<PAGE>
PIMCO Funds Prospectus
Multi-Manager
Series STOCK FUNDS
November 1, 1998 Equity Income Fund
Share Class Value Fund
D Renaissance Fund
Tax-Efficient Equity Fund
Capital Appreciation Fund
Mid-Cap Growth Fund
SPECIALIZED STOCK FUNDS
Innovation Fund
PIMCO
-----
FUNDS
<PAGE>
PIMCO Funds: Multi-Manager Series
PROSPECTUS
November 1, 1998
PIMCO Funds: Multi-Manager Series (the "Trust") is an open-end se-
ries management investment company offering seven separate diver-
sified investment portfolios (each a "Fund") in this Prospectus,
each with different investment objectives and strategies. The ad-
dress of PIMCO Funds: Multi-Manager Series is 840 Newport Center
Drive, Suite 300, Newport Beach, CA 92660.
Each Fund offers Class D shares in this Prospectus. Through sepa-
rate prospectuses, certain Funds and other series of the Trust of-
fer up to five additional classes of shares, Class A, Class B,
Class C, Institutional Class and Administrative Class shares. See
"Description of the Trust--Multiple Classes of Shares."
This Prospectus concisely describes the information investors
should know before investing in Class D shares of the Funds.
Please read this Prospectus carefully and keep it for further ref-
erence. Information about the investment objective of each Fund,
along with a detailed description of the types of securities in
which each Fund may invest, and of investment policies and re-
strictions applicable to each Fund, are set forth in this Prospec-
tus. There can be no assurance that the investment objective of
any Fund will be achieved. Because the market value of each Fund's
investments will change, the investment returns and net asset
value per share of each Fund will vary.
Class D shares are offered only through financial service firms,
such as broker-dealers or registered investment advisers, with
which the Funds' distributor has an agreement for the use of the
Funds in particular investment products, programs or accounts for
which a fee may be charged. See "How to Buy Shares." If you wish
to purchase shares directly from the Trust or the Funds' distribu-
tor, please consider one of the other classes of shares. See "De-
scription of the Trust--Multiple Classes of Shares."
A Statement of Additional Information, dated November 1, 1998, as
amended or supplemented from time to time, is available free of
charge by writing to PIMCO Funds Distributors LLC (the "Distribu-
tor"), 2187 Atlantic Street, Stamford, Connecticut 06902, or by
telephoning 1-888-87-PIMCO. The Statement of Additional Informa-
tion, which contains more detailed information about the Trust,
has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. The Securities and
Exchange Commission maintains an Internet World Wide Web site (at
www.sec.gov) which contains the Statement of Additional Informa-
tion, materials that are incorporated by reference into this Pro-
spectus and the Statement of Additional Information, and other in-
formation about the Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE SHARES ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORA-
TION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
TABLE OF CONTENTS
PIMCO Funds Overview..................3
Schedule of Fees......................4
Financial Highlights..................6
Investment Objectives and Policies....8
Characteristics and Risks of Securities
and Investment Techniques...........11
Performance Information..............22
How to Buy Shares....................23
Exchange Privilege...................24
How to Redeem........................25
Distributor..........................25
How Net Asset Value Is Determined....25
Distributions........................26
Taxes................................27
Management of the Trust..............28
Description of the Trust.............32
2 PIMCO Funds: Multi-Manager Series
<PAGE>
PIMCO Funds Overview
PIMCO Advisors L.P. ("PIMCO Advisors" or the "Adviser") is the in-
vestment adviser of all the Funds. PIMCO Advisors is one of the
largest investment management firms in the U.S. As of September
30, 1998, PIMCO Advisors and its subsidiary partnerships had ap-
proximately $225.9 billion in assets under management. Each of the
Funds also has a sub-adviser (each a "Portfolio Manager") respon-
sible for portfolio investment decisions. All of the Funds' Port-
folio Managers are affiliates of PIMCO Advisors and are listed be-
low.
<TABLE>
<CAPTION>
INVESTMENT SPECIALTY
---------------------------------------------------------------------------------
<S> <C>
CADENCE CAPITAL Stocks of growth companies that the Portfolio Manager
MANAGEMENT ("Cadence") believes are trading at a reasonable price
------------------------------------------------------
NFJ INVESTMENT GROUP Value stocks that the Portfolio Manager believes are
("NFJ") undervalued and/or offer above-average dividend yields
------------------------------------------------------
COLUMBUS CIRCLE Stocks, using its "Positive Momentum & Positive
INVESTORS ("Columbus Surprise" discipline
Circle")
------------------------------------------------------
PARAMETRIC PORTFOLIO Stocks, using quantitatively-driven fundamental
ASSOCIATES ("Parametric") analysis and economic methods, with a specialty in
tax-efficient products
</TABLE>
<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE PRIMARY INVESTMENTS (/1/) PORTFOLIO MANAGER
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FUND STOCK FUNDS Equity Current income as a Common stocks with below- NFJ
PROFILES Income primary objective; long- average price to earnings
term growth of capital ratios and higher dividend
as a secondary objective yields relative to their
industry groups
--------------------------------------------------------------------------------------
Value Long-term growth of Common stocks with below- NFJ
capital and income average price to earnings
ratios relative to their
industry groups
--------------------------------------------------------------------------------------
Renaissance Long-term growth of Common stocks with below- Columbus
capital and income average valuations that Circle
have improving business
fundamentals
-------------------------------------------------------------------------------------
Tax-Efficient Maximum after-tax growth A broadly diversified Parametric
Equity of capital portfolio of at least 200
common stocks of companies
with larger market
capitalizations
-------------------------------------------------------------------------------------
Capital Growth of capital Common stocks of companies Cadence
Appreciation with market
capitalizations of at
least $1 billion that have
improving fundamentals and
whose stock is reasonably
valued by the market
-------------------------------------------------------------------------------------
Mid-Cap Growth of capital Common stocks of companies Cadence
Growth with market
capitalizations in excess
of $500 million that have
improving fundamentals and
whose stock is reasonably
valued by the market
-------------------------------------------------------------------------------------------------
SPECIALIZED Innovation Capital appreciation; no Common stocks of companies Columbus
STOCK FUNDS consideration given to with small, medium and Circle
income large market
capitalizations
(technology-related
stocks)
</TABLE>
1. For specific information concerning the market capitalizations
of companies in which each Fund may invest and each Fund's invest-
ment style, see "Investment Objectives and Policies" in this Pro-
spectus.
November 1, 1998 Prospectus 3
<PAGE>
Schedule of Fees
ALL FUNDS--CLASS D SHARES
---------------------------------------------------------------
MAXIMUM INITIAL SALES CHARGE IMPOSED ON PURCHASES
SHAREHOLDER (as a percentage of offering price at time of purchase) None
TRANSACTION ---------------------------------------------------------------
EXPENSES MAXIMUM SALES CHARGE IMPOSED ON REINVESTED DIVIDENDS
(as a percentage of net asset value at time of purchase) None
---------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE
(as a percentage of original purchase price) None
---------------------------------------------------------------
EXCHANGE FEE None
<TABLE>
<CAPTION>
EXAMPLE: You would pay the
following expenses on a $1,000
investment assuming (1) 5%
ANNUAL FUND OPERATING EXPENSES annual return and (2) with or
(As a percentage of average net without redemption at the end
assets): of each time period:
TOTAL
ADMINI- 12B-1 FUND
ADVISORY STRATIVE (SERVICE) OPERATING YEAR
FUND FEES FEES(/1/) FEES(/1/) EXPENSES 1 3 5 10
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME .45% .40% .25% 1.10% $11 $35 $61 $134
----------------------------------------------------------------------------------------------
VALUE .45 .40 .25 1.10 11 35 61 134
----------------------------------------------------------------------------------------------
RENAISSANCE .60 .40 .25 1.25 13 40 69 151
----------------------------------------------------------------------------------------------
TAX-EFFICIENT EQUITY .45 .40 .25 1.10 11 35 -- --
----------------------------------------------------------------------------------------------
CAPITAL APPRECIATION .45 .40 .25 1.10 11 35 61 134
----------------------------------------------------------------------------------------------
MID-CAP GROWTH .45 .40 .25 1.10 11 35 61 134
----------------------------------------------------------------------------------------------
INNOVATION .65 .40 .25 1.30 13 41 71 157
</TABLE>
1. The Funds' administration agreement includes a plan for Class D
shares that has been adopted in conformity with the requirements
set forth in Rule 12b-1 under the Investment Company Act of 1940.
The plan provides that up to .25% per annum of the total fees paid
under the administration agreement may represent reimbursement for
expenses in respect of activities ("subject activities") that may
be deemed to be primarily intended to result in the sale of Class
D shares. Each Fund will pay a total of .65% per annum under the
administration agreement regardless of whether a portion or none
of the .25% authorized under the plan is paid for subject servic-
es. To the extent that any payments are deemed to be made pursuant
to the plan, the Funds intend to treat such payments as "service
fees" for purposes of applicable rules of the National Association
of Securities Dealers, Inc. (the "NASD"). See "Management of the
Trust--Fund Administrator." To the extent that such payments for
subject activities are deemed not to be "service fees," Class D
shareholders may, depending on the length of time the shares are
held, pay more than the economic equivalent of the maximum front-
end sales charges permitted by relevant rules of the NASD.
The purpose of the foregoing tables is to assist investors in un-
derstanding the various costs and expenses of the Trust that are
borne directly or indirectly by Class D shareholders of the Funds.
The information is based upon each Fund's current fees and ex-
penses.
NOTE: THE FIGURES SHOWN IN THE EXAMPLE ARE ENTIRELY HYPOTHETICAL.
THEY ARE NOT REPRESENTATIONS OF PAST OR FUTURE PERFORMANCE OR EX-
PENSES; ACTUAL PERFORMANCE AND/OR EXPENSES MAY BE MORE OR LESS
THAN SHOWN.
4 PIMCO Funds: Multi-Manager Series
<PAGE>
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November 1, 1998 Prospectus 5
<PAGE>
Financial Highlights
The financial highlights set forth on the following pages present certain in-
formation and ratios as well as performance information for Class D shares of
the Funds that were operational during the periods listed. The information pro-
vided below is included in the June 30, 1998 PIMCO Funds Annual Report (relat-
ing to Class D shares) and has been audited by PricewaterhouseCoopers LLP, in-
dependent accountants, whose report thereon is also included in such Annual Re-
port. The Annual Report is incorporated by reference in the Statement of Addi-
tional Information and may be obtained without charge from the Distributor. Fi-
nancial Statements and related notes are also incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED/ DIVIDENDS DIVIDENDS IN DISTRIBUTIONS DISTRIBUTIONS
Selected Per VALUE NET UNREALIZED TOTAL INCOME FROM NET EXCESS OF NET FROM NET IN EXCESS OF
Class D Share BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT INVESTMENT INVESTMENT REALIZED CAPITAL NET REALIZED
Data for the OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS CAPITAL GAINS
Period Ended: ----------- ------------- -------------- --------------- ---------- ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME
FUND
04/08/98-
06/30/98 $ 16.71 $ 0.09 (a) $(0.66)(a) $ (0.57) $ (0.10) $ 0.00 $ 0.00 $ 0.00
VALUE FUND
04/08/98-
06/30/98 $ 15.99 $ 0.04 (a) $(0.34)(a) $ (0.30) $ (0.05) $ 0.00 $ 0.00 $ 0.00
RENAISSANCE FUND
04/08/98-
06/30/98 $ 18.99 $ 0.01 (a) $ 0.10 (a) $ 0.11 $ 0.00 $ 0.00 $ 0.00 $ 0.00
CAPITAL
APPRECIATION
FUND
04/08/98-
06/30/98 $ 25.41 $ 0.02 (a) $ 0.58 (a) $ 0.60 $ 0.00 $ 0.00 $ 0.00 $ 0.00
MID-CAP GROWTH
FUND
04/08/98-
06/30/98 $ 23.97 $ 0.00 (a) $ 0.02 (a) $ 0.02 $ 0.00 $ 0.00 $ 0.00 $ 0.00
INNOVATION FUND
04/08/98-
06/30/98 $ 21.50 $(0.05)(a) $ 2.83 (a) $ 2.78 $ 0.00 $ 0.00 $ 0.00 $ 0.00
</TABLE>
*Annualized
(a) Per share amounts based upon average number of shares outstanding during the
period.
6 PIMCO Funds: Multi-Manager Series
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
DISTRIBUTION TAX BASIS NET ASSET EXPENSES TO INCOME (LOSS) TO
FROM RETURN OF TOTAL VALUE END OF NET ASSETS END AVERAGE NET AVERAGE NET PORTFOLIO
EQUALIZATION CAPITAL DISTRIBUTIONS PERIOD TOTAL RETURN OF PERIOD (000s) ASSETS ASSETS TURNOVER RATE
- ------------ --------- ------------- ------------ ------------ ---------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ 0.00 $ (0.10) $ 16.04 (3.43)% $ 104 1.10%* 2.23%* 45%
$ 0.00 $ 0.00 $ (0.05) $ 15.64 (1.85)% $ 98 1.10%* 1.23%* 77%
$ 0.00 $ 0.00 $ 0.00 $ 19.10 0.58% $ 126 1.25%* 0.21%* 192%
$ 0.00 $ 0.00 $ 0.00 $ 26.01 2.36% $ 118 1.10%* 0.27%* 75%
$ 0.00 $ 0.00 $ 0.00 $ 23.99 0.08% $ 142 1.10%* 0.03%* 66%
$ 0.00 $ 0.00 $ 0.00 $ 24.28 12.93% $ 139 1.30%* (0.99)%* 100%
</TABLE>
November 1, 1998 Prospectus 7
<PAGE>
Investment Objectives and Policies
The investment objective and general investment policies of each
Fund are described below. There can be no assurance that the in-
vestment objective of any Fund will be achieved. Because the mar-
ket value of each Fund's investments will change, the net asset
value per share of each Fund will also vary. Specific portfolio
securities eligible for purchase by the Funds, investment tech-
niques that may be used by the Funds, and the risks associated
with these securities and techniques are described more fully un-
der "Characteristics and Risks of Securities and Investment Tech-
niques" in this Prospectus and "Investment Objectives and Poli-
cies" in the Statement of Additional Information.
FUND EQUITY INCOME FUND seeks current income as a primary investment
DESCRIP- objective, and long-term growth of capital as a secondary objec-
TIONS tive. The Fund invests primarily in common stocks characterized by
having below-average price to earnings ("P/E") ratios and higher
dividend yields relative to their industry groups. In selecting
securities, the Portfolio Manager classifies a universe of approx-
imately 2,000 stocks by industry, each of which has a minimum mar-
ket capitalization of $200 million at the time of investment. The
universe is then screened to find the lowest P/E ratios in each
industry, subject to application of quality and price momentum
screens. From this group, approximately 25 stocks with the highest
yields are chosen for the Fund. The universe is then rescreened to
find the highest yielding stock in each industry, subject to ap-
plication of quality and price momentum screens. From this group,
approximately 25 stocks with the lowest P/E ratios are added to
the Fund. Although quarterly rebalancing is a general rule, re-
placements are made whenever an alternative stock within the same
industry has a significantly lower P/E ratio or higher dividend
yield than the current Fund holding. The Portfolio Manager for the
Equity Income Fund is NFJ.
VALUE FUND seeks long-term growth of capital and income. The Fund
invests primarily in common stocks characterized by having below-
average P/E ratios relative to their industry groups. In selecting
securities, the Portfolio Manager classifies a universe of approx-
imately 2,000 stocks by industry, each of which has a minimum mar-
ket capitalization of $200 million at the time of investment. The
universe is then screened to find the stocks with the lowest P/E
ratios in each industry, subject to application of quality and
price momentum screens. The stocks in each industry with the low-
est P/E ratios that pass the quality and price momentum screens
are then selected for the Fund. The Fund usually invests in ap-
proximately 50 stocks. Although quarterly rebalancing is a general
rule, replacements are made whenever an alternative stock within
the same industry has a significantly lower P/E ratio than the
current Fund holdings. The Portfolio Manager for the Value Fund is
NFJ.
RENAISSANCE FUND seeks long-term growth of capital and income. The
Fund invests primarily in common stocks having below-average valu-
ations whose issuers are experiencing improvements in their busi-
ness fundamentals. Relative valuation is determined using a multi-
factor approach that examines characteristics such as price to
book, price to earnings and price to cash flow ratios. Stocks
which pass the valuation screen are further analyzed to identify
the key drivers of financial results and catalysts for change
which indicate that a company may demonstrate improving fundamen-
tals in the future. Stocks which appear likely to exceed consensus
expectations are candidates for addition to the Fund's portfolio.
Stocks are sold from the Fund's portfolio when the Portfolio Man-
ager believes that their ability to exceed investor expectations
has diminished or when their valuations have become excessive.
The Fund may invest a portion of its assets in securities of
foreign issuers traded in foreign securities markets (not includ-
ing Eurodollar certificates of deposit), which will not exceed 15%
of the Fund's assets at the time of investment. Investing in the
securities of foreign issuers involves special risks and consider-
ations not typically associated with investing in U.S. securities.
For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The
Fund may also purchase and write call and put options on securi-
ties and securities indexes; enter into futures contracts and use
options on futures contracts; buy or sell foreign currencies; and
enter into forward foreign currency contracts. The Portfolio Man-
ager for the Renaissance Fund is Columbus Circle.
8 PIMCO Funds: Multi-Manager Series
<PAGE>
TAX-EFFICIENT EQUITY FUND seeks maximum after-tax growth of capi-
tal. The Fund attempts to provide a total return which exceeds the
return of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500"). In addition, the Fund seeks to achieve superior
after-tax returns for its shareholders in part by minimizing the
taxes they incur in connection with the Fund's investment income
and realized capital gains by using the strategies described be-
low. Notwithstanding these strategies, the Fund may have taxable
investment income and may realize taxable gains from time to time.
The Fund invests primarily in a broadly diversified portfolio
of at least 200 common stocks of companies with larger market cap-
italizations. In selecting specific securities, the Portfolio Man-
ager uses a proprietary quantitative model that ranks companies
based on long-term (5-10 years) price appreciation potential
through analysis of such factors as growth of sustainable earnings
and dividend behavior. Securities in the top 50% of the model's
ranking are considered for purchase. The Portfolio Manager's sell
discipline incorporates a focus on reducing the realization of
capital gains. Each sell candidate is evaluated based on its cost,
current market value, and anticipated benefit of replacement. Se-
curities in the bottom 20% of the model's ranking are considered
for sale. The Fund may engage in the purchase and writing of op-
tions on securities indexes and may also invest in stock index
futures contracts and options thereon.
The Portfolio Manager utilizes a range of active tax management
techniques to minimize taxable distributions, including: low port-
folio turnover; emphasis towards low-dividend, growth-oriented
companies; tax lot accounting (identification of specific shares
of securities being sold that have the lowest tax cost); and regu-
lar rebalancing to capture available tax credits. The Fund will
generally seek to avoid realizing net short-term capital gains
and, when realizing gains, will attempt to realize long-term gains
(i.e., gains on securities held for more than 12 months). The Fund
intends to notify each shareholder as to that portion of his or
her capital gain dividends which qualifies for a long-term tax
rate of 20% in the hands of the shareholder. Net short-term capi-
tal gains, when distributed, will be taxed as ordinary income, at
graduated rates of up to 39.6%. When the Fund decides to sell a
particular appreciated security, it will normally select for sale
first those share lots with holding periods exceeding 12 months
and among those, the share lots with the highest cost basis. The
Fund may, when prudent, sell securities to realize capital losses
that can be used to offset realized capital gains.
To protect against price declines in securities holdings with
large accumulated capital gains, the Fund may, to the extent per-
mitted by law, use hedging techniques such as the purchase of put
options, the sale of stock index futures contracts and equity
swaps. By using these techniques rather than selling such securi-
ties, the Fund can reduce its exposure to price declines in the
securities without realizing substantial capital gains. In limited
circumstances, the Fund may follow the practice of distributing
selected appreciated securities to meet redemptions of certain in-
vestors and may, within certain limits, use the selection of secu-
rities distributed to meet such redemptions as a management tool.
By distributing appreciated securities the Fund can reduce its po-
sition in such securities without realizing capital gains. During
periods of net withdrawals by investors, using distributions of
securities could enable the Fund to avoid the forced sale of secu-
rities to raise cash for meeting redemptions.
It is expected that by employing the various tax-efficient man-
agement strategies described above, the Fund can minimize the ex-
tent to which shareholders incur taxes as a result of realized
capital gains. The Fund may nevertheless realize gains and share-
holders will incur tax liability from time to time. The Portfolio
Manager for the Tax-Efficient Equity Fund is Parametric.
CAPITAL APPRECIATION FUND seeks growth of capital. The Fund in-
vests primarily in common stocks of companies that have improving
fundamentals (such as growth of earnings and dividends) and whose
stock is reasonably valued by the market. Stocks for the Fund are
selected from a universe of the approximately 1,000 largest market
capitalization stocks, all of which are those of companies with
market capitalizations of at least $1 billion at the time of in-
vestment. The Fund usually invests in approximately 60 to 100 com-
mon stocks. Each issue is screened and ranked using five distinct
computerized models, including: (i) a dividend growth screen, (ii)
an equity growth screen, (iii) an earnings
November 1, 1998 Prospectus 9
<PAGE>
growth screen, (iv) an earnings momentum screen, and (v) an earn-
ings surprise screen. The Portfolio Manager believes that the mod-
els identify the stocks in the universe exhibiting growth charac-
teristics with reasonable valuations. Stocks are replaced when
they score worse-than-median screen ranks, have negative earnings
surprises, or show poor relative price performance. The universe
is rescreened frequently to obtain a favorable composition of
growth and value characteristics for the entire Fund. The Portfo-
lio Manager for the Capital Appreciation Fund is Cadence.
MID-CAP GROWTH FUND seeks growth of capital. The Fund invests pri-
marily in common stocks of middle capitalization companies that
have improving fundamentals (such as growth of earnings and divi-
dends) and whose stock is reasonably valued by the market. Stocks
for the Fund are selected from a universe of companies with market
capitalizations in excess of $500 million at the time of invest-
ment, excluding the 200 companies with the highest market capital-
ization. The Fund usually invests in approximately 60 to 100 com-
mon stocks. Each issue is screened and ranked using five distinct
computerized models, including: (i) a dividend growth screen, (ii)
an equity growth screen, (iii) an earnings growth screen, (iv) an
earnings momentum screen, and (v) an earnings surprise screen. The
Portfolio Manager believes that the models identify the stocks in
the universe exhibiting growth characteristics with reasonable
valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor rela-
tive price performance. The universe is rescreened frequently to
obtain a favorable composition of growth and value characteristics
for the entire Fund. The Portfolio Manager for the Mid-Cap Growth
Fund is Cadence.
INNOVATION FUND seeks capital appreciation. No consideration is
given to income. The Fund invests primarily (i.e., at least 65% of
its assets) in common stocks of companies which utilize innovative
technologies to gain a strategic competitive advantage in their
industry as well as companies that provide and service those tech-
nologies. Securities will be selected with minimal emphasis on
more traditional factors such as growth potential or value rela-
tive to intrinsic worth. Instead, the Fund will be guided by the
theory of Positive Momentum & Positive Surprise (see "Management
of the Trust--Portfolio Managers--Columbus Circle"), with special
emphasis on common stocks of companies whose perceived strength
lies in their use of innovative technologies in new products, en-
hanced distribution systems and improved management techniques.
Although the Fund emphasizes the utilization of technologies, it
is not restricted to investment in companies in a particular busi-
ness sector or industry.
The Fund may invest a portion of its assets in securities of
foreign issuers traded in foreign securities markets (not includ-
ing Eurodollar certificates of deposit), which will not exceed 15%
of the Fund's assets at the time of investment. Investing in the
securities of foreign issuers involves special risks and consider-
ations not typically associated with investing in U.S. companies.
For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The
Fund may also purchase and write call and put options on securi-
ties and securities indexes; enter into futures contracts and use
options on futures contracts; buy or sell foreign currencies; and
enter into forward foreign currency contracts. The Portfolio Man-
ager for the Innovation Fund is Columbus Circle.
STOCK The Equity Income, Value, Tax-Efficient Equity, Capital Apprecia-
INVESTMENTS tion and Mid-Cap Growth Funds will each invest primarily (normally
at least 65% of its assets) in common stock. Each of these Funds
may maintain a portion of its assets, which will usually not ex-
ceed 10%, in U.S. Government securities, high quality debt securi-
ties (whose maturity or remaining maturity will not exceed five
years), money market obligations, and in cash to provide for pay-
ment of the Fund's expenses and to meet redemption requests. It is
the policy of these Funds to be as fully invested in common stocks
as practicable at all times. This policy precludes these Funds
from investing in debt securities as a defensive investment pos-
ture (although these Funds may invest in such securities to pro-
vide for payment of expenses and to meet redemption requests). Ac-
cordingly, investors in these Funds bear the risk of general de-
clines in stock prices and the risk that a Fund's exposure to such
declines cannot be lessened by investment in debt securities.
These Funds may also invest in convertible securities, preferred
stocks, and warrants, subject to certain limitations.
10 PIMCO Funds: Multi-Manager Series
<PAGE>
The Renaissance and Innovation Funds will invest primarily
(normally at least 65% of its assets) in common stocks, and may
also invest in other equity securities, including preferred
stocks and securities (including debt securities and warrants)
convertible into or exercisable for common stocks. Each of
these Funds may invest a portion of its assets in debt
securities and, for temporary defensive purposes, up to 100% of
its assets in short-term U.S. Government securities and other
money market instruments.
One or more of the Funds may temporarily not be invested
primarily in equity securities immediately following the
commencement of operations or after receipt of significant new
monies. While attempting to identify suitable investments, the
Funds may hold assets in cash, short-term U.S. Government
Securities and other money market instruments. Any of the Funds
may temporarily not contain the number of securities in which
it normally invests if the Fund does not have sufficient assets
to be fully invested, or pending the Portfolio Manager's
ability to prudently invest new monies.
The Funds may also lend portfolio securities; enter into
repur-chase agreements and reverse repurchase agreements
(subject to the Funds' investment limitations described below);
purchase and sell securities on a when-issued or delayed
delivery basis; and enter into forward commitments to purchase
securities. Each of the Funds may invest in American Depository
Receipts ("ADRs"), and the Re-naissance and Innovation Funds
may also invest in European Deposi-tory Receipts ("EDRs") and
Global Depository Receipts ("GDRs"). For more information on
these investment practices, see "Charac-teristics and Risks of
Securities and Investment Techniques" in this Prospectus and
"Investment Objectives and Policies" in the Statement of
Additional Information.
Characteristics and Risks of
Securities and Investment Techniques
The different types of securities and investment techniques
used by the individual Funds all have attendant risks of
varying degrees. For example, with respect to common stock,
there can be no assurance of capital appreciation, and there is
a risk of market decline. With respect to debt securities,
including money market instruments, there is the risk that the
issuer of a security may not be able to meet its obligation to
make scheduled interest or principal payments. Because each
Fund seeks a different investment objective and has different
investment policies, each is subject to varying degrees of
financial, market and credit risks. Therefore, investors
should carefully consider the investment objec-tive, investment
policies and potential risks of any Fund or Funds before
investing.
The following describes potential risks associated with
different types of investment techniques that may be used by
the individual Funds. For more detailed information on these
investment techniques, as well as information on the types of
securities in which some or all of the Funds may invest, see
the Statement of Additional Information.
Certain of the Funds may invest in common stock of companies
INVESTMENTS with market capitalizations that are small compared to other
IN COMPANIES publicly traded companies. Generally, small market
WITH SMALL capitalization is considered to be less than $1.5 billion and
AND MEDIUM large market capitalization is considered to be more than $5
MARKET billion. Investments in larger companies present certain
CAPITALIZATIONS advantages in that such companies generally have greater
financial resources, more extensive research and development,
manufacturing, marketing and service capabilities, and more
stability and greater depth of management and technical
personnel. Investments in smaller, less seasoned compa-nies may
present greater opportunities for growth but also may in-volve
greater risks than customarily are associated with more es-
tablished companies. The securities of smaller companies may be
subject to more abrupt or erratic market movements than larger,
more established companies. These companies may have limited
product lines, markets or financial resources, or they may be
dependent upon a limited management group. Their securities
may be traded in the over-the-counter market or on a regional
exchange, or may otherwise have limited liquidity. As a result
of owning large positions in this type of security, a Fund is
subject to the additional risk of possibly having to sell
portfolio securities at disadvantageous times and prices if
redemptions require the Fund to liquidate its securities
positions. In addition, it may be prudent for a Fund with a
November 1, 1998 Prospectus 11
<PAGE>
relatively large asset size to limit the number of relatively
small positions it holds in securities having limited liquidity in
order to minimize its exposure to such risks, to minimize transac-
tion costs, and to maximize the benefits of research. As a conse-
quence, as a Fund's asset size increases, the Fund may reduce its
exposure to illiquid small capitalization securities, which could
adversely affect performance.
Many of the Funds may also invest in stocks of companies with
medium market capitalizations. Whether a U.S. issuer's market cap-
italization is medium is determined by reference to the capital-
ization for all issuers whose equity securities are listed on a
United States national securities exchange or which are reported
on NASDAQ. Issuers with market capitalizations within the range of
capitalization of companies included in the S&P Mid Cap 400 Index
may be regarded as being issuers with medium market capitaliza-
tions. Such investments share some of the risk characteristics of
investments in stocks of companies with small market capitaliza-
tions described above, although such companies tend to have longer
operating histories, broader product lines and greater financial
resources and their stocks tend to be more liquid and less vola-
tile than those of smaller capitalization issuers.
FOREIGN The Renaissance and Innovation Funds may invest up to 15% of their
SECURITIES respective assets in securities which are traded principally in
securities markets outside the United States (Eurodollar certifi-
cates of deposit are excluded for purposes of these limitations),
and may invest without limit in securities of foreign issuers that
are traded in U.S. markets. All of the Funds may invest in ADRs.
In addition, the Renaissance and Innovation Funds may invest in
EDRs and GDRs. ADRs are dollar denominated receipts issued gener-
ally by domestic banks and representing the deposit with the bank
of a security of a foreign issuer, and are publicly traded on ex-
changes or over-the-counter in the United States. EDRs are re-
ceipts similar to ADRs and are issued and traded in Europe. GDRs
may be offered privately in the United States and also trade in
public or private markets in other countries.
Investing in the securities of issuers in any foreign country
involves special risks and considerations not typically associated
with investing in U.S. companies. Shareholders should consider
carefully the substantial risks involved in investing in securi-
ties issued by companies and governments of foreign nations. These
risks include: differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expro-
priation or confiscatory taxation; adverse changes in investment
or exchange control regulations (which may include suspension of
the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign coun-
tries. Individual foreign economies may differ favorably or unfa-
vorably from the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, capital reinvestment, re-
sources, self-sufficiency, and balance of payments position. The
securities markets, values of securities, yields, and risks asso-
ciated with securities markets may change independently of each
other. Additionally, foreign securities and dividends and interest
payable on those securities may be subject to foreign taxes, in-
cluding taxes withheld from payments on those securities. Foreign
securities often trade with less frequency and volume than domes-
tic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securi-
ties may include higher custodial fees than apply to domestic cus-
todial arrangements and transaction costs of foreign currency con-
versions. Changes in foreign exchange rates also will affect the
value of securities denominated or quoted in currencies other than
the U.S. dollar.
A Fund's investments in foreign currency denominated debt obli-
gations and hedging activities will likely produce a difference
between its book income and its taxable income. This difference
may cause a portion of the Fund's income distributions to consti-
tute returns of capital for tax purposes or require the Fund to
make distributions exceeding book income to qualify as a regulated
investment company for federal tax purposes.
To the extent that the Renaissance and Innovation Funds invest
in foreign securities, these Funds may invest in the securities of
issuers based in countries with developing economies. Investing in
developing (or "emerging market") countries involves certain risks
not typically associated with investing in U.S. securities, and
imposes risks greater than, or in addition to, risks of investing
in foreign, developed countries. A number of emerging market coun-
tries restrict, to varying degrees, foreign investment in securi-
ties. Repatriation of investment income, capital, and the proceeds
of sales
12 PIMCO Funds: Multi-Manager Series
<PAGE>
by foreign investors may require governmental registration and/or
approval in some emerging market countries. A number of the cur-
rencies of emerging market countries have experienced significant
declines against the U.S. dollar in recent years, and devaluation
may occur subsequent to investments in these currencies by a Fund.
Inflation and rapid fluctuations in inflation rates have had, and
may continue to have, negative effects on the economies and secu-
rities markets of certain emerging market countries. Many of the
emerging securities markets are relatively small, have low trading
volumes, suffer periods of relative illiquidity, and are charac-
terized by significant price volatility. There is a risk in emerg-
ing market countries that a future economic or political crisis
could lead to price controls, forced mergers of companies, expro-
priation or confiscatory taxation, seizure, nationalization, or
creation of government monopolies, any of which may have a detri-
mental effect on a Fund's investment.
Additional risks of investing in emerging market countries may
include: currency exchange rate fluctuations; greater social, eco-
nomic and political uncertainty and instability (including the
risk of war); more substantial governmental involvement in the
economy; less governmental supervision and regulation of the secu-
rities markets and participants in those markets; unavailability
of currency hedging techniques in certain emerging market coun-
tries; the fact that companies in emerging market countries may be
newly organized and may be smaller and less seasoned companies;
the difference in, or lack of, auditing and financial reporting
standards, which may result in unavailability of material informa-
tion about issuers; the risk that it may be more difficult to ob-
tain and/or enforce a judgment in a court outside the United
States; and significantly smaller market capitalization of securi-
ties markets. Also, any change in the leadership or policies of
emerging market countries, or the countries that exercise a sig-
nificant influence over those countries, may halt the expansion of
or reverse the liberalization of foreign investment policies now
occurring and adversely affect existing investment opportunities.
In addition, emerging securities markets may have different
clearance and settlement procedures, which may be unable to keep
pace with the volume of securities transactions or otherwise make
it difficult to engage in such transactions. Settlement problems
may cause a Fund to miss attractive investment opportunities, hold
a portion of its assets in cash pending investment, or delay in
disposing of a portfolio security. Such a delay could result in
possible liability to a purchaser of the security.
FOREIGN Foreign currency exchange rates may fluctuate significantly over
CURRENCY short periods of time. They generally are determined by the forces
TRANSACTIONSof supply and demand in the foreign exchange markets and the rela-
tive merits of investments in different countries, actual or per-
ceived changes in interest rates and other complex factors, as
seen from an international perspective. Currency exchange rates
also can be affected unpredictably by intervention (or the failure
to intervene) by U.S. or foreign governments or central banks, or
by currency controls or political developments in the U.S. or
abroad. For example, significant uncertainty surrounds the pro-
posed introduction of the euro (a common currency unit for the Eu-
ropean Union) in January 1999 and its effect on the value of secu-
rities denominated in local European currencies. These and other
currencies in which the Funds' assets are denominated may be de-
valued against the U.S. dollar, resulting in a loss to the Funds.
For a more complete discussion of foreign currency risks (includ-
ing those associated with the euro), please see "Investment Objec-
tives and Policies--Foreign Currencies" in the Statement of Addi-
tional Information.
The Renaissance and Innovation Funds may enter into forward
foreign currency exchange contracts to reduce the risks of adverse
changes in foreign exchange rates. All of the Funds that may buy
or sell foreign currencies may enter into forward foreign currency
exchange contracts to reduce the risks of adverse changes in for-
eign exchange rates. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at
a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the
time of the contract. By entering into a forward foreign currency
exchange contract, the Fund "locks in" the exchange rate between
the currency it will deliver and the currency it will receive for
the duration of the contract. As a result, a Fund reduces its ex-
posure to changes in the value of the currency it will deliver and
increases its exposure to changes in the value of the currency it
will exchange into. The effect on the value of a Fund is similar
November 1, 1998 Prospectus 13
<PAGE>
to selling securities denominated in one currency and purchasing
securities denominated in another currency. Contracts to sell for-
eign currency would limit any potential gain which might be real-
ized by a Fund if the value of the hedged currency increases. A
Fund may enter into these contracts for the purpose of hedging
against foreign exchange risk arising from the Fund's investment
or anticipated investment in securities denominated in foreign
currencies. Suitable hedging transactions may not be available in
all circumstances and there can be no assurance that a Fund will
engage in such transactions at any given time or from time to
time. Also, such transactions may not be successful and may elimi-
nate any chance for a Fund to benefit from favorable fluctuations
in relevant foreign currencies.
MONEY Each of the Funds may invest at least a portion of its assets in
MARKET the following kinds of money market instruments:
INSTRUMENTS (1) short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other
bank obligations rated in the two highest rating categories
by at least two NRSROs, or, if rated by only one NRSRO, in
such agency's two highest grades, or, if unrated,
determined to be of comparable quality by the Adviser or a
Portfolio Manager. Bank obligations must be those of a bank
that has deposits in excess of $2 billion or that is a
member of the Federal Deposit Insurance Corporation. A Fund
may invest in obligations of U.S. branches or subsidiaries
of foreign banks ("Yankee dollar obligations") or foreign
branches of U.S. banks ("Eurodollar obligations");
(3) commercial paper rated in the two highest rating categories
by at least two NRSROs, or, if rated by only one NRSRO, in
such agency's two highest grades, or, if unrated, deter-
mined to be of comparable quality by the Adviser or a Port-
folio Manager;
(4) corporate obligations with a remaining maturity of 397 days
or less whose issuers have outstanding short-term debt ob-
ligations rated in the highest rating category by at least
two NRSROs, or, if rated by only one NRSRO, in such
agency's highest grade, or, if unrated, determined to be of
comparable quality by the Adviser or a Portfolio Manager;
and
(5) repurchase agreements with domestic commercial banks or reg-
istered broker-dealers.
MORTGAGE- The Renaissance and Innovation Funds may invest in mortgage-re-
RELATED AND lated securities, and in other asset-backed securities (unrelated
OTHER ASSET-to mortgage loans) that are offered to investors currently or in
BACKED the future. The value of some mortgage-related or asset-backed se-
SECURITIES curities in which the Funds invest may be particularly sensitive
to changes in prevailing interest rates, and, like other fixed in-
come investments, the ability of a Fund to successfully utilize
these instruments may depend in part upon the ability of the Port-
folio Manager to forecast interest rates and other economic fac-
tors correctly.
MORTGAGE PASS-THROUGH SECURITIES are securities representing in-
terests in "pools" of mortgage loans secured by residential or
commercial real property in which payments of both interest and
principal on the securities are generally made monthly, in effect
"passing through" monthly payments made by the individual borrow-
ers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities). Early re-
payment of principal on some mortgage-related securities (arising
from prepayments of principal due to sale of the underlying prop-
erty, refinancing, or foreclosure, net of fees and costs which may
be incurred) may expose a Fund to a lower rate of return upon re-
investment of principal. Also, if a security subject to prepayment
has been purchased at a premium, the value of the premium would be
lost in the event of prepayment. Like other fixed income securi-
ties, when interest rates rise, the value of a mortgage-related
security generally will decline; however, when interest rates are
declining, the value of mortgage-related securities with prepay-
ment features may not increase as much as other fixed income secu-
rities. The rate of prepayments on underlying mortgages will af-
fect the price and volatility of a mortgage-related security, and
may have the effect of shortening or extending the effective matu-
rity of the security beyond what was anticipated at the time of
purchase. To the extent that unanticipated rates of prepayment on
underlying mortgages increase the effective maturity of a mort-
gage-related security, the volatility of such security can be ex-
pected to increase.
Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves)
may be guaranteed by the full faith and credit of the U.S. Govern-
ment (in the case of securities
14 PIMCO Funds: Multi-Manager Series
<PAGE>
guaranteed by the Government National Mortgage Association
("GNMA")); or guaranteed by agencies or instrumentalities of the
U.S. Government (in the case of securities guaranteed by the Fed-
eral National Mortgage Association ("FNMA") or the Federal Home
Loan Mortgage Corporation ("FHLMC"), which are supported only by
the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage-related securities created by non-
governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bank-
ers and other secondary market issuers) may be supported by vari-
ous forms of insurance or guarantees, including individual loan,
title, pool and hazard insurance and letters of credit, which may
be issued by governmental entities, private insurers or the mort-
gage poolers.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs") are hybrid mortgage-
related instruments. Similar to a bond, interest and pre-paid
principal on a CMO are paid, in most cases, on a monthly basis.
CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are structured
into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments,
are first returned to investors holding the shortest maturity
class; investors holding the longer maturity classes receive prin-
cipal only after the first class has been retired. CMOs that are
issued or guaranteed by the U.S. Government or by any of its agen-
cies or instrumentalities will be considered U.S. Government secu-
rities by a Fund, while other CMOs, even if collateralized by U.S.
Government securities, will have the same status as other pri-
vately issued securities for purposes of applying a Fund's diver-
sification tests.
COMMERCIAL MORTGAGE-BACKED SECURITIES include securities that re-
flect an interest in, and are secured by, mortgage loans on com-
mercial real property. The market for commercial mortgage-backed
securities developed more recently and in terms of total outstand-
ing principal amount of issues is relatively small compared to the
market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial mortgage-backed secu-
rities reflect the risks of investing in the real estate securing
the underlying mortgage loans. These risks reflect the effects of
local and other economic conditions on real estate markets, the
ability of tenants to make loan payments, and the ability of a
property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility
than other types of mortgage-related or asset-backed securities.
MORTGAGE-RELATED SECURITIES include securities other than those
described above that directly or indirectly represent a participa-
tion in, or are secured by and payable from, mortgage loans on
real property, such as CMO residuals or stripped mortgage-backed
securities ("SMBS"), and may be structured in classes with rights
to receive varying proportions of principal and interest.
A common type of SMBS will have one class receiving some of the
interest and most of the principal from the mortgage assets, while
the other class will receive most of the interest and the remain-
der of the principal. In the most extreme case, one class will re-
ceive all of the interest (the interest-only, or "IO" class),
while the other class will receive all of the principal (the prin-
cipal-only, or "PO" class). The yield to maturity on an IO class
is extremely sensitive to the rate of principal payments (includ-
ing prepayments) on the related underlying mortgage assets, and a
rapid rate of principal payments may have a material adverse ef-
fect on a Fund's yield to maturity from these securities. For a
discussion of the characteristics of some of these instruments,
see the Statement of Additional Information.
CONVERTIBLE Many of the Funds may invest in convertible securities. Convert-
SECURITIES ible securities are generally preferred stocks or fixed income se-
curities that are convertible into common stock at either a stated
price or a stated rate. The price of the convertible security will
normally vary in some proportion to changes in the price of the
underlying common stock because of this conversion feature. A con-
vertible security will normally also provide a fixed income
stream. For this reason, the convertible security may not decline
in price as rapidly as the underlying common stock.
A Fund's Portfolio Manager will select convertible securities
to be purchased by the Fund based primarily upon its evaluation of
the fundamental investment characteristics and growth prospects of
the issuer of the security. As a fixed income security, a convert-
ible security tends to increase in market value when interest
rates decline and to
November 1, 1998 Prospectus 15
<PAGE>
decrease in value when interest rates rise. While convertible se-
curities generally offer lower interest or dividend yields than
non-convertible fixed income securities of similar quality, their
value tends to increase as the market value of the underlying
stock increases and to decrease when the value of the underlying
stock decreases.
The Renaissance Fund may invest in so-called "synthetic con-
vertible securities," which are composed of two or more different
securities whose investment characteristics, taken together, re-
semble those of convertible securities. For example, the Renais-
sance Fund may purchase a non-convertible debt security and a war-
rant or option. The synthetic convertible differs from the true
convertible security in several respects. Unlike a true convert-
ible security, which is a single security having a unitary market
value, a synthetic convertible comprises two or more separate se-
curities, each with its own market value. Therefore, the "market
value" of a synthetic convertible is the sum of the values of its
fixed income component and its convertible component. For this
reason, the values of a synthetic convertible and a true convert-
ible security may respond differently to market fluctuations.
RISKS OF The Renaissance Fund may invest a portion of its assets in fixed
HIGH YIELD income securities rated lower than Baa by Moody's or lower than
SECURITIES BBB by S&P but rated at least B by Moody's or S&P or, if not rat-
("JUNK ed, determined by the Portfolio Manager to be of comparable quali-
BONDS") ty. In addition, the Renaissance Fund may invest in convertible
securities rated below B by Moody's or S&P (or, if unrated, con-
sidered by the Portfolio Manager to be of comparable quality). Se-
curities rated lower than Baa by Moody's or lower than BBB by S&P
are sometimes referred to as "high yield" or "junk" bonds. Invest-
ors should consider the risks associated with high yield securi-
ties before investing in this Fund. Although the Renaissance Fund
reserves the right to do so at any time, as of the date of this
Prospectus, it does not invest or have the present intention to
invest more than 5% of its assets in high yield securities or junk
bonds.
Investing in high yield securities involves special risks in
addition to the risks associated with investments in higher rated
fixed income securities. While offering a greater potential oppor-
tunity for capital appreciation and higher yields than investments
in higher rated debt securities, high yield securities typically
entail greater potential price volatility and may be less liquid
than investment grade debt. High yield securities may be regarded
as predominately speculative with respect to the issuer's continu-
ing ability to meet principal and interest payments. Analysis of
the creditworthiness of issuers of high yield securities may be
more complex than for issuers of higher quality debt securities,
and achievement of a Fund's investment objective may, to the ex-
tent of its investments in high yield securities, depend more
heavily on the Portfolio Manager's creditworthiness analysis than
would be the case if the Fund were investing in higher quality se-
curities. High yield securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions
than higher grade securities.
For additional discussion of the characteristics of lower rated
fixed income securities, see the Statement of Additional Informa-
tion. Ratings assigned to fixed income securities are described in
the Appendix to the Statement of Additional Information.
DERIVATIVE To the extent permitted by the investment objective and policies
INSTRUMENTS of each Fund, a Fund may purchase and write call and put options
on securities, securities indexes and foreign currencies, and en-
ter into futures contracts and use options on futures contracts as
further described below. In pursuit of their investment objec-
tives, the Renaissance, Tax-Efficient Equity and Innovation Funds
may engage in the purchase and writing of call and put options on
securities and securities indexes and enter into futures contracts
and options thereon, including securities index futures contracts
and options thereon. The Funds that may invest in foreign-currency
denominated securities may engage in the purchase and writing of
call and put options on foreign currencies. The Funds may (but are
not required to) use these techniques to hedge against changes in
interest rates, foreign currency exchange rates or securities
prices. Each Fund will segregate assets determined to be liquid by
the Adviser or a Portfolio Manager in accordance with procedures
established by the Board of Trustees (or, as permitted by applica-
ble regulation, enter into certain offsetting positions) to cover
its obligations under options and futures to limit leveraging of
the Fund.
16 PIMCO Funds: Multi-Manager Series
<PAGE>
Derivative instruments are considered for these purposes to
consist of securities or other instruments whose value is derived
from or related to the value of some other instrument or asset,
and not to include those securities whose payment of principal
and/or interest depend upon cash flows from underlying assets,
such as mortgage-related or asset-backed securities. See "Mort-
gage-Related and Other Asset-Backed Securities." The value of some
derivative instruments in which the Funds may invest may be par-
ticularly sensitive to changes in prevailing interest rates, and,
like the other investments of the Funds, the ability of a Fund to
successfully utilize these instruments may depend in part upon the
ability of the Portfolio Manager to forecast interest rates and
other economic factors correctly. If the Portfolio Manager incor-
rectly forecasts such factors and has taken positions in deriva-
tive instruments contrary to prevailing market trends, the Funds
could be exposed to the risk of loss.
The Funds might not employ any of the strategies described be-
low, and no assurance can be given that any strategy used will
succeed. If the Portfolio Manager incorrectly forecasts interest
rates, market values or other economic factors in utilizing a de-
rivatives strategy for a Fund, the Fund might have been in a bet-
ter position if it had not entered into the transaction at all.
Also, suitable derivative transactions may not be available in all
circumstances. The use of these strategies involves certain spe-
cial risks, including a possible imperfect correlation, or even no
correlation, between price movements of derivative instruments and
price movements of related investments. While some strategies in-
volving derivative instruments can reduce the risk of loss, they
can also reduce the opportunity for gain or even result in losses
by offsetting favorable price movements in related investments or
otherwise, due to the possible inability of a Fund to purchase or
sell a portfolio security at a time that would be favorable or the
possible need to sell a portfolio security at a disadvantageous
time because the Fund is required to maintain asset coverage or
offsetting positions in connection with transactions in derivative
instruments, and the possible inability of a Fund to close out or
to liquidate its derivatives positions. In addition, a Fund's use
of such instruments may cause the Fund to realize higher amounts
of short-term capital gains (generally taxed at ordinary income
tax rates) than if it had not used such instruments.
OPTIONS ON SECURITIES, SECURITIES INDEXES AND CURRENCIES Certain
Funds may purchase put options on securities. One purpose of pur-
chasing put options is to protect holdings in an underlying or re-
lated security against a substantial decline in market value.
These Funds may also purchase call options on securities. One pur-
pose of purchasing call options is to protect against substantial
increases in prices of securities the Fund intends to purchase
pending its ability to invest in such securities in an orderly
manner. A Fund may sell put or call options it has previously pur-
chased, which could result in a net gain or loss depending on
whether the amount realized on the sale is more or less than the
premium and other transaction costs paid on the put or call option
which is sold. A Fund may write a call or put option only if the
option is "covered" by the Fund holding a position in the under-
lying securities or by other means which would permit immediate
satisfaction of the Fund's obligation as writer of the option.
Prior to exercise or expiration, an option may be closed out by an
offsetting purchase or sale of an option of the same series.
The purchase and writing of options involves certain risks.
During the option period, the covered call writer has, in return
for the premium on the option, given up the opportunity to profit
from a price increase in the underlying security above the exer-
cise price, but, as long as its obligation as a writer continues,
has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer
of the option. Once an option writer has received an exercise no-
tice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the un-
derlying security at the exercise price. If a put or call option
purchased by the Fund is not sold when it has remaining value, and
if the market price of the underlying security remains equal to or
greater than the exercise price (in the case of a put), or remains
less than or equal to the exercise price (in the case of a call),
the Fund will lose its entire investment in the option. Also,
where a put or call option on a particular security is purchased
to hedge against price movements in a related security, the price
of the put or call option may move more or less than the price of
the related security. There can be no assurance that a liquid mar-
ket will exist when a Fund seeks to close out an option
November 1, 1998 Prospectus 17
<PAGE>
position. Furthermore, if trading restrictions or suspensions are
imposed on the options markets, a Fund may be unable to close out
a position.
For each of the Renaissance and Innovation Funds, in the case
of a written call option on a securities index, the Fund will own
corresponding securities whose historic volatility correlates with
that of the index.
Over-the-counter options in which certain Funds may invest dif-
fer from traded options in that they are two-party contracts, with
price and other terms negotiated between buyer and seller, and
generally do not have as much market liquidity as exchange-traded
options. The Funds may be required to treat as illiquid over-the-
counter options purchased and securities being used to cover cer-
tain written over-the-counter options.
SWAP AGREEMENTS The Tax-Efficient Equity Fund may enter into eq-
uity index swap agreements for purposes of gaining exposure to the
stocks making up an index of securities without actually purchas-
ing those stocks. Swap agreements are two-party contracts entered
into primarily by institutional investors for periods ranging from
a few weeks to more than one year. In a standard swap transaction,
two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest
factor. The gross returns to be exchanged or "swapped" between the
parties are generally calculated with respect to a "notional
amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, or in a
"basket" of securities representing a particular index.
Most swap agreements entered into by the Fund calculate the ob-
ligations of the parties to the agreement on a "net basis." Conse-
quently, the Fund's current obligations (or rights) under a swap
agreement will generally be equal only to the net amount to be
paid or received under the agreement based on the relative values
of the positions held by each party to the agreement (the "net
amount"). The Fund's current obligations under a swap agreement
will be accrued daily (offset against amounts owed to the Fund),
and any accrued but unpaid net amounts owed to a swap counterparty
will be covered by the segregation of assets determined to be liq-
uid by the Portfolio Manager in accordance with procedures estab-
lished by the Board of Trustees to limit any potential leveraging
of the Fund's portfolio. Obligations under swap agreements so cov-
ered will not be construed to be "senior securities" for purposes
of the Fund's investment restriction concerning senior securities.
The Fund will not enter into a swap agreement with any single
party if the net amount owed or to be received under existing con-
tracts with that party would exceed 5% of the Fund's assets.
Whether the Fund's use of swap agreements will be successful in
furthering its investment objective will depend on the Portfolio
Manager's ability to predict correctly whether certain types of
investments are likely to produce greater returns than other in-
vestments. Because they are two-party contracts and because they
may have terms of greater than seven days, swap agreements may be
considered to be illiquid investments. Moreover, the Fund bears
the risk of loss of the amount expected to be received under a
swap agreement in the event of the default or bankruptcy of a swap
agreement counterparty. The Fund will enter into swap agreements
only with counterparties that meet certain standards for credit-
worthiness (generally, such counterparties would have to be eligi-
ble counterparties under the terms of the Fund's repurchase agree-
ment guidelines). The swaps market is a relatively new market and
is largely unregulated. It is possible that developments in the
swaps market, including potential government regulation, could ad-
versely affect the Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agree-
ments.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS Certain Funds
may enter into futures contracts and options thereon. These Funds
may engage in such futures transactions as an adjunct to their se-
curities activities.
There are several risks associated with the use of futures and
futures options for hedging purposes. There can be no guarantee
that there will be a correlation between price movements in the
hedging vehicle and in the portfolio securities being hedged. An
incorrect correlation could result in a loss on both the hedged
securities in a Fund and the hedging vehicle, so that the portfo-
lio return might have been greater had hedging not been attempted.
There can be no assurance that a liquid market will exist at a
time when a Fund seeks to close out a futures contract or a
futures
18 PIMCO Funds: Multi-Manager Series
<PAGE>
option position. Most futures exchanges and boards of trade limit
the amount of fluctuation permitted in futures contract prices
during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price be-
yond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a re-
sult, there is no assurance that an active secondary market will
develop or continue to exist. Lack of a liquid market for any rea-
son may prevent a Fund from liquidating an unfavorable position,
and the Fund would remain obligated to meet margin requirements
until the position is closed.
INDEX FUTURES The Renaissance, Tax-Efficient Equity and Innovation
Funds may purchase and sell futures contracts on various securi-
ties indexes ("Index Futures") and related options for hedging
purposes and for investment purposes. A Fund's purchase and sale
of Index Futures is limited to contracts and exchanges which have
been approved by the Commodity Futures Trading Commission
("CFTC").
A Fund may close open positions on the futures exchanges on
which Index Futures are traded at any time up to and including the
expiration day. All positions which remain open at the close of
the last business day of the contract's life are required to set-
tle on the next business day (based upon the value of the relevant
index on the expiration day), with settlement made with the appro-
priate clearing house. Because the specific procedures for trading
foreign stock Index Futures on futures exchanges are still under
development, additional or different margin requirements as well
as settlement procedures may be applicable to foreign stock Index
Futures at the time a Fund purchases such instruments.
Positions in Index Futures may be closed out by a Fund only on
the futures exchange upon which the Index Futures are then traded.
There can be no assurance that a liquid market will exist for any
particular contract at any particular time. Also, the price of In-
dex Futures may not correlate perfectly with movement in the rele-
vant index due to certain market distortions. First, all partici-
pants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts
through offsetting transactions which could distort the normal re-
lationship between the index and futures markets. Second, the de-
posit requirements in the futures market are less onerous than
margin requirements in the securities market, and as a result, the
futures market may attract more speculators than does the securi-
ties market. Increased participation by speculators in the futures
market may also cause temporary price distortions. In addition,
trading hours for foreign stock Index Futures may not correspond
perfectly to hours of trading on the foreign exchange to which a
particular foreign stock Index Future relates. This may result in
a disparity between the price of Index Futures and the value of
the relevant index due to the lack of continuous arbitrage between
the Index Futures price and the value of the underlying index.
The Funds may only enter into futures contracts or futures op-
tions which are standardized and traded on a U.S. or foreign ex-
change or board of trade, or similar entity, or quoted on an auto-
mated quotation system. Each Fund may use financial futures con-
tracts and related options only for "bona fide hedging" purposes,
as such term is defined in applicable regulations of the CFTC, or,
with respect to positions in financial futures and related options
that do not qualify as "bona fide hedging" positions, may enter
such positions only to the extent that aggregate initial margin
deposits plus premiums paid by it for open futures option posi-
tions, less the amount by which any such positions are "in-the-
money," would not exceed 5% of the Fund's net assets.
LOANS OF For the purpose of achieving income, each Fund may lend its port-
PORTFOLIO folio securities to brokers, dealers, and other financial institu-
SECURITIES tions, provided:
(i) the loan is secured continuously by collateral consisting
of U.S. Government securities, cash or cash equivalents
(negotiable certificates of deposit, bankers' acceptances
or letters of credit) maintained on a daily mark-to-market
basis in an amount at least equal to the current market
value of the securities loaned;
(ii) the Fund may at any time call the loan and obtain the
return of the securities loaned;
(iii) the Fund will receive any interest or dividends paid on
the loaned securities; and
(iv) the aggregate market value of securities loaned will not
at any time exceed the Fund's limitation on lending its
portfolio securities.
November 1, 1998 Prospectus 19
<PAGE>
Each Fund's performance will continue to reflect changes in the
value of the securities loaned and will also reflect the receipt
of either interest, through investment of cash collateral by the
Fund in permissible investments, or a fee, if the collateral is
U.S. Government securities. Securities lending involves the risk
of loss of rights in the collateral or delay in recovery of the
collateral should the borrower fail to return the security loaned
or become insolvent. The Funds may pay lending fees to the party
arranging the loan.
SHORT SALES Each Fund may from time to time make short sales involving securi-
ties held in the Fund's portfolio or which the Fund has the right
to acquire without the payment of further consideration. For these
purposes, a Fund may also hold or have the right to acquire secu-
rities which, without the payment of any further consideration,
are convertible into or exchangeable for the securities sold
short. Short sales expose the Fund to the risk that it will be re-
quired to acquire, convert or exchange securities to cover its
short position at a time when the securities sold short have ap-
preciated in value, thus resulting in a loss to the Fund.
WHEN- Each Fund may purchase securities which it is eligible to purchase
ISSUED, on a when-issued basis, may purchase and sell such securities for
DELAYED delayed delivery and may make contracts to purchase such securi-
DELIVERY ties for a fixed price at a future date beyond normal settlement
AND time (forward commitments). When-issued transactions, delayed de-
FORWARD livery purchases and forward commitments involve a risk of loss if
COMMITMENT the value of the securities declines prior to the settlement date,
TRANSACTIONSwhich risk is in addition to the risk of decline in the value of
the Fund's other assets. Typically, no income accrues on securi-
ties a Fund has committed to purchase prior to the time delivery
of the securities is made, although a Fund may earn income on se-
curities it has segregated.
REPURCHASE For the purposes of maintaining liquidity and achieving income,
AGREEMENTS each Fund may enter into repurchase agreements, which entail the
purchase of a portfolio-eligible security from a bank or broker-
dealer that agrees to repurchase the security at the Fund's cost
plus interest within a specified time (normally one day). If the
party agreeing to repurchase should default, as a result of bank-
ruptcy or otherwise, the Fund will seek to sell the securities
which it holds, which action could involve procedural costs or de-
lays in addition to a loss on the securities if their value should
fall below their repurchase price. Those Funds whose investment
objectives do not include the earning of income will invest in re-
purchase agreements only as a cash management technique with re-
spect to that portion of the portfolio maintained in cash. Each
Fund will limit its investment in repurchase agreements maturing
in more than seven days consistent with the Fund's policy on in-
vestment in illiquid securities.
REVERSE A reverse repurchase agreement may for some purposes be considered
REPURCHASE borrowing that involves the sale of a security by a Fund and its
AGREEMENTS agreement to repurchase the instrument at a specified time and
AND OTHER price. The Fund will segregate assets determined to be liquid by
BORROWINGS the Adviser or Portfolio Manager in accordance with procedures es-
tablished by the Board of Trustees to cover its obligations under
reverse repurchase agreements. Reverse repurchase agreements will
be subject to the Funds' limitations on borrowings. A Fund also
may borrow money for investment purposes subject to any policies
of the Fund currently described in this Prospectus or in the
Statement of Additional Information. Such a practice will result
in leveraging of a Fund's assets. Leverage will tend to exaggerate
the effect on net asset value of any increase or decrease in the
value of a Fund's portfolio and may cause a Fund to liquidate
portfolio positions when it would not be advantageous to do so.
PORTFOLIO The length of time a Fund has held a particular security is not
TURNOVER generally a consideration in investment decisions. The investment
policies of a Fund may lead to frequent changes in the Fund's in-
vestments, particularly in periods of volatile market movements. A
change in the securities held by a Fund is known as "portfolio
turnover." High portfolio turnover (e.g., over 100%) involves cor-
respondingly greater expenses to a Fund, including brokerage com-
missions or dealer mark-ups and other transaction costs on the
sale of securities and reinvestments in other securities. See "Man-
20 PIMCO Funds: Multi-Manager Series
<PAGE>
agement of the Trust--Portfolio Transactions." Such sales may re-
sult in realization of taxable capital gains (including short-term
capital gains which generally are taxed at ordinary income tax
rates). See "Taxes." The portfolio turnover rates for the Funds
(with the exception of the Tax-Efficient Equity Fund) were as fol-
lows for fiscal 1998 and 1997, respectively: Equity Income--45%
and 45%; Value--77% and 71%; Renaissance--192% and 131%; Capital
Appreciation--75% and 87%; Mid-Cap Growth--66% and 82%; and Inno-
vation--100% and 80%. The annual portfolio turnover rate for the
Tax-Efficient Equity Fund is expected to be less than 40%.
ILLIQUID Each Fund may invest in securities that are illiquid so long as no
SECURITIES more than 15% of the value of the Fund's net assets (taken at mar-
ket value at the time of investment) would be invested in such se-
curities. Certain illiquid securities may require pricing at fair
value as determined in good faith under the supervision of the
Board of Trustees. A Portfolio Manager may be subject to signifi-
cant delays in disposing of illiquid securities, and transactions
in illiquid securities may entail registration expenses and other
transaction costs that are higher than those for transactions in
liquid securities.
The term "illiquid securities" for this purpose means securi-
ties that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which a Fund has
valued the securities. Illiquid securities are considered to in-
clude, among other things, written over-the-counter options, secu-
rities or other liquid assets being used as cover for such op-
tions, repurchase agreements with maturities in excess of seven
days, certain loan participation interests, fixed time deposits
which are not subject to prepayment or provide for withdrawal pen-
alties upon prepayment (other than overnight deposits), securities
that are subject to legal or contractual restrictions on resale
(such as privately placed debt securities), and other securities
which legally or in the Adviser's or a Portfolio Manager's opinion
may be deemed illiquid (not including securities issued pursuant
to Rule 144A under the Securities Act of 1933 and certain commer-
cial paper that the Adviser or a Portfolio Manager has determined
to be liquid under procedures approved by the Board of Trustees).
CREDIT AND All fixed income securities are subject to market risk and credit
MARKET RISK risk. Market risk relates to market-induced changes in a
OF security's value, usually as a result of changes in interest
FIXEDINCOME rates. The value of a Fund's investments in fixed income securi-
SECURITIES ties will change as the general level of interest rates fluctuate.
During periods of falling interest rates, the value of a Fund's
fixed income securities generally rise. Conversely, during periods
of rising interest rates, the value of a Fund's fixed income secu-
rities generally decline. Credit risk relates to the ability of
the issuer to make payments of principal and interest.
SERVICE Many of the services provided to the Funds depend on the smooth
SYSTEMS -- functioning of computer systems. Many systems in use today cannot
YEAR 2000 distinguish between the year 1900 and the year 2000. Should any of
PROBLEM the service systems fail to process information properly, that
could have an adverse impact on the Funds' operations and services
provided to shareholders. The Adviser, Distributor, Shareholder
Servicing and Transfer Agent, Custodian, and certain other service
providers to the Funds have reported that each is working toward
mitigating the risks associated with the so-called "year 2000
problem." However, there can be no assurance that the problem will
be corrected in all respects and that the Funds' operations and
services provided to shareholders will not be adversely affected
nor can there be any assurance that the year 2000 problem will not
have an adverse effect on the entities whose securities are held
by the Funds or on domestic or global equity markets or economies,
generally.
"FUNDAMENTAL"
POLICIES The investment objective of each of the Renaissance, Tax-Efficient
Equity and Innovation Funds described in this Prospectus may be
changed by the Board of Trustees without shareholder approval. The
investment objective of each other Fund is fundamental and may not
be changed without shareholder approval by vote of a majority of
the outstanding shares of that Fund. If there is a change in a
Fund's investment objective, including a change approved by share-
holder vote, shareholders should consider whether the Fund remains
an appropriate investment in light of their then current financial
position and needs.
November 1, 1998 Prospectus 21
<PAGE>
Performance Information
From time to time the Trust may make available certain information
about the performance of the Class D shares of some or all of the
Funds. Information about a Fund's performance is based on that
Fund's (or its predecessor's) record to a recent date and is not
intended to indicate future performance.
The total return of Class D shares of all Funds may be included
in advertisements or other written material. When a Fund's total
return is advertised with respect to its Class D shares, it will
be calculated for the past year, the past five years, and the past
ten years (or if the Fund has been offered for a period shorter
than one, five or ten years, that period will be substituted)
since the establishment of the Fund or its predecessor series of
PIMCO Advisors Funds, as more fully described in the Statement of
Additional Information. For periods prior to the initial offering
date of Class D shares, total return presentations for the class
will be based on the historical performance of an older class of
the Fund (if any) restated, as necessary, to reflect that there
are no sales charges associated with Class D shares. The older
class to be used in each case is set forth in the Statement of Ad-
ditional Information. For these purposes, the performance of the
older class will also be restated to reflect any different operat-
ing expenses (such as different administrative fees and/or 12b-
1/servicing fee charges) associated with Class D shares. In cer-
tain cases, such a restatement will result in Class D performance
which is higher than if the performance of the older class were
not restated to reflect the different Class D operating expenses.
In such cases, the Trust's advertisements will also, to the extent
appropriate, show the lower performance figure reflecting the ac-
tual operating expenses incurred by the older class for periods
prior to the initial offering date of Class D shares. Total return
is measured by comparing the value of an investment in Class D
shares of the Fund at the beginning of the relevant period to the
redemption value of the investment in Class D shares of the Fund
at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions at net asset value). To-
tal return may be advertised using alternative methods that re-
flect all elements of return, but that may be adjusted to reflect
the cumulative impact of alternative fee and expense structures,
such as the currently effective advisory and administrative fees
for Class D shares of the Funds.
Quotations of yield for Class D shares of a Fund will be based
on the investment income per share (as defined by the Securities
and Exchange Commission) during a particular 30-day (or one-month)
period (including dividends and interest), less expenses accrued
during the period ("net investment income"), and will be computed
by dividing net investment income by the maximum public offering
price per Class D share on the last day of the period.
The Funds may also provide current distribution information to
its shareholders in shareholder reports or other shareholder com-
munications, or in certain types of sales literature provided to
prospective investors. Current distribution information for Class
D shares of a Fund will be based on distributions for a specified
period (i.e., total dividends from net investment income), divided
by the net asset value per Class D share on the last day of the
period and annualized. The rate of current distributions does not
reflect deductions for unrealized losses from transactions in de-
rivative instruments such as options and futures, which may reduce
total return. Current distribution rates differ from standardized
yield rates in that they represent what Class D shares of a Fund
have declared and paid to shareholders as of the end of a speci-
fied period rather than the Fund's actual net investment income
for that period.
The Adviser and each Portfolio Manager may also report to
shareholders or to the public in advertisements concerning its
performance as adviser to clients other than the Funds, and on its
comparative performance or standing in relation to other money
managers. Such comparative information may be compiled or provided
by independent ratings services or by news organizations. Any per-
formance information, whether related to the Funds, the Adviser or
the Portfolio Managers, should be considered in light of the
Funds' investment objectives and policies, characteristics and
quality of the Funds, and the market conditions during the time
period indicated, and should not be considered to be representa-
tive of what may be achieved in the future.
Investment results of the Funds will fluctuate over time, and
any representation of the Funds' total return or yield for any
prior period should not be considered as a representation of what
an investor's total return or yield may be in any future period.
22 PIMCO Funds: Multi-Manager Series
<PAGE>
How to Buy Shares
Class D shares of each Fund are continuously offered through fi-
nancial service firms, such as broker-dealers or registered in-
vestment advisers, with which the Trust's principal underwriter,
PIMCO Funds Distributors LLC (the "Distributor"), has an agreement
for the use of the Funds in particular investment products, pro-
grams or accounts for which a fee may be charged. See "Financial
Service Firms" below.
You may purchase Class D shares only through your financial
service firm. In connection with purchases, your financial service
firm is responsible for forwarding all necessary documentation to
the Distributor, and may charge you for such services. Investors
who wish to purchase shares of the Funds directly from the Trust
or the Distributor should inquire as to the other classes of
shares. See "Description of the Trust--Multiple Classes of
Shares."
Class D shares may be purchased at a price equal to their net
asset value per share next determined after receipt of an order.
Purchase payments for Class D shares are fully invested at the net
asset value next determined after acceptance of the trade. All
purchase orders received by the Distributor from your financial
service firm prior to the close of regular trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange (the "Ex-
change"), on a regular business day, are processed at that day's
offering price. In addition, orders received by the Distributor
from financial service firms after the offering price is deter-
mined that day will receive such offering price if the orders were
received by the firm from its customer prior to such determination
and were transmitted to and received by the Distributor prior to
its close of business that day (normally 7:00 p.m., Easterm time).
Purchase orders received on other than a regular business day will
be executed on the next succeeding regular business day.
The Distributor, in its sole discretion, may accept or reject
any order for purchase of Fund shares. The sale of shares will be
suspended during any period in which the Exchange is closed for
other than weekends or holidays, or if permitted by the rules of
the Securities and Exchange Commission, when trading on the Ex-
change is restricted or during an emergency which makes it imprac-
ticable for the Funds to dispose of their securities or to deter-
mine fairly the value of their net assets, or during any other pe-
riod as permitted by the Securities and Exchange Commission for
the protection of investors.
Class D shares of the Funds will be held in your account with
your financial service firm and, generally, your firm will hold
your Class D shares in nominee or street name as your agent. Ac-
cordingly, in most cases, the Trust's transfer agent will have no
information with respect to or control over accounts of specific
Class D shareholders and you may obtain information about your ac-
counts only through your financial service firm. In certain cir-
cumstances, your firm may arrange to have your shares held in your
own name or you may subsequently become a holder of record for
some other reason (for instance, if you terminate your relation-
ship with your firm). In such circumstances, please contact the
Distributor at 1-888-87-PIMCO for information about your account.
If you wish to invest in the Funds through your own account with
the Trust or the Distributor, please inquire as to the other clas-
ses of shares of the Funds. See "Description of the Trust--Multi-
ple Classes of Shares." In the interest of economy and conve-
nience, certificates for Class D shares will not be issued.
FINANCIAL Broker-dealers, registered investment advisers and other financial
SERVICE service firms provide varying investment products, programs or ac-
FIRMS counts, pursuant to arrangements with the Distributor, through
which their clients may purchase and redeem Class D shares of the
Funds. Firms will generally provide or arrange for the provision
of some or all of the shareholder servicing and account mainte-
nance services required by your account, including, without limi-
tation, transfers of registration and dividend payee changes; and
may perform functions such as generation of confirmation state-
ments and disbursement of cash dividends. Firms may also arrange
with their clients for other investment or administrative servic-
es. Your firm may independently establish and charge you transac-
tion fees and/or other additional amounts for such services, which
charges could reduce your investment returns on Class D shares of
the Funds.
Your financial service firm may have omnibus accounts and simi-
lar arrangements with the Trust and may be paid for providing sub-
transfer agency and other services. A firm may be paid for its
services directly or indirectly by
November 1, 1998 Prospectus 23
<PAGE>
the Funds, the Adviser or an affiliate (normally not to exceed an
annual rate of 0.35% of a Fund's average daily net assets attrib-
utable to its Class D shares and purchased through such firm for
its clients). Your firm may establish various minimum investment
requirements for Class D shares of the Funds and may also estab-
lish certain privileges with respect to purchases, redemptions and
exchanges of Class D shares or the reinvestment of dividends.
This Prospectus should be read in connection with your firm's
materials regarding its fees and services.
CHANGE IN The Trust expects to change its transfer agent for its Class D
TRANSFER shares to First Data Investor Services Group, Inc. Shareholders
AGENT will continue to receive all of the services described in this
Prospectus and should continue to follow the various procedures
set forth in this Prospectus, with the exception of the address
changes described below.
There will be no changes in the toll-free 1-800 telephone num-
bers set forth in this Prospectus. However, mailing addresses will
change as follows:
Old Address New Address
----------- -----------
Shareholder Services, Inc. First Data Investor
P.O. Box 5866 Services Group, Inc.
Denver, CO 80217 P.O. Box 9688
Providence, RI 02940-0926
PIMCO Funds Distributors LLC
P.O. Box 5866 PIMCO Funds Distributors
Denver, CO 80217-5866 LLC
P.O. Box 9688
Providence, RI 02940-0926
Exchange Privilege
A shareholder may exchange Class D shares of any Fund for Class D
shares of any other Fund in an account with identical registration
on the basis of their respective net asset values. Class D shares
of each Fund may also be exchanged for Class D shares of certain
series of PIMCO Funds: Pacific Investment Management Series, an
affiliated mutual fund family composed primarily of fixed income
portfolios managed by Pacific Investment Management Company, an
affiliate of the Adviser. There are currently no exchange fees or
charges imposed by the Trust, although your financial service firm
may impose various fees and charges, investment minimums and other
requirements with respect to exchanges. Please contact your finan-
cial service firm for details. An exchange will constitute a tax-
able sale for federal income tax purposes.
The Trust reserves the right to refuse exchange purchases if,
in the judgment of the Adviser, the purchase would adversely af-
fect a Fund and its shareholders. In particular, a pattern of ex-
changes characteristic of "market-timing" strategies may be deemed
by the Adviser to be detrimental to the Trust or a particular
Fund. Currently, the Trust limits the number of "round trip" ex-
changes an investor may make. An investor makes a "round trip" ex-
change when the investor purchases shares of a particular Fund,
subsequently exchanges those shares for shares of a different Fund
and then exchanges back into the originally purchased Fund. The
Trust has the right to refuse any exchange for any investor who
completes (by making the exchange back into the shares of the
originally purchased Fund) more than six round trip exchanges in
any twelve-month period. Although the Trust has no current inten-
tion of terminating or modifying the exchange privilege other than
as set forth in the preceding sentence, it reserves the right to
do so at any time. Except as otherwise permitted by Securities and
Exchange Commission regulations, the Trust will give 60 days' ad-
vance notice to your financial service firm of any termination or
material modification of the exchange privilege. For further in-
formation about exchange privileges, please contact your financial
service firm.
24 PIMCO Funds: Multi-Manager Series
<PAGE>
How to Redeem
Class D shares may be redeemed through your financial service firm
on any day the Exchange is open. Shares are redeemed at their net
asset value next determined after a proper redemption request has
been received from your firm. There is no charge by the Trust or
the Distributor with respect to a redemption, although your finan-
cial service firm may charge you for its services in processing
your redemption request. Please contact your firm for details. If
you are the holder of record of your Class D shares, you may con-
tact the Distributor at 1-888-87-PIMCO for information regarding
how to redeem your shares directly from the Trust.
Your financial service firm is obligated to transmit your re-
demption orders to the Distributor promptly and is responsible for
ensuring that your redemption request is in proper form. Requests
for redemption received by financial service firms prior to the
close of regular trading (normally 4:00 p.m., Eastern time) on the
Exchange on a regular business day and received by the Distributor
prior to the close of the Distributor's business day will be con-
firmed at the net asset value effective as of the closing of the
Exchange on that day. Your financial service firm will be respon-
sible for furnishing all necessary documentation to the Distribu-
tor or the Trust's transfer agent and may charge you for its serv-
ices. Redemption proceeds will be forwarded to your financial
service firm as promptly as possible and in any event within seven
days after the redemption request is received by the Distributor
in good order. Under unusual circumstances, the Trust may suspend
redemptions or postpone payment for more than seven days, as per-
mitted by federal securities law.
REDEMPTIONS The Trust agrees to redeem shares of each Fund solely in cash up
IN KIND to the lesser of $250,000 or 1% of the Fund's net assets during
any 90-day period for any one shareholder. In consideration of the
best interests of the remaining shareholders, the Trust reserves
the right to pay any redemption proceeds exceeding this amount in
whole or in part by a distribution in kind of securities held by a
Fund in lieu of cash. Except for Funds with a tax-efficient
management strategy, it is highly unlikely that shares would ever be
redeemed in kind. When shares are redeemed in kind, the redeeming
shareholder should expect to incur transaction costs upon the
disposition of the se-curities received in the distribution.
Distributor
PIMCO Funds Distributors LLC (the "Distributor"), a wholly owned
subsidiary of the Adviser, is the principal underwriter of the
Trust's shares. Pursuant to a Distribution Agreement with the
Trust, with respect to each Fund's Class D shares, the Distributor
may bear various expenses, including the cost of printing and
mailing prospectuses to persons other than current shareholders.
The Distributor, located at 2187 Atlantic Street, Stamford, Con-
necticut 06902, is a broker-dealer registered with the SEC.
How Net Asset Value Is Determined
The net asset value of Class D shares of each Fund of the Trust
will be determined once on each day on which the Exchange is open
(a "Business Day"), as of the close of regular trading (normally
4:00 p.m., Eastern time) on the Exchange. Net asset value will not
be determined on days on which the Exchange is closed.
Portfolio securities and other assets for which market quota-
tions are readily available are stated at market value. Fixed in-
come securities are normally valued on the basis of quotations ob-
tained from brokers and dealers or pricing services, which take
into account appropriate factors such as institutional-sized trad-
ing in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market
data. Certain fixed income
November 1, 1998 Prospectus 25
<PAGE>
securities for which daily market quotations are not readily
available may be valued, pursuant to guidelines established by the
Board of Trustees, with reference to fixed income securities whose
prices are more readily obtainable and whose durations are compa-
rable to the securities being valued. Short-term investments hav-
ing a maturity of 60 days or less are valued at amortized cost,
when the Board of Trustees determines that amortized cost is their
fair value. Exchange- traded options, futures and options on
futures are valued at the settlement price as determined by the
appropriate clearing corporation. All other securities and assets
are valued at their fair value as determined in good faith by the
Trustees or by persons acting at their direction.
Quotations of foreign securities in foreign currency are con-
verted to U.S. dollar equivalents using foreign exchange quota-
tions received from independent dealers. Under the Trust's proce-
dures, the prices of foreign securities are determined using in-
formation derived from pricing services and other sources. Infor-
mation that becomes known to the Trust or its agents after the
time that net asset value is calculated on any Business Day may be
assessed in determining net asset value per share after the time
of receipt of the information, but will not be used to retroac-
tively adjust the price of the security so determined earlier or
on a prior day. Events affecting the values of portfolio securi-
ties that occur between the time their prices are determined and
the close of regular trading on the Exchange (normally 4:00 p.m.,
Eastern time) may not be reflected in the calculation of net asset
value. If events materially affecting the value of such securities
occur during such period, then these securities may be valued at
fair value as determined by the Adviser or a Portfolio Manager and
approved in good faith by the Board of Trustees.
Each Fund's liabilities are allocated among its classes. The
total of such liabilities allocated to a class plus that class's
distribution and/or servicing fees and any other expenses spe-
cially allocated to that class are then deducted from the class's
proportionate interest in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that
class outstanding to produce the class's "net asset value" per
share. Generally, for Funds that pay income dividends, those divi-
dends are expected to differ over time by approximately the amount
of the expense accrual differential between a particular Fund's
classes.
Distributions
Shares begin earning dividends on the day after the date that
funds are received by the Trust for the purchase of Class D
shares. Net investment income from interest and dividends, if any,
will be declared and paid quarterly to shareholders of record by
the Equity Income, Value and Renaissance Funds. Net investment
income from interest and dividends, if any, will be declared and
paid at least annually to shareholders of record by the Tax-
Efficient Equity, Capital Appreciation, Mid-Cap Growth and
Innovation Funds. Any net capital gains from the sale of portfolio
securities will be distributed no less frequently than once
annually. Net short-term capital gains may be paid more
frequently.
All dividends and/or distributions will be paid in the form of
additional Class D shares of the Fund to which the dividends
and/or distributions relate or, at the election of the sharehold-
er, of another Fund or other series of the Trust or of PIMCO
Funds: Pacific Investment Management Series as described below, at
net asset value, unless the shareholder elects to receive cash
(either paid to shareholders directly or credited to their account
with their financial services firm). If a shareholder has elected
to receive dividends and/or capital gain distributions in cash and
the postal or other delivery service is unable to deliver checks
to the shareholder's address of record, such shareholder's distri-
butions will automatically be invested in the Money Market Fund of
PIMCO Funds: Pacific Investment Management Series, until such
shareholder is located. Dividends paid by each Fund with respect
to each class of shares are calculated in the same manner and at
the same time.
Your financial service firm may offer a program pursuant to
which you may elect to invest dividends and/or distributions paid
by any Fund in Class D shares of any other Fund or series of PIMCO
Funds: Pacific Investment Management Series which offers Class D
shares. Please contact your financial service firm for details.
26 PIMCO Funds: Multi-Manager Series
<PAGE>
Taxes
Each Fund intends to qualify as a regulated investment company an-
nually and to elect to be treated as a regulated investment com-
pany under the Internal Revenue Code of 1986, as amended (the
"Code"). As such, a Fund generally will not pay federal income tax
on the income and gains it pays as dividends to its shareholders.
In order to avoid a 4% federal excise tax, each Fund intends to
distribute each year substantially all of its net income and
gains.
Shareholders subject to U.S. federal income tax will be subject
to tax on dividends received from a Fund, regardless of whether
received in cash or reinvested in additional shares. Distributions
received by tax-exempt shareholders generally will not be subject
to federal income tax to the extent permitted under applicable tax
law. All shareholders must treat dividends, other than capital
gain dividends, exempt-interest dividends and dividends that rep-
resent a return of capital to shareholders, as ordinary income. In
particular, distributions derived from short-term gains will be
treated as ordinary income. Dividends designated by a Fund as cap-
ital gain dividends derived from the Fund's net capital gains
(that is, the excess of its net long-term capital gains over its
net short-term capital losses) are taxable to shareholders as
long-term capital gain (generally subject to a 20% tax rate) ex-
cept as provided by an applicable tax exemption. Any distributions
that are not from a Fund's net investment income or net capital
gain may be characterized as a return of capital to shareholders
or, in some cases, as capital gain. Certain dividends declared in
October, November or December of a calendar year are taxable to
shareholders (who otherwise are subject to tax on dividends) as
though received on December 31 of that year if paid to
shareholders during January of the following calendar year. Each
Fund will advise shareholders annually of the amount and nature of
the dividends paid to them. Dividends derived from interest on
certain U.S. Government securities may be exempt from state and
local taxes, although interest on mortgage-backed U.S. Government
securities is generally not so exempt. While the Tax-Efficient Eq-
uity Fund seeks to minimize taxable distributions, the Fund may be
expected to earn and distribute taxable income and may also be ex-
pected to realize and distribute capital gains from time to time.
Current federal tax law requires the holder of a U.S. Treasury
or other fixed income zero-coupon security to accrue as income
each year a portion of the discount at which the security was pur-
chased, even though the holder receives no interest payment in
cash on the security during the year. In addition, pay-in-kind se-
curities will give rise to income which is required to be distrib-
uted and is taxable even though the Fund holding the security re-
ceives no interest payment in cash on the security during the
year. Also, a portion of the yield on certain high yield securi-
ties (including certain pay-in-kind securities) issued after July
10, 1989 may be treated as dividends. Accordingly, each Fund that
holds the foregoing kinds of securities may be required to pay out
as an income distribution each year an amount which is greater
than the total amount of cash interest the Fund actually received.
Such distributions may be made from the cash assets of the Fund or
by liquidation of portfolio securities, if necessary. The Fund may
realize gains or losses from such liquidations. In the event the
Fund realizes net capital gains from such transactions, its share-
holders may receive a larger capital gain distribution, if any,
than they would in the absence of such transactions.
Taxable shareholders should note that the timing of their in-
vestment or redemptions could have undesirable tax consequences.
Dividends and distributions on a Fund's shares are generally sub-
ject to federal income tax as described herein to the extent they
do not exceed the Fund's realized income and gains, even though
such dividends and distributions may economically represent a re-
turn of a particular shareholder's investment. Such distributions
are likely to occur in respect of shares purchased at a time when
the Fund's net asset value reflects gains that are either
unrealized or realized but not distributed. Such realized gains
may be required to be distributed even when a Fund's net asset
value also reflects unrealized losses. If shares are redeemed be-
fore payment of an exempt-interest dividend, shareholders may re-
alize a taxable capital gain, whereas by waiting and receiving the
exempt-interest dividend, a portion of their share value would
have been received in the form of tax-free income.
The preceding discussion relates only to federal income tax;
the consequences under other tax laws may differ. Shareholders
should consult their tax advisers as to the possible application
of foreign, state and local income tax laws
November 1, 1998 Prospectus 27
<PAGE>
to Trust dividends and capital gain distributions. For additional
information relating to the tax aspects of investing in a Fund,
see the Statement of Additional Information.
Management of the Trust
The business affairs of the Trust are managed under the direction
of the Board of Trustees. Information about the Trustees and the
Trust's executive officers may be found in the Statement of Addi-
tional Information under the heading "Management of the Trust."
INVESTMENT PIMCO ADVISORS serves as investment adviser to the Funds pursuant
ADVISER to an investment advisory agreement with the Trust. PIMCO Advisors
is a Delaware limited partnership organized in 1987. PIMCO Advi-
sors provides investment management and advisory services to pri-
vate accounts of institutional and individual clients and to mu-
tual funds. Total assets under management by PIMCO Advisors and
its subsidiary partnerships as of September 30, 1998 were approxi-
mately $225.9 billion. The general partners of PIMCO Advisors are
PIMCO Partners, G.P. and PIMCO Advisors Holdings L.P. ("PAH").
PIMCO Partners, G.P. is a general partnership between PIMCO Hold-
ing LLC, a Delaware limited liability company and an indirect
wholly-owned subsidiary of Pacific Life Insurance Company, and
PIMCO Partners LLC, a California limited liability company con-
trolled by the current Managing Directors and two former Managing
Directors of Pacific Investment Management Company. PIMCO Part-
ners, G.P. is the sole general partner of PAH. PIMCO Advisors is
governed by a Management Board, which exercises substantially all
of the governance powers of the general partner and serves as the
functional equivalent of a board of directors. PIMCO Advisors' ad-
dress is 800 Newport Center Drive, Newport Beach, California
92660. PIMCO Advisors is registered as an investment adviser with
the Securities and Exchange Commission. PIMCO Advisors currently
has seven subsidiary investment adviser partnerships, the follow-
ing four of which manage one or more of the Funds: Cadence, Colum-
bus Circle, NFJ and Parametric.
Under the investment advisory agreement, PIMCO Advisors, sub-
ject to the supervision of the Board of Trustees, is responsible
for providing advice and guidance with respect to the Funds and
for managing, either directly or through others selected by the
Adviser, the investment of the Funds. PIMCO Advisors also fur-
nishes to the Board of Trustees periodic reports on the investment
performance of each Fund.
PORTFOLIO Pursuant to portfolio management agreements, PIMCO Advisors em-
MANAGERS ploys Portfolio Managers to provide investment advisory services
to all of the Funds. Each Portfolio Manager is an affiliate of
PIMCO Advisors. PIMCO Advisors (and not the Funds or the Trust)
compensates the Portfolio Managers from its advisory fee. Under
these agreements, a Portfolio Manager has full investment discre-
tion and makes all determinations with respect to the investment
of a Fund's assets and makes all determinations respecting the
purchase and sale of a Fund's securities and other investments. If
a Portfolio Manager ceases to manage the portfolio of a Fund,
PIMCO Advisors will either assume full responsibility for the man-
agement of that Fund, or retain a new portfolio manager subject to
the approval of the Trustees and the Fund's shareholders.
CADENCE manages the Capital Appreciation and Mid-Cap Growth Funds
(the "Cadence Funds"). Cadence is an investment management firm
organized as a general partnership. Cadence has two partners:
PIMCO Advisors as the supervisory partner, and Cadence Capital
Management Inc. as the managing partner. Cadence Capital Manage-
ment Corporation, the predecessor investment adviser to Cadence,
commenced operations in 1988. Accounts managed by Cadence had com-
bined assets as of September 30, 1998 of approximately $6.1 bil-
lion. Cadence's address is Exchange Place, 53 State Street, Bos-
ton, Massachusetts 02109. Cadence is registered as an investment
adviser with the Securities and Exchange Commission.
28 PIMCO Funds: Multi-Manager Series
<PAGE>
David B. Breed, William B. Bannick, Katherine A. Burdon and Pe-
ter B. McManus are primarily responsible for the day-to-day man-
agement of the Cadence Funds. Mr. Breed is a Managing Director,
the Chief Executive Officer, and a founding partner of Cadence,
and has 25 years' investment management experience. He has been
the driving force in developing the firm's growth-oriented stock
screening and selection process and has been with Cadence or its
predecessor since its inception. Mr. Breed graduated from the Uni-
versity of Massachusetts and received his MBA from the Wharton
School of Business. He is a Chartered Financial Analyst. Mr.
Bannick is a Managing Director and Executive Vice President of Ca-
dence and has 13 years' investment management experience. He pre-
viously served as Executive Vice President of George D. Bjurman &
Associates and as Supervising Portfolio Manager of Trinity Invest-
ment Management Corporation. Mr. Bannick joined the predecessor of
Cadence in 1992. He graduated from the University of Massachusetts
and received his MBA from Boston University. Mr. Bannick is
a Chartered Financial Analyst. Ms. Burdon is a Managing Director
and Portfolio Manager of Cadence and has 10 years' investment man-
agement experience. She previously served as a Vice President and
Portfolio Manager of The Boston Company. Ms. Burdon joined the
predecessor of Cadence in 1993. She graduated from Stanford Uni-
versity and received a Master of Science degree from Northeastern
University. Ms. Burdon is a Chartered Financial Analyst and Certi-
fied Public Accountant. Mr. McManus is Director of Fund Management
of Cadence and has 21 years' investment management experience. He
previously served as a Vice President of Bank of Boston. Mr. Mc-
Manus joined Cadence in 1994. He graduated from the University of
Massachusetts, and he is certified as a Financial Planner.
NFJ manages the Equity Income and Value Funds. NFJ is an invest-
ment management firm organized as a general partnership. NFJ has
two partners: PIMCO Advisors as the supervisory partner, and NFJ
Management Inc. as the managing partner. NFJ Investment Group,
Inc., the predecessor investment adviser to NFJ, commenced opera-
tions in 1989. Accounts managed by NFJ had combined assets as of
September 30, 1998 of approximately $2.2 billion. NFJ's address is
2121 San Jacinto, Suite 1840, Dallas, Texas 75201. NFJ is regis-
tered as an investment adviser with the Securities and Exchange
Commission.
Chris Najork and Benjamin Fischer are responsible for the day-
to-day management of the Equity Income Fund. Mr. Najork is a Man-
aging Director and a founding partner of NFJ and has 30 years' ex-
perience encompassing equity research and portfolio management. He
received his bachelor's degree and MBA from Southern Methodist
University, and he is a Chartered Financial Analyst. Mr. Fischer
is a Managing Director and a founding partner of NFJ and has 32
years' experience encompassing equity research and portfolio man-
agement. He received his bachelor's degree and JD from Oklahoma
University and his MBA from New York University Graduate School of
Business. He is a Chartered Financial Analyst. Messrs. Najork and
Fischer and Paul A. Magnuson are primarily responsible for the
day-to-day management of the Value Fund. Mr. Magnuson, a research
analyst at NFJ, has 13 years' experience in equity research and
portfolio management. He received his bachelor's degree in Finance
from the University of Nebraska-Lincoln.
COLUMBUS CIRCLE manages the Renaissance and Innovation Funds (the
"Columbus Circle Funds"). Columbus Circle is an investment manage-
ment firm organized as a general partnership. Columbus Circle has
two partners: PIMCO Advisors as the supervisory partner, and Co-
lumbus Circle Investors Management Inc. as the managing partner.
Columbus Circle Investors Division of Thomson Advisory Group L.P.
("TAG"), the predecessor investment adviser to Columbus Circle,
commenced operations in 1975. Accounts managed by Columbus Circle
had combined assets as of September 30, 1998 of approximately $7.8
billion. Columbus Circle's address is Metro Center, One Station
Place, 8th Floor, Stamford, Connecticut 06902. Columbus Circle is
registered as an investment adviser with the Securities and Ex-
change Commission.
At the center of Columbus Circle's equity investment strategy
is its theory of Positive Momentum & Positive Surprise. This the-
ory asserts that a good company doing better than generally ex-
pected will experience a rise in its stock price, and conversely,
a company falling short of expectations will experience a drop in
its stock price. Based on this theory, Columbus Circle attempts to
manage the Columbus Circle Funds with a view to investing in grow-
ing companies that are surprising the market with business results
that are better than anticipated.
November 1, 1998 Prospectus 29
<PAGE>
Investment decisions made by Columbus Circle are generally made
by one or more committees, although the following individuals have
primary responsibility for the noted Columbus Circle Funds. Clif-
ford G. Fox is primarily responsible for the day-to-day management
of the Renaissance Fund. Mr. Fox, a Managing Director of Columbus
Circle, has 17 years of investment management experience. He re-
ceived his bachelor's degree from the University of Pennsylvania
and his MBA from New York University, and he is a Chartered Finan-
cial Analyst. Anthony Rizza and Dennis P. McKechnie are primarily
responsible for the day-to-day management of the Innovation Fund.
Mr. Rizza, a Managing Director of Columbus Circle, has 12 years of
investment management experience. He received his bachelor's de-
gree from the University of Connecticut, and he is a Chartered Fi-
nancial Analyst. Mr. McKechnie, a research analyst at Columbus
Circle, has 7 years of investment management experience. He re-
ceived his bachelor's degree from Purdue University and his MBA
from Columbia University.
PARAMETRIC manages the Tax-Efficient Equity Fund. Parametric is an
investment management firm organized as a general partnership.
Parametric has two partners: PIMCO Advisors as the supervisory
partner, and Parametric Management Inc. as the managing partner.
Parametric Portfolio Associates, Inc., the predecessor investment
adviser to Parametric, commenced operations in 1987. Accounts
managed by Parametric had combined assets as of September 30, 1998
of approximately $2.8 billion. Parametric's address is 7310
Columbia Center, 701 Fifth Avenue, Seattle, Washington 98104-7090.
Parametric is registered as an investment adviser with the
Securities and Exchange Commission and as a commodity trading
adviser with the CFTC.
David Stein, Tom Seto and Cliff Quisenberry are primarily re-
sponsible for the day-to-day management of the Tax-Efficient Eq-
uity Fund. Mr. Stein is a Managing Director of Parametric and has
been associated with Parametric since June 1996. He also directs
research and product development for Parametric. Mr. Stein gradu-
ated with bachelor's and master's degrees in Applied Mathematics
from the University of Witwatersrand, South Africa, and received a
Ph.D. in Applied Mathematics from Harvard University. Prior to
joining Parametric, Mr. Stein served as the Director of Investment
Research at GTE Investment Management, Director of Active Equity
Strategies at the Vanguard Group, and Director of Quantitative
Portfolio Management and Research at IBM. Mr. Seto is a Vice Pres-
ident of Parametric and has 7 years of experience in managing
structured equity portfolios. Prior to joining Parametric, he
served as the Head of U.S. Equity Index Investments at Barclays
Global Investors. Mr. Seto graduated from the University of Wash-
ington with a bachelor's degree in Electrical Engineering, and
from the University of Chicago with an MBA in Finance. Mr.
Quisenberry is a Vice President of Parametric and has been with
Parametric since 1994. He previously served as a Vice President
and Portfolio Manager at Cutler & Co., and as a Security Analyst
and Portfolio Manager at Fred Alger Management. Mr. Quisenberry
graduated from Yale University with a bachelor's degree in Econom-
ics. He is a Chartered Financial Analyst.
Registration as an investment adviser with the Securities and Ex-
change Commission does not involve supervision by the Securities
and Exchange Commission over investment advice, and registration
with the CFTC as a commodity trading adviser does not involve su-
pervision by the CFTC over commodities trading. The portfolio man-
agement agreements are not exclusive, and Columbus Circle, Ca-
dence, NFJ and Parametric may provide, and currently are provid-
ing, investment management services to other clients, including
other investment companies.
FUND
ADMINISTRATOR
PIMCO Advisors also serves as administrator (the "Administrator")
for the Funds' Class D shares pursuant to an administration agree-
ment with the Trust. The Administrator provides or procures admin-
istrative services for Class D shareholders of the Funds, which
include clerical help and accounting, bookkeeping, internal audit
services and certain other services required by the Funds, and
preparation of reports to the Funds' shareholders and regulatory
filings. The Administrator has retained Pacific Investment Manage-
ment Company, its affiliate, to provide such services as sub-ad-
ministrator. The Administrator and/or the sub-administrator may
also retain other affiliates to provide certain of these services.
