<PAGE>
PIMCO Funds Annual Report
[Photo appears here]
June 30, 1998
Multi-Manager Series:
Class D Shares
Equity Income
Value
Renaissance
Capital Appreciation
Mid-Cap Growth
Innovation
Inside this report:
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Page 2 Letter From PIMCO Funds' President
Where We've Been and What's Ahead
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Page 3 Market Review
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Page 4 Today's Investor
Building a Foundation for Your Portfolio
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Page 6 Fund Spotlight
PIMCO Tax-Efficient Equity Fund
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Page 6 Investor Services
PIMCO Funds Is on the Web
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Page 7 Manager Spotlight
PIMCO Innovation Fund: Tony Rizza
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Page 8 In The News
Recent News on PIMCO Funds
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Page 9 The PIMCO Funds Family
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Page 10 PIMCO Funds Financial Information
P I M C O
---------------
F U N D S
<PAGE>
President's
Letter
Dear Fellow Shareholder:
The financial markets continued their ascent during the last year, the magnitude
of which surprised many investors. For the one-year period ended June 30, 1998,
the stock market, as measured by the Standard & Poor's 500 Index
of stocks, rose 30.2%. The overall bond market, as measured by the Lehman
Aggregate Bond Index, posted a 10.5% return.
A Rising Tide Investors have enjoyed a continuation of the bull market in
stocks that began nearly eight years ago. Since October 1990, the stock market
has more than tripled in value, with only one 10% correction. That setback
occurred last October, as the financial upheaval in Asia began to unfold.
However, individual investors viewed the market decline as a buying opportunity
and stock prices rebounded sharply during the first quarter of 1998. To a great
extent, stocks experienced a "cooling off" period during the second quarter, as
performance was mixed.
Turning to the bond market, the Asian crisis has been largely beneficial for
U.S. bonds. With the uncertainty surrounding the potential repercussions in
Asia, many domestic and foreign investors flocked to the relative security of
high quality U.S. fixed income securities. As a result, over the last year the
yield on 30-year Treasuries fell from 6.6% to 5.6%. This led to strong gains in
the prices of bonds, nearly across-the-board.
Looking Ahead As we head into the second half of the year, there are few signs
of a major reversal of fortune in our financial markets. However, it is unlikely
that the pace of the gains we have experienced in the last several years will
continue. While inflation is low and economic growth, while slowing, is still
running at a healthy pace, the lingering financial crisis in Asia may be a drag
on corporate profits going forward.
On the next pages you will find a more complete review of the stock and bond
markets, followed by a number of investment strategies to consider with your
financial advisor given today's market conditions. And on page 6 we provide
details our newest addition to the PIMCO Funds family--PIMCO Tax-Efficient
Equity Fund.
We appreciate the trust you have placed in us, and we will work hard to help you
meet your financial objectives.
Sincerely,
/s/ Stephen J. Treadway
Stephen J. Treadway
President
July 21, 1998
2
<PAGE>
Market
Review
The Stock Market
The Bull Market Continues
Stocks rose sharply during the last
year, due in large part to a rebound
during the first quarter of the year.
[GRAPH APPEARS HERE]
S&P 500 INDEX
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DATE PRICE DATE PRICE DATE PRICE DATE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/26 1133.20 3/27 1095.44 12/26 936.46 9/26 945.22
6/19 1100.65 3/20 1099.16 12/19 946.78 9/19 950.51
6/12 1098.84 3/13 1068.61 12/12 953.39 9/12 923.91
6/ 5 1113.86 3/ 6 1055.69 12/ 5 983.79 9/ 5 929.05
5/29 1090.82 2/27 1049.34 11/28 955.40 8/29 899.47
5/22 1110.47 2/20 1034.21 11/21 963.09 8/22 923.54
5/15 1108.73 2/13 1020.09 11/14 928.35 8/15 900.81
5/ 8 1108.14 2/ 6 1012.46 11/ 7 927.51 8/ 8 933.54
5/ 1 1121.00 8/ 1 947.14
4/24 1107.90 1/30 980.28 10/31 914.62 7/25 938.79
4/17 1122.72 1/23 957.59 10/24 941.64 7/18 915.30
4/10 1110.67 1/16 961.51 10/17 944.16 7/11 916.68
4/ 3 1122.70 1/ 9 927.69 10/10 966.98 7/ 4 916.92
1/ 2 975.04 10/ 3 965.03
</TABLE>
While the overall performance of the stock market is extremely positive, the
shorter-term performance of stocks seems to depend on which calendar quarter
you're looking at.
In the fourth quarter of 1997 stocks fell sharply from their record levels, in
response to the mounting Asian currency crisis. However, during the first
quarter of 1998, fears regarding the Asian situation were put on the back
burner, and the stock market increased 14%.
The second quarter of 1998 was mediocre at best. While large-cap stocks on the
whole posted gains, the best returns were mostly limited to the largest 50
companies, known as the "Nifty 50." On the other hand, many "smaller" large-
caps, mid-cap and small-cap stocks experienced losses during the quarter.
The superior returns of the largest-cap stocks has been somewhat of a
surprise. Since most of the largest-cap firms are multi-national in nature, one
might expect them to be most susceptible to the weakened Asian economies.
Despite this, investors seemed comfortable with these firms' large size and
market presence.
Another important trend worth noting has been the strong results from
technology stocks. This was especially true among Internet firms that have been
benefiting from increased Web traffic and rising advertising revenues.
Turning to the international markets, many European countries have posted
extremely strong returns. However, the dramatic bear market taking place in Asia
has spread to many other emerging markets, including South America.
Looking ahead, we remain cautiously optimistic about the prospects for the
stock market. Yet, we caution investors to trim their expectations, especially
in light of the very strong performance from stocks over the last several years.
- -------------------------------------------------------------------------------
The Bond Market
Strong Returns Abound
Bond prices have risen in the last
year, as interest rates have fallen
[GRAPH APPEARS HERE]
30-Year Treasury Rates
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DATE PRICE DATE PRICE DATE PRICE DATE PRICE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/26 5.632 3/27 5.958 12/26 5.899 9/26 6.367
6/19 5.669 3/20 5.885 12/19 5.922 9/19 6.378
6/12 5.662 3/13 5.893 12/12 5.925 9/12 6.587
6/ 5 5.787 3/ 6 6.018 12/ 5 6.083 9/ 5 6.641
5/29 5.802 2/27 5.923 11/28 6.054 8/29 6.611
5/22 5.900 2/20 5.871 11/21 6.033 8/22 6.648
5/15 5.972 2/13 5.849 11/14 6.113 8/15 6.546
5/ 8 5.977 2/ 6 5.920 11/ 7 6.155 8/ 8 6.635
5/ 1 5.933 8/ 1 6.453
4/24 5.945 1/30 5.800 10/31 6.153 7/25 6.453
4/17 5.876 1/23 5.970 10/24 6.273 7/18 6.530
4/10 5.881 1/16 5.809 10/17 6.439 7/11 6.529
4/ 3 5.794 1/ 9 5.728 10/10 6.430 7/ 4 6.627
1/ 2 5.838 10/ 3 6.294
</TABLE>
Bonds have also been enjoying a continuation of their bull market. During the
last year, most sectors of the bond market posted double-digit gains.
There were several "sub-plots" that contributed to the market's solid
performance. These included the strong U.S. dollar, low inflation, the flight to
high quality U.S. debt, and the renewed popularity of bond funds, as equity
investors became cautious of an eventual market correction.
But perhaps the most important factor behind the bond market's rise was the
ongoing Asian financial crisis. As our bond market expert Bill Gross has said,
"It's almost as if Asia's loss has been our gain." When the crisis first took
shape late in 1997, U.S. interest rates began to fall, as investors flocked to
safer, more liquid fixed income securities. And during the second quarter of
this year, when it was apparent that the economic woes from Asia were not going
to simply disappear, bond prices again rose. In fact, during the second quarter
the bond market on the whole outperformed many sectors of the stock market.
As we look toward the rest of the year, the prospects for the U.S. economy
remain bright. And this could hold true for many European countries as well.
While our growth rate of exports is beginning to slow down, our imports are much
cheaper now than before, and the benefits of falling oil prices and declining
interest rates have benefited many investors.
There are certainly some threats. Six to twelve months of a less than
"exuberant" stock market may slow consumption for at least part of the next few
years. And, our skyrocketing dollar could lead to an unhealthy trade deficit.
But all told, with inflation under control in the 1-2% range, it appears we
have the ingredients for a continued bull market in bonds. Long-term Treasury
yields over the next few years could range between 4 1/2 and 6 1/2% with
the 5% "handle" containing most of the movement.
3
<PAGE>
Today's
Investor
Building a Foundation for Your Portfolio
Start with a core stock and core bond fund
[PHOTO APPEARS HERE]
Whether you're an investment novice or a seasoned professional, the recent
gyrations in the financial markets may be unsettling. If this volatility has
caused you to wonder whether your investments can withstand the current
climate, you and your financial advisor should take a fresh look at your entire
portfolio. A key first step is to make sure you have a solid foundation of both
stock and bond fund investments.
A Variety of Investment Opportunities
Determining exactly which stock and bond funds to select as core investments is
not as simple as it may seem. Within the stock and bond security classes are any
number of sub-categories, each with its own potential risk and reward profile.
These sub-categories provide you with a wide variety of investment
opportunities.
The Bond Market
The bond market can be broadly dissected into four major sectors: government,
mortgage, corporate, and foreign. And securities within each sector are
typically available with varying maturities. Bonds are further divided according
to their credit quality--either investment grade or high yield.
Different bonds perform better in different economic conditions. And bonds that
invest in foreign countries often perform out of step with U.S. bonds.
Top-Performing Bond Sectors by Year
No single sector of the bond market consistently outperforms.
Government High Yield Foreign Short-Term
1997 9.6% 12.3% 11.1% 6.7%
1996 2.8% 11.1% 11.8% 5.1%
1995 18.3% 19.9% 17.9% 11.0%
1994 -3.4% -1.2% -4.0% 0.6%
1993 10.7% 17.2% 13.4% 5.6%
1992 7.2% 18.2% 8.0% 6.4%
1991 15.3% 34.5% 11.1% 11.8%
1990 8.7% -4.4% 3.3% 9.7%
Past performance is no guarantee of future results. "Government Bonds" based on
the return of the Lehman Government Bond Index. "Short-Term Bonds" based on the
return of the Lehman 1-3 Year Government/Corporate Index. "Foreign Bonds" based
on the return of the Salomon Brothers Currency Hedged Non-U.S. Bond Index. "High
Yield Bonds" based on the return of the Merrill Lynch High Yield Index. It is
not possible to invest directly in an unmanaged index. Source: Lipper Analytical
Services, Inc. Performance is not representative of any PIMCO Fund.
Building a Foundation With Bonds
An actively managed mutual fund that primarily invests in intermediate-term,
investment grade bonds is typically considered the foundation of the fixed
income portion of a portfolio.
However, the fund should also have the flexibility to invest in all sectors,
maturities and quality levels of the bond market. By adapting to changing
economic and market conditions, this type of fund can rotate sectors, lengthen
or shorten maturities, and adjust quality to maximize investment opportunities.
How Bonds of Various Maturities React
To Changing Interest Rates
When interest rates fall, bond prices rise, and vice versa. The longer a bond's
maturity (date when it comes due), the more volatile its price will be when
interest rates rise or fall.
[CHART APPEARS HERE]
Average Annual Changes in Price
<TABLE>
<CAPTION>
Short-Term Intermediate-Term Long-Term
Govt. Bond Govt. Bond Govt. Bond
<S> <C> <C> <C>
Declining Interest Rates 1.4% 3.7% 6.8%
Rising Interest Rates -0.4% -2.6% -5.3%
</TABLE>
Data from 1926-1996. Past performance is no guarantee of future results.
Source: Ibbotson Associates.
Build Around the Bond Core
After selecting a core bond fund, you may want to supplement your fixed income
portfolio with more sector-specific holdings, such as a high yield or foreign
bond fund. That way, you can tailor your investments to best achieve your
financial goals, and can further diversify your overall portfolio.
Building on the Bond Foundation
[ARTWORK APPEARS HERE]
There is a variety of fixed income investment choices that can supplement a core
bond fund.
4
<PAGE>
The Stock Market
Within the stock market, you have the option of investing in small-, medium- or
large-sized companies. Beyond the different size categories, you could invest in
domestic or international stocks, stocks issued by companies in relatively
stable industries (such as utilities), or stocks of companies in high growth and
high volatility industries (such as technology). As with bonds, returns in
stocks vary cyclically based on market conditions.
The Stock Foundation
Stocks of large-capitalization companies, or large-caps, are typically
considered the foundation of the equity portion of a portfolio. Large-cap
companies are generally household names, and they also make up the greatest
share of the overall U.S. equity market. As such, they are an important
cornerstone of the stock portion of your investment portfolio.
Large-Caps Constitute the Bulk of the Stock Market
While the total number of large-cap stocks is much less than the small- and
mid-cap stock universe, large-caps represent 75% of the capitalization of the
overall U.S. equity market.
Small-Cap 7%
[PIE CHART APPEARS HERE] Mid-Cap 18%
Large-Cap 75%
Source: Russell Data Services.
Large-cap stocks are also a more conservative investment than small- and mid-cap
stocks, and their history of significant appreciation makes them competitive
with riskier small- and mid-caps.
Potential Risk and Reward by Company Size
Large-cap stocks have historically been less risky than small- and mid-cap
stocks, while providing solid returns (12/31/79-6/30/98).
<TABLE>
<CAPTION>
Potential Risk and Reward
Return Risk
- --------------------------------------------------------------------------------
N Periods Geometric Arithmetic Standard T Statistic
Mean (%) Mean (%) Deviation
(%)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large S&P 500 222 17.667 18.918 17.211 5.136
- --------------------------------------------------------------------------------
Mid Russell Mid-Cap 222 16.998 18.489 18.695 4.618
- --------------------------------------------------------------------------------
Small Russell 2000 222 14.432 16.419 21.226 3.591
- --------------------------------------------------------------------------------
</TABLE>
Past performance is no guarantee of future results. "Large-Cap Stocks"
represented by the S&P 500 Index, an unmanaged index of common stocks. "Mid-Cap
Stocks" represented by Russell Mid-Cap Index. "Small-Cap Stocks" represented by
Russell 2000 Index. It is not possible to invest in an unmanaged index.
Volatility is measured by standard deviation of annual returns. Source: Ibbotson
Associates. Performance is not representative of any PIMCO Fund.
A side benefit of investing in large-cap U.S. stocks is that many of these
companies generate a significant portion of their sales in foreign countries. A
strong foreign presence can be similar to investing in an international stock
without actually owning one of those securities. For example, Coca-Cola's sales
in foreign countries accounted for 66% of its total sales in 1997.
One of the best ways to access large-caps is through actively managed stock
funds. Along with instant diversification, active management can be an added
benefit. Unlike an index stock fund that seeks to mirror
a given index, such as the S&P 500, an actively managed fund portfolio will be
closely monitored and adjusted to meet changing economic and market conditions.
Supplement the Stock Core
As with the bond portion of your portfolio, once your core stock fund is in
place you may want to supplement your equity investments with other types of
stock funds, such as a small-cap or international. Again, this can help you to
better aim towards your financial goals, and will diversify your overall
portfolio.
Building on the Stock Foundation
[ARTWORK APPEARS HERE]
There is a variety of equity investment choices that can supplement a core stock
fund.
Keeping Your Balance
With the abundance of stock and bond funds to choose from, how do you decide
which ones should anchor your portfolio? Given the fact that the bull market in
stocks is now in its eighth year, it may be tempting to invest the bulk of your
portfolio in the equity market.
But a portfolio that's top-heavy in stocks could feel the brunt of the decline
if the stock market enters a correction. By building the foundation of your
portfolio with stock and bond funds, you can diversify your assets and help
protect them against the risk of loss.
Review Your Portfolio Regularly
After your portfolio is in place, you should regularly review it to determine if
any changes need to be made. Be sure to review all of your individual holdings
to make sure that they remain consistent with your overall investment goals.
5
<PAGE>
Fund
Spotlight
In July, PIMCO Funds introduced a new stock fund, the Tax-Efficient Equity Fund.
Here are some details on this new offering.
PIMCO Tax-Efficient Equity Fund:
Tax-Bite Protection
[PHOTO APPEARS HERE]
With the financial markets posting such strong gains over the past several
years, many people have not spent a lot of time considering how taxes can take
a bite out of their investment returns. But taxes, more than almost any other
factor, can play a dramatic role in a mutual fund's performance.
That's why PIMCO Funds launched its Tax-Efficient Equity Fund. The Fund seeks
to provide investors with the benefits of stock fund investing while lessening
investment taxes. The Fund is managed by PIMCO Advisors' Parametric Portfolio
Associates. Parametric is a specialist in privately managed, tax-efficient
portfolios for taxable endowments, trusts and high net worth individuals.
The firm has developed an innovative approach to tax-sensitive investing,
which it utilizes in managing the Tax-Efficient Equity Fund.
Parametric starts by identifying stocks using its proprietary computer ranking
program. First, it seeks to identify companies that appear able to provide
sustained growth. Then it ranks these organizations based on a number of
factors, such as a company's past growth, current valuations, financial
soundness and volatility. Once the portfolio is in place, Parametric employs
numerous tax management techniques. These include using a low investment
turnover strategy, matching profits to losses when buying and selling
securities, and utilizing a low-dividend bias. To learn more about this Fund
call 1-800-426-0107.
TAX-EFFICIENT EQUITY QUICK FACTS
- --------------------------------
Objective:
Maximum after-tax growth of capital
Primary Portfolio:
A broadly diversified portfolio of large-cap stocks
PIMCO Advisors Manager:
Parametric Portfolio Associates
Proposed Symbol:
D Shares: PXTDX
- -------------------------------------------------------------------------------
Investor
Services
PIMCO Funds Is on the Web
www.pimcofunds.com
Have you had an opportunity to visit the PIMCO Funds Web site?
