loans which underlie the securities
(net of fees paid to the issuer or guarantor of the securities). Early
repayment of principal on some mortgage-related securities (arising from
prepayments of principal due to sale of the underlying property, refinancing,
or foreclosure, net of fees and costs which may be incurred) may expose the
Fund to a lower rate of return upon reinvestment of principal. Also, if a
security subject to prepayment has been purchased at a premium, the value of
the premium would be lost in the event of prepayment. Like other fixed income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates are declining, the value
of mortgage-related securities with prepayment features may not increase as
much as other fixed income securities. 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
36
PIMCO Funds: Multi-Manager Series
<PAGE>
property to attract and retain tenants. Commercial mortgage-backed securities
may be less liquid and exhibit greater price volatility than other types of
mortgage-related 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 interest-only,
or "IO" class), while the other class will receive all of the principal (the
principal-only, or "PO" class). The yield to maturity on an IO class is
extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on the Fund's yield to maturity
from these securities. The Fund has adopted a policy under which it will not
invest more than 5% of its net assets in any combination of IO, PO, or inverse
floater securities. For a discussion of the characteristics of some of these
instruments, see the Statement of Additional Information.
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.
INVESTMENT IN INVESTMENT COMPANIES
The Emerging Markets, International Developed, and International Funds may
invest in securities of other investment companies, such as closed-end
management investment companies, or in pooled accounts or other investment
vehicles
January 17, 1997 Prospectus
37
<PAGE>
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, if unrated, determined to be of comparable quality by the
Adviser or a 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 unrated, determined to be of comparable quality by
the Adviser or a 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 unrated, determined to be of
comparable quality by the Adviser or a Portfolio Manager; and
(5) repurchase agreements with domestic commercial banks or registered
broker-dealers.
ILLIQUID SECURITIES
Each of the Capital Appreciation, Mid Cap Growth, Small Cap Growth, Equity
Income, Value, Small Cap Value, 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 the 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). Each of the Emerging Markets, International Developed,
International, Micro Cap Growth, Renaissance, Core Equity, Mid Cap Equity,
Innovation, and Structured Emerging Markets 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.
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PIMCO Funds: Multi-Manager Series
<PAGE>
The term "illiquid securities" for this purpose means securities that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which a Fund has valued the securities. Illiquid
securities are considered to include, among other things, written over-the-
counter options, securities or other liquid assets being used as cover for
such options, repurchase agreements with maturities in excess of seven days,
certain loan participation interests, fixed time deposits which are not
subject to prepayment or provide for withdrawal penalties upon prepayment
(other than overnight deposits), securities that are subject to legal or
contractual restrictions on resale (such as privately placed debt securities),
and other securities whose disposition is restricted under the federal
securities laws (other than securities issued pursuant to Rule 144A under the
Securities Act of 1933 and certain commercial paper that the Adviser or a
Portfolio Manager has determined to be liquid under procedures approved by the
Board of Trustees).
"FUNDAMENTAL" POLICIES
The investment objective of each of the International, Renaissance, and
Innovation 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. Information about the Trustees and the Trust's executive
officers may be found in the Statement of Additional Information under the
heading "Management of the Trust."
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 as of November 30, 1996 were
approximately $111.2 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 an 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, Suite
100, 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.
January 17, 1997 Prospectus
39
<PAGE>
PORTFOLIO MANAGERS
Pursuant to portfolio management agreements, PIMCO Advisors employs
Portfolio Managers for all of the Funds. Each Portfolio Manager is an
affiliate of PIMCO Advisors. PIMCO Advisors compensates the 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.
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 (a
subsidiary of Pacific Mutual Life Insurance Company), 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 its 25% interest in four annual installments of 10%, 5%,
5%, and 5%, respectively, beginning December 31, 1998. Blairlogie Capital
Management Ltd., the predecessor investment adviser to Blairlogie, commenced
operations in 1992. Accounts managed by Blairlogie had combined assets as of
November 30, 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 the 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, and 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.