In addition, the Administrator, at its own expense, arranges for
the provision of legal, audit, custody, transfer agency (including
sub-transfer agency and other administrative services) and other
services necessary for the
30 PIMCO Funds: Multi-Manager Series
<PAGE>
ordinary operation of the Funds, and is responsible for the costs
of registration of the Trust's shares and the printing of prospec-
tuses and shareholder reports for current shareholders.
PIMCO Advisors or an affiliate may pay financial service firms
a portion of the Class D administration fees in return for the
firms' services (normally not to exceed an annual rate of .35% of
a Fund's average daily net assets attributable to Class D shares
purchased through such firms). The Funds' administration agreement
includes a plan for Class D shares that has been adopted in con-
formity with the requirements set forth in Rule 12b-1 under the
1940 Act. The plan provides that up to .25% per annum of the Class
D administrative fees paid under the administration agreement may
represent reimbursement for expenses in respect of activities that
may be deemed to be primarily intended to result in the sale of
Class D shares. The principal types of activities for which such
payments may be made are services in connection with the distribu-
tion of Class D shares and/or the provision of shareholder servic-
es.
The Funds (and not the Administrator) are responsible for the
following expenses: (i) salaries and other compensation of any of
the Trust's executive officers and employees who are not officers,
directors, stockholders, or employees of PIMCO Advisors, Pacific
Investment Management Company, or their subsidiaries or affili-
ates; (ii) taxes and governmental fees; (iii) brokerage fees and
commissions and other portfolio transaction expenses; (iv) the
costs of borrowing money, including interest expenses; (v) fees
and expenses of the Trustees who are not "interested persons" of
the Adviser, any Portfolio Manager, or the Trust, and any counsel
retained exclusively for their benefit; (vi) extraordinary ex-
penses, including costs of litigation and indemnification ex-
penses; (vii) expenses which are capitalized in accordance with
generally accepted accounting principles; and (viii) any expenses
allocated or allocable to a specific class of shares, and may in-
clude certain other expenses as permitted by the Trust's Multiple
Class Plan adopted pursuant to Rule 18f-3 under the 1940 Act, sub-
ject to review and approval by the Trustees.
ADVISORY The Funds feature fixed advisory and administrative fees. For pro-
AND viding or arranging for the provision of investment advisory serv-
ADMINI- ices to the Funds as described above, PIMCO Advisors receives
STRATIVE monthly fees from each Fund at an annual rate based on the average
FEES daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE RATE
---------------------------------
<S> <C>
Equity Income, Value,
Tax-Efficient Equity,
Capital Appreciation
and Mid-Cap Growth
Funds .45%
---------------------------------
Renaissance Fund .60%
---------------------------------
Innovation Fund .65%
</TABLE>
For providing or procuring administrative services to the Funds
as described above, the Administrator receives monthly fees from
each Fund at an annual rate based on the average daily net assets
attributable to the Fund's Class D shares as follows:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FEE RATE*
-------------------------------
<S> <C>
All Funds .65%
</TABLE>
* As described under "Fund Administrator," the administration
agreement includes a plan adopted in conformity with Rule 12b-1
which provides for the payment of up to .25% of the .65% Adminis-
trative Fee Rate as reimbursement for expenses in respect of ac-
tivities that may be deemed to be primarily intended to result in
the sale of Class D shares. The "Annual Fund Operating Expenses"
table on page 4 of this Prospectus shows the .65% Administrative
Fee Rate under two separate columns entitled "Administrative Fees"
(.40%) and "12b-1 (Service) Fees" (.25%).
The investment advisory, administration and sub-administration
agreements for the Funds may be terminated by the Trustees, or by
PIMCO Advisors or Pacific Investment Management Company (as the
case may be) on 60 days' written notice. In addition, the invest-
ment advisory agreement may be terminated with regard to the Re-
naissance and Innovation Funds by a majority of the Trustees that
are not interested persons of the Trust, PIMCO Advisors or Pacific
November 1, 1998 Prospectus 31
<PAGE>
Investment Management Company (as the case may be) on 60 days'
written notice. Following their initial terms, the agreements will
continue from year-to-year if approved by the Trustees.
Pursuant to the portfolio management agreements between the Ad-
viser and each of the Portfolio Managers, PIMCO Advisors (and not
the Funds or the Trust) pays each Portfolio Manager a fee based on
a percentage of the average daily net assets of a Fund as follows:
Columbus Circle--.38% for the Renaissance Fund and .38% for the
Innovation Fund; Cadence--.35% for the Capital Appreciation Fund
and .35% for the Mid-Cap Growth Fund; NFJ--.35% for the Equity In-
come Fund and .35% for the Value Fund; and Parametric--.35% for
the Tax-Efficient Equity Fund.
PORTFOLIO Pursuant to the portfolio management agreements, a Portfolio Man-
TRANSACTIONSager places orders for the purchase and sale of portfolio invest-
ments for a Fund's accounts with brokers or dealers selected by it
in its discretion. In effecting purchases and sales of portfolio
securities for the accounts of the Funds, the Portfolio Managers
will seek the best price and execution of the Fund's orders. In
doing so, a Fund may pay higher commission rates than the lowest
available when the Portfolio Manager believes it is reasonable to
do so in light of the value of the brokerage and research services
provided by the broker effecting the transaction. The Portfolio
Managers also may consider sales of shares of the Trust as a fac-
tor in the selection of broker-dealers to execute portfolio trans-
actions for the Trust.
Some securities considered for investment by the Funds may also
be appropriate for other clients served by the Portfolio Managers.
If a purchase or sale of securities consistent with the investment
policies of a Fund and one or more of these clients served by a
Portfolio Manager is considered at or about the same time, trans-
actions in such securities will be allocated among the Fund and
clients in a manner deemed fair and reasonable by the Portfolio
Manager. Particularly when investing in less liquid or illiquid
securities of smaller capitalization companies, such allocation
may take into account the asset size of a Fund in determining
whether the allocation of an investment is suitable. As a result,
larger Funds may become more concentrated in more liquid securi-
ties than smaller Funds or private accounts of a Portfolio Manager
pursuing a small capitalization investment strategy, which could
adversely affect performance. A Portfolio Manager may aggregate
orders for the Funds with simultaneous transactions entered into
on behalf of its other clients so long as price and transaction
expense are averaged either for the particular transaction or for
that day.
Description of the Trust
CAPITALIZATION
The Trust was organized as a Massachusetts business trust on Au-
gust 24, 1990, and currently consists of twenty-eight portfolios
that are operational, seven of which are described in this Pro-
spectus. Other portfolios may be offered by means of a separate
prospectus. The Board of Trustees may establish additional portfo-
lios in the future. The capitalization of the Trust consists of an
unlimited number of shares of beneficial interest. When issued,
shares of the Trust are fully paid, non-assessable and freely
transferable.
Under Massachusetts law, shareholders could, under certain cir-
cumstances, be held liable for the obligations of the Trust. How-
ever, the Second Amended and Restated Agreement and Declaration of
Trust (the "Declaration of Trust") of the Trust disclaims share-
holder liability for acts or obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obliga-
tion or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust also provides for indemnifica-
tion out of a Fund's property for all loss and expense of any
shareholder of that Fund held liable on account of being or having
been a shareholder. Thus, the risk of a shareholder incurring fi-
nancial loss on account of shareholder liability is limited to
circumstances in which such disclaimer is inoperative or the Fund
of which he or she is or was a shareholder is unable to meet its
obligations, and thus should be considered remote.
32 PIMCO Funds: Multi-Manager Series
<PAGE>
MULTIPLE In addition to Class D shares, certain Funds also offer up to five
CLASSES OF additional classes of shares, Class A, Class B, Class C, Institu-
SHARES tional Class and Administrative Class shares, through separate
prospectuses. This Prospectus relates only to Class D shares of
the Funds. Unlike Class D shares, which may be purchased only
through financial service firms, the other classes may be pur-
chased directly from the Trust and/or the Distributor. The other
classes may be subject to sales charges and different levels of
operating expenses than Class D shares. As a result of different
charges and expense levels, the other five classes are expected to
achieve different investment returns than Class D shares. Share-
holders of a particular class may also receive additional services
or services different from those received by the other classes. To
obtain more information about Class A, Class B and Class C shares,
please call the Distributor at 1-800-426-0107. To obtain more in-
formation about Institutional Class and Administrative Class
shares, please call 1-800-927-4648.
Each class of shares of each Fund represents interests in the
assets of that Fund, and each class has identical dividend, liqui-
dation and other rights and the same terms and conditions, except
that expenses related to the distribution and shareholder servic-
ing of a particular class of shares are borne solely by such class
and each class may, at the Trustees' discretion, also pay a dif-
ferent share of other expenses, not including advisory or custo-
dial fees or other expenses related to the management of the
Trust's assets, if these expenses are actually incurred in a dif-
ferent amount by that class, or if the class receives services of
a different kind or to a different degree than the other classes.
All other expenses are allocated to each class on the basis of the
net asset value of that class in relation to the net asset value
of the particular Fund.
VOTING Each class of shares of each Fund has identical voting rights, ex-
cept that each class of shares has exclusive voting rights on any
matter submitted to shareholders that relates solely to that
class, and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the
interests of any other class. Each class of shares has exclusive
voting rights with respect to matters pertaining to any distribu-
tion and servicing plan or agreement applicable only to that
class. These shares are entitled to vote at meetings of sharehold-
ers. Matters submitted to shareholder vote must be approved by
each Fund separately except (i) when required by the 1940 Act
shares shall be voted together and (ii) when the Trustees have de-
termined that the matter does not affect all Funds, then only
shareholders of the Fund or Funds affected shall be entitled to
vote on the matter. All classes of shares of a Fund will vote to-
gether, except with respect to a distribution and servicing plan
or agreement applicable to a class of shares or when a class vote
is required as specified above or otherwise by the 1940 Act.
Shares are freely transferable, are entitled to dividends as de-
clared by the Trustees and, in liquidation of the Trust, are enti-
tled to receive the net assets of their Fund, but not of the other
Funds. The Trust does not generally hold annual meetings of share-
holders and will do so only when required by law. Shareholders may
remove Trustees from office by votes cast in person or by proxy at
a meeting of shareholders or by written consent. Such a meeting
will be called at the written request of the holders of 10% of the
Trust's outstanding shares.
Shares entitle their holders to one vote per share (with
proportionate voting for fractional shares). As of October 13,
1998, the following was a shareholder of record of at least 25% of
the outstanding voting securities of the indicated Fund: PIMCO
Advisors L.P. (Newport Beach, California), the Trust's investment
adviser and administrator, with respect to the Tax-Efficient
Equity Fund. As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund (or the Trust) means
the vote of the lesser of: (1) 67% of the shares of the Fund (or
the Trust) present at a meeting, if the holders of more than 50%
of the outstanding shares are present in person or by proxy; or
(2) more than 50% of the outstanding shares of the Fund (or the
Trust).
November 1, 1998 Prospectus 33
<PAGE>
--------------------------------------------------------------------
PIMCO INVESTMENT ADVISER AND ADMINISTRATOR
FUNDS:
MULTI- PIMCO Advisors L.P., 800 Newport Center Drive, Newport Beach, CA
MANAGER 92660
SERIES --------------------------------------------------------------------
PORTFOLIO MANAGERS
Cadence Capital Management, NFJ Investment Group, Columbus Circle
Investors, Parametric Portfolio Associates
--------------------------------------------------------------------
DISTRIBUTOR
PIMCO Funds Distributors LLC, 2187 Atlantic Street, Stamford, CT
06902
--------------------------------------------------------------------
CUSTODIAN
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
MO 64105
--------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
Shareholder Services, Inc. P.O. Box 5866, Denver, CO 80217
--------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105
--------------------------------------------------------------------
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, MA 02110
--------------------------------------------------------------------
For further information about the PIMCO Funds, call 1-888-87-PIMCO
or visit our Web site at www.pimcofunds.com.
<PAGE>
PIMCO FUNDS IS ON THE WEB
www.pimcofunds.com
A PARTIAL LIST OF WHAT'S AVAILABLE:
DAILY MANAGER COMMENTARY
FUND MANAGER BIOS
CURRENT AND HISTORICAL FUND PERFORMANCE
LIPPER RANKINGS
MORNINGSTAR RATINGS
LISTING OF FUND PORTFOLIO HOLDINGS
RISK ANALYSIS
DAILY SHARE PRICES
RESOURCES FOR INVESTMENT PROFESSIONALS
(GRAPHIC APPEARS HERE)
PIMCO Funds Distributors LLC is pleased to announce the launch of its Web site.
We can be found on the Worldwide Web at www.pincofunds.com.
You now have around-the-clock access to the most timely and comprehensive
information available on all of the PIMCO Funds. In addition, the site includes
daily commentary from our fund managers, with insights on the economy and other
factors affecting the stockand bond markets.
(GRAPHIC APPEARS HERE)
You'll find the site to be informative and easy-to-use. There are several
functions that can help you navigate your way around the site. Among the major
sections are Investment Insight and Fund Information.
(GRAPHIC APPEARS HERE)
INVESTMENT INSIGHT
The Investment Insight section provides an overview of six of the investment
management firms which are part of PIMCO Advisors L.P. You'll find an
explanation of each firm's investment process, biographies of the investment
team, manager updates and more.
(GRAPHIC APPEARS HERE)
FUND INFORMATION
In the Fund Information section you'll access profiles of all the PIMCO Funds.
Some include a summary of each fund's portfolio, risk analysis data, Lipper
rankings and Morningstar ratings. You an also obtain daily fund share prices.
And now we provide current and historical performance for Class D shares.
QUESTIONS?
We're sure you will 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
1-888-87-PIMCO. Or, use the e-mail feature of the site to contact us.
Please read the relevant prospectus carefully before you invest in any PIMCO
Fund.
<PAGE>
PIMCO Funds Prospectus
Multi Manager
Series STOCK AND BOND FUNDS AGGRESSIVE STOCK FUNDS
Balanced Fund Small-Cap Value Fund
November 1, 1998
Opportunity Fund
Share Classes
A B C STOCK FUNDS
Equity Income Fund
SPECIALIZED STOCK FUNDS
Value Fund International Fund
Renaissance Fund Innovation Fund
Tax-Efficient Equity Fund Precious Metals Fund
Capital Appreciation Fund
Growth Fund
Value 25 Fund
Mid-Cap Growth Fund
Target Fund
PIMCO
FUNDS
<PAGE>
PIMCO Funds: Multi-Manager Series
Prospectus
November 1, 1998
PIMCO Funds: Multi-Manager Series (the "Trust") is an open-end se-
ries management investment company offering fifteen separate di-
versified investment portfolios (each a "Fund") in this Prospec-
tus, each with different investment objectives and strategies. The
address of PIMCO Funds: Multi-Manager Series is 840 Newport Center
Drive, Suite 300, Newport Beach, CA 92660.
Each Fund (except the Opportunity Fund) offers three classes of
shares in this Prospectus: Class A shares (generally sold subject
to an initial sales charge), Class B shares (sold subject to a
contingent deferred sales charge) and Class C shares (sold subject
to an asset based sales charge). The Opportunity Fund does not of-
fer Class B shares. Through separate prospectuses, certain Funds
may offer up to three additional classes of shares, Class D, In-
stitutional Class and Administrative Class shares. See "Alterna-
tive Purchase Arrangements."
This Prospectus concisely describes the information investors
should know before investing in Class A, Class B and Class C
shares of the Funds. Please read this Prospectus carefully and
keep it for further reference.
Information about the investment objective of each Fund, along
with a detailed description of the types of securities in which
each Fund may invest, and of investment policies and restrictions
applicable to each Fund, are set forth in this Prospectus. There
can be no assurance that the investment objective of any Fund will
be achieved. Because the market value of each Fund's investments
will change, the investment returns and net asset value per share
of each Fund will vary.
A Statement of Additional Information, dated November 1, 1998, as
amended or supplemented from time to time, is available free of
charge by writing to PIMCO Funds Distributors LLC (the "Distribu-
tor"), 2187 Atlantic Street, Stamford, Connecticut 06902, or by
telephoning 1-800-426-0107. The Statement of Additional Informa-
tion, which contains more detailed information about the Trust,
has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. The Securities and
Exchange Commission maintains an Internet World Wide Web site (at
www.sec.gov) which contains the Statement of Additional Informa-
tion, materials that are incorporated by reference into this Pro-
spectus and the Statement of Additional Information, and other in-
formation about the Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE SHARES ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORA-
TION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PIMCO Funds Overview.................. 3
Schedule of Fees...................... 4
Financial Highlights.................. 8
Investment Objectives and Policies... 18
Characteristics and Risks of Securities
and Investment Techniques........... 26
Performance Information.............. 38
How to Buy Shares.................... 39
Alternative Purchase Arrangements ... 44
Exchange Privilege................... 52
How to Redeem........................ 53
Distributor and Distribution and
Servicing Plans...................... 57
How Net Asset Value Is Determined.... 60
Distributions........................ 60
Taxes................................ 61
Management of the Trust.............. 62
Description of the Trust............. 68
Mailings to Shareholders............. 69
</TABLE>
2 PIMCO Funds: Multi-Manager Series
<PAGE>
PIMCO Funds Overview
PIMCO Advisors L.P. ("PIMCO Advisors" or the "Adviser") is the in-
vestment adviser of all the Funds. PIMCO Advisors is one of the
largest investment management firms in the U.S. As of September
30, 1998, PIMCO Advisors and its subsidiary partnerships had ap-
proximately $225.9 billion in assets under management. Each of the
Funds also has a sub-adviser (each a "Portfolio Manager") respon-
sible for portfolio investment decisions. All of the Funds' Port-
folio Managers are affiliates of PIMCO Advisors except for Van Eck
Associates Corporation ("Van Eck"), an independent Portfolio Man-
ager that advises the Precious Metals Fund. The affiliated Portfo-
lio Managers are listed below.
<TABLE>
<CAPTION>
INVESTMENT SPECIALTY
---------------------------------------------------------------------------------------------------------
<C> <S>
COLUMBUS CIRCLE INVESTORS ("Columbus Circle") Stocks, using its "Positive Momentum & Positive
Surprise" discipline
------------------------------------------------------
CADENCE CAPITAL MANAGEMENT ("Cadence") Stocks of growth companies that the Portfolio Manager
believes are trading at a reasonable price
------------------------------------------------------
NFJ INVESTMENT GROUP ("NFJ") Value stocks that the Portfolio Manager believes are
undervalued and/or offer above-average dividend yields
------------------------------------------------------
BLAIRLOGIE CAPITAL MANAGEMENT ("Blairlogie") (/1/) International stocks using Scottish standards of
prudent investment management with modern quantitative
analytical tools
------------------------------------------------------
PACIFIC INVESTMENT MANAGEMENT COMPANY All sectors of the bond market using its total return
("Pacific Investment Management") philosophy--seeking both yield and capital
appreciation
------------------------------------------------------
PARAMETRIC PORTFOLIO ASSOCIATES ("Parametric") Stocks, using quantitatively-driven fundamental
analysis and economic methods, with a specialty in
tax-efficient products
</TABLE>
<TABLE>
<CAPTION>
FUND
PROFILES
FUND NAME INVESTMENT OBJECTIVE PRIMARY INVESTMENTS (/2/) PORTFOLIO MANAGER
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STOCK & Balanced Total return consistent Common stocks, fixed Cadence, NFJ and Pacific
BOND FUNDS with prudent investment income securities and Investment Management
management money market instruments
-----------------------------------------------------------------------------------------------------------
STOCK FUNDS Equity Current income as a Common stocks with below- NFJ
Income primary objective; long- average price to earnings
term growth of capital ratios and higher dividend
as a secondary objective yields relative to their
industry groups
----------------------------------------------------------------------------------------------
Value Long-term growth of Common stocks with below- NFJ
capital and income average price to earnings
ratios relative to their
industry groups
----------------------------------------------------------------------------------------------
Renaissance Long-term growth of Common stocks with below- Columbus Circle
capital and income average valuations that
have improving business
fundamentals
----------------------------------------------------------------------------------------------
Tax-Efficient Maximum after-tax growth A broadly diversified Parametric
Equity of capital portfolio of at least 200
common stocks of companies
with larger
market capitalizations
----------------------------------------------------------------------------------------------
Capital Growth of capital Common stocks of companies Cadence
Appreciation with market
capitalizations of at
least $1 billion that have
improving fundamentals and
whose stock is reasonably
valued by the market
----------------------------------------------------------------------------------------------
Growth Long-term growth of Common stocks of companies Columbus Circle
capital; income is with medium to large
incidental market capitalizations
----------------------------------------------------------------------------------------------
Value 25 Long-term growth of Approximately 25 common NFJ
capital and income stocks of companies with
medium market
capitalizations that have
below-average price to
earnings ratios relative
to their industry groups
----------------------------------------------------------------------------------------------
Mid-Cap Growth of capital Common stocks of companies Cadence
Growth with market
capitalizations in excess
of $500 million that have
improving fundamentals and
whose stock is reasonably
valued by the market
----------------------------------------------------------------------------------------------
Target Capital appreciation; no Common stocks of companies Columbus Circle
consideration given to with medium market
income capitalizations
-----------------------------------------------------------------------------------------------------------
AGGRESSIVE Small-Cap Long-term growth of Common stocks of companies NFJ
STOCK FUNDS Value capital and income with market
capitalizations between
$50 million and $1 billion
and below-average price to
earnings ratios relative
to their industry groups
----------------------------------------------------------------------------------------------
Opportunity (/3/) Capital appreciation; no Common stocks of companies Columbus Circle
consideration given to with market
income capitalizations of less
than $2 billion
-----------------------------------------------------------------------------------------------------------
SPECIALIZED International Capital appreciation; Non-U.S. stocks of Blairlogie (/1/)
STOCK FUNDS income is companies with small,
incidental medium and large market
capitalizations (developed
and emerging markets)
----------------------------------------------------------------------------------------------
Innovation Capital appreciation; no Common stocks of companies Columbus Circle
consideration given to with small, medium and
income large market
capitalizations
(technology-related
stocks)
----------------------------------------------------------------------------------------------
Precious Capital appreciation; no U.S. and non-U.S. stocks Van Eck
Metals consideration given to of companies with medium
income and large market
capitalizations (precious
metals-related stocks)
</TABLE>
1. On or before March 31, 1999, it is anticipated that PIMCO Advi-
sors will sell substantially all of its ownership interest in
Blairlogie and assume full portfolio management responsibility for
the International Fund. See "Management of the Trust--Portfolio
Managers--Blairlogie."
2. For specific information concerning the market capitalizations
of companies in which each Fund may invest and each Fund's invest-
ment style, see "Investment Objectives and Policies" in this Pro-
spectus.
3. Except to the extent described under "How to Buy Shares--Re-
strictions on Sales of and Exchanges for Shares of the Opportunity
Fund," the Opportunity Fund is closed to new investors.
November 1, 1998 Prospectus 3
<PAGE>
Schedule of Fees
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES(/1/) SHARES
SHAREHOLDER ------------------------------------------------------------------
TRANSACTION <S> <C> <C> <C>
EXPENSES MAXIMUM INITIAL SALES CHARGE
IMPOSED ON PURCHASES
(as a percentage of offering
price at time of purchase) 5.50% None None
------------------------------------------------------------------
MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS
(as a percentage of net as-
set value at time of pur-
chase) None None None
------------------------------------------------------------------
MAXIMUM CONTINGENT DEFERRED
SALES CHARGE ("CDSC")
(as a percentage of original
purchase price) 1%(/2/) 5%(/3/) 1%(/4/)
------------------------------------------------------------------
EXCHANGE FEE None None None
</TABLE>
1. The Opportunity Fund does not offer Class B shares.
2. Imposed only in certain circumstances where Class A shares are
purchased without a front-end sales charge at the time of pur-
chase. See "Alternative Purchase Arrangements" in this Prospectus.
3. The maximum CDSC is imposed on shares redeemed in the first
year. For shares held longer than one year, the CDSC declines ac-
cording to the schedule set forth under "Alternative Purchase Ar-
rangements -- Deferred Sales Charge Alternative -- Class B Shares"
in this Prospectus.
4. The CDSC on Class C shares is imposed only on shares redeemed
in the first year.
<TABLE>
<CAPTION>
EXAMPLE: You would pay the EXAMPLE: You would pay the
following expenses on a $1,000 following expenses on a $1,000
investment assuming (1) 5% investment assuming (1) 5%
annual return and (2) annual return and (2) no
ANNUAL FUND OPERATING EXPENSES redemption at the end redemption:
(As a percentage of average net assets): of each time period:
TOTAL
ADMINI- FUND
ADVISORY STRATIVE 12B-1 OPERATING YEAR YEAR
FUND FEES FEES(/1/) FEES(/2/) EXPENSES 1 3 5 10 1 3 5 10
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCED .45% .40% .25% 1.10% $66 $88 $112 $182 $66 $88 $112 $182
--------------------------------------------------------------------------------------------------------------------------------
EQUITY INCOME .45 .40 .25 1.10 66 88 112 182 66 88 112 182
--------------------------------------------------------------------------------------------------------------------------------
VALUE .45 .40 .25 1.10 66 88 112 182 66 88 112 182
--------------------------------------------------------------------------------------------------------------------------------
RENAISSANCE .60 .40 .25 1.25 67 92 120 198 67 92 120 198
--------------------------------------------------------------------------------------------------------------------------------
TAX-EFFICIENT
EQUITY .45 .40 .25 1.10 66 88 -- -- 66 88 -- --
--------------------------------------------------------------------------------------------------------------------------------
CAPITAL
APPRECIATION .45 .40 .25 1.10 66 88 112 182 66 88 112 182
--------------------------------------------------------------------------------------------------------------------------------
GROWTH .50 .40 .25 1.15 66 90 115 187 66 90 115 187
--------------------------------------------------------------------------------------------------------------------------------
VALUE 25 .50 .40 .25 1.15 66 90 -- -- 66 90 -- --
--------------------------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH .45 .40 .25 1.10 66 88 112 182 66 88 112 182
--------------------------------------------------------------------------------------------------------------------------------
TARGET .55 .40 .25 1.20 67 91 117 192 67 91 117 192
--------------------------------------------------------------------------------------------------------------------------------
SMALL-CAP VALUE .60 .40 .25 1.25 67 92 120 198 67 92 120 198
--------------------------------------------------------------------------------------------------------------------------------
OPPORTUNITY .65 .40 .25 1.30 68 94 122 203 68 94 122 203
--------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL .55 .65 .25 1.45 69 98 130 219 69 98 130 219
--------------------------------------------------------------------------------------------------------------------------------
INNOVATION .65 .40 .25 1.30 68 94 122 203 68 94 122 203
--------------------------------------------------------------------------------------------------------------------------------
PRECIOUS METALS .60 .45 .25 1.30 68 94 122 203 68 94 122 203
</TABLE>
CLASS A
SHARES
1. The Administrative Fees for each Fund are subject to reduction
to the extent that the average net assets attributable in the ag-
gregate to the Fund's Class A, Class B and Class C shares exceed
$2.5 billion. See "Management of the Trust -- Advisory and Admin-
istrative Fees."
2. 12b-1 fees represent servicing fees which are paid annually to
the Distributor and repaid to participating brokers, certain banks
and other financial intermediaries. See "Distributor and Distribu-
tion and Servicing Plans."
4 PIMCO Funds: Multi-Manager Series
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE: You would pay the
following expenses on a $1,000
investment assuming (1) 5%
ANNUAL FUND OPERATING EXPENSES annual return and (2) redemption
Class (As a percentage of average net assets): at the end of each time period:
B
Shares TOTAL
ADMINI- FUND
ADVISORY STRATIVE 12B-1 OPERATING YEAR
FUND FEES FEES(/1/) FEES(/2/) EXPENSES 1 3 5 10
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCED .45% .40% 1.00% 1.85% $69 $88 $120 $188
- ------------------------------------------------------------------------------------------------------
EQUITY INCOME .45 .40 1.00 1.85 69 88 120 188
- ------------------------------------------------------------------------------------------------------
VALUE .45 .40 1.00 1.85 69 88 120 188
- ------------------------------------------------------------------------------------------------------
RENAISSANCE .60 .40 1.00 2.00 70 93 128 204
- ------------------------------------------------------------------------------------------------------
TAX-EFFICIENT
EQUITY .45 .40 1.00 1.85 69 88 -- --
- ------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION .45 .40 1.00 1.85 69 88 120 188
- ------------------------------------------------------------------------------------------------------
GROWTH .50 .40 1.00 1.90 69 90 123 193
- ------------------------------------------------------------------------------------------------------
VALUE 25 .50 .40 1.00 1.90 69 90 -- --
- ------------------------------------------------------------------------------------------------------
MID-CAP GROWTH .45 .40 1.00 1.85 69 88 120 188
- ------------------------------------------------------------------------------------------------------
TARGET .55 .40 1.00 1.95 70 91 125 198
- ------------------------------------------------------------------------------------------------------
SMALL-CAP VALUE .60 .40 1.00 2.00 70 93 128 204
- ------------------------------------------------------------------------------------------------------
INTERNATIONAL .55 .65 1.00 2.20 72 99 138 225
- ------------------------------------------------------------------------------------------------------
INNOVATION .65 .40 1.00 2.05 71 94 130 209
PRECIOUS METALS .60 .45 1.00 2.05 71 94 130 209
<CAPTION>
EXAMPLE: You would pay the
following expenses on a $1,000
investment assuming (1) 5%
annual return and (2) no
redemption:
YEAR
FUND 1 3 5 10
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED $19 $58 $100 $188
- ---------------------------------------------------------
EQUITY INCOME 19 58 100 188
- ---------------------------------------------------------
VALUE 19 58 100 188
- ---------------------------------------------------------
RENAISSANCE 20 63 108 204
- ---------------------------------------------------------
TAX-EFFICIENT
EQUITY 19 58 -- --
- ---------------------------------------------------------
CAPITAL APPRECIATION 19 58 100 188
- ---------------------------------------------------------
GROWTH 19 60 103 193
- ---------------------------------------------------------
VALUE 25 19 60 -- --
- ---------------------------------------------------------
MID-CAP GROWTH 19 58 100 188
- ---------------------------------------------------------
TARGET 20 61 105 198
- ---------------------------------------------------------
SMALL-CAP VALUE 20 63 108 204
- ---------------------------------------------------------
INTERNATIONAL 22 69 118 225
- ---------------------------------------------------------
INNOVATION 21 64 110 209
- ---------------------------------------------------------
PRECIOUS METALS 21 64 110 209
</TABLE>
1. The Administrative Fees for each Fund are subject to reduction to the extent
that the average net assets attributable in the aggregate to the Fund's Class
A, Class B and Class C shares exceed $2.5 billion. See "Management of the
Trust--Advisory and Adminis-trative Fees."
2. 12b-1 fees which are equal to .25% represent servicing fees which are paid
annually to the Distributor and repaid to partici-pating brokers, certain banks
and other financial intermediaries. 12b-1 fees which exceed .25% represent
aggregate distribution and servicing fees. See "Distributor and Distribution and
Servicing Plans."
November 1, 1998 Prospectus 5
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE: You would pay the
following expenses on a $1,000
investment assuming (1) 5%
ANNUAL FUND OPERATING EXPENSES annual return and (2) redemption
CLASS (As a percentage of average net assets): at the end of each time period:
C TOTAL
SHARES ADMINI- FUND
ADVISORY STRATIVE 12B-1 OPERATING YEAR
FUND FEES FEES(/1/) FEES(/2/) EXPENSES 1 3 5 10
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCED .45% .40% 1.00% 1.85% $29 $58 $100 $217
- ---------------------------------------------------------------------------------------------------
EQUITY INCOME .45 .40 1.00 1.85 29 58 100 217
- ---------------------------------------------------------------------------------------------------
VALUE .45 .40 1.00 1.85 29 58 100 217
- ---------------------------------------------------------------------------------------------------
RENAISSANCE .60 .40 1.00 2.00 30 63 108 233
- ---------------------------------------------------------------------------------------------------
TAX-EFFICIENT
EQUITY .45 .40 1.00 1.85 29 58 -- --
- ---------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION .45 .40 1.00 1.85 29 58 100 217
- ---------------------------------------------------------------------------------------------------
GROWTH .50 .40 1.00 1.90 29 60 103 222
- ---------------------------------------------------------------------------------------------------
VALUE 25 .50 .40 1.00 1.90 29 60 -- --
- ---------------------------------------------------------------------------------------------------
MID-CAP GROWTH .45 .40 1.00 1.85 29 58 100 217
- ---------------------------------------------------------------------------------------------------
TARGET .55 .40 1.00 1.95 30 61 105 227
- ---------------------------------------------------------------------------------------------------
SMALL-CAP VALUE .60 .40 1.00 2.00 30 63 108 233
- ---------------------------------------------------------------------------------------------------
OPPORTUNITY .65 .40 1.00 2.05 31 64 110 238
- ---------------------------------------------------------------------------------------------------
INTERNATIONAL .55 .65 1.00 2.20 32 69 118 253
- ---------------------------------------------------------------------------------------------------
INNOVATION .65 .40 1.00 2.05 31 64 110 238
- ---------------------------------------------------------------------------------------------------
PRECIOUS METALS .60 .45 1.00 2.05 31 64 110 238
<CAPTION>
EXAMPLE: You would pay the
following expenses on a $1,000
investment assuming (1) 5%
annual return and (2) no
redemption:
YEAR
FUND 1 3 5 10
- -------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED $19 $58 $100 $217
- -------------------------------------------------------
EQUITY INCOME 19 58 100 217
- -------------------------------------------------------
VALUE 19 58 100 217
- -------------------------------------------------------
RENAISSANCE 20 63 108 233
- -------------------------------------------------------
TAX-EFFICIENT
EQUITY 19 58 -- --
- -------------------------------------------------------
CAPITAL APPRECIATION 19 58 100 217
- -------------------------------------------------------
GROWTH 19 60 103 222
- -------------------------------------------------------
VALUE 25 19 60 -- --
- -------------------------------------------------------
MID-CAP GROWTH 19 58 100 217
- -------------------------------------------------------
TARGET 20 61 105 227
- -------------------------------------------------------
SMALL-CAP VALUE 20 63 108 233
- -------------------------------------------------------
OPPORTUNITY 21 64 110 238
- -------------------------------------------------------
INTERNATIONAL 22 69 118 253
- -------------------------------------------------------
INNOVATION 21 64 110 238
- -------------------------------------------------------
PRECIOUS METALS 21 64 110 238
</TABLE>
1. The Administrative Fees for each Fund are subject to reduction to the extent
that the average net assets attributable in the ag-gregate to the Fund's Class
A, Class B and Class C shares exceed $2.5 billion. See "Management of the
Trust--Advisory and Administrative Fees."
2. 12b-1 fees which are equal to .25% represent servicing fees which are paid
annually to the Distributor and repaid to partici-pating brokers, certain banks
and other financial intermediaries. 12b-1 fees which exceed .25% represent
aggregate distribution and servicing fees. See "Distributor and Distribution and
Servicing Plans."
The purpose of the foregoing tables is to assist investors in understanding
the various costs and expenses of the Trust that are borne directly or
indirectly by Class A, Class B and Class C shareholders of the Funds. The
information is based upon each Fund's current fees and expenses. The Examples
for Class A shares assume payment of the current maximum applicable sales load.
Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a Class
B or Class C shareholder of the Trust may, depend-ing on the length of time the
shares are held, pay more than the economic equivalent of the maximum front-end
sales charges permit-ted by relevant rules of the National Association of
Securities Dealers, Inc.
NOTE: THE FIGURES SHOWN IN THE EXAMPLES ARE ENTIRELY HYPOTHETICAL. THEY ARE NOT
REPRESENTATIONS OF PAST OR FUTURE PERFORMANCE OR EX-PENSES; ACTUAL PERFORMANCE
AND/OR EXPENSES MAY BE MORE OR LESS THAN SHOWN.
6 PIMCO Funds: Multi-Manager Series
<PAGE>
(This page left blank intentionally)
November 1, 1998 Prospectus 7
<PAGE>
Financial Highlights
The financial highlights set forth on the following pages present certain in-
formation and ratios as well as performance information for the Funds that
were operational during the periods listed. Certain information provided below
is included in the June 30, 1998 PIMCO Funds Annual Report (relating to Class
A, B and C shares) and has been audited by PricewaterhouseCoopers LLP, inde-
pendent accountants, whose report thereon is also included in such Annual Re-
port. The Annual Report is incorporated by reference in the Statement of Addi-
tional Information and may be obtained without charge from the Distributor.
Financial Statements and related notes are also incorporated by reference in
the Statement of Additional Information.
<TABLE>
<CAPTION>
Selected Per Share Data NET REALIZED/ DIVIDENDS DIVIDENDS IN DISTRIBUTIONS
for the Period Ended: NET ASSET VALUE NET UNREALIZED TOTAL INCOME FROM NET EXCESS OF NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT INVESTMENT INVESTMENT REALIZED CAPITAL
OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS
--------------- ------------- -------------- --------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
Class A
06/30/98 $ 11.40 $ 0.29 (a) $ 1.81 (a) $ 2.10 $ (0.30) $ 0.00 $ (1.09)
01/20/97-
06/30/97 10.77 0.21 0.58 0.79 (0.16) 0.00 0.00
Class B
06/30/98 11.39 0.20 (a) 1.82 (a) 2.02 (0.25) 0.00 (1.09)
01/20/97-
06/30/97 10.77 0.19 0.58 0.77 (0.15) 0.00 0.00
Class C
06/30/98 11.39 0.20 (a) 1.82 (a) 2.02 (0.25) 0.00 (1.09)
01/20/97-
06/30/97 10.77 0.18 0.58 0.76 (0.14) 0.00 0.00
EQUITY INCOME
FUND
Class A
06/30/98 $ 15.39 $ 0.39 (a) $ 2.73 (a) $ 3.12 $ (0.38) $ 0.00 $ (2.09)
01/20/97-
06/30/97 13.94 0.15 1.48 1.63 (0.18) 0.00 0.00
Class B
06/30/98 15.37 0.26 (a) 2.73 (a) 2.99 (0.28) 0.00 (2.09)
01/20/97-
06/30/97 13.94 0.11 1.48 1.59 (0.16) 0.00 0.00
Class C
06/30/98 15.37 0.26 (a) 2.74 (a) 3.00 (0.27) 0.00 (2.09)
01/20/97-
06/30/97 13.94 0.11 1.48 1.59 (0.16) 0.00 0.00
VALUE FUND
Class A
06/30/98 $ 14.80 $ 0.19 (a) $ 2.46 (a) $ 2.65 $ (0.18) $ 0.00 $ (1.63)
01/13/97-
06/30/97 13.17 0.47 1.26 1.73 (0.10) 0.00 0.00
Class B
06/30/98 14.80 0.07 (a) 2.46 (a) 2.53 (0.07) 0.00 (1.63)
01/13/97-
06/30/97 13.16 0.44 1.26 1.70 (0.06) 0.00 0.00
Class C
06/30/98 14.80 0.07 (a) 2.46 (a) 2.53 (0.07) 0.00 (1.63)
01/13/97-
06/30/97 13.15 0.43 1.28 1.71 (0.06) 0.00 0.00
RENAISSANCE
FUND (I)
Class A
06/30/98 $ 17.73 $ 0.07 (a) $ 4.91 (a) $ 4.98 $ (0.08) $ 0.00 $ (3.53)
10/01/96-
06/30/97 16.08 0.12 (a) 3.90 (a) 4.02 (0.12) 0.00 (2.25)
09/30/96 14.14 0.23 2.79 3.02 (0.23) (0.07) (0.78)
09/30/95 12.50 0.36 1.61 1.97 (0.33) 0.00 0.00
09/30/94 12.88 0.34 (0.17) 0.17 (0.33) 0.00 (0.22)
09/30/93 10.57 0.33 2.30 2.63 (0.32) 0.00 0.00
09/30/92 9.92 0.34 0.71 1.05 (0.40) 0.00 0.00
02/1/91-
09/30/91 8.38 0.28 1.54 1.82 (0.28) 0.00 0.00
Class B
06/30/98 17.77 (0.07)(a) 4.91 (a) 4.84 (0.02) 0.00 (3.53)
10/01/96-
06/30/97 16.12 0.03 (a) 3.92 (a) 3.95 (0.05) 0.00 (2.25)
09/30/96 14.13 0.09 2.83 2.92 (0.11) (0.04) (0.78)
05/22/95-
09/30/95 12.55 0.11 1.55 1.66 (0.08) 0.00 0.00
<CAPTION>
Selected Per Share Data DISTRIBUTIONS
for the Period Ended: IN EXCESS OF
NET REALIZED
CAPITAL GAINS
-------------
<S> <C>
BALANCED FUND
Class A
06/30/98 $ 0.00
01/20/97-
06/30/97 0.00
Class B
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class C
06/30/98 0.00
01/20/97-
06/30/97 0.00
EQUITY INCOME
FUND
Class A
06/30/98 $ 0.00
01/20/97-
06/30/97 0.00
Class B
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class C
06/30/98 0.00
01/20/97-
06/30/97 0.00
VALUE FUND
Class A
06/30/98 $ 0.00
01/13/97-
06/30/97 0.00
Class B
06/30/98 0.00
01/13/97-
06/30/97 0.00
Class C
06/30/98 0.00
01/13/97-
06/30/97 0.00
RENAISSANCE
FUND (I)
Class A
06/30/98 $ 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
09/30/93 0.00
09/30/92 0.00
02/1/91-
09/30/91 0.00
Class B
06/30/98 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
05/22/95-
09/30/95 0.00
</TABLE>
*Annualized
(a)Per share amounts based upon average number of shares outstanding during
the period.
(i) Formerly, the PIMCO Advisors Equity Income Fund. The information provided
reflects results of operations under the Fund's former investment
objective and policies through January 31, 1992; such results would not
necessarily have been achieved had the Fund's current objective and
policies then been in effect.
8 PIMCO Funds: Multi-Manager Series
<PAGE>
The information provided for each of the Renaissance, Growth, Target,
Opportunity, International, Innovation and Precious Metals Funds reflects the
opera tional history of a corresponding series of PIMCO Advisors Funds which
reorganized as a series of the Trust on January 17, 1997. In connection with the
re organizations, these Funds changed their fiscal year ends from September 30
to June 30. The expense ratios provided for these Funds reflect fee arrangements
of PIMCO Advisors Funds in effect prior to January 17, 1997 which differ from
the current fee arrangements of the Trust.
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
DISTRIBUTIONS TAX BASIS NET ASSET EXPENSES TO INCOME (LOSS) TO
FROM RETURN OF TOTAL VALUE END OF NET ASSETS END AVERAGE NET AVERAGE NET PORTFOLIO
EQUALIZATION CAPITAL DISTRIBUTIONS PERIOD TOTAL RETURN OF PERIOD (000S) ASSETS ASSETS TURNOVER RATE
- ------------- --------- ------------- ------------ ------------ ---------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ 0.00 $ (1.39) $ 12.11 19.40% $ 9,586 1.12% 2.47% 186%
0.00 0.00 (0.16) 11.40 7.42 366 1.15* 3.01* 199
0.00 0.00 (1.34) 12.07 18.59 8,977 1.86 1.71 186
0.00 0.00 (0.15) 11.39 7.15 1,124 1.90* 2.28* 199
0.00 0.00 (1.34) 12.07 18.59 8,469 1.86 1.71 186
0.00 0.00 (0.14) 11.39 7.12 921 1.90* 2.26* 199
$ 0.00 $ 0.00 $ (2.47) $ 16.04 21.35% $ 12,954 1.11% 2.39% 45%
0.00 0.00 (0.18) 15.39 11.77 1,756 1.13* 2.85* 45
0.00 0.00 (2.37) 15.99 20.47 15,178 1.85 1.63 45
0.00 0.00 (0.16) 15.37 11.45 2,561 1.87* 2.11* 45
0.00 0.00 (2.36) 16.01 20.51 23,122 1.85 1.60 45
0.00 0.00 (0.16) 15.37 11.42 6,624 1.87* 2.15* 45
$ 0.00 $ 0.00 $ (1.81) $ 15.64 18.86% $ 21,742 1.11% 1.19% 77%
0.00 0.00 (0.10) 14.80 13.19 15,648 1.11* 1.71* 71
0.00 0.00 (1.70) 15.63 17.98 35,716 1.86 0.45 77
0.00 0.00 (0.06) 14.80 12.93 25,433 1.86* 0.96* 71
0.00 0.00 (1.70) 15.63 17.98 88,235 1.86 0.45 77
0.00 0.00 (0.06) 14.80 13.02 64,110 1.86* 0.97* 71
$ 0.00 $ 0.00 $ (3.61) $ 19.10 30.98% $ 85,562 1.26% 0.35% 192%
0.00 0.00 (2.37) 17.73 27.53 33,606 1.23* 0.95* 131
0.00 0.00 (1.08) 16.08 22.37 20,631 1.25 1.60 203
0.00 0.00 (0.33) 14.14 16.10 12,933 1.30 2.90 177
0.00 0.00 (0.55) 12.50 1.40 14,942 1.30 2.70 175
0.00 0.00 (0.32) 12.88 25.30 6,328 1.30 2.90 168
0.00 0.00 (0.40) 10.57 10.70 2,593 1.40 3.30 149
0.00 0.00 (0.28) 9.92 34.80 15 1.60* 4.40* 143
0.00 0.00 (3.55) 19.06 29.99 100,688 2.01 (0.39) 192
0.00 0.00 (2.30) 17.77 26.88 37,253 1.97* 0.20* 131
0.00 0.00 (0.93) 16.12 21.54 15,693 2.00 0.85 203
0.00 0.00 (0.08) 14.13 13.30 1,760 2.10* 2.20* 177
</TABLE>
November 1, 1998 Prospectus 9
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected Per Share Data NET REALIZED/ DIVIDENDS DIVIDENDS IN DISTRIBUTIONS
for the Period Ended: NET ASSET VALUE NET UNREALIZED TOTAL INCOME FROM NET EXCESS OF NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT INVESTMENT INVESTMENT REALIZED CAPITAL
OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS
--------------- ------------- -------------- --------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
RENAISSANCE FUND
(CONT.)
Class C
06/30/98 $ 17.69 $(0.07)(a) $ 4.88 (a) $ 4.81 $ (0.01) $ 0.00 $ (3.53)
10/01/96-
06/30/97 16.05 0.03 (a) 3.90 (a) 3.93 (0.04) 0.00 (2.25)
09/30/96 14.09 0.12 2.78 2.90 (0.13) (0.03) (0.78)
09/30/95 12.47 0.27 1.59 1.86 (0.24) 0.00 0.00
09/30/94 12.85 0.24 (0.16) 0.08 (0.24) 0.00 (0.22)
09/30/93 10.56 0.25 2.29 2.54 (0.25) 0.00 0.00
09/30/92 9.91 0.29 0.68 0.97 (0.32) 0.00 0.00
09/30/91 8.16 0.36 1.75 2.11 (0.36) 0.00 0.00
09/30/90 11.17 0.49 (2.32) (1.83) (0.49) 0.00 (0.69)
09/30/89 10.05 0.55 1.19 1.74 (0.62) 0.00 0.00
CAPITAL APPRECI-
ATION FUND
Class A
06/30/98 $ 21.16 $ 0.07 (a) $ 6.55 (a) $ 6.62 $ (0.09) $ 0.00 $ (1.68)
01/20/97-
06/30/97 19.31 0.09 1.76 1.85 0.00 0.00 0.00
Class B
06/30/98 21.10 (0.11)(a) 6.51 (a) 6.40 (0.07) 0.00 (1.68)
01/20/97-
06/30/97 19.31 0.01 1.78 1.79 0.00 0.00 0.00
Class C
06/30/98 21.10 (0.12)(a) 6.53 (a) 6.41 (0.05) 0.00 (1.68)
01/20/97-
06/30/97 19.31 0.02 1.77 1.79 0.00 0.00 0.00
GROWTH FUND
Class A
06/30/98 $ 27.03 $(0.08)(a) $ 9.99 (a) $ 9.91 $ 0.00 $ 0.00 $ (4.32)
10/01/96-
06/30/97 26.58 0.69 3.27 3.96 0.00 0.00 (3.51)
09/30/96 25.73 0.06 3.72 3.78 0.00 0.00 (2.93)
09/30/95 22.01 0.12 4.79 4.91 0.00 0.00 (1.19)
09/30/94 23.64 0.12 0.12 0.24 0.00 0.00 (1.87)
09/30/93 20.76 0.09 3.53 3.62 0.00 0.00 (0.74)
09/30/92 20.63 0.14 1.38 1.52 (0.14) 0.00 (1.25)
10/26/90-
09/30/91 16.99 0.21 5.28 5.49 (0.19) 0.00 (1.66)
Class B
06/30/98 25.59 (0.28)(a) 9.35 (a) 9.07 0.00 0.00 (4.32)
10/01/96-
06/30/97 25.46 0.35 3.29 3.64 0.00 0.00 (3.51)
09/30/96 24.94 (0.07) 3.52 3.45 0.00 0.00 (2.93)
05/23/95-
09/30/95 22.63 (0.03) 2.34 2.31 0.00 0.00 0.00
Class C
06/30/98 25.58 (0.28)(a) 9.35 (a) 9.07 0.00 0.00 (4.32)
10/01/96-
06/30/97 25.46 0.45 3.18 3.63 0.00 0.00 (3.51)
09/30/96 24.94 (0.12) 3.57 3.45 0.00 0.00 (2.93)
09/30/95 21.52 (0.04) 4.65 4.61 0.00 0.00 (1.19)
09/30/94 23.32 (0.04) 0.11 0.07 0.00 0.00 (1.87)
09/30/93 20.64 (0.07) 3.49 3.42 0.00 0.00 (0.74)
09/30/92 20.54 (0.01) 1.37 1.36 (0.01) 0.00 (1.25)
09/30/91 16.93 0.12 5.32 5.44 (0.17) 0.00 (1.66)
09/30/90 19.71 0.19 (1.67) (1.48) (0.18) 0.00 (1.12)
09/30/89 13.93 0.11 5.77 5.88 (0.10) 0.00 0.00
MID-CAP GROWTH
FUND
Class A
06/30/98 $ 20.24 $ 0.02 (a) $ 5.11 (a) $ 5.13 $ (0.04) $ 0.00 $ (1.33)
01/13/97-
06/30/97 18.14 (0.04) 2.14 2.10 0.00 0.00 0.00
Class B
06/30/98 20.17 (0.16)(a) 5.09 (a) 4.93 0.00 0.00 (1.33)
01/13/97-
06/30/97 18.14 (0.11) 2.14 2.03 0.00 0.00 0.00
Class C
06/30/98 20.18 (0.16)(a) 5.08 (a) 4.92 0.00 0.00 (1.33)
01/13/97-
06/30/97 18.14 (0.10) 2.14 2.04 0.00 0.00 0.00
<CAPTION>
Selected Per Share Data DISTRIBUTIONS
for the Period Ended: IN EXCESS OF
NET REALIZED
CAPITAL GAINS
-------------
<S> <C>
RENAISSANCE FUND
(CONT.)
Class C
06/30/98 $ 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
09/30/93 0.00
09/30/92 0.00
09/30/91 0.00
09/30/90 0.00
09/30/89 0.00
CAPITAL APPRECI-
ATION FUND
Class A
06/30/98 $ 0.00
01/20/97-
06/30/97 0.00
Class B
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class C
06/30/98 0.00
01/20/97-
06/30/97 0.00
GROWTH FUND
Class A
06/30/98 $ 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
09/30/93 0.00
09/30/92 0.00
10/26/90-
09/30/91 0.00
Class B
06/30/98 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
05/23/95-
09/30/95 0.00
Class C
06/30/98 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
09/30/93 0.00
09/30/92 0.00
09/30/91 0.00
09/30/90 0.00
09/30/89 0.00
MID-CAP GROWTH
FUND
Class A
06/30/98 $ 0.00
01/13/97-
06/30/97 0.00
Class B
06/30/98 0.00
01/13/97-
06/30/97 0.00
Class C
06/30/98 0.00
01/13/97-
06/30/97 0.00
</TABLE>
*Annualized
(a)Per share amounts based upon average number of shares outstanding during
the period.
10 PIMCO Funds: Multi-Manager Series
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
DISTRIBUTIONS TAX BASIS NET ASSET EXPENSES TO INCOME (LOSS) TO
FROM RETURN OF TOTAL VALUE END OF NET ASSETS END AVERAGE NET AVERAGE NET PORTFOLIO
EQUALIZATION CAPITAL DISTRIBUTIONS PERIOD TOTAL RETURN OF PERIOD (000S) ASSETS ASSETS TURNOVER RATE
- ------------- --------- ------------- ------------ ------------ ---------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ 0.00 $ (3.54) $ 18.96 29.98% $ 469,797 2.01% (0.37)% 192%
0.00 0.00 (2.29) 17.69 26.86 313,226 1.97* 0.21* 131
0.00 0.00 (0.94) 16.05 21.52 230,058 2.00 0.85 203
0.00 0.00 (0.24) 14.09 15.20 174,316 2.10 2.10 177
0.00 0.00 (0.46) 12.47 0.70 178,892 2.00 2.00 175
0.00 0.00 (0.25) 12.85 24.40 94,247 2.10 2.20 168
0.00 0.00 (0.32) 10.56 9.90 45,101 2.10 2.70 149
0.00 0.00 (0.36) 9.91 26.50 22,651 2.20 4.20 143
0.00 0.00 (1.18) 8.16 (18.00) 25,758 2.00 5.10 70
0.00 0.00 (0.62) 11.17 17.90 45,168 1.90 5.20 85
$ 0.00 $ 0.00 $ (1.77) $ 26.01 32.39% $ 72,803 1.10% 0.27% 75%
0.00 0.00 0.00 21.16 9.58 6,534 1.11* 0.59* 87
0.00 0.00 (1.75) 25.75 31.39 40,901 1.85 (0.47) 75
0.00 0.00 0.00 21.10 9.27 3,022 1.85* (0.26)* 87
0.00 0.00 (1.73) 25.78 31.40 71,481 1.85 (0.49) 75
0.00 0.00 0.00 21.10 9.27 13,093 1.86* (0.23)* 87
$ 0.00 $ 0.00 $ (4.32) $ 32.62 41.03% $ 180,119 1.16% (0.27)% 123%
0.00 0.00 (3.51) 27.03 15.93 147,276 1.11* 0.13* 94
0.00 0.00 (2.93) 26.58 16.11 151,103 1.11 0.24 104
0.00 0.00 (1.19) 25.73 23.70 134,819 1.10 0.50 111
0.00 0.00 (1.87) 22.01 1.30 107,269 1.10 0.60 115
0.00 0.00 (0.74) 23.64 17.70 97,509 1.10 0.40 110
0.00 0.00 (1.39) 20.76 7.70 71,209 1.10 0.70 92
0.00 0.00 (1.85) 20.63 38.60 17,064 1.20* 0.90* 95
0.00 0.00 (4.32) 30.34 39.97 80,719 1.91 (1.02) 123
0.00 0.00 (3.51) 25.59 15.32 55,626 1.86* (0.62)* 94
0.00 0.00 (2.93) 25.46 15.22 37,256 1.86 (0.51) 104
0.00 0.00 0.00 24.94 10.20 7,671 1.90* (0.40)* 111
0.00 0.00 (4.32) 30.33 39.99 1,853,002 1.91 (1.02) 123
0.00 0.00 (3.51) 25.58 15.27 1,514,432 1.86* (0.61)* 94
0.00 0.00 (2.93) 25.46 15.22 1,450,216 1.86 (0.51) 104
0.00 0.00 (1.19) 24.94 22.80 1,290,152 1.90 (0.20) 111
0.00 0.00 (1.87) 21.52 0.50 1,085,427 1.90 (0.20) 115
0.00 0.00 (0.74) 23.32 16.90 1,077,490 1.90 (0.30) 110
0.00 0.00 (1.26) 20.64 6.90 853,121 1.90 (0.10) 92
0.00 0.00 (1.83) 20.54 35.10 564,398 1.80 0.60 95
0.00 0.00 (1.30) 16.93 (8.00) 314,075 1.70 1.00 89
0.00 0.00 (0.10) 19.71 42.40 373,490 1.70 0.70 83
$ 0.00 $ 0.00 $ (1.37) $ 24.00 25.71% $ 57,164 1.11% 0.07% 66%
0.00 0.00 0.00 20.24 11.58 12,184 1.11* 0.17* 82
0.00 0.00 (1.33) 23.77 24.76 84,535 1.86 (0.68) 66
0.00 0.00 0.00 20.17 11.19 28,259 1.85* (0.58)* 82
0.00 0.00 (1.33) 23.77 24.70 140,438 1.86 (0.68) 66
0.00 0.00 0.00 20.18 11.25 53,686 1.86* (0.58)* 82
</TABLE>
November 1, 1998 Prospectus 11
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected Per Share Data NET REALIZED/ DIVIDENDS DIVIDENDS IN DISTRIBUTIONS
for the Period Ended: NET ASSET VALUE NET UNREALIZED TOTAL INCOME FROM NET EXCESS OF NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT INVESTMENT INVESTMENT REALIZED CAPITAL
OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS
--------------- ------------- -------------- --------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
TARGET FUND
Class A
06/30/98 $ 16.82 $(0.08)(a) $ 4.06 (a) $ 3.98 $ 0.00 $ 0.00 $ (4.45)
10/01/96-
06/30/97 17.11 (0.04)(a) 1.82 (a) 1.78 0.00 0.00 (2.07)
09/30/96 16.40 (0.05) 2.54 2.49 0.00 0.00 (1.78)
09/30/95 13.13 (0.02) 3.45 3.43 0.00 0.00 (0.16)
09/30/94 12.72 (0.04) 0.57 0.53 0.00 0.00 (0.12)
12/17/92-
09/30/93 10.00 (0.02) 2.74 2.72 0.00 0.00 0.00
Class B
06/30/98 16.14 (0.19)(a) 3.84 (a) 3.65 0.00 0.00 (4.45)
10/01/96-
06/30/97 16.58 (0.12)(a) 1.75 (a) 1.63 0.00 0.00 (2.07)
09/30/96 16.06 (0.09) 2.39 2.30 0.00 0.00 (1.78)
05/22/95-
09/30/95 13.93 (0.05) 2.18 2.13 0.00 0.00 0.00
Class C
06/30/98 16.13 (0.19)(a) 3.85 (a) 3.66 0.00 0.00 (4.45)
10/01/96-
06/30/97 16.58 (0.12)(a) 1.74 (a) 1.62 0.00 0.00 (2.07)
09/30/96 16.05 (0.16) 2.47 2.31 0.00 0.00 (1.78)
09/30/95 12.95 (0.12) 3.38 3.26 0.00 0.00 (0.16)
09/30/94 12.65 (0.14) 0.56 0.42 0.00 0.00 (0.12)
12/17/92-
9/30/93 10.00 (0.09) 2.74 2.65 0.00 0.00 0.00
SMALL-CAP
VALUE FUND
Class A
06/30/98 $ 15.75 $ 0.23 (a) $ 2.49 (a) $ 2.72 $ (0.13) $ 0.00 $ (0.76)
01/20/97-
06/30/97 14.02 0.10 1.63 1.73 0.00 0.00 0.00
Class B
06/30/98 15.71 0.09 (a) 2.48 (a) 2.57 (0.09) 0.00 (0.76)
01/20/97-
06/30/97 14.02 0.08 1.61 1.69 0.00 0.00 0.00
Class C
06/30/98 15.71 0.09 (a) 2.49 (a) 2.58 (0.09) 0.00 (0.76)
01/20/97-
06/30/97 14.02 0.08 1.61 1.69 0.00 0.00 0.00
OPPORTUNITY
FUND
Class A
06/30/98 $ 29.35 $(0.27)(a) $ 4.19 (a) $ 3.92 $ 0.00 $ 0.00 $ (1.94)
10/01/96-
06/30/97 37.36 0.00 (3.10) (3.10) 0.00 0.00 (4.91)
09/30/96 39.08 (0.11) 6.12 6.01 0.00 0.00 (7.73)
09/30/95 28.87 (0.11) 11.19 11.08 0.00 0.00 (0.87)
09/30/94 33.43 (0.17) (2.02) (2.19) 0.00 0.00 (2.26)
09/30/93 19.84 (0.15) 14.00 13.85 0.00 0.00 (0.26)
09/30/92 17.95 (0.04) 3.61 3.57 0.00 0.00 (1.68)
12/17/90-
09/30/91 11.78 (0.03) 6.20 6.17 0.00 0.00 0.00
Class C
06/30/98 27.38 (0.46)(a) 3.88 (a) 3.42 0.00 0.00 (1.94)
10/01/96-
06/30/97 35.38 (0.04) (3.05) (3.09) 0.00 0.00 (4.91)
09/30/96 37.64 (0.35) 5.82 5.47 0.00 0.00 (7.73)
09/30/95 28.04 (0.34) 10.81 10.47 0.00 0.00 (0.87)
09/30/94 32.77 (0.38) (1.98) (2.36) 0.00 0.00 (2.26)
09/30/93 19.60 (0.34) 13.77 13.43 0.00 0.00 (0.26)
09/30/92 17.87 (0.18) 3.59 3.41 0.00 0.00 (1.68)
09/30/91 11.93 (0.11) 6.42 6.31 0.00 0.00 (0.37)
09/30/90 15.78 (0.01) (2.13) (2.14) 0.00 0.00 (1.71)
09/30/89 11.84 (0.03) 3.97 3.94 0.00 0.00 0.00
<CAPTION>
Selected Per Share Data DISTRIBUTIONS
for the Period Ended: IN EXCESS OF
NET REALIZED
CAPITAL GAINS
-------------
<S> <C>
TARGET FUND
Class A
06/30/98 $ 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
12/17/92-
09/30/93 0.00
Class B
06/30/98 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
05/22/95-
09/30/95 0.00
Class C
06/30/98 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
12/17/92-
9/30/93 0.00
SMALL-CAP
VALUE FUND
Class A
06/30/98 $ 0.00
01/20/97-
06/30/97 0.00
Class B
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class C
06/30/98 0.00
01/20/97-
06/30/97 0.00
OPPORTUNITY
FUND
Class A
06/30/98 $ 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
09/30/93 0.00
09/30/92 0.00
12/17/90-
09/30/91 0.00
Class C
06/30/98 0.00
10/01/96-
06/30/97 0.00
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
09/30/93 0.00
09/30/92 0.00
09/30/91 0.00
09/30/90 0.00
09/30/89 0.00
</TABLE>
*Annualized
(a) Per share amounts based upon average number of shares outstanding during
the period.
12 PIMCO Funds: Multi-Manager Series
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
DISTRIBUTIONS TAX BASIS NET ASSET EXPENSES TO INCOME (LOSS) TO
FROM RETURN OF TOTAL VALUE END OF NET ASSETS END AVERAGE NET AVERAGE NET PORTFOLIO
EQUALIZATION CAPITAL DISTRIBUTIONS PERIOD TOTAL RETURN OF PERIOD (000S) ASSETS ASSETS TURNOVER RATE
- ------------- --------- ------------- ------------ ------------ ---------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ 0.00 $ (4.45) $ 16.35 27.49 % $157,277 1.22% (0.49)% 226%
0.00 0.00 (2.07) 16.82 11.19 150,689 1.20* (0.31)* 145
0.00 0.00 (1.78) 17.11 16.50 156,027 1.18 (0.34) 141
0.00 0.00 (0.16) 16.40 26.50 121,915 1.20 (0.10) 128
0.00 0.00 (0.12) 13.13 4.20 90,527 1.20 (0.30) 104
0.00 0.00 0.00 12.72 27.20 48,787 1.30* (0.30)* 76
0.00 0.00 (4.45) 15.34 26.45 76,194 1.96 (1.24) 226
0.00 0.00 (2.07) 16.14 10.58 67,531 1.94* (1.05)* 145
0.00 0.00 (1.78) 16.58 15.58 49,851 1.93 (1.09) 141
0.00 0.00 0.00 16.06 15.30 7,554 2.00* (0.90)* 128
0.00 0.00 (4.45) 15.34 26.53 952,728 1.96 (1.24) 226
0.00 0.00 (2.07) 16.13 10.52 969,317 1.94* (1.06)* 145
0.00 0.00 (1.78) 16.58 15.66 974,948 1.93 (1.09) 141
0.00 0.00 (0.16) 16.05 25.60 780,355 2.00 (0.90) 128
0.00 0.00 (0.12) 12.95 3.40 556,043 2.00 (1.10) 104
0.00 0.00 0.00 12.65 26.50 298,238 2.00* (1.00)* 76
$ 0.00 $ 0.00 $ (0.89) $ 17.58 17.33 % $ 75,070 1.25% 1.27% 41%
0.00 0.00 0.00 15.75 12.34 6,563 1.30* 1.94* 48
0.00 0.00 (0.85) 17.43 16.40 110,833 2.00 0.53 41
0.00 0.00 0.00 15.71 12.05 11,077 2.04* 1.23* 48
0.00 0.00 (0.85) 17.44 16.42 130,466 2.00 0.52 41
0.00 0.00 0.00 15.71 12.05 20,637 2.05* 1.13* 48
$ 0.00 $ 0.00 $ (1.94) $ 31.33 13.87 % $200,935 1.31% (0.88)% 86%
0.00 0.00 (4.91) 29.35 (8.87) 213,484 1.25* (0.12)* 69
0.00 0.00 (7.73) 37.36 18.35 134,859 1.13 (0.32) 91
0.00 0.00 (0.87) 39.08 39.70 120,830 1.20 (0.40) 102
0.00 (0.11) (2.37) 28.87 (6.70) 95,261 1.10 (0.60) 78
0.00 0.00 (0.26) 33.43 70.40 106,666 1.20 (0.60) 105
0.00 0.00 (1.68) 19.84 21.60 22,454 1.30 (0.20) 94
0.00 0.00 0.00 17.95 70.90 1,623 1.40* (0.50)* 145
0.00 0.00 (1.94) 28.86 13.01 500,011 2.06 (1.63) 86
0.00 0.00 (4.91) 27.38 (9.40) 629,446 1.97* (0.95)* 69
0.00 0.00 (7.73) 35.38 17.47 800,250 1.88 (1.07) 91
0.00 0.00 (0.87) 37.64 38.60 715,191 1.90 (1.10) 102
0.00 (0.11) (2.37) 28.04 (7.40) 553,460 1.90 (1.40) 78
0.00 0.00 (0.26) 32.77 69.10 618,193 2.00 (1.30) 105
0.00 0.00 (1.68) 19.60 20.80 179,081 2.00 (1.00) 94
0.00 0.00 (0.37) 17.87 54.40 58,656 2.00 (0.80) 145
0.00 0.00 (1.71) 11.93 (14.80) 33,472 1.90 (0.10) 106
0.00 0.00 0.00 15.78 33.30 51,680 1.90 (0.20) 153
</TABLE>
November 1, 1998 Prospectus 13
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected Per Share Data NET REALIZED/ DIVIDENDS DIVIDENDS IN DISTRIBUTIONS
for the Period Ended: NET ASSET VALUE NET UNREALIZED TOTAL INCOME FROM NET EXCESS OF NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT INVESTMENT INVESTMENT REALIZED CAPITAL
OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS
--------------- ------------- -------------- --------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL
FUND (II)
Class A
06/30/98 $ 14.26 $ 0.06 (a) $ 1.13 (a) $ 1.19 $ 0.00 $ 0.00 $ (0.82)
10/01/96-
06/30/97 13.03 0.29 1.33 1.62 0.00 0.00 (0.39)
9/30/96 12.19 0.07 0.77 0.84 0.00 0.00 0.00
9/30/95 12.92 0.07 (0.56) (0.49) 0.00 0.00 (0.24)
9/30/94 12.17 0.04 0.94 0.98 0.00 0.00 (0.23)
9/30/93 10.04 0.07 2.80 2.87 0.00 0.00 (0.74)
9/30/92 10.54 0.05 (0.37) (0.32) 0.00 0.00 (0.18)
2/1/91-9/30/91 9.48 0.02 1.04 1.06 0.00 0.00 0.00
Class B
06/30/98 13.56 (0.05)(a) 1.07 (a) 1.02 0.00 0.00 (0.82)
10/01/96-
06/30/97 12.48 0.16 1.31 1.47 0.00 0.00 (0.39)
9/30/96 11.75 0.00 (a) 0.73 (a) 0.73 0.00 0.00 0.00
5/22/95-
9/30/95 11.30 0.00 0.45 0.45 0.00 0.00 0.00
Class C
06/30/98 13.55 (0.06)(a) 1.08 (a) 1.02 0.00 0.00 (0.82)
10/01/96-
06/30/97 12.47 0.18 1.29 1.47 0.00 0.00 (0.39)
9/30/96 11.75 (0.05) 0.77 0.72 0.00 0.00 0.00
9/30/95 12.56 (0.02) (0.55) (0.57) 0.00 0.00 (0.24)
9/30/94 11.92 (0.06) 0.93 0.87 0.00 0.00 (0.23)
9/30/93 9.92 (0.01) 2.75 2.74 0.00 0.00 (0.74)
9/30/92 10.49 (0.06) (0.33) (0.39) 0.00 0.00 (0.18)
9/30/91 10.04 (0.08) 1.76 1.68 0.00 0.00 (1.23)
9/30/90 13.33 (0.10) (2.02) (2.12) 0.00 0.00 (1.17)
9/30/89 10.07 (0.18) 3.44 3.26 0.00 0.00 0.00
INNOVATION FUND
Class A
06/30/98 $ 17.43 $(0.19)(a) $ 8.21 (a) $ 8.02 $ 0.00 $ 0.00 $ (0.99)
10/01/96-
06/30/97 17.26 0.07 0.36 0.43 0.00 0.00 (0.26)
9/30/96 14.74 (0.07) 2.94 2.87 0.00 0.00 (0.35)
12/22/94-
9/30/95 10.00 (0.06)(b) 4.80 4.74 0.00 0.00 0.00
Class B
06/30/98 17.10 (0.33)(a) 8.00 (a) 7.67 0.00 0.00 (0.99)
10/01/96-
06/30/97 17.04 (0.03) 0.35 0.32 0.00 0.00 (0.26)
9/30/96 14.66 (0.11) 2.84 2.73 0.00 0.00 (0.35)
5/22/95-
9/30/95 11.81 (0.08) 2.93 2.85 0.00 0.00 0.00
Class C
06/30/98 17.09 (0.33)(a) 8.00 (a) 7.67 0.00 0.00 (0.99)
10/01/96-
06/30/97 17.04 (0.02) 0.33 0.31 0.00 0.00 (0.26)
9/30/96 14.65 (0.15) 2.89 2.74 0.00 0.00 (0.35)
12/22/94-
9/30/95 10.00 (0.13)(b) 4.78 4.65 0.00 0.00 0.00
<CAPTION>
Selected Per Share Data DISTRIBUTIONS
for the Period Ended: IN EXCESS OF
NET REALIZED
CAPITAL GAINS
-------------
<S> <C>
INTERNATIONAL
FUND (II)
Class A
06/30/98 $ (0.30)
10/01/96-
06/30/97 0.00
9/30/96 0.00
9/30/95 0.00
9/30/94 0.00
9/30/93 0.00
9/30/92 0.00
2/1/91-9/30/91 0.00
Class B
06/30/98 (0.30)
10/01/96-
06/30/97 0.00
9/30/96 0.00
5/22/95-
9/30/95 0.00
Class C
06/30/98 (0.30)
10/01/96-
06/30/97 0.00
9/30/96 0.00
9/30/95 0.00
9/30/94 0.00
9/30/93 0.00
9/30/92 0.00
9/30/91 0.00
9/30/90 0.00
9/30/89 0.00
INNOVATION FUND
Class A
06/30/98 $ (0.18)
10/01/96-
06/30/97 0.00
9/30/96 0.00
12/22/94-
9/30/95 0.00
Class B
06/30/98 (0.18)
10/01/96-
06/30/97 0.00
9/30/96 0.00
5/22/95-
9/30/95 0.00
Class C
06/30/98 (0.18)
10/01/96-
06/30/97 0.00
9/30/96 0.00
12/22/94-
9/30/95 0.00
</TABLE>
*Annualized
(a) Per share amounts based upon average number of shares outstanding during
the period.
(b) Reflecting voluntary waiver of investment advisory fee of $4,666 (0.00
per share) by the Adviser.
(ii) The information provided for the International Fund reflects results of
operations under the Fund's former investment objective and policies
through August 31, 1992; such results would not necessarily have been
achieved had the Fund's current objective and policies then been in
effect. On November 15, 1994, Blairlogie became the Portfolio Manager of
the Fund.
14 PIMCO Funds: Multi-Manager Series
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
DISTRIBUTIONS TAX BASIS NET ASSET EXPENSES TO INCOME (LOSS) TO
FROM RETURN OF TOTAL VALUE END OF NET ASSETS END AVERAGE NET AVERAGE NET PORTFOLIO
EQUALIZATION CAPITAL DISTRIBUTIONS PERIOD TOTAL RETURN OF PERIOD (000S) ASSETS ASSETS TURNOVER RATE
- ------------- --------- ------------- ------------ ------------ ---------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ 0.00 $ (1.12) $ 14.33 9.95 % $ 12,510 1.48% 0.41% 60%
0.00 0.00 (0.39) 14.26 12.82 18,287 1.51* 0.58* 59
0.00 0.00 0.00 13.03 6.89 20,056 1.41 0.49 110
0.00 0.00 (0.24) 12.19 (3.70) 17,951 1.50 0.60 170
0.00 0.00 (0.23) 12.92 8.20 23,289 1.40 0.30 55
0.00 0.00 (0.74) 12.17 30.40 11,992 1.40 0.60 68
0.00 0.00 (0.18) 10.04 (3.10) 471 1.90 0.50 160
0.00 0.00 0.00 10.54 17.30 22 1.90* 0.70* 107
0.00 0.00 (1.12) 13.46 9.17 8,956 2.22 (0.37) 60
0.00 0.00 (0.39) 13.56 12.17 8,676 2.26* 0.18* 59
0.00 0.00 0.00 12.48 6.21 5,893 2.16 (0.26) 110
0.00 0.00 0.00 11.75 4.00 503 2.30* (0.10)* 170
0.00 0.00 (1.12) 13.45 9.18 132,986 2.22 (0.43) 60
0.00 0.00 (0.39) 13.55 12.18 168,446 2.25* (0.25)* 59
0.00 0.00 0.00 12.47 6.13 203,544 2.16 (0.26) 110
0.00 0.00 (0.24) 11.75 (4.50) 215,349 2.20 (0.20) 170
0.00 0.00 (0.23) 12.56 7.40 294,492 2.20 (0.50) 55
0.00 0.00 (0.74) 11.92 29.40 147,194 2.20 (0.10) 68
0.00 0.00 (0.18) 9.92 (3.80) 28,299 2.60 (0.60) 160
0.00 0.00 (1.23) 10.49 18.30 33,594 2.60 (0.20) 107
0.00 0.00 (1.17) 10.04 (17.40) 36,282 2.30 (0.30) 93
0.00 0.00 0.00 13.33 32.40 56,150 2.30 (0.70) 84
$ 0.00 $ 0.00 $ (1.17) $ 24.28 48.10 % $ 85,800 1.31% (0.94)% 100%
0.00 0.00 (0.26) 17.43 2.41 56,215 1.28* (0.68)* 80
0.00 0.00 (0.35) 17.26 19.86 50,067 1.31 (0.61) 123
0.00 0.00 0.00 14.74 47.40 28,239 1.40* (0.60)* 86
0.00 0.00 (1.17) 23.60 46.95 81,130 2.06 (1.69) 100
0.00 0.00 (0.26) 17.10 1.79 51,472 2.03* (1.43)* 80
0.00 0.00 (0.35) 17.04 18.99 33,778 2.06 (1.36) 123
0.00 0.00 0.00 14.66 24.10 6,509 2.30* (1.70)* 86
0.00 0.00 (1.17) 23.59 46.97 219,258 2.06 (1.69) 100
0.00 0.00 (0.26) 17.09 1.73 162,889 2.03* (1.43)* 80
0.00 0.00 (0.35) 17.04 19.08 137,752 2.06 (1.36) 123
0.00 0.00 0.00 14.65 46.50 63,952 2.20* (1.40)* 86
</TABLE>
November 1, 1998 Prospectus 15
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected Per Share Data NET REALIZED/ DIVIDENDS DIVIDENDS IN DISTRIBUTIONS
for the Period Ended: NET ASSET VALUE NET UNREALIZED TOTAL INCOME FROM NET EXCESS OF NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT INVESTMENT INVESTMENT REALIZED CAPITAL
OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS
--------------- ------------- -------------- --------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
PRECIOUS METALS FUND
(III)
Class A
06/30/98 $ 8.83 $ 0.04 (a) $(3.54)(a) $ (3.50) $ 0.00 $ 0.00 $ 0.00
10/01/96-
06/30/97 12.12 0.17 (3.29) (3.12) 0.00 0.00 0.00
9/30/96 12.33 0.03 (0.24) (0.21) 0.00 0.00 0.00
9/30/95 14.14 0.07 (1.88) (1.81) 0.00 0.00 0.00
9/30/94 10.32 0.08 3.74 3.82 0.00 0.00 0.00
9/30/93 7.54 0.06 2.72 2.78 0.00 0.00 0.00
9/30/92 7.51 (0.01) 0.04 0.03 0.00 0.00 0.00
2/1/91-
9/30/91 7.19 (0.07) 0.39 0.32 0.00 0.00 0.00
Class B
06/30/98 8.42 (0.01)(a) (3.40)(a) (3.41) 0.00 0.00 0.00
10/01/96-
06/30/97 11.62 0.00 (3.03) (3.03) 0.00 0.00 0.00
9/30/96 11.90 (0.03) (0.25) (0.28) 0.00 0.00 0.00
6/15/95-
9/30/95 11.61 (0.01) 0.30 0.29 0.00 0.00 0.00
Class C
06/30/98 8.43 0.00 (a) (3.43)(a) (3.43) 0.00 0.00 0.00
10/01/96-
06/30/97 11.62 (0.03) (2.99) (3.02) 0.00 0.00 0.00
9/30/96 11.90 (0.07) (0.21) (0.28) 0.00 0.00 0.00
9/30/95 13.75 (0.02) (1.83) (1.85) 0.00 0.00 0.00
9/30/94 10.11 (0.02) 3.66 3.64 0.00 0.00 0.00
9/30/93 7.44 (0.02) 2.69 2.67 0.00 0.00 0.00
9/30/92 7.46 (0.06) 0.04 (0.02) 0.00 0.00 0.00
9/30/91 9.40 (0.05) (1.89) (1.94) 0.00 0.00 0.00
9/30/90 9.86 (0.05) (0.41) (0.46) 0.00 0.00 0.00
10/10/88-
9/30/89 10.00 (0.05) (0.08) (0.13) (0.01) 0.00 0.00
<CAPTION>
Selected Per Share Data DISTRIBUTIONS
for the Period Ended: IN EXCESS OF
NET REALIZED
CAPITAL GAINS
-------------
<S> <C>
PRECIOUS METALS FUND
(III)
Class A
06/30/98 $ 0.00
10/01/96-
06/30/97 (0.17)
9/30/96 0.00
9/30/95 0.00
9/30/94 0.00
9/30/93 0.00
9/30/92 0.00
2/1/91-
9/30/91 0.00
Class B
06/30/98 0.00
10/01/96-
06/30/97 (0.17)
9/30/96 0.00
6/15/95-
9/30/95 0.00
Class C
06/30/98 0.00
10/01/96-
06/30/97 (0.17)
9/30/96 0.00
9/30/95 0.00
9/30/94 0.00
9/30/93 0.00
9/30/92 0.00
9/30/91 0.00
9/30/90 0.00
10/10/88-
9/30/89 0.00
</TABLE>
*Annualized
(a) Per share amounts based upon average number of shares outstanding during
the period.
(b) Ratio of expenses to average net assets excluding overdraft expense is
1.26%.
(c) Ratio of expenses to average net assets excluding overdraft expense is
2.06%.
(d) Ratio of expenses to average net assets excluding overdraft expense is
2.06%.
(iii) The information provided for the Precious Metals Fund reflects results
of operations under the Fund's former investment objective and policies
through November 14, 1994; such results would not necessarily have been
achieved had the Fund's current objective and policies then been in
effect.
16 PIMCO Funds: Multi-Manager Series
<PAGE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
DISTRIBUTIONS TAX BASIS NET ASSET EXPENSES TO INCOME TO
FROM RETURN OF TOTAL VALUE END OF NET ASSETS END AVERAGE NET AVERAGE NET PORTFOLIO
EQUALIZATION CAPITAL DISTRIBUTIONS PERIOD TOTAL RETURN OF PERIOD (000S) ASSETS ASSETS TURNOVER RATE
- ------------- --------- ------------- ------------ ------------ ---------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ 0.00 $ 0.00 $ 5.33 (39.64)% $ 4,709 1.31%(b) 0.70% 56%
0.00 0.00 (0.17) 8.83 (26.05) 4,016 1.37* 0.33* 46
0.00 0.00 0.00 12.12 (1.70) 6,245 1.32 0.19 35
0.00 0.00 0.00 12.33 (12.80) 7,670 1.40 0.60 9
0.00 0.00 0.00 14.14 37.00 11,229 1.30 0.60 11
0.00 0.00 0.00 10.32 36.90 3,425 1.40 0.60 10
0.00 0.00 0.00 7.54 0.40 668 1.90 (0.10) 30
0.00 0.00 0.00 7.51 6.80 514 2.10* (1.40)* 19
0.00 0.00 0.00 5.01 (40.50) 3,889 2.11(c) (0.07) 56
0.00 0.00 (0.17) 8.42 (26.40) 4,248 2.13* (0.33)* 46
0.00 0.00 0.00 11.62 (2.35) 2,218 2.07 (0.56) 35
0.00 0.00 0.00 11.90 2.50 251 2.20* (0.20)* 9
0.00 0.00 0.00 5.00 (40.69) 16,943 2.11(d) (0.07) 56
0.00 0.00 (0.17) 8.43 (26.31) 25,113 2.15* (0.41)* 46
0.00 0.00 0.00 11.62 (2.35) 37,609 2.07 (0.56) 35
0.00 0.00 0.00 11.90 (13.50) 42,341 2.20 (0.20) 9
0.00 0.00 0.00 13.75 36.00 62,825 2.10 (0.20) 11
0.00 0.00 0.00 10.11 35.90 23,884 2.20 (0.20) 10
0.00 0.00 0.00 7.44 (0.30) 6,633 2.60 (0.80) 30
0.00 0.00 0.00 7.46 (20.60) 6,995 2.40 (0.80) 19
0.00 0.00 0.00 9.40 (4.70) 9,918 2.40 (0.80) 23
0.00 0.00 (0.01) 9.86 (1.30) 6,630 2.50 (0.60) 9
</TABLE>
November 1, 1998 Prospectus 17
<PAGE>
Investment Objectives and Policies
The investment objective and general investment policies of each
Fund are described below. There can be no assurance that the in-
vestment objective of any Fund will be achieved. Because the mar-
ket value of each Fund's investments will change, the net asset
value per share of each Fund will also vary. Specific portfolio
securities eligible for purchase by the Funds, investment tech-
niques that may be used by the Funds, and the risks associated
with these securities and techniques are described more fully un-
der "Characteristics and Risks of Securities and Investment Tech-
niques" in this Prospectus and "Investment Objectives and Poli-
cies" in the Statement of Additional Information. For information
on other investment policies of the Equity Income, Value, Renais-
sance, Tax-Efficient Equity, Capital Appreciation, Growth, Value
25, Mid-Cap Growth, Target, Small-Cap Value, Opportunity, Interna-
tional, Innovation and Precious Metals Funds (together, the "Stock
Funds"), see "Investment Objectives and Policies--Stock Funds" be-
low. This information is also relevant to an investment in the
Balanced Fund because the Common Stock Segment (as described be-
low) of that Fund is managed in accordance with the investment
policies of the Value and Capital Appreciation Funds. For informa-
tion regarding the average portfolio duration of the Fixed Income
Securities Segment (as described below) of the Balanced Fund, see
"Balanced Fund--Duration" below.
FUND BALANCED FUND seeks total return consistent with prudent invest-
DESCRIPTIONSment management. The Fund attempts to achieve this objective
through a management policy of investing in the following asset
classes: common stock, fixed income securities, and money market
instruments. The proportion of the Fund's total assets allocated
among common stocks, fixed income securities, and money market in-
struments will vary from time to time and will be determined by
the Adviser. In determining the allocation of the Fund's assets
among the three asset classes, the Adviser will employ asset allo-
cation principles which take into account certain economic fac-
tors, market conditions, and the expected relative total return
and risk of the various asset classes. Under normal circumstances,
it is anticipated that the Fund will generally maintain a balance
among the types of securities in which it invests. Thus, the Fund
will normally maintain 40% to 65% of its assets in common stock,
at least 25% of its assets in fixed income securities, and less
than 10% of its assets in money market instruments. However, in no
event would the Fund invest in any common stock if, at the time of
investment, more than 80% of the Fund's assets would be invested
in common stock; in no event would the Fund invest in a fixed in-
come security (other than a short-term instrument) if, at the time
of investment, more than 80% of the Fund's assets would be in-
vested in fixed income securities; nor would the Fund invest in a
money market instrument if, at the time of investment, more than
60% of its assets would be invested in money market instruments.
In managing the Fund, the Adviser uses a specialist approach
and has engaged three of the Trust's Portfolio Managers to manage
certain portions of the Fund's assets. The portion of the assets
of the Fund allocated by the Adviser for investment in common
stock (the "Common Stock Segment") will be further allocated by
the Adviser for investment by NFJ and Cadence. The portion of the
Common Stock Segment allocated to NFJ will be managed in accor-
dance with the investment policies of the Value Fund; the portion
allocated to Cadence will be managed in accordance with the in-
vestment policies of the Capital Appreciation Fund. Allocations of
the Common Stock Segment to NFJ and Cadence will vary from time to
time as determined by the Adviser.
The portion of the assets of the Fund allocated by the Adviser
for investment in fixed income securities (the "Fixed Income Secu-
rities Segment") will be managed by Pacific Investment Management.
The Fund may invest the Fixed Income Securities Segment in the
following types of securities: securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities; corporate
debt securities, including convertible securities and corporate
commercial paper; mortgage-related and other asset-backed securi-
ties; inflation-indexed bonds issued by both governments and cor-
porations; structured notes, including hybrid or "indexed" securi-
ties, catastrophe bonds and loan participations; delayed funding
loans and revolving credit facilities; bank certificates of depos-
it, fixed time deposits and bankers' acceptances; repurchase
agreements and reverse repurchase agreements; obligations of for-
eign governments or their subdivisions, agencies and instrumental-
ities; and obligations of international agencies or supranational
entities. Fixed income securities may have fixed, variable, or
floating rates of interest.
18 PIMCO Funds: Multi-Manager Series
<PAGE>
The Fund invests the Fixed Income Securities Segment in fixed
income securities of varying maturities. Portfolio holdings will
be concentrated in areas of the bond market (based on quality,
sector, coupon or maturity) that Pacific Investment Management be-
lieves to be relatively undervalued. Fixed income securities in
which the Fund may invest will, at the time of investment, be
rated Baa or better by Moody's Investors Service, Inc.
("Moody's"), BBB or better by Standard & Poor's Ratings Services
("S&P") or, if not rated by Moody's or S&P, will be of comparable
quality as determined by Pacific Investment Management, except
that up to 10% of the Fixed Income Securities Segment may be in-
vested in lower rated securities that are rated B or higher by
Moody's or S&P or, if not rated by Moody's or S&P, determined by
Pacific Investment Management to be of comparable quality. High
yield fixed income securities rated lower than Baa by Moody's or
BBB by S&P, or of equivalent quality, are not considered to be in-
vestment grade, and are commonly referred to as "junk bonds." Se-
curities rated below investment grade and comparable unrated secu-
rities are subject to greater risks than higher quality fixed in-
come securities. See "Characteristics and Risks of Securities and
Investment Techniques--Risks of High Yield Securities ("Junk
Bonds")." The Fund also may invest up to 20% of the Fixed Income
Securities Segment in securities denominated in foreign curren-
cies, and may invest beyond this limit in U.S. dollar-denominated
securities of foreign issuers. Investing in securities denominated
in foreign currencies and securities of foreign issuers involves
special risks and considerations not typically associated with in-
vesting in U.S. securities. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Tech-
niques--Foreign Securities."
Each Portfolio Manager generally invests a portion of its allo-
cation in liquid securities to facilitate redemptions. In addi-
tion, PIMCO Advisors reserves the right to allocate a portion of
the Fund's assets (the "Money Market Segment") for investment in
money market instruments and reserves the right to manage the in-
vestment of such assets. Because of the Fund's flexible investment
policy, portfolio turnover may be greater than for a fund that
does not allocate assets among various types of securities. See
"Characteristics and Risks of Securities and Investment Tech-
niques--Portfolio Turnover."
The Fund may engage in the purchase and writing of put and call
options on debt securities and securities indexes and may also
purchase or sell interest rate futures contracts, stock index
futures contracts, and options thereon. The Fund also may enter
into swap agreements with respect to foreign currencies, interest
rates, and securities indexes. With respect to securities of the
Fixed Income Securities Segment denominated in foreign currencies,
the Fund may engage in foreign currency exchange transactions by
means of buying or selling foreign currencies on a spot basis, en-
tering into forward foreign currency contracts, and buying and
selling foreign currency options, foreign currency futures, and
options on foreign currency futures. Foreign currency exchange
transactions may be entered into for the purpose of hedging
against foreign currency exchange risk arising from the Fund's in-
vestment or anticipated investment in securities denominated in
foreign currencies and for purposes of increasing exposure to a
particular foreign currency or to shift exposure to foreign cur-
rency fluctuations from one country to another.
Duration. Under normal circumstances, the average portfolio du-
ration of the Fixed Income Securities Segment of the Balanced Fund
will vary within a three- to six-year time frame based on the
Portfolio Manager's forecast for interest rates. Duration is a
measure of the expected life of a fixed income security that was
developed as a more precise alternative to the concept of "term to
maturity." Traditionally, a fixed income security's "term to matu-
rity" has been used as proxy for the sensitivity of the security's
price to changes in interest rates (which is the "interest rate
risk" or "volatility" of the security). However, "term to maturi-
ty" measures only the time until a fixed income security provides
its final payment, taking no account of the pattern of the
security's payments prior to maturity. In contrast, duration in-
corporates a bond's yield, coupon interest payments, final matu-
rity and call features into one measure of the average life of a
fixed income security on a present value basis. Duration manage-
ment is one of the fundamental tools used by the Portfolio Manager
for the Fixed Income Securities Segment of the Balanced Fund. For
more information on investments in fixed income securities, see
"Characteristics and Risks of Securities and Investment Tech-
niques" in this Prospectus and "Investment Objectives and Poli-
cies" in the Statement of Additional Information.
November 1, 1998 Prospectus 19
<PAGE>
EQUITY INCOME FUND seeks current income as a primary investment
objective, and long-term growth of capital as a secondary objec-
tive. The Fund invests primarily in common stocks characterized by
having below-average price to earnings ("P/E") ratios and higher
dividend yields relative to their industry groups. In selecting
securities, the Portfolio Manager classifies a universe of approx-
imately 2,000 stocks by industry, each of which has a minimum mar-
ket capitalization of $200 million at the time of investment. The
universe is then screened to find the lowest P/E ratios in each
industry, subject to application of quality and price momentum
screens. From this group, approximately 25 stocks with the highest
yields are chosen for the Fund. The universe is then rescreened to
find the highest yielding stock in each industry, subject to ap-
plication of quality and price momentum screens. From this group,
approximately 25 stocks with the lowest P/E ratios are added to
the Fund. Although quarterly rebalancing is a general rule, re-
placements are made whenever an alternative stock within the same
industry has a significantly lower P/E ratio or higher dividend
yield than the current Fund holding. The Portfolio Manager for the
Equity Income Fund is NFJ.
VALUE FUND seeks long-term growth of capital and income. The Fund
invests primarily in common stocks characterized by having below-
average P/E ratios relative to their industry groups. In selecting
securities, the Portfolio Manager classifies a universe of approx-
imately 2,000 stocks by industry, each of which has a minimum mar-
ket capitalization of $200 million at the time of investment. The
universe is then screened to find the stocks with the lowest P/E
ratios in each industry, subject to application of quality and
price momentum screens. The stocks in each industry with the low-
est P/E ratios that pass the quality and price momentum screens
are then selected for the Fund. The Fund usually invests in ap-
proximately 50 stocks. Although quarterly rebalancing is a general
rule, replacements are made whenever an alternative stock within
the same industry has a significantly lower P/E ratio than the
current Fund holdings. The Portfolio Manager for the Value Fund
is NFJ.
RENAISSANCE FUND seeks long-term growth of capital and income. The
Fund invests primarily in common stocks having below-average valu-
ations whose issuers are experiencing improvements in their busi-
ness fundamentals. Relative valuation is determined using a multi-
factor approach that examines characteristics such as price to
book, price to earnings and price to cash flow ratios. Stocks
which pass the valuation screen are further analyzed to identify
the key drivers of financial results and catalysts for change
which indicate that a company may demonstrate improving fundamen-
tals in the future. Stocks which appear likely to exceed consensus
expectations are candidates for addition to the Fund's portfolio.
Stocks are sold from the Fund's portfolio when the Portfolio Man-
ager believes that their ability to exceed investor expectations
has diminished or when their valuations have become excessive.
The Fund may invest a portion of its assets in securities of
foreign issuers traded in foreign securities markets (not includ-
ing Eurodollar certificates of deposit), which will not exceed 15%
of the Fund's assets at the time of investment. Investing in the
securities of foreign issuers involves special risks and consider-
ations not typically associated with investing in U.S. securities.
For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The
Fund may also purchase and write call and put options on securi-
ties and securities indexes; enter into futures contracts and use
options on futures contracts; buy or sell foreign currencies; and
enter into forward foreign currency contracts. The Portfolio Man-
ager for the Renaissance Fund is Columbus Circle.
TAX-EFFICIENT EQUITY FUND seeks maximum after-tax growth of capi-
tal. The Fund attempts to provide a total return which exceeds the
return of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500"). In addition, the Fund seeks to achieve superior
after-tax returns for its shareholders in part by minimizing the
taxes they incur in connection with the Fund's investment income
and realized capital gains by using the strategies described be-
low. Notwithstanding these strategies, the Fund may have taxable
investment income and may realize taxable gains from time to time.
The Fund invests primarily in a broadly diversified portfolio
of at least 200 common stocks of companies with larger market cap-
italizations. In selecting specific securities, the Portfolio Man-
ager uses a proprietary quantitative
20 PIMCO Funds: Multi-Manager Series
<PAGE>
model that ranks companies based on long-term (5-10 years) price
appreciation potential through analysis of such factors as growth
of sustainable earnings and dividend behavior. Securities in the
top 50% of the model's ranking are considered for purchase. The
Portfolio Manager's sell discipline incorporates a focus on reduc-
ing the realization of capital gains. Each sell candidate is eval-
uated based on its cost, current market value, and anticipated
benefit of replacement. Securities in the bottom 20% of the mod-
el's ranking are considered for sale. The Fund may engage in the
purchase and writing of options on securities indexes and may also
invest in stock index futures contracts and options thereon.
The Portfolio Manager utilizes a range of active tax management
techniques to minimize taxable distributions, including: low port-
folio turnover; emphasis towards low-dividend, growth-oriented
companies; tax lot accounting (identification of specific shares
of securities being sold that have the lowest tax cost); and regu-
lar rebalancing to capture available tax credits. The Fund will
generally seek to avoid realizing net short-term capital gains
and, when realizing gains, will attempt to realize long-term gains
(i.e., gains on securities held for more than 12 months). The Fund
intends to notify each shareholder as to that portion of his or
her capital gain dividends which qualifies for a long-term tax
rate of 20% in the hands of the shareholder. Net short-term capi-
tal gains, when distributed, will be taxed as ordinary income, at
graduated rates of up to 39.6%. When the Fund decides to sell a
particular appreciated security, it will normally select for sale
first those share lots with holding periods exceeding 12 months
and among those, the share lots with the highest cost basis. The
Fund may, when prudent, sell securities to realize capital losses
that can be used to offset realized capital gains.
To protect against price declines in securities holdings with
large accumulated capital gains, the Fund may, to the extent per-
mitted by law, use hedging techniques such as the purchase of put
options, the sale of stock index futures contracts and equity
swaps. By using these techniques rather than selling such securi-
ties, the Fund can reduce its exposure to price declines in the
securities without realizing substantial capital gains. In limited
circumstances, the Fund may follow the practice of distributing
selected appreciated securities to meet redemptions of certain in-
vestors and may, within certain limits, use the selection of secu-
rities distributed to meet such redemptions as a management tool.
By distributing appreciated securities the Fund can reduce its po-
sition in such securities without realizing capital gains. During
periods of net withdrawals by investors, using distributions of
securities could enable the Fund to avoid the forced sale of secu-
rities to raise cash for meeting redemptions.