If not, you're missing the ability to access the most timely and comprehensive
information available on all of the PIMCO Funds. In addition, the site includes
daily market commentary from our fund managers, with insights on the economy and
other factors affecting the financial markets. We can be found on the worldwide
web at www.pimcofunds.com.
Portfolio Manager Information
In the site's Investment Insight section you can learn about each of the PIMCO
Fund's institutional investment managers. You'll find details on a manager's
investment process and strategy, biographies on individual portfolio managers,
and timely updates regarding the managers' views on how the financial markets
are affecting fund performance.
[PHOTO APPEARS HERE]
Fund Information
The Fund Information section of the site contains daily share prices and
profiles on all of the PIMCO Funds. Profiles include performance data (for
certain share classes), a summary of a fund's portfolio, Morningstar ratings and
Lipper rankings, fund statistics and more.
Track Your Portfolio
A new feature of the site is "My Portfolio"--which enables you to track the
market value of your investment portfolio. In addition to your PIMCO Funds
investments, you can track other funds, stocks, futures and options. To access
this unique service simply click on "My Portfolio" on the Home page.
Questions?
We're sure you'll find the PIMCO Funds Web site to be an invaluable tool. If you
have any comments or questions about the site, please call us today at 1-800-
426-0107. Or, use the e-mail feature of the site.
6
<PAGE>
Manager
Spotlight
PIMCO Innovation Fund
Tony Rizza
Thus far in 1998, one of the top PIMCO Funds is the Innovation Fund. The high-
tech Innovation Fund has posted a 32% average annual return since its inception
in 1994--ranking #3 of 33 Lipper Science and Technology Funds. A great deal of
the success of the Fund is due to portfolio manager Tony Rizza. We recently
spoke with him regarding Innovation.
Q: Can you provide us some background on the Fund?
A: Innovation is a more aggressive specialized Fund that seeks capital
appreciation through investment in stocks of technology-related companies.
Q: How is the Fund managed?
[PHOTO APPEARS HERE]
A: We use our proprietary investment strategy based on the theory of "Positive
Momentum & Positive Surprise." Briefly, the theory states that good companies
doing better than generally expected will experience a rise in their stock
price. Therefore, we look for growing companies that are surprising the market
with better-than-expected results.
Q: How is the Innovation Fund currently positioned?
A: The Innovation Fund's portfolio is primarily invested in technology-related
companies. And as of June 30, 1998, 12% of its portfolio was in healthcare
issues.
Q: Are there particular areas of the technology sector that you are focusing
on?
A: Companies with ties to the Internet were some of the best performing stocks
during the first half of 1998. The explosive growth of the Net is practically
unsurpassed. While it took radio 30 years to reach an audience of 50 million,
and television took 13, the Internet reached this critical mass in only four
years. With such fast growth we expect periods of short-term volatility.
However, we attempt to temper this risk by taking profits and trimming some of
our holdings when they become too large for a fund's portfolio.
Q: What are some of your favorite Internet stocks?
A: Innovation Fund currently holds America Online (AOL), which we first
purchased in late 1996. The firm's growth has skyrocketed since it introduced a
flat rate for unlimited monthly use of its service. AOL has worked to address
customer service problems by dramatically upgrading its technological capacity,
and by adding 5,000 new customer service representatives. As home computers
become more affordable and Internet use expands, AOL should be in an outstanding
position to continue growing its business.
We have owned Yahoo in the Innovation Fund's portfolio now for about two years,
and it has been extremely successful. Yahoo, an Internet navigational service,
has a very strong story and position in that marketplace. The firm is benefiting
from an increase in Internet usage, which has allowed the firm to increase
advertising rates. Yahoo's fundamentals are in sharp contrast to some of the
recent Internet additions to the market that do not have earnings to back up
their stock movement.
Q: How does the Innovation Fund differ from other high-tech funds?
A: The Innovation Fund invests in both traditional technology stocks and in
companies in other industries that use innovative technology to advance their
business. This allows us to further diversify the Fund's portfolio and seek a
wide range of exciting investment opportunities.
Q: Can you give us an example of a "non-traditional" holding in the Fund?
A: VISX Inc. is a developer of technologies and systems for laser vision
correction, and a top holding in Innovation. The firm has seen its share price
soar, as demand for laser eye surgery has grown and the profit margins on laser
equipment have increased.
The views of Mr. Rizza are not indicative of any future performance of any PIMCO
Fund. Please refer to page 16 for more complete performance information on the
Innovation Fund.
7
<PAGE>
In The
News
Recent News on PIMCO Funds
The PIMCO Funds and their institutional portfolio managers are regularly
featured in the press. Here is a sample of
some recent articles:
[ ] The press is taking notice of PIMCO Innovation Fund. In June, Business
Week, Barron's and SmartMoney featured the Fund and portfolio manager Tony
Rizza. And in its May review of the Fund, Morningstar said it has "been able to
avoid meltdowns. . .and has so far succeeded at a tricky game."
[ ] Pacific Investment Management Company, PIMCO Advisors' institutional bond
management firm, was featured in the June 6th issue of Morningstar Mutual Funds.
It said the firm has "made strategic use of emerging markets and high yield
issues within an overall strategy of risk control" and it is "in the best
position to wring whatever excess returns are available out of the market." Also
in June, Barron's said the firm is "one of the world's leading money-management
companies, with a terrific long-term record."
[ ] CNBC interviewed Cliff Hoover, a portfolio manager of the PIMCO Equity
Income Fund, on June 10th. Mr. Hoover provided details on his investment
strategy for the Fund.
[ ] In its July review of PIMCO Capital Appreciation Fund, Morningstar said it
"is built for consistency. . .the management team shoots for solid relative
returns, but won't make outlandish bets to get there."
[ ] The insights of Bill Gross, manager of the PIMCO Total Return, Low
Duration, Short-Term and StocksPLUS Funds, continue to be sought out by the
press. Over the last three months his views appeared in The Wall Street Journal,
The Washington Post and Barron's.
Morningstar Inc., an independent organization, provides investors with
information regarding a wide range of investment products. One service offered
by Morningstar is assigning star ratings to the mutual funds it tracks. Funds
begin to be rated once they have a three-year record. The highest Morningstar
rating is five-stars, and the lowest rating is one-star. Following are the PIMCO
Fund family's five- and four-star rated Funds as of June 30, 1998.
<TABLE>
<CAPTION>
PIMCO STOCK FUNDS Overall 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C>
StocksPLUS ***** 5 5 -
Renaissance **** 5 4 3
Capital Appreciation **** 5 4 -
Equity Income **** 4 4 -
Value **** 4 4 -
Mid-Cap Growth **** 4 4 -
<CAPTION>
PIMCO BOND FUNDS Overall 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C>
Total Return ***** 4 4 5
High Yield ***** 5 5 -
Foreign Bond ***** 5 5 -
Low Duration ***** 4 5 5
Short-Term **** 4 5 4
</TABLE>
The chart above is based on June 30, 1998 Morningstar ratings. During the 3-, 5-
and 10-year periods there were 2,545, 1,462 and 707 domestic equity funds and
1,468, 890 and 337 taxable bond funds rated, respectively.
Morningstar proprietory ratings reflect historical risk-adjusted performance and
are subject to monthly changes. Therefore, past ratings are not a guarantee of
future results. Overall ratings are calculated from a fund's 3-, 5- and 10-year
(if applicable) average annual total returns in excess of 90-day Treasury bill
returns with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day Treasury bill returns. With the exception of the
Renaissance Fund, ratings are based on institutional class shares. Class D
shares have not yet been rated by Morningstar. Had Class D shares been in
existence for the same time period as the institutional class shares, they may
have received different ratings due to Class D share's higher expenses.
Renaissance rating is based on Class C shares (its oldest class of shares);
other class ratings may vary. 5-star ratings are limited to the top 10% of funds
in an investment category, the next 22.5% earn 4 stars and the next 35% earn 3
stars. Institutional class shares generally have a $5 million minimum
investment. Under special circumstances, institutional shares may be available.
Call for details.
8
<PAGE>
The PIMCO Funds Family
PIMCO Funds offers unique access to the institutional investment capabilities of
PIMCO Advisors L.P., manager of over $229 billion. PIMCO Advisors owns seven
independent investment firms, each seeking the highest caliber performance in a
specific discipline. Six of these firms currently manage PIMCO Funds. Together,
their superior standard of expertise has attracted many prestigious clients,
including 46 of the 100 largest U.S. corporations.
<TABLE>
<CAPTION>
Stock Funds Objective Primary Portfolio Composition PIMCO Advisors Manager
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strategic Total return S&P 500 Index stock futures backed Pacific Investment
Balanced by a portfolio of short-term, Management Company
fixed income securities, and
intermediate-term investment
grade bonds
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Current income and long-term Stocks of companies with NFJ Investment Group
growth below-average P/Es
and above-average dividends
- -----------------------------------------------------------------------------------------------------------------------------------
Value Long-term growth of capital and Stocks of companies with NFJ Investment Group
income below-average P/Es
- -----------------------------------------------------------------------------------------------------------------------------------
Renaissance Long-term growth of capital and Stocks of companies with below- Columbus Circle Investors
income average valuations
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Efficient Equity Maximum after-tax growth of A broadly diversified portfolio of Parametric Portfolio
capital at least 250 common stocks of Associates
companies with larger
market capitalizations
- -----------------------------------------------------------------------------------------------------------------------------------
StocksPLUS Total return exceeding the S&P S&P 500 Index stock index futures Pacific Investment
500 Index backed by a portfolio of Management Company
short-term, fixed-income securities
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Growth of capital Stocks of larger-capitalized Cadence Capital Management
companies the manager believes
are reasonably priced
- -----------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Growth of capital Stocks of medium-capitalized Cadence Capital Management
companies the manager believes
are reasonably priced
- -----------------------------------------------------------------------------------------------------------------------------------
Innovation Capital appreciation Stocks of technology-related Columbus Circle Investors
companies
<CAPTION>
Bond Funds Objective Primary Portfolio Composition PIMCO Advisors Manager
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Maximum current income Money market securities and Pacific Investment
consistent with short-term bonds Management Company
preservation of capital and (up to 1 year duration)
daily liquidity
- -----------------------------------------------------------------------------------------------------------------------------------
Low Duration Maximum total return Shorter-term, investment grade bonds Pacific Investment
(1-3 year duration) Management Company
- -----------------------------------------------------------------------------------------------------------------------------------
Real Return Bond Maximum real return Inflation-indexed government bonds Pacific Investment
Management Company
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return Maximum total return Intermediate-term, investment grade Pacific Investment
bonds (3-6 year duration) Management Company
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return Maximum total return Mortgage-related securities Pacific Investment
Mortgage (2-6 year duration) Management Company
- -----------------------------------------------------------------------------------------------------------------------------------
High Yield Maximum total return High-yield bonds (2-6 year duration) Pacific Investment
Management Company
- -----------------------------------------------------------------------------------------------------------------------------------
Municipal Bond High current income exempt from Investment grade municipal bonds Pacific Investment
federal income tax (3-10 year duration) Management Company
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Bond Maximum total return Intermediate-term, investment grade Pacific Investment
foreign bonds Management Company
(3-6 year duration)
</TABLE>
9
<PAGE>
PIMCO Funds Financial Information
We are pleased to present an in-depth review of the PIMCO Multi-Manager Series:
Class D shares as of June 30, 1998. In order to help analyze, compare and
contrast the Funds, the report is broken down into a number of sections. Listed
below are a table of contents and descriptions of the various sections.
Pages 11-17 Fund Summaries
A summary of a Fund's performance record and portfolio composition, and a review
from the Fund's investment manager.
Pages 18-24 Schedule of Investments
The schedule of investments includes a listing of securities in the Fund's
portfolio as of June 30, 1998, including the number of shares or principal
amount and value as of that date.
<TABLE>
<CAPTION>
Schedule of
Fund Name Fund Summary Investments
<S> <C> <C>
Equity Income Fund Page 11 Page 18
Value Fund Page 12 Page 19
Renaissance Fund Page 13 Page 20
Capital Appreciation Fund Page 14 Page 21
Mid-Cap Growth Fund Page 15 Page 22
Innovation Fund Page 16 Page 24
</TABLE>
Pages 25 Financial Highlights
This chart shows a per share breakdown of the factors that affect a Fund's NAV
for the current and past reporting periods. In addition to showing total return,
the chart reports distributions, asset size, expense ratios and portfolio
turnover rate.
Pages 26 Statement of Assets and Liabilities
A "balance sheet" of a Fund as of the last day of the fiscal period. It includes
the Fund's NAVs per share by dividing the Fund's net assets (assets minus
liabilities) by the number of shares outstanding.
Pages 27 Statement of Operations
This statement lists a Fund's income, expenses, gains and losses on securities
and currency transactions, and appreciation or depreciation from portfolio
holdings.
Pages 28 Statement of Changes in Net Assets
This reports the increase or decrease in a Fund's net assets during the
reporting period. Changes in net assets are due to a variety of factors,
including investment operations, dividends, distributions and capital share
transactions.
Pages 30-33 Notes to Financial Statements
These contain a description of the significant accounting policies of the funds,
more detailed information about the schedules and tables that appear in the
report.
10
<PAGE>
June 30, 1998
PIMCO Equity Income Fund
OBJECTIVE
Current income as a primary objective and long-term growth of capital.
PORTFOLIO
Primarily common stocks with below-average price-to-earnings ratios and higher
dividend yields relative to their industry groups.
TOTAL NET ASSETS
$202 million
NUMBER OF SECURITIES IN THE PORTFOLIO
47 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
NFJ Investment Group
PERFORMANCE*
Average Annual Total Return For periods ended 6/30/98
Lipper
D Shares S&P 500 Equity Inc.
(INCEP. 3/8/91) Index Fund Avg.
1 YEAR 21.4% 30.2% 20.9%
3 YEARS 24.3% 30.2% 23.1%
5 YEARS 17.7% 23.1% 17.5%
INCEPTION 17.0% -- --
Change in Value
$10,000 invested at the Fund's inception
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
EQUITY INCOME S&P 500
CLASS D INDEX
INCEPTION 3/8/91
========= ============= ===========
<S> <C> <C>
03/31/91 10,000.00 10,000.00
04/30/91 10,065.87 10,024.00
05/31/91 10,632.34 10,457.04
06/30/91 10,259.06 9,978.10
07/31/91 10,829.67 10,443.08
08/31/91 10,987.30 10,690.59
09/30/91 11,044.15 10,512.05
10/31/91 11,118.11 10,652.91
11/30/91 10,670.62 10,223.60
12/31/91 11,607.02 11,393.18
01/31/92 11,891.07 11,181.27
02/29/92 12,189.35 11,326.62
03/31/92 11,987.45 11,105.76
04/30/92 12,199.15 11,432.26
05/31/92 12,216.04 11,488.28
06/30/92 12,222.54 11,317.34
07/31/92 12,765.92 11,779.65
08/31/92 12,391.09 11,538.52
09/30/92 12,492.83 11,674.10
10/31/92 12,504.85 11,714.37
11/30/92 12,878.56 12,113.25
12/31/92 13,265.87 12,261.88
01/31/93 13,329.83 12,364.39
02/28/93 13,602.75 12,532.91
03/31/93 13,909.56 12,797.36
04/30/93 13,632.91 12,488.05
05/31/93 13,732.87 12,822.10
06/30/93 13,972.22 12,859.67
07/31/93 13,945.09 12,807.97
08/31/93 14,432.10 13,293.91
09/30/93 14,415.72 13,191.94
10/31/93 14,527.81 13,464.89
11/30/93 14,377.14 13,336.57
12/31/93 14,331.76 13,497.81
01/31/94 14,803.18 13,956.73
02/28/94 14,478.84 13,577.95
03/31/94 13,896.36 12,985.95
04/30/94 14,000.87 13,152.43
05/31/94 14,082.83 13,368.26
06/30/94 13,880.22 13,040.60
07/31/94 14,332.95 13,468.85
08/31/94 14,915.44 14,021.08
09/30/94 14,635.63 13,678.26
10/31/94 14,804.26 13,985.61
11/30/94 14,005.72 13,476.26
12/31/94 14,045.38 13,676.11
01/31/95 14,498.98 14,030.73
02/28/95 14,966.53 14,577.51
03/31/95 15,393.82 15,007.69
04/30/95 15,788.20 15,449.67
05/31/95 16,364.50 16,067.19
06/30/95 16,412.10 16,440.43
07/31/95 16,981.31 16,985.60
08/31/95 17,215.46 17,028.23
09/30/95 17,662.84 17,746.82
10/31/95 17,588.57 17,683.46
11/30/95 18,187.32 18,459.77
12/31/95 18,672.23 18,815.30
01/31/96 18,945.98 19,455.78
02/29/96 19,192.03 19,636.13
03/31/96 19,569.68 19,825.23
04/30/96 20,056.71 20,117.45
05/31/96 20,374.00 20,636.28
06/30/96 20,411.25 20,714.90
07/31/96 19,466.19 19,799.72
08/31/96 20,127.32 20,217.30
09/30/96 20,814.89 21,355.13
10/31/96 21,280.70 21,944.10
11/30/96 22,877.67 23,602.85
12/31/96 22,592.87 23,135.28
01/31/97 23,084.94 24,580.77
02/28/97 23,743.94 24,773.49
03/31/97 22,942.16 23,755.54
04/30/97 23,771.98 25,173.75
05/31/97 25,253.80 26,706.33
06/30/97 25,958.06 27,902.77
07/31/97 27,600.21 30,123.00
08/31/97 26,967.67 28,435.51
09/30/97 28,641.34 29,992.92
10/31/97 27,750.71 28,991.15
11/30/97 28,892.79 30,333.15
12/31/97 29,566.94 30,853.98
01/31/98 29,673.33 31,195.22
02/28/98 31,410.82 33,445.02
03/31/98 32,883.64 35,157.74
04/30/98 32,393.05 35,511.43
05/31/98 32,197.65 34,900.98
06/30/98 31,509.14 36,318.66
</TABLE>
*These returns represent the blended performance of the Fund's Class D shares
(for the period from 4/8/98) and the prior performance of the Fund's
Institutional Class shares (for the period from 3/8/91), adjusted for Class D
expenses. Past performance is not an indication of future results.