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
November 30, 1996 of approximately $3.3 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, the Chief Executive
Officer, and a founding partner of Cadence, and has 23 years' investment
management experience. He has been the driving force in developing the firm's
growth-oriented stock screening and selection process and has been with
Cadence (or its predecessor) since its inception. Mr. Breed graduated from the
University of Massachusetts and received his MBA from the Wharton School of
Business. He is a Chartered Financial Analyst. Mr. Bannick is a Managing
Director and
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PIMCO Funds: Multi-Manager Series
<PAGE>
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 the predecessor of
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 the predecessor of 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 the predecessor of 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, and the Innovation 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. Accounts managed by Columbus Circle had combined assets as
of November 30, 1996 of approximately $14.6 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 Trust has been informed that 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.
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 November 30, 1996 of approximately $1.8 billion.
NFJ's address is 2121 San Jacinto, Suite 1840, 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
January 17, 1997 Prospectus
41
<PAGE>
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.
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 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 $88.8
billion of assets under management as of November 30, 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 advisor 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 a
Managing Director of Pacific Investment Management and has been associated
with Pacific Investment Management or its predecessor for 25 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 November 30, 1996 of
approximately $2.0 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 advisor 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 or
its predecessor 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.
PIMCO ADVISORS determines the allocation of the Balanced Fund's assets among
various asset classes and manages directly 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 advisor does not involve supervision by the CFTC over
42
PIMCO Funds: Multi-Manager Series
<PAGE>
commodities trading. The portfolio management agreements are not exclusive,
and Blairlogie, Cadence, Columbus Circle, NFJ, Parametric, and Pacific
Investment Management may provide, and currently are providing, investment
management services to other clients, including other investment companies.
FUND ADMINISTRATOR
PIMCO Advisors also 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, and preparation of
reports to the Funds' shareholders and regulatory filings. The Administrator
has retained Pacific Investment Management to provide such services as sub-
administrator. The Administrator and/or the sub-administrator may also retain
other affiliates to provide certain of these services. In addition, the
Administrator, at its own expense, arranges for the provision of legal, audit,
custody, transfer agency (including sub-transfer agency and other
administrative services) 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 Funds (and not the Administrator) are 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, any Portfolio
Manager, 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 and/or distribution fees
payable with respect to the Administrative Class shares, and may include
certain other expenses as permitted by the Trust's Multiple Class Plan adopted
pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the "1940
Act"), subject to review and approval by the Trustees.
ADVISORY AND ADMINISTRATIVE FEES
The Funds feature fixed advisory and administrative fees. For providing or
arranging for the provision of investment advisory services to the Funds as
described above, 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>
Capital Appreciation, Mid Cap Growth, Equity Income, Value,
Enhanced Equity, Structured Emerging Markets, and Balanced Funds.. .45%
International Fund................................................. .55%
Core Equity Fund................................................... .57%
International Developed, Renaissance, and Small Cap Value Funds.... .60%
Mid Cap Equity Fund................................................ .63%
Innovation Fund.................................................... .65%
Emerging Markets Fund.............................................. .85%
Small Cap Growth Fund.............................................. 1.00%
Micro Cap Growth Fund.............................................. 1.25%
</TABLE>
January 17, 1997 Prospectus
43
<PAGE>
For providing or procuring administrative services for 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 Institutional Class and Administrative Class shares as
follows:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEE RATE
---- --------------
<S> <C>
Emerging Markets, International Developed, International, and
Structured Emerging Markets Funds........................... .50%
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 International
Fund, Renaissance Fund, and Innovation 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: Blairlogie--.40% for the International Fund, .50% for the
International Developed Fund, and .75% for the Emerging Markets 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--.38% for the Renaissance Fund, .38%
for the Innovation Fund, .47% for the Core Equity Fund, and .53% for the Mid
Cap Equity 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; Pacific Investment
Management--.25% for the Fixed Income Securities Segment of the Balanced Fund;
and Parametric--.35% for the Enhanced Equity Fund and .35% for the Structured
Emerging Markets Fund.