It is expected that by employing the various tax-efficient man-
agement strategies described above, the Fund can minimize the ex-
tent to which shareholders incur taxes as a result of realized
capital gains. The Fund may nevertheless realize gains and share-
holders will incur tax liability from time to time. The Portfolio
Manager for the Tax-Efficient Equity Fund is Parametric.
CAPITAL APPRECIATION FUND seeks growth of capital. The Fund in-
vests primarily in common stocks of companies that have improving
fundamentals (such as growth of earnings and dividends) and whose
stock is reasonably valued by the market. Stocks for the Fund are
selected from a universe of the approximately 1,000 largest market
capitalization stocks, all of which are those of companies with
market capitalizations of at least $1 billion at the time of in-
vestment. The Fund usually invests in approximately 60 to 100 com-
mon stocks. Each issue is screened and ranked using five distinct
computerized models, including: (i) a dividend growth screen, (ii)
an equity growth screen, (iii) an earnings growth screen, (iv) an
earnings momentum screen, and (v) an earnings surprise screen. The
Portfolio Manager believes that the models identify the stocks in
the universe exhibiting growth characteristics with reasonable
valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor rela-
tive price performance. The universe is rescreened frequently to
obtain a favorable composition of growth and value characteristics
for the entire Fund. The Portfolio Manager for the Capital Appre-
ciation Fund is Cadence.
GROWTH FUND seeks long-term growth of capital. Income is an inci-
dental consideration. The Fund invests primarily in common stocks
of companies with medium to large market capitalizations. The Fund
may invest a portion of its
November 1, 1998 Prospectus 21
<PAGE>
assets in securities of foreign issuers traded in foreign securi-
ties markets (not including Eurodollar certificates of deposit),
which will not exceed 15% of the Fund's assets at the time of in-
vestment. Investing in the securities of foreign issuers involves
special risks and considerations not typically associated with in-
vesting in U.S. companies. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Tech-
niques--Foreign Securities." The Fund may also purchase and write
call and put options on securities and securities indexes; enter
into futures contracts and use options on futures contracts; buy
or sell foreign currencies; and enter into forward foreign cur-
rency contracts. The Portfolio Manager for the Growth Fund is Co-
lumbus Circle.
VALUE 25 FUND seeks long-term growth of capital and income. The
Fund invests primarily in a portfolio of approximately 25 common
stocks of companies with medium market capitalizations and below-
average P/E ratios relative to their industry groups. In selecting
securities, the Portfolio Manager classifies a universe of more
than 2,000 stocks by industry, each of which has a minimum market
capitalization of $200 million. The universe is then screened to
find stocks with the lowest P/E ratios in each industry, subject
to application of quality, earnings momentum and price momentum
screens. Those stocks which pass the screenings and satisfy the
medium-cap size criteria are further analyzed. Fundamental re-
search is performed on the companies determined by such process to
be the most undervalued. Approximately 25 stocks, diversified
across industries, are selected on an equal-weighted basis for the
Fund's portfolio. Although quarterly rebalancing is a general
rule, replacements are made whenever an alternative stock has a
significantly lower P/E ratio than the current Fund holdings. Be-
cause the Fund concentrates on approximately 25 stocks at any one
time (and is not as diversified as many stock funds), it is in-
tended for aggressive investors seeking above-average capital
gains and willing to accept the greater risks associated there-
with. The Portfolio Manager for the Value 25 Fund is NFJ.
MID-CAP GROWTH FUND seeks growth of capital. The Fund invests pri-
marily in common stocks of middle capitalization companies that
have improving fundamentals (such as growth of earnings and divi-
dends) and whose stock is reasonably valued by the market. Stocks
for the Fund are selected from a universe of companies with market
capitalizations in excess of $500 million at the time of invest-
ment, excluding the 200 companies with the highest market capital-
ization. The Fund usually invests in approximately 60 to 100 com-
mon stocks. Each issue is screened and ranked using five distinct
computerized models, including: (i) a dividend growth screen, (ii)
an equity growth screen, (iii) an earnings growth screen, (iv) an
earnings momentum screen, and (v) an earnings surprise screen. The
Portfolio Manager believes that the models identify the stocks in
the universe exhibiting growth characteristics with reasonable
valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor rela-
tive price performance. The universe is rescreened frequently to
obtain a favorable composition of growth and value characteristics
for the entire Fund. The Portfolio Manager for the Mid-Cap Growth
Fund is Cadence.
TARGET FUND seeks capital appreciation. No consideration is given
to income. The Fund invests primarily in common stocks of compa-
nies with medium market capitalizations. The Fund may invest a
portion of its assets in securities of foreign issuers traded in
foreign securities markets (not including Eurodollar certificates
of deposit), which will not exceed 15% of the Fund's assets at the
time of investment. Investing in the securities of foreign issuers
involves special risks and considerations not typically associated
with investing in U.S. companies. For a discussion of such risks,
see "Characteristics and Risks of Securities and Investment Tech-
niques--Foreign Securities." The Fund may also purchase and write
call and put options on securities and securities indexes; enter
into futures contracts and use options on futures contracts; buy
or sell foreign currencies; and enter into forward foreign cur-
rency contracts. The Portfolio Manager for the Target Fund is Co-
lumbus Circle.
SMALL-CAP VALUE FUND seeks long-term growth of capital and income.
The Fund invests primarily in common stocks of companies with mar-
ket capitalizations between $50 million and $1 billion at the time
of investment. In selecting
22 PIMCO Funds: Multi-Manager Series
<PAGE>
securities, the Portfolio Manager divides a universe of up to ap-
proximately 2,000 stocks into quartiles based upon P/E ratio. The
lowest quartile in P/E ratio is screened for market capitaliza-
tions between $50 million and $1 billion, subject to application
of quality and price momentum screens. Approximately 100 stocks
with the lowest P/E ratios are combined in the Fund, subject to
limits on the weighting for any one industry. Although quarterly
rebalancing is a general rule, replacements are made whenever a
holding achieves a higher P/E ratio than the S&P 500's P/E ratio
or its industry average P/E ratio, or when an alternative stock
within the same industry has a significantly lower P/E ratio than
the current Fund holding. The Fund is intended for aggressive in-
vestors seeking above-average gains and willing to accept the
greater risks associated therewith. The Portfolio Manager for the
Small-Cap Value Fund is NFJ.
OPPORTUNITY FUND seeks capital appreciation. No consideration is
given to income. Except to the extent described under "How to Buy
Shares--Restrictions on Sales of and Exchanges for Shares of the
Opportunity Fund," the Fund is closed to new investors. The Fund
invests primarily in common stocks of companies with market capi-
talizations of less than $2 billion at the time of investment. The
Fund is intended for aggressive investors seeking above-average
gains and willing to accept the greater risks associated there-
with.
The Fund may invest a portion of its assets in securities of
foreign issuers traded in foreign securities markets (not includ-
ing Eurodollar certificates of deposit), which will not exceed 15%
of the Fund's assets at the time of investment. Investing in the
securities of foreign issuers involves special risks and consider-
ations not typically associated with investing in U.S. companies.
For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The
Fund may also purchase and write call and put options on securi-
ties and securities indexes; enter into futures contracts and use
options on futures contracts; buy or sell foreign currencies; and
enter into forward foreign currency contracts. The Portfolio Man-
ager for the Opportunity Fund is Columbus Circle.
INTERNATIONAL FUND seeks capital appreciation through investments
in an international portfolio. Income is an incidental considera-
tion. Under normal market conditions, at least 65% of the Fund's
total assets will be invested in common stocks, which may or may
not pay dividends, as well as convertible bonds, convertible pre-
ferred stocks, warrants, rights or other equity securities, for a
combination of capital appreciation and income. Convertible secu-
rities may include securities convertible only by certain classes
of investors (which may not include the Fund). The Fund may not
invest in convertible securities which are of less than investment
grade quality at the time of purchase.
The Fund will normally invest in securities traded in developed
foreign securities markets. Particular consideration is given to
investments principally traded in developed North American (other
than United States), Japanese, European, Pacific and Australian
securities markets, and in securities of foreign issuers traded on
U.S. securities markets. The Fund will also invest in emerging
markets, where markets may not yet fully reflect the potential of
the developing economy. There are no prescribed limits on geo-
graphic asset distribution and the Fund has the authority to in-
vest in securities traded in securities markets of any country in
the world. In allocating the Fund's assets among the various secu-
rities markets of any country of the world, the Portfolio Manager
will consider such factors as the condition and growth potential
of the various economies and securities markets, currency and tax-
ation considerations and other pertinent financial, social, na-
tional and political factors. Under certain adverse investment
conditions, the Fund may restrict the number of securities markets
in which its assets will be invested, although under normal market
circumstances the Fund's investments will include securities prin-
cipally traded in at least three different countries. The Fund
will not limit its investments to any particular type or size of
company.
The Fund may invest up to 10% of its assets in securities of
other investment companies, such as closed-end management invest-
ment companies which invest in foreign markets. The Fund may also
purchase and write call and put options on securities, securities
indexes, and on foreign currencies; enter into futures contracts
and use options on futures contracts, including futures contracts
on foreign currencies; buy or sell foreign currencies; and enter
into forward foreign currency contracts. The Fund may utilize
stock index futures contracts and options thereon for hedging pur-
poses and also for investment purposes. For instance, the Fund may
invest in stock index futures contracts and
November 1, 1998 Prospectus 23
<PAGE>
related options as an alternative to purchasing individual stocks
to adjust its exposure to a particular foreign market. See "Char-
acteristics and Risks of Securities and Investment Techniques--De-
rivative Instruments--Index Futures."
The Fund will not normally invest in securities of U.S. issuers
traded on U.S. securities markets. However, when the Portfolio
Manager believes that conditions in international securities mar-
kets warrant a defensive investment strategy, the Fund may invest
up to 100% of its assets in domestic debt, foreign debt and equity
securities principally traded in the U.S., including money market
instruments, obligations issued or guaranteed by the U.S. or a
foreign government or their respective agencies, authorities or
instrumentalities, or corporate bonds and sponsored American De-
pository Receipts.
Investing in the securities of foreign issuers, and particu-
larly emerging market issuers, involves special risks and consid-
erations not typically associated with investing in U.S. compa-
nies. For a discussion of such risks, see "Characteristics and
Risks of Securities and Investment Techniques--Foreign Securi-
ties." Currently, the Portfolio Manager for the International Fund
is Blairlogie. On or before March 31, 1999, it is anticipated that
PIMCO Advisors will sell substantially all of its ownership inter-
est in Blairlogie and assume full portfolio management responsi-
bility for the International Fund. See "Management of the Trust--
Portfolio Managers--Blairlogie."
INNOVATION FUND seeks capital appreciation. No consideration is
given to income. The Fund invests primarily (i.e., at least 65% of
its assets) in common stocks of companies which utilize innovative
technologies to gain a strategic competitive advantage in their
industry as well as companies that provide and service those tech-
nologies. Securities will be selected with minimal emphasis on
more traditional factors such as growth potential or value rela-
tive to intrinsic worth. Instead, the Fund will be guided by the
theory of Positive Momentum & Positive Surprise (see "Management
of the Trust--Portfolio Managers--Columbus Circle"), with special
emphasis on common stocks of companies whose perceived strength
lies in their use of innovative technologies in new products, en-
hanced distribution systems and improved management techniques.
Although the Fund emphasizes the utilization of technologies, it
is not restricted to investment in companies in a particular busi-
ness sector or industry.
The Fund may invest a portion of its assets in securities of
foreign issuers traded in foreign securities markets (not includ-
ing Eurodollar certificates of deposit), which will not exceed 15%
of the Fund's assets at the time of investment. Investing in the
securities of foreign issuers involves special risks and consider-
ations not typically associated with investing in U.S. companies.
For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The
Fund may also purchase and write call and put options on securi-
ties and securities indexes; enter into futures contracts and use
options on futures contracts; buy or sell foreign currencies; and
enter into forward foreign currency contracts. The Portfolio Man-
ager for the Innovation Fund is Columbus Circle.
PRECIOUS METALS FUND seeks capital appreciation. No consideration
is given to income. The Fund concentrates investments in a global
portfolio of common stocks of companies principally engaged in
precious metals-related activities, which include companies prin-
cipally engaged in the extraction, processing, distribution or
marketing of precious metals (the "precious metals industry"). A
particular company is deemed to be "principally engaged" in the
precious metals industry if at the time of investment the Portfo-
lio Manager considers that at least 50% of the company's assets,
revenues or profits are derived from the precious metals industry.
Normally, at least 65% of the assets of the Fund will be invested
in the precious metals industry and in securities the value of
which is linked to the price of a precious metal. See "Character-
istics and Risks of Securities and Investment Techniques--Precious
Metals."
The Fund will seek to identify securities of companies which,
based upon the Portfolio Manager's evaluation of their fundamental
investment characteristics, are undervalued in comparison to the
present or anticipated value of the precious metals relevant to
them. Examples of precious metals include gold, silver and plati-
num. To the extent permitted by federal tax law, the Fund may in-
vest directly in gold bullion and other precious metals. Although
the Fund reserves the right to do so at any time, as of the date
of this Prospectus, it does not have the present intention to in-
vest directly in any precious metals other than gold.
24 PIMCO Funds: Multi-Manager Series
<PAGE>
Although the Fund reserves the right to do so at any time, as
of the date of this Prospectus, it does not have the present in-
tention to invest more than 10% of its assets in either precious
metals, such as gold bullion, or in futures on precious metals,
such as gold futures, and options thereon, or to invest more than
5% of its assets in securities the value of which is linked to the
price of a single precious metal. The Fund may invest up to 100%
of its assets in securities of companies whose assets, revenues or
profits are derived from a single precious metal.
The Fund may invest up to 100% of its assets in securities
principally traded on foreign securities markets and in securities
of foreign issuers that are traded on U.S. securities markets or
on foreign securities markets. Investing in the securities of for-
eign issuers involves special risks and considerations not typi-
cally associated with investing in U.S. companies. For a discus-
sion of such risks, see "Characteristics and Risks of Securities
and Investment Techniques--Foreign Securities." The Fund may also
purchase and write call and put options on securities, securities
indexes, commodity indexes, and on foreign currencies; enter into
futures contracts and use options on futures contracts, including
futures contracts on stock indexes, foreign currencies, and pre-
cious metals; buy or sell foreign currencies; and enter into for-
ward foreign currency contracts.
The Fund, because of its emphasis on one industrial sector,
should be considered as one aspect of a diversified portfolio and
may not be suitable by itself as a balanced investment program.
The Portfolio Manager for the Precious Metals Fund is Van Eck.
STOCK FUNDS The Equity Income, Value, Tax-Efficient Equity, Capital Apprecia-
tion, Value 25, Mid-Cap Growth and Small-Cap Value Funds will each
invest primarily (normally at least 65% of its assets) in common
stock. Each of these Funds may maintain a portion of its assets,
which will usually not exceed 10%, in U.S. Government securities,
high quality debt securities (whose maturity or remaining maturity
will not exceed five years), money market obligations, and in cash
to provide for payment of the Fund's expenses and to meet redemp-
tion requests. It is the policy of these Funds to be as fully in-
vested in common stocks as practicable at all times. This policy
precludes these Funds from investing in debt securities as a de-
fensive investment posture (although these Funds may invest in
such securities to provide for payment of expenses and to meet re-
demption requests). Accordingly, investors in these Funds bear the
risk of general declines in stock prices and the risk that a
Fund's exposure to such declines cannot be lessened by investment
in debt securities. These Funds may also invest in convertible se-
curities, preferred stocks, and warrants, subject to certain
limitations.
The Renaissance, Growth, Target, Opportunity, International,
Innovation and Precious Metals Funds will each invest primarily
(normally at least 65% of its assets) in common stocks, and may
also invest in other equity securities, including preferred stocks
and securities (including debt securities and warrants) convert-
ible into or exercisable for common stocks. Each of these Funds
may invest a portion of its assets in debt securities and, for
temporary defensive purposes, up to 100% of its assets in short-
term U.S. Government securities and other money market instru-
ments.
One or more of the Stock Funds may temporarily not be invested
primarily in equity securities immediately following the commence-
ment of operations or after receipt of significant new monies.
While attempting to identify suitable investments, the Funds may
hold assets in cash, short-term U.S. Government securities and
other money market instruments. Any of the Stock Funds may tempo-
rarily not contain the number of securities in which the Fund nor-
mally invests if the Fund does not have sufficient assets to be
fully invested, or pending the Portfolio Manager's ability to pru-
dently invest new monies.
The Stock Funds may also lend portfolio securities; enter into
repurchase agreements and reverse repurchase agreements (subject
to the Funds' investment limitations described below); purchase
and sell securities on a when-issued or delayed delivery basis;
and enter into forward commitments to purchase securities. Each of
the Stock Funds may invest in American Depository Receipts
("ADRs"). In addition, the Renaissance, Growth, Target, Opportuni-
ty, International, Innovation and Precious Metals Funds may invest
in European Depository Receipts ("EDRs") and Global Depository Re-
ceipts ("GDRs"). The Stock Funds that invest primarily in securi-
ties of foreign issuers may invest a portion of their assets in
debt securities and money market obligations issued by U.S. and
foreign issuers that are either U.S. dollar-denominated or denomi-
nated in foreign currency. For more information on these and other
invest-
November 1, 1998 Prospectus 25
<PAGE>
ment practices, see "Characteristics and Risks of Securities and
Investment Techniques" in this Prospectus and "Investment Objec-
tives and Policies" in the Statement of Additional Information.
Characteristics and Risks of
Securities and Investment Techniques
The different types of securities and investment techniques used
by the individual Funds all have attendant risks of varying de-
grees. For example, with respect to common stock, there can be no
assurance of capital appreciation, and there is a risk of market
decline. With respect to debt securities, including money market
instruments, there is the risk that the issuer of a security may
not be able to meet its obligation to make scheduled interest or
principal payments. Because each Fund seeks a different investment
objective and has different investment policies, each is subject
to varying degrees of financial, market and credit risks. There-
fore, investors should carefully consider the investment objec-
tive, investment policies and potential risks of any Fund or Funds
before investing.
The following describes potential risks associated with differ-
ent types of investment techniques that may be used by the indi-
vidual Funds. For more detailed information on these investment
techniques, as well as information on the types of securities in
which some or all of the Funds may invest, see the Statement of
Additional Information.
INVESTMENTS Certain of the Funds may invest in common stock of companies with
IN COMPANIESmarket capitalizations that are small compared to other publicly
WITH SMALL traded companies. Generally, small market capitalization is con-
AND MEDIUM sidered to be less than $1.5 billion and large market capitaliza-
MARKET tion is considered to be more than $5 billion. Under normal market
CAPITALI- conditions, the Small- Cap Value Fund will invest primarily in
ZATIONS companies with market capitalizations of between $50 million and
$1 billion, and the Opportunity Fund will invest primarily in com-
panies with market capitalizations of less than $2 billion. In-
vestments in larger companies present certain advantages in that
such companies generally have greater financial resources, more
extensive research and development, manufacturing, marketing and
service capabilities, and more stability and greater depth of man-
agement and technical personnel. Investments in smaller, less sea-
soned companies may present greater opportunities for growth but
also may involve greater risks than customarily are associated
with more established companies. The securities of smaller compa-
nies may be subject to more abrupt or erratic market movements
than larger, more established companies. These companies may have
limited product lines, markets or financial resources, or they may
be dependent upon a limited management group. Their securities may
be traded in the over-the-counter market or on a regional ex-
change, or may otherwise have limited liquidity. As a result of
owning large positions in this type of security, a Fund is subject
to the additional risk of possibly having to sell portfolio secu-
rities at disadvantageous times and prices if redemptions require
the Fund to liquidate its securities positions. In addition, it
may be prudent for a Fund with a relatively large asset size to
limit the number of relatively small positions it holds in securi-
ties having limited liquidity in order to minimize its exposure to
such risks, to minimize transaction costs, and to maximize the
benefits of research. As a consequence, as a Fund's asset size in-
creases, the Fund may reduce its exposure to illiquid small capi-
talization securities, which could adversely affect performance.
Many of the Funds may also invest in stocks of companies with
medium market capitalizations. Whether a U.S. issuer's market cap-
italization is medium is determined by reference to the capital-
ization for all issuers whose equity securities are listed on a
United States national securities exchange or which are reported
on NASDAQ. Issuers with market capitalizations within the range of
capitalization of companies included in the S&P Mid Cap 400 Index
may be regarded as being issuers with medium market capitaliza-
tions. Such investments share some of the risk characteristics of
investments in stocks of companies with small market capitaliza-
tions described above, although such companies tend to have longer
operating histories, broader product lines and greater financial
resources and their stocks tend to be more liquid and less vola-
tile than those of smaller capitalization issuers.
26 PIMCO Funds: Multi-Manager Series
<PAGE>
FOREIGN
SECURITIES
The International Fund may invest directly in foreign equity secu-
rities; U.S. dollar- or foreign currency-denominated foreign cor-
porate debt securities; foreign preferred securities; certificates
of deposit, fixed time deposits and bankers' acceptances issued by
foreign banks; and obligations of foreign governments or their
subdivisions, agencies and instrumentalities, international agen-
cies and supranational entities. The Precious Metals Fund may in-
vest primarily in securities of foreign issuers, securities denom-
inated in foreign currencies, securities principally traded on se-
curities markets outside of the United States and in securities of
foreign issuers that are traded on U.S. securities markets. The
Balanced Fund may invest up to 20% of its Fixed Income Securities
Segment in securities denominated in foreign currencies, and may
invest beyond this limit in U.S. dollar-denominated securities of
foreign issuers. The Renaissance, Growth, Target, Opportunity and
Innovation Funds may invest up to 15% of their respective assets
in securities which are traded principally in securities markets
outside the United States (Eurodollar certificates of deposit are
excluded for purposes of these limitations), and may invest with-
out limit in securities of foreign issuers that are traded in U.S.
markets.
All of the Funds may invest in ADRs. In addition, the Renais-
sance, Growth, Target, Opportunity, International, Innovation and
Precious Metals Funds may invest in EDRs and GDRs. ADRs are dol-
lar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign
issuer, and are publicly traded on exchanges or over-the-counter
in the United States. EDRs are receipts similar to ADRs and are
issued and traded in Europe. GDRs may be offered privately in the
United States and also trade in public or private markets in other
countries.
Investing in the securities of issuers in any foreign country
involves special risks and considerations not typically associated
with investing in U.S. companies. Shareholders should consider
carefully the substantial risks involved in investing in securi-
ties issued by companies and governments of foreign nations. These
risks include: differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expro-
priation or confiscatory taxation; adverse changes in investment
or exchange control regulations (which may include suspension of
the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign coun-
tries. Individual foreign economies may differ favorably or unfa-
vorably from the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, capital reinvestment, re-
sources, self-sufficiency, and balance of payments position. The
securities markets, values of securities, yields, and risks asso-
ciated with securities markets may change independently of each
other. Additionally, foreign securities and dividends and interest
payable on those securities may be subject to foreign taxes, in-
cluding taxes withheld from payments on those securities. Foreign
securities often trade with less frequency and volume than domes-
tic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securi-
ties may include higher custodial fees than apply to domestic cus-
todial arrangements and transaction costs of foreign currency con-
versions. Changes in foreign exchange rates also will affect the
value of securities denominated or quoted in currencies other than
the U.S. dollar.
A Fund's investments in foreign currency denominated debt obli-
gations and hedging activities will likely produce a difference
between its book income and its taxable income. This difference
may cause a portion of the Fund's income distributions to consti-
tute returns of capital for tax purposes or require the Fund to
make distributions exceeding book income to qualify as a regulated
investment company for federal tax purposes.
Certain of the Funds may invest in the securities of issuers
based in countries with developing economies. Investing in devel-
oping (or "emerging market") countries involves certain risks not
typically associated with investing in U.S. securities, and im-
poses risks greater than, or in addition to, risks of investing in
foreign, developed countries. A number of emerging market coun-
tries restrict, to varying degrees, foreign investment in securi-
ties. Repatriation of investment income, capital, and the proceeds
of sales by foreign investors may require governmental registra-
tion and/or approval in some emerging market countries. A number
of the currencies of emerging market countries have experienced
significant declines against the U.S. dollar in recent years, and
devaluation may occur subsequent to investments in these curren-
cies by a Fund. Inflation and rapid fluctuations in inflation
rates have had, and may continue to have, negative effects on the
economies and securities markets of certain emerging market coun-
tries.
November 1, 1998 Prospectus 27
<PAGE>
Many of the emerging securities markets are relatively small, have
low trading volumes, suffer periods of relative illiquidity, and
are characterized by significant price volatility. There is a risk
in emerging market countries that a future economic or political
crisis could lead to price controls, forced mergers of companies,
expropriation or confiscatory taxation, seizure, nationalization,
or creation of government monopolies, any of which may have a det-
rimental effect on a Fund's investment.
Additional risks of investing in emerging market countries may
include: currency exchange rate fluctuations; greater social, eco-
nomic and political uncertainty and instability (including the
risk of war); more substantial governmental involvement in the
economy; less governmental supervision and regulation of the secu-
rities markets and participants in those markets; unavailability
of currency hedging techniques in certain emerging market coun-
tries; the fact that companies in emerging market countries may be
newly organized and may be smaller and less seasoned companies;
the difference in, or lack of, auditing and financial reporting
standards, which may result in unavailability of material informa-
tion about issuers; the risk that it may be more difficult to ob-
tain and/or enforce a judgment in a court outside the United
States; and significantly smaller market capitalization of securi-
ties markets. Also, any change in the leadership or policies of
emerging market countries, or the countries that exercise a sig-
nificant influence over those countries, may halt the expansion of
or reverse the liberalization of foreign investment policies now
occurring and adversely affect existing investment opportunities.
In addition, emerging securities markets may have different
clearance and settlement procedures, which may be unable to keep
pace with the volume of securities transactions or otherwise make
it difficult to engage in such transactions. Settlement problems
may cause a Fund to miss attractive investment opportunities, hold
a portion of its assets in cash pending investment, or delay in
disposing of a portfolio security. Such a delay could result in
possible liability to a purchaser of the security.
SPECIAL RISKS OF INVESTING IN RUSSIAN AND OTHER EASTERN EUROPEAN
SECURITIES The International Fund may invest a portion of its as-
sets in securities of issuers located in Russia and in other East-
ern European countries. While investments in securities of such
issuers are subject generally to the same risks associated with
investments in other emerging market countries described above,
the political, legal and operational risks of investing in Russian
and other Eastern European issuers, and of having assets custodied
within these countries, may be particularly acute. A risk of par-
ticular note with respect to direct investment in Russian securi-
ties is the way in which ownership of shares of companies is nor-
mally recorded. When a Fund invests in a Russian issuer, it will
normally receive a "share extract," but that extract is not le-
gally determinative of ownership. The official record of ownership
of a company's share is maintained by the company's share regis-
trar. Such share registrars are completely under the control of
the issuer, and investors are provided with few legal rights
against such registrars. Please refer to "Investment Objectives
and Policies-Foreign Securities" in the Statement of Additional
Information for a more complete description of these and other
risks associated with investments in securities of Russian and
other Eastern European issuers.
FOREIGN Foreign currency exchange rates may fluctuate significantly over
CURRENCY short periods of time. They generally are determined by the forces
TRANSACTIONSof supply and demand in the foreign exchange markets and the rela-
tive merits of investments in different countries, actual or per-
ceived changes in interest rates and other complex factors, as
seen from an international perspective. Currency exchange rates
also can be affected unpredictably by intervention (or the failure
to intervene) by U.S. or foreign governments or central banks, or
by currency controls or political developments in the U.S. or
abroad. For example, significant uncertainty surrounds the pro-
posed introduction of the euro (a common currency unit for the Eu-
ropean Union) in January 1999 and its effect on the value of secu-
rities denominated in local European currencies. These and other
currencies in which the Funds' assets are denominated may be de-
valued against the U.S. dollar, resulting in a loss to the Funds.
For a more complete discussion of foreign currency risks (includ-
ing those associated with the euro), please see "Investment Objec-
tives and Policies--Foreign Currencies" in the Statement of Addi-
tional Information.
28 PIMCO Funds: Multi-Manager Series
<PAGE>
The Balanced, Renaissance, Growth, Target, Opportunity, Inter-
national, Innovation and Precious Metals Funds may enter into for-
ward foreign currency exchange contracts to reduce the risks of
adverse changes in foreign exchange rates. In addition, the Bal-
anced, International and Precious Metals Funds may buy and sell
foreign currency futures contracts and options on foreign curren-
cies and foreign currency futures. All of the Funds that may buy
or sell foreign currencies may enter into forward foreign currency
exchange contracts to reduce the risks of adverse changes in for-
eign exchange rates. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at
a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the
time of the contract. By entering into a forward foreign currency
exchange contract, the Fund "locks in" the exchange rate between
the currency it will deliver and the currency it will receive for
the duration of the contract. As a result, a Fund reduces its ex-
posure to changes in the value of the currency it will deliver and
increases its exposure to changes in the value of the currency it
will exchange into. The effect on the value of a Fund is similar
to selling securities denominated in one currency and purchasing
securities denominated in another currency. Contracts to sell for-
eign currency would limit any potential gain which might be real-
ized by a Fund if the value of the hedged currency increases. A
Fund may enter into these contracts for the purpose of hedging
against foreign exchange risk arising from the Fund's investment
or anticipated investment in securities denominated in foreign
currencies. Suitable hedging transactions may not be available in
all circumstances and there can be no assurance that a Fund will
engage in such transactions at any given time or from time to
time. Also, such transactions may not be successful and may elimi-
nate any chance for a Fund to benefit from favorable fluctuations
in relevant foreign currencies. The International Fund may also
enter into hedging contracts for purposes of increasing exposure
to a foreign currency or to shift exposure to foreign currency
fluctuations from one currency to another. To the extent that it
does so, the International Fund will be subject to the additional
risk that the relative value of currencies will be different than
anticipated by the Fund's Portfolio Manager. The International may
use one currency (or a basket of currencies) to hedge against ad-
verse changes in the value of another currency (or a basket of
currencies) when exchange rates between the two currencies are
positively correlated. The Fund will segregate assets determined
to be liquid by the Adviser or a Portfolio Manager in accordance
with procedures established by the Board of Trustees to cover its
obligations under forward foreign currency exchange contracts en-
tered into for non-hedging purposes.
MONEY Each of the Funds may invest at least a portion of its assets in
MARKET the following kinds of money market instruments:
INSTRUMENTS (1)short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other
bank obligations rated in the two highest rating categories
by at least two NRSROs, or, if rated by only one NRSRO, in
such agency's two highest grades, or, if unrated,
determined to be of comparable quality by the Adviser or a
Portfolio Manager. Bank obligations must be those of a bank
that has deposits in excess of $2 billion or that is a
member of the Federal Deposit Insurance Corporation. A Fund
may invest in obligations of U.S. branches or subsidiaries
of foreign banks ("Yankee dollar obligations") or foreign
branches of U.S. banks ("Eurodollar obligations");
(3) commercial paper rated in the two highest rating categories
by at least two NRSROs, or, if rated by only one NRSRO, in
such agency's two highest grades, or, if unrated, deter-
mined to be of comparable quality by the Adviser or a Port-
folio Manager;
(4) corporate obligations with a remaining maturity of 397 days
or less whose issuers have outstanding short-term debt ob-
ligations rated in the highest rating category by at least
two NRSROs, or, if rated by only one NRSRO, in such
agency's highest grade, or, if unrated, determined to be of
comparable quality by the Adviser or a Portfolio Manager;
and
(5) repurchase agreements with domestic commercial banks or reg-
istered broker-dealers.
November 1, 1998 Prospectus 29
<PAGE>
MORTGAGE- All Funds that may purchase debt securities for investment pur-
RELATEDAND poses (and in particular, the Balanced Fund) may invest in mort-
OTHERASSET- gage-related securities, and in other asset-backed securities (un-
BACKED related to mortgage loans) that are offered to investors currently
SECURITIES or in the future. The value of some mortgage-related or asset-
backed securities in which the Funds invest may be particularly
sensitive to changes in prevailing interest rates, and, like other
fixed income investments, the ability of a Fund to successfully
utilize these instruments may depend in part upon the ability of
the Portfolio Manager to forecast interest rates and other eco-
nomic factors correctly.
MORTGAGE PASS-THROUGH SECURITIES are securities representing in-
terests in "pools" of mortgage loans secured by residential or
commercial real property in which payments of both interest and
principal on the securities are generally made monthly, in effect
"passing through" monthly payments made by the individual borrow-
ers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities). Early re-
payment of principal on some mortgage-related securities (arising
from prepayments of principal due to sale of the underlying prop-
erty, refinancing, or foreclosure, net of fees and costs which may
be incurred) may expose a Fund to a lower rate of return upon re-
investment of principal. Also, if a security subject to prepayment
has been purchased at a premium, the value of the premium would be
lost in the event of prepayment. Like other fixed income securi-
ties, when interest rates rise, the value of a mortgage-related
security generally will decline; however, when interest rates are
declining, the value of mortgage-related securities with prepay-
ment features may not increase as much as other fixed income secu-
rities. The rate of prepayments on underlying mortgages will af-
fect the price and volatility of a mortgage-related security, and
may have the effect of shortening or extending the effective matu-
rity of the security beyond what was anticipated at the time of
purchase. To the extent that unanticipated rates of prepayment on
underlying mortgages increase the effective maturity of a mort-
gage-related security, the volatility of such security can be ex-
pected to increase.
Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves)
may be guaranteed by the full faith and credit of the U.S. Govern-
ment (in the case of securities guaranteed by the Government Na-
tional Mortgage Association ("GNMA")); or guaranteed by agencies
or instrumentalities of the U.S. Government (in the case of secu-
rities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"),
which are supported only by the discretionary authority of the
U.S. Government to purchase the agency's obligations). Mortgage-
related securities created by non-governmental issuers (such as
commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market
issuers) may be supported by various forms of insurance or guaran-
tees, including individual loan, title, pool and hazard insurance
and letters of credit, which may be issued by governmental enti-
ties, private insurers or the mortgage poolers.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs") are hybrid mortgage-
related instruments. Similar to a bond, interest and pre-paid
principal on a CMO are paid, in most cases, on a monthly basis.
CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are structured
into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments,
are first returned to investors holding the shortest maturity
class; investors holding the longer maturity classes receive prin-
cipal only after the first class has been retired. CMOs that are
issued or guaranteed by the U.S. Government or by any of its agen-
cies or instrumentalities will be considered U.S. Government secu-
rities by a Fund, while other CMOs, even if collateralized by U.S.
Government securities, will have the same status as other pri-
vately issued securities for purposes of applying a Fund's diver-
sification tests.
COMMERCIAL MORTGAGE-BACKED SECURITIES include securities that re-
flect an interest in, and are secured by, mortgage loans on com-
mercial real property. The market for commercial mortgage-backed
securities developed more recently and in terms of total outstand-
ing principal amount of issues is relatively small compared to the
market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial mortgage-backed secu-
rities reflect the risks
30 PIMCO Funds: Multi-Manager Series
<PAGE>
of investing in the real estate securing the underlying mortgage
loans. These risks reflect the effects of local and other economic
conditions on real estate markets, the ability of tenants to make
loan payments, and the ability of a property to attract and retain
tenants. Commercial mortgage-backed securities may be less liquid
and exhibit greater price volatility than other types of mortgage-
related or asset-backed securities.
MORTGAGE-RELATED SECURITIES include securities other than those
described above that directly or indirectly represent a participa-
tion in, or are secured by and payable from, mortgage loans on
real property, such as CMO residuals or stripped mortgage-backed
securities ("SMBS"), and may be structured in classes with rights
to receive varying proportions of principal and interest.
A common type of SMBS will have one class receiving some of the
interest and most of the principal from the mortgage assets, while
the other class will receive most of the interest and the remain-
der of the principal. In the most extreme case, one class will re-
ceive all of the interest (the interest-only, or "IO" class),
while the other class will receive all of the principal (the prin-
cipal-only, or "PO" class). The yield to maturity on an IO class
is extremely sensitive to the rate of principal payments (includ-
ing prepayments) on the related underlying mortgage assets, and a
rapid rate of principal payments may have a material adverse ef-
fect on a Fund's yield to maturity from these securities. For a
discussion of the characteristics of some of these instruments,
see the Statement of Additional Information.
CONVERTIBLE Many of the Funds may invest in convertible securities. Convert-
SECURITIES ible securities are generally preferred stocks or fixed income se-
curities that are convertible into common stock at either a stated
price or a stated rate. The price of the convertible security will
normally vary in some proportion to changes in the price of the
underlying common stock because of this conversion feature. A con-
vertible security will normally also provide a fixed income
stream. For this reason, the convertible security may not decline
in price as rapidly as the underlying common stock.
A Fund's Portfolio Manager will select convertible securities
to be purchased by the Fund based primarily upon its evaluation of
the fundamental investment characteristics and growth prospects of
the issuer of the security. As a fixed income security, a convert-
ible security tends to increase in market value when interest
rates decline and to decrease in value when interest rates rise.
While convertible securities generally offer lower interest or
dividend yields than non-convertible fixed income securities of
similar quality, their value tends to increase as the market value
of the underlying stock increases and to decrease when the value
of the underlying stock decreases.
The Renaissance Fund may invest in so-called "synthetic con-
vertible securities," which are composed of two or more different
securities whose investment characteristics, taken together, re-
semble those of convertible securities. For example, the Renais-
sance Fund may purchase a non-convertible debt security and a war-
rant or option. The synthetic convertible differs from the true
convertible security in several respects. Unlike a true convert-
ible security, which is a single security having a unitary market
value, a synthetic convertible comprises two or more separate se-
curities, each with its own market value. Therefore, the "market
value" of a synthetic convertible is the sum of the values of its
fixed income component and its convertible component. For this
reason, the values of a synthetic convertible and a true convert-
ible security may respond differently to market fluctuations.
RISKS OF The Balanced, Renaissance and Growth Funds may invest a portion of
HIGH YIELD their assets in fixed income securities rated lower than Baa by
SECURITIES Moody's or lower than BBB by S&P but rated at least B by Moody's
("JUNK or S&P or, if not rated, determined by the Portfolio Manager to be
BONDS") of comparable quality. In addition, the Renaissance Fund may in-
vest in convertible securities rated below B by Moody's or S&P
(or, if unrated, considered by the Portfolio Manager to be of com-
parable quality). Securities rated lower than Baa by Moody's or
lower than BBB by S&P are sometimes referred to as "high yield" or
"junk" bonds. Investors should consider the risks associated with
high yield securities before investing in these Funds. Although
each of the Renaissance and Growth Funds reserves the right to do
so at any time, as of the date of this Prospectus, neither Fund
invests nor has the present intention to invest more than 5% of
its assets in high yield securities or junk bonds.
November 1, 1998 Prospectus 31
<PAGE>
Investing in high yield securities involves special risks in
addition to the risks associated with investments in higher rated
fixed income securities. While offering a greater potential oppor-
tunity for capital appreciation and higher yields than investments
in higher rated debt securities, high yield securities typically
entail greater potential price volatility and may be less liquid
than investment grade debt. High yield securities may be regarded
as predominately speculative with respect to the issuer's continu-
ing ability to meet principal and interest payments. Analysis of
the creditworthiness of issuers of high yield securities may be
more complex than for issuers of higher quality debt securities,
and achievement of a Fund's investment objective may, to the ex-
tent of its investments in high yield securities, depend more
heavily on the Portfolio Manager's creditworthiness analysis than
would be the case if the Fund were investing in higher quality se-
curities. High yield securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions
than higher grade securities.
For additional discussion of the characteristics of lower rated
fixed income securities, see the Statement of Additional Informa-
tion. Ratings assigned to fixed income securities are described in
the Appendix to the Statement of Additional Information.
DERIVATIVE To the extent permitted by the investment objective and policies
INSTRUMENTS of each Fund, a Fund may purchase and write call and put options
on securities, securities indexes and foreign currencies, and en-
ter into futures contracts and use options on futures contracts as
further described below. In pursuit of their investment objec-
tives, the Balanced, Renaissance, Tax-Efficient Equity, Growth,
Target, Opportunity, International, Innovation and Precious Metals
Funds may engage in the purchase and writing of call and put op-
tions on securities and securities indexes and enter into futures
contracts and options thereon, including securities index futures
contracts and options thereon. The Precious Metals Fund may pur-
chase and write options on commodities indexes. The Funds that may
invest in foreign-currency denominated securities may engage in
the purchase and writing of call and put options on foreign cur-
rencies. The Balanced and Tax-Efficient Equity Funds may also en-
ter into swap agreements with respect to securities indexes. The
Balanced Fund may also enter into swap agreements with respect to
foreign currencies and interest rates. The Funds may (but are not
required to) use these techniques to hedge against changes in in-
terest rates, foreign currency exchange rates or securities pric-
es; and for the International Fund, to increase exposure to a for-
eign currency, to shift exposure to foreign currency fluctuations
from one country to another, or as part of its overall investment
strategy. Each Fund will segregate assets determined to be liquid
by the Adviser or a Portfolio Manager in accordance with proce-
dures established by the Board of Trustees (or, as permitted by
applicable regulation, enter into certain offsetting positions) to
cover its obligations under options, futures, and swaps to limit
leveraging of the Fund.
Derivative instruments are considered for these purposes to
consist of securities or other instruments whose value is derived
from or related to the value of some other instrument or asset,
and not to include those securities whose payment of principal
and/or interest depend upon cash flows from underlying assets,
such as mortgage-related or asset-backed securities. See "Mort-
gage-Related and Other Asset-Backed Securities." The value of some
derivative instruments in which the Funds may invest may be par-
ticularly sensitive to changes in prevailing interest rates, and,
like the other investments of the Funds, the ability of a Fund to
successfully utilize these instruments may depend in part upon the
ability of the Portfolio Manager to forecast interest rates and
other economic factors correctly. If the Portfolio Manager incor-
rectly forecasts such factors and has taken positions in deriva-
tive instruments contrary to prevailing market trends, the Funds
could be exposed to the risk of loss.
The Funds might not employ any of the strategies described be-
low, and no assurance can be given that any strategy used will
succeed. If the Portfolio Manager incorrectly forecasts interest
rates, market values or other economic factors in utilizing a de-
rivatives strategy for a Fund, the Fund might have been in a bet-
ter position if it had not entered into the transaction at all.
Also, suitable derivative transactions may not be available in all
circumstances. The use of these strategies involves certain spe-
cial risks, including a possible imperfect correlation, or even no
correlation, between price movements of derivative instruments and
price movements of related investments. While some strategies in-
volving derivative instruments can reduce the risk of loss, they
can also reduce the opportunity for gain or even result in
32 PIMCO Funds: Multi-Manager Series
<PAGE>
losses by offsetting favorable price movements in related invest-
ments or otherwise, due to the possible inability of a Fund to
purchase or sell a portfolio security at a time that would be fa-
vorable or the possible need to sell a portfolio security at a
disadvantageous time because the Fund is required to maintain as-
set coverage or offsetting positions in connection with transac-
tions in derivative instruments, and the possible inability of a
Fund to close out or to liquidate its derivatives positions. In
addition, a Fund's use of such instruments may cause the Fund to
realize higher amounts of short-term capital gains (generally
taxed at ordinary income tax rates) than if it had not used such
instruments.
OPTIONS ON SECURITIES, SECURITIES INDEXES, AND CURRENCIES Certain
Funds may purchase put options on securities. One purpose of pur-
chasing put options is to protect holdings in an underlying or re-
lated security against a substantial decline in market value.
These Funds may also purchase call options on securities. One pur-
pose of purchasing call options is to protect against substantial
increases in prices of securities the Fund intends to purchase
pending its ability to invest in such securities in an orderly
manner. A Fund may sell put or call options it has previously pur-
chased, which could result in a net gain or loss depending on
whether the amount realized on the sale is more or less than the
premium and other transaction costs paid on the put or call option
which is sold. A Fund may write a call or put option only if the
option is "covered" by the Fund holding a position in the under-
lying securities or by other means which would permit immediate
satisfaction of the Fund's obligation as writer of the option.
Prior to exercise or expiration, an option may be closed out by an
offsetting purchase or sale of an option of the same series.
The purchase and writing of options involves certain risks.
During the option period, the covered call writer has, in return
for the premium on the option, given up the opportunity to profit
from a price increase in the underlying security above the exer-
cise price, but, as long as its obligation as a writer continues,
has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer
of the option. Once an option writer has received an exercise no-
tice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the un-
derlying security at the exercise price. If a put or call option
purchased by the Fund is not sold when it has remaining value, and
if the market price of the underlying security remains equal to or
greater than the exercise price (in the case of a put), or remains
less than or equal to the exercise price (in the case of a call),
the Fund will lose its entire investment in the option. Also,
where a put or call option on a particular security is purchased
to hedge against price movements in a related security, the price
of the put or call option may move more or less than the price of
the related security. There can be no assurance that a liquid mar-
ket will exist when a Fund seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on
the options markets, a Fund may be unable to close out a position.
For each of the Renaissance, Growth, Target, Opportunity, In-
ternational, Innovation, and Precious Metals Funds, in the case of
a written call option on a securities index, the Fund will own
corresponding securities whose historic volatility correlates with
that of the index.
The Balanced, International and Precious Metals Funds may buy
or sell put and call options on foreign currencies as a hedge
against changes in the value of the U.S. dollar (or another cur-
rency) in relation to a foreign currency in which a Fund's securi-
ties may be denominated. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the
ability of a Fund to reduce foreign currency risk using such op-
tions.
Over-the-counter options in which certain Funds may invest dif-
fer from traded options in that they are two-party contracts, with
price and other terms negotiated between buyer and seller, and
generally do not have as much market liquidity as exchange-traded
options. The Funds may be required to treat as illiquid over-the-
counter options purchased and securities being used to cover cer-
tain written over-the-counter options.
SWAP AGREEMENTS The Balanced Fund may enter into swap agreements
to hedge against changes in interest rates, foreign currency ex-
change rates or securities prices. The Tax-Efficient Equity Fund
may enter into equity index swap agreements for purposes of gain-
ing exposure to the stocks making up an index of securities with-
out actually purchasing
November 1, 1998 Prospectus 33
<PAGE>
those stocks. Swap agreements are two-party contracts entered into
primarily by institutional investors for periods ranging from a
few weeks to more than one year. In a standard swap transaction,
two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest
factor. The gross returns to be exchanged or "swapped" between the
parties are generally calculated with respect to a "notional
amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, or in a
"basket" of securities representing a particular index.
Most swap agreements entered into by the Funds calculate the
obligations of the parties to the agreement on a "net basis." Con-
sequently, a Fund's current obligations (or rights) under a swap
agreement will generally be equal only to the net amount to be
paid or received under the agreement based on the relative values
of the positions held by each party to the agreement (the "net
amount"). A Fund's current obligations under a swap agreement will
be accrued daily (offset against amounts owed to the Fund), and
any accrued but unpaid net amounts owed to a swap counterparty
will be covered by the segregation of assets determined to be liq-
uid by the Portfolio Manager in accordance with procedures estab-
lished by the Board of Trustees to limit any potential leveraging
of the Fund's portfolio. Obligations under swap agreements so cov-
ered will not be construed to be "senior securities" for purposes
of a Fund's investment restriction concerning senior securities. A
Fund will not enter into a swap agreement with any single party if
the net amount owed or to be received under existing contracts
with that party would exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in
furthering its investment objective will depend on the Portfolio
Manager's ability to predict correctly whether certain types of
investments are likely to produce greater returns than other in-
vestments. Because they are two-party contracts and because they
may have terms of greater than seven days, swap agreements may be
considered to be illiquid investments. Moreover, a Fund bears the
risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap
agreement counterparty. The Funds will enter into swap agreements
only with counterparties that meet certain standards for credit-
worthiness (generally, such counterparties would have to be eligi-
ble counterparties under the terms of the Funds' repurchase agree-
ment guidelines). The swaps market is a relatively new market and
is largely unregulated. It is possible that developments in the
swaps market, including potential government regulation, could ad-
versely affect a Fund's ability to terminate existing swap agree-
ments or to realize amounts to be received under such
agreements.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS Certain Funds
may enter into futures contracts and options thereon. The Balanced
Fund may invest in interest rate futures contracts and options
thereon. The Precious Metals Fund may purchase and sell futures
contracts on precious metals (such as gold), and purchase and
write options on precious metals futures contracts. The Balanced,
International and Precious Metals Funds may invest in foreign ex-
change futures contracts and options thereon ("futures options")
that are traded on a U.S. or foreign exchange or board of trade,
or similar entity, or quoted on an automated quotation system.
These Funds may engage in such futures transactions as an adjunct
to their securities activities.
There are several risks associated with the use of futures and
futures options for hedging purposes. There can be no guarantee
that there will be a correlation between price movements in the
hedging vehicle and in the portfolio securities being hedged. An
incorrect correlation could result in a loss on both the hedged
securities in a Fund and the hedging vehicle, so that the portfo-
lio return might have been greater had hedging not been attempted.
There can be no assurance that a liquid market will exist at a
time when a Fund seeks to close out a futures contract or a
futures option position. Most futures exchanges and boards of
trade limit the amount of fluctuation permitted in futures con-
tract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day
at a price beyond that limit. In addition, certain of these in-
struments are relatively new and without a significant trading
history. As a result, there is no assurance that an active second-
ary market will develop or continue to exist. Lack of a liquid
market for any reason may prevent a Fund from liquidating an unfa-
vorable position, and the Fund would remain obligated to meet mar-
gin requirements until the position is closed.
34 PIMCO Funds: Multi-Manager Series
<PAGE>
INDEX FUTURES The Balanced, Renaissance, Tax-Efficient Equity,
Growth, Target, Opportunity, International, Innovation and Pre-
cious Metals Funds may purchase and sell futures contracts on var-
ious securities indexes ("Index Futures") and related options for
hedging purposes and for investment purposes. A Fund's purchase
and sale of Index Futures is limited to contracts and exchanges
which have been approved by the Commodity Futures Trading Commis-
sion ("CFTC").
The International Fund may invest to a significant degree in
Index Futures on stock indexes and related options (including
those which may trade outside of the United States) as an alterna-
tive to purchasing individual stocks in order to adjust the Fund's
exposure to a particular market. The Fund may invest in Index
Futures and related options when the Portfolio Manager believes
that there are not enough attractive securities available to main-
tain the standards of diversification and liquidity set for the
Fund pending investment in such securities if or when they do be-
come available. Through the use of Index Futures and related op-
tions, the International Fund may diversify risk in its portfolio
without incurring the substantial brokerage costs which may be as-
sociated with investment in the securities of multiple issuers.
The Fund may also avoid potential market and liquidity problems
which may result from increases in positions already held by it.
A Fund may close open positions on the futures exchanges on
which Index Futures are traded at any time up to and including the
expiration day. All positions which remain open at the close of
the last business day of the contract's life are required to set-
tle on the next business day (based upon the value of the relevant
index on the expiration day), with settlement made with the appro-
priate clearing house. Because the specific procedures for trading
foreign stock Index Futures on futures exchanges are still under
development, additional or different margin requirements as well
as settlement procedures may be applicable to foreign stock Index
Futures at the time a Fund purchases such instruments.
Positions in Index Futures may be closed out by a Fund only on
the futures exchange upon which the Index Futures are then traded.
There can be no assurance that a liquid market will exist for any
particular contract at any particular time. Also, the price of In-
dex Futures may not correlate perfectly with movement in the rele-
vant index due to certain market distortions. First, all partici-
pants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts
through offsetting transactions which could distort the normal re-
lationship between the index and futures markets. Second, the de-
posit requirements in the futures market are less onerous than
margin requirements in the securities market, and as a result, the
futures market may attract more speculators than does the securi-
ties market. Increased participation by speculators in the futures
market may also cause temporary price distortions. In addition,
trading hours for foreign stock Index Futures may not correspond
perfectly to hours of trading on the foreign exchange to which a
particular foreign stock Index Future relates. This may result in
a disparity between the price of Index Futures and the value of
the relevant index due to the lack of continuous arbitrage between
the Index Futures price and the value of the underlying index.
The Funds may only enter into futures contracts or futures op-
tions which are standardized and traded on a U.S. or foreign ex-
change or board of trade, or similar entity, or quoted on an auto-
mated quotation system. Each Fund may use futures contracts and
related options for "bona fide hedging" purposes, as such term is
defined in applicable regulations of the CFTC, or, with respect to
positions in futures and related options that do not qualify as
"bona fide hedging" positions, may enter such positions only to
the extent that aggregate initial margin deposits plus premiums
paid by it for open futures option positions, less the amount by
which any such positions are "in-the-money," would not exceed 5%
of the Fund's net assets.
PRECIOUS The Precious Metals Fund will concentrate its investments in the
METALS precious metals industry. Prices of precious metals can be ex-
pected to respond to changes in rates of inflation and to percep-
tions of economic and political instability. The values of compa-
nies engaged in precious metal-related activities whose securities
are principally traded on foreign securities exchanges may also be
affected by changes in the exchange rate between the relevant for-
eign currency and the U.S. dollar. Based on historical experience,
the prices of precious metals and of securities of companies en-
gaged in
November 1, 1998 Prospectus 35
<PAGE>
precious metal-related activities may be subject to extreme fluc-
tuations, reflecting wider economic or political instability or
for other reasons.
LOANS OF For the purpose of achieving income, each Fund may lend its port-
PORTFOLIO folio securities to brokers, dealers, and other financial institu-
SECURITIES tions, provided:
(i) the loan is secured continuously by collateral consisting
of U.S. Government securities, cash or cash equivalents
(negotiable certificates of deposit, bankers' acceptances
or letters of credit) maintained on a daily mark-to-market
basis in an amount at least equal to the current market
value of the securities loaned;
(ii) the Fund may at any time call the loan and obtain the re-
turn of the securities loaned;
(iii) the Fund will receive any interest or dividends paid on
the loaned securities; and
(iv) the aggregate market value of securities loaned will not
at any time exceed the Fund's limitation on lending its
portfolio securities.
Each Fund's performance will continue to reflect changes in the
value of the securities loaned and will also reflect the receipt
of either interest, through investment of cash collateral by the
Fund in permissible investments, or a fee, if the collateral is
U.S. Government securities. Securities lending involves the risk
of loss of rights in the collateral or delay in recovery of the
collateral should the borrower fail to return the security loaned
or become insolvent. The Funds may pay lending fees to the party
arranging the loan.
SHORT SALES Each Fund may from time to time make short sales involving securi-
ties held in the Fund's portfolio or which the Fund has the right
to acquire without the payment of further consideration. For these
purposes, a Fund may also hold or have the right to acquire secu-
rities which, without the payment of any further consideration,
are convertible into or exchangeable for the securities sold
short. Short sales expose the Fund to the risk that it will be re-
quired to acquire, convert or exchange securities to cover its
short position at a time when the securities sold short have ap-
preciated in value, thus resulting in a loss to the Fund.
WHEN- Each Fund may purchase securities which it is eligible to purchase
ISSUED, on a when-issued basis, may purchase and sell such securities for
DELAYED delayed delivery and may make contracts to purchase such securi-
DELIVERY ties for a fixed price at a future date beyond normal settlement
AND time (forward commitments). When-issued transactions, delayed de-
FORWARD livery purchases and forward commitments involve a risk of loss if
COMMITMENT the value of the securities declines prior to the settlement date,
TRANSACTIONSwhich risk is in addition to the risk of decline in the value of
the Fund's other assets. Typically, no income accrues on securi-
ties a Fund has committed to purchase prior to the time delivery
of the securities is made, although a Fund may earn income on se-
curities it has segregated.
REPURCHASE For the purposes of maintaining liquidity and achieving income,
AGREEMENTS each Fund may enter into repurchase agreements, which entail the
purchase of a portfolio-eligible security from a bank or broker-
dealer that agrees to repurchase the security at the Fund's cost
plus interest within a specified time (normally one day). If the
party agreeing to repurchase should default, as a result of bank-
ruptcy or otherwise, the Fund will seek to sell the securities
which it holds, which action could involve procedural costs or de-
lays in addition to a loss on the securities if their value should
fall below their repurchase price. Those Funds whose investment
objectives do not include the earning of income will invest in re-
purchase agreements only as a cash management technique with re-
spect to that portion of the portfolio maintained in cash. Each
Fund will limit its investment in repurchase agreements maturing
in more than seven days consistent with the Fund's policy on in-
vestment in illiquid securities.
REVERSE A reverse repurchase agreement may for some purposes be considered
REPURCHASE borrowing that involves the sale of a security by a Fund and its
AGREEMENTS agreement to repurchase the instrument at a specified time and
AND OTHER price. The Fund will segregate assets determined to be liquid by
BORROWINGS the Adviser or Portfolio Manager in accordance with procedures es-
tablished by the Board
36 PIMCO Funds: Multi-Manager Series
<PAGE>
of Trustees to cover its obligations under reverse repurchase
agreements. Reverse repurchase agreements will be subject to the
Funds' limitations on borrowings. A Fund also may borrow money for
investment purposes subject to any policies of the Fund currently
described in this Prospectus or in the Statement of Additional In-
formation. Such a practice will result in leveraging of a Fund's
assets. Leverage will tend to exaggerate the effect on net asset
value of any increase or decrease in the value of a Fund's portfo-
lio and may cause a Fund to liquidate portfolio positions when it
would not be advantageous to do so.
PORTFOLIO The length of time a Fund has held a particular security is not
TURNOVER generally a consideration in investment decisions. The investment
policies of a Fund may lead to frequent changes in the Fund's in-
vestments, particularly in periods of volatile market movements. A
change in the securities held by a Fund is known as "portfolio
turnover." High portfolio turnover (e.g., over 100%) involves cor-
respondingly greater expenses to a Fund, including brokerage com-
missions or dealer mark-ups and other transaction costs on the
sale of securities and reinvestments in other securities. See
"Management of the Trust--Portfolio Transactions." Such sales may
result in realization of taxable capital gains (including short-
term capital gains which are generally taxed at ordinary income
tax rates). See "Taxes." Portfolio turnover rates for fiscal 1998
and 1997 for the Renaissance, Growth, Target, Opportunity, Inter-
national, Innovation and Precious Metals Funds and for fiscal 1997
for the remaining Funds (other than the Tax-Efficient Equity and
Value 25 Funds) are set forth under "Financial Highlights." Port-
folio turnover rates for the remaining Funds for fiscal 1997 were
as follows: Balanced--199%; Equity Income--45%; Value--71%; Capi-
tal Appreciation--87%; Mid-Cap Growth--82%; and Small-Cap Value--
48%. The annual portfolio turnover rate for the Tax-Efficient Eq-
uity Fund is expected to be less than 40%. The annual portfolio
turnover rate for the Value 25 Fund is expected to be less than
150%.
ILLIQUID Each Fund may invest in securities that are illiquid so long as no
SECURITIES more than 15% of the value of the Fund's net assets (taken at mar-
ket value at the time of investment) would be invested in such se-
curities. Certain illiquid securities may require pricing at fair
value as determined in good faith under the supervision of the
Board of Trustees. A Portfolio Manager may be subject to signifi-
cant delays in disposing of illiquid securities, and transactions
in illiquid securities may entail registration expenses and other
transaction costs that are higher than those for transactions in
liquid securities.
The term "illiquid securities" for this purpose means securi-
ties that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which a Fund has
valued the securities. Illiquid securities are considered to in-
clude, among other things, written over-the-counter options, secu-
rities or other liquid assets being used as cover for such op-
tions, repurchase agreements with maturities in excess of seven
days, certain loan participation interests, fixed time deposits
which are not subject to prepayment or provide for withdrawal pen-
alties upon prepayment (other than overnight deposits), securities
that are subject to legal or contractual restrictions on resale
(such as privately placed debt securities), and other securities
which legally or in the Adviser's or a Portfolio Manager's opinion
may be deemed illiquid (not including securities issued pursuant
to Rule 144A under the Securities Act of 1933 and certain commer-
cial paper that the Adviser or a Portfolio Manager has determined
to be liquid under procedures approved by the Board of
Trustees).
INVESTMENT
IN
INVESTMENT
COMPANIES The International Fund may invest up to 10% of its assets in secu-
rities of other investment companies, such as closed-end manage-
ment investment companies, or in pooled accounts or other invest-
ment vehicles which invest in foreign markets. As a shareholder of
an investment company, the International Fund may indirectly bear
service and other fees which are in addition to the fees the Fund
pays its service providers.
CREDIT AND All fixed income securities are subject to market risk and credit
MARKET RISK risk. Market risk relates to market-induced changes in a
OF security's value, usually as a result of changes in interest
FIXEDINCOME rates. The value of a Fund's investments in fixed income securi-
SECURITIES ties will change as the general level of interest rates fluctuate.
During periods of falling interest rates, the value of a Fund's
fixed income securities generally rise. Conversely, during periods
of rising interest rates, the value of a Fund's fixed income secu-
rities generally decline. Credit risk relates to the ability of
the issuer to make payments of principal and interest.
November 1, 1998 Prospectus 37
<PAGE>
SERVICE Many of the services provided to the Funds depend on the smooth
SYSTEMS -- functioning of computer systems. Many systems in use today cannot
YEAR 2000 distinguish between the year 1900 and the year 2000. Should any of
PROBLEM the service systems fail to process information properly, that
could have an adverse impact on the Funds' operations and services
provided to shareholders. The Adviser, Distributor, Shareholder
Servicing and Transfer Agent, Custodian, and certain other service
providers to the Funds have reported that each is working toward
mitigating the risks associated with the so-called "year 2000
problem." However, there can be no assurance that the problem will
be corrected in all respects and that the Funds' operations and
services provided to shareholders will not be adversely affected,
nor can there be any assurance that the year 2000 problem will not
have an adverse effect on the entities whose securities are held
by the Funds or on domestic or global equity markets or economies,
generally.
"FUNDAMENTAL"
POLICIES
The investment objective of each of the Renaissance, Tax-Efficient
Equity, Growth, Value 25, Target, Opportunity, International, In-
novation and Precious Metals Funds described in this Prospectus
may be changed by the Board of Trustees without shareholder ap-
proval. The investment objective of each other Fund is fundamental
and may not be changed without shareholder approval by vote of a
majority of the outstanding shares of that Fund. If there is a
change in a Fund's investment objective, including a change ap-
proved by shareholder vote, shareholders should consider whether
the Fund remains an appropriate investment in light of their then
current financial position and needs.
Performance Information
From time to time the Trust may make available certain information
about the performance of the Class A, Class B and Class C shares
of some or all of the Funds. Information about a Fund's perfor-
mance is based on that Fund's (or its predecessor's) record to a
recent date and is not intended to indicate future performance.
Performance information is computed separately for each Fund's
Class A, Class B and Class C shares in accordance with the formu-
las described below. Because Class B and Class C shares bear the
expense of the distribution fee attending the deferred sales
charge (Class B) and asset based sales charge (Class C) alterna-
tives and certain other expenses, it is expected that, under nor-
mal circumstances, the level of performance of a Fund's Class B
and Class C shares will be lower than that of the Fund's Class A
shares, although an investment in Class B or Class C shares is not
reduced by the front-end sales charge generally applicable to an
investment in Class A shares.
The total return of Class A, Class B and/or Class C shares of
all Funds may be included in advertisements or other written mate-
rial. When a Fund's total return is advertised with respect to its
Class A, Class B and/or Class C shares, it will be calculated for
the past year, the past five years, and the past ten years (or if
the Fund has been offered for a period shorter than one, five or
ten years, that period will be substituted) since the establish-
ment of the Fund or its predecessor series of PIMCO Advisors
Funds, as more fully described in the Statement of Additional In-
formation. For periods prior to the initial offering date of a
particular class of shares, total return presentations for the
class will be based on the historical performance of an older
class of the Fund (if any) restated, as necessary, to reflect the
current sales charges (if any) associated with the newer class.
The older class to be used in each case is set forth in the State-
ment of Additional Information. For these purposes, the perfor-
mance of the older class will also be restated to reflect any dif-
ferent operating expenses (such as different administrative fees
and/or 12b-1/servicing fee charges) associated with the newer
class. In certain cases, such a restatement will result in perfor-
mance of the newer class which is higher than if the performance
of the older class were not restated to reflect the different op-
erating expenses of the newer class. In such cases, the Trust's
advertisements will also, to the extent appropriate, show the
lower performance figure reflecting the actual operating expenses
incurred by the older class for periods prior to the initial of-
fering date of the newer class. Total return for each class is
measured by comparing the value of an investment in the Fund at
the beginning of the relevant period (in the case of Class A
shares, giving effect to the maximum initial sales charge) to the
redemption value of the investment in the Fund at the end of the
period (assuming immediate reinvestment of
38 PIMCO Funds: Multi-Manager Series
<PAGE>
any dividends or capital gains distributions at net asset value
and giving effect to the deduction of the maximum CDSC which would
be payable). Total return may be advertised using alternative
methods that reflect all elements of return, but that may be ad-
justed to reflect the cumulative impact of alternative fee and ex-
pense structures, such as the currently effective advisory and ad-
ministrative fees for the Funds.
Quotations of yield for a Fund or class will be based on the
investment income per share (as defined by the Securities and Ex-
change Commission) during a particular 30-day (or one-month) pe-
riod (including dividends and interest), less expenses accrued
during the period ("net investment income"), and will be computed
by dividing net investment income by the maximum public offering
price per share on the last day of the period.
The Funds may also provide current distribution information to
their shareholders in shareholder reports or other shareholder
communications, or in certain types of sales literature provided
to prospective investors. Current distribution information for a
particular class of a Fund will be based on distributions for a
specified period (i.e., total dividends from net investment in-
come), divided by the relevant class net asset value per share on
the last day of the period and annualized. The rate of current
distributions does not reflect deductions for unrealized losses
from transactions in derivative instruments such as options and
futures, which may reduce total return. Current distribution rates
differ from standardized yield rates in that they represent what a
class of a Fund has declared and paid to shareholders as of the
end of a specified period rather than the Fund's actual net in-
vestment income for that period.
The Adviser and each Portfolio Manager may also report to
shareholders or to the public in advertisements concerning its
performance as adviser to clients other than the Funds, and on its
comparative performance or standing in relation to other money
managers. Such comparative information may be compiled or provided
by independent ratings services or by news organizations. Any per-
formance information, whether related to the Funds, the Adviser or
the Portfolio Managers, should be considered in light of the
Funds' investment objectives and policies, characteristics and
quality of the Funds' portfolios, and the market conditions during
the time period indicated, and should not be considered to be rep-
resentative of what may be achieved in the future.
Investment results of the Funds will fluctuate over time, and
any representation of the Funds' total return or yield for any
prior period should not be considered as a representation of what
an investor's total return or yield may be in any future period.
How to Buy Shares
Class A, Class B (except the Opportunity Fund) and Class C shares
of each Fund of the Trust are continuously offered through the
Trust's principal underwriter, PIMCO Funds Distributors LLC (the
"Distributor"), and through other firms which have dealer agree-
ments with the Distributor ("participating brokers") or which have
agreed to act as introducing brokers for the Distributor ("intro-
ducing brokers"). Except to the extent described under "Restric-
tions on Sales of and Exchanges for Shares of the Opportunity
Fund" below, the Opportunity Fund is closed to new investors. The
Opportunity Fund does not offer Class B shares.
There are two ways to purchase Class A, Class B or Class C
shares: either 1) through your dealer or broker which has a dealer
agreement with the Distributor; or 2) directly by mailing a PIMCO
Funds account application (an "account application") with payment,
as described below under the heading Direct Investment, to the
Distributor (if no dealer is named in the account application, the
Distributor may act as dealer).
Each Fund (except the Opportunity Fund) currently offers and
sells three classes of shares in this Prospectus (Class A, Class B
and Class C). The Opportunity Fund does not offer Class B shares.
Shares may be purchased at a price equal to their net asset value
per share next determined after receipt of an order, plus a sales
charge which, at the election of the purchaser, may be imposed ei-
ther (i) at the time of the purchase in the case of Class A shares
(the "initial sales charge alternative"), (ii) on a contingent de-
ferred basis in the case of Class B shares (the "deferred sales
charge alternative"), or (iii) by the deduction of an ongoing as-
set based sales charge in the case of Class C shares (the
November 1, 1998 Prospectus 39
<PAGE>
"asset based sales charge alternative"). In certain circumstances,
Class A and Class C shares are also subject to a CDSC. See "Alter-
native Purchase Arrangements." Purchase payments for Class B and
Class C shares are fully invested at the net asset value next de-
termined after acceptance of the trade. Purchase payments for
Class A shares, less the applicable sales charge, are invested at
the net asset value next determined after acceptance of the trade.
All purchase orders received by the Distributor prior to the
close of regular trading (normally 4:00 p.m., Eastern time) on the
New York Stock Exchange (the "Exchange"), on a regular business
day, are processed at that day's offering price. However, orders
received by the Distributor from dealers or brokers after the of-
fering price is determined that day will receive such offering
price if the orders were received by the dealer or broker from its
customer prior to such determination and were transmitted to and
received by the Distributor prior to its close of business that
day (normally 5:00 p.m., Eastern time) or, in the case of certain
retirement plans, received by the Distributor prior to 9:30 a.m.,
Eastern time on the next business day. Purchase orders received on
other than a regular business day will be executed on the next
succeeding regular business day. The Distributor, in its sole dis-
cretion, may accept or reject any order for purchase of Fund
shares. The sale of shares will be suspended during any period in
which the Exchange is closed for other than weekends or holidays,
or if permitted by the rules of the Securities and Exchange Com-
mission, when trading on the Exchange is restricted or during an
emergency which makes it impracticable for the Funds to dispose of
their securities or to determine fairly the value of their net as-
sets, or during any other period as permitted by the Securities
and Exchange Commission for the protection of investors.
Except for purchases through the PIMCO Funds Auto-Invest plan,
the PIMCO Funds Auto-Exchange plan, investments pursuant to the
Uniform Gifts to Minors Act, and tax-qualified and wrap programs
referred to below under "Tax-Qualified Retirement Plans" and
"Sales at Net Asset Value," the minimum initial investment in
Class A, Class B or Class C shares of any Fund of the Trust or any
series of PIMCO Funds: Pacific Investment Management Series is
$2,500, and the minimum additional investment is $100 per Fund.
For information about dealer commissions, see "Alternative Pur-
chase Arrangements" below. Persons selling Fund shares may receive
different compensation for selling Class A, Class B or Class C
shares. Normally, Fund shares purchased through participating bro-
kers are held in the investor's account with that broker. No share
certificates will be issued unless specifically requested in writ-
ing by an investor or broker-dealer.
DIRECT Investors who wish to invest in Class A, Class B or Class C shares
INVESTMENT of the Trust directly, rather than through a participating broker,
may do so by opening an account with the Distributor. To open an
account, an investor should complete the account application. All
shareholders who open direct accounts with the Distributor will
receive from the Distributor individual confirmations of each pur-
chase, redemption, dividend reinvestment, exchange or transfer of
Trust shares, including the total number of Trust shares owned as
of the confirmation date, except that purchases which result from
the reinvestment of daily-accrued dividends and/or distributions
will be confirmed once each calendar quarter. See "Distributions"
below. Information regarding direct investment or any other fea-
tures or plans offered by the Trust may be obtained by calling the
Distributor at 1-800-426-0107 or by calling your broker.
PURCHASE BY Investors who wish to invest directly may send a check payable to
MAIL PIMCO Funds Distributors LLC, along with a completed application
form to:
PIMCO Funds Distributors LLC
P.O. Box 5866
Denver, CO 80217-5866
Purchases are accepted subject to collection of checks at full
value and conversion into federal funds. Payment by a check drawn
on any member of the Federal Reserve System can normally be con-
verted into federal funds within two business days after receipt
of the check. Checks drawn on a non-member bank may take up to 15
days to convert
40 PIMCO Funds: Multi-Manager Series
<PAGE>
into federal funds. In all cases, the purchase price is based on
the net asset value next determined after the purchase order and
check are accepted, even though the check may not yet have been
converted into federal funds.
SUBSEQUENT Subsequent purchases of Class A, Class B or Class C shares can be
PURCHASES made as indicated above by mailing a check with a letter describ-
OF SHARES ing the investment or with the additional investment portion of a
confirmation statement. Except for subsequent purchases through
the PIMCO Funds Auto-Invest plan, the PIMCO Funds Auto-Exchange
plan, tax-qualified programs and PIMCO Funds Fund Link referred to
below, and except during periods when an Automatic Withdrawal Plan
is in effect, the minimum subsequent purchase is $100 in any Fund.
All payments should be made payable to PIMCO Funds Distributors
LLC and should clearly indicate the shareholder's account number.
Checks should be mailed to the address above under "Purchase by
Mail."
TAX- The Distributor makes available retirement plan services and docu-
QUALIFIED ments for Individual Retirement Accounts (IRAs), including Roth
RETIREMENT IRAs, for which First National Bank of Boston (see "Change in
PLANS Transfer Agent" below) serves as trustee and for IRA Accounts es-
tablished with Form 5305-SIMPLE under the Internal Revenue Code of
1986, as amended (the "Code"). These accounts include Simplified
Employee Pension Plan (SEP) and Salary Reduction Simplified Em-
ployee Pension Plan (SAR/SEP) IRA accounts and prototype docu-
ments. In addition, prototype documents are available for estab-
lishing 403(b)(7) custodial accounts with First National Bank of
Boston as custodian. This type of plan is available to employees
of certain non-profit organizations.
The Distributor also makes available prototype documents for
establishing Money Purchase and/or Profit Sharing Plans and 401(k)
Retirement Savings Plans. These prototype plans require certain
minimum per participant account sizes and certain minimum aggre-
gate investments in the Trust, but are not subject to the small
account fees described below that will apply to other plans. In-
vestors should call the Distributor at 1-800-426-0107 for further
information about these plans and should consult with their own
tax advisers before establishing any retirement plan. Investors
who maintain their accounts with participating brokers should con-
sult their broker about similar types of accounts that may be of-
fered through the broker. The minimum initial investment for all
tax-qualified plans (except for employer-sponsored plans, SIMPLE
IRAs, SEPs and SAR/SEPs) is $1,000 per Fund and the minimum subse-
quent investment is $100. The minimum initial investment for em-
ployer-sponsored plans, SIMPLE IRAs, SEPs and SAR/SEPs and the
minimum subsequent investment per Fund for all such plans is
$50.
PIMCO FUNDS The PIMCO Funds Auto-Invest plan provides for periodic investments
AUTO-INVEST into the shareholder's account with the Trust by means of auto-
matic transfers of a designated amount from the shareholder's bank
account. The minimum investment for eligibility in the PIMCO Funds
Auto-Invest plan is $1,000 per Fund. Investments may be made
monthly or quarterly, and may be in any amount subject to a mini-
mum of $50 per month for each Fund in which shares are purchased
through the plan. Further information regarding the PIMCO Funds
Auto-Invest plan is available from the Distributor or participat-
ing brokers. You may enroll by completing the appropriate section
on the account application, or you may obtain an Auto-Invest ap-
plication by calling the Distributor or your broker.
PIMCO FUNDS The PIMCO Funds Auto-Exchange plan establishes regular, periodic
AUTO- exchanges from one Fund to another Fund or to another series of
EXCHANGE the Trust or PIMCO Funds: Pacific Investment Management Series
which offers Class A, Class B or Class C shares. The plan provides
for regular investments into a shareholder's account in a specific
Fund by means of automatic exchanges of a designated amount from
another Fund account of the same class of shares and with identi-
cal account registration. Exchanges for shares of the Opportunity
Fund are currently restricted to the extent provided under "Re-
strictions on Sales of and Exchanges for Shares of the Opportunity
Fund" below.
Exchanges may be made monthly or quarterly, and may be in any
amount subject to a minimum of $1,000 to open a new Fund account
and of $50 for any existing Fund account for which shares are pur-
chased through the plan.
November 1, 1998 Prospectus 41
<PAGE>
Further information regarding the PIMCO Funds Auto-Exchange plan
is available from the Distributor at 1-800-426-0107 or participat-
ing brokers. You may enroll by completing an application which may
be obtained from the Distributor or by telephone request at 1-800-
426-0107. For more information on exchanges, see "Exchange Privi-
lege."
PIMCO FUNDS PIMCO Funds Fund Link ("Fund Link") connects your Fund account
FUND LINK with a bank account. Fund Link may be used for subsequent pur-
chases and for redemptions and other transactions described under
"How to Redeem." Purchase transactions are effected by electronic
funds transfers from the shareholder's account at a U.S. bank or
other financial institution that is an Automated Clearing House
("ACH") member. Investors may use Fund Link to make subsequent
purchases of shares in amounts from $50 to $10,000. To initiate
such purchases, call 1-800-426-0107. All such calls will be re-
corded. Fund Link is normally established within 45 days of re-
ceipt of a Fund Link application by Shareholder Services, Inc.
(the "Transfer Agent"). The minimum investment by Fund Link is $50
per Fund. Shares will be purchased on the regular business day the
Distributor receives the funds through the ACH system, provided
the funds are received before the close of regular trading on the
Exchange. If the funds are received after the close of regular
trading, the shares will be purchased on the next regular business
day.
Fund Link privileges must be requested on the account applica-
tion. To establish Fund Link on an existing account, complete a
Fund Link application, which is available from the Distributor or
your broker, with signatures guaranteed from all shareholders of
record for the account. See "Signature Guarantee" below. Such
privileges apply to each shareholder of record for the account un-
less and until the Distributor receives written instructions from
a shareholder of record canceling such privileges. Changes of bank
account information must be made by completing a new Fund Link ap-
plication signed by all owners of record of the account, with all
signatures guaranteed. The Distributor, the Transfer Agent and the
Fund may rely on any telephone instructions believed to be genuine
and will not be responsible to shareholders for any damage, loss
or expenses arising out of such instructions. The Fund reserves
the right to amend, suspend or discontinue Fund Link privileges at
any time without prior notice. Fund Link does not apply to shares
held in broker "street name" accounts.
RESTRICTIONS ON SALES OF AND EXCHANGES FOR SHARES OF THE OPPORTU-
NITY FUND Shares of the Opportunity Fund are normally not avail-
able for purchase by new investors in the Fund. However, in 1997,
the Opportunity Fund began offering Class A and Class C shares to
new investors (the "Offering") on a limited basis. With the excep-
tion of certain benefit plans not currently eligible to acquire
Opportunity Fund shares, all investors eligible to purchase shares
of other Funds may participate in the Offering. Existing Class A
shareholders and Class C shareholders of other series of the Trust
or series of PIMCO Funds: Pacific Investment Management Series may
purchase shares or acquire Opportunity Fund shares during the Of-
fering by exchanging their Class A or Class C shares for the same
class of Opportunity Fund shares in the manner described under
"Exchange Privilege" below. The Offering will continue in effect
until it is modified or terminated at the sole discretion of the
Trust. Upon termination of the Offering, the Opportunity Fund will
again be closed to new investors. For additional information re-
garding the terms of the Offering, please contact the Distributor
(at 1-800-426-0107) or your broker.
Except to the extent described above, shares of the Opportunity
Fund are not available for purchase by new investors in the Fund.
The following categories of existing shareholders will still be
permitted to purchase additional shares of the Fund upon termina-
tion of the Offering: (i) shareholders who owned shares of the Op-
portunity Fund on December 31, 1992 will be permitted to purchase
additional shares of the Fund for as long as they continue to own
shares of the Fund; (ii) participants in any self-directed quali-
fied benefit plan (for example, 401(k) plans, 403(b) custodial ac-
counts and Keogh plans, but not IRAs or SEP IRAs) that owned Op-
portunity Fund shares on March 1, 1993 for any single plan partic-
ipant will be eligible to direct the purchase of the Fund's shares
by their plan account for so long as the plan continues to own
shares of the Fund for any single plan participant; and (iii)
shareholders who acquired shares during the Offering will be per-
mitted to purchase additional shares of the Fund for as long as
they
42 PIMCO Funds: Multi-Manager Series
<PAGE>
continue to own shares of the Fund. Upon termination of the Offer-
ing, in the event a shareholder redeems all of his or her shares
of the Opportunity Fund, or all participants in a self-directed
qualified benefit plan described above redeem their shares of the
Opportunity Fund, such shareholder, or the participants in such
plan, will no longer be eligible to purchase shares of the Oppor-
tunity Fund. The Opportunity Fund does not offer Class B shares to
new or existing investors.
Except pursuant to the Offering, shareholders of other Funds
are not permitted to exchange any of their shares for Opportunity
Fund shares unless the shareholders are independently eligible to
purchase Opportunity Fund shares because they already owned such
shares of the Fund on December 31, 1992 (March 1, 1993, in the
case of the self-directed qualified benefit plans described above)
or acquired such shares during the Offering.
The Trust reserves the right at any time to modify these re-
strictions, including the suspension of all sales of Opportunity
Fund shares or the lifting of restrictions on different classes of
investors and/or transactions.
SIGNATURE When a signature guarantee is called for, the shareholder should
GUARANTEE have "Signature Guaranteed" stamped under his signature and guar-
anteed by any of the following entities: U.S. banks, foreign banks
having a U.S. correspondent bank, credit unions, savings associa-
tions, U.S. registered dealers and brokers, municipal securities
dealers and brokers, government securities dealers and brokers,
national securities exchanges, registered securities associations
and clearing agencies (each an "Eligible Guarantor Institution").
The Distributor reserves the right to reject any signature guaran-
tee pursuant to its written signature guarantee standards or pro-
cedures, which may be revised in the future to permit it to reject
signature guarantees from Eligible Guarantor Institutions that do
not, based on credit guidelines, satisfy such written standards or
procedures. The Trust may change the signature guarantee require-
ments from time to time upon notice to shareholders, which may be
given by means of a new or supplemented Prospectus.
ACCOUNT Changes in registration or account privileges may be made in writ-
REGISTRATIONing to the Transfer Agent. Signature guarantees may be required.
CHANGES See "Signature Guarantee" above. All correspondence must include
the account number and must be sent to:
PIMCO Funds Distributors LLC
P.O. Box 5866
Denver, CO 80217-5866
SMALL Because of the disproportionately high costs of servicing accounts
ACCOUNT FEE with low balances, a fee at an annual rate of $16, paid to PIMCO
Advisors, the Funds' administrator, will automatically be deducted
from direct accounts with balances falling below a minimum level.
The valuation of accounts and the deduction are expected to take
place during the last five business days of each calendar quarter.
The fee will be deducted in quarterly installments from accounts
with balances below $2,500 except for Uniform Gift to Minors, IRA,
Roth IRA and Auto-Invest accounts, for which the limit is $1,000.
Effective April 1, 1999, except for prototype plans described
above, the fee will apply to employer-sponsored retirement plan
accounts, Money Purchase and/or Profit Sharing plans, 401(k)
plans, 403(b)(7) custodial accounts, SIMPLE IRAs, SEPs and
SAR/SEPs. (A separate custodial fee may apply to IRAs, Roth IRAs
and other retirement accounts.) No fee will be charged on any ac-
count of a shareholder if the aggregate value of all of the share-
holder's accounts is at least $50,000. No small account fee will
be charged to employee and employee-related accounts of PIMCO Ad-
visors and/or its affiliates.
MINIMUM Due to the relatively high cost to the Funds of maintaining small
ACCOUNT accounts, you are asked to maintain an account balance of at least
SIZE the amount necessary to open the type of account involved. If your
balance is below such minimum for three months or longer, the
Funds' administrator shall have the right (except in the case of
employer-sponsored retirement accounts) to close your account af-
ter giving you 60 days in which to increase your balance. Your ac-
count
November 1, 1998 Prospectus 43
<PAGE>
will not be liquidated if the reduction in size is due solely to
market decline in the value of your Fund shares or if the aggre-
gate value of all your accounts in PIMCO Funds exceeds $50,000.
CHANGE IN The Trust expects to change its transfer agent for its Class A, B
TRANSFER and C shares to First Data Investor Services Group, Inc. Share-
AGENT holders will continue to receive all of the services described in
this Prospectus and should continue to follow the various proce-
dures set forth in this Prospectus, with the exception of the ad-
dress changes described below.
There will be no changes in the toll-free 1-800 telephone num-
bers set forth in this Prospectus. However, mailing addresses will
change as follows:
Old Address New Address
----------- -----------
Shareholder Services,
Inc. First Data Investor Services Group, Inc.
P.O. Box 5866 P.O. Box 9688
Denver, CO 80217 Providence, RI 02940-0926
PIMCO Funds Distributors
LLC PIMCO Funds Distributors LLC
P.O. Box 5866 P.O. Box 9688
Denver, CO 80217-5866 Providence, RI 02940-0926
Also, at the time of the change of Transfer Agent, the
custodian/trustee for the PIMCO Funds prototype retirement plans,
403(b) custodial accounts, IRAs, Roth IRAs, SIMPLE IRAs, SEPs and
SAR/SEPs will be changed from First National Bank of Boston to
Boston Safe Deposit & Trust Company.
Alternative Purchase Arrangements
The Trust offers investors three classes of shares in this Pro-
spectus (Class A, Class B and Class C) which bear sales charges in
different forms and amounts and which bear different levels of ex-
penses. Through separate prospectuses, certain of the Funds cur-
rently offer up to three additional classes of shares, Class D,
Institutional Class and Administrative Class shares. Class D
shares are offered through financial intermediaries. Institutional
Class and Administrative Class shares are offered to pension and
profit sharing plans, employee benefit trusts, endowments, founda-
tions, corporations and other high net worth individuals. Class D,
Institutional Class and Administrative Class shares are sold with-
out a sales charge and have different expenses than Class A, Class
B and Class C shares. As a result of lower sales charges and/or
operating expenses, Class D, Institutional Class and Administra-
tive Class shares are generally expected to achieve higher invest-
ment returns than Class A, Class B or Class C shares. To obtain
more information about the other classes of shares, please call
the Distributor at 1-800-927-4648 (for Institutional and Adminis-
trative Classes) or 1-888-87-PIMCO (for Class D).
The alternative purchase arrangements offered in this Prospec-
tus are designed to enable a retail investor to choose the method
of purchasing Fund shares that is most beneficial to the investor
based on all factors to be considered, which include: the amount
and intended length of the investment; the particular Fund; and
whether the investor intends to exchange shares for shares of
other Funds. Generally, when making an investment decision, in-
vestors should consider the anticipated life of an intended in-
vestment in the Funds, the accumulated distribution and servicing
fees plus CDSCs on Class B or Class C shares, the initial sales
charge plus accumulated servicing fees on Class A shares (plus a
CDSC in certain circumstances), the possibility that the antici-
pated higher return on Class A shares due to the lower ongoing
charges will offset the initial sales charge paid on such shares,
the automatic conversion of Class B shares to Class A shares and
the difference in the CDSCs applicable to Class A, Class B and
Class C shares.
CLASS A The initial sales charge alternative (Class A) might be
preferred by investors purchasing shares of sufficient aggregate
value to qualify for reductions in the initial sales charge appli-
cable to such shares. Similar reductions are not available on the
contingent deferred sales charge alternative (Class B) or the as-
set based sales charge alternative
44 PIMCO Funds: Multi-Manager Series
<PAGE>
(Class C). Class A shares are subject to a servicing fee but are
not subject to a distribution fee and, accordingly, such shares
are expected to pay correspondingly higher dividends on a per
share basis. However, because initial sales charges are deducted
at the time of purchase, not all of the purchase payment for Class
A shares is invested initially. Class B and Class C shares might
be preferable to investors who wish to have all purchase payments
invested initially, although remaining subject to higher distribu-
tion and servicing fees and, for certain periods, being subject to
a CDSC. An investor who qualifies for an elimination of the Class
A initial sales charge should also consider whether he or she an-
ticipates redeeming shares in a time period which will subject
such shares to a CDSC as described below. See "Initial Sales
Charge Alternative--Class A Shares--Class A Deferred Sales Charge"
below.
CLASS B Class B shares might be preferred by investors who intend
to invest in the Funds for longer periods and who do not intend to
purchase shares of sufficient aggregate value to qualify for sales
charge reductions applicable to Class A shares. Both Class B and
Class C shares can be purchased at net asset value without an ini-
tial sales charge. However, unlike Class C shares, Class B shares
convert into Class A shares after the shares have been held for
seven years. After the conversion takes place, the shares will no
longer be subject to a CDSC, and will be subject to the servicing
fees charged for Class A shares which are lower than the distribu-
tion and servicing fees charged on either Class B or Class C
shares. See "Deferred Sales Charge Alternative--Class B Shares"
below. Class B shares are not available for purchase by employer
sponsored retirement plans. The Opportunity Fund does not offer
Class B shares.
CLASS C Class C shares might be preferred by investors who intend
to purchase shares which are not of sufficient aggregate value to
qualify for Class A sales charges of 1% or less and who wish to
have all purchase payments invested initially. Class C shares are
preferable to Class B shares for investors who intend to maintain
their investment for intermediate periods and therefore may also
be preferable for investors who are unsure of the intended length
of their investment. Unlike Class B shares, Class C shares are not
subject to a CDSC after they have been held for one year and are
subject to only a 1% CDSC during the first year. However, because
Class C shares do not convert into Class A shares, Class B shares
are preferable to Class C shares for investors who intend to main-
tain their investment in the Funds for long periods. See "Asset
Based Sales Charge Alternative--Class C Shares" below.
In determining which class of shares to purchase, an investor
should always consider whether any waiver or reduction of a sales
charge or a CDSC is available. See generally "Initial Sales Charge
Alternative--Class A Shares" and "Waiver of Contingent Deferred
Sales Charges" below.
The maximum single purchase of Class B shares of the Trust and
series of PIMCO Funds: Pacific Investment Management Series ac-
cepted is $249,999. The maximum single purchase of Class C shares
of the Trust and series of PIMCO Funds: Pacific Investment Manage-
ment Series accepted is $999,999. The Funds may refuse any order
to purchase shares.
For a description of the Distribution and Servicing Plans and
distribution and servicing fees payable thereunder with respect to
Class A, Class B and Class C shares, see "Distributor and Distri-
bution and Servicing Plans" below.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES The CDSC applicable to
Class A and Class C shares is currently waived for (i) any partial
or complete redemption in connection with (a) required minimum
distributions to IRA account owners or beneficiaries who are age
70 1/2 or older or (b) distributions to participants in employer-
sponsored retirement plans upon attaining age 59 1/2 or on account
of death or disability;* (ii) any partial or complete redemption
in
------
* This subsection (i) shall read as follows until December 31,
1998: "(i) any partial or complete redemption in connection with
any of the following distributions from a retirement plan,
including a 403(b)(7) custodial account or an IRA (with the
exception of a Roth IRA), that qualify for exemption from the
additional tax on early distributions under Section 72(t) of the
Code: (a) upon attaining age 59 1/2, (b) on account of death or
disability, (c) as part of a series of substantially equal
periodic payments, (d) in the case of an IRA (with the exception
of a Roth IRA), attributable to qualified higher education
expenses or to qualified first-time home-buyer expenses or (e)
in the case of a retirement plan other than an IRA, upon
separation from service after attaining age 55;"
November 1, 1998 Prospectus 45
<PAGE>
connection with a qualifying loan or hardship withdrawal from an
employer sponsored retirement plan; (iii) any complete redemption
in connection with a distribution from a qualified employer re-
tirement plan in connection with termination of employment or ter-
mination of the employer's plan and the transfer to another em-
ployer's plan or to an IRA (with the exception of a Roth IRA);
(iv) any partial or complete redemption following death or dis-
ability (as defined in the Code) of a shareholder (including one
who owns the shares as joint tenant with his or her spouse) from
an account in which the deceased or disabled is named, provided
the redemption is requested within one year of the death or ini-
tial determination of disability; (v) any redemption resulting
from a return of an excess contribution to a qualified employer
retirement plan or an IRA (with the exception of a Roth IRA); (vi)
up to 10% per year of the value of an account which (a) has the
value of at least $10,000 at the start of such year and (b) is
subject to an Automatic Withdrawal Plan; (vii) redemptions by
Trustees, officers and employees of the Trust, and by directors,
officers and employees of the Distributor and the Adviser; (viii)
redemptions effected pursuant to a Fund's right to involuntarily
redeem a shareholder's account if the aggregate net asset value of
shares held in such shareholder's account is less than a minimum
account size specified in such Fund's prospectus; (ix) involuntary
redemptions caused by operation of law; (x) redemption of shares
of any Fund that is combined with another Fund, investment compa-
ny, or personal holding company by virtue of a merger, acquisition
or other similar reorganization transaction; (xi) redemptions by a
shareholder who is a participant making periodic purchases of not
less than $50 through certain employer sponsored savings plans
that are clients of a broker-dealer with which the Distributor has
an agreement with respect to such purchases; (xii) redemptions ef-
fected by trustees or other fiduciaries who have purchased shares
for employer sponsored plans, the trustee, administrator, fiducia-
ry, broker, trust company or registered investment adviser for
which has an agreement with the Distributor with respect to such
purchases; or (xiii) redemptions in connection with IRA accounts
established with Form 5305-SIMPLE under the Code for which the
Trust is the designated financial institution.
The CDSC applicable to Class B shares is currently waived for
any partial or complete redemption in each of the following cases:
(a) in connection with required minimum distributions to IRA ac-
count owners or to plan participants or beneficiaries who are age
70 1/2 or older; (b) following death or disability (as defined in
the Code) of a shareholder (including one who owns the shares as
joint tenant with his or her spouse) from an account in which the
deceased or disabled is named, provided the redemption is re-
quested within one year of the death or initial determination of
disability; and (c) up to 10% per year of the value of an account
which (i) has a value of at least $100,000 at the start of such
year and (ii) is subject to an Automatic Withdrawal Plan. See "How
to Redeem--Automatic Withdrawal Plan."
The Distributor may require documentation prior to waiver of
the CDSC for any class, including distribution letters, certifica-
tion by plan administrators, applicable tax forms, death certifi-
cates, physicians' certificates, etc.
46 PIMCO Funds: Multi-Manager Series
<PAGE>
INITIAL
SALES
CHARGE
ALTERNATIVE --
CLASS A
SHARES
Class A shares are sold at a public offering price equal to their
net asset value per share plus a sales charge, as set forth below.
As indicated below under "Class A Deferred Sales Charge," certain
investors that purchase $1,000,000 or more of any Fund's Class A
shares (and thus pay no initial sales charge) may be subject to a
1% CDSC if they redeem such shares during the first 18 months af-
ter their purchase.
ALL FUNDS
<TABLE>
<CAPTION>
DISCOUNT OR
SALES CHARGE AS SALES CHARGE COMMISSION TO
AMOUNT OF % OF NET AS % OF PUBLIC DEALERS AS % OF
PURCHASE AMOUNT INVESTED OFFERING PRICE PUBLIC OFFERING PRICE
-------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 5.82% 5.50% 4.75%
-------------------------------------------------------------------------
$50,000 - $99,999 4.71% 4.50% 4.00%
-------------------------------------------------------------------------
$100,000 - $249,999 3.63% 3.50% 3.00%
-------------------------------------------------------------------------
$250,000 - $499,999 2.56% 2.50% 2.00%
-------------------------------------------------------------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
-------------------------------------------------------------------------
$1,000,000+ 0.00%(/1/) 0.00%(/1/) 0.75%(/2/)
</TABLE>
1. As shown, investors that purchase more than $1,000,000 of any
Fund's Class A shares will not pay any initial sales charge on
such purchase. However, purchasers of $1,000,000 or more of Class
A shares (other than those purchasers described below under "Sales
at Net Asset Value" where no commission is paid) will be subject
to a CDSC of 1% if such shares are redeemed during the first 18
months after such shares are purchased unless such purchaser is
eligible for a waiver of the CDSC as described under "Waiver of
Contingent Deferred Sales Charges" above. See "Class A Deferred
Sales Charge" below.
2. The Distributor will pay a commission to dealers who sell
amounts of $1,000,000 or more of Class A shares (or who sell Class
A shares at net asset value to certain employer-sponsored plans as
outlined in "Sales at Net Asset Value" below) of each Fund accord-
ing to the following schedule: 0.75% of the first $2,000,000,
0.50% of amounts from $2,000,001 to $5,000,000, and 0.25% of
amounts over $5,000,000.
Each Fund receives the entire net asset value of its Class A
shares purchased by investors. The Distributor receives the sales
charge shown above less any applicable discount or commission
"reallowed" to participating brokers in the amounts indicated in
the table above. The Distributor may, however, elect to reallow
the entire sales charge to participating brokers for all sales
with respect to which orders are placed with the Distributor for
any particular Fund during a particular period. During such peri-
ods as may from time to time be designated by the Distributor, the
Distributor will pay an additional amount of up to 0.50% of the
purchase price on sales of Class A shares of all or selected Funds
purchased to each participating broker which obtains purchase or-
ders in amounts exceeding thresholds established from time to time
by the Distributor. From time to time, the Distributor, its parent
and/or its affiliates may make additional payments to one or more
participating brokers based upon factors such as the level of
sales or the length of time clients' assets have remained in the
Trust.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are issued at net asset
value and are not subject to any sales charges.
Under the circumstances described below, investors may be enti-
tled to pay reduced sales charges for Class A shares.