See page 17 for Footnotes, which include additional details.
PORTFOLIO COMPOSITION
Top 10 Holdings % of Total Investments
SUPERVALU Incorporated 4.0%
Large food wholesaler; retail
- --------------------------------------------
PNC Bank Corp. 3.7%
Commercial banking
- --------------------------------------------
RJR Nabisco Holdings, Corp. 3.6%
Tobacco/food products manufacturer
- --------------------------------------------
Ford Motor Co. 2.6%
Automaker
- --------------------------------------------
Atlantic Richfield Co. 2.4%
Integrated oil enterprise
- --------------------------------------------
Pharmacia & Upjohn, Inc. 2.2%
R & D pharmaceutical/health
care products
- --------------------------------------------
American Home Products Corp. 2.2%
Healthcare and agricultural products
- --------------------------------------------
Deluxe Corp. 2.1%
Paper-based/electronic payment
services
- --------------------------------------------
Union Carbide Corp. 2.1%
Chemicals and plastics
- --------------------------------------------
Peoples Energy Co. 2.1%
Gas utility
- --------------------------------------------
Top Ten Total 27.0%
- --------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------
Financial & Business Services 16.2%
- --------------------------------------------
Consumer Discretionary 16.1%
- --------------------------------------------
Utilities 11.9%
- --------------------------------------------
Energy 11.1%
- --------------------------------------------
Materials & Processing 9.5%
Portfolio Composition
- --------------------------------------------
Common Stock 96%
- --------------------------------------------
Cash Equivalents 4%
PORTFOLIO INSIGHTS
For the year ended June 30, 1998, the Equity Income Fund's performance was
solid, returning 21.4%. While this return trailed the S&P 500, it was comparable
to the average return of funds with the same objective (as measured by the
Lipper Equity Income Fund Average).
The Fund found strength throughout much of the year from its consumer-oriented
holdings. A strong domestic economy, including high employment, low interest
rates and low inflation, spurred consumer spending. As a result, many consumer
cyclicals had banner years. Consider for example Ford Motor Co., which was a
particularly strong performer during the period. Like other American automakers,
Ford's truck and sports-utility vehicle sales have greatly increased. But in
addition, Ford's European operations and auto parts division had an increase in
earnings. And at the same time, the company cut $900 million in costs. As a
result, Ford's stock price increased substantially in the first six months of
1998.
Chrysler Corp. was also a standout performer for the Fund this year. Like
Ford, Chrysler benefited from the generally strong economy and made deep cost-
cutting efforts. In addition, luxury German automaker Daimler-Benz AG's
announced a merger with Chrysler in May, which catapulted the company's stock
price.
Also in the consumer cyclicals sector, the Fund saw contributions from
American Home Products Corp., a drug and consumer products company. While this
company had some setbacks during the year, including the withdrawal of two of
its prescription drugs form the market, it also had some very positive news in
the form of an announced merger with Monsanto Co. Industry analysts applauded
this merger and investors must have agreed, as American Home Product's stock
price climbed significantly over the year.
One significant disappointment for the Fund very recently was Capstead
Mortgage Corp. Capstead is a Real Estate Investment Trust (REIT) which took a
large write-off in its portfolio during the second quarter of 1998. As a
result, the company was forced to cut its dividend and watch its stock price
fall sharply in June. This price drop in turn caused the portfolio to lose over
1% for the month and the quarter ended June 30, 1998.
In planning for the coming months the Fund's manager does not presently
anticipate any radical changes to the current positioning. Believing that the
continued over-valuation of large-cap growth stocks will eventually turn
investors back to fundamentals and value holdings, the manager sees the Fund as
a particularly timely investment opportunity.
See page 18 for financial details. 11
<PAGE>
June 30, 1998
PIMCO Value Fund
OBJECTIVE
Long-term growth of capital and current income.
PORTFOLIO
Primarily stocks the manager believes are undervalued and/or offer
above-average dividend yields.
TOTAL NET ASSETS
$239 million
NUMBER OF SECURITIES IN THE PORTFOLIO
51 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
NFJ Investment Group
PERFORMANCE*
Average Annual Total Return For periods ended 6/30/98
Lipper
D Shares S&P 500 GR. & INCOME
(INCEP. 12/30/91) INDEX FUND AVG.
1 YEAR 18.9% 30.2% 22.9%
3 YEARS 23.6% 30.2% 24.7%
5 YEARS 18.6% 23.1% 18.9%
INCEPTION 17.4% -- --
Change in Value
$10,000 invested at the Fund's inception
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
VALUE
CLASS D S&P 500
INCEPTION 12/30/91 INDEX
========= ========== ==========
<S> <C> <C>
12/31/91 10,000.00 10,000.00
01/31/92 10,285.69 9,814.00
02/29/92 10,630.23 9,941.58
03/31/92 10,388.18 9,747.72
04/30/92 10,431.92 10,034.30
05/31/92 10,338.20 10,083.47
06/30/92 10,114.70 9,933.43
07/31/92 10,470.21 10,339.21
08/31/92 10,164.37 10,127.57
09/30/92 10,302.04 10,246.57
10/31/92 10,364.30 10,281.92
11/30/92 10,917.69 10,632.02
12/31/92 11,269.45 10,762.47
01/31/93 11,503.44 10,852.44
02/28/93 11,624.35 11,000.36
03/31/93 11,982.90 11,232.47
04/30/93 11,770.06 10,960.98
05/31/93 11,932.64 11,254.19
06/30/93 12,012.04 11,287.16
07/31/93 11,950.96 11,241.79
08/31/93 12,596.36 11,668.30
09/30/93 12,623.58 11,578.81
10/31/93 13,057.25 11,818.37
11/30/93 12,921.49 11,705.74
12/31/93 13,066.23 11,847.27
01/31/94 13,667.54 12,250.07
02/28/94 13,441.53 11,917.61
03/31/94 12,716.12 11,398.00
04/30/94 12,557.61 11,544.12
05/31/94 12,553.39 11,733.56
06/30/94 12,260.60 11,445.97
07/31/94 12,769.34 11,821.86
08/31/94 13,303.57 12,306.55
09/30/94 12,895.25 12,005.66
10/31/94 13,028.59 12,275.42
11/30/94 12,369.96 11,828.35
12/31/94 12,484.07 12,003.77
01/31/95 12,819.79 12,315.02
02/28/95 13,389.31 12,794.94
03/31/95 13,754.25 13,172.52
04/30/95 14,121.98 13,560.45
05/31/95 14,655.37 14,102.46
06/30/95 14,906.80 14,430.06
07/31/95 15,558.93 14,908.56
08/31/95 15,746.68 14,945.98
09/30/95 16,179.36 15,576.70
10/31/95 16,221.14 15,521.09
11/30/95 16,914.72 16,202.47
12/31/95 17,273.41 16,514.53
01/31/96 17,762.39 17,076.68
02/29/96 18,146.57 17,234.98
03/31/96 18,289.44 17,400.96
04/30/96 18,524.22 17,657.45
05/31/96 18,894.34 18,112.83
06/30/96 18,806.12 18,181.84
07/31/96 17,788.61 17,378.57
08/31/96 18,476.64 17,745.08
09/30/96 18,976.93 18,743.78
10/31/96 19,243.26 19,260.73
11/30/96 20,888.73 20,716.65
12/31/96 20,705.64 20,306.25
01/31/97 21,397.37 21,574.99
02/28/97 21,755.86 21,744.13
03/31/97 20,989.36 20,850.67
04/30/97 21,810.65 22,095.45
05/31/97 23,092.86 23,440.62
06/30/97 23,674.34 24,490.76
07/31/97 25,232.94 26,439.49
08/31/97 24,697.22 24,958.35
09/30/97 26,176.56 26,325.32
10/31/97 24,853.28 25,446.06
11/30/97 25,454.13 26,623.95
12/31/97 26,030.03 27,081.09
01/31/98 26,128.55 27,380.60
02/28/98 27,676.46 29,355.29
03/31/98 28,791.66 30,858.58
04/30/98 28,233.62 31,169.02
05/31/98 28,107.87 30,633.22
06/30/98 28,150.67 31,877.54
</TABLE>
*These returns represent the blended performance of the Fund's retail Class D
shares (for the period from 4/8/98) and the prior performance of the Fund's
Institutional Class shares (for the period from 12/30/91), adjusted for Class D
expenses. Past performance is not an indication of future results. See page 17
for Footnotes, which include additional details.
PORTFOLIO COMPOSITION
Top 10 Holdings % of Total Investments
- ----------------------------------------------------------
DTE Energy Co. 3.2%
Electric and steam utility
- ----------------------------------------------------------
Nicor, Inc. 3.2%
Utility holding/natural gas
- ----------------------------------------------------------
Public Service Enterprises Group, Inc. 3.2%
Electric/gas services
- ----------------------------------------------------------
Southern New England Telecom. 3.0%
Telecommunication services
- ----------------------------------------------------------
Anheuser-Busch Cos., Inc. 3.0%
Largest U.S. brewer:baking
- ----------------------------------------------------------
SUPERVALU, Inc. 3.0%
Large food wholesaler; retail
- ----------------------------------------------------------
Harris Corp. 3.0%
Diversified electronic products/services
- ----------------------------------------------------------
Chase Manhattan Corp. 3.0%
Commercial banking
- ----------------------------------------------------------
Pharmacia & Upjohn, Inc. 2.9%
R & D pharmaceutical/health care products
- ----------------------------------------------------------
Repsol SA SP-ADR 2.9%
Integrated oil company
- ----------------------------------------------------------
Top Ten Total 30.4%
- ----------------------------------------------------------
Top 5 Industries % of Total Investments
- ----------------------------------------------------------
Consumer Discretionary 13.5%
- ----------------------------------------------------------
Financial & Business Services 13.5%
- ----------------------------------------------------------
Consumer Staples 11.7%
- ----------------------------------------------------------
Energy 10.0%
- ----------------------------------------------------------
Technology 9.6%
Portfolio Composition
- ----------------------------------------------------------
Common Stock 97%
- ----------------------------------------------------------
Cash Equivalents 3%
PORTFOLIO INSIGHTS
The Value Fund posted solid results for the year ended June 30, 1998, with
shares returning 18.9%. In general, the market's continued focus on large caps
and more growth-oriented holdings meant it was a difficult year for value
investors.
Much of the Fund's success during this period can be traced to its financial
and consumer cyclical holdings--two sectors that benefited from the growing
domestic economy. Within the financial sector, the Fund saw significant
contributions from banks, such as Chase Manhattan Corp., which was one of the
Fund's largest holdings over the year and also one of its best performers. The
bank reported large trading profits and growing fee income from securities
processing. In addition, Chase had increases in trust revenues, mortgage banking
and bank card fees.
In the consumer cyclicals area, Chrysler Corp. was a standout holding for the
Fund. An announced merger with German luxury automaker Daimler-Benz AG greatly
improved Chrysler's outlook for global growth. Also, profits from the company's
truck sales soared while management implemented a deep cost-cutting program. As
a result, Chrysler's second quarter 1998 earnings were more than double earnings
for the same three-month period in 1997.
One sector that did not do as well for the Fund this year was basic
industries, which includes steel. The steel industry was hit hard by
deteriorating fundamentals over the last six months, the result of rising supply
and softening demand. With predictions of further demand declines in the air,
steel company stock prices began dropping. Fund holding USX-U.S. Steel Group,
Inc. was no exception to this trend, seeing its price decline over the year
ended June 30, 1998.
Although value stocks have trailed growth stocks for much of the year, the
Fund's manager currently sees signs that the tide may turn. More favorable
valuations and lower volatility should make value stocks a more attractive
investment in these increasingly uncertain markets.
12 See page 19 for financial details.
<PAGE>
June 30, 1998
PIMCO Renaissance Fund
OBJECTIVE
Long-term growth of capital and current income.
PORTFOLIO
Primarily common stocks with below-average valuations that have improving
business fundamentals.
TOTAL NET ASSETS
$657 million
NUMBER OF SECURITIES IN THE PORTFOLIO
50 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
Columbus Circle Investors
PERFORMANCE*
Average Annual Total Return For periods ended 6/30/98
Lipper
D Shares S&P 500 Equity Inc.
(INCEP. 4/18/88) Index Fund Avg.
1 YEAR 31.0% 30.2% 20.9%
5 YEARS 21.7% 23.1% 17.5%
10 YEARS 15.3% 18.6% 14.6%
INCEPTION 15.3% -- --
Change in Value
$10,000 invested at the Fund's inception
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
RENAISSANCE
CLASS D S&P 500
INCEPTION 4/18/88 INDEX
========= =========== =========
<S> <C> <C>
04/30/88 10,000.00 10,000.00
05/31/88 9,999.99 10,087.00
06/30/88 10,231.81 10,549.99
07/31/88 10,200.23 10,509.90
08/31/88 10,061.54 10,152.57
09/30/88 10,211.25 10,585.07
10/31/88 10,328.86 10,879.33
11/30/88 10,275.10 10,723.76
12/31/88 10,613.99 10,911.42
01/31/89 10,932.00 11,710.14
02/28/89 10,877.19 11,418.56
03/31/89 10,976.03 11,684.61
04/30/89 11,264.28 12,291.04
05/31/89 11,585.77 12,788.83
06/30/89 11,673.84 12,715.93
07/31/89 11,898.50 13,864.18
08/31/89 12,269.32 14,135.92
09/30/89 12,122.10 14,077.96
10/31/89 11,894.71 13,751.35
11/30/89 11,883.30 14,031.88
12/31/89 11,885.79 14,368.64
01/31/90 11,304.45 13,404.51
02/28/90 11,304.43 13,577.42
03/31/90 11,597.44 13,937.23
04/30/90 11,247.15 13,588.80
05/31/90 11,947.78 14,913.70
06/30/90 11,896.36 14,812.29
07/31/90 11,566.63 14,764.89
08/31/90 10,780.28 13,430.14
09/30/90 10,010.71 12,776.10
10/31/90 9,600.00 12,721.16
11/30/90 9,933.71 13,542.95
12/31/90 10,118.32 13,920.79
01/31/91 10,444.31 14,527.74
02/28/91 11,070.19 15,566.47
03/31/91 11,338.40 15,943.18
04/30/91 11,456.75 15,981.45
05/31/91 12,061.86 16,671.85
06/30/91 11,638.94 15,908.27
07/31/91 12,063.61 16,649.60
08/31/91 12,554.64 17,044.20
09/30/91 12,756.99 16,759.56
10/31/91 13,024.73 16,984.14
11/30/91 12,623.15 16,299.68
12/31/91 13,582.86 18,164.36
01/31/92 13,826.81 17,826.50
02/29/92 14,097.90 18,058.25
03/31/92 13,833.44 17,706.11
04/30/92 13,847.05 18,226.67
05/31/92 13,996.94 18,315.98
06/30/92 13,839.33 18,043.44
07/31/92 14,154.49 18,780.51
08/31/92 13,976.30 18,396.08
09/30/92 14,119.65 18,612.23
10/31/92 14,091.96 18,676.44
11/30/92 14,451.14 19,312.37
12/31/92 14,748.53 19,549.34
01/31/93 14,985.33 19,712.77
02/28/93 14,860.02 19,981.45
03/31/93 15,424.81 20,403.06
04/30/93 15,298.82 19,909.92
05/31/93 15,662.69 20,442.51
06/30/93 15,979.01 20,502.41
07/31/93 16,344.69 20,419.99
08/31/93 17,399.74 21,194.72
09/30/93 17,689.86 21,032.16
10/31/93 17,944.14 21,467.32
11/30/93 17,491.96 21,262.73
12/31/93 18,023.93 21,519.80
01/31/94 18,545.04 22,251.47
02/28/94 18,342.36 21,647.57
03/31/94 17,331.66 20,703.73
04/30/94 17,215.41 20,969.15
05/31/94 17,142.63 21,313.26
06/30/94 16,741.66 20,790.87
07/31/94 17,165.31 21,473.64
08/31/94 17,968.71 22,354.06
09/30/94 17,947.80 21,807.50
10/31/94 17,903.74 22,297.52
11/30/94 17,169.93 21,485.44
12/31/94 17,236.50 21,804.07
01/31/95 17,280.85 22,369.45
02/28/95 17,664.85 23,241.19
03/31/95 18,144.86 23,927.04
04/30/95 18,486.05 24,631.69
05/31/95 18,530.60 25,616.22
06/30/95 18,998.09 26,211.28
07/31/95 19,936.73 27,080.45
08/31/95 20,160.12 27,148.42
09/30/95 20,812.83 28,294.08
10/31/95 20,872.60 28,193.07
11/30/95 21,874.30 29,430.75
12/31/95 22,143.55 29,997.58
01/31/96 22,904.87 31,018.70
02/29/96 23,206.23 31,306.24
03/31/96 23,394.87 31,607.72
04/30/96 23,792.28 32,073.62
05/31/96 24,348.45 32,900.80
06/30/96 24,399.50 33,026.15
07/31/96 23,364.23 31,567.06
08/31/96 24,271.93 32,232.81
09/30/96 25,473.73 34,046.87
10/31/96 26,351.74 34,985.88
11/30/96 27,692.30 37,630.46
12/31/96 27,753.25 36,885.00
01/31/97 28,763.31 39,189.58
02/28/97 28,616.38 39,496.83
03/31/97 27,894.36 37,873.90
04/30/97 29,070.33 40,134.97
05/31/97 30,871.10 42,578.39
06/30/97 32,485.16 44,485.90
07/31/97 35,353.05 48,025.64
08/31/97 34,507.33 45,335.25
09/30/97 37,023.23 47,818.26
10/31/97 35,312.68 46,221.13
11/30/97 36,691.85 48,360.70
12/31/97 37,726.31 49,191.06
01/31/98 37,748.75 49,735.11
02/28/98 40,601.16 53,322.01
03/31/98 42,183.51 56,052.63
04/30/98 43,141.54 56,616.52
05/31/98 42,250.28 55,643.28
06/30/98 42,562.55 57,903.51
</TABLE>
*Class D shares commenced operations after the inception date shown. Total
return for the periods shown before the inception of Class D shares reflects the
performance for this Fund's oldest class of shares (Class C), restated to
reflect the operating expenses for Class D shares. Had Class D share returns
been restated without regard to the lower operating expenses of Class D shares,
the total return figures for the 1-, 5-, 10-year and since inception periods
would have been lower, namely 30.3%, 20.8%, 14.5% and 14.5%, respectively. Past
performance is not an indication of future results. See page 17 for Footnotes,
which include additional details.