SERVICE AND DISTRIBUTION FEES
The Trust has adopted an Administrative Services Plan and a Distribution
Plan (the "Plans") with respect to the Administrative Class shares of each
Fund except for the Emerging Markets, Capital Appreciation, and Small Cap
Growth Funds, for which the Trust has adopted only an Administrative Services
Plan. 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 .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.
Total reimbursements under the Plans may be paid in an amount up to .25% on an
annual basis of the average daily net assets attributable to the
Administrative Class shares of each Fund. 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 either 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. Each Plan has been adopted in accordance with the requirements
of Rule 12b-1 under the 1940 Act and will be administered in accordance with
the provisions of that rule, except that shareholders will not have the voting
rights set forth in Rule 12b-1 with respect to the Administrative Services
Plan that they will have with respect to the Distribution Plan. For more
complete disclosure regarding the Plans and their terms, see the Statement of
Additional Information.
44
PIMCO Funds: Multi-Manager Series
<PAGE>
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
Fund shares by their customers and may charge their customers transaction or
other account fees on the purchase and redemption of Fund 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"), a 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 and Mid Cap Equity Funds, each Fund may offer its
shares in up to 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 high net worth
individuals (Institutional Class shares may also be offered through certain
financial intermediaries that charge their customers transaction or other fees
with respect to their customers' investments in the Funds). Shares of the
Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers, and other intermediaries, and each Fund pays
service and/or distribution fees to such entities for services they provide to
shareholders of that class.
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. Shares 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.
Pension and profit-sharing plans, employee benefit trusts and employee
benefit plan alliances and "wrap account" programs established with broker-
dealers or financial intermediaries may purchase shares of either class only
if the plan or program for which the shares are being acquired will maintain
an omnibus or pooled account for each Fund and will not require a Fund to pay
any type of administrative payment per participant account to any third party.
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.
January 17, 1997 Prospectus
45
<PAGE>
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.
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. However,
orders received by certain retirement plans and other financial intermediaries
by the close of business and communicated to the Transfer Agent prior to 9:00
a.m., Eastern time, on the following business day will be effected at the net
asset value determined on the prior business day. The Trust is "open for
business" on each day the New York Stock Exchange (the "Exchange") is open for
trading (a "Business Day"), 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
Business Days.
ADDITIONAL INVESTMENTS
Additional investments may be made at any time at the relevant net asset
value for that class by calling the Trust and wiring federal funds to the
Transfer Agent as outlined above.
OTHER PURCHASE INFORMATION
Purchases of a Fund's 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.
46
PIMCO Funds: Multi-Manager Series
<PAGE>
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 million, 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 million. 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 International Fund, Small Cap Growth Fund,
and Structured Emerging Markets 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 an order
with the plan administrator and the time the order is forwarded to the
Transfer Agent for execution.
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.
January 17, 1997 Prospectus
47
<PAGE>
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 million or more may be initiated by telephone, but must be confirmed in
writing by an authorized party prior to processing.
In electing a telephone redemption, the investor authorizes 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 within three business days after the redemption request, but may take up
to seven business days. Redemption proceeds will be sent by wire only to the
bank name designated on the Client Registration Application. The Trust may
suspend the right of redemption or postpone the payment date at times when the
Exchange is closed, or during certain other periods as permitted under the
federal securities laws.
For shareholder protection, a request to change information contained in an
account registration (for example, a request to change the bank designated to
receive wire redemption proceeds) must be received in writing, signed by the
minimum number of persons designated on the Client Registration Application
that are required to effect a redemption, and accompanied by a signature
guarantee from any eligible guarantor institution, as determined in accordance
with the Trust's procedures. Shareholders should inquire as to whether a
particular institution is an eligible guarantor institution.