COMBINED PURCHASE PRIVILEGE Investors may qualify for a reduced
sales charge by combining purchases of the Class A shares of one
or more Funds or other series of the Trust or of PIMCO Funds: Pa-
cific Investment Management Series which offer Class A shares (to-
gether, "eligible PIMCO Funds") into a "single purchase," if the
resulting purchase totals at least $50,000. The term single pur-
chase refers to:
(i) a single purchase by an individual, or concurrent pur-
chases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his or her spouse
and their children under the age of 21 years purchasing
Class A shares of the eligible PIMCO Funds for his, her or
their own account;
November 1, 1998 Prospectus 47
<PAGE>
(ii) a single purchase by a trustee or other fiduciary purchas-
ing shares for a single trust, estate or fiduciary account
although more than one beneficiary is involved; or
(iii) a single purchase for the employee benefit plans of a
single employer.
For further information, call the Distributor at 1-800-426-0107
or your broker.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION) A purchase of
additional Class A shares of any eligible PIMCO Fund may qualify
for a Cumulative Quantity Discount at the rate applicable to the
discount bracket obtained by adding:
(i) the investor's current purchase;
(ii) the value (at the close of business on the day of the cur-
rent purchase) of all Class A shares of any eligible PIMCO
Fund held by the investor computed at the maximum offering
price; and
(iii) the value of all shares described in paragraph (ii) owned
by another shareholder eligible to be combined with the
investor's purchase into a "single purchase" as defined
above under "Combined Purchase Privilege."
For example, if you owned Class A shares of the Equity Income
Fund worth $25,000 at the current maximum offering price and
wished to purchase Class A shares of the Growth Fund worth an ad-
ditional $30,000, the sales charge for the $30,000 purchase would
be at the 4.50% rate applicable to a single $55,000 purchase of
shares of the Growth Fund, rather than the 5.50% rate.
LETTER OF INTENT An investor may also obtain a reduced sales
charge by means of a written Letter of Intent, which expresses an
intention to invest not less than $50,000 within a period of 13
months in Class A shares of any eligible PIMCO Fund(s). Each pur-
chase of shares under a Letter of Intent will be made at the pub-
lic offering price or prices applicable at the time of such pur-
chase to a single transaction of the dollar amount indicated in
the Letter. At the investor's option, a Letter of Intent may in-
clude purchases of Class A shares of any eligible PIMCO Fund made
not more than 90 days prior to the date the Letter of Intent is
signed; however, the 13-month period during which the Letter is in
effect will begin on the date of the earliest purchase to be in-
cluded and the sales charge on any purchases prior to the Letter
will not be adjusted.
Investors qualifying for the Combined Purchase Privilege de-
scribed above may purchase shares of the eligible PIMCO Funds un-
der a single Letter of Intent. For example, if at the time you
sign a Letter of Intent to invest at least $100,000 in Class A
shares of any Fund, you and your spouse each purchase Class A
shares of the Growth Fund worth $30,000 (for a total of $60,000),
it will only be necessary to invest a total of $40,000 during the
following 13 months in Class A shares of any of the Funds to qual-
ify for the 3.50% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000 in any
of the Funds).
A Letter of Intent is not a binding obligation to purchase the
full amount indicated. The minimum initial investment under a Let-
ter of Intent is 5% of such amount. Shares purchased with the
first 5% of such amount will be held in escrow (while remaining
registered in your name) to secure payment of the higher sales
charge applicable to the shares actually purchased in the event
the full intended amount is not purchased. If the full amount in-
dicated is not purchased, a sufficient amount of such escrowed
shares will be involuntarily redeemed to pay the additional sales
charge applicable to the amount actually purchased, if necessary.
Dividends on escrowed shares, whether paid in cash or reinvested
in additional eligible PIMCO Fund shares, are not subject to es-
crow. When the full amount indicated has been purchased, the es-
crow will be released.
If you wish to enter into a Letter of Intent in conjunction
with your initial investment in Class A shares of a Fund, you
should complete the appropriate portion of the account applica-
tion. If you are a current Class A shareholder desiring to do so
you may obtain a form of Letter of Intent by contacting the Dis-
tributor at 1-800-426-0107 or any broker participating in this
program.
48 PIMCO Funds: Multi-Manager Series
<PAGE>
REINSTATEMENT PRIVILEGE A Class A shareholder who has caused any
or all of his shares to be redeemed may reinvest all or any por-
tion of the redemption proceeds in Class A shares of any eligible
PIMCO Fund at net asset value without any sales charge, provided
that such reinvestment is made within 120 calendar days after the
redemption or repurchase date. Shares are sold to a reinvesting
shareholder at the net asset value next determined. See "How Net
Asset Value is Determined." A reinstatement pursuant to this priv-
ilege will not cancel the redemption transaction and, consequent-
ly, any gain or loss so realized may be recognized for federal tax
purposes except that no loss may be recognized to the extent that
the proceeds are reinvested in shares of the same Fund within 30
days. The reinstatement privilege may be utilized by a shareholder
only once, irrespective of the number of shares redeemed, except
that the privilege may be utilized without limit in connection
with transactions whose sole purpose is to transfer a sharehold-
er's interest in a Fund to his Individual Retirement Account or
other qualified retirement plan account. An investor may exercise
the reinstatement privilege by written request sent to the Dis-
tributor or to the investor's broker.
SALES AT NET ASSET VALUE Each Fund may sell its Class A shares at
net asset value without a sales charge to (a) current or retired
officers, trustees, directors or employees of the Trust, the Ad-
viser or the Distributor, a parent, brother or sister of any such
officer, trustee, director or employee or a spouse or child of any
of the foregoing persons, or any trust, profit sharing or pension
plan for the benefit of any such person and to any other person if
the Distributor anticipates that there will be minimal sales ex-
penses associated with the sale, (b) current or retired trustees
of PIMCO Funds: Pacific Investment Management Series, a registered
investment company for which Pacific Investment Management, an af-
filiate of the Adviser, acts as investment adviser, (c) current
registered representatives and other full-time employees of par-
ticipating brokers or such persons' spouses or for trust or custo-
dial accounts for their minor children, (d) trustees or other fi-
duciaries purchasing shares for certain plans sponsored by employ-
ers, professional organizations or associations or charitable or-
ganizations, the trustee, administrator, fiduciary, broker, trust
company or registered investment adviser for which has an agree-
ment with the Distributor with respect to such purchases (includ-
ing provisions related to minimum levels of investment in the
Trust), and to participants in such plans and their spouses pur-
chasing for their account(s) or IRAs (with the exception of Roth
IRAs), (e) participants investing through accounts known as "wrap
accounts" established with brokers or dealers approved by the Dis-
tributor where such brokers or dealers are paid a single, inclu-
sive fee for brokerage and investment management services, (f)
client accounts of broker-dealers or registered investment advis-
ers affiliated with such broker-dealers with which the Distributor
has an agreement for the use of PIMCO Funds: Multi-Manager Series
in particular investment products or programs, and (g) accounts
for which a trust company affiliated with the Trust or the Adviser
serves as trustee or custodian. As described above, the Distribu-
tor will not pay any initial commission to dealers upon the sale
of Class A shares to the purchasers described in this paragraph
except for sales to purchasers described under (d) in this para-
graph.
NOTIFICATION OF DISTRIBUTOR An investor or participating broker
must notify the Distributor whenever a quantity discount or re-
duced sales charge is applicable to a purchase and must provide
the Distributor with sufficient information at the time of pur-
chase to verify that each purchase qualifies for the privilege or
discount. Upon such notification, the investor will receive the
lowest applicable sales charge. The quantity discounts described
above may be modified or terminated at any time.
CLASS A DEFERRED SALES CHARGE For all Funds, investors who pur-
chase $1,000,000 or more of Class A shares (and, thus, purchase
such shares without any initial sales charge) may be subject to a
1% CDSC (the "Class A CDSC") if such shares are redeemed within 18
months of their purchase. The Class A CDSC does not apply to in-
vestors purchasing $1,000,000 or more of any Fund's Class A shares
if such investors are otherwise eligible to purchase Class A
shares without any sales charge because they are described under
"Sales at Net Asset Value" above.
November 1, 1998 Prospectus 49
<PAGE>
For purchases subject to the Class A CDSC, a 1% CDSC will apply
for any redemption of such Class A shares that occurs within 18
months of their purchase. No CDSC will be imposed if the shares
redeemed have been acquired through the reinvestment of dividends
or capital gains distributions or if the amount redeemed is de-
rived from increases in the value of the account above the amount
of purchase payments subject to the CDSC. In determining whether a
CDSC is payable, it is assumed that Class A shares acquired
through the reinvestment of dividends and distributions are re-
deemed first, and thereafter that Class A shares that have been
held by an investor for the longest period of time are redeemed
first.
The Class A CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For more
information about the Class A CDSC, call the Distributor at 1-800-
426-0107.
PARTICIPATING BROKERS Investment dealers and other financial in-
termediaries provide varying arrangements for their clients to
purchase and redeem Fund shares. Some may establish higher minimum
investment requirements than set forth above. Firms may arrange
with their clients for other investment or administrative services
and may independently establish and charge transaction fees and/or
other additional amounts to their clients for such services, which
charges would reduce clients' return. Firms also may hold Fund
shares in nominee or street name as agent for and on behalf of
their customers. In such instances, the Trust's transfer agent
will have no information with respect to or control over accounts
of specific shareholders. Such shareholders may obtain access to
their accounts and information about their accounts only from
their broker. In addition, certain privileges with respect to the
purchase and redemption of shares or the reinvestment of dividends
may not be available through such firms. Some firms may partici-
pate in a program allowing them access to their clients' accounts
for servicing including, without limitation, transfers of regis-
tration and dividend payee changes; and may perform functions such
as generation of confirmation statements and disbursement of cash
dividends. This Prospectus should be read in connection with such
firms' material regarding their fees and services.
DEFERRED Class B shares are sold at their current net asset value without
SALES any initial sales charge. The full amount of an investor's pur-
CHARGE chase payment will be invested in shares of the Fund(s) selected.
ALTERNATIVE A CDSC will be imposed on Class B shares if an investor redeems an
- -- CLASS B amount which causes the current value of the investor's account
SHARES for a Fund to fall below the total dollar amount of purchase pay-
ments subject to the CDSC, except that no CDSC is imposed if the
shares redeemed have been acquired through the reinvestment of
dividends or capital gains distributions or if the amount redeemed
is derived from increases in the value of the account above the
amount of purchase payments subject to the CDSC.
Whether a CDSC is imposed and the amount of the CDSC will de-
pend on the number of years since the investor made a purchase
payment from which an amount is being redeemed. Purchases are sub-
ject to the CDSC according to the following schedule:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
-------------------------------------------
<S> <C>
First 5
-------------------------------------------
Second 4
-------------------------------------------
Third 3
-------------------------------------------
Fourth 3
-------------------------------------------
Fifth 2
-------------------------------------------
Sixth 1
-------------------------------------------
Seventh 0*
</TABLE>
*After the seventh year, Class B shares convert into Class A
shares as described below.
50 PIMCO Funds: Multi-Manager Series
<PAGE>
In determining whether a CDSC is payable, it is assumed that
the purchase payment from which a redemption is made is the earli-
est purchase payment from which a redemption or exchange has not
already been fully effected.
The following example will illustrate the operation of the
Class B CDSC:
Assume that an individual opens an account and makes a purchase
payment of $10,000 for Class B shares of a Fund and that six
months later the value of the investor's account for that Fund has
grown through investment performance and reinvestment of distribu-
tions to $11,000. The investor then may redeem up to $1,000 from
that Fund ($11,000 minus $10,000) without incurring a CDSC. If the
investor should redeem $3,000, a CDSC would be imposed on $2,000
of the redemption (the amount by which the investor's account for
the Fund was reduced below the amount of the purchase payment). At
the rate of 5%, the Class B CDSC would be $100.
In determining whether an amount is available for redemption
without incurring a CDSC, the purchase payments made for all Class
B shares in the shareholder's account with the particular Fund are
aggregated, and the current value of all such shares is aggregat-
ed. Any CDSC imposed on a redemption of Class B shares is paid to
the Distributor.
Class B shares are subject to higher distribution fees than
Class A shares for a fixed period after their purchase, after
which they automatically convert to Class A shares and are no
longer subject to such higher distribution fees. Class B shares of
each Fund automatically convert into Class A shares after they
have been held for seven years.
For sales of Class B shares made and services rendered to Class
B shareholders, the Distributor intends to make payments to par-
ticipating brokers, at the time a shareholder purchases Class B
shares, of 4.00% of the purchase amount for each of the Funds.
During such periods as may from time to time be designated by the
Distributor, the Distributor will pay selected participating bro-
kers an additional amount of up to .50% of the purchase price on
sales of Class B shares of all or selected Funds purchased to each
participating broker which obtains purchase orders in amounts ex-
ceeding thresholds established from time to time by the Distribu-
tor.
The Class B CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For
more information about the Class B CDSC, call the Distributor at
1-800-426-0107.
ASSET BASED
SALES
CHARGE
ALTERNATIVE --
CLASS C
SHARES
Class C shares are sold at their current net asset value without
any initial sales charge. A CDSC is imposed on Class C shares if
an investor redeems an amount which causes the current value of
the investor's account for a Fund to fall below the total dollar
amount of purchase payments subject to the CDSC, except that no
CDSC is imposed if the shares redeemed have been acquired through
the reinvestment of dividends or capital gains distributions or if
the amount redeemed is derived from increases in the value of the
account above the amount of purchase payments subject to the CDSC.
All of an investor's purchase payments are invested in shares of
the Fund(s) selected.
Whether a CDSC is imposed and the amount of the CDSC will de-
pend on the number of years since the investor made a purchase
payment from which an amount is being redeemed. Purchases are sub-
ject to the CDSC according to the following schedule:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
-------------------------------------------
<S> <C>
First 1
-------------------------------------------
Thereafter 0
</TABLE>
In determining whether a CDSC is payable, it is assumed that
the purchase payment from which the redemption is made is the ear-
liest purchase payment (from which a redemption or exchange has
not already been effected).
November 1, 1998 Prospectus 51
<PAGE>
The following example will illustrate the operation of the
Class C CDSC:
Assume that an individual opens an account and makes a purchase
payment of $10,000 for Class C shares of a Fund and that six
months later the value of the investor's account for that Fund has
grown through investment performance and reinvestment of distribu-
tions to $11,000. The investor then may redeem up to $1,000 from
that Fund ($11,000 minus $10,000) without incurring a CDSC. If the
investor should redeem $3,000, a CDSC would be imposed on $2,000
of the redemption (the amount by which the investor's account for
the Fund was reduced below the amount of the purchase payment). At
the rate of 1%, the Class C CDSC would be $20.
In determining whether an amount is available for redemption
without incurring a CDSC, the purchase payments made for all Class
C shares in the shareholder's account with the particular Fund are
aggregated, and the current value of all such shares is aggregat-
ed. Any CDSC imposed on a redemption of Class C shares is paid to
the Distributor. Unlike Class B shares, Class C shares do not au-
tomatically convert to any other class of shares of the Funds.
Except as described below, for sales of Class C shares made and
services rendered to Class C shareholders, the Distributor expects
to make payments to participating brokers, at the time the share-
holder purchases Class C shares, of 1.00% (representing .75% dis-
tribution fees and .25% servicing fees) of the purchase amount for
all Funds. For sales of Class C shares made to participants making
periodic purchases of not less than $50 through certain employer
sponsored savings plans which are clients of a broker-dealer with
which the Distributor has an agreement with respect to such pur-
chases, no payments are made at the time of purchase. During such
periods as may from time to time be designated by the Distributor,
the Distributor will pay an additional amount of up to .50% of the
purchase price on sales of Class C shares of all or selected Funds
purchased to each participating broker which obtains purchase or-
ders in amounts exceeding thresholds established from time to time
by the Distributor.
The Class C CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For more
information about the Class C CDSC, contact the Distributor at 1-
800-426-0107.
Exchange Privilege
Except with respect to exchanges for shares of the Opportunity
Fund (which are subject to certain restrictions) or other Funds
for which sales are suspended to new investors, a shareholder may
exchange Class A, Class B and Class C shares of any Fund for the
same Class of shares of any other Fund in an account with identi-
cal registration on the basis of their respective net asset val-
ues. For information on restrictions applicable to exchanges of
shares for shares of the Opportunity Fund, see "Restrictions on
Sales of and Exchanges for Shares of the Opportunity Fund" under
"How to Buy Shares" above. Class A, Class B and Class C shares of
each Fund may also be exchanged for shares of the same class of
another series of the Trust not offered in this Prospectus (in-
cluding the PIMCO Funds Asset Allocation Series portfolios, which
are so-called "funds-of-funds" portfolios offered by the Trust) or
of a series of PIMCO Funds: Pacific Investment Management Series,
an affiliated mutual fund family comprised primarily of fixed in-
come portfolios managed by Pacific Investment Management, an af-
filiate of the Adviser. There are currently no exchange fees or
charges. Exchanges of shares outstanding on September 30, 1998 may
be made in any amount through December 31, 1998 into any portfolio
of PIMCO Funds Asset Allocation Series. All other exchanges, in-
cluding exchanges from PIMCO Funds Asset Allocation Series portfo-
lios into other series of the Trust or of PIMCO Funds: Pacific In-
vestment Management Series, are subject to the $2,500 minimum ini-
tial purchase requirement for each Fund, except with respect to
tax-qualified programs and exchanges effected through the PIMCO
Funds Auto-Exchange plan. An exchange will constitute a taxable
sale for federal income tax purposes.
Investors who maintain their account with the Distributor may
exchange shares by a written exchange request sent to PIMCO Funds
Distributors LLC, P.O. Box 5866, Denver, CO 80217-5866 or, unless
the investor has specifically declined telephone exchange privi-
leges on the account application or elected in writing not to uti-
lize telephone exchanges, by a telephone request to the Transfer
Agent at 1-800-426-0107. The Trust will employ reasonable proce-
52 PIMCO Funds: Multi-Manager Series
<PAGE>
dures to confirm that instructions communicated by telephone are
genuine, and may be liable for any losses due to unauthorized or
fraudulent instructions if it fails to employ such procedures. The
Trust will require a form of personal identification prior to act-
ing on a caller's telephone instructions, will provide written
confirmations of such transactions and will record telephone in-
structions. Exchange forms are available from the Distributor at
1-800-426-0107 and may be used if there will be no change in the
registered name or address of the shareholder. Changes in regis-
tration information or account privileges may be made in writing
to the Transfer Agent, Shareholder Services, Inc., P.O. Box 5866,
Denver, Colorado 80217-5866, or by use of forms which are avail-
able from the Distributor. A signature guarantee is required. See
"How to Buy Shares--Signature Guarantee." Telephone exchanges may
be made between 9:00 a.m., Eastern time and the close of regular
trading (normally 4:00 p.m., Eastern time) on the Exchange on any
day the Exchange is open (generally weekdays other than normal
holidays). The Trust reserves the right to refuse exchange pur-
chases if, in the judgment of the Adviser, the purchase would ad-
versely affect the Fund and its shareholders. In particular, a
pattern of exchanges characteristic of "market-timing" strategies
may be deemed by the Adviser to be detrimental to the Trust or a
particular Fund.
Currently, the Trust limits the number of "round trip" ex-
changes an investor may make. An investor makes a "round trip" ex-
change when the investor purchases shares of a particular Fund,
subsequently exchanges those shares for shares of a different
Fund, and then exchanges back into the originally purchased Fund.
The Trust has the right to refuse any exchange for any investor
who completes (by making the exchange back into the shares of the
originally purchased Fund) more than six round trip exchanges in
any twelve-month period. Although the Trust has no current inten-
tion of terminating or modifying the exchange privilege other than
as set forth in the preceding sentence, it reserves the right to
do so at any time. Except as otherwise permitted by Securities and
Exchange Commission regulations, the Trust will give 60 days' ad-
vance notice to shareholders of any termination or material modi-
fication of the exchange privilege. For further information about
exchange privileges, contact your participating broker or call the
Transfer Agent at 1-800-426-0107.
With respect to Class B and Class C shares, or Class A shares
subject to a CDSC, if less than all of an investment is exchanged
out of a Fund, any portion of the investment attributable to capi-
tal appreciation and/or reinvested dividends or capital gains dis-
tributions will be exchanged first, and thereafter any portions
exchanged will be from the earliest investment made in the Fund
from which the exchange was made. Shareholders should take into
account the effect of any exchange on the applicability of any
CDSC that may be imposed upon any subsequent redemption.
Investors may also select the PIMCO Funds Auto-Exchange plan
which establishes automatic periodic exchanges. For further infor-
mation on automatic exchanges see "How to Buy Shares--PIMCO Funds
Auto-Exchange" above.
How to Redeem
Class A, Class B or Class C shares may be redeemed through a par-
ticipating broker, by telephone, by submitting a written redemp-
tion request directly to the Transfer Agent (for non-broker ac-
counts), or through an Automatic Withdrawal Plan or PIMCO Funds
Fund Link. In the event a shareholder or participants in certain
self-directed qualified employee benefit plans eligible to pur-
chase shares of the Opportunity Fund redeem(s) all of the share-
holder's or the participants' shares of the Fund (including shares
acquired during the Offering described under "How to Buy Shares--
Restrictions on Sales of and Exchanges for Shares of the Opportu-
nity Fund" above), such shareholder or participants in such plans
will no longer be eligible to purchase shares of the Opportunity
Fund.
A CDSC may apply to a redemption of Class A, Class B or Class C
shares. See "Alternative Purchase Arrangements" above. Shares are
redeemed at their net asset value next determined after a proper
redemption request has been received, less any applicable CDSC.
There is no charge by the Distributor (other than an applicable
CDSC) with respect to a redemption; however, a participating bro-
ker who processes a redemption for an investor may charge custom-
ary commissions for its services. Dealers and other financial
services firms are obligated to transmit orders
November 1, 1998 Prospectus 53
<PAGE>
promptly. Requests for redemption received by dealers or other
firms prior to the close of regular trading (normally 4:00 p.m.,
Eastern time) on the Exchange on a regular business day and re-
ceived by the Distributor prior to the close of the Distributor's
business day will be confirmed at the net asset value effective as
of the closing of the Exchange on that day, less any applicable
CDSC.
DIRECT A shareholder's original account application permits the share-
REDEMPTION holder to redeem by written request and by telephone (unless the
shareholder specifically elects not to utilize telephone redemp-
tions) and to elect one or more of the additional redemption pro-
cedures described below. A shareholder may change the instructions
indicated on his original account application, or may request ad-
ditional redemption options, only by transmitting a written direc-
tion to the Transfer Agent. Requests to institute or change any of
the additional redemption procedures will require a signature
guarantee.
Redemption proceeds will normally be mailed to the redeeming
shareholder within seven days or, in the case of wire transfer or
Fund Link redemptions, sent to the designated bank account within
one business day. Fund Link redemptions may be received by the
bank on the second or third business day. In cases where shares
have recently been purchased by personal check, redemption pro-
ceeds may be withheld until the check has been collected, which
may take up to 15 days. To avoid such withholding, investors
should purchase shares by certified or bank check or by wire
transfer.
WRITTEN To redeem shares in writing (whether or not represented by certif-
REQUESTS icates), a shareholder must send the following items to the Trans-
fer Agent, Shareholder Services, Inc., P.O. Box 5866, Denver, Col-
orado 80217-5866:
(1) a written request for redemption signed by all registered
owners exactly as the account is registered on the Transfer
Agent's records, including fiduciary titles, if any, and
specifying the account number and the dollar amount or num-
ber of shares to be redeemed;
(2) for certain redemptions described below, a guarantee of all
signatures on the written request or on the share certifi-
cate or accompanying stock power, if required, as described
under "How to Buy Shares--Signature Guarantee";
(3) any share certificates issued for any of the shares to be
redeemed (see "Certificated Shares" below); and
(4) any additional documents which may be required by the
Transfer Agent for redemption by corporations, partnerships
or other organizations, executors, administrators, trust-
ees, custodians or guardians, or if the redemption is re-
quested by anyone other than the shareholder(s) of record.
Transfers of shares are subject to the same requirements. A
signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record for
the account, to be sent to the address of record for that account.
To avoid delay in redemption or transfer, shareholders having any
questions about these requirements should contact the Transfer
Agent in writing or call 1-800-426-0107 before submitting a re-
quest. Redemption or transfer requests will not be honored until
all required documents in the proper form have been received by
the Transfer Agent. This redemption option does not apply to
shares held in broker "street name" accounts.
If the proceeds of the redemption (i) exceed $50,000, (ii) are
to be paid to a person other than the record owner, (iii) are to
be sent to an address other than the address of the account on the
Transfer Agent's records, or (iv) are to be paid to a corporation,
partnership, trust or fiduciary, the signature(s) on the redemp-
tion request and on the certificates, if any, or stock power must
be guaranteed as described above, except that the Distributor may
waive the signature guarantee requirement for redemptions up to
$2,500 by a trustee of a qualified retirement plan, the adminis-
trator for which has an agreement with the Distributor.
TELEPHONE The Trust accepts telephone requests for redemption of
REDEMPTIONS uncertificated shares for amounts up to $50,000 within any 7 cal-
endar day period, except for investors who have specifically de-
clined telephone redemption privileges on the account application
or elected in writing not to utilize telephone redemptions. The
proceeds of a telephone redemption
54 PIMCO Funds: Multi-Manager Series
<PAGE>
will be sent to the record shareholder at his record address.
Changes in account information must be made in a written authori-
zation with a signature guarantee. See "How to Buy Shares--Signa-
ture Guarantee." Telephone redemptions will not be accepted during
the 30-day period following any change in an account's record ad-
dress. This redemption option does not apply to shares held in
broker "street name" accounts.
By completing an account application, an investor agrees that
the Trust, the Distributor and the Transfer Agent shall not be li-
able for any loss incurred by the investor by reason of the Trust
accepting unauthorized telephone redemption requests for his ac-
count if the Trust reasonably believes the instructions to be gen-
uine. Thus, shareholders risk possible losses in the event of a
telephone redemption not authorized by them. The Trust may accept
telephone redemption instructions from any person identifying him-
self as the owner of an account or the owner's broker where the
owner has not declined in writing to utilize this service. The
Trust will employ reasonable procedures to confirm that instruc-
tions communicated by telephone are genuine, and may be liable for
any losses due to unauthorized or fraudulent instructions if it
fails to employ such procedures. The Trust will require a form of
personal identification prior to acting on a caller's telephone
instructions, will provide written confirmations of such transac-
tions and will record telephone instructions.
A shareholder making a telephone redemption should call the
Transfer Agent at 1-800-426-0107 and state (i) the name of the
shareholder as it appears on the Transfer Agent's records, (ii)
his account number with the Trust, (iii) the amount to be with-
drawn and (iv) the name of the person requesting the redemption.
Usually the proceeds are sent to the investor on the next Trust
business day after the redemption is effected, provided the re-
demption request is received prior to the close of regular trading
(normally 4:00 p.m., Eastern time) on the Exchange that day. If
the redemption request is received after the close of the Ex-
change, the redemption is effected on the following Trust business
day at that day's net asset value and the proceeds are usually
sent to the investor on the second following Trust business day.
The Trust reserves the right to terminate or modify the telephone
redemption service at any time. During times of severe disruptions
in the securities markets, the volume of calls may make it diffi-
cult to redeem by telephone, in which case a shareholder may wish
to send a written request for redemption as described under "Writ-
ten Requests" above. Telephone communications may be recorded by
the Distributor or the Transfer Agent.
FUND LINK If a shareholder has established Fund Link, the shareholder may
REDEMPTIONS redeem shares by telephone and have the redemption proceeds sent
to a designated account at a financial institution. Fund Link is
normally established within 45 days of receipt of a Fund Link ap-
plication by the Transfer Agent. To use Fund Link for redemptions,
call the Transfer Agent at 1-800-426-0107. Subject to the limita-
tions set forth above under "Telephone Redemptions," the Distribu-
tor, the Trust and the Transfer Agent may rely on instructions by
any registered owner believed to be genuine and will not be re-
sponsible to any shareholder for any loss, damage or expense aris-
ing out of such instructions. Requests received by the Transfer
Agent prior to the close of regular trading (normally 4:00 p.m.,
Eastern time) on the Exchange on a business day will be processed
at the net asset value on that day and the proceeds (less any
CDSC) will normally be sent to the designated bank account on the
following business day and received by the bank on the second or
third business day. If the redemption request is received after
the close of regular trading on the Exchange, the redemption is
effected on the following business day. Shares purchased by check
may not be redeemed through Fund Link until such shares have been
owned (i.e., paid for) for at least 15 days. Fund Link may not be
used to redeem shares held in certificated form.
Changes in bank account information must be made by completing a
new Fund Link application, signed by all owners of record of the
account, with all signatures guaranteed. See "How to Buy Shares--
Signature Guarantee." See "How to Buy Shares--PIMCO Funds Fund
Link" for information on establishing the Fund Link privilege. The
Trust may terminate the Fund Link program at any time without no-
tice to shareholders. This redemption option does not apply to
shares held in broker "street name" accounts.
November 1, 1998 Prospectus 55
<PAGE>
PIMCO FUNDS PIMCO Funds Automated Telephone System ("ATS") is an automated
AUTOMATED telephone system that enables shareholders to perform a number of
TELEPHONE account transactions automatically using a touch-tone telephone.
SYSTEM ATS may be used on already-established Fund accounts after you ob-
tain a Personal Identification Number (PIN) by calling the special
ATS number: 1-800-223-2413.
PURCHASING SHARES. You may purchase shares in amounts up to
$100,000 by telephone by calling 1-800-223-2413. You must have es-
tablished ATS privileges to link your bank account with the Fund
to pay for these purchases.
EXCHANGING SHARES. With the PIMCO Funds Exchange Privilege, you
can exchange shares automatically by telephone from your Fund Link
Account to another PIMCO Funds account you have already estab-
lished by calling 1-800-223-2413. Please refer to "Exchange Privi-
lege" for details.
REDEMPTIONS. You may redeem shares by telephone automatically by
calling 1-800-223-2413 and the Fund will send the proceeds di-
rectly to your Fund bank account. Please refer to "How to Redeem"
for details.
EXPEDITED If a shareholder has given authorization for expedited wire re-
WIRE demption, shares can be redeemed and the proceeds sent by federal
TRANSFER wire transfer to a single previously designated bank account. Re-
REDEMPTIONS quests received by the Trust prior to the close of the Exchange
will result in shares being redeemed that day at the next deter-
mined net asset value (less any CDSC) and normally the proceeds
being sent to the designated bank account the following business
day. The bank must be a member of the Federal Reserve wire system.
Delivery of the proceeds of a wire redemption request may be de-
layed by the Trust for up to 7 days if the Distributor deems it
appropriate under then current market conditions. Once authoriza-
tion is on file, the Trust will honor requests by any person iden-
tifying himself as the owner of an account or the owner's broker
by telephone at 1-800-426-0107 or by written instructions. The
Trust cannot be responsible for the efficiency of the Federal Re-
serve wire system or the shareholder's bank. The Trust does not
currently charge for wire transfers. The shareholder is responsi-
ble for any charges imposed by the shareholder's bank. The minimum
amount that may be wired is $2,500. The Trust reserves the right
to change this minimum or to terminate the wire redemption privi-
lege. Shares purchased by check may not be redeemed by wire trans-
fer until such shares have been owned (i.e., paid for) for at
least 15 days. Expedited wire transfer redemptions may be autho-
rized by completing a form available from the Distributor. Wire
redemptions may not be used to redeem shares in certificated form.
To change the name of the single bank account designated to re-
ceive wire redemption proceeds, it is necessary to send a written
request with signatures guaranteed to PIMCO Funds Distributors
LLC, P.O. Box 5866, Denver, CO 80217-5866. See "How to Buy
Shares--Signature Guarantee." This redemption option does not ap-
ply to shares held in broker "street name" accounts.
CERTIFICATEDTo redeem shares for which certificates have been issued, the cer-
SHARES tificates must be mailed to or deposited with the Trust, duly en-
dorsed or accompanied by a duly endorsed stock power or by a writ-
ten request for redemption. Signatures must be guaranteed as de-
scribed under "How to Buy Shares--Signature Guarantee." Further
documentation may be requested from institutions or fiduciary ac-
counts, such as corporations, custodians (e.g., under the Uniform
Gifts to Minors Act), executors, administrators, trustees or
guardians ("institutional account owners"). The redemption request
and stock power must be signed exactly as the account is regis-
tered, including indication of any special capacity of the regis-
tered owner.
AUTOMATIC An investor who owns or buys shares of a Fund having a net asset
WITHDRAWAL value of $10,000 or more may open an Automatic Withdrawal Plan and
PLAN have a designated sum of money (not less than $100 per Fund) paid
monthly (or quarterly) to the investor or another person. Such a
plan may be established by completing the appropriate section of
the account application or you may obtain an Automatic Withdrawal
Plan application from the Distributor or your broker. If an Auto-
matic Withdrawal Plan is set up after the account is established
providing for payment to a person other than the record share-
holder or to an address other than the address of record, a signa-
ture guarantee is required. See "How to Buy Shares--Signature
Guarantee." Class A, Class B and Class C shares of any Fund are
deposited in a plan account
56 PIMCO Funds: Multi-Manager Series
<PAGE>
and all distributions are reinvested in additional shares of the
particular class of the Fund at net asset value. Shares in a plan
account are then redeemed at net asset value (less any applicable
CDSC) to make each withdrawal payment. Any applicable CDSC may be
waived for certain redemptions under an Automatic Withdrawal Plan.
See "Alternative Purchase Arrangements--Waiver of Contingent De-
ferred Sales Charges."
Redemptions for the purpose of withdrawals are ordinarily made
on the business day preceding the day of payment at that day's
closing net asset value and checks are mailed on the day of pay-
ment selected by the shareholder. The Transfer Agent may acceler-
ate the redemption and check mailing date by one day to avoid
weekend delays. Payment will be made to any person the investor
designates; however, if the shares are registered in the name of a
trustee or other fiduciary, payment will be made only to the fidu-
ciary, except in the case of a profit-sharing or pension plan
where payment will be made to the designee. As withdrawal payments
may include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor. The
redemption of shares in connection with an Automatic Withdrawal
Plan may result in a gain or loss for tax purposes. Continued
withdrawals in excess of income will reduce and possibly exhaust
invested principal, especially in the event of a market decline.
The maintenance of an Automatic Withdrawal Plan concurrently with
purchases of additional shares of the Fund would be disadvanta-
geous to the investor because of the CDSC that may become payable
on such withdrawals in the case of Class A, Class B or Class C
shares and because of the initial sales charge in the case of
Class A shares. For this reason, the minimum investment accepted
for a Fund while an Automatic Withdrawal Plan is in effect for
that Fund is $1,000, and an investor may not maintain a plan for
the accumulation of shares of the Fund (other than through rein-
vestment of distributions) and an Automatic Withdrawal Plan at the
same time. The Trust or the Distributor may terminate or change
the terms of the Automatic Withdrawal Plan at any time.
Because the Automatic Withdrawal Plan may involve invasion of
capital, investors should consider carefully with their own finan-
cial advisers whether the plan and the specified amounts to be
withdrawn are appropriate in their circumstances. The Trust and
the Distributor make no recommendations or representations in this
regard.
REDEMPTIONS The Trust agrees to redeem shares of each Fund solely in cash up
IN KIND to the lesser of $250,000 or 1% of the Fund's net assets during
any 90-day period for any one shareholder. In consideration of the
best interests of the remaining shareholders, the Trust reserves
the right to pay any redemption proceeds exceeding this amount in
whole or in part by a distribution in kind of securities held by a
Fund in lieu of cash. Except for Funds with a tax-efficient man-
agement strategy, it is highly unlikely that shares would ever be
redeemed in kind. When shares are redeemed in kind, the redeeming
shareholder should expect to incur transaction costs upon the dis-
position of the securities received in the distribution.
Distributor and Distribution and Servicing Plans
PIMCO Funds Distributors LLC (the "Distributor"), a wholly owned
subsidiary of the Adviser, is the principal underwriter of the
Trust's shares and in that connection makes distribution and ser-
vicing payments to participating brokers and servicing payments to
certain banks and other financial intermediaries in connection
with the sale of Class B and Class C shares and servicing payments
to participating brokers, certain banks and other financial inter-
mediaries in connection with the sale of Class A shares. In the
case of Class A shares, these parties are also compensated based
on the amount of the front-end sales charge reallowed by the Dis-
tributor, except in cases where Class A shares are sold without a
front-end sales charge (although the Distributor may pay brokers
additional compensation in connection with sales of Class A shares
without a sales charge). In the case of Class B shares, partici-
pating brokers and other financial intermediaries are compensated
by an advance of a sales commission by the Distributor. In the
case of Class C shares, part or all of the first year's distribu-
tion and servicing fee is generally paid at the time of sale.
November 1, 1998 Prospectus 57
<PAGE>
Pursuant to a Distribution Agreement with the Trust, with respect
to each Fund's Class A, Class B and Class C shares, the Distribu-
tor bears various other promotional and sales related expenses,
including the cost of printing and mailing prospectuses to persons
other than current shareholders. The Distributor, located at 2187
Atlantic Street, Stamford, Connecticut 06902, is a broker-dealer
registered with the Securities and Exchange Commission.
CLASS A SERVICING FEES As compensation for services rendered and
expenses borne by the Distributor in connection with personal
services rendered to Class A shareholders of the Trust and the
maintenance of Class A shareholder accounts, the Trust pays the
Distributor servicing fees up to the annual rate of .25% (calcu-
lated as a percentage of each Fund's average daily net assets at-
tributable to Class A shares).
CLASS B AND CLASS C DISTRIBUTION AND SERVICING FEES As compensa-
tion for services rendered and expenses borne by the Distributor
in connection with the distribution of Class B and Class C shares
of the Trust, and in connection with personal services rendered to
Class B and Class C shareholders of the Trust and the maintenance
of Class B and Class C shareholder accounts, the Trust pays the
Distributor servicing and distribution fees up to the annual rates
set forth below (calculated as a percentage of each Fund's average
daily net assets attributable to Class B and Class C shares,
respectively):
<TABLE>
<CAPTION>
SERVICING DISTRIBUTION
FUND FEE FEE
---------------------------------
<S> <C> <C>
All Funds .25% .75%
</TABLE>
The Class A servicing fees and Class B and Class C distribution
and servicing fees paid to the Distributor are made under Distri-
bution and Servicing Plans adopted pursuant to Rule 12b-l under
the Investment Company Act of 1940, as amended (the "1940 Act"),
and are of the type known as "compensation" plans. This means
that, although the Trustees of the Trust are expected to take into
account the expenses of the Distributor and its predecessors in
their periodic review of the Distribution and Servicing Plans, the
fees are payable to compensate the Distributor for services ren-
dered even if the amount paid exceeds the Distributor's expenses.
The distribution fee applicable to Class B and Class C shares
may be spent by the Distributor on any activities or expenses pri-
marily intended to result in the sale of Class B or Class C
shares, respectively, including compensation to, and expenses (in-
cluding overhead and telephone expenses) of, financial consultants
or other employees of the Distributor or of participating or in-
troducing brokers who engage in distribution of Class B or Class C
shares, printing of prospectuses and reports for other than exist-
ing Class B or Class C shareholders, advertising, and preparation,
printing and distribution of sales literature. The servicing fee,
applicable to Class A, Class B and Class C shares of the Trust,
may be spent by the Distributor on personal services rendered to
shareholders of the Trust and the maintenance of shareholder ac-
counts, including compensation to, and expenses (including tele-
phone and overhead expenses) of, financial consultants or other
employees of participating or introducing brokers, certain banks
and other financial intermediaries who aid in the processing of
purchase or redemption requests or the processing of dividend pay-
ments, who provide information periodically to shareholders show-
ing their positions in a Fund's shares, who forward communications
from the Trust to shareholders, who render ongoing advice concern-
ing the suitability of particular investment opportunities offered
by the Trust in light of the shareholders' needs, who respond to
inquiries from shareholders relating to such services, or who
train personnel in the provision of such services. Distribution
and servicing fees may also be spent on interest relating to
unreimbursed distribution or servicing expenses from prior years.
Many of the Distributor's sales and servicing efforts involve
the Trust as a whole, so that fees paid by Class A, Class B or
Class C shares of any Fund may indirectly support sales and ser-
vicing efforts relating to the other Funds' shares of the same
class. In reporting its expenses to the Trustees, the Distributor
itemizes expenses that relate to the
58 PIMCO Funds: Multi-Manager Series
<PAGE>
distribution and/or servicing of a single Fund's shares, and allo-
cates other expenses among the Funds based on their relative net
assets. Expenses allocated to each Fund are further allocated
among its classes of shares annually based on the relative sales
of each class, except for any expenses that relate only to the
sale or servicing of a single class. The Distributor may make pay-
ments to brokers (and with respect to servicing fees only, to cer-
tain banks and other financial intermediaries) of up to the fol-
lowing percentages annually of the average daily net assets at-
tributable to shares in the accounts of their customers or cli-
ents:
ALL FUNDS(/1/)
<TABLE>
<CAPTION>
SERVICING DISTRIBUTION
FEE FEE
---------------------------------------
<S> <C> <C>
Class A .25% N/A
---------------------------------------
Class B (/2/) .25% None
---------------------------------------
Class C
(purchased
before July 1,
1991) .25% None
---------------------------------------
Class C (/3/)
(purchased on
or after July
1, 1991) .25% .65%
</TABLE>
1. Applies, in part, to Class A, Class B and Class C shares of the
Trust issued to former shareholders of PIMCO Advisors Funds in
connection with the reorganizations/mergers of series of PIMCO Ad-
visors Funds as/with Funds of the Trust in transactions which took
place on January 17, 1997.
2. Payable only with respect to shares outstanding for one year or
more.
3. Payable only with respect to shares outstanding for one year or
more except in the case of shares for which no payment is made to
the party at the time of sale.
The Distributor may from time to time pay additional cash bo-
nuses or other incentives to selected participating brokers in
connection with the sale or servicing of Class A, Class B and
Class C shares of the Funds. On some occasions, such bonuses or
incentives may be conditioned upon the sale of a specified minimum
dollar amount of the shares of a Fund and/or all of the Funds to-
gether or a particular class of shares, during a specific period
of time. The Distributor currently expects that such additional
bonuses or incentives will not exceed .50% of the amount of any
sale. In its capacity as administrator for the Funds, PIMCO Advi-
sors may pay participating brokers and other intermediaries for
sub-transfer agency and other services.
If in any year the Distributor's expenses incurred in connec-
tion with the distribution of Class B and Class C shares and, for
Class A, Class B and Class C shares, in connection with the ser-
vicing of shareholders and the maintenance of shareholder ac-
counts, exceed the distribution and/or servicing fees paid by the
Trust, the Distributor would recover such excess only if the Dis-
tribution and Servicing Plan with respect to such class of shares
continues to be in effect in some later year when the distribution
and/or servicing fees exceed the Distributor's expenses. The Trust
is not obligated to repay any unreimbursed expenses that may exist
at such time, if any, as the relevant Distribution and Servicing
Plan terminates.
From time to time, expenses of principal underwriters incurred
in connection with the distribution of Class B and Class C shares
of the Funds, and in connection with the servicing of Class A,
Class B and Class C shareholders of the Funds and the maintenance
of Class A, Class B and Class C shareholder accounts, may exceed
the distribution and/or servicing fees collected by the Distribu-
tor. Class A, Class B and Class C Distribution and Servicing
Plans, which are similar to the Trust's current Plans, were in ef-
fect prior to January 17, 1997 in respect of series of PIMCO Advi-
sors Funds that were predecessors of certain Funds of the Trust.
The remaining Funds did not offer Class A, Class B or Class C
shares prior to January 17, 1997. As of June 30, 1998, such ex-
penses were approximately $11,946,000 in excess of payments under
the Class A Plan, $22,563,000 in excess of payments under the
Class B Plan and $2,252,000 in excess of payments under the Class
C Plan.
November 1, 1998 Prospectus 59
<PAGE>
How Net Asset Value Is Determined
The net asset values of Class A, Class B and Class C shares of
each Fund of the Trust will be determined once on each day on
which the Exchange is open (a "Business Day"), as of the close of
regular trading (normally 4:00 p.m., Eastern time) on the Ex-
change. Net asset value will not be determined on days on which
the Exchange is closed.
Portfolio securities and other assets for which market quota-
tions are readily available are stated at market value. Fixed in-
come securities are normally valued on the basis of quotations ob-
tained from brokers and dealers or pricing services, which take
into account appropriate factors such as institutional-sized trad-
ing in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market
data. Certain fixed income securities for which daily market quo-
tations are not readily available may be valued, pursuant to
guidelines established by the Board of Trustees, with reference to
fixed income securities whose prices are more readily obtainable
and whose durations are comparable to the securities being valued.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, when the Board of Trustees determines
that amortized cost is their fair value. Exchange-traded options,
futures and options on futures are valued at the settlement price
as determined by the appropriate clearing corporation. All other
securities and assets are valued at their fair value as determined
in good faith by the Trustees or by persons acting at their direc-
tion.
Quotations of foreign securities in foreign currency are con-
verted to U.S. dollar equivalents using foreign exchange quota-
tions received from independent dealers. The calculation of the
net asset value of the International and Precious Metals Funds may
not take place contemporaneously with the determination of the
prices of certain portfolio securities of foreign issuers used in
such calculation. Further, under the Trust's procedures, the
prices of foreign securities are determined using information de-
rived from pricing services and other sources. Information that
becomes known to the Trust or its agents after the time that net
asset value is calculated on any Business Day may be assessed in
determining net asset value per share after the time of receipt of
the information, but will not be used to retroactively adjust the
price of the security so determined earlier or on a prior day.
Events affecting the values of portfolio securities that occur be-
tween the time their prices are determined and the close of regu-
lar trading on the Exchange (normally 4:00 p.m., Eastern time) may
not be reflected in the calculation of net asset value. If events
materially affecting the value of such securities occur during
such period, then these securities may be valued at fair value as
determined by the Adviser or a Portfolio Manager and approved in
good faith by the Board of Trustees.
Each Fund's liabilities are allocated among its classes. The
total of such liabilities allocated to a class plus that class's
distribution and/or servicing fees and any other expenses spe-
cially allocated to that class are then deducted from the class's
proportionate interest in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that
class outstanding to produce the class's "net asset value" per
share. Under certain circumstances, the per share net asset value
of the Class B and Class C shares of the Funds that do not declare
regular income dividends on a daily basis may be lower than the
per share net asset value of the Class A shares as a result of the
daily expense accruals of the distribution fee applicable to the
Class B and Class C shares. Generally, for Funds that pay income
dividends, those dividends are expected to differ over time by ap-
proximately the amount of the expense accrual differential between
a particular Fund's classes.
Distributions
Shares begin earning dividends on the day after the date that
funds are received by the Trust for the purchase of Class A, Class
B and Class C shares. Net investment income from interest and div-
idends, if any, will be declared and paid quarterly to sharehold-
ers of record by the Balanced, Equity Income, Value and Renais-
sance Funds. Net investment income from interest and dividends, if
any, will be declared and paid at least annually to shareholders
of record by the
60 PIMCO Funds: Multi-Manager Series
<PAGE>
Tax-Efficient Equity, Capital Appreciation, Growth, Value 25, Mid-
Cap Growth, Target, Small-Cap Value, Opportunity, International,
Innovation and Precious Metals Funds. Any net capital gains from
the sale of portfolio securities will be distributed no less
frequently than once annually. Net short-term capital gains may be
paid more frequently.
All dividends and/or distributions will be paid in the form of
additional shares of the class of shares of the Fund to which the
dividends and/or distributions relate or, at the election of the
shareholder, of another Fund or other series of the Trust or of
PIMCO Funds: Pacific Investment Management Series as described be-
low, at net asset value, unless the shareholder elects to receive
cash (either paid to shareholders directly or credited to their
account with their participating broker). If a shareholder has
elected to receive dividends and/or capital gain distributions in
cash and the postal or other delivery service is unable to deliver
checks to the shareholder's address of record, such shareholder's
distributions will automatically be invested in the Money Market
Fund of PIMCO Funds: Pacific Investment Management Series, until
such shareholder is located. Dividends paid by each Fund with re-
spect to each class of shares are calculated in the same manner
and at the same time, but dividends on Class B and Class C shares
are expected to be lower than dividends on Class A shares as a re-
sult of the distribution fee applicable to Class B and Class C
shares. There are no sales charges on reinvested dividends.
Class A, Class B and Class C shareholders of the Trust may
elect to invest dividends and/or distributions paid by any Fund in
shares of the same class of any other Fund, another series of the
Trust (such as a PIMCO Funds Asset Allocation Series portfolio),
or a series of PIMCO Funds: Pacific Investment Management Series
which offers such class of shares at net asset value. The share-
holder must have an account existing in the Fund or series se-
lected for investment with the identical registered name and ad-
dress and must elect this option on the account application, on a
form provided for that purpose or by a telephone request to the
Transfer Agent at 1-800-426-0107. For further information on this
option, contact your broker or call the Distributor at 1-800-426-
0107.
Taxes
Each Fund intends to qualify as a regulated investment company an-
nually and to elect to be treated as a regulated investment com-
pany under the Internal Revenue Code of 1986, as amended (the
"Code"). As such, a Fund generally will not pay federal income tax
on the income and gains it pays as dividends to its shareholders.
In order to avoid a 4% federal excise tax, each Fund intends to
distribute each year substantially all of its net income and
gains.
Shareholders subject to U.S. federal income tax will be subject
to tax on dividends received from a Fund, regardless of whether
received in cash or reinvested in additional shares. Distributions
received by tax-exempt shareholders will not be subject to federal
income tax to the extent permitted under applicable tax law. All
shareholders must treat dividends, other than capital gain divi-
dends, exempt-interest dividends and dividends that represent a
return of capital to shareholders, as ordinary income. In particu-
lar, distributions derived from short-term gains will be treated
as ordinary income. Dividends designated by a Fund as capital gain
dividends derived from the Fund's net capital gains (that is, the
excess of its net long-term capital gains over its net short-term
capital losses) are taxable to shareholders as long-term capital
gain (generally subject to a 20% tax rate) except as provided by
an applicable tax exemption. Any distributions that are not from a
Fund's net investment income or net capital gain may be character-
ized as a return of capital to shareholders or, in some cases, as
capital gain. Certain dividends declared in October, November or
December of a calendar year are taxable to shareholders (who oth-
erwise are subject to tax on dividends) as though received on De-
cember 31 of that year if paid to shareholders during January of
the following calendar year. Each Fund will advise shareholders
annually of the amount and nature of the dividends paid to them.
Dividends derived from interest on certain U.S. Government securi-
ties may be exempt from state and local taxes, although interest
on mortgage-backed U.S. Government securities may not be so ex-
empt. While the Tax-Efficient Equity Fund seeks to minimize tax-
able distributions, the Fund may be expected to earn and distrib-
ute taxable income and may also be expected to realize and dis-
tribute capital gains from time to time.
November 1, 1998 Prospectus 61
<PAGE>
Current federal tax law requires the holder of a U.S. Treasury
or other fixed income zero-coupon security to accrue as income
each year a portion of the discount at which the security was pur-
chased, even though the holder receives no interest payment in
cash on the security during the year. In addition, pay-in-kind se-
curities will give rise to income which is required to be distrib-
uted and is taxable even though the Fund holding the security re-
ceives no interest payment in cash on the security during the
year. Also, a portion of the yield on certain high yield securi-
ties (including certain pay-in-kind securities) issued after July
10, 1989 may be treated as dividends. Accordingly, each Fund that
holds the foregoing kinds of securities may be required to pay out
as an income distribution each year an amount which is greater
than the total amount of cash interest the Fund actually received.
Such distributions may be made from the cash assets of the Fund or
by liquidation of portfolio securities, if necessary. The Fund may
realize gains or losses from such liquidations. In the event the
Fund realizes net capital gains from such transactions, its share-
holders may receive a larger capital gain distribution, if any,
than they would in the absence of such transactions.
Taxable shareholders should note that the timing of their in-
vestment or redemptions could have undesirable tax consequences.
Dividends and distributions on a Fund's shares are generally sub-
ject to federal income tax as described herein to the extent they
do not exceed the Fund's realized income and gains, even though
such dividends and distributions may economically represent a re-
turn of a particular shareholder's investment. Such distributions
are likely to occur in respect of shares purchased at a time when
the Fund's net asset value reflects gains that are either
unrealized or realized but not distributed. Such realized gains
may be required to be distributed even when a Fund's net asset
value also reflects unrealized losses. If shares are redeemed be-
fore payment of an exempt-interest dividend, shareholders may re-
alize a taxable capital gain, whereas by waiting and receiving the
exempt-interest dividend, a portion of their share value would
have been received in the form of tax-free income.
The preceding discussion relates only to federal income tax;
the consequences under other tax laws may differ. Shareholders
should consult their tax advisers as to the possible application
of foreign, state and local income tax laws to Trust dividends and
capital gain distributions. For additional information relating to
the tax aspects of investing in a Fund, see the Statement of Addi-
tional Information.
Management of the Trust
The business affairs of the Trust are managed under the direction
of the Board of Trustees. Information about the Trustees and the
Trust's executive officers may be found in the Statement of Addi-
tional Information under the heading "Management of the Trust."
INVESTMENT PIMCO ADVISORS serves as investment adviser to the Funds pursuant
ADVISER to an investment advisory agreement with the Trust. PIMCO Advisors
is a Delaware limited partnership organized in 1987. PIMCO Advi-
sors provides investment management and advisory services to pri-
vate accounts of institutional and individual clients and to mu-
tual funds. Total assets under management by PIMCO Advisors and
its subsidiary partnerships as of September 30, 1998 were approxi-
mately $225.9 billion. The general partners of PIMCO Advisors are
PIMCO Partners, G.P. and PIMCO Advisors Holdings L.P. ("PAH").
PIMCO Partners, G.P. is a general partnership between PIMCO Hold-
ing LLC, a Delaware limited liability company and an indirect
wholly-owned subsidiary of Pacific Life Insurance Company, and
PIMCO Partners LLC, a California limited liability company con-
trolled by the current Managing Directors and two former Managing
Directors of Pacific Investment Management. PIMCO Partners, G.P.
is the sole general partner of PAH. PIMCO Advisors is governed by
a Management Board, which exercises substantially all of the gov-
ernance powers of the general partner and serves as the functional
equivalent of a board of directors. PIMCO Advisors' address is 800
Newport Center Drive, Newport Beach, California 92660. PIMCO Advi-
sors is registered as an investment adviser with the Securities
and Exchange Commission. PIMCO Advisors currently has seven sub-
sidiary investment adviser partnerships, the following six of
which manage one or more of the Funds: Blairlogie, Cadence,
62 PIMCO Funds: Multi-Manager Series
<PAGE>
Columbus Circle, NFJ, Pacific Investment Management and Paramet-
ric. On or before March 31, 1999, it is anticipated that PIMCO Ad-
visors will sell substantially all of its ownership interest in
Blairlogie. See "Portfolio Managers--Blairlogie" below.
Under the investment advisory agreement, PIMCO Advisors, sub-
ject to the supervision of the Board of Trustees, is responsible
for providing advice and guidance with respect to the Funds and
for managing, either directly or through others selected by the
Adviser, the investment of the Funds. PIMCO Advisors also fur-
nishes to the Board of Trustees periodic reports on the investment
performance of each Fund.
PORTFOLIO Pursuant to portfolio management agreements, PIMCO Advisors em-
MANAGERS ploys Portfolio Managers to provide investment advisory services
to all of the Funds. With the exception of Van Eck (which manages
the Precious Metals Fund), each Portfolio Manager is an affiliate
of PIMCO Advisors. PIMCO Advisors (and not the Funds or the Trust)
compensates the Portfolio Managers from its advisory fee. Under
these agreements, a Portfolio Manager has full investment discre-
tion and makes all determinations with respect to the investment
of a Fund's assets, or, for the Balanced Fund, with respect to the
portion of the Fund's assets allocated to the Portfolio Manager
for investment, and makes all determinations respecting the pur-
chase and sale of a Fund's securities and other investments. If a
Portfolio Manager ceases to manage the portfolio of a Fund, PIMCO
Advisors will either assume full responsibility for the management
of that Fund, or retain a new portfolio manager subject to the ap-
proval of the Trustees and the Fund's shareholders.
COLUMBUS CIRCLE manages the Renaissance, Growth, Target, Opportu-
nity and Innovation Funds (the "Columbus Circle Funds"). Columbus
Circle is an investment management firm organized as a general
partnership. Columbus Circle has two partners: PIMCO Advisors as
the supervisory partner, and Columbus Circle Investors Management
Inc. as the managing partner. Columbus Circle Investors Division
of Thomson Advisory Group L.P. ("TAG"), the predecessor investment
adviser to Columbus Circle, commenced operations in 1975. Accounts
managed by Columbus Circle had combined assets as of September 30,
1998 of approximately $7.8 billion. Columbus Circle's address is
Metro Center, One Station Place, 8th Floor, Stamford, Connecticut
06902. Columbus Circle is registered as an investment adviser with
the Securities and Exchange Commission.
At the center of Columbus Circle's equity investment strategy
is its theory of Positive Momentum & Positive Surprise. This the-
ory asserts that a good company doing better than generally ex-
pected will experience a rise in its stock price, and conversely,
a company falling short of expectations will experience a drop in
its stock price. Based on this theory, Columbus Circle attempts to
manage the Columbus Circle Funds with a view to investing in grow-
ing companies that are surprising the market with business results
that are better than anticipated.
Investment decisions made by Columbus Circle are generally made
by one or more committees, although the following individuals have
primary responsibility for the noted Columbus Circle Funds. An-
thony Rizza is primarily responsible for the day-to-day management
of the Growth Fund. Mr. Rizza, a Managing Director of Columbus
Circle, has 12 years of investment management experience. He re-
ceived his bachelor's degree from the University of Connecticut,
and he is a Chartered Financial Analyst. Marc Felman is primarily
responsible for the day-to-day management of the Opportunity Fund
and Donald A. Chiboucas has secondary responsibility. Mr. Felman,
a Managing Director at Columbus Circle, has 10 years of investment
management experience. He received his bachelor's degree from Em-
ory University and his MBA from the Wharton School of Business.
Mr. Chiboucas, a Managing Director of Columbus Circle, has more
than 30 years of investment management experience. He received his
bachelor's degree and MBA from the University of California,
Berkeley, and he is a Chartered Financial Analyst. Amy H. Hogan is
primarily responsible for the day-to-day management of the Target
Fund. Ms. Hogan, a Managing Director of Columbus Circle, has 13
years of investment management experience. She received her bache-
lor's degree and MBA from the University of Wisconsin, and she is
a Chartered Financial Analyst. Anthony Rizza (see above) and Den-
nis P. McKechnie are primarily responsible for the day-to-day man-
agement of the Innovation Fund. Mr. McKechnie, a research analyst
at
November 1, 1998 Prospectus 63
<PAGE>
Columbus Circle, has 7 years of investment management experience.
He received his bachelor's degree from Purdue University and his
MBA from Columbia University. Clifford G. Fox is primarily respon-
sible for the day-to-day management of the Renaissance Fund. Mr.
Fox, a Managing Director of Columbus Circle, has 17 years of in-
vestment management experience. He received his bachelor's degree
from the University of Pennsylvania and his MBA from New York Uni-
versity, and he is a Chartered Financial Analyst.
CADENCE manages the Capital Appreciation and Mid-Cap Growth Funds,
as well as a portion of the Common Stock Segment of the Balanced
Fund (the "Cadence Funds"). Cadence is an investment management
firm organized as a general partnership. Cadence has two partners:
PIMCO Advisors as the supervisory partner, and Cadence Capital
Management Inc. as the managing partner. Cadence Capital Manage-
ment Corporation, the predecessor investment adviser to Cadence,
commenced operations in 1988. Accounts managed by Cadence had com-
bined assets as of September 30, 1998 of approximately $6.1 bil-
lion. Cadence's address is Exchange Place, 53 State Street, Bos-
ton, Massachusetts 02109. Cadence is registered as an investment
adviser with the Securities and Exchange Commission.
David B. Breed, William B. Bannick, Katherine A. Burdon and Pe-
ter B. McManus are primarily responsible for the day-to-day man-
agement of the Cadence Funds. Mr. Breed is a Managing Director,
the Chief Executive Officer, and a founding partner of Cadence,
and has 25 years' investment management experience. He has been
the driving force in developing the firm's growth-oriented stock
screening and selection process and has been with Cadence or its
predecessor since its inception. Mr. Breed graduated from the Uni-
versity of Massachusetts and received his MBA from the Wharton
School of Business. He is a Chartered Financial Analyst. Mr.
Bannick is a Managing Director and Executive Vice President of Ca-
dence and has 13 years' investment management experience. He pre-
viously served as Executive Vice President of George D. Bjurman &
Associates and as Supervising Portfolio Manager of Trinity Invest-
ment Management Corporation. Mr. Bannick joined the predecessor of
Cadence in 1992. He graduated from the University of Massachusetts
and received his MBA from Boston University. Mr. Bannick is
a Chartered Financial Analyst. Ms. Burdon is a Managing Director
and Portfolio Manager of Cadence and has 10 years' investment man-
agement experience. She previously served as a Vice President and
Portfolio Manager of The Boston Company. Ms. Burdon joined the
predecessor of Cadence in 1993. She graduated from Stanford Uni-
versity and received a Master of Science degree from Northeastern
University. Ms. Burdon is a Chartered Financial Analyst and Certi-
fied Public Accountant. Mr. McManus is Director of Fund Management
of Cadence and has 21 years' investment management experience. He
previously served as a Vice President of Bank of Boston. Mr. Mc-
Manus joined Cadence in 1994. He graduated from the University of
Massachusetts, and he is certified as a Financial Planner.
NFJ manages the Equity Income, Value, Value 25 and Small-Cap Value
Funds, as well as a portion of the Common Stock Segment of the
Balanced Fund. NFJ is an investment management firm organized as a
general partnership. NFJ has two partners: PIMCO Advisors as the
supervisory partner, and NFJ Management Inc. as the managing part-
ner. NFJ Investment Group, Inc., the predecessor investment ad-
viser to NFJ, commenced operations in 1989. Accounts managed by
NFJ had combined assets as of September 30, 1998 of approximately
$2.2 billion. NFJ's address is 2121 San Jacinto, Suite 1840, Dal-
las, Texas 75201. NFJ is registered as an investment adviser with
the Securities and Exchange Commission.
Chris Najork and Benjamin Fischer are responsible for the day-
to-day management of the Equity Income Fund and the portion of the
Common Stock Segment of the Balanced Fund allocated to NFJ. Mr.
Najork is a Managing Director and a founding partner of NFJ and
has 30 years' experience encompassing equity research and portfo-
lio management. He received his bachelor's degree and MBA from
Southern Methodist University, and he is a Chartered Financial An-
alyst. Mr. Fischer is a Managing Director and a founding partner
of NFJ and has 32 years' experience encompassing equity research
and portfolio management. He received his bachelor's degree from
Oklahoma University and his MBA from the New York University Grad-
uate School of Business. He is a Chartered Financial Analyst.
64 PIMCO Funds: Multi-Manager Series
<PAGE>
Messrs. Najork, Fischer and Paul A. Magnuson are primarily respon-
sible for the day-to-day management of the Value Fund and the
Small-Cap Value Fund. Mr. Magnuson, a research analyst at NFJ, has
13 years' experience in equity research and portfolio management.
He received his bachelor's degree in Finance from the University
of Nebraska-Lincoln. Messrs. Najork, Fischer and Cliff Hoover are
primarily responsible for the day-to-day management of the Value
25 Fund. Mr. Hoover is a principal at NFJ and has 24 years' expe-
rience in portfolio management and banking. He received his bache-
lor's degree and MBA from Texas Tech University. He is a Chartered
Financial Analyst.
BLAIRLOGIE manages the International Fund. Blairlogie is an in-
vestment management firm, organized as a limited partnership under
the laws of the United Kingdom, with two general partners and one
limited partner. The general partners are PIMCO Advisors, which
serves as the supervisory partner, and Blairlogie Holdings Limit-
ed, a wholly owned subsidiary of PIMCO Advisors, which serves as
the managing partner. The limited partner is Blairlogie Partners
L.P., a limited partnership, the general partner of which is Pa-
cific Asset Management LLC (a subsidiary of Pacific Life Insurance
Company), and the limited partners of which are the principal ex-
ecutive officers of Blairlogie Capital Management. Blairlogie Cap-
ital Management Ltd., the predecessor investment adviser to
Blairlogie, commenced operations in 1992. Accounts managed by
Blairlogie had combined assets as of September 30, 1998 of approx-
imately $700 million. Blairlogie's address is 4th Floor, 125
Princes Street, Edinburgh EH2 4AD, Scotland. Blairlogie is regis-
tered as an investment adviser with the Securities and Exchange
Commission in the United States and with the Investment Management
Regulatory Organisation in the United Kingdom.
James Smith is primarily responsible for the day-to-day manage-
ment of the International Fund. Mr. Smith is a Managing Director
and the Chief Investment Officer of Blairlogie and is responsible
for managing an investment team of six professionals who, in turn,
specialize in selection of stocks within Europe, Asia, and the
Americas, and in currency and derivatives. He previously served as
a Senior Portfolio Manager at Murray Johnstone in Glasgow,
Scotland, responsible for international investment management for
North American clients, and at Schroder Investment Management in
London. Mr. Smith received his bachelor's degree in Economics from
London University and his MBA from Edinburgh University. He is an
Associate of the Institute of Investment Management and Research.
It is anticipated that PIMCO Advisors will sell substantially
all of its ownership interest in Blairlogie to Alleghany Asset
Management, Inc. on or before March 31, 1999 (the "Blairlogie
Transaction"). The Blairlogie Transaction is subject to a number
of conditions. PIMCO Advisors has determined to terminate its
portfolio management agreement with Blairlogie with respect to the
International Fund, effective on or about the date of the
Blairlogie Transaction. Under the Trust's investment advisory
agreement, PIMCO Advisors would then assume full responsibility
for managing the International Fund's portfolio. This Prospectus
will be supplemented or revised if these events do not occur sub-
stantially in accordance with the schedule outlined above.
PACIFIC INVESTMENT MANAGEMENT manages the Fixed Income Securities
Segment of the Balanced Fund. Pacific Investment Management is an
investment management firm organized as a general partnership. Pa-
cific Investment Management has two partners: PIMCO Advisors as
the supervisory partner, and PIMCO Management, Inc. as the manag-
ing partner. Pacific Investment Management Company, the predeces-
sor investment adviser to Pacific Investment Management, commenced
operations in 1971. Pacific Investment Management had approxi-
mately $148.1 billion of assets under management as of September
30, 1998. Pacific Investment Management's address is 840 Newport
Center Drive, Suite 300, Newport Beach, California 92660. Pacific
Investment Management is registered as an investment adviser with
the Securities and Exchange Commission and as a commodity trading
adviser with the CFTC.
William H. Gross is responsible for the day-to-day management
of the Fixed Income Securities Segment of the Balanced Fund. Mr.
Gross is a founder and a Managing Director of Pacific Investment
Management and has been associated with Pacific Investment Manage-
ment or its predecessor for more than 28 years. He has extensive
investment experience in both credit research and fixed income
portfolio management. He received his bachelor's degree from Duke
University and his MBA from UCLA Graduate School of Business. Mr.
Gross is a Chartered Financial Analyst and a member of The Los An-
geles Society of Financial Analysts.
November 1, 1998 Prospectus 65
<PAGE>
PARAMETRIC manages the Tax-Efficient Equity Fund. Parametric is an
investment management firm organized as a general partnership.
Parametric has two partners: PIMCO Advisors as the supervisory
partner, and Parametric Management Inc. as the managing partner.
Parametric Portfolio Associates, Inc., the predecessor investment
adviser to Parametric, commenced operations in 1987. Accounts man-
aged by Parametric had combined assets as of September 30, 1998 of
approximately $2.8 billion. Parametric's address is 7310 Columbia
Center, 701 Fifth Avenue, Seattle, Washington 98104-7090. Paramet-
ric is registered as an investment adviser with the Securities and
Exchange Commission and as a commodity trading adviser with the
CFTC.
David Stein, Tom Seto and Cliff Quisenberry are primarily re-
sponsible for the day-to-day management of the Tax-Efficient Eq-
uity Fund. Mr. Stein is a Managing Director of Parametric and has
been associated with Parametric since June of 1996. He also di-
rects research and product development for Parametric. Mr. Stein
graduated with bachelor's and master's degrees in Applied Mathe-
matics from the University of Witwatersrand, South Africa, and re-
ceived a Ph.D. in Applied Mathematics from Harvard University.
Prior to joining Parametric, Mr. Stein served as the Director of
Investment Research at GTE Investment Management, Director of Ac-
tive Equity Strategies at the Vanguard Group, and Director of
Quantitative Portfolio Management and Research at IBM. Mr. Seto is
a Vice President of Parametric and has 7 years of experience in
managing structured equity portfolios. Prior to joining Paramet-
ric, he served as the Head of U.S. Equity Index Investments at
Barclays Global Investors. Mr. Seto graduated from the University
of Washington with a bachelor's degree in Electrical Engineering,
and from the University of Chicago with an MBA in Finance. Mr.
Quisenberry is a Vice President of Parametric and has been with
Parametric since 1994. He previously served as a Vice President
and Portfolio Manager at Cutler & Co., and as a Security Analyst
and Portfolio Manager at Fred Alger Management. Mr. Quisenberry
graduated from Yale University with a bachelor's degree in Econom-
ics. He is a Chartered Financial Analyst.
VAN ECK is an unaffiliated investment adviser that manages the
Precious Metals Fund. Van Eck is a Delaware corporation which, to-
gether with its affiliates, provides investment advisory services
to other mutual funds and to private accounts. Van Eck is con-
trolled by John C. van Eck who, along with members of his immedi-
ate family, owns 100% of the stock of Van Eck. Accounts managed by
Van Eck had combined assets as of September 30, 1998 of approxi-
mately $1.2 billion. Van Eck's address is 99 Park Avenue, New
York, NY 10001. Van Eck is registered as an investment adviser
with the Securities and Exchange Commission.
Henry J. Bingham, Executive Managing Director of Van Eck, has
served as the portfolio manager responsible for the day-to-day
management of the Precious Metals Fund since the Fund commenced
operations.
Registration as an investment adviser with the Securities and Ex-
change Commission does not involve supervision by the Securities
and Exchange Commission over investment advice, and registration
with the CFTC as a commodity trading adviser does not involve su-
pervision by the CFTC over commodities trading. The portfolio man-
agement agreements are not exclusive, and Columbus Circle, Ca-
dence, NFJ, Blairlogie, Pacific Investment Management, Parametric
and Van Eck may provide, and currently are providing, investment
management services to other clients, including other investment
companies.
FUND
ADMINISTRATOR
PIMCO Advisors also serves as administrator (the "Administrator")
for the Funds' Class A, Class B and Class C shares pursuant to an
administration agreement with the Trust. The Administrator pro-
vides or procures administrative services for Class A, Class B and
Class C shareholders of the Funds, which include clerical help and
accounting, bookkeeping, internal audit services and certain other
services required by the Funds, and preparation of reports to the
Funds' shareholders and regulatory filings. The Administrator has
retained Pacific Investment Management to provide such services as
sub-administrator. The Administrator and/or the sub-administrator
may also retain other affiliates to provide certain of these serv-
ices. In addition, the Administrator, at its own expense, arranges
for the provision of legal,
66 PIMCO Funds: Multi-Manager Series
<PAGE>
audit, custody, transfer agency (including sub-transfer agency and
other administrative services) and other services necessary for
the ordinary operation of the Funds, and is responsible for the
costs of registration of the Trust's shares and the printing of
prospectuses and shareholder reports for current shareholders.
The Funds (and not the Administrator) are responsible for the
following expenses: (i) salaries and other compensation of any of
the Trust's executive officers and employees who are not officers,
directors, stockholders, or employees of PIMCO Advisors, Pacific
Investment Management, or their subsidiaries or affiliates; (ii)
taxes and governmental fees; (iii) brokerage fees and commissions
and other portfolio transaction expenses; (iv) the costs of bor-
rowing money, including interest expenses; (v) fees and expenses
of the Trustees who are not "interested persons" of the Adviser,
any Portfolio Manager, or the Trust, and any counsel retained ex-
clusively for their benefit; (vi) extraordinary expenses, includ-
ing costs of litigation and indemnification expenses; (vii) ex-
penses which are capitalized in accordance with generally accepted
accounting principles; and (viii) any expenses allocated or allo-
cable to a specific class of shares, which include distribution
and/or service fees payable with respect to Class A, Class B and
Class C shares, and may include certain other expenses as permit-
ted by the Trust's Multiple Class Plan adopted pursuant to Rule
18f-3 under the 1940 Act, subject to review and approval by the
Trustees.
ADVISORY The Funds feature fixed advisory and administrative fees. For pro-
AND viding or arranging for the provision of investment advisory serv-
ADMINIS- ices to the Funds as described above, PIMCO Advisors receives
TRATIVE monthly fees from each Fund at an annual rate based on the average
FEES daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE RATE
---------------------------------
<S> <C>
Balanced, Equity
Income, Value, Tax-
Efficient Equity,
Capital Appreciation
and Mid-Cap Growth
Funds .45%
---------------------------------
Growth and Value 25
Funds .50%
---------------------------------
Target and Interna-
tional Funds .55%
---------------------------------
Renaissance, Small-Cap
Value and Precious
Metals Funds .60%
---------------------------------
Opportunity and Innova-
tion Funds .65%
</TABLE>
For providing or procuring administrative services to the Funds
as described above, the Administrator receives monthly fees from
each Fund at an annual rate based on the average daily net assets
attributable in the aggregate to the Fund's Class A, Class B and
Class C shares as follows:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEE RATE
---------------------------------------------------------------
<S> <C>
Precious Metals Fund .45% of first $2.5 billion
.40% of amounts in excess of $2.5 billion
---------------------------------------------------------------
International Fund .65% of first $2.5 billion
.60% of amounts in excess of $2.5 billion
---------------------------------------------------------------
All Other Funds .40% of first $2.5 billion
.35% of amounts in excess of $2.5 billion
</TABLE>
The investment advisory, administration and sub-administration
agreements for the Funds may be terminated by the Trustees, or by
PIMCO Advisors or Pacific Investment Management (as the case may
be) on 60 days' written notice. In addition, these agreements may
be terminated with regard to the Renaissance, Growth, Target, Op-
portunity, International, Innovation and Precious Metals Funds by
a majority of the Trustees that are not interested persons
November 1, 1998 Prospectus 67
<PAGE>
of the Trust, PIMCO Advisors, or Pacific Investment Management (as
the case may be) on 60 days' written notice. Following their ini-
tial terms, the agreements will continue from year-to-year if ap-
proved by the Trustees.
Pursuant to the portfolio management agreements between the Ad-
viser and each of the Portfolio Managers, PIMCO Advisors (and not
the Funds or the Trust) pays each Portfolio Manager a fee based on
a percentage of the average daily net assets of a Fund as follows:
Columbus Circle--.38% for the Renaissance Fund, .34% for the
Growth Fund, .36% for the Target Fund, .48% for the Opportunity
Fund and .38% for the Innovation Fund; Cadence--.35% for the Capi-
tal Appreciation Fund, .35% for the Mid-Cap Growth Fund and .35%
for the portion of the Common Stock Segment of the Balanced Fund
allocated to Cadence; NFJ--.35% for the Equity Income Fund, .35%
for the Value Fund, .40% for the Value 25 Fund, .50% for the
Small-Cap Value Fund and .35% for the portion of the Common Stock
Segment of the Balanced Fund allocated to NFJ; Blairlogie--.40%
for the International Fund; Pacific Investment Management-- .25%
for the Fixed Income Securities Segment of the Balanced Fund; Par-
ametric--.35% for the Tax-Efficient Equity Fund; and Van Eck--.35%
for the Precious Metals Fund.
PORTFOLIO Pursuant to the portfolio management agreements, a Portfolio Man-
TRANSACTIONSager places orders for the purchase and sale of portfolio invest-
ments for a Fund's accounts with brokers or dealers selected by it
in its discretion. In effecting purchases and sales of portfolio
securities for the accounts of the Funds, the Portfolio Managers
will seek the best price and execution of the Fund's orders. In
doing so, a Fund may pay higher commission rates than the lowest
available when the Portfolio Manager believes it is reasonable to
do so in light of the value of the brokerage and research services
provided by the broker effecting the transaction. The Portfolio
Managers also may consider sales of shares of the Trust as a fac-
tor in the selection of broker-dealers to execute portfolio trans-
actions for the Trust.
Some securities considered for investment by the Funds may also
be appropriate for other clients served by the Portfolio Managers.
If a purchase or sale of securities consistent with the investment
policies of a Fund and one or more of these clients served by a
Portfolio Manager is considered at or about the same time, trans-
actions in such securities will be allocated among the Fund and
clients in a manner deemed fair and reasonable by the Portfolio
Manager. Particularly when investing in less liquid or illiquid
securities of smaller capitalization companies, such allocation
may take into account the asset size of a Fund in determining
whether the allocation of an investment is suitable. As a result,
larger Funds may become more concentrated in more liquid securi-
ties than smaller Funds or private accounts of a Portfolio Manager
pursuing a small capitalization investment strategy, which could
adversely affect performance. A Portfolio Manager may aggregate
orders for the Funds with simultaneous transactions entered into
on behalf of its other clients so long as price and transaction
expense are averaged either for the particular transaction or for
that day.
Description of the Trust
CAPITALIZATION
The Trust was organized as a Massachusetts business trust on Au-
gust 24, 1990, and currently consists of twenty-eight portfolios
that are operational, fifteen of which are described in this Pro-
spectus. Other portfolios may be offered by means of a separate
prospectus. The Board of Trustees may establish additional portfo-
lios in the future. The capitalization of the Trust consists of an
unlimited number of shares of beneficial interest. When issued,
shares of the Trust are fully paid, non-assessable and freely
transferable.
Under Massachusetts law, shareholders could, under certain cir-
cumstances, be held liable for the obligations of the Trust. How-
ever, the Second Amended and Restated Agreement and Declaration of
Trust (the "Declaration of Trust") of the Trust disclaims share-
holder liability for acts or obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obliga-
tion or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust also provides for indemnifica-
tion out of a Fund's property for all loss and expense of any
shareholder of that Fund held liable on account of being or having
been a shareholder. Thus, the risk of a shareholder
68 PIMCO Funds: Multi-Manager Series
<PAGE>
incurring financial loss on account of shareholder liability is
limited to circumstances in which such disclaimer is inoperative
or the Fund of which he or she is or was a shareholder is unable
to meet its obligations, and thus should be considered remote.
MULTIPLE In addition to Class A, Class B and Class C shares, certain Funds
CLASSES OF also offer Class D, Institutional Class and Administrative Class
SHARES shares through separate prospectuses. See "Alternative Purchase
Arrangements." These other classes of shares of the Funds may have
different sales charges and expense levels, which will affect per-
formance accordingly. This Prospectus relates only to Class A,
Class B and Class C shares of the Funds.
Class A, Class B and Class C shares of each Fund represent in-
terests in the assets of that Fund, and each class has identical
dividend, liquidation and other rights and the same terms and con-
ditions, except that expenses related to the distribution and
shareholder servicing of Class A, Class B and Class C shares are
borne solely by such class and each class may, at the Trustees'
discretion, also pay a different share of other expenses, not in-
cluding advisory or custodial fees or other expenses related to
the management of the Trust's assets, if these expenses are actu-
ally incurred in a different amount by that class, or if the class
receives services of a different kind or to a different degree
than the other classes. All other expenses are allocated to each
class on the basis of the net asset value of that class in rela-
tion to the net asset value of the particular Fund.
VOTING Each class of shares of each Fund has identical voting rights, ex-
cept that each class of shares has exclusive voting rights on any
matter submitted to shareholders that relates solely to that
class, and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the
interests of any other class. Each class of shares has exclusive
voting rights with respect to matters pertaining to any Distribu-
tion and Servicing Plan or agreement applicable only to that
class. These shares are entitled to vote at meetings of sharehold-
ers. Matters submitted to shareholder vote must be approved by
each Fund separately except (i) when required by the 1940 Act
shares shall be voted together and (ii) when the Trustees have de-
termined that the matter does not affect all Funds, then only
shareholders of the Fund or Funds affected shall be entitled to
vote on the matter. All classes of shares of a Fund will vote to-
gether, except with respect to a Distribution and Servicing Plan
or agreement applicable to a class of shares or when a class vote
is required as specified above or otherwise by the 1940 Act.
Shares are freely transferable, are entitled to dividends as de-
clared by the Trustees and, in liquidation of the Trust, are enti-
tled to receive the net assets of their Fund, but not of the other
Funds. The Trust does not generally hold annual meetings of share-
holders and will do so only when required by law. Shareholders may
remove Trustees from office by votes cast in person or by proxy at
a meeting of shareholders or by written consent. Such a meeting
will be called at the written request of the holders of 10% of the
Trust's outstanding shares.
Shares entitle their holders to one vote per share (with pro-
portionate voting for fractional shares). As of October 13, 1998,
the following were shareholders of record of at least 25% of the
outstanding voting securities of the indicated Fund: PIMCO Advi-
sors L.P. (Newport Beach, California), the Trust's investment ad-
viser and administrator, with respect to the Tax-Efficient Equity
and Value 25 Funds; and Merrill Lynch, Pierce, Fenner & Smith Inc.
(Jacksonville, Florida) with respect to the Target Fund. To the
extent a shareholder is also the beneficial owner of such shares,
the shareholder may be deemed to control (as that term is defined
in the 1940 Act) the Fund. As used in this Prospectus, the phrase
"vote of a majority of the outstanding shares" of a Fund (or the
Trust) means the vote of the lesser of: (1) 67% of the shares of
the Fund (or the Trust) present at a meeting, if the holders of
more than 50% of the outstanding shares are present in person or
by proxy; or (2) more than 50% of the outstanding shares of the
Fund (or the Trust).
Mailings to Shareholders
To reduce the volume of mail shareholders receive, it is antici-
pated that only one copy of most Trust reports, such as the
Trust's annual reports, will be mailed to a shareholder's house-
hold (same surname, same address). A shareholder may call 1-800-
426-0107 if additional shareholder reports are desired.
November 1, 1998 Prospectus 69
<PAGE>
---------------------------------------------------------------------
PIMCO INVESTMENT ADVISER AND ADMINISTRATOR
FUNDS: PIMCO Advisors L.P., 800 Newport Center Drive, Newport Beach, CA
MULTI- 92660
MANAGER ---------------------------------------------------------------------
SERIES PORTFOLIO MANAGERS
Columbus Circle Investors, Cadence Capital Management, NFJ Invest-
ment Group, Blairlogie Capital Management, Pacific Investment Man-
agement Company, Parametric Portfolio Associates, Van Eck Associates
Corporation
---------------------------------------------------------------------
DISTRIBUTOR
PIMCO Funds Distributors LLC, 2187 Atlantic Street, Stamford, CT
06902
---------------------------------------------------------------------
CUSTODIAN
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, MO
64105
---------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT
Shareholder Services, Inc., P.O. Box 5866, Denver, CO 80217
---------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105
---------------------------------------------------------------------
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, MA 02110
---------------------------------------------------------------------
For further information about the PIMCO Funds, call 1-800-426-0107
or visit our Web site at www.pimcofunds.com.
<PAGE>
PIMCO Funds is on the Web
www.pimcofunds.com
<TABLE>
<S> <C> <C> <C>
A Partial List of PIMCO Funds Distributors
What's Available: LLC is pleased to announce
the launch of its Web site.
Daily Manager You and your financial advisor
Commentary now have around-the-clock [ARTWORK] [ARTWORK]
access to the most timely and
Fund Manager Bios comprehensive information
available on all of the PIMCO
Current and Funds. In addition, the site Investment Insight Resources
Historical Fund includes daily commentary The Investment Insight sec- Our Resources section features
Performance from our fund managers, with tion provides an overview of a variety of useful information,
insights on the economy and six investment management including:
Lipper Rankings other factors affecting the firms under the PIMCO
stock and bond markets. Advisors L.P. umbrella. You'll [_] an on-line document library
Morningstar Ratings find an explanation of each with applications and forms
firm's investment process, that you can view and print
Listing of Fund biographies of the investment
Porfolio Holdings team, manager updates and [_] a literature-by-mail "catalog,"
more. so you can order free materials
Risk Analysis
[ARTWORK]
Daily Share Prices [_] information about our
convenient shareholder
Downloadable services, such as Auto-Invest,
Literature Section Fund Link and our 24-Hour
Telephone Information System
On-line Literature You'll find the site to be [ARTWORK]
Requests informative and easy-to-use. [_] a listing of the features and
It's divided into three benefits of the retirement plans
Resources for main sections: Investment offered by PIMCO Funds
Investment Insight, Fund Information and
Professionals Resources. And there are Fund Information [_] a feature--"My Portfolio"--
several functions that can help In the Fund Information which enables you to track
you navigate your way around section you'll access detailed your portfolio (including
the site. We can be found profiles of all the PIMCO PIMCO Funds, other funds,
on the Worldwide Web at Funds, including current and stocks, futures and options),
www.pimcofunds.com. historical performance, Lipper get detailed stock quotes and
rankings and Morningstar more.
ratings. Additionally, we
provide a summary of a fund's Questions?
portfolio--complete with We're sure you'll find the
risk analysis data. You can PIMCO Funds Web site to be
also obtain daily fund share an invaluable tool. If you have
prices. Please read the relevant any questions about the site,
prospectus carefully before you call us at 1-800-426-0107.
invest in any PIMCO Fund. Or, use the e-mail feature of
the site to contact us.
</TABLE>
[LOGO OF PIMCO FUNDS]
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
Supplement Dated November 1, 1998
to the
Prospectus for Class A, Class B
and Class C Shares Dated November 1, 1998
Disclosure relating to
PIMCO INTERNATIONAL DEVELOPED FUND AND
PIMCO EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
THIS DOCUMENT SUPPLEMENTS THE PIMCO FUNDS: MULTI-MANAGER SERIES (THE
"TRUST") PROSPECTUS FOR CLASS A, CLASS B AND CLASS C SHARES DATED
NOVEMBER 1, 1998 (THE "RETAIL PROSPECTUS").
- --------------------------------------------------------------------------------
In addition to the diversified investment portfolios described in the Retail
Prospectus, the Trust also offers Class A, Class B and Class C Shares of PIMCO
International Developed Fund and PIMCO Emerging Markets Fund (the "Funds").
Existing Class A, B and C shareholders of the Funds and participants in
certain qualified benefits plans that own Class A, B or C shares of the Funds
as of November 1, 1998 may purchase additional shares. Otherwise, Class A, B
and C shares of the Funds are not available for investment or exchanges. See
"Purchase, Redemption and Exchange Information" below.
1. SCHEDULE OF FEES (APPLICABLE TO BOTH FUNDS).
Shareholder Transaction Expenses:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Maximum initial sales charge imposed on purchases (as a
percentage of offering price at time of purchase)..... 5.50% None None
Maximum sales charge imposed on reinvested dividends
(as a percentage of offering price at time of
purchase)............................................. None None None
Maximum contingent deferred sales charge ("CDSC") (as a
percentage of original purchase price) ............... 1%(1) 5%(2) 1%(3)
Exchange Fee........................................... None None None
</TABLE>
- --------
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase. See "Alternative
Purchase Arrangements" in the Retail Prospectus.
2. The maximum CDSC is imposed on shares redeemed in the first year. For
shares held longer than one year, the CDSC declines according to the
schedule set forth under "Alternative Purchase Arrangements--Deferred Sales
Charge Alternative--Class B Shares" in the Retail Prospectus.
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES EXAMPLE: You would pay
the following expenses EXAMPLE: You would pay
on a $1,000 investment the following expenses
ANNUAL FUND assuming (1) 5% annual on a $1,000 investment
OPERATING EXPENSES return and (2) assuming (1) 5% annual
(As a percentage of average net redemption at the end return and (2) no
assets): of each time period: redemption:
- ----------------------------------------------------------- -----------------------------------------------
TOTAL
ADMINI- FUND
ADVISORY STRATIVE 12b-1 OPERATING 1 3 5 10 1 3 5 10
FUND FEES FEES(1) FEES(2) EXPENSES YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------ -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Developed .60% .65% .25% 1.50% $69 $100 $132 $224 $69 $100 $132 $224
Emerging Markets .85 .65 .25 1.75 72 107 145 250 72 107 145 250
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES EXAMPLE: You would pay
the following expenses EXAMPLE: You would pay
on a $1,000 investment the following expenses
ANNUAL FUND assuming (1) 5% annual on a $1,000 investment
OPERATING EXPENSES return and (2) assuming (1) 5% annual
(As a percentage of average net redemption at the end return and (2) no
assets): of each time period: redemption:
- ----------------------------------------------------------- -----------------------------------------------
TOTAL
ADMINI- FUND
ADVISORY STRATIVE 12b-1 OPERATING 1 3 5 10 1 3 5 10
FUND FEES FEES(1) FEES(2) EXPENSES YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------ -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Developed .60% .65% 1.00% 2.25% $73 $100 $140 $230 $23 $70 $120 $230
Emerging Markets .85 .65 1.00 2.50 75 108 153 256 25 78 133 256
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES EXAMPLE: You would pay
the following expenses EXAMPLE: You would pay
on a $1,000 investment the following expenses
ANNUAL FUND assuming (1) 5% annual on a $1,000 investment
OPERATING EXPENSES return and (2) assuming (1) 5% annual
(As a percentage of average net redemption at the end return and (2) no
assets): of each time period: redemption:
- ----------------------------------------------------------- -----------------------------------------------
TOTAL
ADMINI- FUND
ADVISORY STRATIVE 12b-1 OPERATING 1 3 5 10 1 3 5 10
FUND FEES FEES(1) FEES(2) EXPENSES YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
- ------------------------------------------------------------ -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Developed .60% .65% 1.00% 2.25% $33 $70 $120 $258 $23 $70 $120 $258
Emerging Markets .85 .65 1.00 2.50 35 78 133 284 25 78 133 284
</TABLE>
- --------
(1) The Administrative Fees for each Fund are subject to reduction to the
extent that the average net assets attributable in the aggregate to the
Fund's Class A, Class B and Class C shares exceed $2.5 billion. See
"Management of the Trust--Advisory and Administrative Fees" below.
(2) 12b-1 fees which are equal to .25% represent servicing fees which are paid
annually to the Distributor and repaid to participating brokers, certain
banks and other financial intermediaries. 12b-1 fees which exceed .25%
represent aggregate distribution and servicing fees. See "Distributor and
Distribution and Servicing Plans" in the Retail Prospectus.
The purpose of the foregoing tables is to assist investors in understanding
the various costs and expenses of the Trust that are borne directly or
indirectly by Class A, Class B and Class C shareholders of the Funds. The
Examples for Class A shares assume payment of the current maximum applicable
sales load. Due to the 12b-1 distribution fee imposed on Class B and Class C
shares, a Class B or Class C shareholder of a Fund may, depending on the
length of time the shares are held, pay more than the economic equivalent of
the maximum front-end sales charges permitted by relevant rules of the
National Association of Securities Dealers, Inc.
NOTE: THE FIGURES SHOWN IN THE EXAMPLES ARE ENTIRELY HYPOTHETICAL. THEY ARE
NOT REPRESENTATIONS OF PAST OR FUTURE PERFORMANCE OR EXPENSES; ACTUAL
PERFORMANCE AND/OR EXPENSES MAY BE MORE OR LESS THAN SHOWN.
2
<PAGE>
2. FINANCIAL HIGHLIGHTS.
The following financial highlights present certain information and ratios as
well as performance information for the Funds. The information provided below
is included in the June 30, 1998 PIMCO Funds Annual Report (relating to Class
A, B and C shares) and has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon is also included in such Annual
Report. The Annual Report is incorporated by reference in the Statement of
Additional Information and may be obtained without charge from the
Distributor. Financial Statements and related notes are also incorporated by
reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
NET REALIZED/ TOTAL DIVIDENDS DISTRIBUTIONS DISTRIBUTIONS
NET ASSET NET UNREALIZED INCOME DIVIDENDS IN EXCESS FROM NET IN EXCESS
SELECTED PER VALUE INVESTMENT GAIN FROM FROM NET OF NET REALIZED OF NET DISTRIBUTIONS
SHARE DATA FOR BEGINNING INCOME (LOSS) ON NVESTMENT INVESTMENT INVESTMENT CAPITAL REALIZED FROM
THE PERIOD ENDED: OF PERIOD (LOSS) INVESTMENTS PERATIONS INCOME INCOME GAINS CAPITAL GAINS EQUALIZATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL
DEVELOPED FUND
CLASS A
06/30/98 $ 13.08 $ 0.18 (a) $ 1.68 (a) $ 1.86 $ (0.10) $ 0.00 $ (0.58) $ 0.00 $ 0.00
01/20/97--06/30/97 11.71 0.09 (a) 1.28 (a) 1.37 0.00 0.00 0.00 0.00 0.00
CLASS B
06/30/98 13.06 0.01 (a) 1.71 (a) 1.72 (0.06) 0.00 (0.58) 0.00 0.00
01/20/97--06/30/97 11.71 0.06 (a) 1.29 (a) 1.35 0.00 0.00 0.00 0.00 0.00
CLASS C
06/30/98 13.06 0.02 (a) 1.71 (a) 1.73 (0.06) 0.00 (0.58) 0.00 0.00
01/20/97--06/30/97 11.71 0.06 (a) 1.29 (a) 1.35 0.00 0.00 0.00 0.00 0.00
EMERGING MARKETS
FUND
CLASS A
06/30/98 $ 13.94 $ 0.03 (a) $ (3.85)(a) $ (3.82) $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
01/20/97--06/30/97 12.82 0.09 (a) 1.03 (a) 1.12 0.00 0.00 0.00 0.00 0.00
CLASS B
06/30/98 13.89 (0.06)(a) (3.81)(a) (3.87) 0.00 0.00 0.00 0.00 0.00
01/20/97--06/30/97 12.82 0.03 (a) 1.04 (a) 1.07 0.00 0.00 0.00 0.00 0.00
CLASS C
06/30/98 13.89 (0.06)(a) (3.81)(a) (3.87) 0.00 0.00 0.00 0.00 0.00
01/20/97--06/30/97 12.82 0.04 (a) 1.03 (a) 1.07 0.00 0.00 0.00 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
TAX BASIS NET ASSET NET ASSETS EXPENSES INCOME (LOSS) PORTFOLIO
SELECTED PER SHARE DATA RETURN OF TOTAL VALUE END TOTAL END OF TO AVERAGE TO AVERAGE TURNOVER
FOR THE PERIOD ENDED: CAPITAL DISTRIBUTIONS OF PERIOD RETURN PERIOD (000S) NET ASSETS NET ASSETS RATE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL DEVELOPED
FUND
CLASS A
06/30/98 $ 0.00 $ (0.68) $ 14.26 15.49 % $ 1,061 1.57% 1.38% 60%
01/20/97--06/30/97 0.00 0.00 13.08 11.70 318 1.54* 1.74* 77
CLASS B
06/30/98 0.00 (0.64) 14.14 14.32 2,902 2.25 0.08 60
01/20/97--06/30/97 0.00 0.00 13.06 11.53 1,123 2.28* 1.08* 77
CLASS C
06/30/98 0.00 (0.64) 14.15 14.38 6,363 2.25 0.19 60
01/20/97--06/30/97 0.00 0.00 13.06 11.53 2,526 2.28* 1.07* 77
EMERGING MARKETS FUND
CLASS A
06/30/98 $ 0.00 $ 0.00 $ 10.12 (27.40)% $ 426 1.78% 0.25% 52%
01/20/97--06/30/97 0.00 0.00 13.94 8.74 214 1.89* 1.52* 74
CLASS B
06/30/98 0.00 0.00 10.02 (27.86) 384 2.54 (0.51) 52
01/20/97--06/30/97 0.00 0.00 13.89 8.35 308 2.62* 0.47* 74
CLASS C
06/30/98 0.00 0.00 10.02 (27.86) 1,169 2.54 (0.54) 52
01/20/97--06/30/97 0.00 0.00 13.89 8.35 1,833 2.63* 0.66* 74
</TABLE>
- --------
* Annualized
(a) Per share amounts based upon average number of shares outstanding during
the period.
3
<PAGE>
3. INVESTMENT OBJECTIVES AND POLICIES.
The investment objective and general investment policies of the Funds are
described below. There can be no assurance that the investment objective of
either Fund will be achieved. Because the market value of the Funds'
investments will change, the net asset value per share of the Funds also will
vary. The investment objective of each of the International Developed and
Emerging Markets Funds is fundamental and may not be changed without
shareholder approval by vote of a majority of the outstanding shares of the
Fund.
INTERNATIONAL DEVELOPED FUND seeks long-term growth of capital. The Fund
invests primarily in a diversified portfolio of international equity
securities. The Morgan Stanley Capital International EAFE (Europe,
Australasia, Far East) Index ("EAFE Index") is used as a basis for choosing
the countries in which the Fund invests. However, the Fund is not limited to
the countries and weightings of the EAFE Index. Under normal market
conditions, the Fund will invest no more than 35% of its assets in securities
issued by companies located in countries that the Portfolio Manager
determines, on the basis of market capitalization, liquidity, and other
considerations, to have underdeveloped securities markets. The Portfolio
Manager applies two levels of screening in selecting investments for the Fund.