PORTFOLIO COMPOSITION
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------
Sears Roebuck & Co. 4.4%
Merchandise/services retailer
- --------------------------------------------------------------
Tandy Corp. 3.6%
Consumer electronics retailer
- --------------------------------------------------------------
Equitable Cos., Inc. 3.6%
Insurance/financial services
- --------------------------------------------------------------
Enron Corp. 3.2%
National gas pipeline systems
- --------------------------------------------------------------
MediaOne Group, Inc. 3.1%
Communications
- --------------------------------------------------------------
Lafarge Corp. 3.0%
Cement producer
- --------------------------------------------------------------
Hasbro, Inc. 3.0%
Toy/game manufacturer
- --------------------------------------------------------------
Philip Morris Co. 2.9%
Tobacco/food products manufacturer
- --------------------------------------------------------------
Martin Marietta Materials, Inc. 2.8%
Aggregates/building materials
- --------------------------------------------------------------
Atlantic Richfield Co. 2.7%
Integrated oil enterprise
- --------------------------------------------------------------
Top Ten Total 32.3%
- --------------------------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------------------------
Financial & Business Services 18.0%
- --------------------------------------------------------------
Consumer Discretionary 17.1%
- --------------------------------------------------------------
Materials & Processing 8.8%
- --------------------------------------------------------------
Communications 8.2%
- --------------------------------------------------------------
Technology 7.8%
Portfolio Composition
- --------------------------------------------------------------
Common Stock 95%
- --------------------------------------------------------------
Convertible Bonds & Notes 1%
- --------------------------------------------------------------
Cash Equivalents 4%
PORTFOLIO INSIGHTS
For the year ended June 30, 1998, the Renaissance Fund posted excellent results,
returning 31.0%. This return was in line with the Fund's benchmark and far
surpassed an average of funds with the same objective (as measured by the Lipper
Equity Income Fund Average).
As a risk-sensitive investment, the Fund has sought to avoid exposure to
companies connected to the Asian markets. Instead, the Renaissance Fund has
emphasized domestic and interest-sensitive companies-companies that should
benefit from the strong economy. As a result, the Fund has held significant
positions during the year in both the finance and consumer discretionary
sectors.
Holdings in the finance sector were among some of the best performers for the
Fund this year, thanks in large part to unprecedented strength in the stock
market. For example, The Equitable Cos., a large financial-services company, was
a major contributor to the Fund's success. The company's earnings were stronger
than expected this year because of booming revenues from two of its units:
Donaldson, Lufkin and Jenrette, a broker/dealer; and Alliance Capital, an
investment management firm. And The Equitable saw very strong sales in its
variable annuity products over the last six months, despite changes in tax laws
that are generally considered unfavorable to annuities.
A standout in the consumer discretionary sector was Sears, Roebuck & Co..
Purchased by the Fund in the first quarter, the stock had been out of favor and
analysts had low expectations for it because of previous losses in its credit
card division. However, the Fund manager believed Sears' improving retail sales
and the strong economy made it an attractive buying opportunity. Sears'
comparable store sales rose in the second quarter, as did its revenue, which
surpassed analysts' expectations and pushed the stock price up significantly in
the first half of 1998.
The transportation sector proved to be one of the few disappointments for the
portfolio this year, due almost entirely to poor performance from one company,
Trinity Industries, Inc., a railroad car manufacturer. While the company's
fundamentals remained strong, the stock price dropped significantly because
investors were concerned about the Asian currency crisis and the potential
negative effect on exports carried to ports by rail. Despite this price drop,
the Fund's manager believes the company is well-positioned to ride out this
period of investor anxiety, supported by a large order backlog.
Looking ahead, the Fund manager presently intends to maintain the Fund's
current positioning, waiting out the unstable global environment. The manager
anticipates pursuing value companies involved in corporate restructurings and
consolidations--situations that can provide opportunities for positive
surprises and the resulting stock price increase.
See page 20 for financial details. 13
<PAGE>
June 30, 1998
PIMCO Capital Appreciation Fund
OBJECTIVE
Long-term growth of capital and current income.
PORTFOLIO
Primarily common stocks of companies with market capitalizations of at least
$100 million that have improving fundamentals and whose stock is reasonably
valued by the market.
TOTAL NET ASSETS
$1,124 million
NUMBER OF SECURITIES IN THE PORTFOLIO
80 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
Cadence Capital Management
PERFORMANCE*
Average Annual Total Return For periods ended 6/30/98
Lipper
D Shares S&P 500 Cap. App.
(INCEP. 3/8/91) Index Fund Avg.
1 YEAR 32.4% 30.2% 22.1%
3 YEARS 29.1% 30.2% 20.4%
5 YEARS 21.7% 23.1% 16.0%
INCEPTION 20.3% -- --
Change in Value
$10,000 invested at the Fund's inception
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
CAPITAL S&P 500
APPRECIATION INDEX
CLASS D
INCEPTION 3/8/91
========= ============ =========
<S> <C> <C>
03/31/91 10,000.00 10,000.00
04/30/91 9,705.43 10,024.00
05/31/91 10,182.00 10,457.04
06/30/91 9,630.41 9,978.10
07/31/91 10,316.01 10,443.08
08/31/91 10,636.43 10,690.59
09/30/91 10,485.75 10,512.05
10/31/91 10,841.63 10,652.91
11/30/91 10,523.18 10,223.60
12/31/91 11,981.69 11,393.18
01/31/92 11,863.40 11,181.27
02/29/92 11,987.69 11,326.62
03/31/92 11,589.66 11,105.76
04/30/92 11,560.95 11,432.26
05/31/92 11,606.48 11,488.28
06/30/92 11,237.26 11,317.34
07/31/92 11,560.95 11,779.65
08/31/92 11,270.04 11,538.52
09/30/92 11,563.08 11,674.10
10/31/92 11,962.48 11,714.37
11/30/92 12,659.18 12,113.25
12/31/92 12,830.71 12,261.88
01/31/93 13,262.61 12,364.39
02/28/93 13,099.23 12,532.91
03/31/93 13,700.36 12,797.36
04/30/93 13,360.33 12,488.05
05/31/93 13,962.18 12,822.10
06/30/93 14,180.85 12,859.67
07/31/93 13,975.35 12,807.97
08/31/93 14,481.90 13,293.91
09/30/93 14,903.02 13,191.94
10/31/93 14,934.88 13,464.89
11/30/93 14,631.63 13,336.57
12/31/93 15,042.76 13,497.81
01/31/94 15,567.88 13,956.73
02/28/94 15,352.00 13,577.95
03/31/94 14,580.82 12,985.95
04/30/94 14,631.14 13,152.43
05/31/94 14,615.13 13,368.26
06/30/94 14,199.05 13,040.60
07/31/94 14,541.25 13,468.85
08/31/94 14,970.96 14,021.08
09/30/94 14,564.95 13,678.26
10/31/94 14,894.83 13,985.61
11/30/94 14,208.91 13,476.26
12/31/94 14,344.66 13,676.11
01/31/95 14,330.90 14,030.73
02/28/95 15,042.49 14,577.51
03/31/95 15,697.14 15,007.69
04/30/95 16,232.32 15,449.67
05/31/95 16,820.97 16,067.19
06/30/95 17,543.90 16,440.43
07/31/95 18,512.48 16,985.60
08/31/95 18,685.94 17,028.23
09/30/95 19,421.04 17,746.82
10/31/95 19,051.66 17,683.46
11/30/95 19,630.62 18,459.77
12/31/95 19,596.15 18,815.30
01/31/96 20,249.11 19,455.78
02/29/96 21,010.13 19,636.13
03/31/96 21,043.16 19,825.23
04/30/96 21,300.56 20,117.45
05/31/96 21,833.46 20,636.28
06/30/96 21,785.95 20,714.90
07/31/96 20,683.23 19,799.72
08/31/96 21,566.67 20,217.30
09/30/96 22,882.76 21,355.13
10/31/96 23,452.22 21,944.10
11/30/96 25,151.19 23,602.85
12/31/96 24,749.58 23,135.28
01/31/97 26,185.08 24,580.77
02/28/97 25,907.41 24,773.49
03/31/97 24,954.35 23,755.54
04/30/97 25,741.81 25,173.75
05/31/97 27,377.40 26,706.33
06/30/97 28,540.50 27,902.77
07/31/97 31,615.11 30,123.00
08/31/97 30,419.84 28,435.51
09/30/97 32,253.91 29,992.92
10/31/97 31,664.05 28,991.15
11/30/97 32,460.81 30,333.15
12/31/97 33,090.97 30,853.98
01/31/98 32,557.98 31,195.22
02/28/98 34,939.14 33,445.02
03/31/98 36,867.85 35,157.74
04/30/98 36,864.93 35,511.43
05/31/98 36,240.26 34,900.98
06/30/98 37,779.78 36,318.66
</TABLE>
*These returns represent the blended performance of the Fund's Class D shares
(for the period from 4/8/98) and the prior performance of the Fund's
Institutional Class shares (for the period from 3/8/91), adjusted for Class D
expenses. Past performance is not an indication of future results.
See page 17 for Footnotes, which include additional details.
PORTFOLIO COMPOSITION
Top 10 Holdings % of Total Investments
- ---------------------------------------------------------------------
Capital One Financial Corp. 2.1%
Bank card issuer/services
- ---------------------------------------------------------------------
Cognizant Corp. 1.9%
Information services
- ---------------------------------------------------------------------
Costco Cos., Inc. 1.9%
Wholesale cash and carry mdsg.
- ---------------------------------------------------------------------
Safeway, Inc. 1.8%
Food supermarket chain
- ---------------------------------------------------------------------
Carnival Corp. "A" 1.8%
Cruise ships
- ---------------------------------------------------------------------
Omnicom Group 1.8%
Major international advertising company
- ---------------------------------------------------------------------
TJX Cos., Inc. 1.7%
Off-price specialty stores
- ---------------------------------------------------------------------
Jones Apparel Group, Inc. 1.7%
Women's apparel designer/dstr.
- ---------------------------------------------------------------------
Cisco Systems, Inc. 1.6%
Computer network products
- ---------------------------------------------------------------------
Dayton Hudson Corp. 1.4%
General merchandise retailer
- ---------------------------------------------------------------------
Top Ten Total 17.7%
- ---------------------------------------------------------------------
Top 5 Industries % of Total Investments
- ---------------------------------------------------------------------
Financial & Business Services 27.7%
- ---------------------------------------------------------------------
Consumer Discretionary 13.5%
- ---------------------------------------------------------------------
Technology 9.8%
- ---------------------------------------------------------------------
Health Care 9.5%
- ---------------------------------------------------------------------
Consumer Services 8.4%
Portfolio Composition
- ---------------------------------------------------------------------
Common Stock 93%
- ---------------------------------------------------------------------
Cash Equivalents 7%
PORTFOLIO INSIGHTS
For the twelve-month period ended June 30, 1998, the Capital Appreciation Fund
posted an outstanding return of 32.4%. The result allowed the Fund to not only
outperform the market in general (as measured by the S&P 500 Index), but also
surpass the 22.1% average return of funds with the same objective (as measured
by the Lipper Capital Appreciation Fund Average). In addition, the Fund
outpaced the Lipper Average for the 3-, 5-year and since inception periods ended
June 30, 1998.
Strong performance from the Fund's technology holdings were instrumental in
achieving these impressive returns. In general, the sector saw rapid growth in
the networking and the Internet areas. In addition, computer companies were
aided by lower cost components (many of which are supplied by Asian
manufacturers) and robust demand from both North America and Europe.
Cisco Systems, Inc. is a perfect example of a technology holding that rode
this technology wave. Cisco is a leader in the networking industry. But more
than just taking its share of the industry-wide growth, Cisco has gone beyond
many of its competitors and been chosen supplier by such major companies as
Kaiser Permanente, the world's largest HMO. Cisco also benefited from an
announced partnership with Dell Computer Corp. and IBM Corp. which will allow
the networking company to provide Internet access at much faster speeds than are
currently available.
Another top performer for the Fund during the year was Dell Computer. Dell
Computer is the leading direct computer systems provider. Much of the company's
success can be traced to its business practice of only manufacturing products
upon order, which means no inventory and greatly reduced overhead costs. Dell
Computer has also seen significant advantages from its strategy of focusing on
government and corporate clients, rather than the home computer market.
Tempering the Fund's results this year were most of its energy holdings.
Energy was a major contributor to the portfolio in 1997, with the bulk of the
holdings in the drilling industry. Unfortunately, a drop in the demand for oil
(in part due to reduced needs in the Pacific Rim) and a dramatic fall in the
price of crude oil meant oil companies were not hiring drillers, lowering their
day rates and negatively affecting profits. The end result was damaging to the
Fund's energy stocks.
Since these problems in the energy sector erupted, the manager cut back
energy-related holdings from approximately 10% of assets at the high, down to
2.3%. The Fund's manager currently does not expect to be making any other
significant changes to the portfolio's breakdown, believing there is still more
opportunities in the current positions. Specifically, the Fund remains positive
on both financial and technology-related holdings at this time.
14 See page 21 for financial details.
<PAGE>
June 30, 1998
PIMCO Mid-Cap Growth Fund
OBJECTIVE
Growth of capital.
PORTFOLIO
Primarily common stocks of companies with medium capitalizations that have
improving fundamentals and whose stock is reasonably valued.
TOTAL NET ASSETS
$794 million
NUMBER OF SECURITIES IN THE PORTFOLIO
91 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
Cadence Capital Management
PERFORMANCE*
Average Annual Total Return For periods ended 6/30/98
Lipper
D Shares S&P Mid-Cap Mid-Cap
(INCEP. 8/26/91) Index Fund Avg.
1 YEAR 25.6% 27.1% 22.2%
3 YEARS 25.5% 24.0% 20.4%
5 YEARS 19.8% 18.5% 16.7%
INCEPTION 19.1% -- --
Change in Value
$10,000 invested at the Fund's inception
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
MID-CAP S&P 500
GROWTH MID-CAP
CLASS D INDEX
INCEPTION 8/26/91
========= ========= =========
<S> <C> <C>
08/31/91 10,000.00 10,000.00
09/30/91 9,946.54 9,967.45
10/31/91 10,307.48 10,357.92
11/30/91 10,013.26 10,008.88
12/31/91 11,315.88 11,191.96
01/31/92 11,324.89 11,389.96
02/29/92 11,431.83 11,571.19
03/31/92 11,086.41 11,135.40
04/30/92 11,009.36 11,002.40
05/31/92 11,015.68 11,106.57
06/30/92 10,720.90 10,789.48
07/31/92 11,011.98 11,325.11
08/31/92 10,686.40 11,054.23
09/30/92 11,034.74 11,208.93
10/31/92 11,391.85 11,477.21
11/30/92 12,074.30 12,118.62
12/31/92 12,305.85 12,525.27
01/31/93 12,757.68 12,681.89
02/28/93 12,360.10 12,504.48
03/31/93 12,860.41 12,936.20
04/30/93 12,503.90 12,597.71
05/31/93 13,034.86 13,171.58
06/30/93 13,434.48 13,237.63
07/31/93 13,264.54 13,212.21
08/31/93 13,916.66 13,757.69
09/30/93 14,285.83 13,903.11
10/31/93 14,136.39 13,948.52
11/30/93 13,737.19 13,639.97
12/31/93 14,190.86 14,273.20
01/31/94 14,480.04 14,605.21
02/28/94 14,455.28 14,397.96
03/31/94 13,923.56 13,731.08
04/30/94 13,969.53 13,833.24
05/31/94 13,711.50 13,702.29
06/30/94 13,251.15 13,230.40
07/31/94 13,546.23 13,678.39
08/31/94 14,250.94 14,394.76
09/30/94 13,881.54 14,126.14
10/31/94 14,156.77 14,280.59
11/30/94 13,483.36 13,636.47
12/31/94 13,799.78 13,761.63
01/31/95 13,663.31 13,904.89
02/28/95 14,490.28 14,634.47
03/31/95 14,951.42 14,888.42
04/30/95 15,284.02 15,187.34
05/31/95 15,805.95 15,553.70
06/30/95 16,732.99 16,186.88
07/31/95 18,306.34 17,031.31
08/31/95 18,441.95 17,346.29
09/30/95 18,699.42 17,766.75
10/31/95 18,406.55 17,309.61
11/30/95 18,755.15 18,065.61
12/31/95 18,872.82 18,020.66
01/31/96 19,240.22 18,282.10
02/29/96 19,700.93 18,903.47
03/31/96 19,941.14 19,130.01
04/30/96 20,351.39 19,714.26
05/31/96 20,688.31 19,980.88
06/30/96 20,261.34 19,681.07
07/31/96 19,285.19 18,349.56
08/31/96 20,330.81 19,407.84
09/30/96 21,750.84 20,254.02
10/31/96 21,889.11 20,312.96
11/30/96 23,214.06 21,457.19
12/31/96 23,189.17 21,481.00
01/31/97 24,131.70 22,287.40
02/28/97 23,720.61 22,104.20
03/31/97 23,035.80 21,161.90
04/30/97 23,522.36 21,710.20
05/31/97 25,139.66 23,608.54
06/30/97 26,353.03 24,271.94
07/31/97 28,786.86 26,675.11
08/31/97 28,738.44 26,643.10
09/30/97 30,754.85 28,175.07
10/31/97 30,095.49 26,949.46
11/30/97 30,293.52 27,348.31
12/31/97 30,991.52 28,409.42
01/31/98 30,430.01 27,869.65
02/28/98 32,210.96 30,177.25
03/31/98 33,190.85 31,538.25
04/30/98 33,660.86 32,115.40
05/31/98 32,501.25 30,670.20
06/30/98 33,108.60 30,863.43
</TABLE>
*These returns represent the blended performance of the Fund's Class D shares
(for the period from 4/8/98) and the prior performance of the Fund's
Institutional Class shares (for the period from 8/26/91), adjusted for Class D
expenses. Past performance is not an indication of future results.