48
PIMCO Funds: Multi-Manager Series
<PAGE>
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 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 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 series of 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 for tax purposes as a redemption followed by a
purchase and may result in a capital gain or loss, and special rules may apply
in computing tax basis when determining gain or loss. See "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 a Fund's
accounts with brokers or dealers selected by it in its discretion. In
effecting purchases and sales of portfolio securities for the accounts of the
Funds, the Portfolio Managers 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
January 17, 1997 Prospectus
49
<PAGE>
by the broker effecting the transaction. The Portfolio Managers also may
consider sales of shares of the Trust as a factor in the selection of broker-
dealers to execute portfolio transactions for the Trust.
The Portfolio Managers manage the Funds without regard generally to
restrictions on portfolio turnover, except those imposed on its ability to
engage in short-term trading by provisions of the federal tax laws. The use of
futures contracts and other derivative instruments with relatively short
maturities may tend to exaggerate the portfolio turnover rate for some of the
Funds. The use of futures contracts may involve the payment of commissions to
futures commission merchants. The higher the rate of portfolio turnover of a
Fund, the higher the transaction costs borne by the Fund generally will be.
The portfolio turnover rate for each Fund for which financial highlights are
provided in this Prospectus is set forth under "Financial Highlights."
Portfolio turnover for the remaining Funds is incorporated by reference in the
Statement of Additional Information.
Some securities considered for investment by the Funds may also be
appropriate for other clients served by the Portfolio Managers. If a purchase
or sale of securities consistent with the investment policies of a Fund and
one or more of these clients served by a 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 will be determined once on each 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 generally are valued on the basis of quotations obtained from
brokers and dealers or pricing services, which take into account appropriate
factors such as institutional-sized trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data. Certain fixed income securities for which daily market
quotations are not readily available may be valued, pursuant to guidelines
established by the Board of Trustees, with reference to fixed income
securities whose prices are more readily obtainable and whose durations are
comparable to the securities being valued. 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.
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 Emerging Markets,
International Developed, International, and Structured Emerging Markets 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.
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 Adviser or a Portfolio Manager and approved
in good faith by the Board of Trustees.
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PIMCO Funds: Multi-Manager Series
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Each Fund's liabilities are allocated among its classes. The total of such
liabilities allocated to a class plus that class's distribution and/or
servicing fees and any other expenses specially allocated to that class are
then deducted from the class's 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 class's "net asset value" per share.
Under certain circumstances, the per share net asset value of the
Administrative Class shares of the Funds 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 service and/or distribution fees 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.
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 and paid
quarterly to shareholders of record by the Renaissance, Equity Income, Value,
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
other Funds. Any net realized capital gains from the sale of portfolio
securities will be distributed no less frequently than once annually. 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 and/or distribution 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 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. 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.
Current federal tax law requires the holder of a U.S. 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
January 17, 1997 Prospectus
51
<PAGE>
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.
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,
seventeen 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 (the "Declaration of Trust") of
the 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 also 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 such disclaimer is inoperative or the Fund
of which he or she is or was a shareholder is unable to meet its obligations,
and thus should be considered remote.
MULTIPLE CLASSES OF SHARES
In addition to Institutional Class shares and Administrative Class shares,
certain Funds also offer Class A shares, Class B shares, and Class C shares
through a separate prospectus. These other classes of the Funds have different
sales
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PIMCO Funds: Multi-Manager Series
<PAGE>
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
Institutional Class shares and Administrative Class shares of the Funds.