First, an active country selection model analyzes world markets and assigns a
relative value ranking, or "favorability weighting," to each country in the
relevant country universe to determine markets which are relatively
undervalued. Second, at the stock selection level, quality analysis and value
analysis are applied to each security, assessing variables such as balance
sheet strength and earnings growth (quality factors) and performance relative
to the industry, price to earnings ratios, and price to book ratios (value
factors). This two-level screening method identifies undervalued securities
for purchase and also provides a sell discipline for fully valued securities.
In selecting securities, the Portfolio Manager considers, to the extent
practicable and on the basis of information available to it for research, a
company's environmental business practices.
For purposes of allocating the Fund's investments, a company is considered
to be located in the country in which it is domiciled, in which it is
primarily traded, from which it derives a significant portion of its revenues,
or in which a significant portion of its goods or services are produced.
Most of the international equity securities in which the Fund invests will
be traded in foreign currencies. The Fund may engage in foreign currency
transactions to protect itself against fluctuations in currency exchange rates
in relation to the U.S. dollar or to the weighting of a particular foreign
currency on the EAFE Index. Such foreign currency transactions may include
forward foreign currency contracts, foreign exchange futures contracts, and
options thereon, currency exchange transactions on a spot (i.e., cash) basis,
and put and call options on foreign currencies. Up to 10% of the Fund's assets
may be invested in the securities of other investment companies. The Fund may
sell (write) call and put options. The Fund may utilize stock index futures
contracts and options thereon for hedging purposes and also for investment
purposes. For instance, the Fund may invest in stock index futures contracts
and related options as an alternative to purchasing individual stocks to
adjust its exposure to a particular foreign market. See "Characteristics and
Risks of Securities and Investment Techniques--Derivative Instruments--Index
Futures" in the Retail Prospectus. The Fund may also engage in equity index
swap transactions.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. For
a discussion of such risks, see "Characteristics and Risks of Securities and
Investment Techniques--Foreign Securities" in the Retail Prospectus.
Currently, the Portfolio Manager for the International Developed Fund is
Blairlogie Capital Management ("Blairlogie"). It is anticipated that the
International Developed Fund will reorganize as a series of another mutual
fund family on or before March 31, 1999 and thereafter would not be offered as
a series of the Trust. Please see the Note under "Management of the Trust"
below for details.
EMERGING MARKETS FUND seeks long-term growth of capital. The Fund invests
primarily in common stocks of companies located in countries identified as
emerging market countries. The Morgan Stanley Capital
4
<PAGE>
International Emerging Markets Free Index ("MSCI Free Index") and the
International Finance Corporation Emerging Markets Index ("IFC Index") are
used as the bases for choosing the countries in which the Fund invests.
However, the Fund is not limited to the countries and weightings of these
indexes. The Portfolio Manager applies two levels of screening in selecting
investments for the Fund. First, an active country selection model analyzes
world markets and assigns a relative value ranking, or "favorability
weighting," to each country in the relevant country universe to determine
markets which are relatively undervalued. Second, at the stock selection
level, quality analysis and value analysis are applied to each security,
assessing variables such as balance sheet strength and earnings growth
(quality factors), and performance relative to the industry, price to earnings
ratios, and price to book ratios (value factors). This two-level screening
method identifies undervalued securities for purchase as well as provides a
sell discipline for fully valued securities. In selecting securities, the
Portfolio Manager considers, to the extent practicable and on the basis of
information available to it for research, a company's environmental business
practices.
For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries (this list
is not exclusive):
Argentina Greece Jordan Poland Sri Lanka
Brazil Hong Kong Malaysia Portugal Taiwan
Chile Hungary Mexico Romania Thailand
China India Pakistan Russia Turkey
Colombia Indonesia Peru South Africa Venezuela
Czech Republic Israel Philippines South Korea Zimbabwe
For purposes of allocating the Fund's investments, a company is considered
to be located in the country in which it is domiciled, in which it is
primarily traded, from which it derives a significant portion of its revenues,
or in which a significant portion of its goods or services are produced.
Most of the foreign securities in which the Fund invests will be denominated
in foreign currencies. The Fund may engage in foreign currency transactions to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar or to the weighting of a particular foreign currency on the
MSCI Free Index or the IFC Index. Such foreign currency transactions may
include forward foreign currency contracts, foreign exchange futures
contracts, and options thereon, currency exchange transactions on a spot
(i.e., cash) basis, and put and call options on foreign currencies. Up to 10%
of the Fund's assets may be invested in the securities of other investment
companies. The Fund may sell (write) call and put options. The Fund may
utilize stock index futures contracts and options thereon for hedging purposes
and also for investment purposes. For instance, the Fund may invest in stock
index futures contracts and related options as an alternative to purchasing
individual stocks to adjust its exposure to a particular foreign market. See
"Characteristics and Risks of Securities and Investment Techniques--Derivative
Instruments--Index Futures" in the Retail Prospectus. The Fund may also engage
in equity index swap transactions.
Investing in the securities of foreign issuers, and particularly emerging
market issuers, involves special risks and considerations not typically
associated with investing in U.S. companies. For a discussion of such risks,
see "Characteristics and Risks of Securities and Investment Techniques--
Foreign Securities" in the Retail Prospectus.
Currently, the Portfolio Manager for the Emerging Markets Fund is
Blairlogie. It is anticipated that the Emerging Markets Fund will reorganize
as a series of another mutual fund family on or before March 31, 1999 and
thereafter would not be offered as a series of the Trust. Please see the Note
under "Management of the Trust" below for details.
Stock Funds. The International Developed and Emerging Markets Funds are each
"Stock Funds" as described in the Retail Prospectus. Each Fund will invest
primarily (normally at least 65% of its assets) in common stock. Each Fund may
maintain a portion of its assets, which will usually not exceed 10%, in U.S.
5
<PAGE>
Government securities, high quality debt securities (whose maturity or
remaining maturity will not exceed five years), money market obligations, and
in cash to provide for payment of the Fund's expenses and to meet redemption
requests. It is the policy of the Funds to be as fully invested in common
stocks as practicable at all times. This policy precludes the Funds from
investing in debt securities as a defensive investment posture (although the
Funds may invest in such securities to provide for payment of expenses and to
meet redemption requests). Accordingly, investors in the Funds bear the risk
of general declines in stock prices and the risk that a Fund's exposure to
such declines cannot be lessened by investment in debt securities. The Funds
may also invest in convertible securities, preferred stocks, and warrants,
subject to certain limitations.
4. CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES.
The Funds may invest in the securities and utilize the investment techniques
described under the following sub-headings of "Characteristics and Risks of
Securities and Investment Techniques" in the Retail Prospectus and are subject
to the attendant risks described: "Investment in Companies with Small and
Medium Market Capitalizations," "Foreign Securities," "Foreign Currency
Transactions," "Money Market Instruments," "Convertible Securities,"
"Derivative Instruments" (including "Options on Securities, Securities
Indexes, and Currencies," "Swap Agreement" (for the Emerging Markets Fund
only), "Futures Contracts and Options on Futures Contracts" and "Index
Futures"), "Loans of Portfolio Securities," "Short Sales," "When-Issued,
Delayed Delivery and Forward Commitment Transactions," "Repurchase
Agreements," "Reverse Repurchase Agreements and Other Borrowings," "Illiquid
Securities," and "Investment in Investment Companies." The Emerging Markets
Fund may enter into equity index swap agreements for purposes of gaining
exposure to the stocks making up an index of securities without actually
purchasing those stocks. Each Fund is subject to the risks described under
"Service Systems--Year 2000 Problem" in the Retail Prospectus.
The Emerging Markets Fund is particularly sensitive to the risks associated
with investing in the securities of issuers based in "emerging market"
countries as described under "Foreign Securities" in the Retail Prospectus.
The Emerging Markets Fund is also subject to the risks described under
"Foreign Securities--Special Risks of Investing in Russian and Other Eastern
European Securities" in the Retail Prospectus.
The annual portfolio turnover rates for the Funds were as follows for fiscal
1998 and 1997, respectively: International Developed Fund--60% and 77%;
Emerging Markets Fund--52% and 74%.
5. PURCHASE, REDEMPTION AND EXCHANGE INFORMATION.
Please see "How to Buy Shares," "Alternative Purchase Arrangements,"
"Exchange Privilege" and "How to Redeem" in the Retail Prospectus for
information on purchase, redemption and exchange information for Class A,
Class B and Class C shares of the Funds.
As of November 1, 1998, Class A, B and C shares of the International
Developed and Emerging Markets Funds are not available for purchase or
exchange by new investors. Existing Class A, B and C shareholders of the Funds
may purchase additional shares of the Funds. Also, participants in certain
self-directed qualified benefit plans that owned Class A, B or C shares of a
Fund as of November 1, 1998 for any single plan participant will be eligible
to direct the purchase of the Fund's Class A, B or C shares by their plan
account for so long as the plan continues to own Class A, B or C shares of the
Fund for any plan participant. It is anticipated that the Funds will
reorganize as series of another mutual fund family on or before March 31,
1999. Thereafter, shares of the Funds would not be available to any investor
for purchase from the Trust or for exchanges involving other PIMCO Funds.
Please see the Note under "Management of the Trust" below for details.
6. MANAGEMENT OF THE TRUST.
PIMCO Advisors L.P. ("PIMCO Advisors" or the "Adviser") serves as investment
adviser and administrator to the Funds. Please see "Management of the Trust--
Investment Adviser" and "Management of the Trust--Fund Administrator" in the
Retail Prospectus for a description of PIMCO Advisors.
6
<PAGE>
Blairlogie Capital Management ("Blairlogie") serves as the Portfolio Manager
of the Funds and James Smith of Blairlogie is primarily responsible for the
day-to-day management of each Fund. Please see "Management of the Trust--
Portfolio Managers--Blairlogie" in the Retail Prospectus for a description of
Blairlogie and biographical information about Mr. Smith.
NOTE: It is anticipated that PIMCO Advisors will sell substantially all of its
ownership interest in Blairlogie to Alleghany Asset Management, Inc. on or
before March 31, 1999 (the "Blairlogie Transaction"). The Blairlogie
Transaction is subject to a number of conditions, including approval by the
shareholders of the Emerging Markets and International Developed Funds. In
connection with the anticipated Blairlogie Transaction, it is proposed that
the Emerging Markets and International Developed Funds will transfer all of
their assets and liabilities to newly formed series of the Alleghany Funds to
be managed by Blairlogie. (The proposed transactions are referred to as
"Reorganizations"). The proposed Reorganizations are subject to a number of
conditions, including approval by the Trust's Board of Trustees and the
shareholders of the Emerging Markets and International Developed Funds. The
Retail Prospectus will be supplemented or revised if any of these events
involving Blairlogie and the Funds do not occur substantially in accordance
with the schedule outlined above.
Advisory and Administrative Fees
The Funds feature fixed advisory and administrative fees. For providing or
arranging for the provision of investment advisory services to the Funds,
PIMCO Advisors receives monthly Advisory Fees from the International Developed
Fund at the annual rate of 0.60%, and from the Emerging Markets Fund at the
annual rate of 0.85%, each based on the average daily net assets of the
relevant Fund. Pursuant to the portfolio management agreement between PIMCO
Advisors and Blairlogie, PIMCO Advisors (and not the Funds or the Trust) pays
Blairlogie fees at the annual rate of 0.50% based on the average daily net
assets of the International Developed Fund and 0.75% based on the average
daily net assets of the Emerging Markets Fund.
For providing or procuring administrative services for the Funds, PIMCO
Advisors (in its capacity as Administrator) receives monthly Administrative
Fees from each Fund at the following annual rate based on the average daily
net assets attributable in the aggregate to the Fund's Class A, Class B and
Class C Shares: 0.65% of the first $2.5 billion and 0.60% of amounts in excess
of $2.5 billion.
7. DISTRIBUTIONS.
Net investment income from interest and dividends, if any, will be declared
and paid at least annually to shareholders of record by each of the
International Developed and Emerging Markets Funds.
7
<PAGE>
Multi-Manager Series
BLAIRLOGIE CAPITAL MANAGEMENT
PIMCO Emerging Markets Fund
PIMCO International Developed Fund
PIMCO International Fund
CADENCE CAPITAL MANAGEMENT
PIMCO Capital Appreciation Fund
PIMCO Mid-Cap Growth Fund
PIMCO Micro-Cap Growth Fund
PIMCO Small-Cap Growth Fund
COLUMBUS CIRCLE INVESTORS
PIMCO Renaissance Fund
PIMCO Core Equity Fund
PIMCO Mid-Cap Equity Fund
PIMCO Innovation Fund
PIMCO International Growth Fund
NFJ INVESTMENT GROUP
PIMCO Equity Income Fund
PIMCO Value Fund
PIMCO Value 25 Fund
PIMCO Small-Cap Value Fund
PARAMETRIC PORTFOLIO ASSOCIATES
PIMCO Enhanced Equity Fund
PIMCO Structured Emerging Markets Fund
PIMCO Tax-Efficient Structured Emerging Markets Fund
PIMCO Tax-Efficient Equity Fund
MULTIPLE MANAGERS
PIMCO Balanced Fund
PROSPECTUS
- --------------------------------------------------------------------------------
November 1, 1998
<PAGE>
PIMCO Funds: Multi-Manager Series
Prospectus
November 1, 1998
PIMCO Funds: Multi-Manager Series (the "Trust"), formerly PIMCO Funds: Equity
Advisors Series, is an open-end series management investment company ("mutual
fund"). This Prospectus describes twenty-one separate diversified investment
portfolios (the "Funds") of the Trust. Each Fund has its own investment
objective and policies. The Trust is designed to provide access to the
professional investment management services offered by PIMCO Advisors L.P.
("PIMCO Advisors") and the Funds' Portfolio Managers.
This Prospectus describes two classes of shares which may be offered by each
Fund: the "Institutional Class" and the "Administrative Class." Through
separate prospectuses, certain Funds may offer up to four additional classes
of shares, Class A, Class B, Class C, and Class D shares. See "Other
Information--Multiple Classes of Shares."
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. It should be read and retained for
ready reference to information about the Funds. Information about the
investment objective of each Fund, along with a detailed description of the
types of securities in which each Fund may invest, and of investment policies
and restrictions applicable to each Fund, are set forth in this Prospectus.
There can be no assurance that the investment objective of any Fund will be
achieved. Because the market value of the Funds' investments will change, the
investment returns and net asset value per share of each Fund will vary.
A Statement of Additional Information, dated November 1, 1998, as amended or
supplemented from time to time, containing additional and more detailed
information about the Funds, has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference into this Prospectus. The
Securities and Exchange Commission maintains an Internet World Wide Web site
(at www.sec.gov) which contains the Statement of Additional Information,
materials that are incorporated by reference into this Prospectus and the
Statement of Additional Information, and other information about the Funds.
The Statement of Additional Information is available without charge and may be
obtained by writing or calling:
PIMCO Funds
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Telephone: 1-800-927-4648
1-800-987-4626 (PIMCO Infolink Audio Response
Network).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2 PIMCO Funds: Multi-Manager Series
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................................................... 4
Expense Information..................................................... 8
Financial Highlights.................................................... 10
Investment Objectives and Policies...................................... 16
Investment Restrictions................................................. 29
Characteristics and Risks of Securities and Investment Techniques....... 32
Management of the Trust................................................. 46
Purchase of Shares...................................................... 52
Redemption of Shares.................................................... 56
Portfolio Transactions.................................................. 59
Net Asset Value......................................................... 60
Dividends, Distributions and Taxes...................................... 61
Other Information....................................................... 62
</TABLE>
November 1, 1998 Prospectus 3
<PAGE>
PROSPECTUS SUMMARY
PIMCO Funds: Multi-Manager Series (the "Trust") is an open-end management
investment company ("mutual fund") organized as a Massachusetts business trust
on August 24, 1990. This Prospectus describes twenty-one separate diversified
investment portfolios (the "Funds") offered by the Trust.
COMPARISON OF FUNDS
The following chart provides general information about each of the Funds. It
is qualified in its entirety by the more complete descriptions of the Funds
appearing elsewhere in this Prospectus.
PORTFOLIO MANAGER
AND FUND INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS
- --------------------------------------------------------------------------------
BLAIRLOGIE CAPITAL
MANAGEMENT
Emerging Markets Seeks long-term growth of capital; invests primarily in
common stocks of companies located in emerging market
countries.
- --------------------------------------------------------------------------------
International Seeks long-term growth of capital; invests primarily in
Developed a diversified portfolio of international equity
securities.
- --------------------------------------------------------------------------------
International Seeks capital appreciation, income is incidental;
invests primarily in common stocks of non-U.S. issuers.
- --------------------------------------------------------------------------------
CADENCE CAPITAL
MANAGEMENT
Capital Seeks growth of capital; invests primarily in common
Appreciation stocks of companies with market capitalizations of at
least $1 billion that have improving fundamentals and
whose stock is reasonably valued by the market.
- --------------------------------------------------------------------------------
Mid-Cap Growth Seeks growth of capital; invests primarily in common
stocks of companies with market capitalizations in
excess of $500 million that have improving fundamentals
and whose stock is reasonably valued by the market.
- --------------------------------------------------------------------------------
Micro-Cap Growth Seeks long-term growth of capital; invests primarily in
common stocks of companies with market capitalizations
of less than $100 million that have improving
fundamentals and whose stock is reasonably valued by the
market.
- --------------------------------------------------------------------------------
Small-Cap Growth Seeks growth of capital; invests primarily in common
stocks of companies with market capitalizations between
$50 million and $1 billion that have improving
fundamentals and whose stock is reasonably valued by the
market.
- --------------------------------------------------------------------------------
COLUMBUS CIRCLE
INVESTORS
Renaissance Seeks long-term growth of capital and income; invests
primarily in common stocks with below-average valuations
that have improving business fundamentals.
- --------------------------------------------------------------------------------
Core Equity Seeks long-term growth of capital, with income as a
secondary objective; invests primarily in common stocks
of companies with market capitalizations in excess of $3
billion.
- --------------------------------------------------------------------------------
Mid-Cap Equity Seeks long-term growth of capital; invests primarily in
common stocks of companies with market capitalizations
between $800 million and $3 billion.
- --------------------------------------------------------------------------------
Innovation Seeks capital appreciation; invests primarily in common
stocks of technology-related companies.
- --------------------------------------------------------------------------------
International Seeks long-term capital appreciation; invests primarily
Growth in an international portfolio of equity and equity-
related securities.
(CONTINUED ON NEXT PAGE)
4 PIMCO Funds: Multi-Manager Series
<PAGE>
PROSPECTUS SUMMARY (CONTINUED)
COMPARISON OF FUNDS (CONTINUED)
PORTFOLIO MANAGER
AND FUND INVESTMENT OBJECTIVE AND PRIMARY INVESTMENTS
- --------------------------------------------------------------------------------
NFJ INVESTMENT GROUP
Equity Income Seeks current income as a primary investment objective,
and long-term growth of capital as a secondary
objective; invests primarily in common stocks with
below-average price to earnings ratios and higher
dividend yields relative to their industry groups.
- --------------------------------------------------------------------------------
Value Seeks long-term growth of capital and income; invests
primarily in common stocks with below-average price to
earnings ratios relative to their industry groups.
- --------------------------------------------------------------------------------
Value 25 Seeks long-term growth of capital and income; invests
primarily in approximately 25 common stocks with medium
market capitalizations and that have below-average price
to earnings ratios relative to their industry groups.
- --------------------------------------------------------------------------------
Small-Cap Value Seeks long-term growth of capital and income; invests
primarily in common stocks of companies with market
capitalizations between $50 million and $1 billion and
below-average price to earnings ratios relative to their
industry groups.
- --------------------------------------------------------------------------------
PARAMETRIC PORTFOLIO
ASSOCIATES
Enhanced Equity Seeks to provide a total return which equals or exceeds
the total return performance of an index representing
the performance of a reasonably broad spectrum of common
stocks (currently the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500")); invests primarily in
common stocks represented in the S&P 500.
- --------------------------------------------------------------------------------
Structured Seeks long-term growth of capital; invests primarily in
Emerging Markets common stocks of companies located in emerging market
countries.
- --------------------------------------------------------------------------------
Tax-Efficient Has the same investment objective and policies as the
Structured Structured Emerging Markets Fund, except that the Fund
Emerging Markets seeks to achieve superior after-tax returns for
shareholders by employing a variety of tax-efficient
management strategies.
- --------------------------------------------------------------------------------
Tax-Efficient Seeks maximum after-tax growth of capital; invests
Equity primarily in a broadly diversified portfolio of at least
200 common stocks of companies with larger market
capitalizations.
- --------------------------------------------------------------------------------
MULTIPLE MANAGERS
Balanced Seeks total return consistent with prudent investment
management; invests in common stocks, fixed income
securities and money market instruments.
- --------------------------------------------------------------------------------
INVESTMENT RISKS AND CONSIDERATIONS
The following are some of the primary risks relevant to an investment in the
Funds and to the securities in which the Funds invest. Investors should read
this Prospectus carefully for a more complete discussion of the risks relating
to an investment in the Funds. The value of all securities and other
instruments held by the Funds vary from time to time in response to a wide
variety of market factors. Consequently, the net asset value per share of each
Fund will vary. The net asset value per share of any Fund may be less at the
time of redemption than it was at the time of investment. Except for the
Balanced Fund, all of the Funds invest primarily in common stock or other types
of equity securities (the "Stock Funds"). Each of the International,
Renaissance, Innovation, and International Growth Funds may invest a portion of
its assets in debt securities and may invest up to 100% of its assets in money
market instruments for temporary defensive purposes. It is the policy of the
other Stock Funds to be as fully invested as practicable in common stock. These
other Stock Funds may not invest in debt securities as a defensive investment
posture (although they may invest in such securities to provide for payment of
expenses and to meet redemption requests), and, therefore, may be more
vulnerable to general declines in stock prices. For further information, see
"Investment Objectives and Policies--Stock Funds.
November 1, 1998 Prospectus 5
<PAGE>
PROSPECTUS SUMMARY (CONTINUED)
Certain of the Funds may invest in debt securities rated lower than Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings
Services ("S&P"). Such securities carry a high degree of credit risk and are
considered speculative by the major rating agencies. Certain Funds may invest
in securities of foreign issuers, which may be subject to additional risk
factors, including foreign currency and political risks, not applicable to
securities of U.S. issuers. Investments by certain Funds in securities of
issuers based in countries with developing economies may pose political,
currency, and market risks greater than, or in addition to, risks of investing
in foreign developed countries. Certain of the Funds' investment techniques may
involve a form of borrowing, which may tend to exaggerate the effect on net
asset value of any increase or decrease in the market value of a Fund's
portfolio and may require liquidation of portfolio positions when it is not
advantageous to do so.
Certain Funds may (but are not required to) use derivative instruments,
including futures, options, options on futures, and swap agreements, for
hedging purposes or as part of their investment strategies. Use of these
instruments may involve certain costs and risks, including the risk that a Fund
could not close out a position when it would be most advantageous to do so, the
risk of an imperfect correlation between the value of the securities being
hedged and the value of the particular derivative instrument, and the risk that
unexpected changes in interest rates may adversely affect the value of a Fund's
investments in particular derivative instruments.
The Funds offer their shares to both retail and institutional investors.
Institutional shareholders, some of whom also may be investment advisory
clients of PIMCO Advisors L.P. or its affiliates, may hold large positions in
certain of the Funds. Such shareholders may on occasion make large redemptions
of their holdings in the Funds to meet their liquidity needs, in connection
with strategic adjustments to their overall portfolio of investments, or for
other purposes. Large redemptions from some Funds could require liquidation of
portfolio positions when it is not most desirable to do so. Liquidation of
portfolio holdings also may cause a Fund to realize taxable capital gains.
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
PIMCO Advisors L.P. ("PIMCO Advisors" or the "Adviser") serves as investment
adviser to the Trust. PIMCO Advisors is one of the largest investment
management firms in the U.S. As of September 30, 1998, PIMCO Advisors and its
subsidiary partnerships had approximately $225.9 billion in assets under
management. Subject to the supervision of the Board of Trustees of the Trust,
the Adviser is responsible for the investment program for the Funds in
accordance with each Fund's investment objective, policies, and restrictions.
For all of the Funds, the Adviser has engaged its affiliates to serve as
Portfolio Managers. These affiliated Portfolio Managers, each of which is a
subsidiary partnership of PIMCO Advisors, are Blairlogie Capital Management
("Blairlogie"), Cadence Capital Management ("Cadence"), Columbus Circle
Investors ("Columbus Circle"), NFJ Investment Group ("NFJ"), Pacific Investment
Management Company ("Pacific Investment Management"), and Parametric Portfolio
Associates ("Parametric"). Under the supervision of PIMCO Advisors, the
Portfolio Managers make determinations with respect to the purchase and sale of
portfolio securities, and they place, in the names of the Funds, orders for
execution of the Funds' transactions. For the Balanced Fund, PIMCO Advisors
determines the allocation of the Fund's assets among common stock and fixed
income securities and reserves the right to allocate a portion of the Fund's
assets for investment in money market instruments and to manage the investment
of such assets. For its services, the Adviser receives fees based on the
average daily net assets of each Fund. The Portfolio Managers are compensated
by the Adviser out of its fees (not by the Trust). See "Management of the
Trust."
On or before March 31, 1999, it is anticipated that PIMCO Advisors will sell
substantially all of its ownership interest in Blairlogie, PIMCO Advisors will
assume full portfolio management responsibility for the International Fund,
6 PIMCO Funds: Multi-Manager Series
<PAGE>
PROSPECTUS SUMMARY (CONTINUED)
and the Emerging Markets and International Developed Funds will reorganize as
series of another mutual fund family and thereafter would not be offered as
series of the Trust. See "Management of the Trust--Portfolio Managers--
Blairlogie."
PURCHASE OF SHARES
This Prospectus describes two classes of shares of each Fund: the
"Institutional Class" and the "Administrative Class." Shares of the
Institutional Class are offered primarily for direct investment by
institutional investors (Institutional Class shares may also be offered through
certain financial intermediaries that charge their customers transaction or
other fees with respect to the customers' investments in the Funds). Shares of
the Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers and other intermediaries. Each Fund pays service
and/or distribution fees to such entities for services they provide to such
Fund's shareholders of that class. Administrative Class shares of certain Funds
are not currently available for investment.
Except with respect to shares of the Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds, shares of the Institutional Class
and Administrative Class of the Funds are offered at the relevant next
determined net asset value with no sales charge or other fee. A "Fund
Reimbursement Fee" is normally charged on purchases of Institutional Class and
Administrative Class shares of the Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds equal to 1.00% of the net asset
value of the shares purchased. See "Purchase of Shares--Fund Reimbursement
Fees." The minimum initial investment for shares of either class is $5 million,
subject to certain exceptions described under "Purchase of Shares." Shares of
either class may also be offered to clients of the Adviser and its affiliates.
Shares of the Micro-Cap Growth and Small-Cap Growth Funds are normally not
available for purchase by new investors, although purchase orders may be
accepted in certain circumstances. Existing shareholders may continue to invest
in these Funds. In addition, Institutional Class and Administrative Class
shares of the Innovation Fund are not offered as of the date of this
Prospectus; however, investment opportunities in this Fund may be available in
the future. These restrictions may be changed or eliminated at any time at the
discretion of the Trust's Board of Trustees. See "Purchase of Shares." Also, as
noted above under "Investment Adviser and Portfolio Managers," it is
anticipated that the Emerging Markets and International Developed Funds will
reorganize as series of another mutual fund family on or before March 31, 1999,
and thereafter would not be offered as series of the Trust. See "Management of
the Trust--Portfolio Managers--Blairlogie."
REDEMPTIONS AND EXCHANGES
Institutional Class and Administrative Class shares of each Fund may be
redeemed without cost (except as noted below) at the relevant net asset value
per share of the class of that Fund next determined after receipt of the
redemption request. The redemption price may be more or less than the purchase
price.
Institutional Class and Administrative Class shares of any Fund may be
exchanged without cost (except as noted below) on the basis of relative net
asset values for shares of the same class of any other Fund or other series of
the Trust offered generally to the public, or for shares of the same class of a
series of PIMCO Funds: Pacific Investment Management Series, an affiliated
mutual fund family composed primarily of fixed income portfolios managed by
Pacific Investment Management. See "Redemption of Shares."
A Fund Reimbursement Fee is normally charged on redemptions and exchanges
involving Institutional Class and Administrative Class shares of the Structured
Emerging Markets and Tax-Efficient Structured Emerging Markets Funds equal to
1.00% of the net asset value of the shares redeemed or exchanged. See
"Redemption of Shares."
November 1, 1998 Prospectus 7
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES (INSTITUTIONAL CLASS AND ADMINISTRATIVE
CLASS):
<TABLE>
<S> <C>
Sales Load Imposed on Purchases....................................... None
Sales Load Imposed on Reinvested Dividends............................ None
Redemption Fee........................................................ None
Exchange Fee.......................................................... None
Fund Reimbursement Fee Imposed on Purchases, Redemptions and
Exchanges:
Structured Emerging Markets and Tax-Efficient Structured Emerging
Markets Funds....................................................... 1.00%*
All Other Funds...................................................... None
</TABLE>
* Unless a waiver applies, investors are charged a "Fund Reimbursement Fee"
in connection with purchases and redemptions involving Institutional Class
and Administrative Class shares of the Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds equal to 1.00% of the net asset
value of the shares purchased or redeemed. The fee also applies to
exchanges involving these Funds. See "Purchase of Shares--Fund
Reimbursement Fees" and "Redemption of Shares."
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS):
<TABLE>
<CAPTION>
ADVISORY ADMINISTRATIVE TOTAL
INSTITUTIONAL CLASS SHARES FEE FEE EXPENSES
-------------------------- -------- -------------- --------
<S> <C> <C> <C>
Emerging Markets Fund...................... 0.85% 0.50% 1.35%
International Developed Fund............... 0.60 0.50 1.10
International Fund......................... 0.55 0.50 1.05
Capital Appreciation Fund.................. 0.45 0.25 0.70
Mid-Cap Growth Fund........................ 0.45 0.25 0.70
Micro-Cap Growth Fund...................... 1.25 0.25 1.50
Small-Cap Growth Fund...................... 1.00 0.25 1.25
Renaissance Fund........................... 0.60 0.25 0.85
Core Equity Fund........................... 0.57 0.25 0.82
Mid-Cap Equity Fund........................ 0.63 0.25 0.88
Innovation Fund............................ 0.65 0.25 0.90
International Growth Fund.................. 0.85 0.50 1.35
Equity Income Fund......................... 0.45 0.25 0.70
Value Fund................................. 0.45 0.25 0.70
Value 25 Fund.............................. 0.50 0.25 0.75
Small-Cap Value Fund....................... 0.60 0.25 0.85
Enhanced Equity Fund....................... 0.45 0.25 0.70
Structured Emerging Markets Fund........... 0.45 0.50 0.95
Tax-Efficient Structured Emerging Markets
Fund...................................... 0.45 0.50 0.95
Tax-Efficient Equity Fund.................. 0.45 0.25 0.70
Balanced Fund.............................. 0.45 0.25 0.70
</TABLE>
<TABLE>
<CAPTION>
SERVICE/
ADVISORY ADMINISTRATIVE 12B-1 TOTAL
ADMINISTRATIVE CLASS SHARES FEE FEE FEE EXPENSES
--------------------------- -------- -------------- -------- --------
<S> <C> <C> <C> <C>
Emerging Markets Fund............. 0.85% 0.50% 0.25% 1.60%
International Developed Fund...... 0.60 0.50 0.25 1.35
International Fund................ 0.55 0.50 0.25 1.30
Capital Appreciation Fund......... 0.45 0.25 0.25 0.95
Mid-Cap Growth Fund............... 0.45 0.25 0.25 0.95
Micro-Cap Growth Fund............. 1.25 0.25 0.25 1.75
Small-Cap Growth Fund............. 1.00 0.25 0.25 1.50
Renaissance Fund.................. 0.60 0.25 0.25 1.10
Core Equity Fund.................. 0.57 0.25 0.25 1.07
Mid-Cap Equity Fund............... 0.63 0.25 0.25 1.13
Innovation Fund................... 0.65 0.25 0.25 1.15
International Growth Fund......... 0.85 0.50 0.25 1.60
Equity Income Fund ............... 0.45 0.25 0.25 0.95
Value Fund........................ 0.45 0.25 0.25 0.95
Value 25 Fund..................... 0.50 0.25 0.25 1.00
Small-Cap Value Fund.............. 0.60 0.25 0.25 1.10
Enhanced Equity Fund.............. 0.45 0.25 0.25 0.95
Structured Emerging Markets Fund.. 0.45 0.50 0.25 1.20
Tax-Efficient Structured Emerging
Markets Fund..................... 0.45 0.50 0.25 1.20
Tax-Efficient Equity Fund......... 0.45 0.25 0.25 0.95
Balanced Fund..................... 0.45 0.25 0.25 0.95
</TABLE>
For a more detailed discussion of the Funds' fees and expenses, see "Fund
Administrator," "Advisory and Administrative Fees," and "Service and
Distribution Fees" under the caption "Management of the Trust."
8 PIMCO Funds: Multi-Manager Series
<PAGE>
EXPENSE INFORMATION (CONTINUED)
EXAMPLE OF FUND EXPENSES:
An investor would pay the following expenses on a $1,000 investment assuming
(1) a hypothetical 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Emerging Markets Fund....................... $14 $43 $74 $162
International Developed Fund................ 11 35 61 134
International Fund.......................... 11 33 58 128
Capital Appreciation Fund................... 7 22 39 87
Mid-Cap Growth Fund......................... 7 22 39 87
Micro-Cap Growth Fund....................... 15 47 82 179
Small-Cap Growth Fund....................... 13 40 69 151
Renaissance Fund............................ 9 27 47 105
Core Equity Fund............................ 8 26 46 101
Mid-Cap Equity Fund......................... 9 28 49 108
Innovation Fund............................. 9 29 50 111
International Growth Fund................... 14 43 74 162
Equity Income Fund.......................... 7 22 39 87
Value Fund.................................. 7 22 39 87
Value 25 Fund............................... 8 24 -- --
Small-Cap Value Fund........................ 9 27 47 105
Enhanced Equity Fund........................ 7 22 39 87
Structured Emerging Markets Fund*........... 29 50 -- --
Tax-Efficient Structured Emerging Markets
Fund*...................................... 29 50 -- --
Tax-Efficient Equity Fund................... 7 22 -- --
Balanced Fund............................... 7 22 39 87
<CAPTION>
ADMINISTRATIVE CLASS SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Emerging Markets Fund....................... $16 $50 $87 $190
International Developed Fund................ 14 43 74 163
International Fund.......................... 13 41 71 157
Capital Appreciation Fund................... 10 30 53 117
Mid-Cap Growth Fund......................... 10 30 53 117
Micro-Cap Growth Fund....................... 18 55 95 206
Small-Cap Growth Fund....................... 15 47 82 179
Renaissance Fund............................ 11 35 61 134
Core Equity Fund............................ 11 34 59 131
Mid-Cap Equity Fund ........................ 12 36 62 137
Innovation Fund............................. 12 37 63 140
International Growth Fund................... 16 50 87 190
Equity Income Fund.......................... 10 30 53 117
Value Fund.................................. 10 30 53 117
Value 25 Fund............................... 10 32 -- --
Small-Cap Value Fund........................ 11 35 61 134
Enhanced Equity Fund........................ 10 30 53 117
Structured Emerging Markets Fund*........... 32 58 -- --
Tax-Efficient Structured Emerging Markets
Fund*...................................... 32 58 -- --
Tax-Efficient Equity Fund................... 10 30 -- --
Balanced Fund............................... 10 30 53 117
</TABLE>
* The Examples for the Structured Emerging Markets and Tax-Efficient
Structured Emerging Markets Funds assume the payment of a Fund
Reimbursement Fee both at the time of purchase and at the time of
redemption even though such fees may be waived for certain investors. See
"Purchase of Shares--Fund Reimbursement Fees" and "Redemption of Shares."
Assuming there is no redemption at the end of the time periods listed, the
Examples for 1 year and 3 years, respectively, for the Structured Emerging
Markets and Tax-Efficient Structured Emerging Markets Funds would be as
follows: Institutional Class Shares--$20 and $40; and Administrative Class
Shares--$22 and $48.
The above tables are provided to assist investors in understanding the
various expenses which may be borne directly or indirectly in connection with
an investment in the Funds. The information is based upon each Fund's current
fees and expenses. This example should not be considered a representation of
past or future expenses or performance. Actual expenses may be higher or lower
than those shown.
November 1, 1998 Prospectus 9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights set forth on the following pages present certain
information and ratios as well as performance information for the Funds that
were operational during the periods listed. Certain information provided below
is included in the June 30, 1998 PIMCO Funds Annual Report (relating to
Institutional Class and Administrative Class shares) and has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon is
also included in such Annual Report. The Annual Report is incorporated by
reference in the Statement of Additional Information and may be obtained from
the Trust without charge. Financial statements and related notes are also
incorporated by reference in the Statement of Additional Information.The
International, Innovation, Value 25, Structured Emerging Markets, Tax-
Efficient Structured Emerging Markets, and Tax-Efficient Equity Funds did not
offer Institutional or Administrative Class Shares during the reporting
periods. Prior to November 1, 1995, the fiscal year end for each Fund listed
below was October 31.
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET REALIZED/ TOTAL DIVIDENDS DIVIDENDS IN DISTRIBUTIONS
VALUE NET UNREALIZED INCOME FROM FROM NET EXCESS OF NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS FUND
Institutional Class
06/30/98 $13.96 $ 0.06 (a) $(3.84)(a) $(3.78) $ 0.00 $ 0.00 $ 0.00
06/30/97 12.66 0.06 (a) 1.30 (a) 1.36 (0.06) 0.00 0.00
11/01/95-06/30/96 11.27 0.03 1.40 1.43 (0.04) 0.00 0.00
10/31/95 16.53 0.07 (4.55) (4.48) (0.06) 0.00 (0.72)
10/31/94 12.27 (0.01) 4.45 4.44 0.00 0.00 (0.18)
06/01/93-10/31/93 10.00 0.03 2.52 2.55 (0.02) 0.00 (0.26)
Administrative Class
06/30/98 13.95 0.09 (a) (3.90)(a) (3.81) 0.00 0.00 0.00
06/30/97 12.63 0.00 (a) 1.32 (a) 1.32 0.00 0.00 0.00
11/01/95-06/30/96 11.24 0.02 (a) 1.40 (a) 1.42 (0.03) 0.00 0.00
10/31/95 16.95 0.00 (4.95) (4.95) (0.05) 0.00 (0.71)
INTERNATIONAL DEVELOPED
FUND (I)
Institutional Class
06/30/98 $13.12 $ 0.16 (a) $ 1.73 (a) $ 1.89 $(0.11) $ 0.00 $(0.58)
06/30/97 12.54 0.10 (a) 1.09 (a) 1.19 0.00 0.00 (0.61)
11/01/95-06/30/96 11.74 0.72 0.72 1.44 (0.07) (0.36) (0.21)
10/31/95 11.86 0.10 0.30 0.40 (0.09) 0.00 (0.43)
10/31/94 10.69 0.09 1.15 1.24 (0.03) 0.00 (0.04)
06/08/93-10/31/93 10.00 0.05 0.69 0.74 (0.04) 0.00 (0.01)
Administrative Class
06/30/98 13.05 0.17 (a) 1.69 (a) 1.86 (0.03) 0.00 (0.58)
06/30/97 12.51 0.06 (a) 1.09 (a) 1.15 0.00 0.00 (0.61)
11/01/95-06/30/96 11.73 0.69 (a) 0.72 (a) 1.41 (0.07) (0.35) (0.21)
11/30/94-10/31/95 11.21 0.02 1.01 1.03 (0.08) 0.00 0.43)
CAPITAL APPRECIATION
FUND
Institutional Class
06/30/98 $21.19 $ 0.15 (a) $ 6.59 (a) $ 6.74 $(0.12) $ 0.00 $(1.68)
06/30/97 18.10 0.24 5.08 5.32 (0.10) 0.00 (2.13)
11/01/95-06/30/96 16.94 0.35 1.99 2.34 (0.15) 0.00 (1.03)
10/31/95 13.34 0.18 3.60 3.78 (0.18) 0.00 0.00
10/31/94 13.50 0.14 (0.12) 0.02 (0.14) 0.00 (0.04)
10/31/93 11.27 0.11 2.73 2.84 (0.11) 0.00 (0.50)
10/31/92 11.02 0.14 1.05 1.19 (0.14) 0.00 (0.72)
03/08/91-10/31/91 10.00 0.09 1.02 1.11 (0.09) 0.00 0.00
Administrative Class
06/30/98 21.16 0.10 (a) 6.55 (a) 6.65 (0.14) 0.00 (1.68)
07/31/96-06/30/97 17.19 0.16 6.03 6.19 (0.09) 0.00 (2.13)
MID-CAP GROWTH FUND
Institutional Class
06/30/98 $20.28 $ 0.11 (a) $ 5.11 (a) $ 5.22 $(0.07) $(0.01) $(1.33)
06/30/97 19.44 (0.07) 5.25 5.18 (0.05) 0.00 (4.29)
11/01/95-06/30/96 18.16 0.32 1.53 1.85 (0.14) 0.00 (0.43)
10/31/95 13.97 0.07 4.19 4.26 (0.07) 0.00 0.00
10/31/94 13.97 0.06 0.01 0.07 (0.06) 0.00 (0.01)
10/31/93 11.29 0.07 2.70 2.77 (0.07) 0.00 (0.02)
10/31/92 10.28 0.10 1.03 1.13 (0.10) 0.00 0.00
08/26/91-10/31/91 10.00 0.02 0.27 0.29 (0.01) 0.00 0.00
Administrative Class
06/30/98 20.24 0.05 (a) 5.08 (a) 5.13 (0.07) (0.01) (1.33)
06/30/97 19.44 (0.13) 5.25 5.12 (0.03) 0.00 (4.29)
11/01/95-06/30/96 18.17 0.28 1.53 1.81 (0.11) 0.00 (0.43)
11/30/94-10/31/95 13.31 0.03 4.85 4.88 (0.02) 0.00 0.00
</TABLE>
- --------
*Annualized
(a)Per share amounts based on average number of shares outstanding during the
period.
(i)Formerly the Blairlogie International Active Fund.
10 PIMCO Funds: Multi-Manager Series
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF NET
DISTRIBUTIONS RATIO OF INVESTMENT
IN EXCESS OF DISTRIBUTIONS TAX BASIS NET ASSET NET ASSETS EXPENSES TO INCOME (LOSS)
NET REALIZED FROM RETURN OF TOTAL VALUE END END OF AVERAGE NET TO AVERAGE PORTFOLIO
CAPITAL GAINS EQUALIZATION CAPITAL DISTRIBUTIONS OF PERIOD TOTAL RETURN PERIOD (000S) ASSETS NET ASSETS TURNOVER RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $ 0.00 $0.00 $ 0.00 $10.18 (27.08)% $ 24,251 1.39% 0.52% 52%
0.00 0.00 0.00 (0.06) 13.96 10.85 52,703 1.45 0.45 74
0.00 0.00 0.00 (0.04) 12.66 12.70 80,545 1.35* 0.84* 74
0.00 0.00 0.00 (0.78) 11.27 (27.70) 73,539 1.35 0.57 118
0.00 0.00 0.00 (0.18) 16.53 36.31 79,620 1.35 (0.06) 79
0.00 0.00 0.00 (0.28) 12.27 25.55 14,625 1.34* 0.64* 37
0.00 0.00 0.00 0.00 10.14 (27.31) 1,339 1.65 0.81 52
0.00 0.00 0.00 0.00 13.95 10.45 117 1.69 0.02 74
0.00 0.00 0.00 (0.03) 12.63 12.70 368 1.61* 0.18 * 74
0.00 0.00 0.00 (0.76) 11.24 (27.96) 830 1.62 0.02 118
$0.00 $ 0.00 $0.00 $(0.69) $14.32 15.69% $122,126 1.11% 1.20% 60%
0.00 0.00 0.00 (0.61) 13.12 10.07 94,044 1.13 0.85 77
0.00 0.00 0.00 (0.64) 12.54 12.54 70,207 1.10* 0.81* 60
0.00 0.00 0.00 (0.52) 11.74 3.83 63,607 1.10 1.10 63
0.00 0.00 0.00 (0.07) 11.86 11.68 22,569 1.10 1.12 89
0.00 0.00 0.00 (0.05) 10.69 7.39 8,299 1.10* 0.91* 20
0.00 0.00 0.00 (0.61) 14.30 15.33 6,299 1.36 1.31 60
0.00 0.00 0.00 (0.61) 13.05 9.77 2,302 1.38 0.52 77
0.00 0.00 0.00 (0.63) 12.51 12.33 5,624 1.35* 1.04* 60
0.00 0.00 0.00 (0.51) 11.73 9.61 675 1.34* 0.50* 58
$0.00 $ 0.00 $0.00 $(1.80) $26.13 32.97% $805,856 0.71% 0.64% 75%
0.00 0.00 0.00 (2.23) 21.19 31.52 536,187 0.71 1.02 87
0.00 0.00 0.00 (1.18) 18.10 14.65 348,728 0.70* 1.33* 73
0.00 0.00 0.00 (0.18) 16.94 28.47 236,220 0.70 1.22 83
0.00 0.00 0.00 (0.18) 13.34 0.15 165,441 0.70 1.17 77
0.00 0.00 0.00 (0.61) 13.50 25.30 84,990 0.70 0.94 81
0.00 (0.08) 0.00 (0.94) 11.27 10.75 36,334 0.70 1.13 134
0.00 0.00 0.00 (0.09) 11.02 11.19 18,813 0.75* 1.55* 41
0.00 0.00 0.00 (1.82) 25.99 32.55 132,384 0.96 0.39 75
0.00 0.00 0.00 (2.22) 21.16 38.26 3,115 0.96* 0.66* 87
$0.00 $ 0.00 $0.00 $(1.41) $24.09 26.16% $437,985 0.71% 0.46% 66%
0.00 0.00 0.00 (4.34) 20.28 30.58 291,374 0.71 0.53 82
0.00 0.00 0.00 (0.57) 19.44 10.37 231,011 0.70* 1.11* 79
0.00 0.00 0.00 (0.07) 18.16 30.54 189,320 0.70 0.43 78
0.00 0.00 0.00 (0.07) 13.97 0.58 121,791 0.70 0.45 61
0.00 0.00 0.00 (0.09) 13.97 24.57 67,625 0.70 0.56 98
0.00 (0.02) 0.00 (0.12) 11.29 10.91 21,213 0.70 0.87 66
0.00 0.00 0.00 (0.01) 10.28 2.98 2,748 0.82* 0.92* 13
0.00 0.00 0.00 (1.41) 23.96 25.75 73,614 0.95 0.22 66
0.00 0.00 0.00 (4.32) 20.24 30.23 2,066 0.96 0.28 82
0.00 0.00 0.00 (0.54) 19.44 10.17 1,071 0.95* 0.89* 79
0.00 0.00 0.00 (0.02) 18.17 36.64 892 0.94* 0.23* 72
</TABLE>
November 1, 1998 Prospectus 11
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NET ASSET NET REALIZED/ TOTAL DIVIDENDS DIVIDENDS IN DISTRIBUTIONS
VALUE NET UNREALIZED INCOME FROM FROM NET EXCESS OF NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MICRO-CAP GROWTH FUND
Institutional Class
06/30/98 $19.85 $(0.11)(a) $ 6.54 (a) $ 6.43 $0.00 $ 0.00 $(2.62)
06/30/97 18.47 0.00 3.41 3.41 0.00 0.00 (2.03)
11/01/95-06/30/96 15.38 0.00 3.43 3.43 0.00 0.00 (0.34)
10/31/95 11.87 (0.04) 3.55 3.51 0.00 0.00 0.00
10/31/94 11.06 (0.03) 0.84 0.81 0.00 0.00 0.00
06/25/93-10/31/93 10.00 0.00 1.07 1.07 0.00 0.00 0.00
Administrative Class
06/30/98 19.78 (0.17)(a) 6.53 (a) 6.36 0.00 0.00 (2.62)
06/30/97 18.46 (0.06) 3.41 3.35 0.00 0.00 (2.03)
04/01/96-06/30/96 16.73 0.03 1.70 1.73 0.00 0.00 0.00
SMALL-CAP GROWTH FUND
Institutional Class
06/30/98 $13.40 $(0.03)(a) $ 2.52 (a) $ 2.49 $0.00 $ 0.00 $(1.88)
06/30/97 20.83 (0.01)(a) 3.17 (a) 3.16 0.00 0.00 (10.59)
11/01/95-06/30/96 21.02 2.02 (0.61) 1.41 0.00 0.00 (1.60)
10/31/95 19.38 (0.05) 3.12 3.07 0.00 0.00 (1.43)
10/31/94 19.15 (0.02) 0.89 0.87 0.00 0.00 (0.64)
10/31/93 15.80 (0.06) 6.19 6.13 0.00 0.00 (2.78)
10/31/92 14.87 0.01 1.50 1.51 (0.01) 0.00 (0.57)
01/07/91-10/31/91 10.00 0.02 5.03 5.05 (0.02) 0.00 (0.16)
Administrative Class
06/30/98 13.41 0.07 (a) 2.51 (a) 2.44 0.00 0.00 (1.88)
06/30/97 20.82 (0.06)(a) 3.24 (a) 3.18 0.00 0.00 (10.59)
11/01/95-06/30/96 21.01 2.02 (a) (0.61)(a) 1.41 0.00 0.00 (1.60)
09/27/95-10/31/95 21.90 (0.02) (0.87) (0.89) 0.00 0.00 0.00
RENAISSANCE FUND
Institutional Class
12/31/97-06/30/98 $16.73 $ 0.05 $ 2.29 $ 2.34 $0.00 $ 0.00 $ 0.00
CORE EQUITY FUND
Institutional Class
06/30/98 $15.55 $ 0.03 (a) $ 6.11 (a) $ 6.14 $0.00 $ 0.00 $(1.30)
06/30/97 13.55 0.03 (a) 2.78 (a) 2.81 (0.02) 0.00 (0.79)
11/01/95-06/30/96 12.72 0.51 0.65 1.16 (0.04) (0.01) (0.28)
12/28/94-10/31/95 10.00 0.07 2.71 2.78 (0.06) 0.00 0.00
Administrative Class
06/30/98 15.53 0.01 (a) 6.10 (a) 6.09 0.00 0.00 (1.30)
06/30/97 13.56 0.00 (a) 2.77 (a) 2.77 (0.01) 0.00 (0.79)
11/01/95-06/30/96 12.73 0.49 0.65 1.14 (0.02) (0.01) (0.28)
05/31/95-10/31/95 11.45 0.02 1.28 1.30 (0.02) 0.00 0.00
MID-CAP EQUITY FUND
Institutional Class
06/30/98 $14.04 $(0.03)(a) $ 3.61 (a) $ 3.58 $0.00 $ 0.00 $(4.09)
06/30/97 14.66 (0.06)(a) 1.31 (a) 1.25 0.00 0.00 (1.87)
11/01/95-06/30/96 12.92 0.49 1.62 2.11 0.00 0.00 (0.37)
12/28/94-10/31/95 10.00 0.02 2.92 2.94 (0.02) 0.00 0.00
Administrative Class
08/21/97-06/30/98 15.27 (0.05)(a) 2.37 (a) 2.32 0.00 0.00 (4.09)
INTERNATIONAL GROWTH
FUND
Institutional Class
12/31/97-06/30/98 $10.00 $ 0.00 (a) $ 3.55 (a) $ 3.55 $0.00 $ 0.00 $ 0.00
</TABLE>
- --------
*Annualized
(a)Per share amounts based on average number of shares outstanding during
the period.
12 PIMCO Funds: Multi-Manager Series
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF NET
DISTRIBUTIONS RATIO OF INVESTMENT
IN EXCESS OF DISTRIBUTIONS TAX BASIS NET ASSET NET ASSETS EXPENSES TO INCOME (LOSS)
NET REALIZED FROM RETURN OF TOTAL VALUE END END OF AVERAGE NET TO AVERAGE PORTFOLIO
CAPITAL GAINS EQUALIZATION CAPITAL DISTRIBUTIONS OF PERIOD TOTAL RETURN PERIOD (000s) ASSETS NET ASSETS TURNOVER RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $0.00 $0.00 $ (2.62) $23.66 33.95% $257,842 1.51% (0.50)% 72%
0.00 0.00 0.00 (2.03) 19.85 20.05 164,139 1.52 (0.49) 84
0.00 0.00 0.00 (0.34) 18.47 22.64 83,973 1.50* (0.45)* 54
0.00 0.00 0.00 0.00 15.38 29.54 69,775 1.50 (0.37) 87
0.00 0.00 0.00 0.00 11.87 7.31 32,605 1.50 (0.25) 59
0.00 0.00 (0.01) (0.01) 11.06 10.81 10,827 1.50* (0.02)* 16
0.00 0.00 0.00 (2.62) 23.52 33.70 4,779 1.76 (0.74) 72
0.00 0.00 0.00 (2.03) 19.78 19.72 2,116 1.77 (0.74) 84
0.00 0.00 0.00 0.00 18.46 10.34 566 1.73* (0.74)* 54
$0.00 $0.00 $0.00 $ (1.88) $14.01 19.33% $ 47,641 1.26% (0.20)% 77%
0.00 0.00 0.00 (10.59) 13.40 22.82 33,390 1.32 (0.05) 129
0.00 0.00 0.00 (1.60) 20.83 7.22 32,954 1.25* (0.20)* 59
0.00 0.00 0.00 (1.43) 21.02 17.39 73,977 1.25 (0.27) 86
0.00 0.00 0.00 (0.64) 19.38 4.62 50,425 1.25 (0.33) 66
0.00 0.00 0.00 (2.78) 19.15 38.80 43,308 1.25 (0.35) 62
0.00 0.00 0.00 (0.58) 15.80 10.20 33,734 1.25 0.09 66
0.00 0.00 0.00 (0.18) 14.87 50.68 33,168 1.29* 0.11* 48
0.00 0.00 0.00 (1.88) 13.97 18.90 981 1.49 (0.51) 77
0.00 0.00 0.00 (10.59) 13.41 23.12 1 1.54 (0.36) 129
0.00 0.00 0.00 (1.60) 20.82 7.18 112 1.50* (0.41)* 59
0.00 0.00 0.00 0.00 21.01 (5.34) 544 1.60* (0.82)* 9
$0.00 $0.00 $0.00 $ 0.00 $19.07 13.99% $ 851 0.86%* 0.55%* 192%
$0.00 $0.00 $0.00 $ (1.30) $20.39 41.83% $ 1,915 0.83% 0.20% 120%
0.00 0.00 0.00 (0.81) 15.55 21.59 6,444 0.87 0.23 139
0.00 0.00 0.00 (0.33) 13.55 9.41 10,452 0.82* 0.53* 73
0.00 0.00 0.00 (0.06) 12.72 27.86 7,791 0.82* 0.79* 123
0.00 0.00 0.00 (1.30) 20.32 41.54 128,666 1.08 (0.07) 120
0.00 0.00 0.00 (0.80) 15.53 21.20 29,332 1.13 (0.03) 139
0.00 0.00 0.00 (0.31) 13.56 9.23 33,575 1.07* 0.28 * 73
0.00 0.00 0.00 (0.02) 12.73 11.34 24,645 1.06* 0.34 * 58
$0.00 $0.00 $0.00 $ (4.09) $13.53 30.40% $ 8,488 0.89% (0.25)% 268%
0.00 0.00 0.00 (1.87) 14.04 9.61 7,591 1.15 (0.43) 202
0.00 0.00 0.00 (0.37) 14.66 16.72 8,378 0.88* (0.32)* 97
0.00 0.00 0.00 (0.02) 12.92 29.34 8,357 0.88* 0.24 * 132
0.00 0.00 0.00 (4.09) 13.50 19.65 2,371 1.13* (0.49)* 268
$0.00 $0.00 $0.00 $ 0.00 $13.55 35.50% $ 6,822 1.36%* 0.08%* 60%
</TABLE>
November 1, 1998 Prospectus 13
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NET ASSET NET REALIZED/ TOTAL DIVIDENDS DIVIDENDS IN DISTRIBUTIONS
VALUE NET UNREALIZED INCOME FROM FROM NET EXCESS OF NET FROM NET
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME INCOME CAPITAL GAINS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME FUND
Institutional Class
06/30/98 $15.41 $0.44 (a) $ 2.75 (a) $ 3.19 $(0.42) $0.00 $(2.09)
06/30/97 14.36 0.40 3.17 3.57 (0.55) 0.00 (1.97)
11/01/95-06/30/96 13.09 0.78 1.31 2.09 (0.34) 0.00 (0.48)
10/31/95 11.75 0.46 1.67 2.13 (0.46) 0.00 (0.33)
10/31/94 11.95 0.42 (0.16) 0.26 (0.42) 0.00 (0.04)
10/31/93 10.92 0.40 1.40 1.80 (0.40) 0.00 (0.37)
10/31/92 10.77 0.45 0.93 1.38 (0.43) 0.00 (0.57)
03/08/91-10/31/91 10.00 0.24 0.92 1.16 (0.24) 0.00 (0.15)
Administrative Class
06/30/98 15.40 0.40 (a) 2.75 (a) 3.15 (0.38) 0.00 (2.09)
06/30/97 14.35 0.27 3.26 3.53 (0.51) 0.00 (1.97)
11/01/95-06/30/96 13.13 0.75 1.31 2.06 (0.36) 0.00 (0.48)
11/30/94-10/31/95 11.12 0.39 2.35 2.74 (0.40) 0.00 (0.33)
VALUE FUND (II)
Institutional Class
06/30/98 $14.81 $0.25 (a) $ 2.47 (a) $ 2.72 $(0.24) $0.00 $(1.63)
06/30/97 12.46 1.05 2.11 3.16 (0.31) 0.00 (0.50)
11/01/95-06/30/96 12.53 0.25 1.62 1.87 (0.17) 0.00 (1.77)
10/31/95 11.55 0.30 2.18 2.48 (0.30) 0.00 (1.20)
10/31/94 11.92 0.30 (0.28) 0.02 (0.29) 0.00 (0.10)
10/31/93 10.05 0.28 2.36 2.64 (0.28) 0.00 (0.49)
12/30/91-10/31/92 10.00 0.24 0.23 0.47 (0.24) 0.00 (0.18)
Administrative Class
08/21/97-06/30/98 15.66 0.19 (a) 1.65 (a) 1.84 (0.22) 0.00 (1.63)
SMALL-CAP VALUE FUND
Institutional Class
06/30/98 $15.78 $0.29 (a) $ 2.50 (a) $ 2.79 $(0.13) $0.00 $(0.76)
06/30/97 14.20 0.46 3.63 4.09 (0.13) 0.00 (2.38)
11/01/95-06/30/96 13.10 0.56 1.49 2.05 (0.21) 0.00 (0.74)
10/31/95 12.07 0.28 1.92 2.20 (0.28) 0.00 (0.89)
10/31/94 12.81 0.29 (0.65) (0.36) (0.29) 0.00 (0.09)
10/31/93 10.98 0.24 2.33 2.57 (0.24) 0.00 (0.50)
10/31/92 10.09 0.22 1.17 1.39 (0.22) 0.00 (0.24)
10/01/91-10/31/91 10.00 0.02 0.10 0.12 (0.03) 0.00 0.00
Administrative Class
06/30/98 15.76 0.25 (a) 2.49 (a) 2.74 (0.11) 0.00 (0.76)
06/30/97 14.20 0.38 3.68 4.06 (0.12) 0.00 (2.38)
11/01/95-06/30/96 13.16 0.54 1.43 1.97 (0.19) 0.00 (0.74)
ENHANCED EQUITY FUND
Institutional Class
06/30/98 $16.46 $0.11 (a) $ 3.91 (a) $ 4.02 $(0.11) $0.00 $(7.73)
06/30/97 15.91 1.18 3.10 4.28 (0.10) 0.00 (3.63)
11/01/95-06/30/96 14.44 0.34 1.67 2.01 (0.16) 0.00 (0.38)
10/31/95 11.99 0.25 2.62 2.87 (0.25) 0.00 (0.17)
10/31/94 12.08 0.25 (0.04) 0.21 (0.25) 0.00 (0.05)
10/31/93 11.76 0.23 0.74 0.97 (0.23) 0.00 (0.42)
10/31/92 10.80 0.16 1.06 1.22 (0.16) 0.00 (0.04)
02/11/91-10/31/91 10.00 0.16 0.80 0.96 (0.16) 0.00 0.00
Administrative Class
08/21/97-06/30/98 17.53 0.05 (a) 2.85 (a) 2.90 (0.11) 0.00 (7.73)
BALANCED FUND (III)
Institutional Class
06/30/98 $11.42 $0.35 (a) $ 1.81 (a) $ 2.16 $(0.34) $0.00 $(1.09)
06/30/97 11.64 0.89 1.21 2.10 (0.36) 0.00 (1.96)
11/01/95-06/30/96 11.89 0.27 0.76 1.03 (0.27) 0.00 (1.01)
10/31/95 10.35 0.44 1.54 1.98 (0.44) 0.00 0.00
10/31/94 10.84 0.34 (0.34) 0.00 (0.34) 0.00 (0.15)
10/31/93 10.42 0.35 0.68 1.03 (0.35) 0.00 (0.26)
06/25/92-10/31/92 10.00 0.12 0.52 0.64 (0.12) 0.00 (0.10)
</TABLE>
- --------
*Annualized
(a) Per share amounts based on average number of shares outstanding during
the period.
(ii) Formerly the NFJ Diversified Low P/E Fund.
(iii) NFJ and Cadence began serving as Portfolio Managers of the portion of
the Balanced Fund allocated for investment in common stocks on August
1, 1996. Prior to August 1, 1996, a different firm served as portfolio
manager.
14 PIMCO Funds: Multi-Manager Series
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF NET
DISTRIBUTIONS RATIO OF INVESTMENT
IN EXCESS OF DISTRIBUTIONS TAX BASIS NET ASSET NET ASSETS EXPENSES TO INCOME (LOSS)
NET REALIZED FROM RETURN OF TOTAL VALUE END END OF AVERAGE NET TO AVERAGE PORTFOLIO
CAPITAL GAINS EQUALIZATION CAPITAL DISTRIBUTIONS OF PERIOD TOTAL RETURN PERIOD (000s) ASSETS NET ASSETS TURNOVER RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $ 0.00 $0.00 $(2.51) $16.09 21.84% $138,650 0.71% 2.71% 45%
0.00 0.00 0.00 (2.52) 15.41 27.67 121,138 0.72 3.03 45
0.00 0.00 0.00 (0.82) 14.36 16.35 116,714 0.70* 3.41 * 52
0.00 0.00 0.00 (0.79) 13.09 19.36 118,015 0.70 3.83 46
0.00 0.00 0.00 (0.46) 11.75 2.25 92,365 0.70 3.77 36
0.00 0.00 0.00 (0.77) 11.95 16.65 67,854 0.70 3.55 39
0.00 (0.23) 0.00 (1.23) 10.92 12.89 30,506 0.70 3.83 47
0.00 0.00 0.00 (0.39) 10.77 11.81 15,628 0.74* 4.18* 62
0.00 0.00 0.00 (2.47) 16.08 21.58 11,699 0.96 2.45 45
0.00 0.00 0.00 (2.48) 15.40 27.40 8,145 0.97 2.79 45
0.00 0.00 0.00 (0.84) 14.35 16.08 6,097 0.95* 3.19 * 52
0.00 0.00 0.00 (0.73) 13.13 25.69 140 0.95* 3.43 * 43
$0.00 $ 0.00 $0.00 $(1.87) $15.66 19.35% $ 83,219 0.71% 1.59% 77%
0.00 0.00 0.00 (0.81) 14.81 26.38 74,613 0.73 2.02 71
0.00 0.00 0.00 (1.94) 12.46 16.24 52,727 0.70* 2.40* 29
0.00 0.00 0.00 (1.50) 12.53 24.98 14,443 0.70 2.50 71
0.00 0.00 0.00 (0.39) 11.55 0.15 15,442 0.70 2.34 44
0.00 0.00 0.00 (0.77) 11.92 26.35 22,930 0.70 2.43 28
0.00 0.00 0.00 (0.42) 10.05 4.68 18,083 0.70* 2.57* 73
0.00 0.00 0.00 (1.85) 15.65 12.71 10,349 0.96* 1.40* 77
$0.00 $ 0.00 $0.00 $(0.89) $17.68 17.77% $ 47,432 0.85% 1.65% 41%
0.00 0.00 0.00 (2.51) 15.78 31.99 34,639 0.90 1.92 48
0.00 0.00 0.00 (0.95) 14.20 16.35 29,017 0.85* 2.12* 35
0.00 0.00 0.00 (1.17) 13.10 19.88 35,093 0.85 2.25 50
0.00 0.00 0.00 (0.38) 12.07 (2.89) 31,236 0.85 2.23 48
0.00 0.00 0.00 (0.74) 12.81 23.60 46,523 0.85 2.05 42
0.00 (0.04) 0.00 (0.50) 10.98 13.75 18,261 0.85 2.16 27
0.00 0.00 0.00 (0.03) 10.09 1.19 5,060 1.09* 3.06* 0
0.00 0.00 0.00 (0.87) 17.63 17.41 10,751 1.10 1.39 41
0.00 0.00 0.00 (2.50) 15.76 31.70 5,916 1.16 1.68 48
0.00 0.00 0.00 (0.93) 14.20 15.64 4,433 1.10* 1.86* 35
$0.00 $ 0.00 $0.00 $(7.84) $12.64 32.33% $ 36,584 0.71% 0.63% 65%
0.00 0.00 0.00 (3.73) 16.46 31.45 44,838 0.74 1.31 91
0.00 0.00 0.00 (0.54) 15.91 14.21 83,425 0.70* 1.58* 53
0.00 0.00 0.00 (0.42) 14.44 24.46 73,999 0.70 1.91 21
0.00 0.00 0.00 (0.30) 11.99 1.83 65,915 0.70 2.20 44
0.00 0.00 0.00 (0.65) 12.08 8.20 46,724 0.70 1.89 15
0.00 (0.06) 0.00 (0.26) 11.76 11.46 36,515 0.70 1.81 17
0.00 0.00 0.00 (0.16) 10.80 9.59 4,451 0.73* 2.14* 0
0.00 0.00 0.00 (7.84) 12.59 23.85 10,409 0.95* 0.47* 65
$0.00 $ 0.00 $0.00 $(1.43) $12.15 19.91% $ 41,222 0.72% 2.91% 186%
0.00 0.00 0.00 (2.32) 11.42 20.37 61,518 0.74 3.33 199
0.00 0.00 0.00 (1.28) 11.64 9.07 82,562 0.70* 3.46* 140
0.00 0.00 0.00 (0.44) 11.89 19.47 72,638 0.70 3.73 43
0.00 0.00 0.00 (0.49) 10.35 0.08 130,694 0.70 3.25 47
0.00 0.00 0.00 (0.61) 10.84 10.06 126,410 0.70 3.10 19
0.00 0.00 0.00 (0.22) 10.42 6.40 99,198 0.70* 3.36* 39
</TABLE>
November 1, 1998 Prospectus 15
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of each Fund are
described below. There can be no assurance that the investment objective of
any Fund will be achieved. Because the market value of each Fund's investments
will change, the net asset value per share of each Fund also will vary.
Specific portfolio securities eligible for purchase by the Funds, investment
techniques that may be used by the Funds, and the risks associated with these
securities and techniques are described more fully under "Characteristics and
Risks of Securities and Investment Techniques" in this Prospectus and
"Investment Objectives and Policies" in the Statement of Additional
Information. For information on other investment policies of the Stock Funds,
see "Investment Objectives and Policies--Stock Funds." This information is
also relevant to an investment in the Balanced Fund because the Common Stock
Segment (as described below) of that Fund is managed in accordance with the
investment policies of the Value and Capital Appreciation Funds.
EMERGING MARKETS FUND seeks long-term growth of capital. The Fund invests
primarily in common stocks of companies located in countries identified as
emerging market countries. The Morgan Stanley Capital International Emerging
Markets Free Index ("MSCI Free Index") and the International Finance
Corporation Emerging Markets Index ("IFC Index") are used as the bases for
choosing the countries in which the Fund invests. However, the Fund is not
limited to the countries and weightings of these indexes. The Portfolio
Manager applies two levels of screening in selecting investments for the Fund.
First, an active country selection model analyzes world markets and assigns a
relative value ranking, or "favorability weighting," to each country in the
relevant country universe to determine markets which are relatively
undervalued. Second, at the stock selection level, quality analysis and value
analysis are applied to each security, assessing variables such as balance
sheet strength and earnings growth (quality factors), and performance relative
to the industry, price to earnings ratios, and price to book ratios (value
factors). This two-level screening method identifies undervalued securities
for purchase as well as provides a sell discipline for fully valued
securities. In selecting securities, the Portfolio Manager considers, to the
extent practicable and on the basis of information available to it for
research, a company's environmental business practices.
For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries (this list
is not exclusive):
Argentina Hungary Peru Sri Lanka
Brazil India Philippines Taiwan
Chile Indonesia Poland Thailand
China Israel Portugal Turkey
Colombia Jordan Romania Venezuela
Czech Malaysia Russia Zimbabwe
Republic Mexico South Africa
Greece Pakistan South Korea
Hong Kong
For purposes of allocating the Fund's investments, a company is considered
to be located in the country in which it is domiciled, in which it is
primarily traded, from which it derives a significant portion of its revenues,
or in which a significant portion of its goods or services are produced.
Most of the foreign securities in which the Fund invests will be denominated
in foreign currencies. The Fund may engage in foreign currency transactions to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar or to the weighting of a particular foreign currency on the
MSCI Free Index or the IFC Index. Such foreign currency transactions may
include forward foreign currency contracts, foreign exchange futures
contracts, and options
16 PIMCO Funds: Multi-Manager Series
<PAGE>
thereon, currency exchange transactions on a spot (i.e., cash) basis, and put
and call options on foreign currencies. Up to 10% of the Fund's assets may be
invested in the securities of other investment companies. The Fund may sell
(write) call and put options. The Fund may utilize stock index futures
contracts and options thereon for hedging purposes and also for investment
purposes. For instance, the Fund may invest in stock index futures contracts
and related options as an alternative to purchasing individual stocks to
adjust its exposure to a particular foreign market. See "Characteristics and
Risks of Securities and Investment Techniques--Derivative Instruments--Index
Futures." The Fund may also engage in equity index swap transactions.
Investing in the securities of foreign issuers, and particularly emerging
market issuers, involves special risks and considerations not typically
associated with investing in U.S. companies. For a discussion of such risks,
see "Characteristics and Risks of Securities and Investment Techniques--
Foreign Securities." Currently, the Portfolio Manager for the Emerging Markets
Fund is Blairlogie. It is anticipated that the Emerging Markets Fund will
reorganize as a series of another mutual fund family on or before March 31,
1999, and thereafter would not be offered as a series of the Trust. See
"Management of the Trust--Portfolio Managers--Blairlogie."
INTERNATIONAL DEVELOPED FUND seeks long-term growth of capital. The Fund
invests primarily in a diversified portfolio of international equity
securities. The Morgan Stanley Capital International EAFE (Europe,
Australasia, Far East) Index ("EAFE Index") is used as a basis for choosing
the countries in which the Fund invests. However, the Fund is not limited to
the countries and weightings of the EAFE Index. Under normal market
conditions, the Fund will invest no more than 35% of its assets in securities
issued by companies located in countries that the Portfolio Manager
determines, on the basis of market capitalization, liquidity, and other
considerations, to have underdeveloped securities markets. The Portfolio
Manager applies two levels of screening in selecting investments for the Fund.
First, an active country selection model analyzes world markets and assigns a
relative value ranking, or "favorability weighting," to each country in the
relevant country universe to determine markets which are relatively
undervalued. Second, at the stock selection level, quality analysis and value
analysis are applied to each security, assessing variables such as balance
sheet strength and earnings growth (quality factors) and performance relative
to the industry, price to earnings ratios, and price to book ratios (value
factors). This two-level screening method identifies undervalued securities
for purchase and also provides a sell discipline for fully valued securities.
In selecting securities, the Portfolio Manager considers, to the extent
practicable and on the basis of information available to it for research, a
company's environmental business practices.
For purposes of allocating the Fund's investments, a company is considered
to be located in the country in which it is domiciled, in which it is
primarily traded, from which it derives a significant portion of its revenues,
or in which a significant portion of its goods or services are produced.
Most of the international equity securities in which the Fund invests will
be traded in foreign currencies. The Fund may engage in foreign currency
transactions to protect itself against fluctuations in currency exchange rates
in relation to the U.S. dollar or to the weighting of a particular foreign
currency on the EAFE Index. Such foreign currency transactions may include
forward foreign currency contracts, foreign exchange futures contracts, and
options thereon, currency exchange transactions on a spot (i.e., cash) basis,
and put and call options on foreign currencies. Up to 10% of the Fund's assets
may be invested in the securities of other investment companies. The Fund may
sell (write) call and put options. The Fund may utilize stock index futures
contracts and options thereon for hedging purposes and also for investment
purposes. For instance, the Fund may invest in stock index futures contracts
and related options as an alternative to purchasing individual stocks to
adjust its exposure to a particular foreign market. See "Characteristics and
Risks of Securities and Investment Techniques--Derivative Instruments--Index
Futures." The Fund may also engage in equity index swap transactions.
November 1, 1998 Prospectus 17
<PAGE>
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. For
a discussion of such risks, see "Characteristics and Risks of Securities and
Investment Techniques--Foreign Securities." Currently, the Portfolio Manager
for the International Developed Fund is Blairlogie. It is anticipated that the
International Developed Fund will reorganize as a series of another mutual
fund family on or before March 31, 1999, and thereafter would not be offered
as a series of the Trust. See "Management of the Trust--Portfolio Managers--
Blairlogie."
INTERNATIONAL FUND seeks capital appreciation through investments in an
international portfolio. Income is an incidental consideration. Under normal
market conditions, at least 65% of the International Fund's total assets will
be invested in common stocks, which may or may not pay dividends, as well as
convertible bonds, convertible preferred stocks, warrants, rights or other
equity securities, for a combination of capital appreciation and income.
Convertible securities may include securities convertible only by certain
classes of investors (which may not include the Fund). The Fund may not invest
in convertible securities which are of less than investment grade quality at
the time of purchase.
The Fund will normally invest in securities traded in developed foreign
securities markets. Particular consideration is given to investments
principally traded in developed North American (other than United States),
Japanese, European, Pacific and Australian securities markets, and in
securities of foreign issuers traded on United States securities markets. The
Fund will also invest in emerging markets, where markets may not yet fully
reflect the potential of the developing economy. There are no prescribed
limits on geographic asset distribution and the Fund has the authority to
invest in securities traded in securities markets of any country in the world.
In allocating the Fund's assets among the various securities markets of any
country in the world, the Portfolio Manager will consider such factors as the
condition and growth potential of the various economies and securities
markets, currency and taxation considerations and other pertinent financial,
social, national and political factors. Under certain adverse investment
conditions, the Fund may restrict the number of securities markets in which
its assets will be invested, although under normal market circumstances the
Fund's investments will include securities principally traded in at least
three different countries. The Fund will not limit its investments to any
particular type or size of company.
The Fund may invest up to 10% of its assets in securities of other
investment companies, such as closed-end management investment companies which
invest in foreign markets. The Fund may also purchase and write call and put
options on securities, securities indexes, and on foreign currencies; enter
into futures contracts and use options on futures contracts, including futures
contracts on foreign currencies; buy or sell foreign currencies; and enter
into forward foreign currency contracts. The Fund may utilize stock index
futures contracts and options thereon for hedging purposes and also for
investment purposes. For instance, the Fund may invest in stock index futures
contacts and related options as an alternative to purchasing individual stocks
to adjust its exposure to a particular foreign market. See "Characteristics
and Risks of Securities and Investment Techniques--Derivative Instruments--
Index Futures."
The Fund will not normally invest in securities of U.S. issuers traded on
U.S. securities markets. However, when the Portfolio Manager believes that
conditions in international securities markets warrant a defensive investment
strategy, the Fund may invest up to 100% of its assets in domestic debt,
foreign debt and equity securities principally traded in the U.S., including
money market instruments, obligations issued or guaranteed by the U.S. or a
foreign government or their respective agencies, authorities or
instrumentalities, or corporate bonds and sponsored American Depository
Receipts.
Investing in the securities of foreign issuers, and particularly emerging
market issuers, involves special risks and considerations not typically
associated with investing in U.S. companies. For a discussion of such risks,
see
18 PIMCO Funds: Multi-Manager Series
<PAGE>
"Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." Currently, the Portfolio Manager for the International Fund is
Blairlogie. On or before March 31, 1999, it is anticipated that PIMCO Advisors
will sell substantially all of its ownership interest in Blairlogie and assume
full portfolio management responsibility for the International Fund. See
"Management of the Trust--Portfolio Managers--Blairlogie."
CAPITAL APPRECIATION FUND seeks growth of capital. The Fund invests
primarily in common stocks of companies that have improving fundamentals (such
as growth of earnings and dividends) and whose stock is reasonably valued by
the market. Stocks for the Fund are selected from a universe of the
approximately 1,000 largest market capitalization stocks, all of which are
those of companies with market capitalizations of at least $1 billion at the
time of investment. The Fund usually invests in approximately 60 to 100 common
stocks. Each issue is screened and ranked using five distinct computerized
models, including: (i) a dividend growth screen, (ii) an equity growth screen,
(iii) an earnings growth screen, (iv) an earnings momentum screen, and (v) an
earnings surprise screen. The Portfolio Manager believes that the models
identify the stocks in the universe exhibiting growth characteristics with
reasonable valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor relative price
performance. The universe is rescreened frequently to obtain a favorable
composition of growth and value characteristics for the entire Fund. The
Portfolio Manager for the Capital Appreciation Fund is Cadence.
MID-CAP GROWTH FUND seeks growth of capital. The Fund invests primarily in
common stocks of middle capitalization companies that have improving
fundamentals (such as growth of earnings and dividends) and whose stock is
reasonably valued by the market. Stocks for the Fund are selected from a
universe of companies with market capitalizations in excess of $500 million at
the time of investment, excluding the 200 companies with the highest market
capitalization. The Fund usually invests in approximately 60 to 100 common
stocks. Each issue is screened and ranked using five distinct computerized
models, including: (i) a dividend growth screen, (ii) an equity growth screen,
(iii) an earnings growth screen, (iv) an earnings momentum screen, and (v) an
earnings surprise screen. The Portfolio Manager believes that the models
identify the stocks in the universe exhibiting growth characteristics with
reasonable valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor relative price
performance. The universe is rescreened frequently to obtain a favorable
composition of growth and value characteristics for the entire Fund. The
Portfolio Manager for the Mid-Cap Growth Fund is Cadence.
MICRO-CAP GROWTH FUND seeks long-term growth of capital. The Fund invests
primarily in common stocks of companies that have improving fundamentals (such
as growth of earnings and dividends) and whose stock is reasonably valued by
the market. The Fund usually invests in approximately 60 to 100 common stocks
selected from a universe of stocks with publicly available market
capitalizations of less than $100 million at the time of investment. Each
issue is screened and ranked using five distinct computerized models,
including: (i) a dividend growth screen, (ii) an equity growth screen, (iii)
an earnings growth screen, (iv) an earnings momentum screen, and (v) an
earnings surprise screen. The Portfolio Manager believes that the models
identify the stocks in the universe exhibiting growth characteristics with
reasonable valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor relative price
performance. The universe is rescreened frequently to obtain a favorable
composition of growth and value characteristics for the entire Fund. The Fund
is intended for aggressive investors seeking above-average gains and willing
to accept the greater risks associated therewith. The Portfolio Manager for
the Micro-Cap Growth Fund is Cadence.
SMALL-CAP GROWTH FUND seeks growth of capital. The Fund invests primarily in
common stocks of companies that have improving fundamentals (such as growth of
earnings and dividends) and whose stock is reasonably valued by the market.
The Fund usually invests in approximately 60 to 100 common stocks selected
from a universe of stocks with
November 1, 1998 Prospectus 19
<PAGE>
market capitalizations of $50 million to $1 billion at the time of investment.
Each issue is screened and ranked using five distinct computerized models,
including: (i) a dividend growth screen, (ii) an equity growth screen, (iii)
an earnings growth screen, (iv) an earnings momentum screen, and (v) an
earnings surprise screen. The Portfolio Manager believes that the models
identify the stocks in the universe exhibiting growth characteristics with
reasonable valuations. Stocks are replaced when they score worse-than-median
screen ranks, have negative earnings surprises, or show poor relative price
performance. The universe is rescreened frequently to obtain a favorable
composition of growth and value characteristics for the entire Fund. The Fund
is intended for aggressive investors seeking above-average gains and willing
to accept the greater risks associated therewith. The Portfolio Manager for
the Small-Cap Growth Fund is Cadence.
RENAISSANCE FUND seeks long-term growth of capital and income. The Fund
invests primarily in common stocks having below-average valuations whose
issuers are experiencing improvements in their business fundamentals. Relative
valuation is determined using a multi-factor approach that examines
characteristics such as price to book, price to earnings and price to cash
flow ratios. Stocks which pass the valuation screen are further analyzed to
identify the key drivers of financial results and catalysts for change which
indicate that a company may demonstrate improving fundamentals in the future.
Stocks which appear likely to exceed consensus expectations are candidates for
addition to the Fund's portfolio. Stocks are sold from the Fund's portfolio
when the Portfolio Manager believes that their ability to exceed investor
expectations has diminished or when their valuations have become excessive.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets (not including Eurodollar certificates of
deposit), which will not exceed 15% of the Fund's assets at the time of
investment. Investing in the securities of foreign issuers involves special
risks and considerations not typically associated with investing in U.S.
securities. For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The Fund may also
purchase and write call and put options on securities and securities indexes;
enter into futures contracts and use options on futures contracts; buy or sell
foreign currencies; and enter into forward foreign currency contracts. The
Portfolio Manager for the Renaissance Fund is Columbus Circle.
CORE EQUITY FUND seeks long-term growth of capital, with income as a
secondary objective. The Fund attempts to exceed the total return performance
of the S&P 500 over a reasonable measurement period. The Fund usually invests
in approximately 40 to 50 common stocks from companies with market
capitalizations in excess of $3 billion at the time of investment. In
selecting securities, the Portfolio Manager uses an investment discipline
called "Positive Momentum & Positive Surprise." It is based on the premise
that companies performing better than expected will have rising securities
prices, while companies producing less than expected results will not. Through
thorough analysis of company fundamentals in the context of the prevailing
economic environment, the companies selected for purchase remain in the Fund
only if they continue to achieve or exceed expectations, and are sold when
business or earnings results are disappointing. Stock selection may include a
significant portion of middle capitalization companies combined with the large
capitalization stocks.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets, which will not exceed 15% of the Fund's
net assets at the time of investment. Investing in the securities of foreign
issuers involves special risks and considerations not typically associated
with investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." The Fund may also purchase and write call and put options on
securities, securities indexes and on foreign currencies; enter into futures
contracts and use options on futures contracts; and enter into forward foreign
currency contracts. The Portfolio Manager for the Core Equity Fund is Columbus
Circle.
20 PIMCO Funds: Multi-Manager Series
<PAGE>
MID-CAP EQUITY FUND seeks long-term growth of capital. The Fund usually
invests in approximately 40 to 60 common stocks from companies with market
capitalizations of $800 million to $3 billion at the time of investment. In
selecting securities, the Portfolio Manager uses an investment discipline
called "Positive Momentum & Positive Surprise." It is based on the premise
that companies performing better than expected will have rising securities
prices, while companies producing less than expected results will not. Through
thorough analysis of company fundamentals in the context of the prevailing
economic environment, the companies selected for purchase remain in the Fund
only if they continue to achieve or exceed expectations, and are sold when
business or earnings results are disappointing. Stock selection may include
companies that have grown rapidly from small capitalization status.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets, which will not exceed 15% of the Fund's
net assets at the time of investment. Investing in the securities of foreign
issuers involves special risks and considerations not typically associated
with investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." The Fund may also purchase and write call and put options on
securities, securities indexes and on foreign currencies; enter into futures
contracts and use options on futures contracts; and enter into forward foreign
currency contracts. The Portfolio Manager for the Mid-Cap Equity Fund is
Columbus Circle.
INNOVATION FUND seeks capital appreciation. No consideration is given to
income. The Fund invests primarily (i.e., at least 65% of its assets) in
common stocks of companies which utilize innovative technologies to gain a
strategic competitive advantage in their industry as well as companies that
provide and service those technologies. Securities will be selected with
minimal emphasis on more traditional factors such as growth potential or value
relative to intrinsic worth. Instead, the Fund will be guided by the theory of
Positive Momentum & Positive Surprise (see "Management of the Trust--Portfolio
Managers--Columbus Circle"), with special emphasis on common stocks of
companies whose perceived strength lies in their use of innovative
technologies in new products, enhanced distribution systems and improved
management techniques. Although the Fund emphasizes the utilization of
technologies, it is not restricted to investment in companies in a particular
business sector or industry.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets (not including Eurodollar certificates of
deposit), which will not exceed 15% of the Fund's assets at the time of
investment. Investing in the securities of foreign issuers involves special
risks and considerations not typically associated with investing in U.S.
companies. For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The Fund may also
purchase and write call and put options on securities and securities indexes;
enter into futures contracts and use options on futures contracts; buy or sell
foreign currencies; and enter into forward foreign currency contracts. The
Portfolio Manager for the Innovation Fund is Columbus Circle.
INTERNATIONAL GROWTH FUND seeks long-term capital appreciation. The Fund
invests in an international portfolio of equity and equity-related securities
of companies the principal activities of which are in countries other than the
United States. The Fund will normally invest in securities traded in foreign
securities markets and in securities of foreign issuers traded on U.S.
securities markets. As noted below, except for temporary defensive
investments, the Fund will not invest in securities of U.S. issuers traded on
U.S. securities markets. Otherwise, there are no prescribed limits on
geographic asset distribution, and the Fund has the authority to invest in
securities traded in securities markets of any country in the world. Under
certain adverse investment conditions, the Fund may restrict the number of
securities markets in which it invests, although under normal market
conditions, the Fund's investments will include securities principally traded
in at least three different countries (not including the U.S.). The Fund will
not limit its investments to any particular type or size of company. In
pursuing its investment objective, under normal market conditions, the Fund
will invest at least 65%
November 1, 1998 Prospectus 21
<PAGE>
of its assets in equity securities of issuers which exhibit growth
characteristics in accordance with the Portfolio Manager's Positive Momentum &
Positive Surprise investment discipline (see "Management of the Trust--
Portfolio Managers--Columbus Circle"). The Fund may also invest in issuers
which do not exhibit growth characteristics, but whose securities are thought
to be undervalued.
The Fund may invest in developed foreign securities markets and in emerging
markets, where markets may not fully reflect the potential of the developing
economy. The Fund may also invest in shares of companies which are not
presently listed but are in the process of being privatized by the government
and shares of companies that are traded in over-the-counter markets or other
types of unlisted securities markets.
The Fund will apply the Portfolio Manager's Positive Momentum & Positive
Surprise investment discipline to international markets (see "Management of
the Trust--Portfolio Managers--Columbus Circle"). Asset allocation decisions
("top down") and individual stock selections ("bottom up") result from
identification of positively surprising fundamental trends. Fundamental
factors considered and their importance vary by security, but include country
factors (e.g., changes in the political environment or funds flows);
macroeconomic factors (e.g., GDP growth, inflation and interest rates); global
secular trends (e.g., global grain shortages or growth in wireless
communications); and industry and company specific factors. Investments are
made when the relevant factors are improving (Positive Momentum) faster than
expected (Positive Surprise). The relevant factors can be country (top down)
or company (bottom up) specific.
The Portfolio Manager believes that securities markets of many nations can
be expected to move relatively independently of one another, because business
cycles and other economic or political events that influence one country's
securities markets may have little effect on the securities markets of other
countries. By investing in an international portfolio, the Fund seeks to
reduce the risks associated with investing in the economy of only one country.
The Fund may invest up to 10% of its assets in securities of other
investment companies, such as closed-end management investment companies which
invest in foreign markets. The Fund may also purchase and write call and put
options on securities, securities indexes, and on foreign currencies; enter
into futures contracts and use options on futures contracts, including futures
contracts on foreign currencies; buy or sell foreign currencies; and enter
into forward foreign currency contracts. The Fund may utilize stock index
futures contracts and options thereon for hedging purposes and also for
investment purposes. For instance, the Fund may invest in stock index futures
contracts and related options as an alternative to purchasing individual
stocks to adjust its exposure to a particular foreign market. See
"Characteristics and Risks of Securities and Investment Techniques--Derivative
Instruments--Index Futures."
The Fund will not normally invest in securities of U.S. issuers traded on
U.S. securities markets. However, when the Portfolio Manager believes that
conditions in international securities markets warrant a defensive investment
strategy, the Fund may temporarily invest up to 100% of its assets in domestic
debt, foreign debt and equity securities principally traded in the U.S.,
including money market instruments, obligations issued or guaranteed by the
U.S. or a foreign government or their respective agencies, authorities or
instrumentalities, or corporate bonds and sponsored American Depository
Receipts. The Fund will not invest in debt securities which are of less than
investment grade quality at the time of purchase (i.e., securities rated Ba or
below by Moody's or BB or below by S&P or, if unrated, considered by the
Portfolio Manager to be of comparable quality).
Investing in the securities of foreign issuers, and particularly emerging
market issuers, involves special risks not typically associated with investing
in U.S. companies. For a discussion of such risks, see "Characteristics and
Risks of Securities and Investment Techniques--Foreign Securities." The
Portfolio Manager for the International Growth Fund is Columbus Circle.
22 PIMCO Funds: Multi-Manager Series
<PAGE>
EQUITY INCOME FUND seeks current income as a primary investment objective,
and long-term growth of capital as a secondary objective. The Fund invests
primarily in common stocks characterized by having below-average price to
earnings ("P/E") ratios and higher dividend yields relative to their industry
groups. In selecting securities, the Portfolio Manager classifies a universe
of approximately 2,000 stocks by industry, each of which has a minimum market
capitalization of $200 million at the time of investment. The universe is then
screened to find the lowest P/E ratios in each industry, subject to
application of quality and price momentum screens. From this group,
approximately 25 stocks with the highest yields are chosen for the Fund. The
universe is then rescreened to find the highest yielding stock in each
industry, subject to application of quality and price momentum screens. From
this group, approximately 25 stocks with the lowest P/E ratios are added to
the Fund. Although quarterly rebalancing is a general rule, replacements are
made whenever an alternative stock within the same industry has a
significantly lower P/E ratio or higher dividend yield than the current Fund
holding. The Portfolio Manager for the Equity Income Fund is NFJ.
VALUE FUND seeks long-term growth of capital and income. The Fund invests
primarily in common stocks characterized by having below-average P/E ratios
relative to their industry groups. In selecting securities, the Portfolio
Manager classifies a universe of approximately 2,000 stocks by industry, each
of which has a minimum market capitalization of $200 million at the time of
investment. The universe is then screened to find the stocks with the lowest
P/E ratios in each industry, subject to application of quality and price
momentum screens. The stocks in each industry with the lowest P/E ratios that
pass the quality and price momentum screens are then selected for the Fund.
The Fund usually invests in approximately 50 stocks. Although quarterly
rebalancing is a general rule, replacements are made whenever an alternative
stock within the same industry has a significantly lower P/E ratio than the
current Fund holding. The Portfolio Manager for the Value Fund is NFJ.
VALUE 25 FUND seeks long-term growth of capital and income. The Fund invests
primarily in a portfolio of approximately 25 common stocks of companies with
medium market capitalizations and below-average P/E ratios relative to their
industry groups. In selecting securities, the Portfolio Manager classifies a
universe of more than 2,000 stocks by industry, each of which has a minimum
market capitalization of $200 million. The universe is then screened to find
stocks with the lowest P/E ratios in each industry, subject to application of
quality, earnings momentum and price momentum screens. Those stocks which pass
the screenings and satisfy the medium-cap size criteria are further analyzed.
Fundamental research is performed on the companies determined by such process
to be the most undervalued. Approximately 25 stocks, diversified across
industries, are selected on an equal-weighted basis for the Fund's portfolio.
Although quarterly rebalancing is a general rule, replacements are made
whenever an alternative stock has a significantly lower P/E ratio than the
current Fund holdings. Because the Fund concentrates on approximately 25
stocks at any one time (and is not as diversified as many stock funds), it is
intended for aggressive investors seeking above-average capital gains and
willing to accept the greater risks associated therewith. The Portfolio
Manager for the Value 25 Fund is NFJ.
SMALL-CAP VALUE FUND seeks long-term growth of capital and income. The Fund
invests primarily in common stocks of companies with market capitalizations
between $50 million and $1 billion at the time of investment. In selecting
securities, the Portfolio Manager divides a universe of up to approximately
2,000 stocks into quartiles based upon P/E ratio. The lowest quartile in P/E
ratio is screened for market capitalizations between $50 million and $1
billion, subject to application of quality and price momentum screens.
Approximately 100 stocks with the lowest P/E ratios are combined in the Fund,
subject to limits on the weighting for any one industry. Although quarterly
rebalancing is a general rule, replacements are made whenever a holding
achieves a higher P/E ratio than the S&P 500's P/E ratio or its industry
average P/E ratio, or when an alternative stock within the same industry has a
significantly lower P/E ratio than the
November 1, 1998 Prospectus 23
<PAGE>
current Fund holding. The Fund is intended for aggressive investors seeking
above-average gains and willing to accept the greater risks associated
therewith. The Portfolio Manager for the Small-Cap Value Fund is NFJ.
ENHANCED EQUITY FUND seeks to provide a total return which equals or exceeds
the total return performance of an index that represents the performance of a
reasonably broad spectrum of common stocks that are publicly traded in the
United States. The Fund currently attempts to equal or exceed the total return
performance of the S&P 500. The Portfolio Manager uses quantitative techniques
to construct a portfolio that consists of some, but not all, of the common
stocks that are represented in the S&P 500. The Fund may invest in common
stocks of foreign issuers if included in the S&P 500. The Fund attempts to
provide risk-controlled exposure to the S&P 500 while adding value through
security selection. The Fund is designed to have no greater volatility than
the S&P 500. Stocks in the S&P 500 are ranked by their exposure to growth and
value factors and combined to create a sector-neutral portfolio which exhibits
above average return potential relative to the S&P 500. Approximately 150
positions are owned by the Fund. Stocks with rising earnings expectations,
reasonable valuation of those earnings and positive investor sentiment are
more heavily weighted. The fundamental inputs used in the stock selection
process include company revenues and cash flow, stock price, reported and
estimated earnings, analyst ratings and earnings estimates revisions. A
computer optimization model is used to achieve diversification and risk
control relative to the S&P 500. Frequent and modest rebalancing assures these
exposures are maintained through time. The Trustees reserve the right to
change, without shareholder approval, the index whose total return the Fund
will attempt to equal or exceed, although it is not anticipated that such a
change would be made in the ordinary course of the Fund's operations. The Fund
may engage in the purchase and writing of options on securities indexes, and
may also invest in stock index futures contracts and options thereon. The
Portfolio Manager for the Enhanced Equity Fund is Parametric.
STRUCTURED EMERGING MARKETS FUND seeks long-term growth of capital. The Fund
invests primarily in equity securities of companies located in, or whose
business relates to, emerging markets. The Portfolio Manager will identify
those markets that it considers to be emerging markets, relying primarily on
those countries listed on the International Finance Corporation Investable
Composite Index (the "IFC Investable Index"). However, the Portfolio Manager
has discretion in identifying other countries that qualify as emerging markets
on the basis of market capitalization and liquidity, as well as their
inclusion, or consideration for inclusion, as emerging market countries in
other broad-based market indexes. The Fund seeks to achieve its objective by
following a disciplined and systematic methodology for selecting and weighting
countries, industries, and stocks. Diversification and consistent exposure to
opportunity are emphasized over tactical timing decisions with regard to
countries, industries, or stocks. A disciplined methodology for maintaining
the allocation to countries, industries, and stocks is utilized in portfolio
composition, rather than discretionary shifting in country and industry
concentration levels. First, countries are selected based upon their level of
development and equity market institutions. GNP per capita, local economic
diversification, and freedom of investment flows are the primary
considerations in country selection decisions. Most countries are assigned an
equal weight in the Fund unless the size of their equity market is
prohibitive; countries with smaller markets (i.e., less than $5 billion of
market capitalization) are assigned one-half of the weight assigned to
countries with larger markets. Second, all stocks in each eligible country are
divided into five broad economic sector groups: financial, industrial,
consumer, utilities, and natural resources. The Portfolio Manager will
generally endeavor to maintain exposure across all five sectors in each
country. Finally, stocks are selected and purchased to fill out the country
and industry structure. Stock purchase candidates are examined for liquidity,
industry representation, performance relative to industry, and long-term
profitability. Under normal market conditions and assuming Fund size of at
least $5 million, the Portfolio Manager will endeavor to maintain investment
exposure to roughly 20 countries and hold in excess of 200 securities in the
Fund. The allocation methodology described above may be changed from time to
time based on evaluations of economic trends by the Portfolio Manager,
consistent with the principles of broad country and company diversification of
the Fund's investments.