See page 17 for Footnotes, which include additional details.
PORTFOLIO COMPOSITION
Top 10 Holdings of Total Investments
- ----------------------------------------------------------------------
Unisys Corp. 1.6%
Business info. systems manufacturer
- ----------------------------------------------------------------------
Compuware Corp. 1.5%
Systems software products developer
- ----------------------------------------------------------------------
Borders Group, Inc. 1.5%
Book superstores
- ----------------------------------------------------------------------
Network Associates, Inc. 1.5%
Network/security software
- ----------------------------------------------------------------------
Providian Financial Corp. 1.4%
Consumer loans/services
- ----------------------------------------------------------------------
Royal Caribbean Cruises Limited 1.4%
Cruise ships
- ----------------------------------------------------------------------
Citrix Systems, Inc. 1.3%
Client/server software
- ----------------------------------------------------------------------
Waters Corp. 1.3%
Liquid chromatography instrument manufacturer
- ----------------------------------------------------------------------
Ambac, Inc. 1.2%
Municipal bond insurance
- ----------------------------------------------------------------------
Proffitt's, Inc. 1.2%
Specialty department stores
- ----------------------------------------------------------------------
Top Ten Total 13.9%
- ----------------------------------------------------------------------
Top 5 Industries % of Total Investments
- ----------------------------------------------------------------------
Financial & Business Services 25.3%
- ----------------------------------------------------------------------
Technology 15.1%
- ----------------------------------------------------------------------
Consumer Discretionary 12.1%
- ----------------------------------------------------------------------
Health Care 9.2%
- ----------------------------------------------------------------------
Consumer Staples 7.1%
Portfolio Composition
- ----------------------------------------------------------------------
Common Stock 94%
- ----------------------------------------------------------------------
Cash Equivalents 6%
PORTFOLIO INSIGHTS
With a result of 25.6%, the Mid-Cap Growth Fund had an excellent year ending
June 30, 1998. And, while mid-cap stocks in general did well during this
period, the Fund was still able to clearly outperform the 22.2% average return
for funds with the same objective (as measured by the Lipper Mid-Cap Fund
Average).
Leading the Fund's success during this period was the financial sector,
including banks and securities companies. This sector was supported by the
generally strong economy, allowing increased revenue and stock price growth.
Another sector that made significant contributions more recently was technology,
which was underweighted in this area relative to its index, but still saw
excellent performance from its selected holdings, including Unisys Corp. and
Compuware Corp. Unisys Corp., a provider of information technology solutions,
had at one time been primarily focused on the mainframe business but has been
moving towards the computer services business. This change in strategy has been
well received by industry analysts who recognize that Unisys was not a
significant player in the mainframe arena but that it has the opportunity for
attractive growth in services. In addition, the service business provides a more
predictable revenue stream. By augmenting this new strategy with efforts to
reduce debt and improve the balance sheet, the company was able to boost its
stock price significantly.
Compuware was also an outstanding holding for the Fund this year. This
software provider has been a particular favorite among investors during this
time because of its role in the "Year 2000" solution. Compuware has developed
software that can diagnose a system's vulnerability to this problem and also
provide measures to correct it. As a result, the company's stock has been
getting a great deal of attention and the price has climbed.
The Fund saw much less success from its holdings in the energy sector. While
energy was the Fund's best sector during the second and third quarter of 1997,
by June 30, 1998 almost all of the Fund's energy holdings had become a drag on
performance. The manager traces a portion of the problems in this sector to the
Asian crisis. The Pacific Rim had been expected to consume a certain amount of
oil to sustain its economic growth. But, the collapse of that economy meant the
demand disappeared. At the same time, the price of crude oil fell dramatically
in the fourth quarter of 1997 and the first quarter of 1998. The end result was
a hard hit to energy related stocks, especially drilling concerns such as Fund
holding TransOcean Offshore, Inc. To limit the Fund's exposure to any further
problems in this sector, the manager has trimmed back its holdings in this area.
In the months to come, the Fund's manager expects to see slowing of the global
markets. In addition, the manager does not see any fast resolution to the
problems in Asia, and in fact would not be surprised if the worst was yet to
come. As a result, the Fund currently plans to maintain a more domestic-oriented
exposure, continuing for the foreseeable future to concentrate on technology and
financial services.
See page 22 for financial details. 15
<PAGE>
June 30, 1998
PIMCO Innovation Fund
OBJECTIVE
Capital appreciation; no consideration given to income.
PORTFOLIO
Primarily technology-related stocks of companies of all sizes.
TOTAL NET ASSETS
$386 million
NUMBER OF SECURITIES IN THE PORTFOLIO
40 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
Columbus Circle Investors
PERFORMANCE*
Average Annual Total Return For periods ended 6/30/98
Lipper
D Shares S&P 500 Sci. & Tech.
(INCEP. 12/22/94) Index Fund Avg.
1 YEAR 48.1% 30.2% 22.7%
3 YEARS 27.7% 30.2% 17.1%
INCEPTION 32.3% -- --
Change in Value
$10,000 invested at the Fund's inception
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
INNOVATION S&P 500
CLASS D INDEX
INCEPTION 12/22/94
========= ========== =========
<S> <C> <C>
12/31/94 10,000.00 10,000.00
01/31/95 9,919.80 10,259.30
02/28/95 10,551.05 10,659.10
03/31/95 10,871.71 10,973.66
04/30/95 11,342.67 11,296.83
05/31/95 11,613.18 11,748.36
06/30/95 12,895.69 12,021.28
07/31/95 14,098.07 12,419.90
08/31/95 14,428.68 12,451.08
09/30/95 14,769.27 12,976.51
10/31/95 14,589.00 12,930.19
11/30/95 14,989.73 13,497.82
12/31/95 14,532.71 13,757.79
01/31/96 14,337.93 14,226.10
02/29/96 15,035.38 14,357.98
03/31/96 14,912.35 14,496.25
04/30/96 16,502.09 14,709.92
05/31/96 17,845.53 15,089.29
06/30/96 17,117.27 15,146.78
07/31/96 14,686.57 14,477.60
08/31/96 15,578.75 14,782.93
09/30/96 17,701.79 15,614.91
10/31/96 17,578.58 16,045.57
11/30/96 18,634.91 17,258.46
12/31/96 17,962.34 16,916.57
01/31/97 18,950.47 17,973.51
02/28/97 16,807.97 18,114.43
03/31/97 15,705.41 17,370.10
04/30/97 15,954.99 18,407.10
05/31/97 17,962.35 19,527.72
06/30/97 18,128.81 20,402.57
07/31/97 20,812.12 22,026.00
08/31/97 20,312.88 20,792.10
09/30/97 21,820.89 21,930.89
10/31/97 20,416.59 21,198.39
11/30/97 20,322.81 22,179.67
12/31/97 19,583.81 22,560.49
01/31/98 20,357.79 22,810.01
02/28/98 22,856.77 24,455.07
03/31/98 23,719.15 25,707.41
04/30/98 25,433.10 25,966.03
05/31/98 23,818.50 25,519.67
06/30/98 26,848.19 26,556.28
</TABLE>
*Class D shares commenced operations after the inception date shown. Total
return for the periods shown before the inception of Class D shares reflects the
performance for one of the Fund's oldest classes of shares (Class C), restated
to reflect the operating expenses for Class D shares. Past performance is not an
indication of future results. See page 17 for Footnotes, which include
additional details.
PORTFOLIO COMPOSITION
Top 10 Holdings % of Total Investments
- ---------------------------------------------------------------------------
America Online, Inc. 8.1%
Online service provider
- ---------------------------------------------------------------------------
Federal Home Loan Bank Corp. 6.9%
Residential mortgage funds provider
- ---------------------------------------------------------------------------
Cisco Systems, Inc. 5.9%
Computer network products
- ---------------------------------------------------------------------------
Microsoft Corp. 5.3%
Computer software
- ---------------------------------------------------------------------------
Nokia Corp. 4.8%
Telecommunications sys. & equipment
- ---------------------------------------------------------------------------
Lucent Technologies, Inc. 4.7%
Telecommunication systems software
- ---------------------------------------------------------------------------
Yahoo, Inc. 4.0%
Internet navigational services
- ---------------------------------------------------------------------------
Saville Systems-ADR 3.5%
Telecommunication industry billing sys.
- ---------------------------------------------------------------------------
Ascend Communications, Inc. 3.2%
Network access products
- ---------------------------------------------------------------------------
VISX, Inc. 3.0%
Vision correction systems manufacturer
- ---------------------------------------------------------------------------
Top Ten Total 49.4%
- ---------------------------------------------------------------------------
Top 5 Industries % of Total Investments
- ---------------------------------------------------------------------------
Technology 71.3%
- ---------------------------------------------------------------------------
Health Care 12.0%
- ---------------------------------------------------------------------------
Cash Equivalents 7.5%
- ---------------------------------------------------------------------------
Communications 5.9%
- ---------------------------------------------------------------------------
Financial & Business Services 1.6%
Portfolio Composition
- ---------------------------------------------------------------------------
Common Stock 92%
- ---------------------------------------------------------------------------
Cash Equivalents 8%
PORTFOLIO INSIGHTS
The Innovation Fund produced an outstanding return of 48.1% for the year ended
June 30, 1998, which soundly beat the S&P 500's 30.2% return for the same
period.
The Innovation Fund began 1998 with dramatically reduced investments in
companies with Asian exposure, meaning operations in Asia or a dependence on
Asian suppliers or clients. Instead, the Fund opted to focus on domestically-
oriented technology stocks. Within this group, the Fund found particular success
through investment in on-line service providers, including such holdings as
Yahoo, Inc. and America Online, Inc. Yahoo enjoys strong brand awareness as the
leading Internet search engine. Using this visibility along with increasing
statistics on Internet users, Yahoo was able to generate new advertisers,
greatly increasing company revenues.
In the hardware sector of technology, the Fund realized positive results from
Dell Computer Corp. Dell Computer dominates the personal computer direct sales
markets. The company's success has been due in large part to its unique business
process: manufacturing computers after ordered. This process has allowed the
company to have very high inventory turnover figures, and great overhead cost
control. So, while many PC companies suffered through an industry correction
during the year, Dell Computer saw its profits and stock price soar.
The Innovation Fund also benefited over this time period from its "non-
traditional" technology holdings, such as VISX, Inc., a developer of proprietary
technologies and systems for laser vision correction. The company's share price
rose this year in response to growing demand for laser eye surgery and greater
profit margins on these systems. The Fund's manager believes the demand for
VISX's products should continue growing, and that the company is well-positioned
to dominate the market.
An area that did not perform up to expectations during this time was the
Fund's semiconductor holdings. Though the prices of most semiconductor stocks
rebounded in the first quarter of 1998, they fell in the second quarter when the
Asian currency crisis reared its head again. The good news is that the Fund was
underweighted in semiconductors throughout the first half of 1998, so the
relative performance of the Fund was not hurt by the sector's poor showing.
Looking ahead, the manager currently believes the Fund is well-positioned to
avoid any additional disruptions from the Asia situation and is poised to
benefit from the strong domestic economy. The manager is interested in expanding
the Fund's exposure in the networking area and is currently watching this sector
closely. The manager is also monitoring the inventory level in the PC industry,
looking for positive fundamentals. In general, the Fund continues to look for
innovative technology-related companies that will positively surprise the
market.
16 See page 24 for financial details.
<PAGE>
June 30, 1998
FOOTNOTES
A few notes and definitions are needed for a complete understanding of the
performance figures.
Past performance is no indication of future results. Investment return will
fluctuate and the value of an investor's shares will fluctuate and may be worth
more or less than original cost when redeemed. Total return measures
performance, assuming that all dividends and capital gains distributions were
reinvested.
The PIMCO stock funds can invest a portion of their assets in foreign
securities, which can involve special risks due to foreign economic and
political developments. The Innovation Fund concentrates its portfolio in one
sector, making it more volatile than a more diversified stock portfolio, and
they, therefore, should be considered as only part of a diversified portfolio.
Line graphs have been included so an investor can compare a Fund's historical
performance to that of an appropriate broad-based index. Each index reflects a
group of unmanaged securities, and it is not possible to invest directly in an
unmanaged index. The Standard & Poor's 500 and Standard & Poor's Mid-Cap are
indices of stocks of companies with larger- and medium-sized capitalizations,
respectively.
Lipper averages are calculated by Lipper Analytical Services, Inc., a nationally
recognized mutual fund performance evaluation firm. They are total return
performance averages of those funds that are tracked by Lipper, with the
investment objective noted. Lipper rankings are based on total returns, not
adjusted for sales charges.
For additional details on the PIMCO bond funds, contact your financial advisor
to receive a prospectus that contains more complete information, including
charges and expenses. Or contact PIMCO Funds Distributors LLC at 2187 Atlantic
Street, Stamford, CT 06902, 1-800-277-7337, www.pimcofunds.com. Please read the
prospectus carefully before you invest or send money.
17
<PAGE>
Schedule of Investments
Equity Income Fund
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (000s)
COMMON STOCKS 96.2%
<S> <C> <C>
Aerospace 1.9%
BFGoodrich Co. 79,000 $3,920
Capital Goods 3.9%
GATX Corp. 94,200 4,133
General Signal Corp. 105,600 3,802
--------
7,935
Communications 5.7%
Bell Atlantic Corp. 86,132 3,930
US West, Inc. 83,000 3,901
Southern New England Telecommunications Corp. 56,800 3,720
--------
11,551
Consumer Discretionary 16.1%
Ford Motor Co. 87,900 5,186
VF Corp. 82,300 4,238
American Greetings Corp. "A" 81,000 4,126
Chrysler Corp. 71,260 4,017
Penny J.C., Inc. 55,000 3,977
Brunswick Corp. 159,000 3,935
Armstrong World Industries 55,000 3,706
Springs Industries, Inc. "A" 71,000 3,275
--------
32,460
Consumer Staples 9.5%
SUPERVALU, Inc. 181,000 8,032
RJR Nabisco Holdings Corp. 305,000 7,244
Anheuser Busch Cos., Inc. 82,000 3,870
--------
19,146
Energy 11.1%
Atlantic Richfield Co. 61,600 4,813
Repsol SA SP - ADR 71,000 3,905
Amoco Corp. 90,000 3,746
Occidental Petroleum Corp. 134,600 3,634
Ultramar Diamond Shamrock Corp. 112,000 3,535
Kerr McGee Corp. 48,100 2,784
--------
22,417
Financial & Business Services 16.3%
PNC Bank Corp. 138,000 7,426
Deluxe Corp. 119,700 4,287
Chase Manhattan Corp. 55,712 4,206
Union Planters Corp. 67,800 3,987
CIGNA Corp. 55,800 3,850
Bankers Trust New York Corp. 32,500 3,772
Ohio Casualty Corp. 80,500 3,562
Capstead Mortgage Corp. 196,000 1,642
--------
32,732
Health Care 6.3%
Pharmacia & Upjohn, Inc. 97,995 4,520
American Home Products Corp. 86,000 4,451
Mallinckrodt Group, Inc. 124,000 3,681
--------
12,652
Materials & Processing 9.5%
Union Carbide Corp. 80,000 4,270
Dow Chemical Co. 39,300 3,800
Westvaco Corp. 134,000 3,786
Phelps Dodge Corp. 65,000 3,717
USX-U.S. Steel Group, Inc. 109,000 3,597
--------
19,170
Technology 4.0%
Harris Corp. 90,600 4,048
International Business Machines Corp. 34,900 4,007
--------
8,055
Utilities 11.9%
Peoples Energy Corp. 110,000 4,249
DTE Energy Co. 103,000 4,159
Public Service Enterprise Group, Inc. 114,600 3,946
PP&L Resources, Inc. 173,000 3,925
NICOR, Inc. 97,000 3,892
Washington Water Power Co. 169,000 3,792
--------
23,963
--------
Total Common Stocks 194,001
(Cost $165,750) ========
<CAPTION>
Principal
Amount Value
(000s) (000s)
<S> <C> <C>
SHORT-TERM INSTRUMENTS 3.9%
Repurchase Agreement 3.9%
State Street Bank
4.250% due 07/01/98 $ 7,859 $ 7,859
(Dated 06/30/98. Collateralized by
U.S. Treasury Note 5.625% 11/30/98
valued at $8,020,489. Repurchase
proceeds are $7,859,928.)