Institutional and Administrative Class shares of each Fund represent
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/or 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. The Administrative Class shares
have 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.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As of December 17, 1996, the following were
shareholders of record of at least 25% of the outstanding voting securities of
the indicated Funds: Pacific Mutual Life Insurance Company (Newport Beach,
California) with respect to the Diversified Low P/E Fund (the predecessor of
the Value Fund) and the Mid Cap Equity Fund; the Jewish Federation of
Metropolitan Chicago (Chicago, Illinois) with respect to the Small Cap Growth
Fund; First Interstate Bank of California (Calabasas, California) with respect
to the Enhanced Equity Fund; Melville Corporation (Rye, New York) with respect
to the Core Equity Fund; and Charles Schwab & Co., Inc. (San Francisco,
California) with respect to the Emerging Markets Fund. To the extent such
shareholders are also the beneficial owners of such securities, they may be
deemed to control (as that term is defined in the 1940 Act) the relevant Fund.
As used in this Prospectus, the phrase "vote of a majority of the outstanding
shares" of a Fund (or the Trust) means the vote of the lesser of: (1) 67% of
the shares of the Fund (or the Trust) present at a meeting, if the holders of
more than 50% of the outstanding shares are present in person or by proxy; or
(2) more than 50% of the outstanding shares of the Fund (or the Trust).
PERFORMANCE INFORMATION
From time to time the Trust may make available certain information about the
performance of the Institutional Class and Administrative Class shares of some
or all of the Funds. Information about a Fund's performance is based on
January 17, 1997 Prospectus
53
<PAGE>
that Fund's (or its predecessor's) record to a recent date and is not intended
to indicate future performance. Performance information is computed separately
for each Fund's Institutional Class and Administrative Class shares in
accordance with the formulas described below. Because Administrative Class
shares bear the expense of service and/or distribution fees, it is expected
that, under normal circumstances, the level of performance of a Fund's
Administrative Class shares will be lower than that of the Fund's
Institutional Class shares.
The total return of Institutional Class and Administrative Class shares of
all Funds may be included in advertisements or other written material. When a
Fund's total return is advertised with respect to its Institutional Class and
Administrative Class shares, it will be calculated for the past year, the past
five years, and the past ten years (or if the Fund has been offered for a
period shorter than one, five or ten years, that period will be substituted)
since the establishment of the Fund or its predecessor series of PIMCO
Advisors Funds, as more fully described in the Statement of Additional
Information. Consistent with SEC rules and informal guidance, for periods
prior to the initial offering date of a particular class, total return
presentations for the class may be based on the historical performance of an
older class of the Fund (the older class to be used in each case is set forth
in the Statement of Additional Information) restated to reflect current sales
charges or redemption fees (if any) of the newer class, but not reflecting
different operating expenses (such as service or distribution fees and
administrative fee charges) associated with the newer class. All other things
being equal, higher expenses of an older class would have adversely affected
(i.e., reduced) total return for a newer class (i.e., if the newer class had
been issued since the inception of the Fund) by the amount of such higher
expenses, compounded over the relevant period. Total return for each class is
measured by comparing the value of an investment in the Fund at the beginning
of the relevant period to the redemption value of the investment in the Fund
at the end of the period (assuming immediate reinvestment of any dividends or
capital gains distributions at net asset value). Total return may be
advertised using alternative methods that reflect all elements of return, but
that may be adjusted to reflect the cumulative impact of alternative fee and
expense structures, such as the currently effective advisory and
administrative fees for the Funds.
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.
Current distribution information may also be provided to the Trust's
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.
The Adviser and each Portfolio Manager may also report to shareholders or to
the public in advertisements concerning its performance as adviser to clients
other than the Funds, and on its comparative performance or standing 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 Fund's investment
objectives and policies, characteristics
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PIMCO Funds: Multi-Manager Series
<PAGE>
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).
January 17, 1997 Prospectus
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[LOGO OF PIMCO APPEARS HERE]
PIMCO FUNDS
- -----------
Multi-Manager Series
INVESTMENT ADVISER AND ADMINISTRATOR
PIMCO Advisors L.P.
800 Newport Center Drive
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
PROSPECTUS
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January 17, 1997