24 PIMCO Funds: Multi-Manager Series
<PAGE>
For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries (this list
is not exclusive):
Argentina Greece Mexico Slovenia
Botswana Hungary Morocco South Africa
Brazil India Pakistan South Korea
Chile Indonesia Peru Taiwan
China Israel Philippines Thailand
Colombia Kenya Poland Turkey
Czech Republic Latvia Portugal Venezuela
Egypt Lithuania Romania Zimbabwe
Estonia Mauritius Russia
Ghana Malaysia Slovak Republic
For purposes of allocating the Fund's investments, a company is considered
to be located in the country in which the company is domiciled, and a
company's business "relates to" any emerging market country in which the
company's securities are primarily traded, from which the company derives a
significant portion of its revenues, or in which a significant portion of the
company's goods or services are produced.
Most of the foreign securities in which the Fund invests will be denominated
in foreign currencies. The Fund may engage in foreign currency transactions to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar or to the weighting of a particular foreign currency on the
IFC Investable Index. Such foreign currency transactions may include forward
foreign currency contracts, foreign exchange futures contracts, and options
thereon, currency exchange transactions on a spot (i.e., cash) basis, and put
and call options on foreign currencies. The Fund may sell (write) call and put
options. The Fund may utilize stock index futures contracts and options
thereon for hedging purposes and also for investment purposes. For instance,
the Fund may invest in stock index futures contracts and related options as an
alternative to purchasing individual stocks to adjust its exposure to a
particular foreign market. See "Characteristics and Risks of Securities and
Investment Techniques--Derivative Instruments--Index Futures." The Fund may
also engage in equity index swap transactions.
Investing in securities of foreign issuers, and particularly emerging market
issuers, involves special risks and considerations not typically associated
with investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." The Portfolio Manager for the Structured Emerging Markets Fund is
Parametric.
TAX-EFFICIENT STRUCTURED EMERGING MARKETS FUND has the same investment
objective and policies as the Structured Emerging Markets Fund, except that
the Fund seeks to achieve superior after-tax returns for its shareholders in
part by minimizing the taxes they incur in connection with the Fund's
investment income and realized capital gains by using the strategies described
under "Tax-Efficient Management Strategies" below. While the Fund seeks to
minimize investor taxes associated with the Fund's investment income and
realized capital gains, the Fund may have taxable investment income and may
realize taxable gains from time to time.
Investing in securities of foreign issuers, and particularly emerging market
issuers, involves special risks and considerations not typically associated
with investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risk of Securities and Investment Techniques--Foreign
Securities." The Portfolio Manager for the Tax-Efficient Structured Emerging
Markets Fund is Parametric.
TAX-EFFICIENT EQUITY FUND seeks maximum after-tax growth of capital. The
Fund attempts to provide a total return which exceeds the return of the S&P
500. In addition, the Fund seeks to achieve superior after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Fund's investment income and realized
November 1, 1998 Prospectus 25
<PAGE>
capital gains by using the strategies described under "Tax-Efficient
Management Strategies" below. Notwithstanding these strategies, the Fund may
have taxable investment income and may realize taxable gains from time to
time.
The Fund invests primarily in a broadly diversified portfolio of at least
200 common stocks of companies with larger market capitalizations. In
selecting specific securities, the Portfolio Manager uses a proprietary
quantitative model that ranks companies based on long-term (5-10 years) price
appreciation potential through analysis of such factors as growth of
sustainable earnings and dividend behavior. Securities in the top 50% of the
model's ranking are considered for purchase. The Portfolio Manager's sell
discipline incorporates a focus on reducing the realization of capital gains.
Each sell candidate is evaluated based on its cost, current market value, and
anticipated benefit of replacement. Securities in the bottom 20% of the
model's ranking are considered for sale. The Fund may engage in the purchase
and writing of options on securities indexes and may also invest in stock
index futures contracts and options thereon. The Portfolio Manager for the
Tax-Efficient Equity Fund is Parametric.
Tax-Efficient Management Strategies The Portfolio Manager for the Tax-
Efficient Structured Emerging Markets and Tax-Efficient Equity Funds utilizes
a range of active tax management techniques to minimize taxable distributions
for these Funds, including: low portfolio turnover; emphasis towards low-
dividend, growth-oriented companies; tax lot accounting (identification of
specific shares of securities being sold that have the lowest tax cost); and
regular rebalancing to capture available tax credits. The Tax-Efficient
Structured Emerging Markets and Tax-Efficient Equity Funds will generally seek
to avoid realizing net short-term capital gains and, when realizing gains,
will attempt to realize long-term gains (i.e., gains on securities held for
more than 12 months). The Funds intend to notify each shareholder as to that
portion of his or her capital gain dividends which qualifies for a long-term
tax rate of 20% in the hands of the shareholder. Net short-term capital gains,
when distributed, will be taxed as ordinary income, at graduated rates of up
to 39.6%. When these Funds decide to sell a particular appreciated security,
they will normally select for sale first those share lots with holding periods
exceeding 12 months and among those, the share lots with the highest cost
basis. The Funds may, when prudent, sell securities to realize capital losses
that can be used to offset realized capital gains.
To protect against price declines in securities holdings with large
accumulated capital gains, the Tax-Efficient Structured Emerging Markets and
Tax-Efficient Equity Funds may, to the extent permitted by law, use hedging
techniques such as the purchase of put options, the sale of stock index
futures contracts, and equity swaps. By using these techniques rather than
selling such securities, the Funds can reduce their exposure to price declines
in the securities without realizing substantial capital gains. In limited
circumstances, the Funds may follow the practice of distributing selected
appreciated securities to meet redemptions of certain investors and may,
within certain limits, use the selection of securities distributed to meet
such redemptions as a management tool. By distributing appreciated securities
the Funds can reduce their position in such securities without realizing
capital gains. During periods of net withdrawals by investors, using
distributions of securities could enable the Funds to avoid the forced sale of
securities to raise cash for meeting redemptions.
It is expected that by employing the various tax-efficient management
strategies described above, the Tax-Efficient Structured Emerging Markets and
Tax-Efficient Equity Funds can minimize the extent to which shareholders incur
taxes as a result of realized capital gains. The Funds may nevertheless
realize gains and shareholders will incur tax liability from time to time.
BALANCED FUND seeks total return consistent with prudent investment
management. The Fund attempts to achieve this objective through a management
policy of investing in the following asset classes: common stock, fixed income
securities, and money market instruments. The proportion of the Fund's total
assets allocated among common stocks,
26 PIMCO Funds: Multi-Manager Series
<PAGE>
fixed income securities, and money market instruments will vary from time to
time and will be determined by the Adviser. In determining the allocation of
the Fund's assets among the three asset classes, the Adviser will employ asset
allocation principles which take into account certain economic factors, market
conditions, and the expected relative total return and risk of the various
asset classes. Under normal circumstances, it is anticipated that the Fund
will generally maintain a balance among the types of securities in which it
invests. Thus, the Fund will normally maintain 40% to 65% of its assets in
common stock, at least 25% of its assets in fixed income securities, and less
than 10% of its assets in money market instruments. However, in no event would
the Fund invest in any common stock if, at the time of investment, more than
80% of the Fund's assets would be invested in common stock; in no event would
the Fund invest in a fixed income security (other than a short-term
instrument) if, at the time of investment, more than 80% of the Fund's assets
would be invested in fixed income securities; nor would the Fund invest in a
money market instrument if, at the time of investment, more than 60% of its
assets would be invested in money market instruments.
In managing the Fund, the Adviser uses a specialist approach and has engaged
three of the Trust's Portfolio Managers to manage certain portions of the
Fund's assets. The portion of the assets of the Fund allocated by the Adviser
for investment in common stock (the "Common Stock Segment") will be further
allocated by the Adviser for investment by Cadence and NFJ. The portion of the
Common Stock Segment allocated to Cadence will be managed in accordance with
the investment policies of the Capital Appreciation Fund; the portion
allocated to NFJ will be managed in accordance with the investment policies of
the Value Fund. Allocations of the Common Stock Segment to Cadence and NFJ
will vary from time to time as determined by the Adviser.
The portion of the assets of the Fund allocated by the Adviser for
investment in fixed income securities (the "Fixed Income Securities Segment")
will be managed by Pacific Investment Management. The Fund may invest the
Fixed Income Securities Segment in the following types of securities:
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; corporate debt securities, including convertible securities
and corporate commercial paper; mortgage-related and other asset-backed
securities; inflation-indexed bonds issued by both governments and
corporations; structured notes, including hybrid or "indexed" securities,
catastrophe bonds and loan participations; delayed funding loans and revolving
credit facilities; bank certificates of deposit, fixed time deposits and
bankers' acceptances; repurchase agreements and reverse repurchase agreements;
obligations of foreign governments or their subdivisions, agencies and
instrumentalities; and obligations of international agencies or supranational
entities. Fixed income securities may have fixed, variable, or floating rates
of interest.
The Fund invests the Fixed Income Securities Segment in fixed income
securities of varying maturities. Portfolio holdings will be concentrated in
areas of the bond market (based on quality, sector, coupon or maturity) that
the Portfolio Manager believes to be relatively undervalued. Fixed income
securities in which the Fund may invest will, at the time of investment, be
rated Baa or better by Moody's, BBB or better by S&P or, if not rated by
Moody's or S&P, will be of comparable quality as determined by the Portfolio
Manager, except that up to 10% of the Fixed Income Securities Segment may be
invested in lower rated securities that are rated B or higher by Moody's or
S&P or, if not rated by Moody's or S&P, determined by the Portfolio Manager to
be of comparable quality. High yield fixed income securities rated lower than
Baa by Moody's or BBB by S&P, or of equivalent quality, are not considered to
be investment grade, and are commonly referred to as "junk bonds." Securities
rated below investment grade and comparable unrated securities are subject to
greater risks than higher quality fixed income securities. See
"Characteristics and Risks of Securities and Investment Techniques--High Yield
Securities ("Junk Bonds")." The Fund also may invest up to 20% of the Fixed
Income Securities Segment in securities denominated in foreign currencies, and
may invest beyond this limit in U.S. dollar-denominated securities of foreign
issuers. Investing in securities denominated in foreign currencies and
securities of foreign issuers involves special risks and considerations not
typically associated with investing in U.S.
November 1, 1998 Prospectus 27
<PAGE>
securities. For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities."
Each Portfolio Manager generally invests a portion of its allocation in
liquid securities to facilitate redemptions. In addition, PIMCO Advisors
reserves the right to allocate a portion of the Fund's assets (the "Money
Market Segment") for investment in money market instruments and reserves the
right to manage the investment of such assets. Because of the Fund's flexible
investment policy, portfolio turnover may be greater than for a fund that does
not allocate assets among various types of securities. See "Portfolio
Transactions."
The Fund may engage in the purchase and writing of put and call options on
debt securities and securities indexes and may also purchase or sell interest
rate futures contracts, stock index futures contracts, and options thereon.
The Fund also may enter into swap agreements with respect to foreign
currencies, interest rates, and securities indexes. With respect to securities
of the Fixed Income Securities Segment denominated in foreign currencies, the
Fund may engage in foreign currency exchange transactions by means of buying
or selling foreign currencies on a spot basis, entering into forward foreign
currency contracts, and buying and selling foreign currency options, foreign
currency futures, and options on foreign currency futures. Foreign currency
exchange transactions may be entered into for the purpose of hedging against
foreign currency exchange risk arising from the Fund's investment or
anticipated investment in securities denominated in foreign currencies and for
purposes of increasing exposure to a particular foreign currency or to shift
exposure to foreign currency fluctuations from one country to another.
Duration Under normal circumstances, the average portfolio duration of the
Fixed Income Securities Segment of the Balanced Fund will vary within a three-
to six-year time frame, based on the Portfolio Manager's forecast for interest
rates. Duration is a measure of the expected life of a fixed income security
that was developed as a more precise alternative to the concept of "term to
maturity." Traditionally, a fixed income security's "term to maturity" has
been used as proxy for the sensitivity of the security's price to changes in
interest rates (which is the "interest rate risk" or "volatility" of the
security). However, "term to maturity" measures only the time until a fixed
income security provides its final payment, taking no account of the pattern
of the security's payments prior to maturity. In contrast, duration
incorporates a bond's yield, coupon interest payments, final maturity and call
features into one measure of the average life of a fixed income security on a
present value basis. Duration management is one of the fundamental tools used
by the Portfolio Manager for the Fixed Income Securities Segment of the
Balanced Fund. For more information on investments in fixed income securities,
see "Characteristics and Risks of Securities and Investment Techniques" in
this Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information.
STOCK FUNDS
The Emerging Markets, International Developed, Capital Appreciation, Mid-Cap
Growth, Micro-Cap Growth, Small-Cap Growth, Core Equity, Mid-Cap Equity,
Equity Income, Value, Value 25, Small-Cap Value, Enhanced Equity, Structured
Emerging Markets, Tax-Efficient Structured Emerging Markets, and Tax-Efficient
Equity Funds will each invest primarily (normally at least 65% of its assets)
in common stock. Each of these Funds may maintain a portion of its assets,
which will usually not exceed 10%, in U.S. Government securities, high quality
debt securities (whose maturity or remaining maturity will not exceed five
years), money market obligations, and in cash to provide for payment of the
Fund's expenses and to meet redemption requests. It is the policy of these
Funds to be as fully invested in common stocks as practicable at all times.
This policy precludes these Funds from investing in debt securities as a
defensive investment posture (although these Funds may invest in such
securities to provide for payment of expenses and to meet redemption
requests). Accordingly, investors in these Funds bear the risk of general
declines in stock prices and the risk that a Fund's exposure
28 PIMCO Funds: Multi-Manager Series
<PAGE>
to such declines cannot be lessened by investment in debt securities. The
Funds may also invest in convertible securities, preferred stock, and
warrants, subject to certain limitations.
The International, Renaissance, and Innovation Funds will each invest
primarily (normally at least 65% of its assets) in common stocks, and may also
invest in other equity securities, including preferred stocks and securities
(including debt securities and warrants) convertible into or exercisable for
common stocks. The International Growth Fund will invest primarily in equity
and equity-related securities. Each of these Funds may invest a portion or,
for temporary defensive purposes, up to 100% of its assets in short-term U.S.
Government securities and other money market instruments.
One or more of the Stock Funds may temporarily not be invested primarily in
equity securities immediately following the commencement of operations or
after receipt of significant new monies. While attempting to identify suitable
investments, the Funds may hold assets in cash, short-term U.S. Government
securities, and other money market instruments. Any of the Stock Funds may
temporarily not contain the number of securities in which the Fund normally
invests if the Fund does not have sufficient assets to be fully invested, or
pending the Portfolio Manager's ability to prudently invest new monies.
The Stock Funds may also lend portfolio securities; enter into repurchase
agreements and reverse repurchase agreements (subject to the Funds' investment
limitations described below); purchase and sell securities on a when-issued or
delayed delivery basis; and enter into forward commitments to purchase
securities. All of the Stock Funds may invest in American Depository Receipts
("ADRs"). The Emerging Markets, International Developed, International,
Renaissance, Core Equity, Mid-Cap Equity, Innovation, International Growth,
Structured Emerging Markets, and Tax-Efficient Structured Emerging Markets
Funds may invest in European Depository Receipts ("EDRs") and Global
Depository Receipts ("GDRs"). The Stock Funds that invest primarily in
securities of foreign issuers may invest a portion of their assets in debt
securities and money market obligations issued by U.S. and foreign issuers
that are either U.S. dollar-denominated or denominated in foreign currency.
For more information on these and other investment practices, see
"Characteristics and Risks of Securities and Investment Techniques" in this
Prospectus and "Investment Objectives and Policies" in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of the
International, Renaissance, Innovation, and International Growth Funds and may
not be changed with respect to any such Fund without shareholder approval by
vote of a majority of the outstanding voting securities of that Fund. The
investment objective of each of these Funds and the Value 25, Tax-Efficient
Structured Emerging Markets, and Tax-Efficient Equity Funds is non-fundamental
and may be changed with respect to each such Fund by the Trustees without
shareholder approval. Under the following fundamental restrictions, none of
the International, Renaissance, Innovation, and International Growth Funds
may:
(1) Borrow money in excess of 10% of the value (taken at the lower of cost
or current value) of such Fund's total assets (not including the
amount borrowed) at the time the borrowing is made, and then only from
banks as a temporary measure to facilitate the meeting of redemption
requests (not for leverage) which might otherwise require the untimely
disposition of portfolio investments or for extraordinary or emergency
purposes. Such borrowings will be repaid before any additional
investments are purchased.
(2) Pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 10% of such Fund's total assets (taken at cost) and then
only to secure borrowings permitted by Restriction (1) above. (The
deposit of securities or cash or cash equivalents in escrow in
connection with the writing of covered call or put options,
respectively, is not deemed to be pledges or other encumbrances.) (For
the purpose of this restriction, collateral
November 1, 1998 Prospectus 29
<PAGE>
arrangements with respect to the writing of options, futures contracts,
options on futures contracts, and collateral arrangements with respect
to initial and variation margin are not deemed to be a pledge of assets
and neither such arrangements nor the purchase or sale of futures or
related options are deemed to be the issuance of a senior security).
(3) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under federal securities laws.
(4) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, including securities of real
estate investment trusts, and may purchase securities which are
secured by interests in real estate.
(5) Acquire more than 10% of the voting securities of any issuer, both
with respect to any such Fund and to the Funds to which this policy
relates in the aggregate.
(6) Concentrate more than 25% of the value of its total assets in any one
industry; except that the Innovation Fund will concentrate more than
25% of its assets in companies which use innovative technologies to
gain a strategic, competitive advantage in their industry as well as
companies that provide and service those technologies.
The investment restrictions set forth below are fundamental policies of each
of the Emerging Markets, International Developed, Capital Appreciation, Mid-
Cap Growth, Micro-Cap Growth, Small-Cap Growth, Core Equity, Mid-Cap Equity,
Equity Income, Value, Value 25, Small-Cap Value, Enhanced Equity, Structured
Emerging Markets, Tax-Efficient Structured Emerging Markets, Tax-Efficient
Equity, and Balanced Funds and may not be changed with respect to any such
Fund without shareholder approval by vote of a majority of the outstanding
shares of that Fund. The investment objective of each of these Funds (with the
exception of the Value 25, Tax-Efficient Structured Emerging Markets, and Tax-
Efficient Equity Funds) is also fundamental and may not be changed without
such shareholder approval. Under the following fundamental restrictions, none
of the above-referenced Funds may:
(1) Invest in a security if, as a result of such investment, more than 25%
of its total assets (taken at market value at the time of such
investment) would be invested in the securities of issuers in any
particular industry, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities (or repurchase agreements with respect thereto).
(2) With respect to 75% of its assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at
market value at the time of such investment) would be invested in the
securities of any one issuer, except that this restriction does not
apply to securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.
(3) With respect to 75% of its assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the
time of such investment) of the outstanding voting securities of any
one issuer, except that this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
(4) Purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies in the real estate industry or which invest in real estate
or interests therein.
(5) Purchase or sell commodities or commodities contracts (which, for the
purpose of this restriction, shall not include foreign currency or
forward foreign currency contracts or swap agreements), except that
any such Fund may engage in interest rate futures contracts, stock
index futures contracts, futures contracts based on other financial
instruments or one or more groups of instruments, and on options on
such futures contracts.
30 PIMCO Funds: Multi-Manager Series
<PAGE>
(6) Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio
securities, but it may make margin deposits in connection with
transactions in options, futures, and options on futures, and except
that effecting short sales will be deemed not to constitute a margin
purchase for purposes of this restriction.
(7) Borrow money, or pledge, mortgage or hypothecate its assets, except
that a Fund may (i) borrow from banks or enter into reverse repurchase
agreements, or employ similar investment techniques, and pledge its
assets in connection therewith, but only if immediately after each
borrowing and continuing thereafter, there is asset coverage of 300%
and (ii) enter into reverse repurchase agreements and transactions in
options, futures, options on futures, and forward foreign currency
contracts as described in this Prospectus and in the Statement of
Additional Information (the deposit of assets in escrow in connection
with the writing of covered put and call options and the purchase of
securities on a when-issued or delayed delivery basis and collateral
arrangements with respect to initial or variation margin deposits for
futures contracts, options on futures contracts, and forward foreign
currency contracts will not be deemed to be pledges of such Fund's
assets).
(8) Issue senior securities, except insofar as such Fund may be deemed to
have issued a senior security by reason of borrowing money in
accordance with the Fund's borrowing policies, and except for purposes
of this investment restriction, collateral, escrow, or margin or other
deposits with respect to the making of short sales, the purchase or
sale of futures contracts or related options, purchase or sale of
forward foreign currency contracts, and the writing of options on
securities are not deemed to be an issuance of a senior security.
(9) Lend any funds or other assets, except that such Fund may, consistent
with its investment objective and policies: (a) invest in debt
obligations, including bonds, debentures, or other debt securities,
bankers' acceptances and commercial paper, even though the purchase of
such obligations may be deemed to be the making of loans, (b) enter
into repurchase agreements and reverse repurchase agreements, and (c)
lend its portfolio securities in an amount not to exceed one-third of
the value of its total assets, provided such loans are made in
accordance with applicable guidelines established by the Securities
and Exchange Commission ("SEC") and the Trustees of the Trust.
(10) Act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio
securities, it may be deemed to be an underwriter under the federal
securities laws.
Unless otherwise noted, the remaining restrictions and policies of each Fund
relating to the investment of its assets and activities are non-fundamental
and may be changed without shareholder approval. As indicated above, certain
fundamental investment restrictions do not apply to certain Funds. However,
certain non-fundamental restrictions, set forth in the Statement of Additional
Information, place comparable limitations on these Funds. See "Investment
Restrictions" in the Statement of Additional Information.
Unless otherwise indicated, all limitations applicable to Fund investments
apply only at the time a transaction is entered into. Any subsequent change in
a rating assigned by any rating service to a security (or, if unrated, deemed
to be of comparable quality), or change in the percentage of Fund assets
invested in certain securities or other instruments resulting from market
fluctuations or other changes in a Fund's total assets will not require a Fund
to dispose of an investment until the Adviser or Portfolio Manager determines
that it is practicable to sell or close out the investment without undue
market or tax consequences to the Fund. In the event that ratings services
assign different ratings to the same security, the Adviser or Portfolio
Manager will determine which rating it believes best reflects the security's
quality and risk at that time, which may be the higher of the several assigned
ratings.
November 1, 1998 Prospectus 31
<PAGE>
CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES
The different types of securities and investment techniques used by the
individual Funds all have attendant risks of varying degrees. For example,
with respect to common stock, there can be no assurance of capital
appreciation, and there is a risk of market decline. With respect to debt
securities, including money market instruments, there is the risk that the
issuer of a security may not be able to meet its obligation to make scheduled
interest or principal payments. Because each Fund seeks a different investment
objective and has different investment policies, each is subject to varying
degrees of financial, market, and credit risks. Therefore, investors should
carefully consider the investment objective, investment policies, and
potential risks of any Fund or Funds before investing.
The following describes potential risks associated with different types of
investment techniques that may be used by the individual Funds. For more
detailed information on these investment techniques, as well as information on
the types of securities in which some or all of the Funds may invest, see the
Statement of Additional Information.
SMALL AND MEDIUM CAPITALIZATION STOCKS
Certain of the Funds may invest in common stock of companies with market
capitalizations that are small compared to those of other publicly traded
companies. Generally, small market capitalization is considered to be less
than $1.5 billion and large market capitalization is considered to be more
than $5 billion. Under normal market conditions, the Small-Cap Growth and
Small-Cap Value Funds will invest primarily in companies with market
capitalizations of between $50 million and $1 billion, and the Micro-Cap
Growth Fund will invest primarily in companies with market capitalizations of
less than $100 million. Investments in larger companies present certain
advantages in that such companies generally have greater financial resources,
more extensive research and development, manufacturing, marketing and service
capabilities, and more stability and greater depth of management and technical
personnel. Investments in smaller, less seasoned companies may present greater
opportunities for growth but also may involve greater risks than customarily
are associated with more established companies. The securities of smaller
companies may be subject to more abrupt or erratic market movements than
larger, more established companies. These companies may have limited product
lines, markets or financial resources, or they may be dependent upon a limited
management group. Their securities may be traded in the over-the-counter
market or on a regional exchange, or may otherwise have limited liquidity. As
a result of owning large positions in this type of security, a Fund is subject
to the additional risk of possibly having to sell portfolio securities at
disadvantageous times and prices if redemptions require the Fund to liquidate
its securities positions. In addition, it may be prudent for a Fund with a
relatively large asset size to limit the number of relatively small positions
it holds in securities having limited liquidity in order to minimize its
exposure to such risks, to minimize transaction costs, and to maximize the
benefits of research. As a consequence, as a Fund's asset size increases, the
Fund may reduce its exposure to illiquid small capitalization securities,
which could adversely affect performance.
Many of the Funds may also invest in stocks of companies with medium market
capitalizations. Whether a U.S. issuer's market capitalization is medium is
determined by reference to the capitalization for all issuers whose equity
securities are listed on a United States national securities exchange or which
are reported on NASDAQ. Issuers with market capitalizations within the range
of capitalization of companies included in the S&P Mid Cap 400 Index may be
regarded as being issuers with medium market capitalizations. Such investments
share some of the risk characteristics of investments in stocks of companies
with small market capitalizations described above, although such companies
tend to have longer operating histories, broader product lines and greater
financial resources, and their stocks tend to be more liquid and less volatile
than those of smaller capitalization issuers.
32 PIMCO Funds: Multi-Manager Series
<PAGE>
REPURCHASE AGREEMENTS
For the purposes of maintaining liquidity and achieving income, each Fund
may enter into repurchase agreements, which entail the purchase of a
portfolio-eligible security from a bank or broker-dealer that agrees to
repurchase the security at the Fund's cost plus interest within a specified
time (normally one day). If the party agreeing to repurchase should default,
as a result of bankruptcy or otherwise, the Fund will seek to sell the
securities which it holds, which action could involve procedural costs or
delays in addition to a loss on the securities if their value should fall
below their repurchase price. Those Funds whose investment objectives do not
include the earning of income will invest in repurchase agreements only as a
cash management technique with respect to that portion of the portfolio
maintained in cash. Each Fund will limit its investment in repurchase
agreements maturing in more than seven days consistent with the Fund's policy
on investment in illiquid securities.
REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS
A reverse repurchase agreement may for some purposes be considered borrowing
that involves the sale of a security by a Fund and its agreement to repurchase
the instrument at a specified time and price. The Fund will segregate assets
determined to be liquid by the Adviser or a Portfolio Manager in accordance
with procedures established by the Board of Trustees to cover its obligations
under reverse repurchase agreements. Reverse repurchase agreements will be
subject to the Funds' limitations on borrowings. A Fund also may borrow money
for investment purposes subject to any policies of the Fund currently
described in this Prospectus or in the Statement of Additional Information.
Such a practice will result in leveraging of a Fund's assets. Leverage will
tend to exaggerate the effect on net asset value of any increase or decrease
in the value of a Fund's portfolio and may cause a Fund to liquidate portfolio
positions when it would not be advantageous to do so.
LOANS OF PORTFOLIO SECURITIES
For the purpose of achieving income, each Fund may lend its portfolio
securities to brokers, dealers, and other financial institutions, provided:
(i) the loan is secured continuously by collateral consisting of U.S.
Government securities, cash or cash equivalents (negotiable
certificates of deposit, bankers' acceptances or letters of credit)
maintained on a daily mark-to-market basis in an amount at least equal
to the current market value of the securities loaned;
(ii) the Fund may at any time call the loan and obtain the return of the
securities loaned;
(iii) the Fund will receive any interest or dividends paid on the loaned
securities; and
(iv) the aggregate market value of securities loaned will not at any time
exceed the Fund's limitation on lending its portfolio securities.
Each Fund's performance will continue to reflect changes in the value of the
securities loaned and will also reflect the receipt of either interest,
through investment of cash collateral by the Fund in permissible investments,
or a fee, if the collateral is U.S. Government securities. Securities lending
involves the risk of loss of rights in the collateral or delay in recovery of
the collateral should the borrower fail to return the security loaned or
become insolvent. The Funds may pay lending fees to the party arranging the
loan.
FOREIGN SECURITIES
The Emerging Markets, International Developed, International, International
Growth, Structured Emerging Markets, and Tax-Efficient Structured Emerging
Markets Funds may invest directly in foreign equity securities; U.S. dollar-
or foreign currency-denominated foreign corporate debt securities; foreign
preferred securities; certificates of deposit, fixed time
November 1, 1998 Prospectus 33
<PAGE>
deposits and bankers' acceptances issued by foreign banks; and obligations of
foreign governments or their subdivisions, agencies and instrumentalities,
international agencies and supranational entities. The Renaissance, Core
Equity, Mid-Cap Equity, and Innovation Funds may invest up to 15% of their
respective net assets in securities which are traded principally in securities
markets outside the United States (Eurodollar certificates of deposit are
excluded for purposes of these limitations). The Renaissance and Innovation
Funds may invest without limit in securities of foreign issuers that are
traded in U.S. markets. The Enhanced Equity Fund may invest in common stock of
foreign issuers if included in the index from which stocks are selected. The
Balanced Fund may invest up to 20% of its Fixed Income Securities Segment in
securities denominated in foreign currencies, and may invest beyond this limit
in U.S. dollar-denominated securities of foreign issuers.
All of the Funds may invest in ADRs. In addition, the Emerging Markets,
International Developed, International, Renaissance, Core Equity, Mid-Cap
Equity, Innovation, International Growth, Structured Emerging Markets, and
Tax-Efficient Structured Emerging Markets Funds may invest in EDRs and GDRs.
ADRs are dollar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign issuer, and
are publicly traded on exchanges or over-the-counter in the United States.
EDRs are receipts similar to ADRs and are issued and traded in Europe. GDRs
may be offered privately in the United States and also trade in public or
private markets in other countries.
Investing in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing in
U.S. companies. Shareholders should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations. These risks include: differences in accounting, auditing and
financial reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or exchange control
regulations (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, capital reinvestment, resources, self-sufficiency,
and balance of payments position. The securities markets, values of
securities, yields, and risks associated with securities markets may change
independently of each other. Additionally, foreign securities and dividends
and interest payable on those securities may be subject to foreign taxes,
including taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Additional costs associated
with an investment in foreign securities may include higher custodial fees
than apply to domestic custodial arrangements and transaction costs of foreign
currency conversions. Changes in foreign exchange rates also will affect the
value of securities denominated or quoted in currencies other than the U.S.
dollar.
A Fund's investments in foreign currency denominated debt obligations and
hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Fund's
income distributions to constitute returns of capital for tax purposes or
require the Fund to make distributions exceeding book income to qualify as a
regulated investment company for federal tax purposes.
Certain of the Funds and, in particular, the Emerging Markets, Structured
Emerging Markets, and Tax-Efficient Structured Emerging Markets Funds, may
invest in the securities of issuers based in countries with developing
economies. Investing in developing (or "emerging market") countries involves
certain risks not typically associated with investing in U.S. securities, and
imposes risks greater than, or in addition to, risks of investing in foreign,
developed countries. A number of emerging market countries restrict, to
varying degrees, foreign investment in securities. Repatriation of
34 PIMCO Funds: Multi-Manager Series
<PAGE>
investment income, capital, and the proceeds of sales by foreign investors may
require governmental registration and/or approval in some emerging market
countries. A number of the currencies of emerging market countries have
experienced significant declines against the U.S. dollar in recent years, and
devaluation may occur subsequent to investments in these currencies by a Fund.
Inflation and rapid fluctuations in inflation rates have had, and may continue
to have, negative effects on the economies and securities markets of certain
emerging market countries. Many of the emerging securities markets are
relatively small, have low trading volumes, suffer periods of relative
illiquidity, and are characterized by significant price volatility. There is a
risk in emerging market countries that a future economic or political crisis
could lead to price controls, forced mergers of companies, expropriation or
confiscatory taxation, seizure, nationalization, or creation of government
monopolies, any of which may have a detrimental effect on a Fund's investment.
Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned companies; the difference in,
or lack of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the
United States; and significantly smaller market capitalization of securities
markets. Also, any change in the leadership or politics of emerging market
countries, or the countries that exercise a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and adversely affect existing investment
opportunities.
In addition, emerging securities markets may have different clearance and
settlement procedures, which may be unable to keep pace with the volume of
securities transactions or otherwise make it difficult to engage in such
transactions. Settlement problems may cause a Fund to miss attractive
investment opportunities, hold a portion of its assets in cash pending
investment, or delay in disposing of a portfolio security. Such a delay could
result in possible liability to a purchaser of the security.
Special Risks of Investing in Russian and Other Eastern European Securities
The Emerging Markets, International, International Growth, Structured Emerging
Markets, and Tax-Efficient Structured Emerging Markets Funds may invest a
portion of their assets in securities of issuers located in Russia and in
other Eastern European countries. While investments in securities of such
issuers are subject generally to the same risks associated with investments in
other emerging market countries described above, the political, legal and
operational risks of investing in Russian and other Eastern European issuers,
and of having assets custodied within these countries, may be particularly
acute. A risk of particular note with respect to direct investment in Russian
securities is the way in which ownership of shares of companies is normally
recorded. When a Fund invests in a Russian issuer, it will normally receive a
"share extract," but that extract is not legally determinative of ownership.
The official record of ownership of a company's share is maintained by the
company's share registrar. Such share registrars are completely under the
control of the issuer, and investors are provided with few legal rights
against such registrars. Please refer to "Investment Objectives and Policies--
Foreign Securities" in the Statement of Additional Information for a more
complete description of these and other risks associated with investments in
securities of Russian and other Eastern European issuers.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
November 1, 1998 Prospectus 35
<PAGE>
in different countries, actual or perceived changes in interest rates and
other complex factors, as seen from an international perspective. Currency
exchange rates also can be affected unpredictably by intervention (or the
failure to intervene) by U.S. or foreign governments or central banks, or by
currency controls or political developments in the U.S. or abroad. For
example, significant uncertainty surrounds the proposed introduction of the
euro (a common currency unit for the European Union) in January 1999 and its
effect on the value of securities denominated in local European currencies.
These and other currencies in which the Funds' assets are denominated may be
devalued against the U.S. dollar, resulting in a loss to the Funds. For a more
complete discussion of foreign currency risks (including those associated with
the euro), please see "Investment Objectives and Policies--Foreign Currencies"
in the Statement of Additional Information.
The Emerging Markets, International Developed, International, Renaissance,
Core Equity, Mid-Cap Equity, Innovation, International Growth, Structured
Emerging Markets, Tax-Efficient Structured Emerging Markets, and Balanced
Funds may enter into forward foreign currency exchange contracts to reduce the
risks of adverse changes in foreign exchange rates. In addition, the Emerging
Markets, International Developed, International, International Growth,
Structured Emerging Markets, Tax-Efficient Structured Emerging Markets, and
Balanced Funds may buy and sell foreign currency futures contracts and options
on foreign currencies and foreign currency futures. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. By entering into a forward foreign currency exchange contract, the
Fund "locks in" the exchange rate between the currency it will deliver and the
currency it will receive for the duration of the contract. As a result, a Fund
reduces its exposure to changes in the value of the currency it will deliver
and increases its exposure to changes in the value of the currency it will
exchange into. The effect on the value of a Fund is similar to selling
securities denominated in one currency and purchasing securities denominated
in another. Contracts to sell foreign currency would limit any potential gain
which might be realized by a Fund if the value of the hedged currency
increases. A Fund may enter into these contracts for the purpose of hedging
against foreign exchange risk arising from the Fund's investment or
anticipated investment in securities denominated in foreign currencies.
Suitable hedging transactions may not be available in all circumstances and
there can be no assurance that a Fund will engage in such transactions at any
given time or from time to time. Also, such transactions may not be successful
and may eliminate any chance for a Fund to benefit from favorable fluctuations
in relevant foreign currencies. The Emerging Markets, International Developed,
International, International Growth, Structured Emerging Markets, and Tax-
Efficient Structured Emerging Markets Funds also may enter into these
contracts for purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another.
To the extent that they do so, the Emerging Markets, International Developed,
International, International Growth, Structured Emerging Markets, and Tax-
Efficient Structured Emerging Markets Funds will be subject to the additional
risk that the relative value of currencies will be different than anticipated
by the particular Fund's Portfolio Manager. These Funds may use one currency
(or a basket of currencies) to hedge against adverse changes in the value of
another currency (or a basket of currencies) when exchange rates between the
two currencies are positively correlated. Each Fund will segregate assets
determined to be liquid by the Adviser or a Portfolio Manager in accordance
with procedures established by the Board of Trustees to cover its obligations
under forward foreign currency exchange contracts entered into for non-hedging
purposes.
36 PIMCO Funds: Multi-Manager Series
<PAGE>
HIGH YIELD SECURITIES ("JUNK BONDS")
The Renaissance and Balanced Funds may invest a portion of their assets in
fixed income securities rated lower than Baa by Moody's or lower than BBB by
S&P but rated at least B by Moody's or S&P or, if not rated, determined by the
Portfolio Manager to be of comparable quality. In addition, the Renaissance
Fund may invest in convertible securities rated below B by Moody's or S&P (or,
if unrated, considered by the Portfolio Manager to be of comparable quality).
Securities rated lower than Baa by Moody's or lower than BBB by S&P are
sometimes referred to as "high yield" or "junk" bonds. Investors should
consider the risks associated with high yield securities before investing in
these Funds. Although the Renaissance Fund reserves the right to do so at any
time, as of the date of this Prospectus, it does not invest or have the
present intention to invest more than 5% of its assets in high yield
securities or junk bonds.
Investing in high yield securities involves special risks in addition to the
risks associated with investments in higher rated fixed income securities.
While offering a greater potential opportunity for capital appreciation and
higher yields than investments in higher rated debt securities, high yield
securities typically entail greater potential price volatility and may be less
liquid than investment grade debt. High yield securities may be regarded as
predominately speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Analysis of the creditworthiness of
issuers of high yield securities may be more complex than for issuers of
higher quality debt securities, and achievement of a Fund's investment
objective may, to the extent of its investments in high yield securities,
depend more heavily on the Portfolio Manager's creditworthiness analysis than
would be the case if the Fund were investing in higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities.
For additional discussion of the characteristics of lower rated fixed income
securities, see the Statement of Additional Information. Ratings assigned to
fixed income securities are described in the Appendix to the Statement of
Additional Information.
DERIVATIVE INSTRUMENTS
To the extent permitted by the investment objective and policies of each
Fund, a Fund may purchase and write call and put options on securities,
securities indexes and foreign currencies, and enter into futures contracts
and use options on futures contracts as further described below. In pursuit of
their investment objectives, the Emerging Markets, International Developed,
International, Renaissance, Core Equity, Mid-Cap Equity, Innovation,
International Growth, Structured Emerging Markets, Tax-Efficient Structured
Emerging Markets, Tax-Efficient Equity, and Balanced Funds may engage in the
purchase and writing of call and put options on securities and enter into
futures contracts and options thereon; each of these Funds, along with the
Enhanced Equity Fund, may engage in the purchase and writing of options on
securities indexes and enter into securities index futures contracts and
options thereon. The Funds that may invest in foreign currency denominated
securities may engage in the purchase and writing of call and put options on
foreign currencies. The Emerging Markets, International Developed, Structured
Emerging Markets, Tax-Efficient Structured Emerging Markets, Tax-Efficient
Equity, and Balanced Funds also may enter into swap agreements with respect to
securities indexes. The Balanced Fund may also enter into swap agreements with
respect to foreign currencies and interest rates. The Funds may (but are not
required to) use these techniques to hedge against changes in interest rates,
foreign currency exchange rates or securities prices; and for the Emerging
Markets, International Developed, International, International Growth,
Structured Emerging Markets, and Tax-Efficient Structured Emerging Markets
Funds, to increase exposure to a foreign currency, to shift exposure to
foreign currency fluctuations from one country to another, or as part of their
overall
November 1, 1998 Prospectus 37
<PAGE>
investment strategies. Each Fund will segregate assets determined to be liquid
by the Adviser or a Portfolio Manager in accordance with procedures
established by the Board of Trustees (or, as permitted by applicable
regulation, enter into certain offsetting positions) to cover its obligations
under options, futures, and swaps to limit leveraging of the Fund.
Derivative instruments are considered for these purposes to consist of
securities or other instruments whose value is derived from or related to the
value of some other instrument or asset, and not to include those securities
whose payment of principal and/or interest depends upon cash flows from
underlying assets, such as mortgage-related or asset-backed securities. See
"Mortgage-Related and Other Asset-Backed Securities." The value of some
derivative instruments in which the Funds may invest may be particularly
sensitive to changes in prevailing interest rates, and, like the other
investments of the Funds, the ability of a Fund to successfully utilize these
instruments may depend in part upon the ability of the Portfolio Manager to
forecast interest rates and other economic factors correctly. If the Portfolio
Manager incorrectly forecasts such factors and has taken positions in
derivative instruments contrary to prevailing market trends, the Funds could
be exposed to the risk of loss.
The Funds might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If the Portfolio
Manager incorrectly forecasts interest rates, market values or other economic
factors in utilizing a derivatives strategy for a Fund, the Fund might have
been in a better position if it had not entered into the transaction at all.
Also, suitable derivative transactions may not be available in all
circumstances. The use of these strategies involves certain special risks,
including a possible imperfect correlation, or even no correlation, between
price movements of derivative instruments and price movements of related
investments. While some strategies involving derivative instruments can reduce
the risk of loss, they can also reduce the opportunity for gain or even result
in losses by offsetting favorable price movements in related investments or
otherwise, due to the possible inability of a Fund to purchase or sell a
portfolio security at a time that otherwise would be favorable or the possible
need to sell a portfolio security at a disadvantageous time because the Fund
is required to maintain asset coverage or offsetting positions in connection
with transactions in derivative instruments, and the possible inability of a
Fund to close out or to liquidate its derivatives positions. In addition, a
Fund's use of such instruments may cause the Fund to realize higher amounts of
short-term capital gains (generally taxed at ordinary income tax rates) than
if the Fund had not used such instruments.
Options on Securities, Securities Indexes, and Currencies Certain Funds may
purchase put options on securities. One purpose of purchasing put options is
to protect holdings in an underlying or related security against a substantial
decline in market value. These Funds may also purchase call options on
securities. One purpose of purchasing call options is to protect against
substantial increases in prices of securities the Fund intends to purchase
pending its ability to invest in such securities in an orderly manner. A Fund
may sell put or call options it has previously purchased, which could result
in a net gain or loss depending on whether the amount realized on the sale is
more or less than the premium and other transaction costs paid on the put or
call option which is sold. A Fund may write a call or put option only if the
option is "covered" by the Fund holding a position in the underlying
securities or by other means which would permit immediate satisfaction of the
Fund's obligation as writer of the option. Prior to exercise or expiration, an
option may be closed out by an offsetting purchase or sale of an option of the
same series.
The purchase and writing of options involves certain risks. During the
option period, the covered call writer has, in return for the premium on the
option, given up the opportunity to profit from a price increase in the
underlying security above the exercise price, but, as long as its obligation
as a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot
effect a
38 PIMCO Funds: Multi-Manager Series
<PAGE>
closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying security at the exercise price. If a
put or call option purchased by the Fund is not sold when it has remaining
value, and if the market price of the underlying security remains equal to or
greater than the exercise price (in the case of a put), or remains less than
or equal to the exercise price (in the case of a call), the Fund will lose its
entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security. There can be no assurance that a liquid market
will exist when a Fund seeks to close out an option position. Furthermore, if
trading restrictions or suspensions are imposed on the options markets, a Fund
may be unable to close out a position.
For each of the International, Renaissance, Innovation, and International
Growth Funds, in the case of a written call option on a securities index, the
Fund will own corresponding securities whose historic volatility correlates
with that of the index.
The Emerging Markets, International Developed, International, Core Equity,
Mid-Cap Equity, International Growth, Structured Emerging Markets, Tax-
Efficient Structured Emerging Markets, and Balanced Funds may buy or sell put
and call options on foreign currencies as a hedge against changes in the value
of the U.S. dollar (or another currency) in relation to a foreign currency in
which a Fund's securities may be denominated. Currency options traded on U.S.
or other exchanges may be subject to position limits which may limit the
ability of a Fund to reduce foreign currency risk using such options.
Over-the-counter options in which certain Funds may invest differ from
traded options in that they are two-party contracts, with price and other
terms negotiated between buyer and seller, and generally do not have as much
market liquidity as exchange-traded options. The Funds may be required to
treat as illiquid over-the-counter options purchased and securities being used
to cover certain written over-the-counter options.
Swap Agreements The Emerging Markets, International Developed, Structured
Emerging Markets, Tax-Efficient Structured Emerging Markets, and Tax-Efficient
Equity Funds may enter into equity index swap agreements for purposes of
gaining exposure to the stocks making up an index of securities without
actually purchasing those stocks. The Balanced Fund may enter into swap
agreements to hedge against changes in interest rates, foreign currency
exchange rates or securities prices. Swap agreements are two-party contracts
entered into primarily by institutional investors for periods ranging from a
few weeks to more than one year. In a standard swap transaction, two parties
agree to exchange the returns (or differentials in rates of return) earned or
realized on particular predetermined investments or instruments, which may be
adjusted for an interest factor. The gross returns to be exchanged or
"swapped" between the parties are generally calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, or in a "basket" of
securities representing a particular index.
Most swap agreements entered into by the Funds calculate the obligations of
the parties to the agreement on a "net basis." Consequently, a Fund's current
obligations (or rights) under a swap agreement will generally be equal only to
the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the "net
amount"). A Fund's current obligations under a swap agreement will be accrued
daily (offset against amounts owed to the Fund), and any accrued but unpaid
net amounts owed to a swap counterparty will be covered by the segregation of
assets determined to be liquid by the Portfolio Manager in accordance with
procedures established by the Board of Trustees to limit any potential
leveraging of the Fund's portfolio. Obligations under swap agreements so
covered will not be construed to be "senior securities" for purposes of a
Fund's investment restriction
November 1, 1998 Prospectus 39
<PAGE>
concerning senior securities. A Fund will not enter into a swap agreement with
any single party if the net amount owed or to be received under existing
contracts with that party would exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the Portfolio Manager's ability to predict
correctly whether certain types of investments are likely to produce greater
returns than other investments. Because they are two-party contracts and
because they may have terms of greater than seven days, swap agreements may be
considered to be illiquid investments. Moreover, a Fund bears the risk of loss
of the amount expected to be received under a swap agreement in the event of
the default or bankruptcy of a swap agreement counterparty. The Funds will
enter into swap agreements only with counterparties that meet certain
standards for creditworthiness (generally, such counterparties would have to
be eligible counterparties under the terms of the Funds' repurchase agreement
guidelines). The swaps market is a relatively new market and is largely
unregulated. It is possible that developments in the swaps market, including
potential government regulation, could adversely affect a Fund's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
Futures Contracts and Options on Futures Contracts Certain Funds may enter
into futures contracts and options thereon. The Balanced Fund may invest in
interest rate futures contracts and options thereon. The Emerging Markets,
International Developed, International, Core Equity, Mid-Cap Equity,
International Growth, Structured Emerging Markets, Tax-Efficient Structured
Emerging Markets, and Balanced Funds may invest in foreign exchange futures
contracts and options thereon ("futures options") that are traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted on an
automated quotation system. These Funds may engage in such futures
transactions as an adjunct to their securities activities.
There are several risks associated with the use of futures and futures
options for hedging purposes. There can be no guarantee that there will be a
correlation between price movements in the hedging vehicle and in the
portfolio securities being hedged. An incorrect correlation could result in a
loss on both the hedged securities in a Fund and the hedging vehicle, so that
the portfolio return might have been greater had hedging not been attempted.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures contract or a futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and without a significant trading history. As a result, there
is no assurance that an active secondary market will develop or continue to
exist. Lack of a liquid market for any reason may prevent a Fund from
liquidating an unfavorable position, and the Fund would remain obligated to
meet margin requirements until the position is closed.
Index Futures The Emerging Markets, International Developed, International,
Renaissance, Core Equity, Mid-Cap Equity, Innovation, International Growth,
Enhanced Equity, Structured Emerging Markets, Tax-Efficient Structured
Emerging Markets, Tax-Efficient Equity, and Balanced Funds may purchase and
sell futures contracts on various securities indexes ("Index Futures") and
related options for hedging purposes and for investment purposes. A Fund's
purchase and sale of Index Futures is limited to contracts and exchanges which
have been approved by the Commodity Futures Trading Commission ("CFTC").
Each of the Emerging Markets, International Developed, International,
International Growth, Structured Emerging Markets, and Tax-Efficient
Structured Emerging Markets Funds may invest to a significant degree in Index
Futures on stock indexes and related options (including those which may trade
outside of the United States) as an alternative to purchasing individual
stocks in order to adjust the Fund's exposure to a particular market. These
Funds may invest in
40 PIMCO Funds: Multi-Manager Series
<PAGE>
Index Futures and related options when a Portfolio Manager believes that there
are not enough attractive securities available to maintain the standards of
diversification and liquidity set for a Fund pending investment in such
securities if or when they do become available. Through the use of Index
Futures and related options, a Fund may diversify risk in its portfolio
without incurring the substantial brokerage costs which may be associated with
investment in the securities of multiple issuers. A Fund may also avoid
potential market and liquidity problems which may result from increases in
positions already held by the Fund.
A Fund may close open positions on the futures exchanges on which Index
Futures are traded at any time up to and including the expiration day. All
positions which remain open at the close of the last business day of the
contract's life are required to settle on the next business day (based upon
the value of the relevant index on the expiration day), with settlement made
with the appropriate clearing house. Because the specific procedures for
trading foreign stock Index Futures on futures exchanges are still under
development, additional or different margin requirements as well as settlement
procedures may be applicable to foreign stock Index Futures at the time a Fund
purchases such instruments.
Positions in Index Futures may be closed out by a Fund only on the futures
exchanges upon which the Index Futures are then traded. There can be no
assurance that a liquid market will exist for any particular contract at any
particular time. Also, the price of Index Futures may not correlate perfectly
with movement in the relevant index due to certain market distortions. First,
all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the index and
futures markets. Second, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market, and as a
result, the futures market may attract more speculators than does the
securities market. Increased participation by speculators in the futures
market may also cause temporary price distortions. In addition, trading hours
for foreign stock Index Futures may not correspond perfectly to hours of
trading on the foreign exchange to which a particular foreign stock Index
Future relates. This may result in a disparity between the price of Index
Futures and the value of the relevant index due to the lack of continuous
arbitrage between the Index Futures price and the value of the underlying
index.
The Funds may only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. Each Fund may use
futures contracts and related options for "bona fide hedging" purposes, as
such term is defined in applicable regulations of the CFTC, or, with respect
to positions in futures and related options that do not qualify as "bona fide
hedging" positions, may enter such positions only to the extent that aggregate
initial margin deposits plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-the-money,"
would not exceed 5% of the Fund's net assets.
SHORT SALES
Each Fund may from time to time make short sales involving securities held
in the Fund's portfolio or which the Fund has the right to acquire without the
payment of further consideration. For these purposes, a Fund may also hold or
have the right to acquire securities which, without the payment of any further
consideration, are convertible into or exchangeable for the securities sold
short. Short sales expose the Fund to the risk that it will be required to
acquire, convert or exchange securities to cover its short position at a time
when the securities sold short have appreciated in value, thus resulting in a
loss to the Fund.
November 1, 1998 Prospectus 41
<PAGE>
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT TRANSACTIONS
Each Fund may purchase securities which it is eligible to purchase on a
when-issued basis, may purchase and sell such securities for delayed delivery
and may make contracts to purchase securities for a fixed price at a future
date beyond normal settlement time (forward commitments). When-issued
transactions, delayed delivery purchases and forward commitments involve a
risk of loss if the value of the securities declines prior to the settlement
date, which risk is in addition to the risk of decline in the value of the
Fund's other assets. Typically, no income accrues on securities a Fund has
committed to purchase prior to the time delivery of the securities is made,
although a Fund may earn income on securities it has segregated.
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES
All Funds that may purchase debt securities for investment purposes (and in
particular the Balanced Fund) may invest in mortgage-related securities, and
in other asset-backed securities (unrelated to mortgage loans) that are
offered to investors currently or in the future. The value of some mortgage-
related or asset-backed securities in which the Funds invest may be
particularly sensitive to changes in prevailing interest rates, and, like
other fixed income investments, the ability of a Fund to successfully utilize
these instruments may depend in part upon the ability of the Portfolio Manager
to forecast interest rates and other economic factors correctly.
Mortgage Pass-Through Securities are securities representing interests in
"pools" of mortgage loans secured by residential or commercial real property
in which payments of both interest and principal on the securities are
generally made monthly, in effect "passing through" monthly payments made by
the individual borrowers on the mortgage loans which underlie the securities
(net of fees paid to the issuer or guarantor of the securities). Early
repayment of principal on some mortgage-related securities (arising from
prepayments of principal due to sale of the underlying property, refinancing,
or foreclosure, net of fees and costs which may be incurred) may expose a Fund
to a lower rate of return upon reinvestment of principal. Also, if a security
subject to prepayment has been purchased at a premium, the value of the
premium would be lost in the event of prepayment. Like other fixed income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates are declining, the value
of mortgage-related securities with prepayment features may not increase as
much as other fixed income securities. The rate of prepayments on underlying
mortgages will affect the price and volatility of a mortgage-related security,
and may have the effect of shortening or extending the effective maturity of
the security beyond what was anticipated at the time of purchase. To the
extent that unanticipated rates of prepayment on underlying mortgages increase
the effective maturity of a mortgage-related security, the volatility of such
security can be expected to increase.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA")); or
guaranteed by agencies or instrumentalities of the U.S. Government (in the
case of securities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are
supported only by the discretionary authority of the U.S. Government to
purchase the agency's obligations). Mortgage-related securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
42 PIMCO Funds: Multi-Manager Series
<PAGE>
Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-related
instruments. Similar to a bond, interest and pre-paid principal on a CMO are
paid, in most cases, on a monthly basis. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are
structured into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class; investors holding
the longer maturity classes receive principal only after the first class has
been retired. CMOs that are issued or guaranteed by the U.S. Government or by
any of its agencies or instrumentalities will be considered U.S. Government
securities by a Fund, while other CMOs, even if collateralized by U.S.
Government securities, will have the same status as other privately issued
securities for purposes of applying a Fund's diversification tests.
Commercial Mortgage-Backed Securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property.
The market for commercial mortgage-backed securities developed more recently
and in terms of total outstanding principal amount of issues is relatively
small compared to the market for residential single-family mortgage-backed
securities. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans. These risks reflect the effects of local and other
economic conditions on real estate markets, the ability of tenants to make
loan payments, and the ability of a property to attract and retain tenants.
Commercial mortgage-backed securities may be less liquid and exhibit greater
price volatility than other types of mortgage-related or asset-backed
securities.
Mortgage-Related Securities include securities other than those described
above that directly or indirectly represent a participation in, or are secured
by and payable from, mortgage loans on real property, such as CMO residuals or
stripped mortgage-backed securities ("SMBS"), and may be structured in classes
with rights to receive varying proportions of principal and interest.
A common type of SMBS will have one class receiving some of the interest and
most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the interest-only,
or "IO" class), while the other class will receive all of the principal (the
principal-only, or "PO" class). The yield to maturity on an IO class is
extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on a Fund's yield to maturity from
these securities. For a discussion of the characteristics of some of these
instruments, see the Statement of Additional Information.
CONVERTIBLE SECURITIES
Many of the Funds may invest in convertible securities. Convertible
securities are generally preferred stocks or fixed income securities that are
convertible into common stock at either a stated price or a stated rate. The
price of the convertible security will normally vary in some proportion to
changes in the price of the underlying common stock because of this conversion
feature. A convertible security will normally also provide a fixed income
stream. For this reason, the convertible security may not decline in price as
rapidly as the underlying common stock.
A Fund's Portfolio Manager will select convertible securities to be
purchased by the Fund based primarily upon its evaluation of the fundamental
investment characteristics and growth prospects of the issuer of the security.
As a fixed income security, a convertible security tends to increase in market
value when interest rates decline and to decrease in
November 1, 1998 Prospectus 43
<PAGE>
value when interest rates rise. While convertible securities generally offer
lower interest or dividend yields than non-convertible fixed income securities
of similar quality, their value tends to increase as the market value of the
underlying stock increases and to decrease when the value of the underlying
stock decreases.
The Renaissance Fund may invest in so-called "synthetic convertible
securities," which are composed of two or more different securities whose
investment characteristics, taken together, resemble those of convertible
securities. For example, the Renaissance Fund may purchase a non-convertible
debt security and a warrant or option. The synthetic convertible differs from
the true convertible security in several respects. Unlike a true convertible
security, which is a single security having a unitary market value, a
synthetic convertible comprises two or more separate securities, each with its
own market value. Therefore, the "market value" of a synthetic convertible is
the sum of the values of its fixed income component and its convertible
component. For this reason, the values of a synthetic convertible and a true
convertible security may respond differently to market fluctuations.
INVESTMENT IN INVESTMENT COMPANIES
The Emerging Markets, International Developed, International, and
International Growth Funds may each invest up to 10% of its assets in
securities of other investment companies, such as closed-end management
investment companies, or in pooled accounts or other investment vehicles which
invest in foreign markets. As a shareholder of an investment company, these
Funds may indirectly bear service and other fees which are in addition to the
fees the Funds pay their service providers.
CREDIT AND MARKET RISK OF FIXED INCOME SECURITIES
All fixed income securities are subject to market risk and credit risk.
Market risk relates to market-induced changes in a security's value, usually
as a result of changes in interest rates. The value of a Fund's investments in
fixed income securities will change as the general level of interest rates
fluctuate. During periods of falling interest rates, the value of a Fund's
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the value of a Fund's fixed income securities generally
decline. Credit risk relates to the ability of the issuer to make payments of
principal and interest.
MONEY MARKET INSTRUMENTS
Each of the Funds may invest at least a portion of its assets in the
following kinds of money market instruments:
(1) short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other bank
obligations rated in the two highest rating categories by at least
two NRSROs, or, if rated by only one NRSRO, in such agency's two
highest grades, or, if unrated, determined to be of comparable
quality by the Adviser or a Portfolio Manager. Bank obligations
must be those of a bank that has deposits in excess of $2 billion
or that is a member of the Federal Deposit Insurance Corporation. A
Fund may invest in obligations of U.S. branches or subsidiaries of
foreign banks ("Yankee dollar obligations") or foreign branches of
U.S. banks ("Eurodollar obligations");
(3) commercial paper rated in the two highest rating categories by at
least two NRSROs, or, if rated by only one NRSRO, in such agency's
two highest grades, or, if unrated, determined to be of comparable
quality by the Adviser or a Portfolio Manager;
44 PIMCO Funds: Multi-Manager Series
<PAGE>
(4) corporate obligations with a remaining maturity of 397 days or less
whose issuers have outstanding short-term debt obligations rated in
the highest rating category by at least two NRSROs, or, if rated by
only one NRSRO, in such agency's highest grade, or, if unrated,
determined to be of comparable quality by the Adviser or a
Portfolio Manager; and
(5) repurchase agreements with domestic commercial banks or registered
broker-dealers.
ILLIQUID SECURITIES
Each Fund may invest in securities that are illiquid so long as no more than
15% of the net assets of the Fund (taken at market value at the time of
investment) would be invested in such securities. Certain illiquid securities
may require pricing at fair value as determined in good faith under the
supervision of the Board of Trustees. A Portfolio Manager may be subject to
significant delays in disposing of illiquid securities, and transactions in
illiquid securities may entail registration expenses and other transaction
costs that are higher than those for transactions in liquid securities.
The term "illiquid securities" for this purpose means securities that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which a Fund has valued the securities. Illiquid
securities are considered to include, among other things, written over-the-
counter options, securities or other liquid assets being used as cover for
such options, repurchase agreements with maturities in excess of seven days,
certain loan participation interests, fixed time deposits which are not
subject to prepayment or provide for withdrawal penalties upon prepayment
(other than overnight deposits), securities that are subject to legal or
contractual restrictions on resale (such as privately placed debt securities),
and other securities which legally or in the Adviser's or a Portfolio
Manager's opinion may be deemed illiquid (not including securities issued
pursuant to Rule 144A under the Securities Act of 1933 and certain commercial
paper that the Adviser or a Portfolio Manager has determined to be liquid
under procedures approved by the Board of Trustees).
SERVICE SYSTEMS -- YEAR 2000 PROBLEM
Many of the services provided to the Funds depend on the smooth functioning
of computer systems. Many systems in use today cannot distinguish between the
year 1900 and the year 2000. Should any of the service systems fail to process
information properly, that could have an adverse impact on the Funds'
operations and services provided to shareholders. The Adviser, Distributor,
Shareholder Servicing and Transfer Agent, Custodian, and certain other service
providers to the Funds have reported that each is working toward mitigating
the risks associated with the so-called "year 2000 problem." However, there
can be no assurance that the problem will be corrected in all respects and
that the Funds' operations and services provided to shareholders will not be
adversely affected, nor can there be any assurance that the year 2000 problem
will not have an adverse effect on the entities whose securities are held by
the Funds or on domestic or global equity markets or economies, generally.
"FUNDAMENTAL" POLICIES
The investment objective of each of the International, Renaissance,
Innovation, International Growth, Value 25, Tax-Efficient Structured Emerging
Markets, and Tax-Efficient Equity Funds described in this Prospectus may be
changed by the Board of Trustees without shareholder approval. The investment
objective of each other Fund is fundamental and may not be changed without
shareholder approval by vote of a majority of the outstanding shares of that
Fund. If there is a change in a Fund's investment objective, including a
change approved by shareholder vote, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current
financial position and needs.
November 1, 1998 Prospectus 45
<PAGE>
MANAGEMENT OF THE TRUST
The business affairs of the Trust are managed under the direction of the
Board of Trustees. Information about the Trustees and the Trust's executive
officers may be found in the Statement of Additional Information under the
heading "Management of the Trust."
INVESTMENT ADVISER
PIMCO Advisors serves as investment adviser to the Funds pursuant to an
investment advisory agreement with the Trust. PIMCO Advisors is a Delaware
limited partnership organized in 1987. PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. Total assets under management by PIMCO
Advisors and its subsidiary partnerships as of September 30, 1998 were
approximately $225.9 billion. The general partners of PIMCO Advisors are PIMCO
Partners, G.P. and PIMCO Advisors Holdings L.P. ("PAH"). PIMCO Partners, G.P.
is a general partnership between PIMCO Holding LLC, a Delaware limited
liability company and an indirect wholly-owned subsidiary of Pacific Life
Insurance Company, and PIMCO Partners LLC, a California limited liability
company controlled by the current Managing Directors and two former Managing
Directors of Pacific Investment Management. PIMCO Partners, G.P. is the sole
general partner of PAH. PIMCO Advisors is governed by a Management Board,
which exercises substantially all of the governance powers of the general
partner and serves as the functional equivalent of a board of directors. PIMCO
Advisors' address is 800 Newport Center Drive, Newport Beach, California
92660. PIMCO Advisors is registered as an investment adviser with the SEC.
PIMCO Advisors currently has seven subsidiary investment adviser partnerships,
the following six of which manage one or more of the Funds: Blairlogie,
Cadence, Columbus Circle, NFJ, Pacific Investment Management, and Parametric.
On or before March 31, 1999, it is anticipated that PIMCO Advisors will sell
substantially all of its ownership interest in Blairlogie. See "Portfolio
Managers--Blairlogie" below.
Under the investment advisory agreement, PIMCO Advisors, subject to the
supervision of the Board of Trustees, is responsible for providing advice and
guidance with respect to the Funds and for managing, either directly or
through others selected by the Adviser, the investment of the Funds. PIMCO
Advisors also furnishes to the Board of Trustees periodic reports on the
investment performance of each Fund.
PORTFOLIO MANAGERS
Pursuant to portfolio management agreements, PIMCO Advisors employs
Portfolio Managers for all of the Funds. Each Portfolio Manager is an
affiliate of PIMCO Advisors. PIMCO Advisors (and not the Funds or the Trust)
compensates the Portfolio Managers from its advisory fee. Under these
agreements, a Portfolio Manager has full investment discretion and makes all
determinations with respect to the investment of a Fund's assets, or, for the
Balanced Fund, with respect to the portion of the Fund's assets allocated to
the Portfolio Manager for investment, and makes all determinations respecting
the purchase and sale of a Fund's securities and other investments. If a
Portfolio Manager ceases to manage the portfolio of a Fund, PIMCO Advisors
will either assume full responsibility for the management of that Fund, or
retain a new portfolio manager subject to the approval of the Trustees and the
Fund's shareholders.
BLAIRLOGIE manages the Emerging Markets, International Developed, and
International Funds (the "Blairlogie Funds"). Blairlogie is an investment
management firm, organized as a limited partnership under the laws of the
United Kingdom, with two general partners and one limited partner. The general
partners are PIMCO Advisors, which serves as the supervisory partner, and
Blairlogie Holdings Limited, a wholly owned subsidiary of PIMCO Advisors,
which serves as the managing partner. The limited partner is Blairlogie
Partners L.P., a limited partnership, the general partner of which
46 PIMCO Funds: Multi-Manager Series
<PAGE>
is Pacific Asset Management LLC (a subsidiary of Pacific Life Insurance
Company), and the limited partners of which are the principal executive
officers of Blairlogie Capital Management. Blairlogie Capital Management Ltd.,
the predecessor investment adviser to Blairlogie, commenced operations in
1992. Accounts managed by Blairlogie had combined assets as of September 30,
1998 of approximately $700 million. Blairlogie's address is 4th Floor, 125
Princes Street, Edinburgh EH2 4AD, Scotland. Blairlogie is registered as an
investment adviser with the SEC in the United States and with the Investment
Management Regulatory Organisation ("IMRO") in the United Kingdom.
James Smith is primarily responsible for the day-to-day management of the
Blairlogie Funds. Mr. Smith is a Managing Director and the Chief Investment
Officer of Blairlogie and is responsible for managing an investment team of
six professionals who, in turn, specialize in selection of stocks within
Europe, Asia, and the Americas, and in currency and derivatives. He previously
served as a Senior Portfolio Manager at Murray Johnstone in Glasgow, Scotland,
responsible for international investment management for North American
clients, and at Schroder Investment Management in London. Mr. Smith received
his bachelor's degree in Economics from London University and his MBA from
Edinburgh University. He is an Associate of the Institute of Investment
Management and Research.
It is anticipated that PIMCO Advisors will sell substantially all of its
ownership interest in Blairlogie to Alleghany Asset Management, Inc. on or
before March 31, 1999 (the "Blairlogie Transaction"). The Blairlogie
Transaction is subject to a number of conditions, including approval by the
shareholders of the Emerging Markets and International Developed Funds.
In connection with the anticipated Blairlogie Transaction, it is proposed
that the Emerging Markets and International Developed Funds (the "Transferring
Funds") will transfer all of their assets and liabilities to newly formed
series of Alleghany Funds to be managed by Blairlogie (the proposed
transactions are referred to as "Reorganizations"). The proposed
Reorganizations are subject to a number of conditions, including approval by
the Trust's Board of Trustees and the shareholders of the Transferring Funds.
In addition, PIMCO Advisors has determined to terminate its portfolio
management agreement with Blairlogie with respect to the International Fund,
effective on or about the date of the Blairlogie Transaction. Under the
Trust's investment advisory agreement, PIMCO Advisors would then assume full
responsibility for managing the International Fund's portfolio.
This Prospectus will be supplemented or revised if any of these events
involving Blairlogie and the Blairlogie Funds do not occur substantially in
accordance with the schedule outlined above.
CADENCE manages the Capital Appreciation, Mid-Cap Growth, Micro-Cap Growth,
and Small-Cap Growth Funds, as well as a portion of the Common Stock Segment
of the Balanced Fund (the "Cadence Funds"). Cadence is an investment
management firm organized as a general partnership. Cadence has two partners:
PIMCO Advisors as the supervisory partner, and Cadence Capital Management Inc.
as the managing partner. Cadence Capital Management Corporation, the
predecessor investment adviser to Cadence, commenced operations in 1988.
Accounts managed by Cadence had combined assets as of September 30, 1998 of
approximately $6.1 billion. Cadence's address is Exchange Place, 53 State
Street, Boston, Massachusetts 02109. Cadence is registered as an investment
adviser with the SEC.
David B. Breed, William B. Bannick, Katherine A. Burdon, and Peter B.
McManus are primarily responsible for the day-to-day management of the Cadence
Funds. Mr. Breed is a Managing Director, the Chief Executive Officer, and a
founding partner of Cadence, and has 25 years' investment management
experience. He has been the driving force in
November 1, 1998 Prospectus 47
<PAGE>
developing the firm's growth-oriented stock screening and selection process
and has been with Cadence (or its predecessor) since its inception. Mr. Breed
graduated from the University of Massachusetts and received his MBA from the
Wharton School of Business. He is a Chartered Financial Analyst. Mr. Bannick
is a Managing Director and Executive Vice President of Cadence and has 13
years' investment management experience. He previously served as Executive
Vice President of George D. Bjurman & Associates and as Supervising Portfolio
Manager of Trinity Investment Management Corporation. Mr. Bannick joined the
predecessor of Cadence in 1992. He graduated from the University of
Massachusetts and received his MBA from Boston University. Mr. Bannick is a
Chartered Financial Analyst. Ms. Burdon is a Managing Director and Portfolio
Manager of Cadence and has 10 years' investment management experience. She
previously served as a Vice President and Portfolio Manager of The Boston
Company. Ms. Burdon joined the predecessor of Cadence in 1993. She graduated
from Stanford University and received a Master of Science degree from
Northeastern University. Ms. Burdon is a Chartered Financial Analyst and
Certified Public Accountant. Mr. McManus is Director of Fund Management of
Cadence and has 21 years' investment management experience. He previously
served as a Vice President of Bank of Boston. Mr. McManus joined Cadence in
1994. He graduated from the University of Massachusetts, and he is certified
as a Financial Planner.
COLUMBUS CIRCLE manages the Renaissance, Core Equity, Mid-Cap Equity,
Innovation, and International Growth Funds (the "Columbus Circle Funds").
Columbus Circle is an investment management firm organized as a general
partnership. Columbus Circle has two partners: PIMCO Advisors as the
supervisory partner, and Columbus Circle Investors Management Inc. as the
managing partner. Columbus Circle Investors Division of Thomson Advisory Group
L.P. ("TAG"), the predecessor investment adviser to Columbus Circle, commenced
operations in 1975. Accounts managed by Columbus Circle had combined assets as
of September 30, 1998 of approximately $7.8 billion. Columbus Circle's address
is Metro Center, One Station Place, 8th Floor, Stamford, Connecticut 06902.
Columbus Circle is registered as an investment adviser with the SEC.
At the center of Columbus Circle's equity investment strategy is its theory
of Positive Momentum & Positive Surprise. This theory asserts that a good
company doing better than generally expected will experience a rise in its
stock price. And, conversely, a company falling short of expectations will
experience a drop in its stock price. Based on this theory, Columbus Circle
attempts to manage the Columbus Circle Funds with a view to investing in
growing companies that are surprising the market with business results that
are better than anticipated.
Investment decisions made by Columbus Circle are generally made by one or
more committees, although the following individuals have primary
responsibility for the noted Columbus Circle Funds. Clifford G. Fox is
primarily responsible for the day-to-day management of the Renaissance and
International Growth Funds. Mr. Fox, a Managing Director of Columbus Circle,
has 17 years of investment management experience. He received his bachelor's
degree from the University of Pennsylvania and his MBA from New York
University, and he is a Chartered Financial Analyst. Anthony Rizza is
primarily responsible for the day-to-day management of the Core Equity Fund.
Mr. Rizza, a Managing Director of Columbus Circle, has 12 years of investment
management experience. He received his bachelor's degree from the University
of Connecticut, and he is a Chartered Financial Analyst. Amy H. Hogan is
primarily responsible for the day-to-day management of the Mid-Cap Equity
Fund. Ms. Hogan, a Managing Director of Columbus Circle, has 13 years of
investment management experience. She received her bachelor's degree and MBA
from the University of Wisconsin, and she is a Chartered Financial Analyst.
Anthony Rizza (see above) and Dennis P. McKechnie are primarily responsible
for the day-to-day management of the Innovation Fund. Mr. McKechnie, a
research analyst at Columbus Circle, has 7 years of investment management
experience. He received his bachelor's degree from Purdue University and his
MBA from Columbia University.
48 PIMCO Funds: Multi-Manager Series
<PAGE>
NFJ manages the Equity Income, Value, Value 25, and Small-Cap Value Funds,
as well as a portion of the Common Stock Segment of the Balanced Fund. NFJ is
an investment management firm organized as a general partnership. NFJ has two
partners: PIMCO Advisors as the supervisory partner, and NFJ Management Inc.
as the managing partner. NFJ Investment Group, Inc., the predecessor
investment adviser to NFJ, commenced operations in 1989. Accounts managed by
NFJ had combined assets as of September 30, 1998 of approximately $2.2
billion. NFJ's address is 2121 San Jacinto, Suite 1840, Dallas, Texas 75201.
NFJ is registered as an investment adviser with the SEC.
Chris Najork and Benjamin Fischer are responsible for the day-to-day
management of the Equity Income Fund, and the portion of the Common Stock
Segment of the Balanced Fund allocated to NFJ. Mr. Najork is a Managing
Director and a founding partner of NFJ and has 30 years' experience
encompassing equity research and portfolio management. He received his
bachelor's degree and MBA from Southern Methodist University, and he is a
Chartered Financial Analyst. Mr. Fischer is a Managing Director and a founding
partner of NFJ and has 32 years' experience encompassing equity research and
portfolio management. He received his bachelor's degree from Oklahoma
University and his MBA from the New York University Graduate School of
Business. He is a Chartered Financial Analyst. Messrs. Najork, Fischer and
Paul A. Magnuson are primarily responsible for the day-to-day management of
the Value Fund and the Small-Cap Value Fund. Mr. Magnuson, a research analyst
at NFJ, has 13 years' experience in equity research and portfolio management.
He received his bachelor's degree in Finance from the University of Nebraska-
Lincoln. Messrs. Najork, Fischer, and Cliff Hoover are primarily responsible
for the day-to-day management of the Value 25 Fund. Mr. Hoover is a principal
at NFJ and has 24 years' experience in portfolio management and banking. He
received his bachelor's degree and MBA from Texas Tech University. He is a
Chartered Financial Analyst.
PACIFIC INVESTMENT MANAGEMENT manages the Fixed Income Securities Segment of
the Balanced Fund. Pacific Investment Management is an investment management
firm organized as a general partnership. Pacific Investment Management has two
partners: PIMCO Advisors as the supervisory partner, and PIMCO Management,
Inc. as the managing partner. Pacific Investment Management Company, the
predecessor investment adviser to Pacific Investment Management, commenced
operations in 1971. Pacific Investment Management had approximately $148.1
billion of assets under management as of September 30, 1998. Pacific
Investment Management's address is 840 Newport Center Drive, Suite 300,
Newport Beach, California 92660. Pacific Investment Management is registered
as an investment adviser with the SEC and as a commodity trading advisor with
the CFTC.
William H. Gross is responsible for the day-to-day management of the Fixed
Income Securities Segment of the Balanced Fund. Mr. Gross is a founder and a
Managing Director of Pacific Investment Management and has been associated
with Pacific Investment Management or its predecessor for more than 28 years.
He has extensive investment experience in both credit research and fixed
income portfolio management. He received his bachelor's degree from Duke
University and his MBA from UCLA Graduate School of Business. Mr. Gross is a
Chartered Financial Analyst and a member of The Los Angeles Society of
Financial Analysts.
PARAMETRIC manages the Enhanced Equity, Structured Emerging Markets, Tax-
Efficient Structured Emerging Markets, and Tax-Efficient Equity Funds (the
"Parametric Funds"). Parametric is an investment management firm organized as
a general partnership. Parametric has two partners: PIMCO Advisors as the
supervisory partner, and Parametric Management Inc. as the managing partner.
Parametric Portfolio Associates, Inc., the predecessor investment adviser to
Parametric, commenced operations in 1987. Accounts managed by Parametric had
combined assets as of September 30, 1998 of approximately $2.8 billion.
Parametric's address is 7310 Columbia Center, 701 Fifth Avenue, Seattle,
Washington 98104-7090. Parametric is registered as an investment adviser with
the SEC and as a commodity trading advisor with the CFTC.
November 1, 1998 Prospectus 49
<PAGE>
David Stein, Tom Seto, and Cliff Quisenberry are primarily responsible for
the day-to-day management of the Parametric Funds. Mr. Stein is a Managing
Director of Parametric and has been associated with Parametric since June,
1996. He also directs research and product development for Parametric. Mr.
Stein graduated with bachelor's and master's degrees in Applied Mathematics
from the University of Witwatersrand, South Africa, and received a Ph.D. in
Applied Mathematics from Harvard University. Prior to joining Parametric, Mr.
Stein served as the Director of Investment Research at GTE Investment
Management, Director of Active Equity Strategies at the Vanguard Group, and
Director of Quantitative Portfolio Management and Research at IBM. Mr. Seto is
a Vice President of Parametric and has 7 years of experience in managing
structured equity portfolios. Prior to joining Parametric, he served as the
Head of U.S. Equity Index Investments at Barclays Global Investors. Mr. Seto
graduated from the University of Washington with a bachelor's degree in
Electrical Engineering, and from the University of Chicago with an MBA in
Finance. Mr. Quisenberry is a Vice President of Parametric and has been with
Parametric since 1994. He previously served as a Vice President and Portfolio
Manager at Cutler & Co., and as a Security Analyst and Portfolio Manager at
Fred Alger Management. Mr. Quisenberry graduated from Yale University with a
bachelor's degree in Economics. He is a Chartered Financial Analyst.
Registration as an investment adviser with the SEC does not involve
supervision by the SEC over investment advice, and registration with the CFTC
as a commodity trading adviser does not involve supervision by the CFTC over
commodities trading. The portfolio management agreements are not exclusive,
and Blairlogie, Cadence, Columbus Circle, NFJ, Parametric, and Pacific
Investment Management may provide, and currently are providing, investment
management services to other clients, including other investment companies.
FUND ADMINISTRATOR
PIMCO Advisors also serves as administrator (the "Administrator") for the
Funds' Institutional Class and Administrative Class shares pursuant to an
administration agreement with the Trust. The Administrator provides or
procures administrative services for Institutional Class and Administrative
Class shareholders of the Funds, which include clerical help and accounting,
bookkeeping, internal audit services and certain other services required by
the Funds, and preparation of reports to the Funds' shareholders and
regulatory filings. The Administrator has retained Pacific Investment
Management to provide such services as sub-administrator. The Administrator
and/or the sub-administrator may also retain other affiliates to provide
certain of these services. In addition, the Administrator, at its own expense,
arranges for the provision of legal, audit, custody, transfer agency
(including sub-transfer agency and other administrative services) and other
services necessary for the ordinary operation of the Funds, and is responsible
for the costs of registration of the Trust's shares and the printing of
prospectuses and shareholder reports for current shareholders.
The Funds (and not the Administrator) are responsible for the following
expenses: (i) salaries and other compensation of any of the Trust's executive
officers and employees who are not officers, directors, stockholders, or
employees of PIMCO Advisors, Pacific Investment Management, or their
subsidiaries or affiliates; (ii) taxes and governmental fees; (iii) brokerage
fees and commissions and other portfolio transaction expenses; (iv) the costs
of borrowing money, including interest expenses; (v) fees and expenses of the
Trustees who are not "interested persons" of the Adviser, any Portfolio
Manager, or the Trust, and any counsel retained exclusively for their benefit;
(vi) extraordinary expenses, including costs of litigation and indemnification
expenses; (vii) expenses which are capitalized in accordance with generally
accepted accounting principles; and (viii) any expenses allocated or allocable
to a specific class of shares, which include service and/or distribution fees
payable with respect to the Administrative Class shares, and may include
certain other expenses as permitted by the Trust's Multiple Class Plan adopted
pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the "1940
Act"), subject to review and approval by the Trustees.
50 PIMCO Funds: Multi-Manager Series
<PAGE>
ADVISORY AND ADMINISTRATIVE FEES
The Funds feature fixed advisory and administrative fees. For providing or
arranging for the provision of investment advisory services to the Funds as
described above, PIMCO Advisors receives monthly fees from each Fund at an
annual rate based on the average daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE RATE
---- --------
<S> <C>
Capital Appreciation, Mid-Cap Growth, Equity Income, Value,
Enhanced Equity, Structured Emerging Markets, Tax-Efficient
Structured Emerging Markets, Tax-Efficient Equity,
and Balanced Funds............................................... .45%
Value 25 Fund..................................................... .50%
International Fund................................................ .55%
Core Equity Fund.................................................. .57%
International Developed, Renaissance, and Small-Cap Value Funds... .60%
Mid-Cap Equity Fund............................................... .63%
Innovation Fund................................................... .65%
Emerging Markets and International Growth Funds................... .85%
Small-Cap Growth Fund............................................. 1.00%
Micro-Cap Growth Fund............................................. 1.25%
</TABLE>
For providing or procuring administrative services for the Funds as
described above, the Administrator receives monthly fees from each Fund at an
annual rate based on the average daily net assets attributable in the
aggregate to the Fund's Institutional Class and Administrative Class shares as
follows:
<TABLE>
<CAPTION>
ADMINISTRATIVE
FUND FEE RATE
---- --------------
<S> <C>
Emerging Markets, International Developed, International,
International Growth, Structured Emerging Markets, and
Tax-Efficient Structured Emerging Markets Funds............. .50%
All Other Funds.............................................. .25%
</TABLE>
The investment advisory, administration, and sub-administration agreements
for the Funds may be terminated by the Trustees, PIMCO Advisors or Pacific
Investment Management (as the case may be) on 60 days' written notice. In
addition, these agreements may be terminated with regard to the International,
Renaissance, and Innovation Funds by a majority of the Trustees that are not
interested persons of the Trust, PIMCO Advisors, or Pacific Investment
Management (as the case may be), on 60 days' written notice. Following their
initial terms, the agreements will continue from year to year if approved by
the Trustees.
Pursuant to the portfolio management agreements between the Adviser and each
of the Portfolio Managers, PIMCO Advisors (and not the Funds or the Trust)
pays each Portfolio Manager a fee based on a percentage of the average daily
net assets of a Fund as follows: Blairlogie--.40% for the International Fund,
.50% for the International Developed Fund, and .75% for the Emerging Markets
Fund; Cadence--.35% for the Capital Appreciation Fund, .35% for the Mid-Cap
Growth Fund, .35% for the portion of the Common Stock Segment of the Balanced
Fund allocated to Cadence, .90% for the Small-Cap Growth Fund, and 1.15% for
the Micro-Cap Growth Fund; Columbus Circle--.38% for the Renaissance Fund,
.38% for the Innovation Fund, .47% for the Core Equity Fund, .53% for the Mid-
Cap Equity Fund, and .75% for the International Growth Fund; NFJ--.35% for the
Equity Income Fund, .35% for the Value Fund, .35% for the portion of the
Common Stock Segment of the Balanced Fund allocated to NFJ, .40% for the Value
25 Fund, and .50% for the Small-Cap Value Fund; Pacific Investment
Management--.25% for the Fixed Income Securities Segment of the Balanced Fund;
and Parametric--.35% for the Enhanced Equity Fund, .35% for the Structured
Emerging Markets Fund, .35% for the Tax-Efficient Structured Emerging Markets
Fund, and .35% for the Tax-Efficient Equity Fund.
November 1, 1998 Prospectus 51
<PAGE>
SERVICE AND DISTRIBUTION FEES
The Trust has adopted an Administrative Services Plan and a Distribution
Plan (the "Plans") with respect to the Administrative Class shares of each
Fund except for the Emerging Markets, Capital Appreciation, and Small-Cap
Growth Funds, for which the Trust has adopted only an Administrative Services
Plan. Under the terms of the Plans, the Trust is permitted to reimburse, out
of the Administrative Class assets of each Fund, in an amount up to .25% on an
annual basis of the average daily net assets of that class, financial
intermediaries that provide services in connection with the distribution and
marketing of shares and/or the provision of certain shareholder services (in
the case of the Distribution Plan) or the administration of plans or programs
that use Fund shares as their funding medium (in the case of the
Administrative Services Plan), and to reimburse certain other related
expenses. Total reimbursements under the Plans may be paid in an amount up to
.25% on an annual basis of the average daily net assets attributable to the
Administrative Class shares of each Fund. The same entity may not receive both
distribution and administrative services fees with respect to the same assets
but may with respect to separate assets receive fees under each Plan. Fees
paid pursuant to either Plan may be paid for shareholder services and the
maintenance of accounts, and therefore may constitute "service fees" for
purposes of applicable rules of the National Association of Securities
Dealers, Inc. Each Plan has been adopted in accordance with the requirements
of Rule 12b-1 under the 1940 Act and will be administered in accordance with
the provisions of that rule, except that shareholders will not have the voting
rights set forth in Rule 12b-1 with respect to the Administrative Services
Plan that they will have with respect to the Distribution Plan. For more
complete disclosure regarding the Plans and their terms, see the Statement of
Additional Information.
Institutional and Administrative Class shares of the Trust may also be
offered through certain brokers and financial intermediaries ("service
agents") that have established a shareholder servicing relationship with the
Trust on behalf of their customers. The Trust pays no compensation to such
entities other than service fees paid with respect to Administrative Class
shares. Service agents may impose additional or different conditions on the
purchase or redemption of Fund shares by their customers and may charge their
customers transaction or other account fees on the purchase and redemption of
Fund shares. Each service agent is responsible for transmitting to its
customers a schedule of any such fees and information regarding any additional
or different conditions regarding purchases and redemptions. Shareholders who
are customers of service agents should consult their service agents for
information regarding these fees and conditions.
DISTRIBUTOR
Shares of the Trust are distributed through PIMCO Funds Distributors LLC
(the "Distributor"), a wholly owned subsidiary of PIMCO Advisors. The
Distributor, located at 2187 Atlantic Street, Stamford, Connecticut 06902, is
a broker-dealer registered with the SEC.
PURCHASE OF SHARES
With certain exceptions, each Fund may offer its shares in up to six
classes: Institutional Class, Administrative Class, Class A, Class B, Class C,
and Class D. This Prospectus relates only to the Institutional Class shares
and Administrative Class shares of the Funds. For information regarding Class
A, Class B, Class C, and Class D shares, see "Other Information--Multiple
Classes of Shares" below.
Shares of the Institutional Class are offered primarily for direct
investment by investors such as pension and profit sharing plans, employee
benefit trusts, endowments, foundations, corporations, and high net worth
individuals (Institutional Class shares may also be offered through certain
financial intermediaries that charge their customers
52 PIMCO Funds: Multi-Manager Series
<PAGE>
transaction or other fees with respect to their customers' investments in the
Funds). Shares of the Administrative Class are offered primarily through
employee benefit plan alliances, broker-dealers, and other intermediaries, and
each Fund pays service and/or distribution fees to such entities for services
they provide to shareholders of that class.
Except as described below under "Fund Reimbursement Fees," shares of either
the Institutional Class or the Administrative Class of the Funds may be
purchased at the relevant net asset value of that class without a sales charge
or other fee. The minimum initial investment for shares of either class is $5
million, except that the minimum initial investment for a registered
investment adviser purchasing Institutional Class shares for its clients
through omnibus accounts is $250,000 per Fund. Shares may also be offered to
clients of Blairlogie, Cadence, Columbus Circle, NFJ, Pacific Investment
Management, Parametric, and their affiliates, and to the benefit plans of
PIMCO Advisors and its affiliates. In addition, the minimum initial investment
does not apply to shares of the Institutional Class offered through fee-based
programs sponsored and maintained by a registered broker-dealer and approved
by the Distributor pursuant to which each investor pays an asset based fee at
an annual rate of at least .50% of the assets in the account to a financial
intermediary for investment advisory and/or administrative services.
Pension and profit-sharing plans, employee benefit trusts and employee
benefit plan alliances and "wrap account" programs established with broker-
dealers or financial intermediaries may purchase shares of either class only
if the plan or program for which the shares are being acquired will maintain
an omnibus or pooled account for each Fund and will not require a Fund to pay
any type of administrative payment per participant account to any third party.
The investment minimums discussed in this section and the limitations set
forth in "Investment Limitations" below do not apply to participants in PIMCO
Advisors Portfolio Strategies, a managed product sponsored by PIMCO Advisors.
INITIAL INVESTMENT
An account may be opened by completing and signing a Client Registration
Application and mailing it to PIMCO Funds at the following address: 840
Newport Center Drive, Suite 300, Newport Beach, California 92660. A Client
Registration Application may be obtained by calling 1-800-800-0952.
Except as provided below, purchases of Institutional Class and
Administrative Class shares can only be made by wiring federal funds to
Investors Fiduciary Trust Company (the "Transfer Agent"), 801 Pennsylvania,
Kansas City, Missouri 64105. Before wiring federal funds, the investor must
first telephone the Trust at 1-800-927-4648 to receive instructions for wire
transfer, and the following information will be requested: name of authorized
person; shareholder name; shareholder account number; name of Fund and share
class; amount being wired; and wiring bank name.
Shares may be purchased without first wiring federal funds if the proceeds
of the investment are derived from an advisory account maintained by the
investor with PIMCO Advisors or one of its affiliates; from surrender or other
payment from an annuity, insurance, or other contract held by Pacific Life
Insurance Company; or from an investment by broker-dealers, institutional
clients or other financial intermediaries which have established a shareholder
servicing relationship with the Trust on behalf of their customers.
A purchase order, together with payment in proper form, received by the
Transfer Agent prior to the close of regular trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange (the "Exchange"), on a day the
Trust is open for business, will be effected at that day's net asset value. An
order received after the close of regular trading on the Exchange will be
effected at the net asset value determined on the next business day. However,
orders received by certain retirement plans and other financial intermediaries
on a business day prior to the close of regular trading on the Exchange
November 1, 1998 Prospectus 53
<PAGE>
and communicated to the Transfer Agent prior to 9:00 a.m., Eastern time, on
the following business day will be effected at the net asset value determined
on the prior business day. The Trust is "open for business" on each day the
Exchange is open for trading, which excludes the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Purchase orders will be accepted only on days on which the Trust is open for
business.
ADDITIONAL INVESTMENTS
Additional investments may be made at any time at the relevant net asset
value for the particular class by calling the Trust and wiring federal funds
to the Transfer Agent as outlined above.
FUND REIMBURSEMENT FEES
Investors in Institutional Class and Administrative Class shares of the
Structured Emerging Markets and Tax-Efficient Structured Emerging Markets
Funds are subject to a fee ("Fund Reimbursement Fee"), both at the time of
purchase and at the time of redemption, equal to 1.00% of the net asset value
of the shares purchased or redeemed. Fund Reimbursement Fees are deducted
automatically from the amount invested or the amount to be received in
connection with a redemption; the fees are not paid separately. Fund
Reimbursement Fees are paid to and retained by the Funds to defray certain
costs described below and no portion of such fees are paid to or retained by
the Adviser, the Distributor, or the Portfolio Manager. Fund Reimbursement
Fees are not sales loads or contingent deferred sales charges. Reinvestment of
dividends and capital gains distributions paid to shareholders by the Funds
are not subject to Fund Reimbursement Fees, but redemptions of shares acquired
by such reinvestments are subject to Fund Reimbursement Fees.
The purpose of Fund Reimbursement Fees is to defray the costs associated
with investing the proceeds of the sale of shares to investors (in the case of
purchases) or the costs associated with the sale of portfolio securities to
satisfy redemption requests (in the case of redemptions), thus insulating
existing shareholders from such costs. The amount of a Fund Reimbursement Fee
represents the Portfolio Manager's estimate of the costs reasonably
anticipated to be incurred by the Funds in connection with the purchase or
sale of portfolio securities, including international stocks, associated with
an investor's purchase or redemption proceeds. These costs include brokerage
costs, market impact costs (i.e., the increase in market prices which may
result when a Fund purchases or sells thinly traded stocks), and the effect of
"bid/asked" spreads in international markets. Transaction costs incurred when
purchasing or selling stocks of companies in foreign countries, and
particularly emerging market countries, may be significantly higher than those
in more developed countries. This is due, in part, to less competition among
brokers, underutilization of technology on the part of foreign exchanges and
brokers, the lack of less expensive investment options (such as derivative
instruments), and lower levels of liquidity in foreign and underdeveloped
markets.
On July 1, 1998, the Structured Emerging Markets and Tax-Efficient
Structured Emerging Markets Funds commenced investment operations immediately
following a transaction (the "Transaction") in which each Fund issued
Institutional Class shares to unit holders of the Parametric Portfolio
Associates Emerging Markets Trust, a separate account managed by Parametric
(the "EM Trust"), in exchange for the EM Trust's assets. The EM Trust's unit
holders were divided into two categories: participants who pay taxes ("Taxable
Participants") and participants that are non-taxable entities ("Non-Taxable
Participants"; together with the Taxable Participants, the "Participants").
Assets in the EM Trust equal in value to the value of the Taxable
Participants' participation in the EM Trust were transferred to the Tax-
Efficient Structured Emerging Markets Fund in exchange for Institutional Class
shares of that Fund. Assets in the EM Trust equal in value to the value of the
Non-Taxable Participants' participation in the EM Trust were transferred to
the Structured Emerging Markets Fund in exchange for Institutional Class
shares of that Fund. The Participants' interests in the EM Trust were
54 PIMCO Funds: Multi-Manager Series
<PAGE>
then terminated and Institutional Class shares of the Tax-Efficient Structured
Emerging Markets Fund were distributed to the Taxable Participants and
Institutional Class shares of the Structured Emerging Markets Fund were
distributed to the Non-Taxable Participants, in each case in proportion to
each Participant's interest in the EM Trust. After the completion of the
Transaction, the portfolio securities which were owned by the EM Trust became
portfolio securities of the Funds (allocated to the Funds on a substantially
pro-rata basis), to be held or sold as Parametric deems appropriate.
Portfolio securities transferred to the Funds pursuant to the Transaction
will have the same tax basis as they had when held by the EM Trust. Such
securities have "built-in" capital gains if their market value at the time of
the Transaction was greater than their tax basis (other securities may have
"built-in" capital losses for tax purposes if their market value at the time
of the Transaction was less than their tax basis). Built-in capital gains
realized upon the disposition of these securities will be distributed to all
Fund shareholders who are shareholders of record on the record date for the
distribution, even if such shareholders were not Participants in the EM Trust
prior to the Transaction. This means that investors purchasing Fund shares
after the date of this Prospectus may be required to pay taxes on
distributions that economically represent a return of a portion of the amount
invested. For further information, see "Dividends, Distributions and Taxes"
below and "Taxation--Distributions" in the Statement of Additional
Information.
In connection with the Transaction, the Participants in the EM Trust will
not be subject to Fund Reimbursement Fees with respect to any shares of these
Funds they acquired through June 30, 1998, and will not be subject to Fund
Reimbursement Fees upon the subsequent redemption (including any redemption in
connection with an exchange) of any shares acquired by any such Participant
through June 30, 1998. Such Participants will be subject to such Fund
Reimbursement Fees to the same extent as any other shareholder on any shares
of either Fund acquired (whether by reinvestment of dividends or capital gain
distributions or otherwise) after June 30, 1998.
OTHER PURCHASE INFORMATION
Purchases of a Fund's Institutional Class and Administrative Class shares
will be made in full and fractional shares. In the interest of economy and
convenience, certificates for shares will not be issued.
The Trust and the Distributor each reserves the right, in its sole
discretion, to suspend the offering of shares of the Funds or to reject any
purchase order, in whole or in part, when, in the judgment of management, such
suspension or rejection is in the best interests of the Trust. The Trust and
the Distributor may also waive the minimum initial investment for certain
investors.
Purchases and sales should be made for long-term investment purposes only.
The Trust and Adviser each reserves the right to restrict purchases of Fund
shares (including exchanges) when a pattern of frequent purchases and sales
made in response to short-term fluctuations in share price appears evident.
Institutional Class and Administrative Class shares of the Trust are not
qualified or registered for sale in all states. Prospective investors should
inquire as to whether shares of a particular Fund are available for offer and
sale in their state of residence. Shares of the Trust may not be offered or
sold in any state unless registered or qualified in that jurisdiction or
unless an exemption from registration or qualification is available.
Investors may, subject to the approval of the Trust, purchase shares of a
Fund with liquid securities that are eligible for purchase by the Fund
(consistent with such Fund's investment policies and restrictions) and that
have a value that is readily ascertainable in accordance with the Trust's
valuation policies. These transactions will be effected only if the Portfolio
Manager intends to retain the security in the Fund as an investment. Assets so
purchased by a Fund will be
November 1, 1998 Prospectus 55
<PAGE>
valued in generally the same manner as they would be valued for purposes of
pricing the Fund's shares, if such assets were included in the Fund's assets
at the time of purchase. The Trust reserves the right to amend or terminate
this practice at any time.