--------
Total Short-Term Instruments 7,859
(Cost $7,859) --------
Total Investments (a) 100.1% $201,860
(Cost $173,609)
Other Assets and Liabilities (Net) (0.1%) (153)
--------
Net Assets 100.0% $201,707
========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 1998, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost. $ 37,725
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost
over value. (9,606)
--------
Unrealized appreciation-net $ 28,119
========
</TABLE>
18 See accompanying notes
<PAGE>
Schedule of Investments
Value Fund
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
COMMON STOCKS 97.3%
Aerospace 1.4%
Northrop Grumman Corp. 32,600 $3,362
Capital Goods 0.9%
AGCO Corp. 105,000 2,159
Communications 5.9%
Southern New England Telecommunications Corp. 110,000 7,205
Bell Atlantic Corp. 152,000 6,935
--------
14,140
Consumer Discretionary 13.5%
Tandy Corp. 108,000 5,731
Chrysler Corp. 92,500 5,215
American Greetings Corp. "A" 100,000 5,094
Maytag Corp. 100,000 4,937
VF Corp. 91,800 4,728
Brunswick Corp. 118,200 2,925
Dillards, Inc. "A" 65,000 2,693
Tupperware Corp. 38,300 1,077
--------
32,400
Consumer Services 1.0%
Central Newspapers, Inc. "A" 33,400 2,330
Consumer Staples 11.7%
Anheuser Busch Cos., Inc. 152,500 7,196
SUPERVALU, Inc. 162,000 7,189
Whitman Corp. 220,000 5,046
RJR Nabisco Holdings Corp. 203,200 4,826
Kimberly-Clark Corp. 60,000 2,752
IBP, Inc. 55,000 997
--------
28,006
Energy 10.0%
Repsol SA SP - ADR 126,500 6,957
Ultramar Diamond Shamrock Corp. 200,000 6,312
Amoco Corp. 120,000 4,995
Kerr McGee Corp. 58,000 3,357
Atlantic Richfield Co. 16,800 1,312
Tidewater, Inc. 31,500 1,039
--------
23,972
Environmental Services 2.0%
Browning Ferris Industries, Inc. 136,300 4,736
Financial & Business Services 13.5%
Chase Manhattan Corp. 94,200 7,112
PNC Bank Corp. 125,000 6,726
Countrywide Credit Industries, Inc. 104,000 5,278
Bear Stearns Cos. 90,000 5,119
CIGNA Corp. 70,000 4,830
Loews Corp. 27,000 2,352
Union Planters Corp. 15,900 935
--------
32,352
Health Care 7.5%
Pharmacia & Upjohn, Inc. 152,510 7,035
American Home Products Corp. 91,900 4,756
Mallinckrodt Group, Inc. 160,000 4,750
Foundation Health Systems, Inc. "A" (b) 52,000 1,371
--------
17,912
Materials & Processing 8.8%
USG Corp. (b) 90,000 4,871
USX-U.S. Steel Group, Inc. 140,000 4,620
Union Carbide Corp. 85,000 4,537
Westvaco Corp. 144,600 4,085
Wellman, Inc. 134,700 3,056
--------
21,169
Technology 9.6%
Harris Corp. 160,000 7,150
International Business Machines Corp. 40,700 4,673
Storage Technology Corp. (b) 106,200 4,606
Adobe Systems, Inc. 102,400 4,346
Tektronix, Inc. 60,000 2,122
--------
22,897
Transportation 1.9%
UAL Corp. (b) 57,200 4,462
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
Utilities 9.6%
DTE Energy Co. 190,000 $ 7,671
NICOR, Inc. 190,000 7,624
Public Service Enterprise Group, Inc. 220,000 7,576
--------
22,871
--------
Total Common Stocks 232,768
(Cost $206,927) ========
SHORT-TERM INSTRUMENTS 2.8%
<CAPTION>
Principal
Amount
(000s)
<S> <C> <C>
Repurchase Agreement 2.8%
State Street Bank
4.250% due 07/01/98 $ 6,793 6,793
(Dated 06/30/98. Collateralized by
U.S. Treasury Note 5.875% 07/31/99
valued at $6,933,303. Repurchase
proceeds are $6,793,802.)
--------
Total Short-Term Instruments 6,793
(Cost $6,793) --------
Total Investments (a) 100.1% $239,561
(Cost $213,720)
Other Assets and Liabilities (Net) (0.1%) (202)
--------
Net Assets 100.0% $239,359
========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 1998, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost. $ 33,148
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost
over value. (7,556)
--------
Unrealized appreciation-net $ 25,592
========
</TABLE>
(b) Non-income producing security.
See accompanying notes 19
<PAGE>
Schedule of Investments
Renaissance Fund
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
COMMON STOCKS 94.0%
Aerospace 1.3%
BFGoodrich Co. 177,900 $ 8,828
Building 5.0%
Lafarge Corp. 501,300 19,707
D.R. Horton, Inc. 638,600 13,331
--------
33,038
Capital Goods 5.5%
Ahmanson (H.F.) & Co. 204,300 14,505
Trinity Industries, Inc. 215,100 8,927
Kuhlman Corp. 170,000 6,726
Lear Corp. (b) 118,700 6,091
--------
36,249
Communications 8.1%
MediaOne Group, Inc. (b) 467,000 20,519
Sprint Corp. 170,300 12,006
AT&T Corp. 136,400 7,792
Citizens Utilities Co. 683,488 6,579
Glenayre Technologies, Inc. (b) 587,400 6,315
US West, Inc. 1 0
--------
53,211
Consumer Discretionary 17.0%
Sears Roebuck & Co. 471,300 28,779
Tandy Corp. 445,500 23,639
Hasbro, Inc. 496,900 19,534
Tommy Hilfiger Corp. (b) 263,300 16,456
B.J.'s Wholesale Club, Inc. (b) 363,500 14,767
Kmart Corp. (b) 434,200 8,358
--------
111,533
Consumer Services 2.6%
Waste Management, Inc. 390,500 13,668
Foodmaker, Inc. (b) 200,300 3,380
--------
17,048
Consumer Staples 2.8%
Philip Morris Cos., Inc. 472,200 18,593
Energy 5.8%
Enron Corp. 380,700 20,582
Atlantic Richfield Co. 222,800 17,406
--------
37,988
Financial & Business Services 17.9%
Equitable Cos., Inc. 312,200 23,395
NationsBank Corp. 204,600 15,652
Capital One Financial Corp. 124,100 15,412
Fremont General Corp. 275,200 14,912
Allmerica Financial Corp. 216,000 14,040
Greenpoint Financial Corp. 358,200 13,477
Travelers Group, Inc. 202,400 12,271
PMI Group, Inc. 108,600 7,968
--------
117,127
Health Care 7.4%
Integrated Health Services, Inc. 422,700 15,851
Wellpoint Health Networks, Inc. (b) 179,200 13,261
Allegiance Corp. 257,200 13,182
McKesson Corp. 80,600 6,549
--------
48,843
Materials & Processing 8.8%
Martin Marietta Materials, Inc. 409,400 18,423
Vulcan Materials Co. 141,600 15,107
E.I. Du Pont de Nemours, Inc. 170,000 12,686
Akzo Nobel NV SP - ADR 102,600 11,376
--------
57,592
Technology 7.7%
Learning Company, Inc. (b) 579,800 17,176
Flextronics International Limited 347,800 15,129
EG&G, Inc. 360,700 10,821
SCI Systems, Inc. (b) 169,700 6,385
Danka Business Systems PLC 101,600 1,126
--------
50,637
Transportation 3.1%
Atlas Air, Inc. 444,300 15,023
CNF Transportation, Inc. 119,900 5,096
--------
20,119
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
Utilities 1.0%
BEC Energy 164,600 $ 6,831
--------
Total Common Stocks 617,637
(Cost $554,163) ========
CONVERTIBLE BONDS & NOTES 0.7%
<CAPTION>
Principal
Amount
(000s)
<S> <C> <C>
Industrial 0.7%
Pier 1 Imports, Inc.
5.750% due 10/01/03 $ 2,209 4,349
--------
Total Convertible Bonds & Notes 4,349
(Cost $2,370) ========
SHORT-TERM INSTRUMENTS 4.5%
Commercial Paper 4.5%
Federal National Mortage Association
5.750% due 07/01/98 16,000 16,000
Federal Home Loan Bank Corp
5.400% due 07/01/98 13,800 13,800
--------
Total Short-Term Instruments 29,800
(Cost $29,800) ========
Total Investments (a) 99.2% $651,786
(Cost $586,333)
Written Options (c) (0.0%) (55)
(Premiums $132)
Other Assets and Liabilities (Net) 0.8% 5,293
--------
Net Assets 100.0% $657,024
========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 1998, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost. $ 78,482
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost
over value. (14,992)
--------
Unrealized appreciation-net $ 63,490
========
</TABLE>
(b) Non-income producing security.
(c) Premiums received on written options:
<TABLE>
<CAPTION>
Premium Value
Type Contracts (000s) (000s)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call - OTC Tommy Hilfiger Corp. 630 132 55
Strike @ 65.00 Exp. 07/17/98
</TABLE>
20 See accompanying notes
<PAGE>
Schedule of Investments
Capital Appreciation Fund
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
COMMON STOCKS 95.6%
Building 0.7%
Centex Corp. 207,300 $ 7,825
Capital Goods 7.1%
Tyco International Limited 238,000 14,994
Textron, Inc. 209,000 14,983
Illinois Tool Works, Inc. 205,800 13,724
Johnson Controls, Inc. 235,400 13,462
United Technologies Corp. 125,600 11,618
Dana Corp. 203,300 10,877
-------
79,658
Communications 1.0%
SBC Communications, Inc. 289,500 11,580
Consumer Discretionary 13.8%
Costco Cos., Inc. (b) 340,500 21,473
TJX Cos., Inc. 822,200 19,836
Jones Apparel Group, Inc. (b) 526,200 19,239
Dayton Hudson Corp. 342,800 16,626
Harley-Davidson, Inc. 425,300 16,480
Ford Motor Co. 231,500 13,659
Black & Decker Corp. 203,800 12,432
Federated Department Stores, Inc. (b) 227,100 12,221
Chrysler Corp. 214,400 12,087
CVS Corp. 290,500 11,311
-------
155,364
Consumer Services 8.6%
Carnival Corp. "A" 522,600 20,708
Omnicom Group 407,300 20,314
New York Times Co. 199,900 15,842
Gannett, Inc. 210,000 14,923
Tribune Co. 184,600 12,703
Marriott International, Inc. "A" 366,700 11,872
-------
96,362
Consumer Staples 6.4%
Safeway, Inc. (b) 517,800 21,068
Hershey Foods Corp. 198,300 13,683
Quaker Oats Co. 237,800 13,064
Kroger Co. (b) 288,000 12,348
Albertson's, Inc. 224,100 11,611
-------
71,774
Energy 2.7%
Dresser Industries, Inc. 317,200 13,976
Transocean Offshore, Inc. 297,700 13,248
Rowan Cos., Inc. (b) 139,800 2,717
-------
29,941
Financial & Business Services 28.4%
Capital One Financial Corp. 191,800 23,819
Cognizant Corp. 346,700 21,842
American Express Co. 133,900 15,265
Southtrust Corp. 347,750 15,127
Morgan Stanley, Dean Witter, Discover and Co. 162,700 14,867
Alliance Capital Management LP 564,200 14,281
Household International, Inc. 284,600 14,159
MBNA Corp. 425,300 14,035
Associates First Capital Corp. "A" 177,937 13,679
Hartford Financial Services Group, Inc. 117,200 13,405
Lincoln National Corp. 141,300 12,911
National City Corp. 176,000 12,496
Simon DeBartolo Group, Inc. 377,000 12,253
First Union Corp. 207,200 12,069
Provident Cos., Inc. "B" 336,800 11,620
Washington Mutual, Inc. 266,700 11,585
BankAmerica Corp. 133,800 11,565
Travelers Group, Inc. 188,600 11,434
Fleet Financial Group, Inc. 136,800 11,423
PNC Bank Corp. 212,215 11,420
Banc One Corp. 195,800 10,928
Allstate Corp. 118,900 10,887
BankBoston Corp. 176,000 9,790
Nationwide Financial Services, Inc. 161,300 8,226
-------
319,086
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
Health Care 9.7%
Schering-Plough Corp. 179,100 $16,410
HBO & Co. 449,700 15,852
Wellpoint Health Networks, Inc. (b) 200,400 14,830
Biogen, Inc. 298,600 14,631
Biomet, Inc. 436,600 14,435
Health Management Associates, Inc. "A" (b) 384,500 12,857
United Healthcare Corp. 181,200 11,506
HEALTHSOUTH Corp. (b) 331,600 8,849
----------
109,370
Materials & Processing 0.9%
Leggett & Platt, Inc. 424,530 10,613
Technology 10.1%
Cisco Systems, Inc. (b) 194,300 17,888
BMC Software, Inc. (b) 316,500 16,438
Storage Technology Corp. (b) 360,400 15,632
Xerox Corp. 145,000 14,736
Computer Associates International, Inc. 246,600 13,702
Cadence Design Systems, Inc. (b) 395,500 12,359
Dell Computer Corp. (b) 128,400 11,917
International Business Machines Corp. 91,700 10,528
----------
113,200
Transportation 4.2%
U.S. Airways Group, Inc. (b) 163,200 12,934
Continental Airlines, Inc. "B" (b) 208,000 12,662
Delta Air Lines, Inc. 89,100 11,516
FDX Corp. (b) 169,100 10,611
----------
47,723
Utilities 2.0%
Consolidated Edison, Inc. 242,000 11,147
Ameritech Corp. 247,800 11,120
----------
22,267
Total Common Stocks 1,074,763
(Cost $825,076) ----------
SHORT-TERM INSTRUMENTS 6.8%
<CAPTION>
Principal
Amount
(000s)
<S> <C> <C>
Repurchase Agreement 6.8%
State Street Bank
4.250% due 07/01/98 $ 76,037 76,037
(Dated 06/30/98. Collateralized by
U.S. Treasury Note 6.000% 08/15/99
valued at $77,560,771. Repurchase
proceeds are $76,045,977.)
----------
Total Short-Term Instruments 76,037
(Cost $76,037) ==========
Total Investments (a) 102.4% $1,150,800
(Cost $901,113)
Other Assets and Liabilities (Net) (2.4%) (27,257)
----------
Net Assets 100.0% $1,123,543
==========
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 1998, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost. $ 255,750
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost
over value. (7,403)
----------
Unrealized appreciation-net $ 248,347
==========
</TABLE>
(b) Non-income producing security.
See accompanying notes 21
<PAGE>
Schedule of Investments
Mid-Cap Growth Fund
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
COMMON STOCKS 96.1%
Aerospace 1.1%
BFGoodrich Co. 171,000 $ 8,486
Building 1.1%
Lennar Corp. 297,100 8,764
Capital Goods 5.9%
Waters Corp. (b) 176,300 10,391
General Dynamics Corp. 183,600 8,537
Aeroquip-Vickers, Inc. 140,600 8,208
Cordant Technologies, Inc. 171,200 7,897
Kaydon Corp. 215,800 7,620
Lear Corp. (b) 84,600 4,341
--------
46,994
Communications 1.0%
Century Telephone Enterprise 178,900 8,207
Consumer Discretionary 12.4%
Borders Group, Inc. (b) 326,300 12,073
Proffitt's, Inc. (b) 240,900 9,726
Warnaco Group, Inc. "A" 227,100 9,638
Dial Corp. 363,500 9,428
HON Industries 269,100 9,149
Abercrombie & Fitch Co. "A" (b) 202,400 8,906
Liz Claiborne, Inc. 161,800 8,454
Maytag Corp. 163,800 8,088
General Nutrition Cos., Inc. (b) 252,800 7,868
Herman Miller, Inc. 307,000 7,464
Bed, Bath & Beyond, Inc. (b) 142,400 7,378
Mattel, Inc. 1 0
--------
98,172
Consumer Services 5.5%
Royal Caribbean Cruises Limited 138,400 11,003
Promus Hotel Corp. (b) 239,837 9,234
CKE Restaurants, Inc. 216,900 8,947
GTECH Holdings Corp. (b) 253,400 8,536
Darden Restaurants, Inc. 374,700 5,948
--------
43,668
Consumer Staples 7.2%
McCormick & Co. 248,000 8,858
Rexall Sundown, Inc. (b) 240,500 8,478
Richfood Holdings, Inc. 409,250 8,466
Kroger Co. (b) 195,500 8,382
Suiza Foods Corp. (b) 136,700 8,159
Interstate Bakeries Corp. 231,400 7,680
Flowers Industries, Inc. 354,700 7,249
--------
57,272
Energy 3.9%
EVI Weatherford, Inc. (b) 217,000 8,056
Diamond Offshore Drilling, Inc. 199,000 7,960
National-Oilwell, Inc. (b) 289,600 7,765
R&B Falcon Corp. (b) 319,300 7,224
--------
31,005
Financial & Business Services 25.8%
Providian Financial Corp. 141,500 11,117
Ambac, Inc. 167,500 9,799
AmSouth Bancorp. 240,700 9,463
Valassis Communications, Inc. (b) 243,900 9,405
Protective Life Corp. 250,600 9,194
PaineWebber Group, Inc. 212,300 9,102
Mutual Risk Management Limited 247,030 9,001
SunAmerica, Inc. 151,350 8,693
Popular, Inc. 130,000 8,645
Finova Group, Inc. 152,500 8,635
Crestar Financial Corp. 158,100 8,626
EXEL Limited 110,700 8,614
Cullen/Frost Bankers, Inc. 155,600 8,441
Bank United Corp. 175,000 8,378
Mercury Gen Corp. 128,200 8,245
Allmerica Financial Corp. 126,800 8,242
Equity Residential Properties Trust 172,500 8,183
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
Equifax, Inc. 221,100 $ 8,029
Mercantile BanCorp. 152,313 7,673
Crescent Real Estate Equities Co. 219,800 7,391
Summit Bancorp 152,490 7,274
Travelers Property Casualty "A" 166,600 7,143
PMI Group, Inc. 83,600 6,134
BB&T Corp. 71,300 4,822
Life Re Corp. 53,800 4,412
--------
204,661
Health Care 9.4%
Total Renal Care Holdings 265,100 9,146
Health Management Associates, Inc. `A' (b) 268,925 8,992
Guidant Corp. 120,800 8,615
Watson Pharmaceuticals, Inc. (b) 180,000 8,404
Allegiance Corp. 158,700 8,133
Bausch & Lomb, Inc. 162,100 8,125
Trigon Healthcare, Inc. (b) 221,200 8,005
Mylan Laboratories, Inc. 260,100 7,819
DePuy, Inc. 263,100 7,433
--------
74,672
Materials & Processing 3.0%
Southdown, Inc. 131,600 9,393
Cytec Industries, Inc. (b) 166,200 7,354
Crompton & Knowles Corp. 274,300 6,909
--------
23,656
Technology 15.4%
Unisys Corp. (b) 461,100 13,026
Compuware Corp. (b) 243,900 12,469
Network Associates, Inc. (b) 248,350 11,890
Citrix Systems, Inc. (b) 152,800 10,448
Sanmina Corp. (b) 217,100 9,417
BEA Systems, Inc. (b) 408,500 9,370
Comverse Technology, Inc. (b) 179,400 9,306
Platinum Technology, Inc. (b) 315,000 8,997
Synopsys, Inc. (b) 190,900 8,734
Comdisco, Inc. 459,250 8,726
Tech Data Corp. (b) 189,600 8,129
American Power Conversion Corp. (b) 247,800 7,434
SCI Systems, Inc. (b) 120,000 4,515
--------
122,461
Transportation 2.2%
ASA Holdings, Inc. 180,600 8,962
Comair Holdings, Inc. 285,700 8,824
--------
17,786
Utilities 2.2%
El Paso Natural Gas Co. 239,700 9,169
IPALCO Enterprises, Inc. 184,400 8,194
--------
17,363
Total Common Stocks 763,167
(Cost $623,443) ========
SHORT-TERM INSTRUMENTS 5.7%
<CAPTION>
Principal
Amount
(000s)
<S> <C> <C>
Repurchase Agreement 5.7%
State Street Bank
4.250% due 07/01/98 $ 45,212 45,212
(Dated 06/30/98. Collateralized by
U.S. Treasury Note 5.625% 11/30/98
valued at $46,116,557. Repurchase
proceeds are $45,217,338.)
--------
Total Short-Term Instruments 45,212
(Cost $45,212) ========
Total Investments (a) 101.8% $808,379
(Cost $668,655)
Other Assets and Liabilities (Net) (1.8%) (14,501)
--------
Net Assets 100.0% $793,878
========
</TABLE>
22 See accompanying notes
<PAGE>
Schedule of Investments
Mid-Cap Growth Fund
June 30, 1998
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 1998, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost. $ 145,339
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost
over value. (5,876)
---------
Unrealized appreciation-net $ 139,463
=========
(b) Non-income producing security.
See accompanying notes 23
<PAGE>
Schedule of Investments
Innovation Fund
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (000s)
<S> <C> <C>
COMMON STOCKS 93.5%
Capital Goods 0.8%
MotivePower Industries, Inc. (b) 120,000 $ 2,940
Communications 6.0%
Nextel Communications, Inc. "A" (b) 250,000 6,219
Skytel Communications, Inc. 250,000 5,852
WinStar Communications, Inc. (b) 100,000 4,294
Clearnet Communications, Inc. "A" (b) 320,000 3,520
Com21, Inc. 150,000 3,187
--------
23,072
Consumer Discretionary 0.9%
Tefron Limited (b) 150,000 3,300
Financial & Business Services 1.7%
Outdoor Systems, Inc. (b) 230,000 6,440
Health Care 12.1%
VISX, Inc. (b) 200,000 11,900
Quintiles Transnational Corp. (b) 200,000 9,838
Sofamor Danek Group, Inc. (b) 90,000 7,791
STERIS Corp. (b) 100,000 6,359
Guidant Corp. 80,000 5,705
Theragenics Corp. (b) 200,000 5,213
--------
46,806
Technology 72.0%
America Online, Inc. (b) 300,000 31,800
Cisco Systems, Inc. (b) 250,000 23,016
Microsoft Corp. (b) 190,000 20,591
Nokia Corp. - ADR 260,000 18,866
Lucent Technologies, Inc. 219,600 18,268
Yahoo, Inc. (b) 100,000 15,750
Saville Systems - ADR (b) 270,000 13,534
Ascend Communications, Inc. (b) 250,000 12,391
CBT Group PLC SP - ADR (b) 220,000 11,770
Dell Computer Corp. (b) 120,000 11,137
Tellabs, Inc. (b) 150,000 10,744
Intel Corp. 140,000 10,377
Network Associates, Inc. (b) 195,000 9,336
Tekelec (b) 200,000 8,950
Aspect Development, Inc. (b) 110,000 8,319
CheckFree Holdings Corp. 250,000 7,359
Fore Systems, Inc. (b) 265,000 7,022
Citrix Systems, Inc. (b) 100,000 6,837
Premisys Communications, Inc. (b) 230,000 5,721
Xilinx, Inc. (b) 140,000 4,760
Compaq Computer Corp. (b) 165,000 4,682
3Com Corp. (b) 150,000 4,603
BEA Systems, Inc. (b) 200,000 4,587
Flextronics International Limited 100,000 4,350
Business Objects SA SP - ADR (b) 225,000 3,797
America Online, Inc. Rights (b) 300,000 0
--------
278,567
--------
Total Common Stocks 361,125
(Cost $204,437) ========
</TABLE>
SHORT-TERM INSTRUMENTS 7.6%
<TABLE>
<CAPTION>
Principal
Amount
(000s)
<S> <C> <C>
Commercial Paper 7.6%
Federal Home Loan Bank Corp
5.400% due 07/01/98 $ 27,000 27,000
Federal National Mortage Association
5.750% due 07/01/98 2,300 2,300
--------
Total Short-Term Instruments 29,300
(Cost $29,300) ========
<CAPTION>
Value
(000s)
<S> <C>
Total Investments (a) 101.1% $390,425
(Cost $233,737)
Written Options (c) (0.3%) (975)
(Premiums $650)
Other Assets and Liabilities (0.8%) (3,123)
--------
Net Assets 100.0% $386,327
========
</TABLE>
Notes to Schedule of Investments (amounts in thousands):
(a) At June 30, 1998, the net unrealized appreciation
(depreciation) of investments based on cost for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost. $159,448
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost
over value. (2,760)
---------
Unrealized appreciation-net $156,688
---------
(b) Non-income producing security.
(c) Premiums received on written options:
<TABLE>
<CAPTION>
Premium Value
Type Contracts (000s) (000s)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call - OTC America Online, Inc. (07/98)
Strike @ 110.00 Exp. 07/17/98 1,000 $310 $300
Call - OTC Yahoo, Inc. (07/98)
Strike @ 150.00 Exp. 07/17/98 500 340 675
----------------
$650 $975
================
</TABLE>
24 See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Equity Capital Mid-Cap
Income Value Renaissance Appreciation Growth Innovation
Selected Per Share Data for the Period Ended: June 30, 1998 Fund (b) Fund (b) Fund (b) Fund (b) Fund (b) Fund (b)
<S> <C> <C> <C> <C> <C> <C>
--------- ---------- ----------- ----------- --------- ----------
Net Asset Value Beginning of Period $16.71 $15.99 $18.99 $25.41 $23.97 $21.50
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Net Investment Income (Loss) (a) 0.09 0.04 0.01 0.02 0.00 (0.05)
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Net Realized / Unrealized Gain (Loss) on Investments (a) (0.66) (0.34) 0.10 0.58 0.02 2.83
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Total Income from Investment Operations (0.57) (0.30) 0.11 0.60 0.02 2.78
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Dividends from Net Investment Income (0.10) (0.05) 0.00 0.00 0.00 0.00
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Distributions from Net Realized Capital Gains 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Tax Basis Return of Capital 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Total Distributions (0.10) (0.05) 0.00 0.00 0.00 0.00
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Net Asset Value End of Period 16.04 15.64 19.10 26.01 23.99 24.28
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Total Return (%) (3.43) (1.85) 0.58 2.36 0.08 12.93
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Net Assets End of Period (000s) $ 104 $ 98 $ 126 $ 118 $ 142 $ 139
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Ratio of Expenses to Average Net Assets (%) * 1.10 1.10 1.25 1.10 1.10 1.30
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Ratio of Net Investment Income (Loss)
to Average Net Assets (%) * 2.23 1.23 0.21 0.27 0.03 (0.99)
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
Portfolio Turnover Rate (%) 45 77 192 75 66 100
- ------------------------------------------------------------ --------- ---------- ----------- ----------- --------- ----------
</TABLE>
*Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Commenced operations on April 8, 1998.
See accompanying notes 25
<PAGE>
Statement of Assets and Liabilities
June 30, 1998
<TABLE>
<CAPTION>
Equity Capital Mid-Cap
Income Value Renaissance Appreciation Growth Innovation
Amounts in thousands, except per share amounts Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
----------- ---------- ------------- -------------- ----------- ----------
Assets:
Investments, at value $201,860 $239,561 $651,786 $1,150,800 $808,379 $390,425
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Cash and foreign currency 1 1 357 0 1,762 454
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Receivable for investments and foreign currency sold 4,103 11,943 11,230 9,631 0 0
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Receivable for Fund shares sold 542 133 3,789 2,496 1,937 4,978
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Variation margin receivable 0 0 0 0 0 0
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Interest and dividends receivable 582 529 661 799 573 2
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Other assets 0 0 0 0 0 0
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
207,088 252,167 667,823 1,163,726 812,651 395,859
====================================================== =========== ========== ============= ============== =========== ==========
Liabilities:
Payable for investments and foreign currency purchased $ 5,054 $ 12,119 $ 8,489 $ 38,145 $ 17,385 $ 1,973
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Written options outstanding 0 0 55 0 0 975
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Payable for Fund shares redeemed 160 394 912 1,190 689 5,922
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Dividends payable 9 32 360 79 28 124
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Accrued investment advisor's fee 75 88 310 400 280 185
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Accrued administrator's fee 48 67 206 244 189 114
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Accrued distribution and/or servicing fee 35 108 467 125 202 239
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
5,381 12,808 10,799 40,183 18,773 9,532
====================================================== =========== ========== ============= ============== =========== ==========
Net Assets $201,707 $239,359 $657,024 $1,123,543 $793,878 $386,327
====================================================== =========== ========== ============= ============== =========== ==========
Net Assets Consist of:
Paid in capital $154,232 $193,061 $512,594 $ 801,861 $613,076 $229,964
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Undistributed net investment income 4,754 5,621 46,534 2,964 52 0
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Accumulated undistributed net realized gain 14,470 14,836 32,366 69,031 41,026 0
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Net unrealized appreciation 28,251 25,841 65,530 249,687 139,724 156,363
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
$201,707 $239,359 $657,024 $1,123,543 $793,878 $386,327
====================================================== =========== ========== ============= ============== =========== ==========
Net Assets:
Class D 104 98 126 118 142 139
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Other Classes 201,603 239,261 656,898 1,123,425 793,736 386,188
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Shares Issued and Outstanding:
Class D 7 6 7 5 6 6
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Net Asset Value and Redemption Price Per Share
(Net Assets Per Share Outstanding):
Class D $16.04 $15.64 $19.10 $26.01 $23.99 $24.28
- ------------------------------------------------------ ----------- ---------- ------------- -------------- ----------- ----------
Cost of Investments Owned $173,609 $213,720 $586,333 $ 901,113 $668,655 $233,737
====================================================== =========== ========== ============= ============== =========== ==========
</TABLE>
26 See accompanying notes
<PAGE>
Statement of Operations
For the year ended June 30, 1998
<TABLE>
<CAPTION>
Equity Capital Mid-Cap
Income Value Renaissance Appreciation Growth Innovation
Amounts in thousands Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
--------- ---------- ------------- -------------- --------- ----------
Investment Income:
Dividends, net of foreign taxes $ 5,723 $ 4,626 $ 7,141 $ 8,511 $ 4,903 $ 458
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Interest 345 253 1,054 2,397 1,951 699
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Total income 6,068 4,879 8,195 10,908 6,854 1,157
========================================================== ========= ========== ============= ============== ========= ==========
Expenses:
Investment advisory fees 795 951 3,010 3,628 2,622 2,029
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Administration fees 487 721 2,006 2,144 1,722 1,248
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Servicing fees - Class D 0 0 0 0 0 0
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Distribution and/or servicing fees - Other Classes 267 1,155 4,622 770 1,618 2,628
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Trustees' fees 16 20 45 70 51 33
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Miscellaneous 0 0 1 0 0 5
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Total Expenses 1,565 2,847 9,684 6,612 6,013 5,943
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Net Investment Income (Loss) 4,503 2,032 (1,489) 4,296 841 (4,786)
========================================================== ========= ========== ============= ============== ========= ==========
Net Realized and Unrealized Gain (Loss):
Net realized gain on investments 23,527 29,304 123,499 89,980 58,714 17,532
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Net realized gain on futures contracts and written options 0 0 71 0 0 606
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Net change in unrealized appreciation on investments 4,261 3,088 3,968 125,025 57,682 109,895
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Net change in unrealized appreciation (depreciation)
on futures contracts and written options 0 0 77 0 0 (325)
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Net Gain 27,788 32,392 127,615 215,005 116,396 127,708
- ---------------------------------------------------------- --------- ---------- ------------- -------------- --------- ----------
Net Increase in Assets Resulting from Operations $32,291 $34,424 $126,126 $219,301 $117,237 $122,922
========================================================== ========= ========== ============= ============== ========= ==========
</TABLE>
See accompanying notes 27
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Equity Income Fund Value Fund Renaissance Fund
---------------------------------- ----------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Nine Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net
Assets from:
Operations:
Net investment income (loss) $ 4,503 $ 3,710 $ 2,032 $ 1,702 $ (1,489) $ 664
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain 23,527 20,609 29,304 13,315 123,570 42,917
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 4,261 6,318 3,088 19,593 4,045 33,883
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase resulting
from operations 32,291 30,637 34,424 34,610 126,126 77,464
==================================================================================================================================
Distributions to Shareholders:
From net investment income
Class D (1) 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes (4,434) (4,659) (2,015) (1,968) (425) (973)
- -----------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class D 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
From net realized capital gains
Class D 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes (20,707) (14,904) (20,689) (2,344) (80,722) (38,793)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (25,142) (19,563) (22,704) (4,312) (81,147) (39,766)
==================================================================================================================================
Fund Share Transactions:
Receipts for shares sold
Class D 108 0 100 0 126 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes 64,648 28,212 90,008 38,497 465,308 151,393
- -----------------------------------------------------------------------------------------------------------------------------------
Shares issued in reorganization
Other Classes 0 0 0 80,835 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of
distributions
Class D 1 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes 24,499 18,969 21,627 4,260 74,240 886
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed
Class D 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes (34,922) (40,842) (63,900) (26,813) (311,714) (72,275)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting
from Fund share transactions 54,334 6,339 47,835 96,779 227,960 80,004
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets 61,483 17,413 59,555 127,077 272,939 117,702
==================================================================================================================================
Net Assets:
Beginning of period 140,224 122,811 179,804 52,727 384,085 266,383
- -----------------------------------------------------------------------------------------------------------------------------------
End of period * $201,707 $140,224 $239,359 $179,804 $ 657,024 $384,085
- -----------------------------------------------------------------------------------------------------------------------------------
*Including net undistributed investment
income of: $ 4,754 $ 2,380 $ 5,621 $ 6,824 $ 46,534 $ 28,688
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28 See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
Capital Appreciation Fund Mid-Cap Growth Fund Innovation Fund
----------------------------- ---------------------------- --------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Nine Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Investments from:
Operations:
Net investment income (loss) $ 4,296 $ 4,349 $ 841 $ 1,077 $ (4,786) $ (2,397)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain 89,980 45,370 58,714 30,855 18,138 3,357
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation 125,025 74,013 57,682 50,902 109,570 2,593
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase resulting from
operations 219,301 123,732 117,237 82,834 122,922 3,553
===================================================================================================================================
Distributions to Shareholders:
From net investment income
Class D 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes (3,830) (2,210) (1,495) (606) 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income
Class D 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
From net realized capital gains
Class D 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes (50,344) (44,170) (30,237) (43,786) (17,902) (3,592)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (54,174) (46,380) (31,732) (44,392) (17,902) (3,592)
===================================================================================================================================
Fund Share Transactions:
Receipts for shares sold
Class D 115 0 142 0 124 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes 560,304 191,296 600,636 83,229 462,082 212,663
- -----------------------------------------------------------------------------------------------------------------------------------
Shares issued in reorganization
Other Classes 0 0 0 75,422 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of
distributions
Class D 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes 43,103 36,688 30,438 43,184 16,937 0
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed
Class D 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Other Classes (207,057) (92,113) (310,412) (84,790) (468,412) (163,645)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting
from Fund share transactions 396,465 135,871 320,804 117,045 10,731 49,018
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets 561,592 213,223 406,309 155,487 115,751 48,979
===================================================================================================================================
Net Assets:
Beginning of period 561,951 348,728 387,569 232,082 270,576 221,597
- -----------------------------------------------------------------------------------------------------------------------------------
End of period * $1,123,543 $561,951 $ 793,878 $387,569 $ 386,327 $ 270,576
- -----------------------------------------------------------------------------------------------------------------------------------
*Including net undistributed
investment income of: $ 2,964 $ 8,727 $ 52 $ 513 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes 29
<PAGE>
Notes to Financial Statements
June 30, 1998
1. Organization
PIMCO Funds: Multi-Manager Series (the "Trust") is registered under the
Investment Company Act of 1940, as amended as an open-end management investment
company organized as a Massachusetts business trust. The Trust currently
consists of twenty three separate investment funds (the "Funds"). The Trust may
offer up to six classes of shares: Institutional, Administrative, A, B, C and D.