INVESTMENT LIMITATIONS
Shares of the Micro-Cap Growth and Small-Cap Growth Funds are normally not
available for purchase by new investors, although purchase orders may be
accepted in certain circumstances. Existing shareholders may continue to
invest in these Funds. In addition, Institutional Class and Administrative
Class shares of the Innovation Fund are not offered as of the date of this
Prospectus; however, investment opportunities in this Fund may be available in
the future. These restrictions may be changed or eliminated at any time at the
discretion of the Trust's Board of Trustees. Also, it is anticipated that the
Emerging Markets and International Developed Funds will reorganize as series
of another mutual fund family on or before March 31, 1999 and thereafter would
not be available for purchase from the Trust. See "Management of the Trust--
Portfolio Managers--Blairlogie."
RETIREMENT PLANS
Shares of the Funds are available for purchase by retirement and savings
plans, including Keogh plans, 401(k) plans, 403(b) custodial accounts, and
Individual Retirement Accounts. The administrator of a plan or employee
benefits office can provide participants or employees with detailed
information on how to participate in the plan and how to elect a Fund as an
investment option. Participants in a retirement or savings plan may be
permitted to elect different investment options, alter the amounts contributed
to the plan, or change how contributions are allocated among investment
options in accordance with the plan's specific provisions. The plan
administrator or employee benefits office should be consulted for details. For
questions about participant accounts, participants should contact their
employee benefits office, the plan administrator, or the organization that
provides recordkeeping services for the plan. Investors who purchase shares
through retirement plans should be aware that plan administrators may
aggregate purchase and redemption orders for participants in the plan.
Therefore, there may be a delay between the time the investor places an order
with the plan administrator and the time the order is forwarded to the
Transfer Agent for execution.
REDEMPTION OF SHARES
REDEMPTIONS BY MAIL
Institutional Class and Administrative Class shares may be redeemed by
submitting a written request to PIMCO Funds, 840 Newport Center Drive, Suite
300, Newport Beach, California 92660, stating the Fund from which the shares
are to be redeemed, the class of shares, the number or dollar amount of the
shares to be redeemed and the account number. The request must be signed
exactly as the names of the registered owners appear on the Trust's account
records, and the request must be signed by the minimum number of persons
designated on the Client Registration Application that are required to effect
a redemption.
REDEMPTIONS BY TELEPHONE OR OTHER WIRE COMMUNICATION
If an election is made on the Client Registration Application (or
subsequently in writing), redemptions of shares may be requested by calling
the Trust at 1-800-927-4648, by sending a facsimile to 1-949-760-4456, or by
other means of wire communication. Investors should state the Fund and class
from which the shares are to be redeemed, the number
56 PIMCO Funds: Multi-Manager Series
<PAGE>
or dollar amount of the shares to be redeemed and the account number.
Redemption requests of an amount of $10 million or more may be initiated by
telephone, but must be confirmed in writing by an authorized party prior to
processing.
In electing a telephone redemption, the investor authorizes Pacific
Investment Management and the Transfer Agent to act on telephone instructions
from any person representing himself to be the investor, and reasonably
believed by Pacific Investment Management and the Transfer Agent to be
genuine. Neither the Trust nor its Transfer Agent may be liable for any loss,
cost or expense for acting on instructions (whether in writing or by
telephone) believed by the party receiving such instructions to be genuine and
in accordance with the procedures described in this Prospectus. Shareholders
should realize that by electing the telephone or wire redemption option, they
may be giving up a measure of security that they might have if they were to
redeem their shares in writing. Furthermore, interruptions in telephone
service may mean that a shareholder will be unable to effect a redemption by
telephone when desired. The Transfer Agent also provides written confirmation
of transactions initiated by telephone as a procedure designed to confirm that
telephone instructions are genuine (written confirmation is also provided for
redemption requests received in writing). All telephone transactions are
recorded, and Pacific Investment Management or the Transfer Agent may request
certain information in order to verify that the person giving instructions is
authorized to do so. If the Trust or Transfer Agent fails to employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
it may be liable for any losses due to unauthorized or fraudulent telephone
transactions. All redemptions, whether initiated by letter or telephone, will
be processed in a timely manner, and proceeds will be forwarded by wire in
accordance with the redemption policies of the Trust detailed below. See
"Redemption of Shares--Other Redemption Information."
Shareholders may decline telephone exchange or redemption privileges after
an account is opened by instructing the Transfer Agent in writing at least
seven business days prior to the date the instruction is to be effective.
Shareholders may experience delays in exercising telephone redemption
privileges during periods of abnormal market activity. During periods of
volatile economic or market conditions, shareholders may wish to consider
transmitting redemption orders by telegram, facsimile or overnight courier.
Defined contribution plan participants may request redemptions by contacting
the employee benefits office, the plan administrator or the organization that
provides recordkeeping services for the plan.
OTHER REDEMPTION INFORMATION
Redemption requests for Fund shares are effected at the net asset value per
share next determined after receipt in good order of the redemption request by
the Trust or its designee. A redemption request received by the Trust or its
designee prior to the close of regular trading on the Exchange (normally 4:00
p.m., Eastern time), on a day the Trust is open for business, is effective on
that day. A redemption request received after that time becomes effective on
the next business day.
Unless eligible for a waiver, shareholders of the Structured Emerging
Markets and Tax-Efficient Structured Emerging Markets Funds who redeem their
shares will pay a Fund Reimbursement Fee equal to 1.00% of the net asset value
of the shares redeemed. See "Purchase of Shares--Fund Reimbursement Fees."
Payment of the redemption price will ordinarily be wired to the investor's
bank within three business days after the redemption request, but may take up
to seven business days. Redemption proceeds will be sent by wire only to the
bank name designated on the Client Registration Application. The Trust may
suspend the right of redemption or postpone the payment date at times when the
Exchange is closed, or during certain other periods as permitted under the
federal securities laws.
November 1, 1998 Prospectus 57
<PAGE>
For shareholder protection, a request to change information contained in an
account registration (for example, a request to change the bank designated to
receive wire redemption proceeds) must be received in writing, signed by the
minimum number of persons designated on the Client Registration Application
that are required to effect a redemption, and accompanied by a signature
guarantee from any eligible guarantor institution, as determined in accordance
with the Trust's procedures. Shareholders should inquire as to whether a
particular institution is an eligible guarantor institution. A signature
guarantee cannot be provided by a notary public. In addition, corporations,
trusts, and other institutional organizations are required to furnish evidence
of the authority of the persons designated on the Client Registration
Application to effect transactions for the organization.
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem Institutional Class and Administrative Class
shares in any account for their then-current value (which will be promptly
paid to the investor) if at any time, due to redemption by the investor, the
shares in the account do not have a value of at least $100,000. A shareholder
will receive advance notice of a mandatory redemption and will be given at
least 30 days to bring the value of its account up to at least $100,000. This
mandatory redemption policy does not apply to participants in PIMCO Advisors
Portfolio Strategies, a managed product sponsored by PIMCO Advisors.
The Trust agrees to redeem shares of each Fund solely in cash up to the
lesser of $250,000 or 1% of the Fund's net assets during any 90-day period for
any one shareholder. In consideration of the best interests of the remaining
shareholders, the Trust reserves the right to pay any redemption proceeds
exceeding this amount in whole or in part by a distribution in kind of
securities held by a Fund in lieu of cash. Except for Funds with a tax-
efficient management strategy, it is highly unlikely that shares would ever be
redeemed in kind. When shares are redeemed in kind, the redeeming shareholder
should expect to incur transaction costs upon the disposition of the
securities received in the distribution.
EXCHANGE PRIVILEGE
Shares of a Fund may be exchanged for shares of the same class of any other
Fund or other series of the Trust based on the respective net asset values of
the shares involved. An exchange may be made by following the redemption
procedure described above under "Redemptions by Mail" or, if the telephone
redemption option has been elected, by calling the Trust at 1-800-927-4648.
Shares of a Fund may also be exchanged for shares of the same class of a
series of PIMCO Funds: Pacific Investment Management Series, an affiliated
mutual fund family composed primarily of fixed income portfolios managed by
Pacific Investment Management. Shareholders interested in such an exchange may
request a prospectus for these other series by contacting PIMCO Funds: Pacific
Investment Management Series at the same address and telephone number as the
Trust.
Unless eligible for a waiver, shareholders who exchange their Institutional
Class or Administrative Class shares of any PIMCO Fund for the same class of
shares of the Structured Emerging Markets Fund or Tax-Efficient Structured
Emerging Markets Fund will be subject to a Fund Reimbursement Fee of 1.00% of
the net asset value of the shares of these Funds acquired in connection with
the exchange. Also, shareholders who exchange their shares of the Structured
Emerging Markets Fund or Tax-Efficient Structured Emerging Markets Fund for
shares of any other PIMCO Fund will be subject to a Fund Reimbursement Fee of
1.00% of the net asset value of the shares of these Funds redeemed in
connection with the exchange. See "Purchase of Shares--Fund Reimbursement
Fees."
Exchanges may be made only with respect to Funds or other eligible series
that are registered in the state of residence of the investor or where an
exemption from registration is available. An exchange order is treated the
same for tax purposes as a redemption followed by a purchase and may result in
a capital gain or loss, and special rules may apply in computing tax basis
when determining gain or loss. See "Taxation" in the Statement of Additional
Information.
58 PIMCO Funds: Multi-Manager Series
<PAGE>
It is anticipated that the Emerging Markets and International Developed
Funds will reorganize as series of another mutual fund family on or before
March 31, 1999 and thereafter would not be eligible for exchanges involving
other PIMCO Funds. See "Management of the Trust--Portfolio Managers--
Blairlogie."
The Trust reserves the right to refuse exchange purchases if, in the
judgment of the Adviser, the purchase would adversely affect a Fund and its
shareholders. In particular, a pattern of exchanges characteristic of "market-
timing" strategies may be deemed by the Adviser to be detrimental to the Trust
or a particular Fund. Currently, the Trust limits the number of "round trip"
exchanges an investor may make. An investor makes a "round trip" exchange when
the investor purchases shares of a particular Fund, subsequently exchanges
those shares for shares of a different Fund, and then exchanges back into the
originally purchased Fund. The Trust has the right to refuse any exchange for
any investor who completes (by making the exchange back into the shares of the
originally purchased Fund) more than six round trip exchanges in any twelve-
month period. Although the Trust will attempt to give shareholders prior
notice whenever it is reasonably able to do so, it may impose additional
restrictions on exchanges at any time.
PORTFOLIO TRANSACTIONS
Pursuant to the portfolio management agreements, a Portfolio Manager places
orders for the purchase and sale of portfolio investments for a Fund's
accounts with brokers or dealers selected by it in its discretion. In
effecting purchases and sales of portfolio securities for the accounts of the
Funds, the Portfolio Managers will seek the best price and execution of the
Funds' orders. In doing so, a Fund may pay higher commission rates than the
lowest available when the Portfolio Manager believes it is reasonable to do so
in light of the value of the brokerage and research services provided by the
broker effecting the transaction. The Portfolio Managers also may consider
sales of shares of the Trust as a factor in the selection of broker-dealers to
execute portfolio transactions for the Trust.
A change in the securities held by a Fund is known as "portfolio turnover."
With the exception of the Tax-Efficient Structured Emerging Markets and Tax-
Efficient Equity Funds (which may attempt to minimize portfolio turnover as a
tax-efficient management strategy), the Portfolio Managers manage the Funds
without regard generally to restrictions on portfolio turnover, except those
imposed on their ability to engage in short-term trading by provisions of the
federal tax laws. The use of futures contracts and other derivative
instruments with relatively short maturities may tend to exaggerate the
portfolio turnover rate for some of the Funds. The use of futures contracts
may involve the payment of commissions to futures commission merchants. High
portfolio turnover (e.g., over 100%) involves correspondingly greater expenses
to a Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and reinvestments in other
securities. Such sales may result in realization of taxable capital gains
(including short-term capital gains which are generally taxed at ordinary
income tax rates). See "Dividends, Distributions and Taxes." Portfolio
turnover rates for each Fund for which financial highlights for at least the
past two fiscal years are provided in this Prospectus are set forth under
"Financial Highlights." Portfolio turnover rates for the remaining Funds which
have not recently commenced operations were as follows for the fiscal years
ended June 30, 1998 and 1997, respectively: International--60% and 59%;
Renaissance--192% and 131%; and Innovation--100% and 80%. The annual portfolio
turnover rate for each of the Tax-Efficient Structured Emerging Markets and
Tax-Efficient Equity Funds is expected to be less than 40%. The annual
portfolio turnover rate for the Structured Emerging Markets and International
Growth Funds is expected to be less than 100% and for the Value 25 Fund is
expected to be less than 150%.
Some securities considered for investment by the Funds may also be
appropriate for other clients served by the Portfolio Managers. If a purchase
or sale of securities consistent with the investment policies of a Fund and
one or more
November 1, 1998 Prospectus 59
<PAGE>
of these clients served by a Portfolio Manager is considered at or about the
same time, transactions in such securities will be allocated among the Fund
and clients in a manner deemed fair and reasonable by the Portfolio Manager.
Particularly when investing in less liquid or illiquid securities of smaller
capitalization companies, such allocation may take into account the asset size
of a Fund in determining whether the allocation of an investment is suitable.
As a result, larger Funds may become more concentrated in more liquid
securities than smaller Funds or private accounts of a Portfolio Manager
pursuing a small capitalization investment strategy, which could adversely
affect performance. A Portfolio Manager may aggregate orders for the Funds
with simultaneous transactions entered into on behalf of its other clients so
long as price and transaction expenses are averaged either for the portfolio
transaction or for that day.
NET ASSET VALUE
The net asset values of Institutional and Administrative Class shares of
each Fund will be determined once on each day on which the Exchange is open (a
"Business Day"), as of the close of regular trading (normally 4:00 p.m.,
Eastern time) on the Exchange. Net asset value will not be determined on days
on which the Exchange is closed.
Portfolio securities and other assets for which market quotations are
readily available are stated at market value. Fixed income securities are
normally valued on the basis of quotations obtained from brokers and dealers
or pricing services, which take into account appropriate factors such as
institutional-sized trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data. Certain fixed income securities for which daily market quotations
are not readily available may be valued, pursuant to guidelines established by
the Board of Trustees, with reference to fixed income securities whose prices
are more readily obtainable and whose durations are comparable to the
securities being valued. Short-term investments having a maturity of 60 days
or less are valued at amortized cost, when the Board of Trustees determines
that amortized cost is their fair value. Exchange-traded options, futures and
options on futures are valued at the settlement price as determined by the
appropriate clearing corporation. All other securities and assets are valued
at their fair value as determined in good faith by the Trustees or by persons
acting at their direction.
Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using foreign exchange quotations received from independent
dealers. The calculation of the net asset value of the Emerging Markets,
International Developed, International, International Growth, Structured
Emerging Markets, and Tax-Efficient Structured Emerging Markets Funds may not
take place contemporaneously with the determination of the prices of certain
portfolio securities of foreign issuers used in such calculation. Further,
under the Trust's procedures, the prices of foreign securities are determined
using information derived from pricing services and other sources. Information
that becomes known to the Trust or its agents after the time that net asset
value is calculated on any Business Day may be assessed in determining net
asset value per share after the time of receipt of the information, but will
not be used to retroactively adjust the price of the security so determined
earlier or on a prior day. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of
regular trading on the Exchange (normally 4:00 p.m., Eastern time) may not be
reflected in the calculation of net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities may be valued at fair value as determined by the Adviser or a
Portfolio Manager and approved in good faith by the Board of Trustees.
Each Fund's liabilities are allocated among its classes. The total of such
liabilities allocated to a class plus that class's distribution and/or
servicing fees and any other expenses specially allocated to that class are
then deducted from the class's proportionate interest in the Fund's assets,
and the resulting amount for each class is divided by the number of
60 PIMCO Funds: Multi-Manager Series
<PAGE>
shares of that class outstanding to produce the class's "net asset value" per
share. Under certain circumstances, the per share net asset value of the
Administrative Class shares of the Funds may be lower than the per share net
asset value of the Institutional Class shares as a result of the daily expense
accruals of the service and/or distribution fees applicable to the
Administrative Class shares. Generally, for Funds that pay income dividends,
those dividends are expected to differ over time by approximately the amount
of the expense accrual differential between a particular Fund's classes.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Shares begin earning dividends on the effective date of purchase, provided
notification deadlines are met. See "Purchase of Shares." Net investment
income from interest and dividends, if any, will be declared and paid
quarterly to shareholders of record by the Renaissance, Equity Income, Value,
and Balanced Funds. Net investment income from interest and dividends, if any,
will be declared and paid at least annually to shareholders of record by the
other Funds. Any net capital gains from the sale of portfolio securities will
be distributed no less frequently than once annually. Net short-term capital
gains may be paid more frequently. Dividend and capital gain distributions of
a Fund will be reinvested in additional shares of that Fund unless the
shareholder elects to have them paid in cash. Dividends from net investment
income with respect to Administrative Class shares will be lower than those
paid with respect to Institutional Class shares, reflecting the payment of
service and/or distribution fees by that class.
Each Fund intends to qualify as a regulated investment company annually and
to elect to be treated as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"). As such, a Fund generally will
not pay federal income tax on the income and gains it pays as dividends to its
shareholders. In order to avoid a 4% federal excise tax, each Fund intends to
distribute each year substantially all of its net income and gains.
Shareholders subject to U.S. federal income tax will be subject to tax on
dividends received from a Fund, regardless of whether received in cash or
reinvested in additional shares. Distributions received by tax-exempt
shareholders generally will not be subject to federal income tax to the extent
permitted under applicable tax law. All shareholders must treat dividends,
other than capital gain dividends, exempt-interest dividends, and dividends
that represent a return of capital to shareholders, as ordinary income. In
particular, distributions derived from short-term gains will be treated as
ordinary income. Dividends derived from interest on certain U.S. Government
securities may be exempt from state and local taxes, although interest on
mortgage-backed U.S. Government securities is generally not so exempt. While
the Tax-Efficient Structured Emerging Markets and Tax-Efficient Equity Funds
seek to minimize taxable distributions, the Funds may be expected to earn and
distribute taxable income and may also be expected to realize and distribute
capital gains from time to time.
Dividends designated by a Fund as capital gain dividends derived from the
Fund's net capital gains (that is, the excess of its net long-term capital
gains over its net short-term capital losses) are taxable to shareholders as
long-term capital gain (generally subject to a 20% tax rate) except as
provided by an applicable tax exemption. Any distributions that are not from a
Fund's net investment income or net capital gain may be characterized as a
return of capital to shareholders or, in some cases, as capital gain. Certain
dividends declared in October, November or December of a calendar year are
taxable to shareholders (who otherwise are subject to tax on dividends) as
though received on December 31 of that year if paid to shareholders during
January of the following calendar year. Each Fund will advise shareholders
annually of the amount and nature of the dividends paid to them.
Current federal tax law requires the holder of a U.S. Treasury or other
fixed income zero coupon security to accrue as income each year a portion of
the discount at which the security was purchased, even though the holder
receives no
November 1, 1998 Prospectus 61
<PAGE>
interest payment in cash on the security during the year. In addition, pay-in-
kind securities will give rise to income which is required to be distributed
and is taxable even though the Fund holding the security receives no interest
payment in cash on the security during the year. Also, a portion of the yield
on certain high yield securities (including certain pay-in-kind securities)
issued after July 10, 1989 may be treated as dividends. Accordingly, each Fund
that holds the foregoing kinds of securities may be required to pay out as an
income distribution each year an amount which is greater than the total amount
of cash interest the Fund actually received. Such distributions may be made
from the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize gains or losses from such liquidations. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution, if any, than they
would in the absence of such transactions.
Taxable shareholders should note that the timing of their investment or
redemptions could have undesirable tax consequences. Dividends and
distributions on a Fund's shares are generally subject to federal income tax
as described herein to the extent they do not exceed the Fund's realized
income and gains, even though such dividends and distributions may
economically represent a return of a particular shareholder's investment. Such
distributions are likely to occur in respect of shares purchased at a time
when the Fund's net asset value reflects gains that are either unrealized or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized
losses.
The preceding discussion relates only to federal income tax; the
consequences under other tax laws may differ. Shareholders should consult
their tax advisers as to the possible application of foreign, state and local
income tax laws to Trust dividends and capital gain distributions. For
additional information relating to the tax aspects of investing in a Fund, see
the Statement of Additional Information.
OTHER INFORMATION
CAPITALIZATION
The Trust was organized as a Massachusetts business trust on August 24,
1990, and currently consists of twenty-eight portfolios that are operational,
twenty-one of which are described in this Prospectus. Other portfolios may be
offered by means of a separate prospectus. The Board of Trustees may establish
additional portfolios in the future. The capitalization of the Trust consists
of an unlimited number of shares of beneficial interest. When issued, shares
of the Trust are fully paid, non-assessable and freely transferable.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Trust. However, the Second Amended and
Restated Agreement and Declaration of Trust (the "Declaration of Trust") of
the Trust disclaims shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust also provides for indemnification out of a
Fund's property for all loss and expense of any shareholder of that Fund held
liable on account of being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which such disclaimer is inoperative or the Fund
of which he or she is or was a shareholder is unable to meet its obligations,
and thus should be considered remote.
62 PIMCO Funds: Multi-Manager Series
<PAGE>
MULTIPLE CLASSES OF SHARES
In addition to Institutional Class shares and Administrative Class shares,
certain Funds also offer up to four additional classes of shares, Class A,
Class B, Class C and Class D, through separate prospectuses. This Prospectus
relates only to Institutional Class and Administrative Class shares of the
Funds. The other classes of the Funds have different sales charges and expense
levels, which will affect performance accordingly. To obtain more information
about the other classes of shares, please call the Distributor at 1-800-426-
0107 (for Class A, Class B, and Class C) or 1-888-87-PIMCO (for Class D).
Institutional Class and Administrative Class shares of each Fund represent
interests in the assets of that Fund, and each class has identical dividend,
liquidation and other rights and the same terms and conditions, except that
expenses related to the distribution and/or shareholder servicing of
Administrative Class shares are borne solely by such class, and each class
may, at the Trustees' discretion, also pay a different share of other
expenses, not including advisory or custodial fees or other expenses related
to the management of the Trust's assets, if these expenses are actually
incurred in a different amount by that class, or if the class receives
services of a different kind or to a different degree than the other classes.
All other expenses are allocated to each class on the basis of the net asset
value of that class in relation to the net asset value of the particular Fund.
VOTING
Each class of shares of each Fund has identical voting rights, except that
each class of shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. The Administrative Class shares
have exclusive voting rights with respect to matters pertaining to any
Distribution Plan applicable to that class. These shares are entitled to vote
at meetings of shareholders. Matters submitted to shareholder vote must be
approved by each Fund separately except (i) when required by the 1940 Act,
shares shall be voted together, and (ii) when the Trustees have determined
that the matter does not affect all Funds, then only shareholders of the Fund
or Funds affected shall be entitled to vote on the matter. All classes of
shares of a Fund will vote together, except with respect to a Distribution
Plan or agreement applicable to a class of shares or when a class vote is
required as specified above or otherwise by the 1940 Act. Shares are freely
transferable, are entitled to dividends as declared by the Trustees and, in
liquidation of the Trust, are entitled to receive the net assets of their
Fund, but not of the other Funds. The Trust does not generally hold annual
meetings of shareholders and will do so only when required by law.
Shareholders may remove Trustees from office by votes cast in person or by
proxy at a meeting of shareholders or by written consent. Such a meeting will
be called at the written request of the holders of 10% of the Trust's
outstanding shares.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As of October 13, 1998, the following were
shareholders of record of at least 25% of the outstanding voting securities of
the indicated Funds: The Bank of New York as Trustee for Melville Corporation
(New York, New York) with respect to the Core Equity Fund; Pacific Mutual Life
Insurance Company Employee's Retirement Plan Trust (Newport Beach, California)
with respect to the Enhanced Equity Fund; Pacific Mutual Life Insurance
Company (Newport Beach, California) with respect to the Mid-Cap Equity Fund;
Pacific Asset Management LLC (Newport Beach, California) with respect to the
International Growth Fund; and PIMCO Advisors L.P. (Newport Beach,
California), the Trust's investment adviser and administrator, with respect to
the Value 25 and Tax-Efficient Equity Funds. To the extent such shareholders
are also the beneficial owners of such securities, they may be deemed to
control (as that term is defined in the 1940 Act) the relevant Fund. As used
in this Prospectus, the phrase "vote of a majority of the outstanding shares"
of a Fund (or the Trust) means the vote of the lesser of: (1) 67% of the
shares of the Fund (or the Trust) present at a meeting, if the holders of
November 1, 1998 Prospectus 63
<PAGE>
more than 50% of the outstanding shares are present in person or by proxy; or
(2) more than 50% of the outstanding shares of the Fund (or the Trust).
PERFORMANCE INFORMATION
From time to time the Trust may make available certain information about the
performance of the Institutional Class and Administrative Class shares of some
or all of the Funds. Information about a Fund's performance is based on that
Fund's (or its predecessor's) record to a recent date and is not intended to
indicate future performance. Performance information is computed separately
for each Fund's Institutional Class and Administrative Class shares in
accordance with the formulas described below. Because Administrative Class
shares bear the expense of service and/or distribution fees, it is expected
that, under normal circumstances, the level of performance of a Fund's
Administrative Class shares will be lower than that of the Fund's
Institutional Class shares.
The total return of Institutional Class and Administrative Class shares of
all Funds may be included in advertisements or other written material. When a
Fund's total return is advertised with respect to its Institutional Class and
Administrative Class shares, it will be calculated for the past year, the past
five years, and the past ten years (or if the Fund has been offered for a
period shorter than one, five or ten years, that period will be substituted)
since the establishment of the Fund or its predecessor series of PIMCO
Advisors Funds, as more fully described in the Statement of Additional
Information. For periods prior to the initial offering date of Institutional
Class or Administrative Class shares, total return presentations for a class
will be based on the historical performance of an older class of the Fund (if
any) restated, as necessary, to reflect that there are no sales charges
associated with Institutional Class or Administrative Class shares. The older
class to be used in each case is set forth in the Statement of Additional
Information. For these purposes, the performance of the older class will also
be restated to reflect any different operating expenses (such as different
administrative fees and/or 12b-1/servicing fee charges) associated with the
newer class. In certain cases, such a restatement will result in Institutional
Class or Administrative Class performance which is higher than if the
performance of the older class were not restated to reflect the different
operating expenses of the newer class. In such cases, the Trust's
advertisements will also, to the extent appropriate, show the lower
performance figure reflecting the actual operating expenses incurred by the
older class for periods prior to the initial offering date of the newer class.
Total return for each class is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the
redemption value of the investment in the Fund at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions at net asset value). Total return may be advertised using
alternative methods that reflect all elements of return, but that may be
adjusted to reflect the cumulative impact of alternative fee and expense
structures.
Quotations of yield for a Fund or class will be based on the investment
income per share (as defined by the SEC) during a particular 30-day (or one-
month) period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and will be computed by dividing net
investment income by the maximum public offering price per share on the last
day of the period.
The Funds may also provide current distribution information to their
shareholders in shareholder reports or other shareholder communications, or in
certain types of sales literature provided to prospective investors. Current
distribution information for a particular class of a Fund will be based on
distributions for a specified period (i.e., total dividends from net
investment income), divided by the relevant class net asset value per share on
the last day of the period and annualized. The rate of current distributions
does not reflect deductions for unrealized losses from transactions in
64 PIMCO Funds: Multi-Manager Series
<PAGE>
derivative instruments such as options and futures, which may reduce total
return. Current distribution rates differ from standardized yield rates in
that they represent what a class of a Fund has declared and paid to
shareholders as of the end of a specified period rather than the Fund's actual
net investment income for that period.
The Adviser and each Portfolio Manager may also report to shareholders or to
the public in advertisements concerning its performance as adviser to clients
other than the Funds, and on its comparative performance or standing in
relation to other money managers. Such comparative information may be compiled
or provided by independent ratings services or by news organizations. Any
performance information, whether related to the Funds, the Adviser or the
Portfolio Managers, should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Funds, and the
market conditions during the time period indicated, and should not be
considered to be representative of what may be achieved in the future.
Investment results of the Funds will fluctuate over time, and any
representation of the Funds' total return or yield for any prior period should
not be considered as a representation of what an investor's total return or
yield may be in any future period. The Trust's Annual and Semi-Annual Reports
contain additional performance information for the Funds and are available
upon request, without charge, by calling 1-800-927-4648 (Current
Shareholders), or 1-800-800-0952 (New Accounts).
November 1, 1998 Prospectus 65
<PAGE>
--------------------------------------------------------------------
PIMCO INVESTMENT ADVISER AND ADMINISTRATOR
FUNDS: PIMCO Advisors L.P., 800 Newport Center Drive, Newport Beach, CA
MULTI- 92660
MANAGER
SERIES --------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
MO 64105
--------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105
--------------------------------------------------------------------
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, MA 02110
--------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C>
FOR MORE INFORMATION To request a free copy of these doc- Information about the Trust
uments or to make inquiries about (including the SAI) can be
The following documents are the Funds, please write or call: reviewed and copied at the
available that offer further infor- Securities and Exchange
mation on the Funds of PIMCO PIMCO Funds: Commission's Public Reference
Funds: Multi-Manager Series. Multi-Manager Series Room in Washington, D.C.
840 Newport Center Drive Information on the operation
ANNUAL/SEMI-ANNUAL REPORTS TO Suite 300 of the public reference room
SHAREHOLDERS The Trust's annual Newport Beach, CA 92660 may be obtained by calling the
and semi-annual reports include a obtained by calling the
discussion of the market condi- Telephone: Commission at 1-800-SEC-0330.
tions and investment strategies 1-800-927-4648 Reports and other information
that significantly affected the 1-800-987-4626 (PIMCO about the Trust are available
Funds' performance during its last Infolink Audio Response on the Commission's Internet
fiscal year or other period. Network) site at www.sec.gov, and
copies of that information
STATEMENT OF ADDITIONAL INFORMATION may be obtained, upon payment
(SAI) The SAI contains additional of a duplicating fee, by
information about the Funds. A writing the Public Reference
current SAI has been filed with Section of the Commission,
the Securities and Exchange Washington, D.C. 20549-6009.
Commission, and is incorporated
into this prospectus by reference.
SEC File Number: 811-06161
</TABLE>
PIMCO
- -----------------
FUNDS
PIMCO FUNDS
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660
<PAGE>
CLASS A, B AND C SHARES
NOVEMBER 1, 1998
PIMCO FUNDS ASSET ALLOCATION SERIES
PROSPECTUS
Actively managed portfolios of select PIMCO Funds
PIMCO Funds Asset Allocation Series consists of three actively managed mutual
funds that invest in a diversified portfolio of PIMCO Funds. In addition to
broad diversification, each Portfolio provides access to the extensive asset
allocation and investment management capabilities of PIMCO Advisors L.P. and its
affiliates.
<TABLE>
<CAPTION>
90/10 Portfolio 60/40 Portfolio 30/70 Portfolio
<S> <C> <C>
Seeks long-term capital Seeks long-term capital Seeks current income, with
appreciation. The Portfolio appreciation and current long-term capital
normally invests approximately income. The portfolio appreciation as a secondary
90% of its assets normally invests objective. The Portfolio
in PIMCO Stock Funds approximately 60% of its normally invests
and 10% in PIMCO assets in PIMCO Stock approximately 30% of its
Bond Funds. Funds and 40% in PIMCO assets in PIMCO Stock
Bond Funds. Funds and 70% in PIMCO
Bond Funds.
</TABLE>
PIMCO
-----
FUNDS
<PAGE>
PIMCO Funds: Multi-Manager Series
Prospectus
November 1, 1998
PIMCO Funds Asset Allocation Series
90/10 PORTFOLIO
60/40 PORTFOLIO
30/70 PORTFOLIO
PIMCO Funds: Multi-Manager Series (the "Trust") is an open-end se-
ries management investment company offering three diversified in-
vestment portfolios (each a "Portfolio") in this Prospectus, each
with different investment objectives and strategies. The Portfo-
lios are professionally-managed series of the Trust designed to
take advantage of the benefits of asset allocation. Each Portfolio
seeks to achieve its particular investment objective by investing
within specified equity and fixed income ranges among a number of
other mutual funds in the PIMCO Funds family ("Underlying Funds"
or "Funds"). The address of PIMCO Funds: Multi-Manager Series is
840 Newport Center Drive, Suite 300, Newport Beach, CA 92660.
PIMCO Advisors L.P. ("PIMCO Advisors" or the "Adviser") serves as
investment adviser to the Portfolios and determines how the assets
of each Portfolio are allocated among the Underlying Funds. PIMCO
Advisors and its affiliates also provide advisory services to the
Underlying Funds. See "Management of the Portfolios."
Each Portfolio offers three classes of shares in this Prospectus:
Class A shares (generally sold subject to an initial sales
charge), Class B shares (sold subject to a contingent deferred
sales charge) and Class C shares (sold subject to an asset based
sales charge).
This Prospectus concisely describes the information investors
should know before investing in Class A, Class B and Class C
shares of the Portfolios. Please read this Prospectus carefully
and keep it for further reference.
Information about the investment objective of each Portfolio and
of the investment policies and restrictions applicable to each
Portfolio are set forth in this Prospectus. There can be no assur-
ance that the investment objective of any Portfolio will be
achieved. Because the market value of each Portfolio's investments
will change, the investment returns and net asset value per share
of each Portfolio will vary.
A Statement of Additional Information, dated November 1, 1998, as
amended or supplemented from time to time, is available free of
charge by writing to PIMCO Funds Distributors LLC (the "Distribu-
tor"), 2187 Atlantic Street, Stamford, Connecticut 06902, or by
telephoning 1-800-426-0107. In addition, a Trust Prospectus dated
November 1, 1998 and a Prospectus of PIMCO Funds: Pacific Invest-
ment Management Series dated September 25, 1998, each as amended
or supplemented from time to time (together, the "Underlying Fund
Prospectuses"), relating to Institutional Class shares of the Un-
derlying Funds, are available free of charge from the Distributor.
The Statement of Additional Information and the Underlying Fund
Prospectuses, which contain more detailed information about the
Trust, the Portfolios and/or the Underlying Funds, have each been
filed with the Securities and Exchange Commission and are incorpo-
rated by reference in this Prospectus. The Securities and Exchange
Commission maintains an Internet World Wide Web site (at
www.sec.gov) which contains the Statement of Additional Informa-
tion and materials that are incorporated by reference into this
Prospectus and the Statement of Additional Information, the Under-
lying Fund Prospectuses, and other information about the Trust,
the Portfolios and the Underlying Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE
SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Overview.............................. 3
Schedule of Fees...................... 4
Investment Objectives and Policies.... 6
Underlying Funds...................... 10
Performance Information............... 16
How to Buy Shares..................... 17
Alternative Purchase Arrangements..... 21
Exchange Privilege.................... 29
How to Redeem......................... 30
Distributor and Distribution and
Servicing Plans...................... 34
How Net Asset Value Is Determined.... 36
Distributions........................ 36
Taxes................................ 37
Management of the Portfolios......... 38
Description of the Trust............. 43
Mailings to Shareholders............. 44
</TABLE>
2 PIMCO Funds Asset Allocation Series
<PAGE>
Overview
PIMCO Funds: Multi-Manager Series (the "Trust") is an open-end se-
ries management investment company organized as a Massachusetts
business trust on August 24, 1990. This Prospectus describes three
separate diversified investment portfolios (the "Portfolios") of-
fered by the Trust, PIMCO Funds Asset Allocation Series--90/10
Portfolio (the "90/10 Portfolio"), PIMCO Funds Asset Allocation
Series--60/40 Portfolio (the "60/40 Portfolio") and PIMCO Funds
Asset Allocation Series--30/70 Portfolio (the "30/70 Portfolio").
The Portfolios are intended for investors who prefer to have
their asset allocation decisions made by professional money manag-
ers. Each Portfolio has a distinct investment objective which it
seeks to achieve by investing within specified equity and fixed
income ranges among certain series ("Underlying Funds" or "Funds")
of the Trust and PIMCO Funds: Pacific Investment Management Se-
ries. PIMCO Advisors serves as investment adviser for each Fund of
the Trust and its affiliate, Pacific Investment Management Company
("Pacific Investment Management"), serves as investment adviser
for each Fund of PIMCO Funds: Pacific Investment Management Se-
ries. Some of the Underlying Funds invest primarily in equity se-
curities ("Underlying Stock Funds"); other Funds invest primarily
in fixed income securities, including money market instruments
("Underlying Bond Funds"). The Portfolios are named in accordance
with their equity/fixed income allocation targets. For instance,
the 90/10 Portfolio will normally invest approximately 90% of its
assets in Underlying Stock Funds and 10% of its assets in Under-
lying Bond Funds. The following summarizes certain key information
relating to the Portfolios and is qualified in its entirety by the
more detailed information contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PORTFOLIO PIMCO FUNDS
PROFILES ASSET ALLOCATION SERIES INVESTMENT OBJECTIVE ALLOCATION STRATEGY
--------------------------------------------------------------------------------------------------
<C> <C> <S>
90/10 PORTFOLIO Long-term capital appreciation Under normal conditions,
approximately 90% of the
Portfolio's assets will
be allocated among
Underlying Stock Funds
and 10% among Underlying
Bond Funds.
--------------------------------------------------------------------------------------------------
60/40 PORTFOLIO Long-term capital appreciation and current income Under normal conditions,
approximately 60% of the
Portfolio's assets will
be allocated among
Underlying Stock Funds
and 40% among Underlying
Bond Funds.
--------------------------------------------------------------------------------------------------
30/70 PORTFOLIO Current income, with long-term Under normal conditions,
capital appreciation as a secondary objective approximately 30% of the
Portfolio's assets will
be allocated among
Underlying Stock Funds
and 70% among Underlying
Bond Funds.
</TABLE>
The Underlying Funds have different investment objectives and
policies and different degrees of potential investment risk and
reward. Based on the allocation strategies listed above, an in-
vestor should choose among the Portfolios based on personal objec-
tives, investment time horizon, tolerance for risk and personal
financial circumstances. For example, because the 90/10 Portfolio
will normally invest approximately 90% of its assets in Underlying
Stock Funds, this Portfolio might be suitable for an investor with
a relatively long time horizon who seeks long-term capital appre-
ciation potential and has a fairly high tolerance for risk and
volatility. An investor with a shorter time horizon who seeks a
balance of income and long-term capital appreciation and has less
tolerance for risk and volatility might choose the 60/40 Portfo-
lio, which invests in a fairly balanced portfolio of Underlying
Stock and Bond Funds. An investor who seeks a higher level of cur-
rent income combined with some potential for long-term capital ap-
preciation and has a lower tolerance for risk and volatility might
choose the 30/70 Portfolio, which will normally invest approxi-
mately 70% of its assets in Underlying Bond Funds. While each
Portfolio provides a relatively high level of diversification in
comparison to most mutual funds, a single Portfolio may not be
suitable as a complete investment program. For a more complete de-
scription of the investment objectives and policies of the Portfo-
lios, please see "Investment Objectives and Policies."
Because each Portfolio will invest all of its assets in the Un-
derlying Funds, each Portfolio's investment performance is di-
rectly related to the investment performance of the Underlying
Funds in which it invests. The ability of a Portfolio to realize
its investment objective will depend upon the extent to which the
Underlying Funds realize their objectives. The value of the Under-
lying Funds' investments, and the net asset values of the shares
of both the Underlying Funds and the Portfolios, will fluctuate in
response to changes in market and economic conditions, as well as
the financial condition and prospects of issuers in which the Un-
derlying Funds invest.
November 1, 1998 Prospectus 3
<PAGE>
The possible use of certain investment techniques by an Under-
lying Fund, including various derivative instruments such as
futures contracts, options and swap agreements, will subject the
Fund to greater risk than Funds that do not employ such tech-
niques. In addition, investments by certain Underlying Funds in
small market capitalization companies, foreign issuers (including
emerging market issuers) and foreign currencies, illiquid securi-
ties and other instruments will expose those Funds to a higher de-
gree of risk and price volatility. Some Underlying Funds may also
invest in fixed income securities rated below investment grade
(commonly referred to as "high yield" securities or "junk" bonds),
which are considered to be speculative by traditional investment
standards. Each Portfolio may be subject to these and other risks
associated with investments in the Underlying Funds depending upon
the Portfolio's asset allocation strategy. For a description of
the various risks associated with the Portfolios and the Under-
lying Funds, see "Investment Objectives and Policies" and "Under-
lying Funds" in this Prospectus, "Investment Objectives and Poli-
cies" in the Statement of Additional Information and "Characteris-
tics and Risks of Securities and Investment Techniques" in the Un-
derlying Fund Prospectuses, which are incorporated herein by ref-
erence and are available free of charge by telephoning the Dis-
tributor at 1-800-426-0107.
Potential investors in the Portfolios should realize that they
may invest directly in the Underlying Funds and make their own as-
set allocation decisions. By investing in a Portfolio, an investor
will incur not only a proportionate share of the expenses of the
Portfolio but also a portion of the expenses of the Underlying
Funds in which the Portfolio invests (including investment advi-
sory and administrative fees charged at the Underlying Fund lev-
el). See "Schedule of Fees" and "Management of the Portfolios--
Underlying Fund Expenses."
Schedule of Fees
Expenses are one of several factors to consider when investing in
Class A, Class B or Class C shares of the Portfolios. The follow-
ing tables and Examples summarize the expenses of each Portfolio
that are borne by its Class A, Class B and Class C shareholders
based on estimated expenses for the Portfolio's current fiscal
year.
You should bear in mind that shareholders of each Portfolio
bear indirectly the expenses of the Underlying Funds in which the
Portfolio invests. The Portfolios will invest only in Institu-
tional Class shares of the Underlying Funds and will not pay any
sales charges or 12b-1 fees in connection with their investments
in the Underlying Funds. The Portfolios will, however, indirectly
bear their pro rata share of the fees and expenses (including ad-
visory and administrative fees) incurred by the Underlying Funds
that are borne by all Institutional Class shareholders. Because
the Underlying Funds have varied fee and expense levels and the
Portfolios will own different proportions of the Underlying Funds
at different times, the actual fees and expenses indirectly in-
curred by the Portfolios will vary.
<TABLE>
<CAPTION>
SHAREHOLDER
TRANSACTION
EXPENSES
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
-------------------------------------------------------------------------
<S> <C> <C> <C>
MAXIMUM INITIAL SALES CHARGE IM-
POSED ON PURCHASES
(as a percentage of offering
price at time of purchase)
90/10 Portfolio and 60/40 Portfolio 5.50% None None
30/70 Portfolio 4.50% None None
-------------------------------------------------------------------------
MAXIMUM SALES CHARGE IMPOSED ON
REINVESTED DIVIDENDS
(as a percentage of net asset
value at time of purchase) None None None
-------------------------------------------------------------------------
MAXIMUM CONTINGENT DEFERRED SALES
CHARGE ("CDSC")
(as a percentage of original
purchase price) 1%(/1/) 5%(/2/) 1%(/3/)
-------------------------------------------------------------------------
EXCHANGE FEE None None None
</TABLE>
1. Imposed only in certain circumstances where Class A shares are
purchased without a front-end sales charge at the time of pur-
chase. See "Alternative Purchase Arrangements."
2. The maximum CDSC is imposed on shares redeemed in the first
year. For shares held longer than one year, the CDSC declines ac-
cording to the schedule set forth under "Alternative Purchase Ar-
rangements--Deferred Sales Charge Alternative--Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed
in the first year.
4 PIMCO Funds Asset Allocation Series
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE: You EXAMPLE: You
would pay would pay
the the
following following
expenses on expenses on
a $1,000 a $1,000
investment investment
assuming assuming (1)
(1) 5% 5% annual
annual return and
return and (2) no
(2) redemption:
redemption
at the end
ANNUAL PORTFOLIO OPERATING EXPENSES of each time
(As a percentage of average net assets): period:
TOTAL
PIMCO FUNDS ADMINI- UNDERLYING PORTFOLIO
ASSET ALLOCATION ADVISORY STRATIVE 12B-1 FUND OPERATING ONE THREE ONE THREE
SERIES FEES FEES(/1/) FEES(/2/) EXPENSES(/3/) EXPENSES(/3/) YEAR YEARS YEAR YEARS
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A 90/10 PORTFOLIO None .40% .25% .79% 1.44% $ 69 $ 98 $ 69 $ 98
SHARES -------------------------------------------------------------------------------------------------------
60/40 PORTFOLIO None .40 .25 .67 1.32 68 95 68 95
-------------------------------------------------------------------------------------------------------
30/70 PORTFOLIO None .40 .25 .55 1.20 57 81 57 81
CLASS B 90/10 PORTFOLIO None .40 1.00 .79 2.19 72 99 22 69
SHARES -------------------------------------------------------------------------------------------------------
60/40 PORTFOLIO None .40 1.00 .67 2.07 71 95 21 65
-------------------------------------------------------------------------------------------------------
30/70 PORTFOLIO None .40 1.00 .55 1.95 70 91 20 61
CLASS C 90/10 PORTFOLIO None .40 1.00 .79 2.19 32 69 22 69
SHARES -------------------------------------------------------------------------------------------------------
60/40 PORTFOLIO None .40 1.00 .67 2.07 31 65 21 65
-------------------------------------------------------------------------------------------------------
30/70 PORTFOLIO None .40 1.00 .55 1.95 30 61 20 61
</TABLE>
1. The Administrative Fees for each Portfolio are subject to re-
duction to the extent that the average net assets attributable in
the aggregate to the Portfolio's Class A, Class B and Class C
shares exceed $2.5 billion. See "Management of the Portfolios--Ad-
ministrative Fees."
2. 12b-1 fees which are equal to .25% represent servicing fees
which are paid annually to the Distributor and repaid to partici-
pating brokers, certain banks and other financial intermediaries.
12b-1 fees which exceed .25% represent aggregate distribution and
servicing fees. See "Distributor and Distribution and Servicing
Plans."
3. Based on estimated expenses for the current fiscal year. Under-
lying Fund Expenses for each Portfolio are estimated based upon
the initial allocation of each Portfolio's assets among the Under-
lying Funds and upon the total annual operating expenses of each
Underlying Fund. For a listing of the expenses associated with
each Underlying Fund, please see "Management of the Portfolios--
Underlying Fund Expenses." Total Portfolio Operating Expenses and
the Examples set forth above are based on estimates of the Under-
lying Fund Expenses each Portfolio will incur. Actual Underlying
Fund Expenses for each Portfolio are expected to vary with changes
in the allocation of the Portfolio's assets, and may be higher or
lower than those shown above.
The purpose of the foregoing tables is to assist investors in un-
derstanding the various costs and expenses of the Trust that are
borne directly or indirectly by Class A, Class B and Class C
shareholders of the Portfolios. The Examples for Class A shares
assume payment of the current maximum applicable sales load. Due
to the 12b-1 distribution fee imposed on Class B and Class C
shares, a Class B or Class C shareholder of a Portfolio may, de-
pending on the length of time the shares are held, pay more than
the economic equivalent of the maximum front-end sales charges
permitted by relevant rules of the National Association of Securi-
ties Dealers, Inc.
NOTE: THE FIGURES SHOWN IN THE EXAMPLES ARE ENTIRELY HYPOTHETICAL.
THEY ARE NOT REPRESENTATIONS OF PAST OR FUTURE PERFORMANCE OR EX-
PENSES; ACTUAL PERFORMANCE AND/OR EXPENSES MAY BE MORE OR LESS
THAN SHOWN.
November 1, 1998 Prospectus 5
<PAGE>
Investment Objectives and Policies
The investment objective and general investment policies of each
Portfolio are described below. There can be no assurance that the
investment objective of any Portfolio will be achieved. Because
the market value of each Portfolio's investments will change, the
net asset value per share of each Portfolio will also vary.
The Portfolios are intended for investors who prefer to have
their asset allocation decisions made by professional money manag-
ers. Each Portfolio seeks to achieve its investment objective by
investing within specified equity and fixed income ranges among
the Underlying Funds. Each Underlying Fund is a series of the
Trust or PIMCO Funds: Pacific Investment Management Series and is
managed by PIMCO Advisors and/or its affiliates. The Portfolios
have different investment objectives and policies and degrees of
potential investment risk and reward depending upon their alloca-
tion strategies. An investor should choose a Portfolio based on
personal objectives, investment time horizon, tolerance for risk
and personal financial circumstances.
PORTFOLIO 90/10 PORTFOLIO seeks long-term capital appreciation. Under normal
DESCRIPTIONSconditions, approximately 90% of the Portfolio's assets will be
allocated among Underlying Stock Funds and 10% among Underlying
Bond Funds.
60/40 PORTFOLIO seeks long-term capital appreciation and current
income. Under normal conditions, approximately 60% of the Portfo-
lio's assets will be allocated among Underlying Stock Funds and
40% among Underlying Bond Funds.
30/70 PORTFOLIO seeks current income. Long-term capital apprecia-
tion is a secondary objective. Under normal conditions, approxi-
mately 30% of the Portfolio's assets will be allocated among Un-
derlying Stock Funds and 70% among Underlying Bond Funds.
Unless otherwise noted, each Portfolio's investment objective
and its restrictions and policies relating to the investment of
its assets are non-fundamental and may be changed without share-
holder approval.
PIMCO Advisors serves as the investment adviser to the Portfo-
lios and determines how each Portfolio's assets are allocated
among the Underlying Funds. Each Portfolio invests in particular
Underlying Funds (which may differ from time to time) based on
various criteria observed by PIMCO Advisors. Among other things,
PIMCO Advisors analyses the various investment objectives, poli-
cies and strategies of the Underlying Funds to determine which
Funds, in combination with others, are appropriate in light of a
Portfolio's investment objective. PIMCO Advisors then makes allo-
cation decisions among these Underlying Funds in an attempt to
achieve the Portfolio's objective. The table below illustrates the
initial equity and fixed income allocation targets and typical
ranges for each Portfolio under normal market conditions.
EQUITY AND FIXED INCOME RANGES
(as a percentage of each Portfolio's average net assets)
<TABLE>
<CAPTION>
TYPICAL
PIMCO FUNDS TARGET ALLOCATION
ASSET ALLOCATION SERIES ALLOCATION RANGE*
---------------------------------------------------------------
<S> <C> <C>
90/10 PORTFOLIO
Equity 90% 80% - 100%
Fixed Income (including money market**) 10% 0% - 20%
---------------------------------------------------------------
60/40 PORTFOLIO
Equity 60% 50% - 70%
Fixed Income (including money market**) 40% 30% - 50%
---------------------------------------------------------------
30/70 PORTFOLIO
Equity 30% 25% - 35%
Fixed Income (including money market**) 70% 65% - 75%
</TABLE>
* Each Portfolio may temporarily deviate from its asset alloca-
tion range for defensive purposes.
** Each Portfolio may hold a portion of its assets in PIMCO Money
Market Fund, in part, so that it can readily sell the securities
and have cash available to pay Portfolio expenses without incur-
ring capital gains.
6 PIMCO Funds Asset Allocation Series
<PAGE>
Each Portfolio is authorized to invest in any or all of the Un-
derlying Funds. However, it is expected that a Portfolio will in-
vest in only some of the Underlying Funds at any particular time.
A Portfolio's investment in a particular Underlying Fund may and
in some cases is expected to exceed 25% of its total assets. To
the extent that a Portfolio invests a significant portion of its
assets in an Underlying Fund, it will be particularly sensitive to
the risks associated with that Fund. Please see "Underlying Funds"
and "Principal Risks of the Underlying Funds" below for a descrip-
tion of the Underlying Funds and their attendant risks. The par-
ticular Underlying Funds in which each Portfolio may invest, the
equity and fixed income allocation targets and ranges specified
above, and the percentage of each Portfolio's assets invested from
time to time in any Underlying Fund or combination of Funds may be
changed from time to time without the approval of the Portfolio's
shareholders.
Each Portfolio's net asset value will fluctuate in response to
changes in the net asset values of the Underlying Funds in which
it invests. Each Portfolio will invest all of its assets in Under-
lying Funds, and may invest up to 100% of its assets in PIMCO
Money Market Fund (and thereby deviate from its asset allocation
range) for temporary defensive purposes. A Portfolio may also bor-
row money for temporary or emergency purposes.
Each Portfolio is also subject to certain investment restric-
tions that are described under "Investment Restrictions" in the
Statement of Additional Information.
OVERVIEW OF PIMCO Advisors' Asset Allocation Committee determines how the
ASSET Portfolios' assets are allocated and reallocated from time to time
ALLOCATION among the Underlying Funds. The individuals who constitute the As-
set Allocation Committee and are primarily responsible for making
asset allocation and other investment decisions for the Portfolios
are William D. Cvengros, Timothy R. Clark, Robert S. Venable, Da-
vid Young and Edward P. Rennie. Please see "Management of the
Portfolios" for a description of PIMCO Advisors and the individu-
als on the Asset Allocation Committee.
PIMCO Advisors' approach to asset allocation encompasses both
quantitative and qualitative processes designed to allocate the
Portfolios' assets among multiple Underlying Funds in order to
achieve broadly diversified Portfolios. The Asset Allocation Com-
mittee meets regularly to analyze various economic and market da-
ta. The Committee also collects and synthesizes multiple proprie-
tary models maintained by the Portfolio Managers of the Underlying
Funds, each of which is an affiliate of PIMCO Advisors. See "Man-
agement of the Portfolios--Portfolio Managers for the Underlying
Funds." These models are quantitatively compiled by the Committee
to provide a framework for developing PIMCO Advisors' allocation
strategies with respect to the major asset classes and sub-classes
held by the Underlying Funds.
The resulting framework assists the Asset Allocation Committee
in the following ways: (1) it identifies the desired tactical al-
location ranges for the Portfolios around long-term strategic
broad asset class and sub-class targets, (2) it identifies indi-
vidual Funds among the Underlying Funds that are expected to pro-
vide consistent, quality performance in the various asset classes
and sub-classes identified for the Portfolios, and (3) it is used
by the Committee in its on-going evaluation of the equity and
fixed income markets in an attempt to identify and implement val-
ue-added tactical shifts for the Portfolios. These tactical shifts
and resulting reallocations of Portfolio assets are not expected
to be large or frequent in nature, and should result in modest
levels of portfolio turnover for the Portfolios. See "Portfolio
Turnover."
EQUITY The equity portion of each Portfolio will be allocated among a
PORTION OF number of Underlying Stock Funds which provide a broad range of
THE equity-based investment objectives and strategies. By allocating
PORTFOLIOS assets among these Funds, the equity portions of the Portfolios
can be diversified in multiple ways, including the following:
BY REGION
- U.S. Equities
- International Developed Markets Equities
- International Emerging Markets Equities
November 1, 1998 Prospectus 7
<PAGE>
BY INVESTMENT STYLE
- Blend (Broad Market)
- Value
- Growth
BY SIZE
- Large-Cap
- Mid-Cap
- Small-Cap
For a description of the Underlying Stock Funds and their in-
vestment objectives and strategies, please see "Underlying Funds."
The Portfolio Managers for the Underlying Stock Funds each have
different investment philosophies and processes which are re-
flected in the Funds they manage. Through asset allocation, PIMCO
Advisors can take advantage of the expertise of each Portfolio
Manager and combine the investment styles set forth above in pro-
viding broadly diversified Portfolios. For a description of each
Portfolio Manager and its particular investment philosophy and
process, please see "Management of the Portfolios--Portfolio Man-
agers for the Underlying Funds."
FIXED The fixed income portion of each Portfolio will be allocated among
INCOME a number of Underlying Bond Funds which provide a broad range of
PORTION OF fixed income-based investment objectives and strategies. By allo-
THE cating assets among these Funds, the fixed income portions of the
PORTFOLIOS Portfolios can be diversified in multiple ways, including the fol-
lowing:
BY REGION
- U.S. Fixed Income
- Foreign Fixed Income
BY SECTOR/INVESTMENT SPECIALTY
- Governments
- Mortgages
- Corporate
- Inflation Indexed
BY CREDIT QUALITY
- Investment Grade/Money Market
- Medium Grade
- High Yield
BY DURATION
- Long-Term
- Intermediate-Term
- Short-Term
For a description of the Underlying Bond Funds and their in-
vestment objectives and strategies, please see "Underlying Funds."
Pacific Investment Management is the investment adviser and Port-
folio Manager for each Underlying Bond Fund. Through asset alloca-
tion, PIMCO Advisors can take advantage of the broad fixed income
expertise of Pacific Investment Management and combine the invest-
ment styles set forth above in providing broadly diversified Port-
folios. For a description of Pacific Investment Management and its
investment philosophy and process, please see "Management of the
Portfolios--Portfolio Managers for the Underlying Funds."
8 PIMCO Funds Asset Allocation Series
<PAGE>
POTENTIAL As described above, PIMCO Advisors has broad discretion to allo-
CONFLICTS cate and reallocate the Portfolios' assets among the Underlying
OF INTEREST Funds consistent with the Portfolios' investment objectives and
policies and the asset allocation ranges specified above. Although
PIMCO Advisors does not charge an investment advisory fee for its
asset allocation services, PIMCO Advisors and its affiliates indi-
rectly receive fees (including investment advisory and administra-
tive fees) from the Underlying Funds in which the Portfolios in-
vest. In this regard, PIMCO Advisors has a financial incentive to
invest a Portfolio's assets in Underlying Funds with higher fees
than other Funds, even if it believes that alternate investments
would better serve the Portfolio's investment program. PIMCO Advi-
sors is legally obligated to disregard that incentive in making
asset allocation decisions for the Portfolios. The Trustees and
officers of the Trust may also have conflicting interests in ful-
filling their fiduciary duties to both the Portfolios and the Un-
derlying Funds.
GENERAL Because the Portfolios invest all of their assets in the Under-
RISKS OF lying Funds, the risks associated with investing in the Portfolios
INVESTING are closely related to the risks associated with the securities
IN THE held by the Underlying Funds. The ability of a Portfolio to
PORTFOLIOS achieve its investment objective will depend upon the ability of
the Underlying Funds to achieve their objectives. Of course, the
extent to which the investment performance and risks associated
with a particular Portfolio correlate to those of a particular Un-
derlying Fund will depend upon the extent to which the Portfolio's
assets are allocated from time to time for investment in the Un-
derlying Fund. For a description of the principal risks associated
with investments in the Underlying Funds, please see "Underlying
Funds--Principal Risks of the Underlying Funds" in this Prospec-
tus, "Investment Objectives and Policies" in the Statement of Ad-
ditional Information and "Characteristics and Risks of Securities
and Investment Techniques" in the Underlying Fund Prospectuses,
which are incorporated herein by reference and are available free
of charge by telephoning the Distributor at 1-800-426-0107.
PORTFOLIO A change in the securities held by a Portfolio is known as "port-
TURNOVER folio turnover." Because PIMCO Advisors does not expect to reallo-
cate the Portfolios' assets among the Underlying Funds on a fre-
quent basis, the portfolio turnover rates for the Portfolios are
expected to be modest (i.e., less than 25%) in comparison to most
mutual funds. However, the Portfolios' indirectly bear the ex-
penses associated with portfolio turnover of the Underlying Funds,
a number of which have fairly high portfolio turnover rates (i.e.,
in excess of 100%). High portfolio turnover involves correspond-
ingly greater expenses to an Underlying Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the
sale of securities and reinvestments in other securities. Share-
holders in the Portfolios may also bear expenses directly or indi-
rectly through sales of securities held by the Portfolios and the
Underlying Funds which result in realization of ordinary income or
taxable capital gains (including short-term capital gains which
are generally taxed at ordinary income tax rates). See "Taxes."
SERVICE Many of the services provided to the Portfolios depend on the
SYSTEMS -- smooth functioning of computer systems. Many systems in use today
YEAR 2000 cannot distinguish between the year 1900 and the year 2000. Should
PROBLEM any of the service systems fail to process information properly,
that could have an adverse impact on the Portfolios' operations
and services provided to shareholders. The Adviser, Distributor,
Shareholder Servicing and Transfer Agent, Custodian, and certain
other service providers to the Portfolios have reported that each
is working toward mitigating the risks associated with the so-
called "year 2000 problem." However, there can be no assurance
that the problem will be corrected in all respects and that the
Portfolios' operations and services provided to shareholders will
not be adversely affected, nor can there be any assurance that the
year 2000 problem will not have an adverse effect on the entities
whose securities are held by the Underlying Funds or on domestic
or global equity markets or economies, generally.
"FUNDAMENTAL"
POLICIES
The investment objective of each Portfolio described in this Pro-
spectus may be changed by the Board of Trustees without share-
holder approval. If there is a change in a Portfolio's investment
objective, shareholders should consider whether the Portfolio re-
mains an appropriate investment in light of their then current fi-
nancial positions and needs.
November 1, 1998 Prospectus 9
<PAGE>
Underlying Funds
Each Portfolio invests all of its assets in Underlying Funds. Ac-
cordingly, each Portfolio's investment performance depends upon a
favorable allocation among the Underlying Funds as well as the
ability of the Underlying Funds to meet their objectives. There
can be no assurance that the investment objective of any Under-
lying Fund will be achieved. Shares of the Underlying Funds are
not offered in this Prospectus.
PORTFOLIO PIMCO Advisors serves as investment adviser for each of the Under-
MANAGERS lying Stock Funds and its affiliates serve as sub-advisers, except
that another affiliate, Pacific Investment Management, is the sole
investment adviser to PIMCO StocksPLUS Fund. Under these arrange-
ments, the sub-advisers and Pacific Investment Management (re-
ferred to collectively as "Portfolio Managers") have full invest-
ment discretion and make all determinations with respect to the
investment of the assets of these Funds. Pacific Investment Man-
agement is also the sole investment adviser to each Underlying
Bond Fund. The Portfolio Managers and their investment specialties
are listed below.
<TABLE>
<CAPTION>
PORTFOLIO MANAGER INVESTMENT SPECIALTY
----------------------------------------------------------------------------
<C> <S>
PACIFIC INVESTMENT MANAGEMENT All sectors of the bond
market using its total
return philosophy--
seeking both yield and
capital appreciation
----------------------------------------------------------------------------
COLUMBUS CIRCLE INVESTORS ("COLUMBUS CIRCLE") Stocks, using its
"Positive Momentum &
Positive Surprise"
discipline
----------------------------------------------------------------------------
CADENCE CAPITAL MANAGEMENT ("CADENCE") Stocks of growth
companies that the
Portfolio Manager
believes are trading at
a reasonable price
----------------------------------------------------------------------------
NFJ INVESTMENT GROUP ("NFJ") Value stocks that the
Portfolio Manager
believes are undervalued
and/or offer above-
average dividend yields
----------------------------------------------------------------------------
BLAIRLOGIE CAPITAL MANAGEMENT ("BLAIRLOGIE") (/1/) International stocks
using Scottish standards
of prudent investment
management with modern
quantitative analytical
tools
----------------------------------------------------------------------------
PARAMETRIC PORTFOLIO ASSOCIATES ("PARAMETRIC") Stocks, using
quantitatively-driven
fundamental analysis and
economic methods, with
specialties in emerging
markets and tax-
efficient products
</TABLE>
1. On or before March 31, 1999, it is anticipated that PIMCO
Advisors will sell substantially all of its ownership interest
in Blairlogie, in which case Blairlogie would no longer serve
as a Portfolio Manager for any Underlying Fund. See "Management
of the Portfolios--Portfolio Managers for the Underlying
Funds--Blairlogie."
10 PIMCO Funds Asset Allocation Series
<PAGE>
UNDERLYING The following provides a concise description of the investment ob-
STOCK FUNDS jective and primary investments of each Underlying Stock Fund and
lists the Fund's Portfolio Manager. For a complete description of
these Funds, please see the Underlying Fund Prospectuses, which
are incorporated herein by reference and are available free of
charge by telephoning the Distributor at 1-800-426-0107.
<TABLE>
<CAPTION>
PORTFOLIO
FUND NAME INVESTMENT OBJECTIVE PRIMARY INVESTMENTS MANAGER
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STOCK FUNDS PIMCO Equity Income Current income as a Common stocks with below- NFJ
primary objective; long- average price to earnings
term growth of capital ratios and higher dividend
as a secondary objective yields relative to their
industry groups
----------------------------------------------------------------------------------------
PIMCO Renaissance Long-term growth of Common stocks with below- Columbus Circle
capital and income average valuations that
have improving business
fundamentals
----------------------------------------------------------------------------------------
PIMCO Core Equity Long-term growth of Common stocks of companies Columbus Circle
capital; income as a with market
secondary objective capitalizations in excess
of $3 billion
----------------------------------------------------------------------------------------
PIMCO Mid-Cap Equity Long-term growth of Common stocks of companies Columbus Circle
capital with market
capitalizations between
$800 million and $3
billion
----------------------------------------------------------------------------------------
PIMCO Value Long-term growth of Common stocks with below- NFJ
capital and income average price to earnings
ratios relative to their
industry groups
----------------------------------------------------------------------------------------
PIMCO Value 25 Long-term growth of Approximately 25 common NFJ
capital and income stocks of companies with
medium market
capitalizations and below-
average price to earnings
ratios relative to their
industry groups
----------------------------------------------------------------------------------------
PIMCO Capital Growth of capital Common stocks of companies Cadence
Appreciation with market
capitalizations of at
least $1 billion that have
improving fundamentals and
whose stock is reasonably
valued by the market
----------------------------------------------------------------------------------------
PIMCO Mid-Cap Growth Growth of capital Common stocks of companies Cadence
with market
capitalizations in excess
of $500 million that have
improving fundamentals and
whose stock is reasonably
valued by the market
----------------------------------------------------------------------------------------
PIMCO Enhanced Equity Total return which Commons stocks represented Parametric
equals or exceeds the in the S&P 500
total return performance
of an index representing
the performance of a
reasonably broad
spectrum of common
stocks (currently the
S&P 500 (/2/))
----------------------------------------------------------------------------------------
PIMCO Tax-Efficient Maximum after-tax growth A broadly diversified Parametric
Equity of capital portfolio of at least 200
common stocks of companies
with larger
market capitalizations
-----------------------------------------------------------------------------------------------------------
AGGRESSIVE PIMCO Small-Cap Value Long-term growth of Common stocks of companies NFJ
STOCK FUNDS capital and income with market
capitalizations between
$50 million and $1 billion
and below-average price to
earnings ratios relative
to their industry groups
----------------------------------------------------------------------------------------
PIMCO Small-Cap Growth Growth of capital Common stocks of companies Cadence
with market
capitalizations between
$50 million and $1 billion
that have improving
fundamentals and whose
stock is reasonably valued
by the market
----------------------------------------------------------------------------------------
PIMCO Micro-Cap Growth Long-term growth of Common stocks of companies Cadence
capital with market
capitalizations of less
than $100 million that
have improving
fundamentals and whose
stock is reasonably valued
by the market
-----------------------------------------------------------------------------------------------------------
INTERNATIONAL PIMCO International Capital appreciation; Non-U.S. stocks of Blairlogie (/1/)
STOCK FUNDS income is incidental companies with small,
medium and large market
capitalizations (developed
and emerging markets)
----------------------------------------------------------------------------------------
PIMCO International Long-term capital An international portfolio Columbus Circle
Growth appreciation of equity and equity-
related securities
----------------------------------------------------------------------------------------
PIMCO Structured Long-term growth of Common stocks of companies Parametric
Emerging Markets capital located in emerging market
countries
----------------------------------------------------------------------------------------
PIMCO Tax-Efficient Same as PIMCO Structured Common stocks of companies Parametric
Structured Emerging Markets Fund, located in emerging market
Emerging Markets except that the Fund countries
seeks to achieve
superior after-tax
returns by employing a
variety of tax-efficient
management strategies
-----------------------------------------------------------------------------------------------------------
SPECIALIZED PIMCO Innovation Capital appreciation; no Common stocks of companies Columbus Circle
STOCK FUNDS consideration with small, medium and
given to income large market
capitalizations
(technology-related stocks)
----------------------------------------------------------------------------------------
PIMCO StocksPLUS Total return which S&P 500 stock index Pacific
exceeds the total derivatives backed by Investment
return performance of a portfolio of fixed Management
the S&P 500 income securities
</TABLE>
1. On or before March 31, 1999, it is anticipated that PIMCO Advi-
sors will sell substantially all of its ownership interest in
Blairlogie and assume full portfolio management responsibility
for PIMCO International Fund.
2. The Standard & Poor's 500 Composite Stock Price Index.
November 1, 1998 Prospectus 11
<PAGE>
UNDERLYING Pacific Investment Management has full investment discretion and
BOND FUNDS makes all determinations with respect to the investment of the as-
sets of each Underlying Bond Fund.
The investment objective of each Underlying Bond Fund (except
as provided below) is to seek to realize maximum total return,
consistent with preservation of capital and prudent investment
management. The "total return" sought by most of the Underlying
Bond Funds will consist of interest and dividends from underlying
securities and capital appreciation or depreciation reflected in
changes in the value of portfolio securities. The investment ob-
jective of PIMCO Real Return Bond Fund is to seek to realize maxi-
mum real return, consistent with preservation of real capital and
prudent investment management. "Real return" is total return ad-
justed for inflation. The investment objective of each of PIMCO
Money Market Fund and PIMCO Short-Term Fund is to seek to obtain
maximum current income consistent with preservation of capital and
daily liquidity. PIMCO Money Market Fund also attempts to maintain
a stable net asset value of $1.00 per share, although there can be
no assurance that it will be successful in doing so.
The following provides a concise description of the primary in-
vestments of and other information relating to each Underlying
Bond Fund. For a complete description of these Funds, please see
the Underlying Fund Prospectus for PIMCO Funds: Pacific Investment
Management Series, which is incorporated herein by reference and
is available free of charge by telephoning the Distributor at 1-
800-426-0107.
<TABLE>
<CAPTION>
FUND NAME PRIMARY INVESTMENTS DURATION CREDIT QUALITY(/1/) FOREIGN(/2/)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
SHORT-TERM PIMCO Money Market Money market instruments (less than or Min 95% Aaa or Prime 1; 0%
BOND equal to) 90 days (less than or equal to)
FUNDS dollar-weighted 5% Aa or Prime 2
average maturity
--------------------------------------------------------------------------------------------------------------------
PIMCO Short-Term Money market instruments 0-1 yr B to Aaa; max 10% 0-5%
and short maturity below Baa
fixed
income securities
--------------------------------------------------------------------------------------------------------------------
PIMCO Low Duration Short and intermediate 1-3 yrs B to Aaa; max 10% 0-20%
maturity fixed income below Baa
securities
- ------------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE- PIMCO Moderate Duration Short and intermediate 2-5 yrs B to Aaa; max 10% 0-20%
TERM maturity fixed income below Baa
BOND FUNDS securities
--------------------------------------------------------------------------------------------------------------------
PIMCO Real Return Bond Inflation-indexed fixed N/A B to Aaa; max 10% 0-35%
income securities below Baa
--------------------------------------------------------------------------------------------------------------------
PIMCO Total Return Intermediate maturity 3-6 yrs B to Aaa; max 10% 0-20%
fixed income securities below Baa
--------------------------------------------------------------------------------------------------------------------
PIMCO Total Return II Same as PIMCO Total Return 3-6 yrs Baa to Aaa 0%
Fund, except that the
Fund is subject to credit
quality and
foreign issuer
restrictions
--------------------------------------------------------------------------------------------------------------------
PIMCO High Yield Higher yielding fixed 2-6 yrs B to Aaa; min 65% 0%
income securities below Baa
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM PIMCO Long-Term U.S. Government Long-term maturity (greater than or A to Aaa 0%
BOND fixed income securities equal to) 8 yrs
FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PIMCO Global Bond Intermediate maturity 3-7 yrs B to Aaa; max 10% 25%-75%
BOND U.S. and foreign fixed below Baa
FUNDS income
securities
--------------------------------------------------------------------------------------------------------------------
PIMCO Foreign Bond Intermediate maturity 3-7 yrs B to Aaa; max 10% (greater
hedged foreign fixed below Baa than or
income equal to)
securities 85%
--------------------------------------------------------------------------------------------------------------------
PIMCO Emerging Markets Bond Emerging market fixed 0-8 yrs B to Aaa (greater
income securities than or
equal to)
80%
</TABLE>
1. As rated by Moody's Investors Service, Inc., or if unrated, de-
termined by Pacific Investment Management to be of comparable
quality.
2. Percentage limitations relate to foreign currency-denominated
securities for all Underlying Bond Funds except PIMCO Foreign
Bond, Global Bond and Emerging Markets Bond Funds. Percentage lim-
itations for these three Funds relate to securities of foreign is-
suers, denominated in any currency. Each Underlying Bond Fund (ex-
cept PIMCO Long-Term U.S. Government Fund) may invest beyond these
limits in U.S. dollar-denominated securities of foreign issuers.
PIMCO Long-Term U.S. Government Fund may not invest in any securi-
ties of foreign issuers.
12 PIMCO Funds Asset Allocation Series
<PAGE>
Each Underlying Bond Fund will normally invest at least 65% of
its assets in the following types of securities, which, unless
provided above, may be issued by domestic or foreign entities and
denominated in U.S. dollars or foreign currencies: securities is-
sued or guaranteed by the U.S. Government, its agencies or instru-
mentalities ("U.S. Government securities"); corporate debt securi-
ties, including convertible securities and corporate commercial
paper; mortgage-backed and other asset-backed securities; infla-
tion-indexed bonds issued by both governments and corporations;
structured notes, including hybrid or "indexed" securities, catas-
trophe bonds and loan participations; delayed funding loans and
revolving credit facilities; bank certificates of deposit, fixed
time deposits and bankers' acceptances; repurchase agreements and
reverse repurchase agreements; debt securities issued by states or
local governments and their agencies, authorities and instrumen-
talities; obligations of foreign governments or their subdivi-
sions, agencies and instrumentalities; and obligations of interna-
tional agencies or supranational entities. Fixed income securities
may have fixed, variable, or floating rates of interest, including
rates of interest that vary inversely at a multiple of a desig-
nated or floating rate, or that vary according to changes in rela-
tive values of currencies. Most of the Underlying Bond Funds may
(but are not required to) make substantial use of derivative in-
struments or use a series of purchase and sale contracts or other
investment techniques to obtain market exposure to the securities
in which they primarily invest.
ADDITIONAL
UNDERLYING FUNDS
In addition to the Funds listed above, a Portfolio may invest in
additional Underlying Funds, including those that may become
available for investment in the future, at the discretion of PIMCO
Advisors and without shareholder approval.
PRINCIPAL There can be no assurance that the investment objectives of any of
RISKS OF the Underlying Funds will be achieved. The following summarizes
THE principal risks associated with investments in the Underlying
UNDERLYING Funds. The summary is not intended to be exhaustive. For a more
FUNDS complete description of these risks, please refer to "Investment
Objectives and Policies" in the Statement of Additional Informa-
tion and "Characteristics and Risks of Securities and Investment
Techniques" in the Underlying Fund Prospectuses, which are incor-
porated herein by reference and are available free of charge by
telephoning the Distributor at 1-800-426-0107.
MARKET RISK Most securities in which the Underlying Funds invest
are subject to some degree of market risk, which is the risk of
unfavorable market-induced changes in the value of a security. The
following summarizes general market risks associated with invest-
ments in fixed income and equity securities.
Fixed Income Securities Changes in the market values of fixed
income securities (i.e., capital appreciation or depreciation) are
largely a function of changes in the current level of interest
rates. The value of an Underlying Fund's investments in fixed in-
come securities will typically change as the level of interest
rates fluctuate. During periods of falling interest rates, the
value of fixed income securities generally rise. Conversely, dur-
ing periods of rising interest rates, the value of fixed income
securities generally decline.
"Duration" is one measure of the expected life of a fixed in-
come security. When interest rates are falling, a portfolio with a
shorter duration will generally not generate as high a level of
total return as a portfolio with a longer duration. When interest
rates are rising, a portfolio with a shorter duration will gener-
ally outperform a longer duration portfolio. When interest rates
are flat, shorter duration portfolios generally will not generate
as high a level of total return as longer duration portfolios (as-
suming that long-term interest rates are higher than short-term
rates, which is commonly the case). Accordingly, longer duration
portfolios generally have a greater potential for total return
than shorter duration portfolios, but are also subject to greater
levels of market risk and price volatility. Therefore, Underlying
Bond Funds with longer average portfolio durations (e.g., PIMCO
Long-Term U.S. Government Fund) are generally subject to higher
levels of market risk than Funds with shorter durations (e.g.,
PIMCO Money Market, Short-Term and Low Duration Funds). Also, some
portfolios (e.g., those with mortgage-backed and other prepayable
securities) have changing durations and may have increasing dura-
tions precisely when that is least advantageous (i.e., when inter-
est rates are rising).
Certain types of securities in which the Underlying Bond Funds
may invest are particularly sensitive to fluctuations in
prevailing interest rates and have relatively high levels of
market risk. These include various mortgage- related securities
(for instance, the interest-only or "IO" class of a stripped
mortgage-backed security) and "zero
November 1, 1998 Prospectus 13
<PAGE>
coupon" securities (fixed income securities, including certain
U.S. Government securities, that do not make periodic interest
payments and are purchased at a discount from their value at
maturity). Please see "Investment Objectives and Policies" in the
Statement of Additional Information for a description of these and
other fixed income securities that are particularly sensitive to
market risk.
Equity Securities Changes in the market values of equity secu-
rities (i.e., capital appreciation or depreciation) may depend
upon a number of factors, including: general economic and market
conditions, prospects of the security's issuer, changing interest
rates, real or perceived economic and competitive industry condi-
tions, and currency exchange rates. Generally, over the long term,
the total return obtained by a portfolio that invests primarily in
equity securities has historically been greater than that obtained
by a portfolio that invests primarily in fixed income securities.
However, an equity portfolio is generally subject to greater mar-
ket risk and price volatility than a fixed income portfolio and is
considered to be a more aggressive investment.
CREDIT RISK OF FIXED INCOME SECURITIES Credit risk associated with
investments in fixed income securities relates to the ability of
the issuer to make scheduled payments of principal and interest on
an obligation. The Underlying Funds that invest in fixed income
securities are subject to varying degrees of risk that the issuers
of the securities will have their credit ratings downgraded or
will default, potentially reducing the Underlying Fund's share
price and income level. Nearly all fixed income securities are
subject to some credit risk, whether the issuers of the securities
are corporations, states and local governments or foreign govern-
ments. Even certain U.S. Government securities are subject to
credit risk.
Credit risk is particularly acute for Underlying Funds which
invest in so-called "high-yield" securities or "junk" bonds, which
are fixed income securities rated lower than Baa by Moody's In-
vestors Service, Inc. ("Moody's") or BBB by Standard & Poor's Rat-
ings Services ("S&P"), or are determined to be of comparable qual-
ity to securities so rated. While such securities offer the poten-
tial for higher investment returns than higher-rated securities,
they carry a high degree of credit risk and are considered predom-
inantly speculative with respect to the issuer's continuing abil-
ity to meet principal and interest payments. High yield securities
may also be more susceptible to real or perceived adverse economic
and competitive industry conditions and may be less liquid than
higher-rated securities. Accordingly, Underlying Funds which in-
vest a significant portion of their assets in high yield securi-
ties (e.g., PIMCO High Yield and Emerging Markets Bond Funds) are
subject to substantial credit risk, while Funds that invest in
higher quality securities (e.g., PIMCO Money Market and Long-Term
U.S. Government Funds) are subject to less credit risk.
INVESTMENTS IN COMPANIES WITH SMALL MARKET CAPITALIZATIONS Certain
Underlying Stock Funds (in particular, PIMCO Micro-Cap Growth,
Small-Cap Value and Small-Cap Growth Funds) invest in common stock
of companies with market capitalizations that are small compared
to other publicly traded companies. Investments in smaller, less
seasoned companies may present greater opportunities for growth
and capital appreciation, but also involve greater risks than cus-
tomarily are associated with larger, more established companies.
These companies may have limited product lines, markets or finan-
cial resources, or they may be dependent upon a limited management
group. In addition, their securities may be traded in the over-
the-counter market or on a regional exchange, or may otherwise
have limited liquidity.
FOREIGN SECURITIES AND CURRENCIES Many Underlying Funds (in par-
ticular, PIMCO International, International Growth, Structured
Emerging Markets, Tax-Efficient Structured Emerging Markets,
Global Bond, Foreign Bond and Emerging Markets Bond Funds) invest
in securities of foreign issuers, securities traded principally in
securities markets outside the United States and/or securities de-
nominated in foreign currencies (together, "foreign securities").
Investing in foreign securities involves special risks not typ-
ically associated with investing in U.S. securities. These risks
include: differences in accounting, auditing and financial report-
ing standards; generally higher commission rates on foreign port-
folio transactions; higher custodial costs; the possibility that
foreign taxes will be charged on dividends and interest payable on
foreign securities; the possibility of nationalization, expropria-
tion or confiscatory
14 PIMCO Funds Asset Allocation Series
<PAGE>
taxation; adverse changes in investment or exchange control regu-
lations (which may include suspension of the ability to transfer
currency from a country); political instability; the possibility
of unfavorable foreign economic factors; and greater price vola-
tility.
Certain Underlying Funds (in particular, PIMCO Structured
Emerging Markets, Tax-Efficient Structured Emerging Markets and
Emerging Markets Bond Funds) may invest in the securities of is-
suers based in countries with developing or "emerging market"
economies. These securities may present market, credit, currency,
liquidity, legal, political and other risks greater than, or in
addition to, risks of investing in developed foreign countries.
These risks include: high currency exchange rate fluctuations;
greater social, economic and political uncertainty and instability
(including the risk of war); more substantial governmental in-
volvement in the economy; less governmental supervision and regu-
lation of the securities markets and participants in those mar-
kets; unavailability of currency hedging techniques in certain
emerging market countries; the fact that companies in emerging
market countries may be newly organized and may be smaller and
less seasoned companies; the difference in, or lack of, auditing
and financial reporting standards, which may result in unavaila-
bility of material information about issuers; different clearance
and settlement procedures, which may be unable to keep pace with
the volume of securities transactions or otherwise make it diffi-
cult to engage in such transactions; the risk that it may be more
difficult to obtain and/or enforce legal judgments in foreign ju-
risdictions; and significantly smaller market capitalizations of
emerging market issuers.
Underlying Funds that invest in fixed income securities denomi-
nated in foreign currencies or in foreign currencies and related
derivative instruments (in particular, PIMCO Global Bond, Foreign
Bond and Emerging Markets Bond Funds) and Underlying Funds that
invest in equity securities traded principally in foreign curren-
cies, may be adversely affected by changes in foreign currency ex-
change rates. Those rates may fluctuate significantly over short
periods of time for a number of reasons, including the forces of
supply and demand in the foreign exchange markets, actual or per-
ceived changes in interest rates, and intervention (or the failure
to intervene) by U.S. or foreign governments or central banks, or
by currency controls or political developments in the U.S. or
abroad. For example, significant uncertainty surrounds the pro-
posed introduction of the euro (a common currency unit for the Eu-
ropean Union) in January 1999 and its effect on the value of secu-
rities denominated in local European currencies. For a more com-
plete discussion of foreign currency risks (including those asso-
ciated with the euro), please see "Investment Objectives and Poli-
cies--Foreign Currencies" in the Statement of Additional Informa-
tion.
DERIVATIVE INSTRUMENTS The Underlying Funds (with the exception of
PIMCO Money Market Fund) may (but are not required to) utilize a
number of derivative instruments for risk management purposes or
as part of their investment strategies. These include futures con-
tracts, options contracts, options on futures contracts, forward
contracts and swap agreements. Generally, derivatives are finan-
cial contracts whose value depends upon, or is derived from, the
value of an underlying asset, reference rate or index, and may re-
late to stocks, bonds, interest rates, currencies or currency ex-
change rates, commodities, and related indexes. For a description
of the various derivative instruments that may be utilized by the
Underlying Funds, please see "Investment Objectives and Policies"
in the Statement of Additional Information.
The use of derivatives instruments involves risks different
from, or greater than, the risks associated with investing di-
rectly in securities and other more traditional investments. The
following provides a general discussion of important risk factors
relating to the use of derivative instruments by the Underlying
Funds.
Management Risk Derivative products are highly specialized in-
struments that require investment techniques and risk analyses
different from those associated with stocks and bonds. The use of
a derivative requires an understanding not only of the underlying
instrument but also of the derivative itself, without the benefit
of observing the performance of the derivative under all possible
market conditions.
Credit Risk The use of a derivative involves the risk that a
loss may be sustained as a result of the failure of another party
to the contract (usually referred to as a "counterparty") to make
required payments or otherwise comply with the contract's terms.
Liquidity Risk Liquidity risk exists when a particular deriva-
tive instrument is difficult to purchase or sell. If a derivative
transaction is particularly large or if the relevant market is il-
liquid (as is the case with many privately
November 1, 1998 Prospectus 15
<PAGE>
negotiated derivatives), it may not be possible to initiate a
transaction or liquidate a position at an advantageous time or
price.
Leverage Risk Because many derivatives have a leverage compo-
nent, adverse changes in the value or level of the underlying as-
set, reference rate or index can result in a loss substantially
greater than the amount invested in the derivative itself. Certain
derivatives have the potential for unlimited loss, regardless of
the size of the initial investment. When an Underlying Fund uses
derivatives for leverage, investments in that Fund will tend to be
more volatile, resulting in larger gains or losses in response to
market changes.
Market and Other Risks Like most other investments, derivative
instruments are subject to the general risk that the market value
of the instrument will change in a way detrimental to the invest-
or's interest. Other risks in using derivatives include the risk
of mispricing or improper valuation of derivatives and the inabil-
ity of derivatives to correlate perfectly with underlying assets,
rates and indexes. Many derivatives, in particular privately nego-
tiated derivatives, are complex and often valued subjectively. Im-
proper valuations can result in increased cash payment require-
ments to counterparties or a loss of value to an Underlying Fund.
Also, the value of derivatives may not correlate perfectly, or at
all, with the value of the assets, reference rates or indices they
are designed to closely track. Consequently, an Underlying Fund's
use of derivatives may not always be an effective means of, and
sometimes could be counterproductive to, furthering the Fund's in-
vestment objective or risk management strategy. In addition, suit-
able derivative transactions may not be available in all circum-
stances and there can be no assurance that an Underlying Fund will
engage in such transactions at any given time or from time to
time.
A NOTE ON PIMCO STOCKSPLUS FUND While the objective of PIMCO
StocksPLUS Fund is to achieve a total return which exceeds the to-
tal return performance of the S&P 500, it does so by investing
substantially all of its assets in a combination of equity-based
derivative instruments and a portfolio of fixed income securities.
Consequently, the risks of investing in the Fund include the risks
of derivatives and the risks generally associated with the Under-
lying Bond Funds. To the extent that the Fund invests in S&P 500
derivatives backed by a portfolio of fixed income securities, un-
der certain conditions, generally in a market where the value of
both S&P 500 derivatives and fixed income securities are declin-
ing, the Fund may experience greater losses than would be the case
if it were to invest directly in a portfolio of S&P 500 stocks.
CERTAIN OTHER MISCELLANEOUS INVESTMENT PRACTICES In addition to
investing in the securities listed above under "Primary Invest-
ments," some or all of the Underlying Funds may to varying
extents: lend portfolio securities; enter into repurchase agree-
ments and reverse repurchase agreements; purchase and sell securi-
ties on a when-issued or delayed delivery basis; enter into for-
ward commitments to purchase securities; purchase and write call
and put options on securities and securities indexes; enter into
futures contracts, options on futures contracts and swap agree-
ments; invest in foreign securities; and buy or sell foreign cur-
rencies and enter into forward foreign currency contracts. These
and the other types of securities and investment techniques used
by the Underlying Funds all have attendant risks. The Portfolios
are indirectly subject to some or all of these risks to varying
degrees because they invest all of their assets in the Underlying
Funds. For further information concerning the investment practices
of and risks associated with the Underlying Funds, please see "In-
vestment Objectives and Policies" in the Statement of Additional
Information and the Underlying Fund Prospectuses, which are incor-
porated herein by reference and are available free of charge by
telephoning the Distributor at 1-800-426-0107.
Performance Information
From time to time the Trust may make available certain information
about the performance of the Class A, Class B and Class C shares
of some or all of the Portfolios. Information about a Portfolio's
performance is based on that Portfolio's record to a recent date
and is not intended to indicate future performance. Performance
information is computed separately for each Portfolio's Class A,
Class B and Class C shares in accordance with the formulas de-
scribed below. Because Class B and Class C shares bear the expense
of the distribution fee attending the deferred sales
16 PIMCO Funds Asset Allocation Series
<PAGE>
charge (Class B) and asset based sales charge (Class C) alterna-
tives and certain other expenses, it is expected that, under nor-
mal circumstances, the level of performance of a Portfolio's Class
B and Class C shares will be lower than that of the Portfolio's
Class A shares, although an investment in Class B or Class C
shares is not reduced by the front-end sales charge generally ap-
plicable to an investment in Class A shares.
The total return of Class A, Class B and/or Class C shares of
all Portfolios may be included in advertisements or other written
material. When a Portfolio's total return is advertised with re-
spect to its Class A, Class B and/or Class C shares, it will be
calculated for the past year, the past five years, and the past
ten years (or if the Portfolio has been offered for a period
shorter than one, five or ten years, that period will be substi-
tuted) since the establishment of the Portfolio, as more fully de-
scribed in the Statement of Additional Information. Total return
for each class is measured by comparing the value of an investment
in the Portfolio at the beginning of the relevant period (in the
case of Class A shares, giving effect to the maximum initial sales
charge) to the redemption value of the investment in the Portfolio
at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions at net asset value and
giving effect to the deduction of the maximum CDSC which would be
payable). Total return may be advertised using alternative methods
that reflect all elements of return.
Quotations of yield for a Portfolio or class will be based on
the investment income per share (as defined by the Securities and
Exchange Commission) during a particular 30-day (or one-month) pe-
riod (including dividends and interest), less expenses accrued
during the period ("net investment income"), and will be computed
by dividing net investment income by the maximum public offering
price per share on the last day of the period.
The Portfolios may also provide current distribution informa-
tion to their shareholders in shareholder reports or other share-
holder communications, or in certain types of sales literature
provided to prospective investors. Current distribution informa-
tion for a particular class of a Portfolio will be based on dis-
tributions for a specified period (i.e., total dividends from net
investment income), divided by the relevant class net asset value
per share on the last day of the period and annualized. Current
distribution rates differ from standardized yield rates in that
they represent what a class of a Portfolio has declared and paid
to shareholders as of the end of a specified period rather than
the Portfolio's actual net investment income for that period.
The Adviser may also report to shareholders or to the public in
advertisements concerning its performance as adviser to clients
other than the Portfolios, and on its comparative performance or
standing in relation to other money managers. Such comparative in-
formation may be compiled or provided by independent ratings serv-
ices or by news organizations. Any performance information,
whether related to the Portfolios, the Adviser or an advisory af-
filiate of the Adviser, should be considered in light of the Port-
folios' investment objectives and policies, characteristics and
quality of the Portfolios' investments, and the market conditions
during the time period indicated, and should not be considered to
be representative of what may be achieved by the Portfolios in the
future.
Investment results of the Portfolios will fluctuate over time,
and any representation of the Portfolios' total return or yield
for any prior period should not be considered as a representation
of what an investor's total return or yield may be in any future
period.
How to Buy Shares
Class A, Class B and Class C shares of each Portfolio are continu-
ously offered through the Trust's principal underwriter, PIMCO
Funds Distributors LLC (the "Distributor"), and through other
firms which have dealer agreements with the Distributor ("partici-
pating brokers") or which have agreed to act as introducing bro-
kers for the Distributor ("introducing brokers").
There are two ways to purchase Class A, Class B or Class C
shares: either 1) through your dealer or broker which has a dealer
agreement with the Distributor; or 2) directly by mailing a PIMCO
Funds account application (an "account application") with payment,
as described below under the heading Direct Investment, to the
Distributor (if no dealer is named in the account application, the
Distributor may act as dealer).
November 1, 1998 Prospectus 17
<PAGE>
Each Portfolio currently offers and sells three classes of
shares in this Prospectus (Class A, Class B and Class C). Shares
may be purchased at a price equal to their net asset value per
share next determined after receipt of an order, plus a sales
charge which, at the election of the purchaser, may be imposed ei-
ther (i) at the time of the purchase in the case of Class A shares
(the "initial sales charge alternative"), (ii) on a contingent de-
ferred basis in the case of Class B shares (the "deferred sales
charge alternative"), or (iii) by the deduction of an ongoing as-
set based sales charge in the case of Class C shares (the "asset
based sales charge alternative"). In certain circumstances, Class
A and Class C shares are also subject to a CDSC. See "Alternative
Purchase Arrangements." Purchase payments for Class B and Class C
shares are fully invested at the net asset value next determined
after acceptance of the trade. Purchase payments for Class A
shares, less the applicable sales charge, are invested at the net
asset value next determined after acceptance of the trade.
All purchase orders received by the Distributor prior to the
close of regular trading (normally 4:00 p.m., Eastern time) on the
New York Stock Exchange (the "Exchange"), on a regular business
day, are processed at that day's offering price. However, orders
received by the Distributor from dealers or brokers after the of-
fering price is determined that day will receive such offering
price if the orders were received by the dealer or broker from its
customer prior to such determination and were transmitted to and
received by the Distributor prior to its close of business that
day (normally 5:00 p.m., Eastern time) or, in the case of certain
retirement plans, received by the Distributor prior to 9:30 a.m.,
Eastern time on the next business day. Purchase orders received on
other than a regular business day will be executed on the next
succeeding regular business day. The Distributor, in its sole dis-
cretion, may accept or reject any order for purchase of Portfolio
shares. The sale of shares will be suspended during any period in
which the Exchange is closed for other than weekends or holidays,
or if permitted by the rules of the Securities and Exchange Com-
mission, when trading on the Exchange is restricted or during an
emergency which makes it impracticable for the Portfolios to dis-
pose of their securities or to determine fairly the value of their
net assets, or during any other period as permitted by the Securi-
ties and Exchange Commission for the protection of investors.
Except for purchases through the PIMCO Funds Auto-Invest plan,
the PIMCO Funds Auto-Exchange plan, investments pursuant to the
Uniform Gifts to Minors Act, and tax-qualified and wrap programs
referred to below under "Tax-Qualified Retirement Plans" and
"Sales at Net Asset Value," the minimum initial investment in
Class A, Class B or Class C shares of any Portfolio or other se-
ries of the Trust or any series of PIMCO Funds: Pacific Investment
Management Series is $2,500, and the minimum additional investment
is $100 per Portfolio. For information about dealer commissions,
see "Alternative Purchase Arrangements" below. Persons selling
Portfolio shares may receive different compensation for selling
Class A, Class B or Class C shares. Normally, Portfolio shares
purchased through participating brokers are held in the investor's
account with that broker. No share certificates will be issued un-
less specifically requested in writing by an investor or broker-
dealer.
DIRECT Investors who wish to invest in Class A, Class B or Class C shares
INVESTMENT of the Portfolios directly, rather than through a participating
broker, may do so by opening an account with the Distributor. To
open an account, an investor should complete the account applica-
tion. All shareholders who open direct accounts with the Distribu-
tor will receive from the Distributor individual confirmations of
each purchase, redemption, dividend reinvestment, exchange or
transfer of Trust shares, including the total number of Trust
shares owned as of the confirmation date, except that purchases
which result from the reinvestment of daily-accrued dividends
and/or distributions will be confirmed once each calendar quarter.
See "Distributions" below. Information regarding direct investment
or any other features or plans offered by the Trust may be ob-
tained by calling the Distributor at 1-800-426-0107 or by calling
your broker.
PURCHASE BY
MAIL Investors who wish to invest directly may send a check payable to
PIMCO Funds Distributors LLC, along with a completed application
form to:
PIMCO Funds Distributors LLC
P.O. Box 5866
Denver, CO 80217-5866
18 PIMCO Funds Asset Allocation Series
<PAGE>
Purchases are accepted subject to collection of checks at full
value and conversion into federal funds. Payment by a check drawn
on any member of the Federal Reserve System can normally be con-
verted into federal funds within two business days after receipt
of the check. Checks drawn on a non-member bank may take up to 15
days to convert into federal funds. In all cases, the purchase
price is based on the net asset value next determined after the
purchase order and check are accepted, even though the check may
not yet have been converted into federal funds.
SUBSEQUENT Subsequent purchases of Class A, Class B or Class C shares can be
PURCHASES made as indicated above by mailing a check with a letter describ-
OF ing the investment or with the additional investment portion of a
SHARES confirmation statement. Except for subsequent purchases through
the PIMCO Funds Auto-Invest plan, the PIMCO Funds Auto-Exchange
plan, tax-qualified programs and PIMCO Funds Fund Link referred to
below, and except during periods when an Automatic Withdrawal Plan
is in effect, the minimum subsequent purchase is $100 in any Port-
folio. All payments should be made payable to PIMCO Funds Distrib-
utors LLC and should clearly indicate the shareholder's account
number. Checks should be mailed to the address above under "Pur-
chase by Mail."
TAX- The Distributor makes available retirement plan services and docu-
QUALIFIED ments for Individual Retirement Accounts (IRAs), including Roth
RETIREMENT IRAs, for which First National Bank of Boston (see "Change in
PLANS Transfer Agent" below) serves as trustee and for IRA Accounts es-
tablished with Form 5305-SIMPLE under the Internal Revenue Code of
1986, as amended (the "Code"). These accounts include Simplified
Employee Pension Plan (SEP) and Salary Reduction Simplified Em-
ployee Pension Plan (SAR/SEP) IRA accounts and prototype docu-
ments. In addition, prototype documents are available for estab-
lishing 403(b)(7) custodial accounts with First National Bank of
Boston as custodian. This type of plan is available to employees
of certain non-profit organizations.
The Distributor also makes available prototype documents for
establishing Money Purchase and/or Profit Sharing plans and 401(k)
Retirement Savings Plans. These prototype plans require certain
minimum per participant account sizes and certain minimum aggre-
gate investments in the Trust, but are not subject to the small
account fees described below that will apply to other plans. In-
vestors should call the Distributor at 1-800-426-0107 for further
information about these plans and should consult with their own
tax advisers before establishing any retirement plan. Investors
who maintain their accounts with participating brokers should con-
sult their broker about similar types of accounts that may be of-
fered through the broker. The minimum initial investment for all
tax-qualified plans (except for employer-sponsored plans, SIMPLE
IRAs, SEPs and SAR/SEPs) is $1,000 per Portfolio and the minimum
subsequent investment is $100. The minimum initial investment for
employer-sponsored plans, SIMPLE IRAs, SEPs and SAR/SEPs and the
minimum subsequent investment per Portfolio for all such plans is
$50.
PIMCO FUNDS The PIMCO Funds Auto-Invest plan provides for periodic investments
AUTO-INVEST into the shareholder's account with the Trust by means of auto-
matic transfers of a designated amount from the shareholder's bank
account. The minimum investment for eligibility in the PIMCO Funds
Auto-Invest plan is $1,000 per Portfolio. Investments may be made
monthly or quarterly, and may be in any amount subject to a mini-
mum of $50 per month for each Portfolio in which shares are pur-
chased through the plan. Further information regarding the PIMCO
Funds Auto-Invest plan is available from the Distributor or par-
ticipating brokers. You may enroll by completing the appropriate
section on the account application, or you may obtain an Auto-In-
vest application by calling the Distributor or your broker.
PIMCO FUNDS
AUTO-EXCHANGE
The PIMCO Funds Auto-Exchange plan establishes regular, periodic
exchanges from one Portfolio to another Portfolio or other series
of the Trust or PIMCO Funds: Pacific Investment Management Series
which offers Class A, Class B or Class C shares. The plan provides
for regular investments into a shareholder's account in a specific
Portfolio by means of automatic exchanges of a designated amount
from an account for another Portfolio or other series of the same
class of shares and with identical account registration.
Exchanges may be made monthly or quarterly, and may be in any
amount subject to a minimum of $1,000 to open a new Portfolio ac-
count and of $50 for any existing Portfolio account for which
shares are purchased through the
November 1, 1998 Prospectus 19
<PAGE>
plan. Further information regarding the PIMCO Funds Auto-Exchange
plan is available from the Distributor at 1-800-426-0107 or par-
ticipating brokers. You may enroll by completing an application
which may be obtained from the Distributor or by telephone request
at 1-800-426-0107. For more information on exchanges, see "Ex-
change Privilege."
PIMCO FUNDS PIMCO Funds Fund Link ("Fund Link") connects your Portfolio ac-
FUND LINK count with a bank account. Fund Link may be used for subsequent
purchases and for redemptions and other transactions described un-
der "How to Redeem." Purchase transactions are effected by elec-
tronic funds transfers from the shareholder's account at a U.S.
bank or other financial institution that is an Automated Clearing
House ("ACH") member. Investors may use Fund Link to make subse-
quent purchases of shares in amounts from $50 to $10,000. To ini-
tiate such purchases, call 1-800-426-0107. All such calls will be
recorded. Fund Link is normally established within 45 days of re-
ceipt of a Fund Link application by Shareholder Services, Inc.
(the "Transfer Agent"). The minimum investment by Fund Link is $50
per Portfolio. Shares will be purchased on the regular business
day the Distributor receives the funds through the ACH system,
provided the funds are received before the close of regular trad-
ing on the Exchange. If the funds are received after the close of
regular trading, the shares will be purchased on the next regular
business day.
Fund Link privileges must be requested on the account applica-
tion. To establish Fund Link on an existing account, complete a
Fund Link application, which is available from the Distributor or
your broker, with signatures guaranteed from all shareholders of
record for the account. See "Signature Guarantee" below. Such
privileges apply to each shareholder of record for the account un-
less and until the Distributor receives written instructions from
a shareholder of record canceling such privileges. Changes of bank
account information must be made by completing a new Fund Link ap-
plication signed by all owners of record of the account, with all
signatures guaranteed. The Distributor, the Transfer Agent and the
Trust may rely on any telephone instructions believed to be genu-
ine and will not be responsible to shareholders for any damage,
loss or expenses arising out of such instructions. The Trust re-
serves the right to amend, suspend or discontinue Fund Link privi-
leges at any time without prior notice. Fund Link does not apply
to shares held in broker "street name" accounts.
SIGNATURE When a signature guarantee is called for, the shareholder should
GUARANTEE have "Signature Guaranteed" stamped under his signature and guar-
anteed by any of the following entities: U.S. banks, foreign banks
having a U.S. correspondent bank, credit unions, savings associa-
tions, U.S. registered dealers and brokers, municipal securities
dealers and brokers, government securities dealers and brokers,
national securities exchanges, registered securities associations
and clearing agencies (each an "Eligible Guarantor Institution").
The Distributor reserves the right to reject any signature guaran-
tee pursuant to its written signature guarantee standards or pro-
cedures, which may be revised in the future to permit it to reject
signature guarantees from Eligible Guarantor Institutions that do
not, based on credit guidelines, satisfy such written standards or
procedures. The Trust may change the signature guarantee require-
ments from time to time upon notice to shareholders, which may be
given by means of a new or supplemented Prospectus.
ACCOUNT Changes in registration or account privileges may be made in writ-
REGISTRATIONing to the Transfer Agent. Signature guarantees may be required.
CHANGES See "Signature Guarantee" above. All correspondence must include
the account number and must be sent to:
PIMCO Funds Distributors LLC
P.O. Box 5866
Denver, CO 80217-5866
SMALL
ACCOUNT Because of the disproportionately high costs of servicing accounts
FEE with low balances, a fee at an annual rate of $16, paid to PIMCO
Advisors, the Portfolios' administrator, will automatically be de-
ducted from direct accounts with balances falling below a minimum
level. The valuation of accounts and the deduction are expected to
take place during the last five business days of each calendar
quarter. The fee will be deducted in quarterly installments from
20 PIMCO Funds Asset Allocation Series
<PAGE>
accounts with balances below $2,500 except for Uniform Gift to Mi-
nors, IRA, Roth IRA and Auto-Invest accounts, for which the limit
is $1,000. Effective April 1, 1999, except for prototype plans de-
scribed above, the fee will apply to employer-sponsored retirement
plan accounts, Money Purchase and/or Profit Sharing plans, 401(k)
plans, 403(b)(7) custodial accounts, SIMPLE IRAs, SEPs and
SAR/SEPs. (A separate custodial fee may apply to IRAs, Roth IRAs
and other retirement accounts.) No fee will be charged on any ac-
count of a shareholder if the aggregate value of all of the share-
holder's accounts is at least $50,000. No small account fee will
be charged to employee and employee-related accounts of PIMCO Ad-
visors and/or its affiliates.
MINIMUM Due to the relatively high cost to the Portfolios of maintaining
ACCOUNT small accounts, you are asked to maintain an account balance of at
SIZE least the amount necessary to open the type of account involved.
If your balance is below such minimum for three months or longer,
the Portfolios' administrator shall have the right (except in the
case of employer-sponsored retirement accounts) to close your ac-
count after giving you 60 days in which to increase your balance.
Your account will not be liquidated if the reduction in size is
due solely to market decline in the value of your Portfolio shares
or if the aggregate value of all your accounts in PIMCO Funds ex-
ceeds $50,000.
CHANGE IN The Trust expects to change its transfer agent for its Class A, B
TRANSFER and C shares to First Data Investor Services Group, Inc. Share-
AGENT holders will continue to receive all of the services described in
this Prospectus and should continue to follow the various proce-
dures set forth in this Prospectus, with the exception of the ad-
dress changes described below.
There will be no changes in the toll-free 1-800 telephone num-
bers set forth in this Prospectus. However, mailing addresses will
change as follows:
<TABLE>
<CAPTION>
Old Address New Address
----------- -----------
<S> <C>
Shareholder Services, Inc. First Data Investor Services Group, Inc.
P.O. Box 5866 P.O. Box 9688
Denver, CO 80217 Providence, RI 02940-0926
PIMCO Funds Distributors LLC PIMCO Funds Distributors LLC
P.O. Box 5866 P.O. Box 9688
Denver, CO 80217-5866 Providence, RI 02940-0926
</TABLE>
Also, at the time of the change of Transfer Agent, the
custodian/trustee for the PIMCO Funds prototype retirement plans,
403(b) custodial accounts, IRAs, Roth IRAs, SIMPLE IRAs, SEPs and
SAR/SEPs will be changed from First National Bank of Boston to
Boston Safe Deposit & Trust Company.
Alternative Purchase Arrangements
The Trust offers investors three classes of shares in this Pro-
spectus (Class A, Class B and Class C) which bear sales charges in
different forms and amounts and which bear different levels of ex-
penses. The alternative purchase arrangements offered in this Pro-
spectus are designed to enable a retail investor to choose the
method of purchasing Portfolio shares that is most beneficial to
the investor based on all factors to be considered, which include:
the amount and intended length of the investment; the particular
Portfolio; and whether the investor intends to exchange shares for
shares of other PIMCO Funds. Generally, when making an investment
decision, investors should consider the anticipated life of an in-
tended investment in the Portfolios, the accumulated distribution
and servicing fees plus CDSCs on Class B or Class C shares, the
initial sales charge plus accumulated servicing fees on Class A
shares (plus a CDSC in certain circumstances), the possibility
that the anticipated higher return on Class A shares due to the
lower ongoing charges will offset the initial sales charge paid on
such shares, the automatic conversion of Class B shares to Class A
shares and the difference in the CDSCs applicable to Class A,
Class B and Class C shares.
CLASS A The initial sales charge alternative (Class A) might be
preferred by investors purchasing shares of sufficient aggregate
value to qualify for reductions in the initial sales charge appli-
cable to such shares. Similar reductions are not
November 1, 1998 Prospectus 21
<PAGE>
available on the contingent deferred sales charge alternative
(Class B) or the asset based sales charge alternative (Class C).
Class A shares are subject to a servicing fee but are not subject
to a distribution fee and, accordingly, such shares are expected
to pay correspondingly higher dividends on a per share basis. How-
ever, because initial sales charges are deducted at the time of
purchase, not all of the purchase payment for Class A shares is
invested initially. Class B and Class C shares might be preferable
to investors who wish to have all purchase payments invested ini-
tially, although remaining subject to higher distribution and ser-
vicing fees and, for certain periods, being subject to a CDSC. An
investor who qualifies for an elimination of the Class A initial
sales charge should also consider whether he or she anticipates
redeeming shares in a time period which will subject such shares
to a CDSC as described below. See "Initial Sales Charge Alterna-
tive--Class A Shares--Class A Deferred Sales Charge" below.
CLASS B Class B shares might be preferred by investors who intend
to invest in the Portfolios for longer periods and who do not in-
tend to purchase shares of sufficient aggregate value to qualify
for sales charge reductions applicable to Class A shares. Both
Class B and Class C shares can be purchased at net asset value
without an initial sales charge. However, unlike Class C shares,
Class B shares convert into Class A shares after the shares have
been held for seven years. After the conversion takes place, the
shares will no longer be subject to a CDSC, and will be subject to
the servicing fees charged for Class A shares which are lower than
the distribution and servicing fees charged on either Class B or
Class C shares. See "Deferred Sales Charge Alternative--Class B
Shares" below. Class B shares are not available for purchase by
employer sponsored retirement plans.
CLASS C Class C shares might be preferred by investors who intend
to purchase shares which are not of sufficient aggregate value to
qualify for Class A sales charges of 1% or less and who wish to
have all purchase payments invested initially. Class C shares are
preferable to Class B shares for investors who intend to maintain
their investment for intermediate periods and therefore may also
be preferable for investors who are unsure of the intended length
of their investment. Unlike Class B shares, Class C shares are not
subject to a CDSC after they have been held for one year and are
subject to only a 1% CDSC during the first year. However, because
Class C shares do not convert into Class A shares, Class B shares
are preferable to Class C shares for investors who intend to main-
tain their investment in the Portfolios for long periods. See "As-
set Based Sales Charge Alternative--Class C Shares" below.
In determining which class of shares to purchase, an investor
should always consider whether any waiver or reduction of a sales
charge or a CDSC is available. See generally "Initial Sales Charge
Alternative--Class A Shares" and "Waiver of Contingent Deferred
Sales Charges" below.
The maximum single purchase of Class B shares of the Portfolios
and other series of the Trust and PIMCO Funds: Pacific Investment
Management Series accepted is $249,999. The maximum single pur-
chase of Class C shares of the Portfolios and other series of the
Trust and PIMCO Funds: Pacific Investment Management Series ac-
cepted is $999,999. The Portfolios may refuse any order to pur-
chase shares.
For a description of the Distribution and Servicing Plans and
distribution and servicing fees payable thereunder with respect to
Class A, Class B and Class C shares, see "Distributor and Distri-
bution and Servicing Plans" below.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES The CDSC applicable to
Class A and Class C shares is currently waived for (i) any partial
or complete redemption in connection with (a) required minimum
distributions to IRA account owners or beneficiaries who are age
70 1/2 or older or (b) distributions to participants in employer-
sponsored retirement plans upon attaining age 59 1/2 or on account
of death or disability;* (ii) any partial or complete redemption
in connection with a qualifying loan or hardship withdrawal from
an employer sponsored retirement plan; (iii) any
------
* This subsection (i) shall read as follows until December 31,
1998: "(i) any partial or complete redemption in connection with
any of the following distributions from a retirement plan,
including a 403(b)(7) custodial account or an IRA (with the
exception of a Roth IRA), that qualify for exemption from the
additional tax on early distributions under Section 72(t) of the
Code: (a) upon attaining age 59 1/2, (b) on account of death or
disability, (c) as part of a series of substantially equal
periodic payments, (d) in the case of an IRA (with the exception
of a Roth IRA), attributable to qualified higher education
expenses or to qualified first-time home-buyer expenses or (e)
in the case of a retirement plan other than an IRA, upon
separation from service after attaining age 55;"
22 PIMCO Funds Asset Allocation Series
<PAGE>
complete redemption in connection with a distribution from a qual-
ified employer retirement plan in connection with termination of
employment or termination of the employer's plan and the transfer
to another employer's plan or to an IRA (with the exception of a
Roth IRA); (iv) any partial or complete redemption following death
or disability (as defined in the Code) of a shareholder (including
one who owns the shares as joint tenant with his or her spouse)
from an account in which the deceased or disabled is named, pro-
vided the redemption is requested within one year of the death or
initial determination of disability; (v) any redemption resulting
from a return of an excess contribution to a qualified employer
retirement plan or an IRA (with the exception of a Roth IRA); (vi)
up to 10% per year of the value of an account which (a) has the
value of at least $10,000 at the start of such year and (b) is
subject to an Automatic Withdrawal Plan; (vii) redemptions by
Trustees, officers and employees of the Trust, and by directors,
officers and employees of the Distributor and the Adviser; (viii)
redemptions effected pursuant to a Portfolio's right to involun-
tarily redeem a shareholder's account if the aggregate net asset
value of shares held in such shareholder's account is less than a
minimum account size specified in such Portfolio's prospectus;
(ix) involuntary redemptions caused by operation of law; (x) re-
demption of shares of any Portfolio that is combined with another
Portfolio or other series of the Trust or another investment com-
pany, or a personal holding company by virtue of a merger, acqui-
sition or other similar reorganization transaction; (xi) redemp-
tions by a shareholder who is a participant making periodic pur-
chases of not less than $50 through certain employer sponsored
savings plans that are clients of a broker-dealer with which the
Distributor has an agreement with respect to such purchases; (xii)
redemptions effected by trustees or other fiduciaries who have
purchased shares for employer sponsored plans, the trustee, admin-
istrator, fiduciary, broker, trust company or registered invest-
ment adviser for which has an agreement with the Distributor with
respect to such purchases; or (xiii) redemptions in connection
with IRA accounts established with Form 5305-SIMPLE under the Code
for which the Trust is the designated financial institution.
The CDSC applicable to Class B shares is currently waived for
any partial or complete redemption in each of the following cases:
(a) in connection with required minimum distributions to IRA ac-
count owners or to plan participants or beneficiaries who are age
70 1/2 or older; (b) following death or disability (as defined in
the Code) of a shareholder (including one who owns the shares as
joint tenant with his or her spouse) from an account in which the
deceased or disabled is named, provided the redemption is re-
quested within one year of the death or initial determination of
disability; and (c) up to 10% per year of the value of an account
which (i) has a value of at least $100,000 at the start of such
year and (ii) is subject to an Automatic Withdrawal Plan. See "How
to Redeem--Automatic Withdrawal Plan."
The Distributor may require documentation prior to waiver of
the CDSC for any class, including distribution letters, certifica-
tion by plan administrators, applicable tax forms, death certifi-
cates, physicians' certificates, etc.
November 1, 1998 Prospectus 23
<PAGE>
INITIAL
SALES
CHARGE
ALTERNATIVE --
CLASS A SHARES
Class A shares are sold at a public offering price equal to their
net asset value per share plus a sales charge, as set forth below.
As indicated below under "Class A Deferred Sales Charge," certain
investors that purchase $1,000,000 or more of any Portfolio's
Class A shares (and thus pay no initial sales charge) may be sub-
ject to a 1% CDSC if they redeem such shares during the first 18
months after their purchase.
90/10 PORTFOLIO AND 60/40 PORTFOLIO
<TABLE>
<CAPTION>
DISCOUNT OR
SALES CHARGE AS SALES CHARGE COMMISSION TO
AMOUNT OF % OF NET AS % OF PUBLIC DEALERS AS % OF
PURCHASE AMOUNT INVESTED OFFERING PRICE PUBLIC OFFERING PRICE
-------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 5.82% 5.50% 4.75%
-------------------------------------------------------------------------
$50,000 - $99,999 4.71% 4.50% 4.00%
-------------------------------------------------------------------------
$100,000 - $249,999 3.63% 3.50% 3.00%
-------------------------------------------------------------------------
$250,000 - $499,999 2.56% 2.50% 2.00%
-------------------------------------------------------------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
-------------------------------------------------------------------------
$1,000,000+ 0.00%(/1/) 0.00%(/1/) 0.75%(/2/)
</TABLE>
30/70 PORTFOLIO
<TABLE>
<CAPTION>
DISCOUNT OR
SALES CHARGE AS SALES CHARGE COMMISSION TO
AMOUNT OF % OF NET AS % OF PUBLIC DEALERS AS % OF
PURCHASE AMOUNT INVESTED OFFERING PRICE PUBLIC OFFERING PRICE
-------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 4.71% 4.50% 4.00%
-------------------------------------------------------------------------
$50,000 - $99,999 4.17% 4.00% 3.50%
-------------------------------------------------------------------------
$100,000 - $249,999 3.63% 3.50% 3.00%
-------------------------------------------------------------------------
$250,000 - $499,999 2.56% 2.50% 2.00%
-------------------------------------------------------------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
-------------------------------------------------------------------------
$1,000,000+ 0.00%(/1/) 0.00%(/1/) 0.50%(/2/)
</TABLE>
1. As shown, investors that purchase more than $1,000,000 of any
Portfolio's Class A shares will not pay any initial sales charge
on such purchase. However, purchasers of $1,000,000 or more of
Class A shares (other than those purchasers described below under
"Sales at Net Asset Value" where no commission is paid) will be
subject to a CDSC of 1% if such shares are redeemed during the
first 18 months after such shares are purchased unless such pur-
chaser is eligible for a waiver of the CDSC as described under
"Waiver of Contingent Deferred Sales Charges" above. See "Class A
Deferred Sales Charge" below.
2. The Distributor will pay a commission to dealers who sell
amounts of $1,000,000 or more of Class A shares (or who sell Class
A shares at net asset value to certain employer-sponsored plans as
outlined in "Sales at Net Asset Value" below) of the 90/10 Portfo-
lio and the 60/40 Portfolio according to the following schedule:
0.75% of the first $2,000,000, 0.50% of amounts from $2,000,001 to
$5,000,000, and 0.25% of amounts over $5,000,000; and of the 30/70
Portfolio according to the following schedule: 0.50% of the first
$2,000,000, and 0.25% of amounts over $2,000,000.
Each Portfolio receives the entire net asset value of its Class
A shares purchased by investors. The Distributor receives the
sales charge shown above less any applicable discount or commis-
sion "reallowed" to participating brokers in the amounts indicated
in the table above. The Distributor may, however, elect to reallow
the entire sales charge to participating brokers for all sales
with respect to which orders are placed with the Distributor for
any particular Portfolio during a particular period. During such
periods as may from time to time be designated by the Distributor,
the Distributor will pay an additional amount of up to 0.50% of
the purchase price on sales of Class A shares of all or selected
Portfolios purchased to each participating broker which obtains
purchase orders in amounts exceeding thresholds established from
time to time by the Distributor. From time to time, the Distribu-
tor, its parent and/or its affiliates may make additional payments
to one or more participating brokers based upon factors such as
the level of sales or the length of time clients' assets have re-
mained in the Trust.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are issued at net asset
value and are not subject to any sales charges.
24 PIMCO Funds Asset Allocation Series
<PAGE>
Under the circumstances described below, investors may be enti-
tled to pay reduced sales charges for Class A shares.
COMBINED PURCHASE PRIVILEGE Investors may qualify for a reduced
sales charge by combining purchases of the Class A shares of one
or more Portfolios or other series of the Trust or PIMCO Funds:
Pacific Investment Management Series which offer Class A shares
(together, "eligible PIMCO Funds") into a "single purchase," if
the resulting purchase totals at least $50,000. The term "single
purchase" refers to:
(i) a single purchase by an individual, or concurrent pur-
chases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his or her spouse
and their children under the age of 21 years purchasing
Class A shares of the eligible PIMCO Funds for his, her or
their own account;
(ii) a single purchase by a trustee or other fiduciary pur-
chasing shares for a single trust, estate or fiduciary
account although more than one beneficiary is involved;
or
(iii) a single purchase for the employee benefit plans of a
single employer.
For further information, call the Distributor at 1-800-426-0107
or your broker.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION) A purchase of
additional Class A shares of any eligible PIMCO Fund may qualify
for a Cumulative Quantity Discount at the rate applicable to the
discount bracket obtained by adding:
(i) the investor's current purchase;
(ii) the value (at the close of business on the day of the
current purchase) of all Class A shares of any eligible
PIMCO Fund held by the investor computed at the maximum
offering price; and
(iii) the value of all shares described in paragraph (ii)
owned by another shareholder eligible to be combined
with the investor's purchase into a "single purchase" as
defined above under "Combined Purchase Privilege."
For example, if you owned Class A shares of the 90/10 Portfolio
worth $25,000 at the current maximum offering price and wished to
purchase Class A shares of the 60/40 Portfolio worth an additional
$30,000, the sales charge for the $30,000 purchase would be at the
4.50% rate applicable to a single $55,000 purchase of shares of
the 90/10 Portfolio, rather than the 5.50% rate.
LETTER OF INTENT An investor may also obtain a reduced sales
charge by means of a written Letter of Intent, which expresses an
intention to invest not less than $50,000 within a period of 13
months in Class A shares of any eligible PIMCO Fund(s). Each pur-
chase of shares under a Letter of Intent will be made at the pub-
lic offering price or prices applicable at the time of such pur-
chase to a single transaction of the dollar amount indicated in
the Letter. At the investor's option, a Letter of Intent may in-
clude purchases of Class A shares of any eligible PIMCO Fund made
not more than 90 days prior to the date the Letter of Intent is
signed; however, the 13-month period during which the Letter is in
effect will begin on the date of the earliest purchase to be in-
cluded and the sales charge on any purchases prior to the Letter
will not be adjusted.
Investors qualifying for the Combined Purchase Privilege de-
scribed above may purchase shares of the eligible PIMCO Funds un-
der a single Letter of Intent. For example, if at the time you
sign a Letter of Intent to invest at least $100,000 in Class A
shares of any Portfolio, you and your spouse each purchase Class A
shares of the 90/10 Portfolio worth $30,000 (for a total of
$60,000), it will only be necessary to invest a total of $40,000
during the following 13 months in Class A shares of any of the
Portfolios to qualify for the 3.50% sales charge on the total
amount being invested (the sales charge applicable to an invest-
ment of $100,000 in any of the Portfolios).
A Letter of Intent is not a binding obligation to purchase the
full amount indicated. The minimum initial investment under a Let-
ter of Intent is 5% of such amount. Shares purchased with the
first 5% of such amount will be held in escrow (while remaining
registered in your name) to secure payment of the higher sales
charge applicable to the shares actually purchased in the event
the full intended amount is not purchased. If the full amount in-
dicated is not purchased, a sufficient amount of such escrowed
shares will be involuntarily redeemed to pay the additional sales
charge applicable to the amount actually purchased, if necessary.
Dividends on escrowed shares, whether paid in cash
November 1, 1998 Prospectus 25
<PAGE>
or reinvested in additional eligible PIMCO Fund shares, are not
subject to escrow. When the full amount indicated has been pur-
chased, the escrow will be released. If you wish to enter into a
Letter of Intent in conjunction with your initial investment in
Class A shares of a Portfolio, you should complete the appropriate
portion of the account application. If you are a current Class A
shareholder desiring to do so you may obtain a form of Letter of
Intent by contacting the Distributor at 1-800-426-0107 or any bro-
ker participating in this program.
REINSTATEMENT PRIVILEGE A Class A shareholder who has caused any
or all of his shares to be redeemed may reinvest all or any por-
tion of the redemption proceeds in Class A shares of any eligible
PIMCO Fund at net asset value without any sales charge, provided
that such reinvestment is made within 120 calendar days after the
redemption or repurchase date. Shares are sold to a reinvesting
shareholder at the net asset value next determined. See "How Net
Asset Value is Determined." A reinstatement pursuant to this priv-
ilege will not cancel the redemption transaction and, consequent-
ly, any gain or loss so realized may be recognized for federal tax
purposes except that no loss may be recognized to the extent that
the proceeds are reinvested in shares of the same Portfolio within
30 days. The reinstatement privilege may be utilized by a share-
holder only once, irrespective of the number of shares redeemed,
except that the privilege may be utilized without limit in connec-
tion with transactions whose sole purpose is to transfer a share-
holder's interest in a Portfolio to his Individual Retirement Ac-
count or other qualified retirement plan account. An investor may
exercise the reinstatement privilege by written request sent to
the Distributor or to the investor's broker.
SALES AT NET ASSET VALUE Each Portfolio may sell its Class A
shares at net asset value without a sales charge to (a) current or
retired officers, trustees, directors or employees of the Trust,
the Adviser or the Distributor, a parent, brother or sister of any
such officer, trustee, director or employee or a spouse or child
of any of the foregoing persons, or any trust, profit sharing or
pension plan for the benefit of any such person and to any other
person if the Distributor anticipates that there will be minimal
sales expenses associated with the sale, (b) current or retired
trustees of PIMCO Funds: Pacific Investment Management Series, (c)
current registered representatives and other full-time employees
of participating brokers or such persons' spouses or for trust or
custodial accounts for their minor children, (d) trustees or other
fiduciaries purchasing shares for certain plans sponsored by em-
ployers, professional organizations or associations or charitable
organizations, the trustee, administrator, fiduciary, broker,
trust company or registered investment adviser for which has an
agreement with the Distributor with respect to such purchases (in-
cluding provisions related to minimum levels of investment in the
Trust), and to participants in such plans and their spouses pur-
chasing for their account(s) or IRAs (with the exception of Roth
IRAs), (e) participants investing through accounts known as "wrap
accounts" established with brokers or dealers approved by the Dis-
tributor where such brokers or dealers are paid a single, inclu-
sive fee for brokerage and investment management services, (f)
client accounts of broker-dealers or registered investment advis-
ers affiliated with such broker-dealers with which the Distributor
has an agreement for the use of PIMCO Funds: Multi-Manager Series
in particular investment products or programs, and (g) accounts
for which a trust company affiliated with the Trust or the Adviser
serves as trustee or custodian. As described above, the Distribu-
tor will not pay any initial commission to dealers upon the sale
of Class A shares to the purchasers described in this paragraph
except for sales to purchasers described under (d) in this para-
graph.
NOTIFICATION OF DISTRIBUTOR An investor or participating broker
must notify the Distributor whenever a quantity discount or re-
duced sales charge is applicable to a purchase and must provide
the Distributor with sufficient information at the time of pur-
chase to verify that each purchase qualifies for the privilege or
discount. Upon such notification, the investor will receive the
lowest applicable sales charge. The quantity discounts described
above may be modified or terminated at any time.
CLASS A DEFERRED SALES CHARGE For all Portfolios, investors who
purchase $1,000,000 or more of Class A shares (and, thus, purchase
such shares without any initial sales charge) may be subject to a
1% CDSC (the "Class A CDSC") if such shares are redeemed within 18
months of their purchase. The Class A CDSC does not apply to in-
vestors purchasing $1,000,000 or more of any Portfolio's Class A
shares if such investors are otherwise eligible to purchase Class
A shares without any sales charge because they are described under
"Sales at Net Asset Value" above.
26 PIMCO Funds Asset Allocation Series
<PAGE>
For purchases subject to the Class A CDSC, a 1% CDSC will apply
for any redemption of such Class A shares that occurs within 18
months of their purchase. No CDSC will be imposed if the shares
redeemed have been acquired through the reinvestment of dividends
or capital gains distributions or if the amount redeemed is de-
rived from increases in the value of the account above the amount
of purchase payments subject to the CDSC. In determining whether a
CDSC is payable, it is assumed that Class A shares acquired
through the reinvestment of dividends and distributions are re-
deemed first, and thereafter that Class A shares that have been
held by an investor for the longest period of time are redeemed
first.
The Class A CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For more
information about the Class A CDSC, call the Distributor at 1-800-
426-0107.
PARTICIPATING BROKERS Investment dealers and other financial in-
termediaries provide varying arrangements for their clients to
purchase and redeem Portfolio shares. Some may establish higher
minimum investment requirements than set forth above. Firms may
arrange with their clients for other investment or administrative
services and may independently establish and charge transaction
fees and/or other additional amounts to their clients for such
services, which charges would reduce clients' return. Firms also
may hold Portfolio shares in nominee or street name as agent for
and on behalf of their customers. In such instances, the Trust's
transfer agent will have no information with respect to or control
over accounts of specific shareholders. Such shareholders may ob-
tain access to their accounts and information about their accounts
only from their broker. In addition, certain privileges with re-
spect to the purchase and redemption of shares or the reinvestment
of dividends may not be available through such firms. Some firms
may participate in a program allowing them access to their cli-
ents' accounts for servicing including, without limitation, trans-
fers of registration and dividend payee changes; and may perform
functions such as generation of confirmation statements and dis-
bursement of cash dividends. This Prospectus should be read in
connection with such firms' material regarding their fees and
services.
DEFERRED Class B shares are sold at their current net asset value without
SALES any initial sales charge. The full amount of an investor's pur-
CHARGE chase payment will be invested in shares of the Portfolio(s) se-
ALTERNATIVE lected. A CDSC will be imposed on Class B shares if an investor
- -- CLASS B redeems an amount which causes the current value of the investor's
SHARES account for a Portfolio to fall below the total dollar amount of
purchase payments subject to the CDSC, except that no CDSC is im-
posed if the shares redeemed have been acquired through the rein-
vestment of dividends or capital gains distributions or if the
amount redeemed is derived from increases in the value of the ac-
count above the amount of purchase payments subject to the CDSC.
Whether a CDSC is imposed and the amount of the CDSC will de-
pend on the number of years since the investor made a purchase
payment from which an amount is being redeemed. Purchases are sub-
ject to the CDSC according to the following schedule:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
-------------------------------------------
<S> <C>
First 5
-------------------------------------------
Second 4
-------------------------------------------
Third 3
-------------------------------------------
Fourth 3
-------------------------------------------
Fifth 2
-------------------------------------------
Sixth 1
-------------------------------------------
Seventh 0*
</TABLE>
*After the seventh year, Class B shares convert into Class A
shares as described below.
November 1, 1998 Prospectus 27
<PAGE>
In determining whether a CDSC is payable, it is assumed that
the purchase payment from which a redemption is made is the earli-
est purchase payment from which a redemption or exchange has not
already been fully effected.
The following example will illustrate the operation of the
Class B CDSC:
Assume that an individual opens an account and makes a purchase
payment of $10,000 for Class B shares of a Portfolio and that six
months later the value of the investor's account for that Portfo-
lio has grown through investment performance and reinvestment of
distributions to $11,000. The investor then may redeem up to
$1,000 from that Portfolio ($11,000 minus $10,000) without incur-
ring a CDSC. If the investor should redeem $3,000, a CDSC would be
imposed on $2,000 of the redemption (the amount by which the in-
vestor's account for the Portfolio was reduced below the amount of
the purchase payment). At the rate of 5%, the Class B CDSC would
be $100.
In determining whether an amount is available for redemption
without incurring a CDSC, the purchase payments made for all Class
B shares in the shareholder's account with the particular Portfo-
lio are aggregated, and the current value of all such shares is
aggregated. Any CDSC imposed on a redemption of Class B shares is
paid to the Distributor.
Class B shares are subject to higher distribution fees than
Class A shares for a fixed period after their purchase, after
which they automatically convert to Class A shares and are no
longer subject to such higher distribution fees. Class B shares of
each Portfolio automatically convert into Class A shares after
they have been held for seven years.
For sales of Class B shares made and services rendered to Class
B shareholders, the Distributor intends to make payments to par-
ticipating brokers, at the time a shareholder purchases Class B
shares, of 4.00% of the purchase amount for each of the Portfo-
lios. During such periods as may from time to time be designated
by the Distributor, the Distributor will pay selected participat-
ing brokers an additional amount of up to .50% of the purchase
price on sales of Class B shares of all or selected Portfolios
purchased to each participating broker which obtains purchase or-
ders in amounts exceeding thresholds established from time to time
by the Distributor.
The Class B CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For more
information about the Class B CDSC, call the Distributor at 1-800-
426-0107.
ASSET BASED Class C shares are sold at their current net asset value without
SALES any initial sales charge. A CDSC is imposed on Class C shares if
CHARGE an investor redeems an amount which causes the current value of
ALTERNATIVE the investor's account for a Portfolio to fall below the total
- -- CLASS C dollar amount of purchase payments subject to the CDSC, except
SHARES that no CDSC is imposed if the shares redeemed have been acquired
through the reinvestment of dividends or capital gains distribu-
tions or if the amount redeemed is derived from increases in the
value of the account above the amount of purchase payments subject
to the CDSC. All of an investor's purchase payments are invested
in shares of the Portfolio(s) selected.
Whether a CDSC is imposed and the amount of the CDSC will de-
pend on the number of years since the investor made a purchase
payment from which an amount is being redeemed. Purchases are sub-
ject to the CDSC according to the following schedule:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE CONTINGENT
PAYMENT WAS MADE DEFERRED SALES CHARGE
-------------------------------------------
<S> <C>
First 1
-------------------------------------------
Thereafter 0
</TABLE>
In determining whether a CDSC is payable, it is assumed that
the purchase payment from which the redemption is made is the ear-
liest purchase payment (from which a redemption or exchange has
not already been effected).
28 PIMCO Funds Asset Allocation Series
<PAGE>
The following example will illustrate the operation of the
Class C CDSC:
Assume that an individual opens an account and makes a purchase
payment of $10,000 for Class C shares of a Portfolio and that six
months later the value of the investor's account for that Portfo-
lio has grown through investment performance and reinvestment of
distributions to $11,000. The investor then may redeem up to
$1,000 from that Portfolio ($11,000 minus $10,000) without incur-
ring a CDSC. If the investor should redeem $3,000, a CDSC would be
imposed on $2,000 of the redemption (the amount by which the in-
vestor's account for the Portfolio was reduced below the amount of
the purchase payment). At the rate of 1%, the Class C CDSC would
be $20.
In determining whether an amount is available for redemption
without incurring a CDSC, the purchase payments made for all Class
C shares in the shareholder's account with the particular Portfo-
lio are aggregated, and the current value of all such shares is
aggregated. Any CDSC imposed on a redemption of Class C shares is
paid to the Distributor. Unlike Class B shares, Class C shares do
not automatically convert to any other class of shares of the
Portfolios.
Except as described below, for sales of Class C shares made and
services rendered to Class C shareholders, the Distributor expects
to make payments to participating brokers, at the time the share-
holder purchases Class C shares, of 1.00% (representing .75% dis-
tribution fees and .25% servicing fees) of the purchase amount for
all Portfolios. For sales of Class C shares made to participants
making periodic purchases of not less than $50 through certain em-
ployer sponsored savings plans which are clients of a broker-
dealer with which the Distributor has an agreement with respect to
such purchases, no payments are made at the time of purchase. Dur-
ing such periods as may from time to time be designated by the
Distributor, the Distributor will pay an additional amount of up
to .50% of the purchase price on sales of Class C shares of all or
selected Portfolios purchased to each participating broker which
obtains purchase orders in amounts exceeding thresholds estab-
lished from time to time by the Distributor.
The Class C CDSC is currently waived in connection with certain
redemptions as described above under "Alternative Purchase Ar-
rangements--Waiver of Contingent Deferred Sales Charges." For more
information about the Class C CDSC, contact the Distributor at 1-
800-426-0107.
Exchange Privilege
A shareholder may exchange Class A, Class B and Class C shares of
any Portfolio for the same Class of shares of any other Portfolio
or other series of the Trust in an account with identical regis-
tration on the basis of their respective net asset values. Class
A, Class B and Class C shares of each Portfolio may also be ex-
changed for shares of the same class of a series of PIMCO Funds:
Pacific Investment Management Series. There are currently no ex-
change fees or charges. Exchanges of shares outstanding on Septem-
ber 30, 1998 may be made in any amount through December 31, 1998
into any other Portfolio. All other exchanges, including exchanges
from a Portfolio into another series of the Trust or of PIMCO
Funds: Pacific Investment Management Series, are subject to the
$2,500 minimum initial purchase requirement for each Portfolio,
except with respect to tax-qualified programs and exchanges ef-
fected through the PIMCO Funds Auto-Exchange plan. An exchange
will constitute a taxable sale for federal income tax purposes.
Investors who maintain their account with the Distributor may
exchange shares by a written exchange request sent to PIMCO Funds
Distributors LLC, P.O. Box 5866, Denver, CO 80217-5866 or, unless
the investor has specifically declined telephone exchange privi-
leges on the account application or elected in writing not to uti-
lize telephone exchanges, by a telephone request to the Transfer
Agent at 1-800-426-0107. The Trust will employ reasonable proce-
dures to confirm that instructions communicated by telephone are
genuine, and may be liable for any losses due to unauthorized or
fraudulent instructions if it fails to employ such procedures. The
Trust will require a form of personal identification prior to act-
ing on a caller's telephone instructions, will provide written
confirmations of such transactions and will record telephone in-
structions. Exchange forms are available from the Distributor at
1-800-426-0107 and may be used if there will be no change in the
registered name or address of the shareholder. Changes in regis-
tration information or account privileges may be made in writing
to the Transfer Agent, Shareholder Services, Inc.,
November 1, 1998 Prospectus 29
<PAGE>
P.O. Box 5866, Denver, Colorado 80217-5866, or by use of forms
which are available from the Distributor. A signa
ture guarantee is required. See "How to Buy Shares--Signature
Guarantee." Telephone exchanges may be made between 9:00 a.m.,
Eastern time and the close of regular trading (normally 4:00 p.m.,
Eastern time) on the Exchange on any day the Exchange is open
(generally weekdays other than normal holidays). The Trust re-
serves the right to refuse exchange purchases if, in the judgment
of the Adviser, the purchase would adversely affect the Portfolio
and its shareholders. In particular, a pattern of exchanges char-
acteristic of "market-timing" strategies may be deemed by the Ad-
viser to be detrimental to the Trust or a particular Portfolio.
Currently, the Trust limits the number of "round trip" ex-
changes an investor may make. An investor makes a "round trip" ex-
change when the investor purchases shares of a particular Portfo-
lio, subsequently exchanges those shares for shares of a different
Portfolio or other PIMCO Fund and then exchanges back into the
originally purchased Portfolio. The Trust has the right to refuse
any exchange for any investor who completes (by making the ex-
change back into the shares of the originally purchased Portfolio)
more than six round trip exchanges in any twelve-month period. Al-
though the Trust has no current intention of terminating or modi-
fying the exchange privilege other than as set forth in the pre-
ceding sentence, it reserves the right to do so at any time. Ex-
cept as otherwise permitted by Securities and Exchange Commission
regulations, the Trust will give 60 days' advance notice to share-
holders of any termination or material modification of the ex-
change privilege. For further information about exchange privi-
leges, contact your participating broker or call the Transfer
Agent at 1-800-426-0107.
With respect to Class B and Class C shares, or Class A shares
subject to a CDSC, if less than all of an investment is exchanged
out of a Portfolio, any portion of the investment attributable to
capital appreciation and/or reinvested dividends or capital gains
distributions will be exchanged first, and thereafter any portions
exchanged will be from the earliest investment made in the Portfo-
lio from which the exchange was made. Shareholders should take
into account the effect of any exchange on the applicability of
any CDSC that may be imposed upon any subsequent redemption.
Investors may also select the PIMCO Funds Auto-Exchange plan
which establishes automatic periodic exchanges. For further infor-
mation on automatic exchanges, see "How to Buy Shares--PIMCO Funds
Auto-Exchange" above.
How to Redeem
Class A, Class B or Class C shares may be redeemed through a par-
ticipating broker, by telephone, by submitting a written redemp-
tion request directly to the Transfer Agent (for non-broker ac-
counts), or through an Automatic Withdrawal Plan or PIMCO Funds
Fund Link.
A CDSC may apply to a redemption of Class A, Class B or Class C
shares. See "Alternative Purchase Arrangements" above. Shares are
redeemed at their net asset value next determined after a proper
redemption request has been received, less any applicable CDSC.
There is no charge by the Distributor (other than an applicable
CDSC) with respect to a redemption; however, a participating bro-
ker who processes a redemption for an investor may charge custom-
ary commissions for its services. Dealers and other financial
services firms are obligated to transmit orders promptly. Requests
for redemption received by dealers or other firms prior to the
close of regular trading (normally 4:00 p.m., Eastern time) on the
Exchange on a regular business day and received by the Distributor
prior to the close of the Distributor's business day will be con-
firmed at the net asset value effective as of the closing of the
Exchange on that day, less any applicable CDSC.
DIRECT
REDEMPTION A shareholder's original account application permits the share-
holder to redeem by written request and by telephone (unless the
shareholder specifically elects not to utilize telephone redemp-
tions) and to elect one or more of the additional redemption pro-
cedures described below. A shareholder may change the instructions
indicated on his original account application, or may request ad-
ditional redemption options, only by transmitting a written direc-
tion to the
30 PIMCO Funds Asset Allocation Series
<PAGE>
Transfer Agent. Requests to institute or change any of the addi-
tional redemption procedures will require a signature guarantee.
Redemption proceeds will normally be mailed to the redeeming
shareholder within seven days or, in the case of wire transfer or
Fund Link redemptions, sent to the designated bank account within
one business day. Fund Link redemptions may be received by the
bank on the second or third business day. In cases where shares
have recently been purchased by personal check, redemption pro-
ceeds may be withheld until the check has been collected, which
may take up to 15 days. To avoid such withholding, investors
should purchase shares by certified or bank check or by wire
transfer.
WRITTEN To redeem shares in writing (whether or not represented by certif-
REQUESTS icates), a shareholder must send the following items to the Trans-
fer Agent, Shareholder Services, Inc., P.O. Box 5866, Denver, Col-
orado 80217-5866:
(1) a written request for redemption signed by all registered
owners exactly as the account is registered on the Trans-
fer Agent's records, including fiduciary titles, if any,
and specifying the account number and the dollar amount or
number of shares to be redeemed;
(2) for certain redemptions described below, a guarantee of
all signatures on the written request or on the share cer-
tificate or accompanying stock power, if required, as de-
scribed under "How to Buy Shares--Signature Guarantee";
(3) any share certificates issued for any of the shares to be
redeemed (see "Certificated Shares" below); and
(4) any additional documents which may be required by the
Transfer Agent for redemption by corporations, partner-
ships or other organizations, executors, administrators,
trustees, custodians or guardians, or if the redemption is
requested by anyone other than the shareholder(s) of rec-
ord.
Transfers of shares are subject to the same requirements. A
signature guarantee is not required for redemptions of $50,000 or
less, requested by and payable to all shareholders of record for
the account, to be sent to the address of record for that account.
To avoid delay in redemption or transfer, shareholders having any
questions about these requirements should contact the Transfer
Agent in writing or call 1-800-426-0107 before submitting a re-
quest. Redemption or transfer requests will not be honored until
all required documents in the proper form have been received by
the Transfer Agent. This redemption option does not apply to
shares held in broker "street name" accounts.
If the proceeds of the redemption (i) exceed $50,000, (ii) are
to be paid to a person other than the record owner, (iii) are to
be sent to an address other than the address of the account on the
Transfer Agent's records, or (iv) are to be paid to a corporation,
partnership, trust or fiduciary, the signature(s) on the redemp-
tion request and on the certificates, if any, or stock power must
be guaranteed as described above, except that the Distributor may
waive the signature guarantee requirement for redemptions up to
$2,500 by a trustee of a qualified retirement plan, the adminis-
trator for which has an agreement with the Distributor.
TELEPHONE The Trust accepts telephone requests for redemption of
REDEMPTIONS uncertificated shares for amounts up to $50,000 within any seven
calendar day period, except for investors who have specifically
declined telephone redemption privileges on the account applica-
tion or elected in writing not to utilize telephone redemptions.
The proceeds of a telephone redemption will be sent to the record
shareholder at his record address. Changes in account information
must be made in a written authorization with a signature guaran-
tee. See "How to Buy Shares--Signature Guarantee." Telephone re-
demptions will not be accepted during the 30-day period following
any change in an account's record address. This redemption option
does not apply to shares held in broker "street name" accounts.
By completing an account application, an investor agrees that
the Trust, the Distributor and the Transfer Agent shall not be li-
able for any loss incurred by the investor by reason of the Trust
accepting unauthorized telephone redemption requests for his ac-
count if the Trust reasonably believes the instructions to be gen-
uine. Thus, shareholders risk possible losses in the event of a
telephone redemption not authorized by them. The Trust may accept
telephone redemption instructions from any person identifying him-
self as the owner of an account or the owner's broker where the
owner has not declined in writing to utilize this service. The
Trust will employ reasonable procedures to confirm
November 1, 1998 Prospectus 31
<PAGE>
that instructions communicated by telephone are genuine, and may
be liable for any losses due to unauthorized or fraudulent in-
structions if it fails to employ such procedures. The Trust will
require a form of personal identification prior to acting on a
caller's telephone instructions, will provide written confirma-
tions of such transactions and will record telephone instructions.
A shareholder making a telephone redemption should call the
Transfer Agent at 1-800-426-0107 and state (i) the name of the
shareholder as it appears on the Transfer Agent's records, (ii)
his account number with the Trust, (iii) the amount to be with-
drawn and (iv) the name of the person requesting the redemption.
Usually the proceeds are sent to the investor on the next Trust
business day after the redemption is effected, provided the re-
demption request is received prior to the close of regular trading
(normally 4:00 p.m., Eastern time) on the Exchange that day. If
the redemption request is received after the close of the Ex-
change, the redemption is effected on the following Trust business
day at that day's net asset value and the proceeds are usually
sent to the investor on the second following Trust business day.
The Trust reserves the right to terminate or modify the telephone
redemption service at any time. During times of severe disruptions
in the securities markets, the volume of calls may make it diffi-
cult to redeem by telephone, in which case a shareholder may wish
to send a written request for redemption as described under "Writ-
ten Requests" above. Telephone communications may be recorded by
the Distributor or the Transfer Agent.
FUND LINK If a shareholder has established Fund Link, the shareholder may
REDEMPTIONS redeem shares by telephone and have the redemption proceeds sent
to a designated account at a financial institution. Fund Link is
normally established within 45 days of receipt of a Fund Link ap-
plication by the Transfer Agent. To use Fund Link for redemptions,
call the Transfer Agent at 1-800-426-0107. Subject to the limita-
tions set forth above under "Telephone Redemptions," the Distribu-
tor, the Trust and the Transfer Agent may rely on instructions by
any registered owner believed to be genuine and will not be re-
sponsible to any shareholder for any loss, damage or expense aris-
ing out of such instructions. Requests received by the Transfer
Agent prior to the close of regular trading (normally 4:00 p.m.,
Eastern time) on the Exchange on a business day will be processed
at the net asset value on that day and the proceeds (less any
CDSC) will normally be sent to the designated bank account on the
following business day and received by the bank on the second or
third business day. If the redemption request is received after
the close of regular trading on the Exchange, the redemption is
effected on the following business day. Shares purchased by check
may not be redeemed through Fund Link until such shares have been
owned (i.e., paid for) for at least 15 days. Fund Link may not be
used to redeem shares held in certificated form.
Changes in bank account information must be made by completing
a new Fund Link application, signed by all owners of record of the
account, with all signatures guaranteed. See "How to Buy Shares--
Signature Guarantee." See "How to Buy Shares--PIMCO Funds Fund
Link" for information on establishing the Fund Link privilege. The
Trust may terminate the Fund Link program at any time without no-
tice to shareholders. This redemption option does not apply to
shares held in broker "street name" accounts.
PIMCO FUNDS PIMCO Funds Automated Telephone System ("ATS") is an automated
AUTOMATED telephone system that enables shareholders to perform a number of
TELEPHONE account transactions automatically using a touch-tone telephone.
SYSTEM ATS may be used on already- established Portfolio accounts after
you obtain a Personal Identification Number (PIN) by calling the
special ATS number: 1-800-223-2413.
PURCHASING SHARES. You may purchase shares in amounts up to
$100,000 by telephone by calling 1-800-223-2413. You must have es-
tablished ATS privileges to link your bank account with the Port-
folio to pay for these purchases.
EXCHANGING SHARES. With the PIMCO Funds Exchange Privilege, you
can exchange shares automatically by telephone from your Fund Link
Account to another PIMCO Funds account you have already estab-
lished by calling 1-800-223-2413. Please refer to "Exchange Privi-
lege" for details.
REDEMPTIONS. You may redeem shares by telephone automatically by
calling 1-800-223-2413 and the Portfolio will send the proceeds
directly to your Portfolio bank account. Please refer to "How to
Redeem" for details.
32 PIMCO Funds Asset Allocation Series
<PAGE>
EXPEDITED If a shareholder has given authorization for expedited wire re-
WIRE demption, shares can be redeemed and the proceeds sent by federal
TRANSFER wire transfer to a single previously designated bank account. Re-
REDEMPTIONS quests received by the Trust prior to the close of the Exchange
will result in shares being redeemed that day at the next deter-
mined net asset value (less any CDSC) and normally the proceeds
being sent to the designated bank account the following business
day. The bank must be a member of the Federal Reserve wire system.
Delivery of the proceeds of a wire redemption request may be de-
layed by the Trust for up to 7 days if the Distributor deems it
appropriate under then current market conditions. Once authoriza-
tion is on file, the Trust will honor requests by any person iden-
tifying himself as the owner of an account or the owner's broker
by telephone at 1-800-426-0107 or by written instructions. The
Trust cannot be responsible for the efficiency of the Federal Re-
serve wire system or the shareholder's bank. The Trust does not
currently charge for wire transfers. The shareholder is responsi-
ble for any charges imposed by the shareholder's bank. The minimum
amount that may be wired is $2,500. The Trust reserves the right
to change this minimum or to terminate the wire redemption privi-
lege. Shares purchased by check may not be redeemed by wire trans-
fer until such shares have been owned (i.e., paid for) for at
least 15 days. Expedited wire transfer redemptions may be autho-
rized by completing a form available from the Distributor. Wire
redemptions may not be used to redeem shares in certificated form.
To change the name of the single bank account designated to re-
ceive wire redemption proceeds, it is necessary to send a written
request with signatures guaranteed to PIMCO Funds Distributors
LLC, P.O. Box 5866, Denver, CO 80217-5866. See "How to Buy
Shares--Signature Guarantee." This redemption option does not ap-
ply to shares held in broker "street name" accounts.
CERTIFICATEDTo redeem shares for which certificates have been issued, the cer-
SHARES tificates must be mailed to or deposited with the Trust, duly en-
dorsed or accompanied by a duly endorsed stock power or by a writ-
ten request for redemption. Signatures must be guaranteed as de-
scribed under "How to Buy Shares--Signature Guarantee." Further
documentation may be requested from institutions or fiduciary ac-
counts, such as corporations, custodians (e.g., under the Uniform
Gifts to Minors Act), executors, administrators, trustees or
guardians ("institutional account owners"). The redemption request
and stock power must be signed exactly as the account is regis-
tered, including indication of any special capacity of the regis-
tered owner.
AUTOMATIC An investor who owns or buys shares of a Portfolio having a net
WITHDRAWAL asset value of $10,000 or more may open an Automatic Withdrawal
PLAN Plan and have a designated sum of money (not less than $100 per
Portfolio) paid monthly (or quarterly) to the investor or another
person. Such a plan may be established by completing the appropri-
ate section of the account application or you may obtain an Auto-
matic Withdrawal Plan application from the Distributor or your
broker. If an Automatic Withdrawal Plan is set up after the ac-
count is established providing for payment to a person other than
the record shareholder or to an address other than the address of
record, a signature guarantee is required. See "How to Buy
Shares--Signature Guarantee." Class A, Class B and Class C shares
of any Portfolio are deposited in a plan account and all distribu-
tions are reinvested in additional shares of the particular class
of the Portfolio at net asset value. Shares in a plan account are
then redeemed at net asset value (less any applicable CDSC) to
make each withdrawal payment. Any applicable CDSC may be waived
for certain redemptions under an Automatic Withdrawal Plan. See
"Alternative Purchase Arrangements--Waiver of Contingent Deferred
Sales Charges."
Redemptions for the purpose of withdrawals are ordinarily made
on the business day preceding the day of payment at that day's
closing net asset value and checks are mailed on the day of pay-
ment selected by the shareholder. The Transfer Agent may acceler-
ate the redemption and check mailing date by one day to avoid
weekend delays. Payment will be made to any person the investor
designates; however, if the shares are registered in the name of a
trustee or other fiduciary, payment will be made only to the fidu-
ciary, except in the case of a profit-sharing or pension plan
where payment will be made to the designee. As withdrawal payments
may include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor. The
redemption of shares in connection with an Automatic Withdrawal
Plan may result in a gain or loss for tax purposes. Continued
withdrawals
November 1, 1998 Prospectus 33
<PAGE>
in excess of income will reduce and possibly exhaust invested
principal, especially in the event of a market decline. The main-
tenance of an Automatic Withdrawal Plan concurrently with pur-
chases of additional shares of the Portfolio would be disadvanta-
geous to the investor because of the CDSC that may become payable
on such withdrawals in the case of Class A, Class B or Class C
shares and because of the initial sales charge in the case of
Class A shares. For this reason, the minimum investment accepted
for a Portfolio while an Automatic Withdrawal Plan is in effect
for that Portfolio is $1,000, and an investor may not maintain a
plan for the accumulation of shares of the Portfolio (other than
through reinvestment of distributions) and an Automatic Withdrawal
Plan at the same time. The Trust or the Distributor may terminate
or change the terms of the Automatic Withdrawal Plan at any time.
Because the Automatic Withdrawal Plan may involve invasion of
capital, investors should consider carefully with their own finan-
cial advisors whether the plan and the specified amounts to be
withdrawn are appropriate in their circumstances. The Trust and
the Distributor make no recommendations or representations in this
regard.
REDEMPTIONS The Trust agrees to redeem shares of each Portfolio solely in cash
IN KIND up to the lesser of $250,000 or 1% of the Portfolio's net assets
during any 90-day period for any one shareholder. In consideration
of the best interests of the remaining shareholders, the Trust re-
serves the right to pay any redemption proceeds exceeding this
amount in whole or in part by a distribution in kind of securities
held by a Portfolio in lieu of cash. When shares are redeemed in
kind, the redeeming shareholder may incur transaction costs upon
the disposition of the securities received in the distribution.
Distributor and Distribution and Servicing Plans
PIMCO Funds Distributors LLC (the "Distributor"), a wholly owned
subsidiary of the Adviser, is the principal underwriter of the
Trust's shares and in that connection makes distribution and ser-
vicing payments to participating brokers and servicing payments to
certain banks and other financial intermediaries in connection
with the sale of Class B and Class C shares and servicing payments
to participating brokers, certain banks and other financial inter-
mediaries in connection with the sale of Class A shares. In the
case of Class A shares, these parties are also compensated based
on the amount of the front-end sales charge reallowed by the Dis-
tributor, except in cases where Class A shares are sold without a
front-end sales charge (although the Distributor may pay brokers
additional compensation in connection with sales of Class A shares
without a sales charge). In the case of Class B shares, partici-
pating brokers and other financial intermediaries are compensated
by an advance of a sales commission by the Distributor. In the
case of Class C shares, part or all of the first year's distribu-
tion and servicing fee is generally paid at the time of sale.
Pursuant to a Distribution Agreement with the Trust, with re-
spect to each Portfolio's Class A, Class B and Class C shares, the
Distributor bears various other promotional and sales related ex-
penses, including the cost of printing and mailing prospectuses to
persons other than current shareholders. The Distributor, located
at 2187 Atlantic Street, Stamford, Connecticut 06902, is a broker-
dealer registered with the Securities and Exchange Commission.
CLASS A SERVICING FEES As compensation for services rendered and
expenses borne by the Distributor in connection with personal
services rendered to Class A shareholders of the Trust and the
maintenance of Class A shareholder accounts, the Trust pays the
Distributor servicing fees up to the annual rate of .25% (calcu-
lated as a percentage of each Portfolio's average daily net assets
attributable to Class A shares).
CLASS B AND CLASS C DISTRIBUTION AND SERVICING FEES As compensa-
tion for services rendered and expenses borne by the Distributor
in connection with the distribution of Class B and Class C shares
of the Trust, and in connection with personal services rendered to
Class B and Class C shareholders of the Trust and the maintenance
of Class B and Class C shareholder accounts, the Trust pays the
Distributor servicing and distribution fees up to the annual rates
set
34 PIMCO Funds Asset Allocation Series
<PAGE>
forth below (calculated as a percentage of each Portfolio's aver-
age daily net assets attributable to Class B and Class C shares,
respectively):
<TABLE>
<CAPTION>
SERVICING DISTRIBUTION
FEE FEE
--------------------------------------
<S> <C> <C>
All Portfolios .25% .75%
</TABLE>
The Class A servicing fees and Class B and Class C distribution
and servicing fees paid to the Distributor are made under Distri-
bution and Servicing Plans adopted pursuant to Rule 12b-l under
the Investment Company Act of 1940, as amended (the "1940 Act"),
and are of the type known as "compensation" plans. This means
that, although the Trustees of the Trust are expected to take into
account the expenses of the Distributor and its predecessors in
their periodic review of the Distribution and Servicing Plans, the
fees are payable to compensate the Distributor for services ren-
dered even if the amount paid exceeds the Distributor's expenses.
The distribution fee applicable to Class B and Class C shares
may be spent by the Distributor on any activities or expenses pri-
marily intended to result in the sale of Class B or Class C
shares, respectively, including compensation to, and expenses (in-
cluding overhead and telephone expenses) of, financial consultants
or other employees of the Distributor or of participating or in-
troducing brokers who engage in distribution of Class B or Class C
shares, printing of prospectuses and reports for other than exist-
ing Class B or Class C shareholders, advertising, and preparation,
printing and distribution of sales literature. The servicing fee,
applicable to Class A, Class B and Class C shares of the Trust,
may be spent by the Distributor on personal services rendered to
shareholders of the Trust and the maintenance of shareholder ac-
counts, including compensation to, and expenses (including tele-
phone and overhead expenses) of, financial consultants or other
employees of participating or introducing brokers, certain banks
and other financial intermediaries who aid in the processing of
purchase or redemption requests or the processing of dividend pay-
ments, who provide information periodically to shareholders show-
ing their positions in a Portfolio's shares, who forward communi-
cations from the Trust to shareholders, who render ongoing advice
concerning the suitability of particular investment opportunities
offered by the Trust in light of the shareholders' needs, who re-
spond to inquiries from shareholders relating to such services, or
who train personnel in the provision of such services. Distribu-
tion and servicing fees may also be spent on interest relating to
unreimbursed distribution or servicing expenses from prior years.
Many of the Distributor's sales and servicing efforts involve
the Trust as a whole, so that fees paid by Class A, Class B or
Class C shares of any Portfolio may indirectly support sales and
servicing efforts relating to other shares of the same class of
the Portfolios or other series of the Trust. In reporting its ex-
penses to the Trustees, the Distributor itemizes expenses that re-
late to the distribution and/or servicing of a single Portfolio's
shares, and allocates other expenses among the Portfolios and
other series of the Trust based on their relative net assets. Ex-
penses allocated to each Portfolio are further allocated among its
classes of shares annually based on the relative sales of each
class, except for any expenses that relate only to the sale or
servicing of a single class. The Distributor may make payments to
brokers (and with respect to servicing fees only, to certain banks
and other financial intermediaries) of up to the following per-
centages annually of the average daily net assets attributable to
shares in the accounts of their customers or clients:
ALL PORTFOLIOS
<TABLE>
<CAPTION>
SERVICING DISTRIBUTION
FEE FEE
-------------------------------------
<S> <C> <C>
Class A .25% N/A
-------------------------------------
Class B (/1/) .25% None
-------------------------------------
Class C (/2/) .25% .65%
</TABLE>
1. Payable only with respect to shares outstanding for one year or
more.
2. Payable only with respect to shares outstanding for one year or
more except in the case of shares for which no payment is made to
the party at the time of sale.
November 1, 1998 Prospectus 35
<PAGE>
The Distributor may from time to time pay additional cash bo-
nuses or other incentives to selected participating brokers in
connection with the sale or servicing of Class A, Class B and
Class C shares of the Portfolios. On some occasions, such bonuses
or incentives may be conditioned upon the sale of a specified min-
imum dollar amount of the shares of a Portfolio and/or all of the
Portfolios or other series of the Trust together, or a particular
class of shares, during a specific period of time. The Distributor
currently expects that such additional bonuses or incentives will
not exceed .50% of the amount of any sale. In its capacity as ad-
ministrator for the Portfolios, PIMCO Advisors may pay participat-
ing brokers and other intermediaries for sub-transfer agency and
other services.
If in any year the Distributor's expenses incurred in connec-
tion with the distribution of Class B and Class C shares and, for
Class A, Class B and Class C shares, in connection with the ser-
vicing of shareholders and the maintenance of shareholder ac-
counts, exceed the distribution and/or servicing fees paid by the
Trust, the Distributor would recover such excess only if the Dis-
tribution and Servicing Plan with respect to such class of shares
continues to be in effect in some later year when the distribution
and/or servicing fees exceed the Distributor's expenses. The Trust
is not obligated to repay any unreimbursed expenses that may exist
at such time, if any, as the relevant Distribution and Servicing
Plan terminates.
From time to time, expenses of principal underwriters incurred
in connection with the distribution of Class B and Class C shares
of the Portfolios, and in connection with the servicing of Class
A, Class B and Class C shareholders of the Portfolios and the
maintenance of Class A, Class B and Class C shareholder accounts,
may exceed the distribution and/or servicing fees collected by the
Distributor.
How Net Asset Value Is Determined
The net asset values of Class A, Class B and Class C shares of
each Portfolio of the Trust will be determined once on each day on
which the Exchange is open (a "Business Day"), as of the close of
regular trading (normally 4:00 p.m., Eastern time) on the Ex-
change. Net asset value will not be determined on days on which
the Exchange is closed.
The market values of the shares of the Underlying Funds held by
the Portfolios are determined once each Business Day in the same
manner as the net asset values of the Portfolios' shares are de-
termined as described below.
Each Portfolio's liabilities are allocated among its classes.
The total of such liabilities allocated to a class plus that
class's distribution and/or servicing fees and any other expenses
specially allocated to that class are then deducted from the
class's proportionate interest in the Portfolio's assets, and the
resulting amount for each class is divided by the number of shares
of that class outstanding to produce the class's "net asset value"
per share. Under certain circumstances, the per share net asset
value of the Class B and Class C shares of the Portfolios that do
not declare regular income dividends on a daily basis may be lower
than the per share net asset value of the Class A shares as a re-
sult of the daily expense accruals of the distribution fee appli-
cable to the Class B and Class C shares. Generally, for Portfolios
that pay income dividends, those dividends are expected to differ
over time by approximately the amount of the expense accrual dif-
ferential between a particular Portfolio's classes.
Distributions
Shares begin earning dividends on the day after the date that
funds are received by the Trust for the purchase of Class A, Class
B and Class C shares. Net investment income from interest and div-
idends, if any, will be declared and paid to shareholders of rec-
ord at least monthly by the 30/70 Portfolio, at least quarterly by
the 60/40 Portfolio and at least annually by the 90/10 Portfolio.
Any net capital gains from the sale of portfolio securities will
be distributed no less frequently than once annually. Net short-
term capital gains may be paid more frequently.
All dividends and/or distributions will be paid in the form of
additional shares of the class of shares of the Portfolio to which
the dividends and/or distributions relate or, at the election of
the shareholder, of another series of the Trust or PIMCO Funds:
Pacific Investment Management Series as described below, at net
asset value, unless the shareholder elects to receive cash (either
paid to shareholders directly or credited to their account with
their participat-
36 PIMCO Funds Asset Allocation Series
<PAGE>
ing broker). If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other
delivery service is unable to deliver checks to the shareholder's
address of record, such shareholder's distributions will automati-
cally be invested in PIMCO Money Market Fund until such share-
holder is located. Dividends paid by each Portfolio with respect
to each class of shares are calculated in the same manner and at
the same time, but dividends on Class B and Class C shares are ex-
pected to be lower than dividends on Class A shares as a result of
the distribution fee applicable to Class B and Class C shares.
There are no sales charges on reinvested dividends.
Class A, Class B and Class C shareholders of the Portfolios may
elect to invest dividends and/or distributions paid by any Portfo-
lio in shares of the same class of any other series of the Trust
or PIMCO Funds: Pacific Investment Management Series which offers
such class of shares at net asset value. The shareholder must have
an account existing in the PIMCO series selected for investment
with the identical registered name and address and must elect this
option on the account application, on a form provided for that
purpose or by a telephone request to the Transfer Agent at 1-800-
426-0107. For further information on this option, contact your
broker or call the Distributor at 1-800-426-0107.
Taxes
Each Portfolio intends to qualify as a regulated investment com-
pany annually and to elect to be treated as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the
"Code"). As such, a Portfolio generally will not pay federal in-
come tax on the income and gains it pays as dividends to its
shareholders. In order to avoid a 4% federal excise tax, each
Portfolio intends to distribute each year substantially all of its
net income and gains.
Shareholders subject to U.S. federal income tax will be subject
to tax on dividends received from a Portfolio, regardless of
whether received in cash or reinvested in additional shares. Dis-
tributions received by tax-exempt shareholders will not be subject
to federal income tax to the extent permitted under applicable tax
law. All shareholders must treat dividends, other than capital
gain dividends and dividends that represent a return of capital to
shareholders, as ordinary income. In particular, distributions de-
rived from short-term gains will be treated as ordinary income.
Dividends designated by a Portfolio as capital gain dividends de-
rived from the Portfolio's net capital gains (that is, the excess
of its net long-term capital gains over its net short-term capital
losses) are taxable to shareholders as long-term capital gain
(generally subject to a 20% tax rate) except as provided by an ap-
plicable tax exemption. Any distributions that are not from a
Portfolio's net investment income or net capital gain may be char-
acterized as a return of capital to shareholders or, in some
cases, as capital gain. Certain dividends declared in October, No-
vember or December of a calendar year are taxable to shareholders
(who otherwise are subject to tax on dividends) as though received
on December 31 of that year if paid to shareholders during January
of the following calendar year. Each Portfolio will advise share-
holders annually of the amount and nature of the dividends paid to
them.
Taxable shareholders should note that the timing of their in-
vestment or redemptions could have undesirable tax consequences.
Dividends and distributions on a Portfolio's shares are generally
subject to federal income tax as described herein to the extent
they do not exceed the Portfolio's realized income and gains, even
though such dividends and distributions may economically represent
a return of a particular shareholder's investment. Such distribu-
tions are likely to occur in respect of shares purchased at a time
when the Portfolio's net asset value reflects gains that are ei-
ther unrealized, or realized but not distributed. Such realized
gains may be required to be distributed even when a Portfolio's
net asset value also reflects unrealized losses.
A Portfolio's use of a fund-of-funds structure could affect the
amount, timing and character of distributions to shareholders. See
"Taxation" in the Statement of Additional Information.
The preceding discussion relates only to federal income tax;
the consequences under other tax laws may differ. Shareholders
should consult their tax advisers as to the possible application
of foreign, state and local income tax laws to Trust dividends and
capital gain distributions. For additional information relating to
the tax aspects of investing in a Portfolio, see the Statement of
Additional Information.
November 1, 1998 Prospectus 37
<PAGE>
Management of the Portfolios
The business affairs of the Trust are managed under the direction
of the Board of Trustees. Information about the Trustees and the
Trust's executive officers may be found in the Statement of Addi-
tional Information under the heading "Management of the Trust."
INVESTMENT PIMCO ADVISORS serves as investment adviser to the Portfolios pur-
ADVISER suant to an investment advisory agreement with the Trust. PIMCO
Advisors is a Delaware limited partnership organized in 1987.
PIMCO Advisors provides investment management and advisory serv-
ices to private accounts of institutional and individual clients
and to mutual funds. Total assets under management by PIMCO Advi-
sors and its subsidiary partnerships as of September 30, 1998 were
approximately $225.9 billion. The general partners of PIMCO Advi-
sors are PIMCO Partners, G.P. and PIMCO Advisors Holdings L.P.
("PAH"). PIMCO Partners, G.P. is a general partnership between
PIMCO Holding LLC, a Delaware limited liability company and an in-
direct wholly-owned subsidiary of Pacific Life Insurance Company,
and PIMCO Partners LLC, a California limited liability company
controlled by the current Managing Directors and two former Manag-
ing Directors of Pacific Investment Management. PIMCO Partners,
G.P. is the sole general partner of PAH. PIMCO Advisors is gov-
erned by a Management Board, which exercises substantially all of
the governance powers of the general partner and serves as the
functional equivalent of a board of directors. PIMCO Advisors' ad-
dress is 800 Newport Center Drive, Newport Beach, California
92660. PIMCO Advisors is registered as an investment adviser with
the Securities and Exchange Commission. PIMCO Advisors currently
has seven subsidiary investment adviser partnerships, the follow-
ing six of which manage one or more of the Underlying Funds:
Blairlogie, Cadence, Columbus Circle, NFJ, Pacific Investment Man-
agement and Parametric. On or before March 31, 1999, it is antici-
pated that PIMCO Advisers will sell substantially all of its own-
ership interest in Blairlogie. See "Portfolio Managers for the Un-
derlying Funds--Blairlogie" below.
PIMCO Advisors' Asset Allocation Committee is responsible for
determining how the Portfolios' assets are allocated and reallo-
cated from time to time among the Underlying Funds. Individuals
who determine general investment advice and constitute the Asset
Allocation Committee for PIMCO Advisors are William D. Cvengros,
Timothy R. Clark, Robert S. Venable, David Young and Edward P.
Rennie.
William D. Cvengros is the Chief Executive Officer, President
and a Member of the Management Board of PIMCO Advisors and a
Trustee of the Trust. He was formerly President of the Trust and a
Director and the Vice Chairman and Chief Investment Officer of Pa-
cific Life Insurance Company. He received a B.A. in Economics from
the University of Notre Dame and an M.B.A. from Northwestern Uni-
versity and he is a Chartered Financial Analyst. Timothy R. Clark
is a Vice President of PIMCO Advisors and a Senior Vice President
of the Distributor. He previously served as President of Katonah
Capital Management, Inc. Prior to that, he was with Zweig Advisors
Inc. and its affiliates serving in various capacities, including
portfolio manager for various open- and closed-end funds. He re-
ceived a B.A. in Economics from Harvard University and an M.B.A.
from New York University. Robert S. Venable is a Vice President of
PIMCO Advisors. He previously served as a Vice President and port-
folio manager at Pacific Investment Management. Mr. Venable has a
B.S. from the University of California, Berkeley and an M.B.A.
from the Wharton School of Business and he is a Chartered Finan-
cial Analyst. David Young is a Vice President in Account Manage-
ment at Pacific Investment Management. Previously, he was a Vice
President--Client Relations and Marketing of a former division of
PIMCO Advisors, a Director--Client Relations with Pacific Finan-
cial Asset Management Company and a Vice President and portfolio
manager with Analytic Investment Management, Inc. He received a
B.A. in Economics and Political Science and an M.B.A. from the
University of California, Irvine and he is a Chartered Financial
Analyst. Edward P. Rennie is a Senior Vice President and Regional
Manager of Pacific Investment Management in Singapore. Previously,
he was a Vice President and Director of New Product Services at
Pacific Investment Management or its predecessor. He received a
B.S. in Engineering from Drexel University and he is a Chartered
Financial Analyst.
Under the investment advisory agreement, PIMCO Advisors, sub-
ject to the supervision of the Board of Trustees, is responsible
for providing advice and guidance with respect to the Portfolios
and for managing, either directly or
38 PIMCO Funds Asset Allocation Series
<PAGE>
through others selected by the Adviser, the investment of the
Portfolios. PIMCO Advisors also furnishes to the Board of Trustees
periodic reports on the investment performance of each Portfolio.
PORTFOLIO Pursuant to portfolio management agreements, PIMCO Advisors em-
MANAGERS ploys Portfolio Managers to manage the portfolios of all of the
FOR THE Underlying Stock Funds with the exception of PIMCO StocksPLUS
UNDERLYING Fund, for which Pacific Investment Management serves as investment
FUNDS adviser and Portfolio Manager. Pacific Investment Management also
serves as investment adviser and Portfolio Manager of each Under-
lying Bond Fund. The Portfolio Managers have full investment dis-
cretion and make all determinations with respect to the investment
of the assets of the Underlying Funds they manage. If a Portfolio
Manager ceases to manage the portfolio of an Underlying Stock Fund
for which PIMCO Advisors serves as adviser, PIMCO Advisors will
either assume full responsibility for the management of that Fund,
or retain a new portfolio manager subject to the approval of the
Trustees and the shareholders of the Fund.
PACIFIC INVESTMENT MANAGEMENT manages each Underlying Bond Fund
and PIMCO StocksPLUS Fund, each of which is a series of PIMCO
Funds: Pacific Investment Management Series. Pacific Investment
Management is an investment management firm organized as a general
partnership. Pacific Investment Management has two partners: PIMCO
Advisors as the supervisory partner, and PIMCO Management, Inc. as
the managing partner. Pacific Investment Management Company, the
predecessor investment adviser to Pacific Investment Management,
commenced operations in 1971. Pacific Investment Management had
approximately $148.1 billion of assets under management as of Sep-
tember 30, 1998. Pacific Investment Management's address is 840
Newport Center Drive, Suite 300, Newport Beach, California 92660.
Pacific Investment Management is registered as an investment ad-
viser with the Securities and Exchange Commission and as a commod-
ity trading adviser with the CFTC.
Pacific Investment Management specializes in all sectors of the
fixed income market using its total return philosophy--seeking
both yield and capital appreciation. Pacific Investment Manage-
ment's total return philosophy revolves around the principle of
diversification and that no single risk should dominate returns.
By diversifying strategies, or relying on multiple sources of val-
ue, Pacific Investment Management attempts to generate a solid
track record with a high degree of consistency. Pacific Investment
Management seeks to add value through the use of "top down" strat-
egies such as its exposure to interest rates, or duration, chang-
ing volatility, yield curve positioning and sector rotation. "Bot-
tom up" strategies are also employed involving analysis and selec-
tion of specific securities.
COLUMBUS CIRCLE manages PIMCO Renaissance, Core Equity, Mid-Cap
Equity, International Growth, and Innovation Funds (the "Columbus
Circle Funds"). Columbus Circle is an investment management firm
organized as a general partnership. Columbus Circle has two part-
ners: PIMCO Advisors as the supervisory partner, and Columbus Cir-
cle Investors Management Inc. as the managing partner. Columbus
Circle Investors Division of Thomson Advisory Group L.P. ("TAG"),
the predecessor investment adviser to Columbus Circle, commenced
operations in 1975. Accounts managed by Columbus Circle had com-
bined assets as of September 30, 1998 of approximately $7.8 bil-
lion. Columbus Circle's address is Metro Center, One Station
Place, 8th Floor, Stamford, Connecticut 06902. Columbus Circle is
registered as an investment adviser with the Securities and Ex-
change Commission.
At the center of Columbus Circle's equity investment strategy
is its theory of Positive Momentum & Positive Surprise. This the-
ory asserts that a good company doing better than generally ex-
pected will experience a rise in its stock price, and conversely,
a company falling short of expectations will experience a drop in
its stock price. Based on this theory, Columbus Circle attempts to
manage the Columbus Circle Funds with a view to investing in grow-
ing companies that are surprising the market with business results
that are better than anticipated.
CADENCE manages PIMCO Capital Appreciation, Mid-Cap Growth, Small-
Cap Growth, and Micro-Cap Growth Funds (the "Cadence Funds"). Ca-
dence is an investment management firm organized as a general
partnership. Cadence has two partners: PIMCO Advisors as the su-
pervisory partner, and Cadence Capital Management Inc. as the man-
aging partner. Cadence Capital Management Corporation, the prede-
cessor investment adviser to Cadence, commenced operations in
1988. Accounts managed by Cadence had combined assets as of Sep-
tember 30, 1998 of
November 1, 1998 Prospectus 39
<PAGE>
approximately $6.1 billion. Cadence's address is Exchange Place,
53 State Street, Boston, Massachusetts 02109. Cadence is regis-
tered as an investment adviser with the Securities and Exchange
Commission.
Cadence utilizes an equity investment strategy that focuses on
both growth (evaluating securities on the basis of their potential
earnings growth) and value (evaluating securities based on their
price) characteristics, and attempts to identify reasonably priced
securities that offer rapid prospective earnings growth potential.
Cadence utilizes a quantitative screening process in selecting
stocks. Distinct computerized models are used to screen and rank
each issue in a selected universe according to growth and price
considerations. Cadence believes that the models identify the
stocks in the universe exhibiting growth characteristics with rea-
sonable valuations. Stocks are then selected for a portfolio using
qualitative research, and are replaced when they score worse-than-
median screen ranks, have negative earnings surprises or show poor
relative performance. The universes are rescreened frequently to
obtain a favorable composition of growth and value characteristics
for the Cadence Funds.
NFJ manages PIMCO Equity Income, Value, Value 25, and Small-Cap
Value Funds (the "NFJ Funds"). NFJ is an investment management
firm organized as a general partnership. NFJ has two partners:
PIMCO Advisors as the supervisory partner, and NFJ Management Inc.
as the managing partner. NFJ Investment Group, Inc., the predeces-
sor investment adviser to NFJ, commenced operations in 1989. Ac-
counts managed by NFJ had combined assets as of September 30, 1998
of approximately $2.2 billion. NFJ's address is 2121 San Jacinto,
Suite 1840, Dallas, Texas 75201. NFJ is registered as an invest-
ment adviser with the Securities and Exchange Commission.
In managing the NFJ Funds, NFJ uses a value-based philosophy
and investment process. NFJ adheres to the traditional value phi-
losophy that stocks priced lower than the true value of the issu-
ing company will increase in value, but differs from many value
managers by also considering industry diversification and the ben-
efits it affords a portfolio. NFJ classifies stock universes by
industry and according to market capitalization. Stocks are se-
lected from a universe using screening processes that focus on low
P/E ratios and/or high yields within each industry, subject to
quality and price momentum screens. Although quarterly rebalancing
is a general rule, NFJ will replace stocks when an alternate stock
within the same industry has a significantly better characteris-
tics than the current NFJ Fund holdings.
BLAIRLOGIE manages PIMCO International Fund. Blairlogie is an in-
vestment management firm, organized as a limited partnership under
the laws of the United Kingdom, with two general partners and one
limited partner. Currently, the general partners are PIMCO Advi-
sors, which serves as the supervisory partner, and Blairlogie
Holdings Limited, a wholly owned subsidiary of PIMCO Advisors,
which serves as the managing partner. Blairlogie Capital Manage-
ment Ltd., the predecessor investment adviser to Blairlogie, com-
menced operations in 1992. Accounts managed by Blairlogie had com-
bined assets as of September 30, 1998 of approximately $700 mil-
lion. Blairlogie's address is 4th Floor, 125 Princes Street, Edin-
burgh EH2 4AD, Scotland. Blairlogie is registered as an investment
adviser with the Securities and Exchange Commission in the United
States and with the Investment Management Regulatory Organisation
in the United Kingdom.
Blairlogie has more than 50 years of experience in the highly
specialized field of international investing. Its investment phi-
losophy combines traditional Scottish standards of prudent invest-
ment management with modern quantitative analytical tools. In man-
aging PIMCO International Fund, Blairlogie employs sophisticated
analytical tools to attain specific information on each country
considered for investment and conducts personal visits to numerous
geographical regions, using the information to determine country
allocations. It then selects what it believes to be the best
stocks within each country according to growth, quality and value
characteristics. Through continued monitoring, sell decisions are
influenced by changes in country weightings or changes in a par-
ticular security's attractiveness.
It is anticipated that PIMCO Advisors will sell substantially
all of its ownership interest in Blairlogie to Alleghany Asset
Management, Inc. on or before March 31, 1999 (the "Blairlogie
Transaction"). The Blairlogie Transaction is subject to a number
of conditions. PIMCO Advisors has determined to terminate its
portfolio management agreement with Blairlogie with respect to the
International Fund, effective on or about the date of the
Blairlogie Transaction. Under the Trust's investment advisory
agreement, PIMCO Advisors would then assume full responsibil-
40 PIMCO Funds Asset Allocation Series
<PAGE>
ity for managing the International Fund's portfolio. This Prospec-
tus will be supplemented or revised if these events do not occur
substantially in accordance with the schedule outlined above.
PARAMETRIC manages PIMCO Enhanced Equity, Tax-Efficient Equity,
Structured Emerging Markets, and Tax-Efficient Structured Emerging
Markets Funds (the "Parametric Funds"). Parametric is an invest-
ment management firm organized as a general partnership. Paramet-
ric has two partners: PIMCO Advisors as the supervisory partner,
and Parametric Management Inc. as the managing partner. Parametric
Portfolio Associates, Inc., the predecessor investment adviser to
Parametric, commenced operations in 1987. Accounts managed by Par-
ametric had combined assets as of September 30, 1998 of approxi-
mately $2.8 billion. Parametric's address is 7310 Columbia Center,
701 Fifth Avenue, Seattle, Washington 98104-7090. Parametric is
registered as an investment adviser with the SEC and as a commod-
ity trading adviser with the CFTC.
Parametric has developed a structured, long-term investment
process that combines quantitatively-driven fundamental analysis
and economic methods. Parametric attempts to build risk-controlled
portfolios of equity securities that are both reasonably priced
and poised to benefit from investor sentiment by combining its un-
derstanding of the financial markets and investment behavior with
extensive quantitative research and modeling. This investment phi-
losophy is applied for each Parametric Fund, including those with
an emerging markets or tax-efficient focus.
FUND
ADMINISTRATOR
PIMCO Advisors also serves as administrator (the "Administrator")
for the Portfolios' Class A, Class B and Class C shares pursuant
to an administration agreement with the Trust. The Administrator
provides or procures administrative services for Class A, Class B
and Class C shareholders of the Portfolios, which include clerical
help and accounting, bookkeeping, internal audit services and cer-
tain other services required by the Portfolios, and preparation of
reports to the Portfolios' shareholders and regulatory filings.
The Administrator has retained Pacific Investment Management to
provide such services as sub-administrator. The Administrator
and/or the sub-administrator may also retain other affiliates to
provide certain of these services. In addition, the Administrator,
at its own expense, arranges for the provision of legal, audit,
custody, transfer agency (including sub-transfer agency and other
administrative services) and other services necessary for the or-
dinary operation of the Portfolios, and is responsible for the
costs of registration of the Trust's shares and the printing of
prospectuses and shareholder reports for current shareholders.
The Portfolios (and not the Administrator) are responsible for
the following expenses: (i) salaries and other compensation of any
of the Trust's executive officers and employees who are not offi-
cers, directors, stockholders, or employees of PIMCO Advisors, Pa-
cific Investment Management, or their subsidiaries or affiliates;
(ii) taxes and governmental fees; (iii) brokerage fees and commis-
sions and other portfolio transaction expenses; (iv) the costs of
borrowing money, including interest expenses; (v) fees and ex-
penses of the Trustees who are not "interested persons" of the Ad-
viser, any Portfolio Manager, or the Trust, and any counsel re-
tained exclusively for their benefit; (vi) extraordinary expenses,
including costs of litigation and indemnification expenses; (vii)
expenses which are capitalized in accordance with generally ac-
cepted accounting principles; and (viii) any expenses allocated or
allocable to a specific class of shares, which include distribu-
tion and/or service fees payable with respect to Class A, Class B
and Class C shares, and may include certain other expenses as per-
mitted by the Trust's Multiple Class Plan adopted pursuant to Rule
18f-3 under the 1940 Act, subject to review and approval by the
Trustees. The Portfolios also indirectly pay their proportionate
share of the expenses of the Underlying Funds (including advisory
and administrative fees) in which they invest. See "Underlying
Fund Expenses" below.
November 1, 1998 Prospectus 41
<PAGE>
ADVISORY The Portfolios do not pay any fees to PIMCO Advisors under the
FEES Trust's investment advisory agreement in return for the advisory
and asset allocation services provided by PIMCO Advisors. The
Portfolios do, however, indirectly pay a proportionate share of
the advisory fees paid to PIMCO Advisors and Pacific Investment
Management by the Underlying Funds in which the Portfolios invest.
See "Underlying Fund Expenses" below.
ADMINISTRATIVE
FEES
The Portfolios feature fixed administrative fees. For providing or
procuring administrative services to the Portfolios as described
above, the Administrator receives monthly fees from each Portfolio
at the annual rate of 0.40% based on the average daily net assets
attributable in the aggregate to the Portfolio's Class A, Class B
and Class C shares up to and including $2.5 billion, and .35%
based on such net assets in excess of $2.5 billion. The Portfolios
also indirectly pay a proportionate share of the administrative
fees charged by PIMCO Advisors and Pacific Investment Management
to the Underlying Funds in which the Portfolios invest. See "Un-
derlying Fund Expenses" below. The administration and sub-
administration agreements for the Portfolios may be terminated by
the Trustees, or by PIMCO Advisors or Pacific Investment Manage-
ment (as the case may be) on 60 days' written notice. Following
their initial terms, the agreements will continue from year-to-
year if approved by the Trustees.
UNDERLYING The expenses associated with investing in a "fund of funds," such
FUND as the Portfolios, are generally higher than those for mutual
EXPENSES funds that do not invest primarily in other mutual funds. This is
because shareholders in a "fund of funds" indirectly pay a portion
of the fees and expenses charged at the underlying fund level.
The Trust has structured the Portfolios to reduce expenses in-
curred at the Underlying Fund level as follows: (a) the Portfolios
do not pay any fees for asset allocation or advisory services un-
der the Trust's investment advisory agreement; and (b) the Portfo-
lios invest in Institutional Class shares of the Underlying Funds,
which are not subject to any sales charges or 12b-1 fees.
The table on the following page sets forth annual advisory fee
and total operating expense information for Institutional Class
shares of the Underlying Funds. Shareholders of each Portfolio in-
directly bear a proportionate share of these expenses depending
upon how the Portfolio's assets are allocated from time to time
among the Underlying Funds. See "Schedule of Fees."
42 PIMCO Funds Asset Allocation Series
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERLYING FUND EXPENSES
(Based on the average daily net assets
attributable to a Fund's Institutional
Class shares):
ADVISORY ADMINI- TOTAL FUND
UNDERLYING FUND FEES STRATIVE FEES OPERATING EXPENSES
--------------------------------------------------------------------
<S> <C> <C> <C>
PIMCO Equity Income 0.45% 0.25% 0.70%
--------------------------------------------------------------------
PIMCO Renaissance 0.60 0.25 0.85
--------------------------------------------------------------------
PIMCO Core Equity 0.57 0.25 0.82
--------------------------------------------------------------------
PIMCO Mid-Cap Equity 0.63 0.25 0.88
--------------------------------------------------------------------
PIMCO Value 0.45 0.25 0.70
--------------------------------------------------------------------
PIMCO Value 25 0.50 0.25 0.75
--------------------------------------------------------------------
PIMCO Capital
Appreciation 0.45 0.25 0.70
--------------------------------------------------------------------
PIMCO Mid-Cap Growth 0.45 0.25 0.70
--------------------------------------------------------------------
PIMCO Enhanced Equity 0.45 0.25 0.70
--------------------------------------------------------------------
PIMCO Tax-Efficient
Equity 0.45 0.25 0.70
--------------------------------------------------------------------
PIMCO Small-Cap Value 0.60 0.25 0.85
--------------------------------------------------------------------
PIMCO Small-Cap Growth 1.00 0.25 1.25
--------------------------------------------------------------------
PIMCO Micro-Cap Growth 1.25 0.25 1.50
--------------------------------------------------------------------
PIMCO International 0.55 0.50 1.05
--------------------------------------------------------------------
PIMCO International
Growth 0.85 0.50 1.35
--------------------------------------------------------------------
PIMCO Structured Emerging
Markets 0.45 0.50 0.95
--------------------------------------------------------------------
PIMCO Tax-Efficient
Structured Emerging
Markets 0.45 0.50 0.95
--------------------------------------------------------------------
PIMCO Innovation 0.65 0.25 0.90
--------------------------------------------------------------------
PIMCO StocksPLUS 0.40 0.25 0.65
--------------------------------------------------------------------
PIMCO Money Market 0.15 0.20 0.35
--------------------------------------------------------------------
PIMCO Short-Term 0.25 0.20 0.45
--------------------------------------------------------------------
PIMCO Low Duration 0.25 0.18 0.43
--------------------------------------------------------------------
PIMCO Moderate Duration 0.25 0.20 0.45
--------------------------------------------------------------------
PIMCO Real Return Bond 0.25 0.25 0.50
--------------------------------------------------------------------
PIMCO Total Return 0.25 0.18 0.43
--------------------------------------------------------------------
PIMCO Total Return II 0.25 0.25 0.50
--------------------------------------------------------------------
PIMCO High Yield 0.25 0.25 0.50
--------------------------------------------------------------------
PIMCO Long-Term U.S.
Government 0.25 0.25 0.50
--------------------------------------------------------------------
PIMCO Global Bond 0.25 0.30 0.55
--------------------------------------------------------------------
PIMCO Foreign Bond 0.25 0.25 0.50
--------------------------------------------------------------------
PIMCO Emerging Markets
Bond 0.45 0.40 0.85
</TABLE>
Description of the Trust
CAPITALIZATION
The Trust was organized as a Massachusetts business trust on Au-
gust 24, 1990, and currently consists of twenty-eight portfolios
that are operational, three of which are described in this Pro-
spectus. Other portfolios may be offered by means of a separate
prospectus. The Board of Trustees may establish additional portfo-
lios in the future. The capitalization of the Trust consists of an
unlimited number of shares of beneficial interest. When issued,
shares of the Trust are fully paid, non-assessable and freely
transferable.
Under Massachusetts law, shareholders could, under certain cir-
cumstances, be held liable for the obligations of the Trust. How-
ever, the Trust's Second Amended and Restated Agreement and Decla-
ration of Trust (the "Declaration of Trust") disclaims shareholder
liability for acts or obligations of the Trust and requires that
notice of such
November 1, 1998 Prospectus 43
<PAGE>
disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the Trustees. The Decla-
ration of Trust also provides for indemnification out of a Portfo-
lio's property for all loss and expense of any shareholder of that
Portfolio held liable on account of being or having been a share-
holder. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in
which such disclaimer is inoperative or the Portfolio of which he
or she is or was a shareholder is unable to meet its obligations,
and thus should be considered remote.
MULTIPLE Class A, Class B and Class C shares of each Portfolio represent
CLASSES OF interests in the assets of that Portfolio, and each class has
SHARES identical dividend, liquidation and other rights and the same
terms and conditions, except that expenses related to the distri-
bution and shareholder servicing of Class A, Class B and Class C
shares are borne solely by such class and each class may, at the
Trustees' discretion, also pay a different share of other ex-
penses, not including advisory or custodial fees or other expenses
related to the management of the Trust's assets, if these expenses
are actually incurred in a different amount by that class, or if
the class receives services of a different kind or to a different
degree than the other classes. All other expenses are allocated to
each class on the basis of the net asset value of that class in
relation to the net asset value of the particular Portfolio.
VOTING Each class of shares of each Portfolio has identical voting
rights, except that each class of shares has exclusive voting
rights on any matter submitted to shareholders that relates solely
to that class, and has separate voting rights on any matter sub-
mitted to shareholders in which the interests of one class differ
from the interests of any other class. Each class of shares has
exclusive voting rights with respect to matters pertaining to any
Distribution and Servicing Plan or agreement applicable only to
that class. These shares are entitled to vote at meetings of
shareholders. Matters submitted to shareholder vote must be ap-
proved by each Portfolio separately except (i) when required by
the 1940 Act shares shall be voted together and (ii) when the
Trustees have determined that the matter does not affect all Port-
folios, then only shareholders of the Portfolio or Portfolios af-
fected shall be entitled to vote on the matter. All classes of
shares of a Portfolio will vote together, except with respect to a
Distribution and Servicing Plan or agreement applicable to a class
of shares or when a class vote is required as specified above or
otherwise by the 1940 Act. Shares are freely transferable, are en-
titled to dividends as declared by the Trustees and, in liquida-
tion of the Trust, are entitled to receive the net assets of their
Portfolio, but not of the other Portfolios or other series of the
Trust. The Trust does not generally hold annual meetings of share-
holders and will do so only when required by law. Shareholders may
remove Trustees from office by votes cast in person or by proxy at
a meeting of shareholders or by written consent. Such a meeting
will be called at the written request of the holders of 10% of the
Trust's outstanding shares.
Shares entitle their holders to one vote per share (with pro-
portionate voting for fractional shares). As of October 13, 1998
the following were shareholders of record of at least 25% of the
outstanding voting securities of the indicated Portfolios: PIMCO
Advisors L.P. (Newport Beach, California), the Trust's investment
adviser and administrator, with respect to each of the 90/10,
60/40 and 30/70 Portfolios. As used in this Prospectus, the phrase
"vote of a majority of the outstanding shares" of a Portfolio (or
the Trust) means the vote of the lesser of: (1) 67% of the shares
of the Portfolio (or the Trust) present at a meeting, if the hold-
ers of more than 50% of the outstanding shares are present in per-
son or by proxy; or (2) more than 50% of the outstanding shares of
the Portfolio (or the Trust).
Mailings to Shareholders
To reduce the volume of mail shareholders receive, it is antici-
pated that only one copy of most Trust reports, such as the
Trust's annual reports, will be mailed to a shareholder's house-
hold (same surname, same address). A shareholder may call 1-800-
426-0107 if additional shareholder reports are desired.
44 PIMCO Funds Asset Allocation Series
<PAGE>
PIMCO FUNDS ASSET ALLOCATION SERIES
Actively managed portfolios of select PIMCO Funds
<TABLE>
<S> <C> <C>
Investment Adviser and Shareholder Servicing Agent For further information
Administrator and Transfer Agent about PIMCO Funds Asset
PIMCO Advisors L.P. Shareholder Services, Inc. Allocation Series, call
800 Newport Center Drive P.O. Box 5866 1-800-426-0107 or visit
Newport Beach, CA 92660 Denver, CO 80217 our Web site at
www.pimcofunds.com.
Distributor Independent Accountants
PIMCO Funds Distributors LLC PricewaterhouseCoopers LLP
2187 Atlantic Street 1055 Broadway
Stamford, CT 06902 Kansas City, MO 64105
Custodian Legal Counsel
Investors Fiduciary Trust Ropes & Gray
Company One International Place
801 Pennsylvania Boston, MA 02110
Kansas City, MO 64105
</TABLE>
PIMCO
-----
FUNDS
PZ008.11/98