Each share class has identical voting rights (except shareholders of a class
that have exclusive voting rights regarding any matter relating solely to that
class of shares). The Structured Emerging Markets and Tax-Efficient Structured
Emerging Markets Funds had not commenced operations as of June 30, 1998.
Information presented in these financial statements pertains to the Class D
shares of the Trust. Certain detail financial information for the Institutional,
Administrative, A, B and C Classes (the "Other Classes") is provided separately
and is available upon request.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in preparation of its financial statements. These policies
are in conformity with generally accepted accounting principles. The preparation
of financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
Security Valuation. Portfolio securities and other financial instruments for
which market quotations are readily available are stated at market value. Market
value is determined on the basis of last reported sales prices, or if no sales
are reported, as is the case for most securities traded over-the-counter, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market value. Certain fixed income securities for which daily
market quotations are not readily available may be valued, pursuant to
guidelines established by the Board of Trustees, with reference to fixed income
securities whose prices are more readily obtainable.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statement of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared and paid quarterly to shareholders of record by the
Equity Income, Value and Renaissance Funds. Dividends from net investment
income, if any, are declared and paid at least annually to shareholders of
record by the other Funds. Net long-term capital gains earned by a Fund, if any,
will be distributed no less frequently than once each year.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for such
items as wash sales, foreign currency transactions, net operating losses and
capital loss carryforwards. Certain amounts have been reclassified between
undistributed net investment income, accumulated undistributed net realized
gains or losses and paid in capital to more appropriately conform financial
accounting and tax characterizations of dividend distributions.
Multiclass Operations. Each class offered by the Trust has equal rights as to
assets. Income, non-class specific expenses, and realized and unrealized capital
gains and losses are allocated to each class of shares based on the relative net
assets of each class.
Federal Income Taxes. Each Fund intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Foreign Taxes on Dividends. Dividend income in the Statement of Operations is
shown net of foreign taxes withheld on dividends from foreign securities.
Foreign taxes withheld were as follows: Equity Income Fund - $6,396; Value Fund
- - $12,048; Renaissance Fund - $40,871; Mid-Cap Growth Fund - $6,930; and
Innovation Fund - $31,650.
30
<PAGE>
Futures and Options. Certain Funds are authorized to enter into futures
contracts and options. A Fund may use futures contracts to manage its exposure
to the markets or to movements in interest rates and currency values. The
primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Forward Currency Transactions. Certain Funds are authorized to enter into
forward foreign exchange contracts for the purpose of hedging against foreign
exchange risk arising from the Fund's investment or anticipated investment in
securities denominated in foreign currencies. A Fund may also 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. All
commitments are marked to market daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded. Realized gains or losses
are recorded at the time the forward contract matures or by delivery of the
currency. Risks may arise upon entering these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
Repurchase Agreements. Each Fund may engage in repurchase transactions. Under
the terms of a typical repurchase agreement, the Fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time. The
market value of the collateral must be equal at all times to the total amount of
the repurchase obligations, including interest. Generally, in the event of
counterparty default, the Fund has the right to use the collateral to offset
losses incurred.
3. Fees, Expenses, and Related Party Transactions Investment Advisory Fee.
PIMCO Advisors L.P. ("PIMCO Advisors") serves as investment advisor to the
Trust, pursuant to an Investment Advisory Agreement. PIMCO Advisors receives
from the Trust a fee based on an annual percentage of the average daily net
assets of each Fund as follows: 0.60% for the Renaissance Fund; 0.65% for the
Innovation Fund; and 0.45% for all other Funds. Each of the Funds also has a
sub-advisor which, under the supervision of PIMCO Advisors, directs the
investments of the Fund's assets. All of the sub-advisors are affiliates of
PIMCO Advisors. The advisory fees received by PIMCO Advisors are paid in all or
in part to each of the sub-advisors in accordance with the portfolio
management agreements.
Administration Fee. PIMCO Advisors provides administrative services to the Trust
for which it receives from each Fund a monthly administrative fee based on each
share class's average daily net assets. The Administration Fee for Class D is
charged at the annual rate of 0.40%. The Administration Fee for the
Institutional and Administrative Classes is charged at the annual rate of 0.25%.
The Administration Fee for the A, B and C Classes is charged at the annual rate
of 0.40%.
Distribution and Servicing Fees. PIMCO Funds Distributors LLC ("PFD"), formerly
PIMCO Funds Distribution Company, a wholly-owned subsidiary of PIMCO Advisors,
serves as the distributor of the Trust's shares.
The Trust is permitted to reimburse out of the Administrative Class assets of
each Fund, in an amount up to 0.25% on an annual basis of the average daily net
assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Fund shares as their funding medium. The effective rate paid
to PFD was 0.25% during the current fiscal year.
Pursuant to the Distribution and Servicing Plans adopted by the A, B, C and D
Classes of the Trust, the Trust compensates PFD or an affiliate with respect to
Class D for services provided and expenses incurred in connection with
assistance rendered in the sale of shares and services rendered to shareholders
and for maintenance of shareholder accounts of the A, B, C and D Classes. The
Trust paid PFD distribution and servicing fees at an effective rate as set forth
below (calculated as a percentage of each Fund's average daily net assets
attributable to each class):
<TABLE>
<CAPTION>
Distribution Fee(%) Servicing Fee(%)
- --------------------------------------------------
<S> <C> <C>
Class A
All Funds -- 0.25
Class B
All Funds 0.75 0.25
Class C
All Funds 0.75 0.25
Class D
All Funds -- 0.25
</TABLE>
PFD also receives the proceeds of the initial sales charges paid by the
shareholders upon the purchase of Class A shares and the contingent
deferred sales charges paid by the shareholders upon certain redemptions of
Class A, B and C shares. For the period ended June 30, 1998, PFD received
$2,872,883 representing commissions (sales charges) and contingent deferred
sales charges.
31
<PAGE>
Notes to Financial Statements (Cont.)
June 30, 1998
Expenses. The Trust is also responsible for the following expenses: (i) salaries
and other compensation of any of the Trust's executive officers and employees
who are not officers, directors, stockholders or employees of PIMCO Advisors,
PIMCO, or its subsidiaries or affiliates; (ii) taxes and governmental fees;
(iii) brokerage fees and commissions and other portfolio transaction expenses;
(iv) the cost of borrowing money, including interest expenses; (v) fees and
expenses of the Trustees who are not "interested persons" of the Advisor, PIMCO,
Portfolio Managers, or the Trust, and any counsel retained exclusively for their
benefit; (vi) extraordinary expenses, including costs of litigation and
indemnification expenses; (vii) expenses such as organizational expenses, which
are capitalized in accordance with generally accepted accounting principles; and
(viii) any expenses allocated or allocable to a specific class of shares, which
include distribution and service fees payable with respect to certain share
classes 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 and subject to review and approval by the Trustees. The ratio of
expenses to average net assets, as disclosed in the Financial Highlights, may
differ from the annual fund operating expenses per share class as disclosed in
the Prospectus for the reasons set forth above.
Each unaffiliated Trustee receives an annual retainer of $45,000, plus $2,000
for each Board of Trustees meeting attended, and $500 for each Audit and
Performance Committee meeting attended, plus reimbursement of related expenses.
Each Audit and Performance Committee Member receives an additional annual
retainer of $1,000, the Chairman of the Audit and Performance Committees
receives an additional annual retainer of $2,000, the Chairman of the
Independent Trustees receives an additional annual retainer of $6,000, and each
Vice Chairman of the entire Board receives an additional annual retainer of
$3,000. These expenses are allocated to the Funds of the Trust according to
their respective net assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended June 30, 1998 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
U.S. Government/Agency All Other
------------------------------------------------------------------
Purchases Sales Purchases Sales
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income Fund $ 108,839 $ 76,245
Value Fund 188,181 158,285
Renaissance Fund 1,093,485 966,292
Capital Appreciation Fund 879,186 566,842
Mid-Cap Growth Fund 637,096 360,640
Innovation Fund 300,097 328,301
</TABLE>
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Renaissance Fund Innovation Fund
------------------------------------------------------------------
Premium Contracts Premium Contracts
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at 06/30/97 $ 0 0 $ 0 0
Sales 271 1,130 3,864 10,142
Closing Buys (139) (500) (2,140) (4,892)
Expirations 0 0 (897) (2,996)
Exercised 0 0 (176) (754)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at 06/30/98 $ 132 630 $ 651 1,500
===================================================================================================================================
</TABLE>
32
<PAGE>
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Equity Income Fund Value Fund
------------------------------------------ -----------------------------------------
Year Ended 6/30/98 Year Ended 6/30/97 Year Ended 6/30/98 Year Ended 6/30/97
Shares Amount Shares Amount Shares Amount Shares Amount
- ---------------------------------- ------------------------------------------ -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receipts for shares sold
Class D 7 $ 108 0 $ 0 6 $ 100 0 $ 0
- ---------------------------------- ------------------------------------------ -----------------------------------------
Other Classes 4,002 64,648 1,965 28,213 5,791 90,008 3,576 38,497
- ---------------------------------- ------------------------------------------ -----------------------------------------
Shares issued in reorganization
Other Classes 0 0 0 0 0 0 5,988 80,835
- ---------------------------------- ------------------------------------------ -----------------------------------------
Issued as reinvestment of
distributions
Class D 0 1 0 0 0 0 0 0
- ---------------------------------- ------------------------------------------ -----------------------------------------
Other Classes 1,593 24,499 1,384 18,968 1,478 21,627 322 4,260
- ---------------------------------- ------------------------------------------ -----------------------------------------
Cost of shares redeemed
Class D 0 0 0 0 0 0 0 0
- ---------------------------------- ------------------------------------------ -----------------------------------------
Other Classes (2,151) (34,922) (2,803) (40,842) (4,119) (63,900) (1,970) (26,813)
- ---------------------------------- ------------------------------------------ -----------------------------------------
Net increase resulting from
Fund share transactions 3,451 $ 54,334 546 $ 6,339 3,156 $ 47,835 7,916 $ 96,779
================================== ========================================== =========================================
</TABLE>
<TABLE>
<CAPTION>
Renaissance Fund
-------------------------------------------------
Year Ended 6/30/98 Year Ended 6/30/97
Shares Amount Shares Amount
-------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------- -------------------------------------------------
Receipts for shares sold
Class D 7 $ 126 0 $ 0
- ---------------------------------- -------------------------------------------------
Other Classes 25,062 465,308 9,568 151,393
- ---------------------------------- -------------------------------------------------
Shares issued in reorganization
Other Classes 0 0 0 0
- ---------------------------------- -------------------------------------------------
Issued as reinvestment of
distributions
Class D 0 0 0 0
- ---------------------------------- -------------------------------------------------
Other Classes 4,447 74,240 56 886
- ---------------------------------- -------------------------------------------------
Cost of shares redeemed
Class D 0 0 0 0
- ---------------------------------- -------------------------------------------------
Other Classes (16,657) (311,714) (4,514) (72,275)
- ---------------------------------- -------------------------------------------------
Net increase resulting from
Fund share transactions 12,859 $ 227,960 5,110 $ 80,004
================================== =================================================
</TABLE>
<TABLE>
<CAPTION>
Capital Appreciation Fund Mid-Cap Growth Fund
-------------------------------------------- -------------------------------------------
Year Ended 6/30/98 Year Ended 6/30/97 Year Ended 6/30/98 Year Ended 6/30/97
Shares Amount Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------- -------------------------------------------- -------------------------------------------
Receipts for shares sold
Class D 5 $ 115 0 $ 0 6 $ 142 0 $ 0
- ---------------------------------- -------------------------------------------- -------------------------------------------
Other Classes 23,379 560,304 10,030 191,296 25,999 600,636 5,047 83,229
- ---------------------------------- -------------------------------------------- -------------------------------------------
Shares issued in reorganization
Other Classes 0 0 0 0 0 0 4,103 75,422
- ---------------------------------- -------------------------------------------- -------------------------------------------
Issued as reinvestment of
distributions
Class D 0 0 0 0 0 0 0 0
- ---------------------------------- -------------------------------------------- -------------------------------------------
Other Classes 1,860 43,103 2,026 36,688 1,338 30,438 2,496 43,184
- ---------------------------------- -------------------------------------------- -------------------------------------------
Cost of shares redeemed
Class D 0 0 0 0 0 0 0 0
- ---------------------------------- -------------------------------------------- -------------------------------------------
Other Classes (8,659) (207,057) (4,802) (92,113) (13,377) (310,412) (4,446) (84,790)
- ---------------------------------- -------------------------------------------- -------------------------------------------
Net increase resulting from
Fund share transactions 16,585 $ 396,465 7,254 $135,871 13,966 $ 320,804 7,200 $117,045
================================== ============================================ ===========================================
</TABLE>
<TABLE>
<CAPTION>
Innovation Fund
-------------------------------------------------
Year Ended 6/30/98 Year Ended 6/30/97
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ----------------------------------- --------------------------------------------------
Receipts for shares sold
Class D 6 $ 124 0 $ 0
- ----------------------------------- --------------------------------------------------
Other Classes 22,660 462,082 12,622 212,663
- ----------------------------------- --------------------------------------------------
Shares issued in reorganization
Other Classes 0 0 0 0
- ----------------------------------- --------------------------------------------------
Issued as reinvestment of
distributions
Class D 0 0 0 0
- ----------------------------------- --------------------------------------------------
Other Classes 930 16,937 0 0
- ----------------------------------- --------------------------------------------------
Cost of shares redeemed
Class D 0 0 0 0
- ----------------------------------- --------------------------------------------------
Other Classes (23,091) (468,412) (9,824) (163,645)
- ----------------------------------- --------------------------------------------------
Net increase resulting from
Fund share transactions 505 $ 10,731 2,798 $ 49,018
=================================== ==================================================
</TABLE>
33
<PAGE>
Report of Independent Accountants
To the Trustees and Class D Shareholders of the
PIMCO Funds: Multi-Manager Series
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights of the Class D shares present
fairly, in all material respects, the financial position of the Equity Income
Fund, Value Fund, Renaissance Fund, Capital Appreciation Fund, Mid-Cap Growth
Fund and Innovation Fund (hereafter referred to as the "Funds") at June 30,
1998, and the results of each of their operations, the changes in each of their
net assets and the financial highlights of the Class D shares for each of the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Kansas City, Missouri
August 17, 1998
34
<PAGE>
Federal Income Tax Information
(unaudited)
For the benefit of corporate shareholders only, the portion of dividends paid
out of ordinary income earned during certain Funds' fiscal years ended June 30,
1998 which qualify for the corporate dividend-received deduction are as follows:
Equity Income Fund 61.03%
Value Fund 40.22%
Renaissance Fund 9.64%
Capital Appreciation Fund 55.27%
Mid-Cap Growth Fund 60.37%
Innovation Fund 3.53%
Shareholders are advised to consult their own tax advisor with respect to the
tax consequences of their investment in the Trust. However, income received by
tax-exempt recipients need not be reported as taxable income. In January 1999,
you will be advised on IRS form 1099-DIV as to the federal tax status of the
dividends and distributions received by you in calendar year 1998.
35
<PAGE>
PIMCO Funds: Access to the highest standard
PIMCO Funds offers unique access to the institutional investment capabilities of
PIMCO Advisors L.P., manager of over $229 billion. PIMCO Advisors consists of
seven institutional investment firms, each seeking the highest caliber
performance in a single discipline.
PIMCO Advisors L.P. Graphic
Six of these firms currently manage PIMCO Funds. Together, their superior
standard of expertise has attracted many prestigious institutional clients,
including 46 of the 100 largest U.S. corporations.
- --------------------------------------------------------------------------------
Manager PIMCO Advisors L.P., 800 Newport Center Drive,
Newport Beach, CA 92660
- --------------------------------------------------------------------------------
Distributor PIMCO Funds Distributors LLC, 2187 Atlantic Street,
Stamford, CT 06902
- --------------------------------------------------------------------------------
Custodian Investors Fiduciary Trust Company, 801 Pennsylvania,
Kansas City, MO 64105
- --------------------------------------------------------------------------------
Shareholder Shareholder Services, Inc., P.O. Box 5866, Denver, CO 80217
Servicing Agent and
Transfer Agent
- --------------------------------------------------------------------------------
Independent PricewaterhouseCoopers LLP, 1055 Broadway,
Accountant Kansas City, MO, 64105
- --------------------------------------------------------------------------------
Legal Counsel Ropes & Gray, One International Place,
Boston, MA 02110
- --------------------------------------------------------------------------------
For Account For PIMCO Funds account information contact your financial
Information advisor, or if you receive account statements directly from
PIMCO Funds, you can also call 1-800-426-0107. Telephone
representatives are available M-F 8:30 am to 8:00 pm E.T.
- --------------------------------------------------------------------------------
Web Site https://www.pimcofunds.com
- --------------------------------------------------------------------------------
This is a copy of a report by PIMCO Funds to its shareholders. Distribution of
this report to persons other than shareholders of the Trust is authorized only
when accompanied by the Trust's Prospectus. This report does not offer for sale
or solicit orders to buy any securities.
This material is authorized for use only when preceded or accompanied by a
current PIMCO Funds prospectus, which describes in greater detail the investment
policies, management fees and other matters of interest to prospective
investors. Please read the prospectus carefully before you invest or send money.
PZ005.8/98
- --------------------------------------------------------------------------------
LOGO PIMCO Funds
PIMCO Funds
Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
